Exhibit 10.1

 

 

TUESDAY MORNING CORPORATION,
as Borrower

 

and

 

THE GUARANTORS PARTY HERETO

 

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CREDIT AGREEMENT

 

Dated as of September 27, 2002

 

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FLEET NATIONAL BANK,
as Administrative Agent and Issuing Lender,

 

WELLS FARGO BANK, N.A.,
as Syndication Agent,

 

LASALLE BANK, NATIONAL ASSOCIATION
U.S. BANK NATIONAL ASSOCIATION
WACHOVIA BANK, NATIONAL ASSOCIATION
as Documentation Agents

 

FLEET SECURITIES, INC.,
as Lead Arranger,

 

and

 

THE REVOLVING CREDIT LENDERS PARTY HERETO

 

 

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TABLE OF CONTENTS

 

This Table of Contents is not part of the Credit Agreement to which it is
attached but is inserted for convenience of reference only.

 

Section 1.

Definitions, Accounting Matters and Rules of Construction

 

 

 

1.01

Certain Defined Terms

 

1.02

Accounting Terms and Determinations

 

1.03

Types of Loans

 

1.04

Rules of Construction

 

 

 

Section 2.

Commitments, Loans, Notes, Prepayments, Replacement of Revolving Credit Lenders
and Annual Cleandown

 

 

 

 

2.01

Loans

 

2.02

Borrowings

 

2.03

Letters of Credit

 

2.04

Extension of Revolving Credit Commitment Termination Date

 

2.05

Termination and Reductions of Commitments and Overadvance Period

 

2.06

Fees

 

2.07

Lending Offices

 

2.08

Several Obligations of Revolving Credit Lenders

 

2.09

Notes; Register

 

2.10

Optional Prepayments and Conversions or Continuations of Loans

 

2.11

Mandatory Prepayments

 

2.12

Replacement of Revolving Credit Lenders

 

2.13

Annual Cleandown

 

 

 

Section 3.

Payments of Principal and Interest

 

 

 

 

3.01

Repayment of Loans

 

3.02

Interest

 

 

 

Section 4.

Payments; Pro Rata Treatment; Computations; Etc.

 

 

 

 

4.01

Payments

 

4.02

Pro Rata Treatment

 

4.03

Computations

 

4.04

Minimum Amounts

 

4.05

Certain Notices

 

4.06

Non-Receipt of Funds by the Administrative Agent

 

4.07

Right of Setoff; Sharing of Payments, Etc.

 

 

 

Section 5.

Yield Protection, Etc.

 

 

 

 

5.01

Additional Costs

 

5.02

Limitation on Types of Loans

 

5.03

Illegality

 

5.04

Treatment of Affected Loans

 

5.05

Compensation

 

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5.06

Net Payments

 

 

 

Section 6.

Guarantee

 

 

 

 

6.01

The Guarantee

 

6.02

Obligations Unconditional

 

6.03

Reinstatement

 

6.04

Subrogation; Subordination

 

6.05

Remedies

 

6.06

Continuing Guarantee

 

6.07

General Limitation on Guarantee Obligations

 

 

 

Section 7.

Conditions Precedent

 

 

 

 

7.01

Effectiveness of This Agreement and Initial Extension of Credit Under This
Agreement

 

7.02

Initial and Subsequent Extensions of Credit Under This Agreement

 

 

 

Section 8.

Representations and Warranties

 

 

 

 

8.01

Corporate Existence

 

8.02

Financial Condition; Etc.

 

8.03

Litigation

 

8.04

No Breach; No Default

 

8.05

Action

 

8.06

Approvals

 

8.07

ERISA

 

8.08

Taxes

 

8.09

Investment Company Act; Public Utility Holding Company Act; Other Restrictions

 

8.10

Senior Subordinated Notes

 

8.11

Environmental Matters

 

8.12

Environmental Investigations

 

8.13

Use of Proceeds

 

8.14

Subsidiaries

 

8.15

Properties

 

8.16

Security Interest; Absence of Financing Statements

 

8.17

Compliance with Laws

 

8.18

True and Complete Disclosure

 

8.19

Solvency

 

 

 

Section 9.

Covenants

 

 

 

 

9.01

Financial Statements, Etc.

 

9.02

Litigation, Etc.

 

9.03

Existence; Compliance with Law; Payment of Taxes; Inspection Rights; Performance
of Obligations; Etc.

 

9.04

Insurance

 

9.05

Limitation on Lines of Business

 

9.06

Limitation on Fundamental Changes; Limitation on Acquisitions; Limitation on
Dispositions

 

9.07

Limitation on Liens and Related Matters

 

9.08

Limitation on Indebtedness

 

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9.09

Limitation on Investments; Limitation on Creation of Subsidiaries

 

9.10

Limitation on Dividend Payments

 

9.11

Financial Covenants

 

9.12

Pledge of Additional Collateral

 

9.13

Security Interests

 

9.14

Compliance with Environmental Laws

 

9.15

Limitation on Prepayments of Senior Subordinated Notes, Etc.

 

9.16

Limitation on Transactions with Affiliates

 

9.17

Limitation on Accounting Changes; Limitation on Investment Company Status

 

9.18

Limitation on Modifications of Certain Documents, Etc.

 

9.19

Limitation on Certain Restrictions Affecting Subsidiaries

 

9.20

Additional Obligors

 

9.21

Limitation on Designated Senior Indebtedness

 

9.22

Limitation on Change of Principal Place of Business or Corporate Name

 

9.23

Replacement Documentation

 

 

 

Section 10.

Events of Default

 

 

 

Section 11.

The Administrative Agent

 

 

 

 

11.01

General Provisions

 

11.02

Indemnification

 

11.03

Consents Under Other Credit Documents

 

11.04

Collateral Sub-Agents

 

11.05

Other Agents

 

 

 

Section 12.

Miscellaneous

 

 

 

 

12.01

Rights and Remedies

 

12.02

Notices

 

12.03

Expenses, Indemnification, Etc.

 

12.04

Amendments, Etc.

 

12.05

Successors and Assigns

 

12.06

Assignments and Participations

 

12.07

Survival

 

12.08

Captions

 

12.09

Counterparts; Interpretation; Effectiveness

 

12.10

Governing Law; Submission to Jurisdiction

 

12.11

Waivers

 

12.12

Confidentiality

 

12.13

Independence of Representations, Warranties and Covenants

 

12.14

Severability

 

 

 

Signatures

 

 

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ANNEX A

-

Commitments

 

 

 

SCHEDULE 1.1(a)

-

Applicable Margins

SCHEDULE 1.1(b)

-

Guarantors

SCHEDULE 1.1(c)

-

Existing Letters of Credit

SCHEDULE 8.2

-

Certain Contingent Obligations

SCHEDULE 8.3

-

Litigation

SCHEDULE 8.8

-

Certain Tax Matters

SCHEDULE 8.11

-

Environmental Matters

SCHEDULE 8.14

-

Subsidiaries of Borrower

SCHEDULE 9.7

-

Certain Existing Liens

SCHEDULE 9.8

-

Certain Indebtedness to Remain Outstanding

SCHEDULE 9.9

-

Investments

SCHEDULE 9.16

-

Existing Affiliate Agreements

 

 

 

EXHIBIT A-1

-

Form of Revolving Credit Note

EXHIBIT A-2

-

Form of Swing Loan Note

EXHIBIT B

-

Form of Intercompany Note

EXHIBIT C-1

-

Form of Interest Rate Certificate

EXHIBIT C-2

-

Form of Borrowing Base Certificate

EXHIBIT D

-

Form of Security Agreement

EXHIBIT E

-

Form of Notice of Assignment

EXHIBIT F

-

Form of Mortgage

EXHIBIT G

-

Form of Section 5.6 Certificate

EXHIBIT H

-

Form of Notice of Borrowing

EXHIBIT I

-

Form of Notice of Conversion/Continuation

EXHIBIT J

-

Form of Subordination Provisions

EXHIBIT K

-

Form of Joinder Agreement

EXHIBIT L

-

Form of Compliance Certificate

 

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CREDIT AGREEMENT, dated as of September 27, 2002, among

 

TUESDAY MORNING CORPORATION, a Delaware corporation (“Borrower,” which term
shall include its successors and assigns); and

 

the GUARANTORS party hereto; and

 

each of the REVOLVING CREDIT LENDERS that is a signatory hereto identified under
the caption “REVOLVING CREDIT LENDERS” on the signature pages hereto or that,
pursuant to Section 12.6(b), shall become a “Revolving Credit Lender” hereunder
(individually, a “Revolving Credit Lender” and, collectively, the “Revolving
Credit Lenders”); and

 

FLEET NATIONAL BANK, as the issuer of Letters of Credit (in such capacity,
together with its successors in such capacity, the “Issuing Lender”) and as
administrative agent for the Revolving Credit Lenders (in such capacity,
together with its successors in such capacity, the “Administrative Agent”);

 

WELLS FARGO BANK, N.A., as syndication agent (in such capacity, together with
its successors in such capacity, the “Syndication Agent”); and

 

LASALLE BANK, NATIONAL ASSOCIATION, U.S. BANK NATIONAL ASSOCIATION, and WACHOVIA
BANK, NATIONAL ASSOCIATION, as Documentation Agents, (in such capacity, together
with their successors in such capacity, the “Documentation Agents”)

 

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

 

Section 1.               Definitions, Accounting Matters and Rules of
Construction

 

1.1           Certain Defined Terms.  As used herein, the following terms shall
have the following meanings:

 

“Acquired Indebtedness” shall mean Indebtedness incurred or assumed in
connection with an Acquisition permitted under Section 9.6(l) or Section 9.6(n),
to the extent the incurrence or assumption of Indebtedness in connection with
such Acquisition is not prohibited under Section 9.6(l) or Section 9.6(n);
provided, however, that such Indebtedness was outstanding prior to and was not
created in connection with or in contemplation of such Acquisition.

 

“Acquisition” shall mean, with respect to any Person, any transaction or series
of related transactions for the direct or indirect (a) acquisition of all or
substantially all of the Property of any other Person, or of any business or
division of any other Person, (b) acquisition of in excess of 50% of the Equity
Interests of any other Person, or otherwise causing any other Person to become a
Subsidiary of such Person, or (c) merger or consolidation or any other
combination with any other Person.

 

“Additional Collateral” see Section 9.12.

 

“Additional Obligors” see Section 9.20.

 

“Administrative Agent” see the introduction to this Agreement.

 

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“Advance Date” see Section 4.6.

 

“Affiliate” shall mean, with respect to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person, or, in the case of any Revolving Credit Lender which
is an investment fund, the investment advisor thereof and any investment fund
having the same investment advisor. As used in this definition, “control”
(including, with its correlative meanings, “controlled by” and “under common
control with”) shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).

 

“Affiliate Transaction” see Section 9.16.

 

“Agreement” shall mean this Credit Agreement, as amended from time to time.

 

“Alternate Base Rate” shall mean for any day, a rate per annum that is equal to
the higher of (a) the Prime Rate or (b) the Federal Funds Rate.

 

“Alternate Base Rate Loans” shall mean Loans that bear interest at rates based
upon the Alternate Base Rate.

 

“Applicable Lending Office” shall mean, for each Revolving Credit Lender and for
each Type of Loan, the “Lending Office” of such Revolving Credit Lender (or of
an Affiliate of such Revolving Credit Lender) designated for such type of Loan
on the signature pages hereof or such other office of such Revolving Credit
Lender (or of an Affiliate of such Revolving Credit Lender) as such Revolving
Credit Lender may from time to time specify to the Administrative Agent and
Borrower as the office by which its Loans of such Type are to be made and
maintained.

 

“Applicable Margin” shall be (a) from the Closing Date to the date (the “Reset
Date”) Borrower shall have delivered to the Revolving Credit Lenders the
financial statements, the Interest Rate Certificate and the Compliance
Certificate required by Section 9.1 in respect of the fiscal quarter and fiscal
year of Borrower ending December 31, 2002, with respect to Alternate Base Rate
Loans, 0.375% and with respect to LIBOR Loans, 1.875%, unless the Leverage Ratio
at the end of any fiscal quarter is at the level set forth for Tier I of
Schedule 1.1(a), in which case the Applicable Margin shall be the percentages
per annum for each applicable Type of Loan set forth opposite Tier I of Schedule
1.1(a), and (b) thereafter, when the Leverage Ratio at the end of the most
recently ended fiscal quarter ending after the Reset Date is as set forth in
Schedule 1.1(a), the percentage per annum set forth opposite such Leverage Ratio
in Schedule 1.1(a). Any change in the Leverage Ratio shall be effective to
adjust the Applicable Margin as of the date of receipt by the Administrative
Agent of the Interest Rate Certificate most recently delivered pursuant to
Section 9.1(d).  If Borrower fails to deliver the Interest Rate Certificates and
financial statements within the times specified in Sections 9.1(a), (b) and (d),
such ratio shall be deemed to be that set forth opposite Tier I of Schedule
1.1(a) until Borrower delivers such Interest Rate Certificates and financial
statements.

 

“Applicable Revolving Credit Fee Percentage” shall mean 0.50% per annum;
provided, however, that from and after the Reset Date, the Applicable Revolving
Credit Fee Percentage shall be, when the Leverage Ratio at the end of the most
recently ended fiscal quarter ending after the Reset Date is as set forth in
Schedule 1.1(a), the percentage per annum set forth opposite such Leverage Ratio
in Schedule 1.1(a).  Any change in the Leverage Ratio shall be effective to
adjust the Applicable Revolving Credit Fee

 

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Percentage as of the date of receipt by the Administrative Agent of the Interest
Rate Certificate most recently delivered pursuant to Section 9.1(d).  If
Borrower fails to deliver the Interest Rate Certificates and financial
statements within the times specified in Sections 9.1(a), (b) and (d), such
ratio shall be deemed to be that set forth opposite Tier I of Schedule 1.1(a)
until Borrower delivers such Interest Rate Certificates and financial
statements.

 

“Appraised Inventory Liquidation Value” shall mean the product of (a) the
aggregate value of Eligible Inventory (net of Inventory Reserves) multiplied by
(b) that percentage, determined from the then most recent appraisal of the
Borrower’s Inventory undertaken by, or at the request of, the Administrative
Agent, to reflect the appraiser’s estimate of the net recovery on the Borrower’s
Inventory in the event of an in-store liquidation of that Inventory.

 

“Availability Reserves” shall mean such reserves as the Administrative Agent
from time to time determines in the Administrative Agent’s discretion as being
appropriate to reflect the impediments to the Agents’ ability to realize upon
the Pledged Collateral.

 

“Bankruptcy Code” shall mean Title 11, U.S.C., as amended from time to time.

 

“Benefit Arrangement” shall mean at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.

 

“Borrower” see the introduction to this Agreement.

 

“Borrowing Base” shall mean, as at any date, (i) the lesser of (A) up to sixty
five percent (65%) of the aggregate value of Eligible Inventory (net of
Inventory Reserves) at said date or (B) up to eighty-five percent (85%) of the
Appraised Inventory Liquidation Value of Eligible Inventory (the lesser of (A)
or (B) being referred to as the “Normal Advance Rate”), minus (ii) Availability
Reserves; provided, however, that if no Event of Default has occurred and is
continuing, the Revolving Credit Lenders will, upon Borrower’s request, make
advances of up to the sum of (x) the Normal Advance Rate plus (y) $20.0 Million
(the “Increased Advance Rate”), minus (z) Availability Reserves; provided,
however, that the Increased Advance Rate shall be in effect only during the
Overadvance Period.

 

“Borrowing Base Certificate” shall mean a certificate of a senior financial
officer of Borrower, substantially in the form of Exhibit C-2 and appropriately
completed.

 

“Business Day” shall mean any day (a) on which commercial banks are not
authorized or required to close in Boston, Massachusetts or Dallas, Texas and
(b) if such day relates to a borrowing of, a payment or prepayment of principal
of or interest on, a Continuation or Conversion of or into, or an Interest
Period for, a LIBOR Loan or a notice by Borrower with respect to any such
borrowing, payment, prepayment, Continuation, Conversion or Interest Period,
that is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.

 

“Capital Expenditures” shall mean, for any period, (a)  any direct or indirect
(by way of acquisition of securities of a Person or the expenditure of cash or
the incurrences of Indebtedness) expenditures made or costs incurred in respect
of the purchase or other acquisition, maintenance or repair (to the extent
capitalized on the balance sheet of such

 

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Person) of fixed or capital assets, and (b) Capital Lease Obligations incurred
by the Borrowers during such period, all of the foregoing as determined in
accordance with GAAP.  Notwithstanding the foregoing, “Capital Expenditures”
shall not include expenditures made with the Net Available Proceeds of any
Casualty Event or any Taking, Destruction, or loss of title with respect to Real
Property.

 

“Capital Lease,” as applied to any Person, shall mean any lease of any Property
by that Person as lessee which, in conformity with GAAP, is required to be
classified and accounted for as a capital lease on the balance sheet of that
Person.

 

“Capital Lease Obligations” shall mean, for any Person, all obligations of such
Person to pay rent or other amounts under a Capital Lease, and, for purposes of
this Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

 

“Casualty Event” shall mean, with respect to any Property (other than Real
Property) of any Person, any loss of or damage to, or any condemnation or other
taking of, such Property for which such Person or any of its Subsidiaries
receives insurance proceeds or proceeds of a condemnation award or other
compensation.  Casualty Event shall not include any Taking or Destruction or
loss of title to Real Property.

 

“CERCLA” see Section 8.11.

 

“Change of Control” shall mean any transaction or event (including, without
limitation, an issuance, sale or exchange of Equity Interests, a merger or
consolidation, or a dissolution or liquidation) occurring on or after the
Closing Date (whether or not approved by the board of directors of Borrower) as
a direct or indirect result of which: (a)(i) any “Person” or any “group” (as
such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended) (other than the Permitted Holders) shall (directly or
indirectly) beneficially own in the aggregate shares of Equity Interests of
Borrower having 33-1/3% or more of the aggregate voting power of all shares of
Equity Interests of Borrower at the time outstanding; provided, however, that
the foregoing shall be a Change of Control only if the Permitted Holders
beneficially own a lesser percentage of the aggregate voting power of all shares
of Equity Interests of Borrower at the time outstanding than such Person or
group or do not have the right or ability by voting power, contract or otherwise
to elect or designate for elections at least a majority of the board of
directors of Borrower; or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the board of
directors of Borrower (together with any new directors whose election by such
board of directors or whose nomination for election by the shareholders of
Borrower was approved by a vote of at least 66-2/3% of the directors of Borrower
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
then in office; or (b) any event or circumstance constituting a “change of
control” or other similar occurrence under documentation evidencing or governing
any Indebtedness of Borrower in a principal amount in excess of $5.0 million
(other than under the Credit Documents) shall occur which results in an
obligation of Borrower to prepay, purchase, offer to purchase, redeem or defease
all or a portion of such Indebtedness.  For purposes of this definition, the
terms “beneficially own” and “group” shall have the respective meanings ascribed
to them pursuant to Section 13(d) of the United States Securities Exchange Act
of 1934.

 

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“Closing Date” shall mean the date upon which the conditions specified in
Section 7.1 are satisfied (or waived in accordance with Section 12.4).

 

“Code” shall mean the United States Internal Revenue Code of 1986, as amended.

 

“Collateral” shall mean all of the Pledged Collateral and Mortgaged Real
Property.

 

“Collateral Account” see Section 4.1 of the Security Agreement.

 

“Consolidated Adjusted Income Tax Expense” has the same meaning herein as the
term “Consolidated Income Tax Expense” in the Indenture as in effect on the date
hereof.  Specifically, the term “Consolidated Adjusted Income Tax Expense”
means, for any period, the provision for federal, state, local and foreign
income taxes of the Borrower and all Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.

 

“Consolidated Adjusted Interest Expense” has the same meaning herein as the term
“Consolidated Interest Expense” in the Indenture as in effect on the date
hereof. Specifically, the term “Consolidated Adjusted Interest Expense” means,
for any period, without duplication, (1) the sum of (a) the interest expense of
the Borrower and its Restricted Subsidiaries for such period, including, without
limitation, (i) amortization of debt discount, (ii) the net cost of Swap
Agreements (including amortization of discounts), (iii) the interest portion of
any deferred payment obligation and (iv) amortization of debt issuance costs,
plus (b) the interest component of Capital Lease Obligations of the Borrower and
its Restricted Subsidiaries during such period, plus (c) cash dividends due
(whether or not declared) on Preferred Stock by the Borrower and any Restricted
Subsidiary, plus (d) cash dividends due (whether or not declared) on Redeemable
Capital stock by the Borrower and any Restricted Subsidiary, in each case as
determined on a consolidated basis in accordance with GAAP, less (2) interest on
the Exchange Debentures (as defined in the Indenture) outstanding on the
Exchange Date (as defined in the Indenture) paid in kind with Exchange
Debentures and on Exchange Debentures so issued as payment in kind interest, all
in accordance with the Debenture Indenture (as defined in the Indenture) as in
effect on the issuance date of the notes under the Indenture; provided that (x)
the Consolidated Adjusted Interest Expense attributable to interest on any
Indebtedness computed on a pro forma basis and (A) bearing a floating interest
rate shall be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire period and (B) which was not outstanding
during the period for which the computation is being made but which bears, at
the option of the Borrower, a fixed or floating rate of interest, shall be
computed by applying at the option of the Borrower, either the fixed or floating
rate, and (y) in making such computation, the Consolidated Adjusted Interest
Expense attributable to interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the applicable period; provided
further that, notwithstanding the foregoing, the interest rate with respect to
any Indebtedness covered by any Swap Agreement shall be deemed to be effective
interest rate with respect to such Indebtedness after taking into account such
Swap Agreement.

 

“Consolidated Adjusted Non-Cash Charges” has the same meaning herein as the term
“Consolidated Non-Cash Charges” in the Indenture as in effect on the date
hereof. Specifically, the term “Consolidated Adjusted Non-Cash Charges” means,
for any period, the aggregate depreciation, amortization, depletion and other
non-cash expenses of the Borrower and any Restricted Subsidiary reducing
Consolidated Adjusted Net Income for

 

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such period, determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge that requires an accrual of or reserve for
cash charges for any future period).

 

“Consolidated Adjusted Net Income” has the same meaning herein as the term
“Consolidated Adjusted Net Income” in the Indenture as in effect on the date
hereof. Specifically, the term “Consolidated Adjusted Net Income” shall mean,
for any period, the consolidated net income of the Borrower and its Restricted
Subsidiaries for such period, as determined in accordance with GAAP, adjusted by
excluding, without duplication, (a) any net after-tax extraordinary gains or
losses (less all fees and expenses relating thereto), (b) any net after-tax
gains or losses (less all fees and expenses relating thereto) attributable to
asset dispositions other than in the ordinary course of business, (c) the
portion of net income (or loss) of any Person (other than the Borrower or a
Restricted Subsidiary), including Unrestricted Subsidiaries, in which the
Borrower or a Restricted Subsidiary has an ownership interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Borrower or any Restricted Subsidiary in cash dividends or distributions during
such period, (d) the net income (or loss) of any Person combined with the
Borrower or any Restricted Subsidiary on a “pooling of interests” basis
attributable to any period prior to the date of combination, and (e) the net
income of any Restricted Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Restricted Subsidiary is
not at the date of determination permitted, 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 such Restricted
Subsidiary or its stockholders.

 

“Consolidated EBITDA” shall mean, for any Measurement Period, the sum (without
duplication) of the amounts for such period of (a) Consolidated Net Income, (b)
income tax expense to the extent deducted in determining Consolidated Net Income
for such period, (c) Consolidated Interest Expense to the extent deducted in
determining Consolidated Net Income for such period, and (d) depreciation
expense and amortization expense to the extent deducted in determining
Consolidated Net Income for such period, each such item described in clauses
(b)-(d) determined in accordance with GAAP.

 

“Consolidated Interest Expense” shall mean, for any period, for Borrower and its
Consolidated Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) all interest expense during such period
(whether or not actually paid during such period), other than any non-cash
interest expense in respect of Indebtedness in the form of accretion of original
issue discount or pay-in-kind issuances of additional debt in lieu of cash
interest and other than amortization of financing fees.

 

“Consolidated Minimum Interest Coverage Ratio” of the Borrower means, for any
period, the ratio of (a) the sum of Consolidated Adjusted Net Income and, to the
extent deducted in computing Consolidated Adjusted Net Income, Consolidated
Adjusted Interest Expense, Consolidated Adjusted Income Tax Expense and
Consolidated Adjusted Non-Cash Charges, in each case, for such period to (b) the
Consolidated Adjusted Interest Expense for such period.

 

“Consolidated Net Income” shall mean, for any Measurement Period, the
consolidated net income (loss) of Borrower and its Consolidated Subsidiaries
calculated on a consolidated basis in accordance with GAAP.

 

“Consolidated Rental Expense” shall mean, for any period, the aggregate amount
of all rents paid or to be incurred under all leases of Real Property of
Borrower and its

 

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Consolidated Subsidiaries as lessees (net of sublease income), calculated in
accordance with GAAP.

 

“Consolidated Subsidiary” shall mean, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with the
financial statements of such Person in accordance with GAAP.

 

“Consolidated Tangible Net Worth” shall mean, at any particular date, the
difference of (a) the aggregate book value of all of the assets (net of all
applicable reserves) of the Borrower which would, in accordance with GAAP,
appear as assets upon a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries prepared as at such date, less (b) the sum of the
following:

 

(i)            without duplication, all proper reserves which would, in
accordance with GAAP, be classified as liabilities upon a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as at such particular
date;

 

(ii)           the Consolidated Total Liabilities as at such particular date;

 

(iii)          all intangible assets (including, without limitation, franchise,
license, permits, copyrights, patents, trademarks, trade names, goodwill,
covenants not to compete, loan acquisition fees and other like intangibles) of
the Borrower and its Consolidated Subsidiaries that are included within the
consolidated balance sheet of such parties as at such particular date;

 

(iv)          all obligations and liabilities owed to the Borrower or its
Consolidated Subsidiaries by any Affiliate or stockholder or employee (or
relative of any employee) of the Borrower or its Consolidated Subsidiaries that
are included as assets within the consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as at such particular date; and

 

(v)           the value of any minority interests in Subsidiaries.

 

“Consolidated Total Liabilities” shall mean, at any particular date, all of the
liabilities of the Borrower and its Consolidated Subsidiaries which, in
accordance with GAAP, would be classified as a liability upon a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries prepared as at
such particular date.

 

“Contingent Obligation” shall mean, as to any Person, any direct or indirect
liability of such Person, whether or not contingent, with or without recourse:
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the “primary obligations”) of another Person (the “primary
obligor”), including any obligation of such Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each of (a)(i)-(iv), a “Guaranty Obligation”); (b) with respect to any
Surety Instrument (other than any Letter of Credit)

 

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issued for the account of such Person or as to which such Person is otherwise
liable for reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered; or (d) in respect of any Swap Contract; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities entered into, in each
case in the ordinary course of business.  The amount of any Contingent
Obligation shall (x) in the case of a Guaranty Obligation, be deemed equal to
the stated or determinable amount of the primary obligation in respect of which
such Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, and (y) in the case
of other Contingent Obligations, be equal to the maximum reasonably anticipated
liability in respect thereof.

 

“Continue,” “Continuation” and “Continued” shall refer to the continuation
pursuant to Section 2.10 of a LIBOR Loan from one Interest Period to the next
Interest Period.

 

“Convert,” “Conversion” and “Converted” shall refer to a conversion pursuant to
Section 2.10 of one Type of Loan into another Type of Loan, which may be
accompanied by the transfer by a Revolving Credit Lender (at its sole
discretion) of a Loan from one Applicable Lending Office to another.

 

“Covered Taxes” see Section 5.6(a).

 

“Credit Documents” shall mean this Agreement, the Notes, any Letter of Credit
Documents and any Security Documents, all of the foregoing whether executed and
delivered on or after the Closing Date.

 

“Creditor” shall mean the Administrative Agent, the Issuing Lender, any
Revolving Credit Lender or any Affiliate of a Revolving Credit Lender party to a
Swap Contract with an Obligor.

 

“Debt Issuance” shall mean the incurrence by any Obligor of any Indebtedness
after the Closing Date (other than as permitted by Section 9.8).

 

“Default” shall mean an event that with notice or lapse of time or both would
become an Event of Default.

 

“Destruction” shall mean any damage to, or loss or destruction of, any Real
Property or Mortgaged Real Property.  Destruction shall not include any Casualty
Event.

 

“Disposition” shall mean (a) any conveyance, sale, lease, assignment, transfer
or other disposition (including by way of merger or consolidation and including
any sale-leaseback transaction) of any Property (including receivables and
shares of Equity Interests of any Subsidiary or joint venture of any Person)
(whether now owned or hereafter acquired) by any Obligor or any of its
Subsidiaries to any Person, (b) any issuance of any Equity Interests in any
Subsidiary to any Person other than Borrower or any Wholly Owned Subsidiary, and
(c) any liquidating or other non-ordinary course dividend or distribution
received by any Obligor or any of its Subsidiaries in respect of any joint
venture or similar enterprise, excluding, however, any Excluded Disposition.

 

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“Disposition Event”  shall mean the receipt by any Obligor or any of its
Subsidiaries of cash proceeds or cash distributions of any kind from Property
received in consideration for a Disposition.

 

“Disqualified Capital Stock” shall mean, with respect to any Person, any Equity
Interests of such Person that, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event, matures (excluding any maturity as the result of an
optional redemption by the issuer thereof) or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole
option of the holder thereof, in whole or in part, on or prior to March 31,
2007; provided, however, that no Equity Interests issued to management of
Borrower shall be deemed Disqualified Capital Stock by virtue of the fact that
they may be put to Borrower upon the occurrence of certain events disclosed to
the Revolving Credit Lenders prior to the Closing Date.

 

“Dividend Payment”  shall mean dividends (in cash, Property or obligations) on,
or other payments or distributions on account of, or the setting apart of money
for a sinking or other analogous fund for, or the purchase, redemption,
retirement or other acquisition of, any shares of any Equity Interests of any
Obligor or any of its Subsidiaries, or of any Equity Rights, but excluding (a)
dividends payable in respect of shares of Equity Interests through the issuance
of additional shares of Qualified Capital Stock, (b) any redemption or exchange
of any Equity Interests of such Obligor through the issuance of Qualified
Capital Stock of such Obligor and (c) cash dividends paid in respect of any
fractional shares that would otherwise be issued as dividends.

 

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

 

“Domestic Subsidiary” shall mean any Subsidiary that is not a Foreign
Subsidiary.

 

“Eligible Inventory” shall mean Inventory valued at lower of cost or market on a
“first in-first out” (“FIFO”) basis or based on specific identification with
respect to Inventory in the warehouse that constitutes first quality finished
goods, and that: (a) is not, in the Administrative Agent’s reasonable judgment,
obsolete or unmerchantable (it being understood that Borrower is in the business
of buying closeout or discontinued merchandise); (b) upon which the
Administrative Agent, for the benefit of the Revolving Credit Lenders, has a
first priority perfected security interest subject only to Prior Liens; and (c)
the Administrative Agent otherwise deems eligible as the basis for Revolving
Credit Loans based on such other credit and collateral considerations as the
Administrative Agent may from time to time establish in its reasonable
discretion consistent with its general policies and business judgment.  Without
intending to limit the Administrative Agent’s discretion to establish other
criteria of eligibility, no spare parts, packaging and shipping material,
supplies, slow-moving or obsolete Inventory, sample Inventory, scratched or
dented Inventory, Inventory in transit (unless it meets the requirements of
clause (iii), below) , bill and hold Inventory, returned or defective Inventory
or Inventory delivered to Borrower on consignment shall constitute Eligible
Inventory.  Eligible Inventory shall not include Inventory stored at locations
other than those locations either owned by Borrower or locations for which an
appropriate UCC filing has been filed in the appropriate offices to perfect the
security interest in such Inventory.  Eligible Inventory shall not include (i)
Inventory with respect to which the representations and warranties set forth in
the Security Agreement applicable to Inventory are not true and correct in all
material respects; (ii) Inventory in respect of which the Security Agreement,
after giving effect to the related filings of financing

 

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statements that have then been made, if any, does not or has ceased to create a
valid and perfected first priority lien (subject to Prior Liens) or security
interest in favor of the Revolving Credit Lenders securing the Obligations and
as to which no other Liens exist, other than Permitted Liens; (iii) Inventory
located outside the United States which is being shipped to Borrower, other than
any such Inventory which meets each of the following conditions:  (A) such
Inventory would otherwise qualify as Eligible Inventory and would not be
excluded by any other clause of this definition, (B) such Inventory is in
transit to Borrower on an F.O.B. shipping basis, and (C) such Inventory is fully
paid for by Borrower and fully insured on terms acceptable to the Administrative
Agent pursuant to insurance which names the Administrative Agent as loss payee
for the benefit of the Revolving Credit Lenders, and the Administrative Agent,
if it so requests, shall have received (x) all negotiable instruments of title
issued in connection with such shipment or (y) a customs broker agency agreement
reasonably acceptable to the Administrative Agent; provided, however, that not
more than $10.0 million of Inventory may be included at any time pursuant to
this clause (iii); and (iv) Inventory located outside the United States which is
not being shipped to Borrower unless arrangements for the granting and
perfection of a security interest in such Inventory have been made in a manner
acceptable to the Administrative Agent in its sole discretion.  In addition, the
buying, freight and distribution costs (“UNICAP Costs”) and the product
development expenses which are a component of the cost of Inventory will not be
considered as part of the value of the Inventory.

 

“Eligible Person” shall mean (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having a combined capital and
surplus of at least $100.0 million; (b) a commercial bank organized under the
laws of any other country that is a member of the Organization for Economic
Cooperation and Development (the “OECD”), or a political subdivision of any such
country, and having a combined capital and surplus in a dollar equivalent amount
of at least $100.0 million; provided, however, that such bank is acting through
a branch or agency located in the country in which it is organized or another
country that is also a member of the OECD; (c) an insurance company, mutual fund
entity which is regularly engaged in making, purchasing or investing in loans or
securities or other financial institution organized under the laws of the United
States, any state thereof, any other country that is a member of the OECD or a
political subdivision of any such country with assets, or assets under
management, in a dollar equivalent amount of at least $100.0 million; (d) any
Affiliate of a Revolving Credit Lender; and (e) any other entity (other than a
natural person) which is an “accredited investor” (as defined in Regulation D
under the United States Securities Act of 1933, as amended) which extends credit
or buys loans as one of its regular businesses including, but not limited to,
insurance companies, mutual funds, and investment funds.  With respect to any
Revolving Credit Lender that is a fund that invests in loans, any other fund
that invests in loans and is managed or advised by the same investment advisor
of such Revolving Credit Lender or by an Affiliate of such investment advisor
shall be treated as a single Eligible Person.

 

“Environmental Claim” shall mean, with respect to any Person, any written
notice, claim, demand or other communication (collectively, a “claim”) by any
other Person alleging such Person’s liability for any costs, cleanup costs,
response or corrective action costs, damages to natural resources or other
Property, personal injuries, fines or penalties arising out of or resulting from
(i) the presence, Release or threatened Release into the environment, of any
Hazardous Material at any location, whether or not owned by such Person, or (ii)
any violation of any Environmental Law.  The term “Environmental Claim” shall
include any claim by any Person seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting

 

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from the presence of Hazardous Materials or arising from alleged injury or
threat of injury to health, safety or the environment.

 

“Environmental Laws” shall mean any and all present and future applicable laws,
rules or regulations of any Governmental Authority, any orders, decrees,
judgments or injunctions and the common law in each case as now or hereafter in
effect, relating to pollution or protection of human health, safety or the
environment, including without limitation, ambient air, indoor air, soil,
surface water, ground water, wetlands, land or subsurface strata, including,
without limitation, those relating to Releases or threatened Releases of
Hazardous Materials into the environment, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.

 

“Equity Interests” shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents, including membership interests
(however designated, whether voting or non-voting), of capital of such Person,
including, if such Person is a partnership, partnership interests (whether
general or limited) and 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, such partnership, whether outstanding on the Closing
Date or issued after the Closing Date.

 

“Equity Issuance” shall mean any of (a) any issuance or sale after the Closing
Date by any Obligor or Subsidiary or any direct or indirect parent of Borrower
of (x) any Equity Interests (including any Equity Interests issued upon exercise
of any Equity Rights) or any Equity Rights, or (y) any other security or
instrument representing an Equity Interest (or the right to obtain any Equity
Interest) in the issuing or selling Person, or (b) the receipt by Borrower or
any Subsidiary after the Closing Date of any capital contribution (whether or
not evidenced by any Equity Interest issued by the recipient of such
contribution) other than from Borrower or any Subsidiary, excluding (x) any
issuance of Equity Interests (or Equity Rights) to the seller or sellers in
consideration for an Acquisition, (y) the issuance of Equity Rights to
management and consultants of Borrower (and the exercise thereof) in an amount
not to exceed 10% (on a fully diluted basis) of the outstanding common Equity
Interests of Borrower, and (z) any issuance of Equity Interests by the Borrower
in connection with any secondary offering of Qualified Capital Stock by Madison
Dearborn Partners, Inc., Madison Dearborn Capital Partners II, L.P. or any of
their Affiliates (to the extent that the Borrower does not receive any Net
Available Proceeds therefrom).  For purposes of this definition, a Person shall
be deemed the “direct or indirect parent” of Borrower only if such Person’s
assets consist solely of Equity Interests of Borrower or Equity Interests of
another direct of indirect parent of Borrower and if Borrower is directly or
indirectly a Wholly Owned Subsidiary of such Person; provided, however, that in
no event, for purposes of this definition, shall Madison Dearborn or any other
fund managed or sponsored by Madison Dearborn be the “direct or indirect parent”
of Borrower.

 

“Equity Rights” shall mean, with respect to any Person, any outstanding
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including any stockholders’ or voting trust agreements) for the
issuance, sale, registration or voting of, or outstanding securities convertible
into, any additional shares of Equity Interests of any class of such Person.

 

“ERISA” shall mean the United States Employee Retirement Income Security Act of
1974, as amended.

 

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“ERISA Group” shall mean Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Code.

 

“Event of Default” see Section 10.

 

“Excess Availability” shall mean, at any time, (a) the lesser of (i) the
Revolving Credit Commitments in effect at such time or (ii) the Borrowing Base
in effect at such time minus (b) the sum of (i) the aggregate principal amount
of (without duplication) all Revolving Credit Loans then outstanding, plus (ii)
the aggregate principal amount of Swing Loans then outstanding, plus (iii) the
aggregate amount of all Letter of Credit Liabilities then outstanding.

 

“Existing Affiliate Agreements” see Section 9.16.

 

“Existing Letters of Credit” means those letters of credit described on Schedule
1.1(c) hereto which have been issued by Fleet National Bank  under the
Borrower’s existing credit facility with, among others, Fleet National Bank.

 

“Extended Revolving Credit Commitment Termination Date” shall mean March 27,
2007.

 

“Federal Funds Rate” shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided, however, that (a) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate quoted to the Administrative Agent on such Business
Day on such transactions by three federal funds brokers of recognized standing,
as determined by the Administrative Agent.

 

“Fee Letter” shall mean the Fee Letter dated as of July 17, 2002 by and among
Fleet Securities, Inc., Fleet National Bank and Borrower.

 

“Fixed Charges” shall mean, for any period of calculation, the sum of (i)
Consolidated Interest Expense of Borrower and its Consolidated Subsidiaries,
(ii) the sum of all scheduled principal payments on any Indebtedness of
Borrower, and voluntary prepayments of Indebtedness (other than Revolving Credit
Loans unless and to the extent accompanied by a permanent reduction of Revolving
Credit Commitments), in  each case to the extent made from internally generated
funds of Borrower and the Subsidiaries, and (iii) Consolidated Rental Expense.

 

“Foreign Plan” see Section 8.7.

 

“Foreign Subsidiary” shall mean any direct or indirect Subsidiary organized
outside of the United States as defined in Section 7701(a)(9) of the Code (or
any successor provision).

 

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“Funding Date” shall mean the date of the making of any extension of credit
hereunder (including the Closing Date).

 

“GAAP” shall mean generally accepted accounting principles set forth as of the
relevant date in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.

 

“Governmental Authority” shall mean any government or political subdivision of
the United States or any other country or any agency, authority, board, bureau,
central bank, commission, department or instrumentality thereof or therein,
including, without limitation, any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to such government or political subdivision.

 

“Guarantee” shall mean the guarantee of each Guarantor pursuant to Section 6.

 

“Guaranteed Obligations” see Section 6.1.

 

“Guarantors” shall mean each of the direct and indirect Domestic Subsidiaries of
Borrower listed on Schedule 1.1(b), and each direct and indirect Domestic
Subsidiary that guarantees the payment of the Obligations of Borrower hereunder
pursuant to Section 9.20 and the other Credit Documents.

 

“Guaranty Obligation” see the definition of Contingent Obligation.

 

“Hazardous Material” shall mean any pollutant, contaminant, toxic, hazardous or
extremely hazardous substance, constituent or waste, or any other constituent,
waste, material, compound or substance including, without limitation, petroleum
including crude oil or any fraction thereof, or any petroleum product, subject
to regulation under any Environmental Law.

 

“Increased Advance Rate” see the definition of Borrowing Base.

 

“Increased Facility Amount” shall mean an increase in the Revolving Credit
Commitments (whether by the Revolving Credit Lenders or New Lenders) of up to
$25.0 Million.

 

“Indebtedness” shall mean, for any Person, without duplication, (a) all
indebtedness for borrowed money of such Person; (b) all obligations issued,
undertaken or assumed by such Person as the deferred purchase price of Property
or services (other than trade payables and accrued expenses not overdue by more
than 90 days incurred in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations of such Person with
respect to Surety Instruments (such as, for example, unpaid reimbursement
obligations in respect of a drawing under a letter of credit); (d) all
obligations of such Person evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the
acquisition of Property or businesses; (e) all indebtedness of such Person
created or arising under any conditional sale or other title retention
agreement, in either case with respect to Property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession

 

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or sale of such Property); (f) all Capital Lease Obligations of such Person; (g)
all net obligations of such Person with respect to Swap Contracts (such
obligations to be equal at any time to the aggregate net amount that would have
been payable by such Person at the most recent fiscal quarter end in connection
with the termination of such Swap Contracts at such fiscal quarter end); (h) all
amounts required to be paid by such Person as a guaranteed payment to partners,
including any mandatory redemption of shares or interests; (i) all indebtedness
of other Persons referred to in clauses (a) through (h) above secured by (or for
which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in Property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such indebtedness; and (j) all
Contingent Obligations of such Person in respect of indebtedness or obligations
of others of the kinds referred to in clauses (a) through (i) above. 
Indebtedness shall not include (i) accounts extended by suppliers in the
ordinary course on normal trade terms in connection with the purchase of goods
and services, (ii) obligations under operating leases (as well as contingent
obligations in respect thereof) or (iii) wages, salaries, accrued vacations or
deferred compensation.  The Indebtedness of any Person shall include any
Indebtedness of any partnership in which such Person is the general partner.

 

“Indemnitee” see Section 12.3.

 

“Indenture” shall mean the Indenture, dated as of December 29, 1997, among the
Borrower, the Subsidiary Guarantors named therein, and Harris Trust and Savings
Bank, an Illinois corporation, as Trustee, as in effect on the Closing Date.

 

“Initial Revolving Credit Commitment Termination Date” shall mean March 27,
2006.

 

“Intercompany Note” shall mean a promissory note substantially in the form of
Exhibit B.

 

“Interest Period” shall mean, with respect to any LIBOR Loan, each period
commencing on the date such LIBOR Loan is made or Converted from an Alternate
Base Rate Loan or the last day of the next preceding Interest Period for such
LIBOR Loan and (subject to the requirements of Sections 2.1(a)(i) and (iii) and
2.10) ending on the numerically corresponding day in the first, second, third or
sixth calendar month thereafter, as Borrower may select as provided in Section
4.5, except that each Interest Period that commences on the last Business Day of
a calendar month (or on any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month. Notwithstanding the
foregoing:  (i) if any Interest Period for any Revolving Credit Loan would
otherwise end after the Revolving Credit Commitment Termination Date, such
Interest Period shall end on the Revolving Credit Commitment Termination Date;
(ii) each Interest Period that would otherwise end on a day that is not a
Business Day shall end on the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); and (iii) notwithstanding clause (i) above, no Interest
Period shall have a duration of less than one month and, if the Interest Period
for any LIBOR Loan would otherwise be a shorter period, such Loan shall not be
available hereunder as a LIBOR Loan for such period.

 

“Interest Rate Certificate” shall mean an Officer’s Certificate substantially in
the form of Exhibit C-1, delivered pursuant to Section 9.1(d), demonstrating in
reasonable detail the calculation of the Leverage Ratio as of the last day of
the Measurement Period

 

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then last ended on or immediately prior to the date such certificate is required
to be delivered.

 

“Inventory” shall include, without limitation, all of Borrower’s now owned or
hereafter acquired “inventory” as defined in the UCC and also all: (a) Goods (as
such term is defined in the UCC) which are leased by a Person as lessor; are
held by a Person for sale or lease or to be furnished under a contract of
service; are furnished by a Person under a contract of service; or consist of
raw materials, work in process, or materials used or consumed in a business; (b)
Goods of said description in transit; (c) Goods of said description which are
returned, repossessed and rejected; (d) packaging, advertising, and shipping
materials related to any of the foregoing; (e) all names, marks, and General
Intangibles (as such term is defined in the UCC) affixed or to be affixed or
associated thereto; and (f) Documents (as such term is defined in the UCC) which
represent any of the foregoing.

 

“Inventory Reserves” shall mean, without duplication, such Reserves as may be
established from time to time by the Administrative Agent in the Administrative
Agent’s reasonable, good faith 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.

 

“Investment” shall mean, for any Person:  (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person; (b) the making of any deposit with, or advance, loan or
other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person); (c) any
capital contribution to (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)
any other Person; (d) the entering into, or direct or indirect incurrence, of
any Contingent Obligation with respect to Indebtedness or other liability of any
other Person; (e) the entering into of any Swap Contract; or (f) any agreement
to make any Investment (including any “short sale” or any sale of any securities
at a time when such securities are not owned by the Person entering into such
sale).

 

“Issuing Lender” shall mean Fleet National Bank, or any of its Affiliates, or
such other Revolving Credit Lender or Revolving Credit Lenders selected by the
Administrative Agent reasonably satisfactory to Borrower, as the issuer of
Letters of Credit under Section 2.3, together with its successors and assigns in
such capacity.

 

“Lead Arranger” shall mean Fleet Securities, Inc.

 

“Lease” shall mean any lease, sublease, franchise agreement, license, occupancy
or concession agreement.

 

“Letter of Credit” see Section 2.3.

 

“Letter of Credit Documents” shall mean, with respect to any Letter of Credit,
collectively, any other agreements, instruments, guarantees or other documents
(whether general in application or applicable only to such Letter of Credit)
governing or providing for (a) the rights and obligations of the parties
concerned or at risk with respect to such Letter of Credit or (b) any collateral
security for any of such obligations, each as the same may be modified and
supplemented and in effect from time to time.

 

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“Letter of Credit Interest” shall mean, for each Revolving Credit Lender, such
Revolving Credit Lender’s participation interest (or, in the case of the Issuing
Lender, the Issuing Lender’s retained interest) in the Issuing Lender’s
liability under Letters of Credit and such Revolving Credit Lender’s rights and
interests in Reimbursement Obligations and fees, interest and other amounts
payable in connection with Letters of Credit and Reimbursement Obligations.

 

“Letter of Credit Liability” shall mean, without duplication, at any time and in
respect of any Letter of Credit, the sum of (a) the undrawn face amount of such
Letter of Credit, plus (b) the aggregate unpaid principal amount of all
Reimbursement Obligations of Borrower at such time due and payable in respect of
all drawings made under such Letter of Credit.

 

“Leverage Ratio” shall mean, at any date, the ratio of (x) Total Debt at such
date to (y) Consolidated EBITDA for the Measurement Period ended on such date,
or, if such date is not the end of a fiscal quarter, the Measurement Period
ended immediately prior to such date.

 

“LIBOR Base Rate” shall mean, with respect to any LIBOR Loan for any Interest
Period therefor, the rate per annum determined by the Administrative Agent to be
the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates
for deposits in Dollars with a term comparable to such Interest Period that
appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page
(as defined below) at approximately 11:00 a.m., London, England time, on the
second full Business Day preceding the first day of such Interest Period;
provided, however, that if there shall at any time no longer exist a Telerate
British Bankers Assoc. Interest Settlement Rates Page, “LIBOR Rate” shall mean,
with respect to each day during each Interest Period pertaining to LIBOR Loans
comprising part of the same Borrowing, the rate per annum equal to the rate at
which the Administrative Agent is offered deposits in Dollars at approximately
11:00 a.m., London, England time, two Business Days prior to the first day of
such Interest Period in the London interbank market for delivery on the first
day of such Interest Period for the number of days comprised therein and in an
amount comparable to its portion of the amount of such LIBOR Loan to be
outstanding during such Interest Period.  “Telerate British Bankers Assoc.
Interest Settlement Rates Page” shall mean the display designated as Page 3750
on the Telerate System Incorporated Service (or such other page as may replace
such page on such service for the purpose of displaying the rates at which
Dollar deposits are offered by leading banks in the London interbank deposit
market).

 

“LIBOR Loans” shall mean Loans that bear interest at rates based on rates
referred to in the definition of “LIBOR Base Rate” in this Section 1.1.

 

“LIBOR Rate” shall mean, for any LIBOR Loan for any Interest Period therefor, a
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Administrative Agent to be equal to the LIBOR Base Rate for
such Loan for such Interest Period divided by 1 minus the Reserve Requirement
(if any) for such Loan for such Interest Period.

 

“Lien” shall mean, with respect to any Property, any mortgage, lien, pledge,
claim, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement in respect of such Property, including any easement,
right-of-way or other encumbrance on title to Real Property, other than ordinary
course rights of set-off of depositary banks.  For purposes of the Credit
Documents, a Person shall be

 

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deemed to own subject to a Lien any Property that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.

 

“Loans” shall mean the Revolving Credit Loans and the Swing Loans.

 

“Losses” of any Person shall mean the losses, liabilities, claims (including
those based upon negligence, strict or absolute liability and liability in
tort), damages, reasonable expenses, obligations, penalties, actions, judgments,
encumbrances, liens, penalties, fines, suits, reasonable and documented costs or
disbursements of any kind or nature whatsoever (including reasonable fees and
expenses of counsel in connection with any Proceeding commenced or threatened in
writing, whether or not such Person shall be designated a party thereto) at any
time (including following the payment of the Obligations) incurred by, imposed
on or asserted against such Person.

 

“Majority Revolving Credit Lenders” shall mean (a) Revolving Credit Lenders
holding at least fifty-one percent (51%) of the aggregate amount of the
Revolving Credit Commitments then outstanding, and (b) if the Revolving Credit
Commitments have been terminated, Revolving Credit Lenders holding at least
fifty-one percent (51%) of the sum of (without duplication) (i) the aggregate
principal amount of outstanding Revolving Credit Loans, plus (ii) the aggregate
amount of all Letter of Credit Liabilities.

 

“Margin Stock” shall mean margin stock within the meaning of Regulations T, U
and X.

 

“Material Adverse Change” shall mean a material adverse change or any condition
or event that could reasonably be expected to result in a material adverse
change in the business, assets, liabilities (contingent or otherwise),
operations, condition (financial or otherwise), solvency, properties or material
agreements or prospects of Borrower and its Subsidiaries, taken as a whole.

 

“Material Adverse Effect” shall mean any of (a) a material adverse effect or any
condition or event that could reasonably be expected to result in a material
adverse effect on the business, assets, liabilities (contingent or otherwise),
operations, condition (financial or otherwise), solvency, properties or material
agreements or prospects of Borrower and its Subsidiaries, taken as a whole, (b)
a material adverse effect on the ability of the Obligors to consummate in a
timely manner the Transactions or to perform their obligations under any Credit
Document or (c) an adverse effect on the legality, binding effect or
enforceability of any material provision of any Credit Document or affecting any
material rights and remedies of the Revolving Credit Lenders thereunder.

 

“Material Plan”  means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $2.0 million as of the end of its last annual valuation
period.

 

“Measurement Period” shall mean the most recent four full fiscal quarters of
Borrower for which financial statements have been provided pursuant to Section
9.1.

 

“Mortgage” shall mean an agreement creating and evidencing a Lien on a Mortgaged
Real Property, which shall be substantially in the form of Exhibit F, containing
such schedules and including such additional provisions and other deviations
from such Exhibit as shall be necessary to conform such document to applicable
or local law or as shall be customary under local law, as the same may at any
time be amended, modified or supplemented in accordance with the terms thereof
and hereof.

 

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“Mortgaged Real Property” shall mean each Real Property which shall be subject
to a Mortgage delivered on the Closing Date or thereafter pursuant to Sections
9.6(m) or 9.12.

 

“Multiemployer Plan” shall mean at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA (a) to which any member of the
ERISA Group is then making or accruing an obligation to make contributions, (b)
to which any member of the ERISA Group has within the preceding five plan years
made contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period, or (c) with respect to
which Borrower or a Subsidiary could incur liability.

 

“NAIC” shall mean the National Association of Insurance Commissioners.

 

“Net Available Proceeds” shall mean:

 

(a)           in the case of any Disposition Event, the amount of Net Cash
Payments received by any Obligor or any of its Subsidiaries in connection with
such Disposition Event less deductions for amounts applied to Indebtedness
secured by Prior Liens on the asset sold, taxes (including income taxes) and
costs of sale;

 

(b)           in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received by
any Obligor or any of its Subsidiaries in respect of such Casualty Event net of
(i) reasonable expenses incurred by such Obligor and its Subsidiaries in
connection therewith, (ii) repayments of Indebtedness to the extent secured by a
Prior Lien on such Property and (iii) any income and transfer taxes payable by
any Obligor or any of its Subsidiaries in respect of such Casualty Event;

 

(c)           in the case of any Equity Issuance or any Debt Issuance, the
aggregate amount of all cash and other property received by any Obligor and its
Subsidiaries in respect thereof net of all reasonable investment banking fees,
discounts and commissions, legal fees, consulting fees, accountants’ fees,
underwriting discounts and commissions and other customary fees and expenses,
actually incurred and satisfactorily documented in connection therewith;

 

(d)           in the case of any Taking or Destruction, the Net Award or Net
Proceeds, as applicable, resulting therefrom; and

 

(e)           with respect to any loss of title to all or any portion of any
Mortgaged Real Property or Real Property, any title insurance proceeds resulting
therefrom less the amount of any expenses (including, without limitation, taxes)
incurred in litigating, arbitrating, compromising or settling any claim arising
out of such loss of title.

 

“Net Award” shall mean the proceeds, award or payment received by any Obligor or
any of its Subsidiaries in respect of any Taking, together with any interest
thereon, less the amount of any reasonable expenses (including, without
limitation, any taxes) incurred in litigating, arbitrating, compromising or
settling any claim arising out of any such Taking including repayments of any
Indebtedness secured by a Prior Lien.

 

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“Net Cash Payments” shall mean, with respect to any Disposition Event, the
aggregate amount of all cash payments (including any cash payments received by
way of deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise, but only as and
when received) received by any Obligor or any of its Subsidiaries directly or
indirectly in connection with such Disposition Event; provided, however, that
Net Cash Payments shall be net (without duplication) of (a) the amount of all
reasonable fees and expenses paid by any Obligor or any of its Subsidiaries in
connection with such Disposition Event (the “Relevant Disposition”); (b) any
repayments by any Obligor or any of its Subsidiaries of Indebtedness to the
extent that (i) such Indebtedness is secured by a Prior Lien on the Property
that is the subject of the Relevant Disposition and (ii) the transferee of (or
holder of a Lien on) such Property requires that such Indebtedness be repaid as
a condition to the purchase of such Property; and (c) amounts required to be
paid to any Person (other than any Obligor or any of its Subsidiaries) owning a
beneficial interest in the assets subject to such Relevant Disposition.

 

“Net Proceeds” shall mean the proceeds of any insurance or other payment
received by any Obligor or any of its Subsidiaries in connection with any
Destruction, less repayment of any Indebtedness secured by a Prior Lien, less
the amount of any reasonable expenses (including, without limitation, any taxes)
incurred in litigating, arbitrating, compromising or settling any claim arising
out of such Destruction and less the amount of any other reasonable expenses
incurred as a result of such Destruction.

 

“New Lenders” shall mean any financial institutions reasonably acceptable to the
Administrative Agent who provide any or all of the Increased Facility Amount.

 

“Non-U.S. Lender” see Section 5.6(b).

 

“Normal Advance Rate” see the definition of Borrowing Base.

 

“Notes” shall mean the Revolving Credit Notes and the Swing Loan Note.

 

“Notice of Assignment” shall mean a notice of assignment pursuant to Section
12.6 substantially in the form of Exhibit E.

 

“Obligations” shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to any
Creditor pursuant to the terms of any Credit Document or secured by any of the
Security Documents.

 

“Obligors” shall mean Borrower and the Guarantors.

 

“Officer’s Certificate” shall mean, as applied to any corporation, a certificate
executed on behalf of such corporation by its Chief Executive Officer, or one of
its Vice Presidents or its Chief Financial Officer in his or her official (and
not individual) capacity and without personal liability and which certificate,
if given with respect to the compliance with a condition precedent to the making
of any Loan or the taking of any other action hereunder, shall include (a) a
statement that the officer making or giving such Officer’s Certificate has read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, and (b) a statement as to whether, in the opinion of
the signer (in his or her official, but not individual, capacity), such
condition has been complied with.

 

“Other Taxes” see Section 5.6(c).

 

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“Overadvance Period” shall mean the period commencing on the Closing Date and
ending on the earlier of (i) November 30, 2002, or (ii) the date selected by the
Borrower in accordance with the provisions of Section 2.5(c) hereof.

 

“Participant” see Section 12.6(c).

 

“Payor” see Section 4.6.

 

“PBGC” shall mean the United States Pension Benefit Guaranty Corporation or any
successor thereto.

 

“Permitted Holders” shall mean Madison Dearborn and any of its Affiliates
controlled by Madison Dearborn.

 

“Permitted Investments” shall mean, for any Person:  (a) direct obligations of
the United States of America, or of any agency thereof, or obligations
guaranteed as to principal and interest by the United States of America, or by
any agency thereof, in either case maturing not more than one year from the date
of acquisition thereof by such Person; (b) time deposits, certificates of
deposit, bankers’ acceptances (including eurodollar deposits) issued by any bank
or trust company organized or licensed under the laws of the United States of
America or any state thereof and having capital, surplus and undivided profits
of at least $500.0 million and a deposit rating of investment grade; (c)
commercial paper rated A-1 or better by Standard & Poor’s Corporation or P-1 or
better by Moody’s Investors Service, Inc., respectively, maturing not more than
270 days from the date of acquisition thereof by such Person; and (d) money
market mutual funds that invest primarily in the foregoing items.

 

“Permitted Liens” see Section 9.7.

 

“Person” shall mean any individual, corporation, company, voluntary association,
partnership, joint venture, trust, unincorporated organization or government (or
any agency, instrumentality or political subdivision thereof).

 

“Plan” shall mean at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or with respect to which Borrower or a Subsidiary
could incur liability.

 

“Pledged Collateral” shall have the meaning set forth in the Security Agreement.

 

“Preferred Stock” means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person’s preferred or preference stock whether now outstanding or issued after
the Closing Date, and including, without limitation, all classes and series of
preferred or preference stock of such Person.

 

“Prime Rate” shall mean for any day, a rate per annum that is equal to the
corporate base rate of interest announced by Administrative Agent from time to
time, changing when and as said corporate base rate changes.  The corporate base
rate is not necessarily the lowest rate charged by the Administrative Agent to
its customers.

 

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“Principal Office” shall mean the office of the Administrative Agent, located on
the Closing Date at 100 Federal Street, Boston, Massachusetts 02110.

 

“Prior Liens” shall mean Liens which, pursuant to the provisions of any Security
Document, are or may be superior to the Lien of such Security Document.

 

“Proceeding” shall mean any claim, counterclaim, action, judgment, suit,
hearing, governmental investigation, arbitration or proceeding, including by or
before any Governmental Authority and whether judicial or administrative.

 

“Property” shall mean any right or interest in or to property or assets of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible and including Equity Interests or other ownership interests of any
Person.

 

“Qualified Capital Stock” shall mean with respect to any Person any Equity
Interest of such Person that is not Disqualified Capital Stock.

 

“Quarterly Dates” shall mean the last Business Day of March, June, September and
December in each year, commencing with the last Business Day of September 2002.

 

“Real Property” shall mean all right, title and interest of Borrower or any
Subsidiary (including, without limitation, any leasehold estate) in and to a
parcel of real property owned or operated by Borrower or any Subsidiary together
with, in each case, all improvements and appurtenant fixtures, equipment,
personal property, easements and other property and rights incidental to the
ownership, lease or operation thereof.

 

“Redeemable Capital Stock” means any class or series of Equity Interests of a
Person that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time, would be, required to be redeemed
prior to the final stated maturity date of the notes issued under the Indenture
or is redeemable at the option of the holder thereof at any time prior to the
final stated maturity date of the notes issued under the Indenture, or is
convertible into or exchangeable for debt securities at any time prior to the
final stated maturity date of the notes issued under the Indenture.

 

“Refinancing” see Section 9.8(l).

 

“Register” see Section 2.9(d).

 

“Regulation D” shall mean Regulation D (12 C.F.R. Part 204) of the Board of
Governors of the United States Federal Reserve System.

 

“Regulatory Change” shall mean, with respect to any Revolving Credit Lender, any
change after the Closing Date in any law or regulations (including Regulation D)
of any Governmental Authority or the adoption or making after such date of any
interpretation, directive or request applying to a class of banks or other
financial institutions including such Revolving Credit Lender of or under any
law or regulations of any Governmental Authority (whether or not having the
force of law and whether or not failure to comply therewith would be unlawful)
by any court or governmental or monetary authority or any other regulatory
agency with proper authority, including nongovernmental agencies or bodies,
charged with the interpretation or administration thereof or by the NAIC.

 

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“Reimbursement Obligations” shall mean, at any time, the obligations of Borrower
then outstanding, or that may thereafter arise in respect of all Letters of
Credit then outstanding, to reimburse amounts paid by the Issuing Lender in
respect of any drawings under a Letter of Credit.

 

“Related Document” shall mean any agreement, document or instrument entered into
by any Obligor in connection with any document, as any such agreement, document
or instrument is amended and in effect from time to time in accordance with its
terms and this Agreement.

 

“Related Parties” see Section 11.1.

 

“Release” shall mean any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of any Hazardous
Material into the environment.

 

“Relevant Parties” and “Relevant Party” see Section 10(b).

 

“Replaced Lender” see Section 2.12.

 

“Replacement Lender” see Section 2.12.

 

“Required Payment” see Section 4.6.

 

“Requirement of Law” shall mean as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.

 

“Reserve Requirement” shall mean, for any Interest Period for any LIBOR Loan,
the average maximum rate at which reserves (including any marginal, supplemental
or emergency reserves) are required to be maintained during such Interest Period
under Regulation D by member banks of the United States Federal Reserve System
in New York City with deposits exceeding one billion Dollars against
“Eurocurrency liabilities” (as such term is used in Regulation D).  LIBOR Loans
shall be deemed to constitute Eurocurrency liabilities and to be subject to such
reserve requirements without benefit of or credit for proration, exceptions or
offsets which may be available from time to time to any Revolving Credit Lender
under Regulation D.

 

“Reset Date” see the definition of “Applicable Margin.”

 

“Responsible Officer” shall mean the chief executive officer of Borrower and the
president of Borrower (if not the chief executive officer) and, with respect to
financial matters, the chief financial officer of Borrower.

 

“Restricted Subsidiary” shall mean, at any time, any direct or indirect
Subsidiary of the Borrower that is not then an Unrestricted Subsidiary;
provided, however, that upon the occurrence of any Unrestricted Subsidiary
ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in
the definition of “Restricted Subsidiary.”

 

“Revolving Credit Commitment” shall mean, for each Revolving Credit Lender, the
obligation of such Revolving Credit Lender to make Revolving Credit Loans in an

 

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aggregate principal amount at any one time outstanding up to but not exceeding
the amount set opposite the name of such Revolving Credit Lender on Annex A
under the caption “Revolving Credit Commitment” (as the same may be reduced from
time to time pursuant to Section 2.5 or changed pursuant to Section 12.6(b)). 
The aggregate principal amount of the Revolving Credit Commitments at the
Closing Date is $135.0 million.

 

“Revolving Credit Commitment Percentage” shall mean, with respect to any
Revolving Credit Lender, the ratio of (a) the amount of the Revolving Credit
Commitment of such Revolving Credit Lender to (b) the aggregate amount of the
Revolving Credit Commitments of all of the Revolving Credit Lenders.

 

“Revolving Credit Commitment Termination Date” shall mean the Initial Revolving
Credit Commitment Termination Date or, if extended in accordance with Section
2.4, the Extended Revolving Credit Commitment Termination Date.

 

“Revolving Credit Commitments” shall mean the aggregate sum of the Revolving
Credit Commitment of all of the Revolving Credit Lenders, including the
Increased Facility Amount, if any.

 

“Revolving Credit Lenders” shall mean (a) on the Closing Date, the Revolving
Credit Lenders having Revolving Credit Commitments on the signature pages hereof
and (b) thereafter, the Revolving Credit Lenders from time to time holding
Revolving Credit Loans and Revolving Credit Commitments after giving effect to
any assignments thereof permitted by Section 12.6(b).

 

“Revolving Credit Loans” see Section 2.1(a).

 

“Revolving Credit Notes” shall mean the promissory notes provided for by Section
2.9(a) and all promissory notes delivered in substitution or exchange therefor,
in each case as the same shall be modified and supplemented and in effect from
time to time.

 

“Section 5.6 Certificate” see Section 5.6(b).

 

“Security Agreement” shall mean a Security Agreement substantially in the form
of Exhibit D among the Obligors and the Administrative Agent, as the same may be
amended, modified or supplemented in accordance with the terms thereof and
hereof.

 

“Security Documents” shall mean the Security Agreement, the Mortgage, and all
Uniform Commercial Code financing statements required by this Agreement, the
Security Agreement or any Mortgage to be filed with respect to the security
interests in Property and fixtures created pursuant to the Security Agreement or
any Mortgage and any other document or instrument utilized to pledge as
Collateral for the Obligations any property or assets of whatever kind or
nature.

 

“Senior Subordinated Financing” shall mean the issuance by Borrower of Senior
Subordinated Notes pursuant to the Senior Subordinated Note Documents for gross
cash proceeds of $100 million.

 

“Senior Subordinated Notes” shall mean the unsecured senior subordinated notes
issued pursuant to the Senior Subordinated Financing, including the senior
subordinated notes issued pursuant to a registered exchange offer therefor made
pursuant to the

 

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registration rights agreement entered into in connection with the issuance
thereof on December 29, 1997.

 

“Senior Subordinated Note Documents” shall mean the Indenture pursuant to which
the Senior Subordinated Notes were issued and all documents relating thereto, as
any such agreement or document may be amended and in effect from time to time in
accordance with its terms and this Agreement.

 

“Solvent” and “Solvency” shall mean, for any Person on a particular date, that
on such date (a) the fair value of the Property of such Person on a going
concern basis is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present fair
salable value of the Property of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (c) such Person does not intend to, and does
not believe that it will, incur debts and liabilities beyond such Person’s
ability to pay as such debts and liabilities mature, (d) such Person is not
engaged in a business or a transaction, and is not about to engage in a business
or a transaction, for which such Person’s Property would constitute an
unreasonably small capital and (e) such Person is able to pay its debts as they
become due and payable.

 

“State and Local Real Property Disclosure Requirements” shall mean any state or
local laws requiring notification of the buyer of real property, or
notification, registration, or filing to or with any state or local agency,
prior to the sale of any real property or transfer of control of an
establishment, of the actual or threatened presence or release into the
environment, or the use, disposal, or handling of Hazardous Materials on, at,
under, or near the real property to be sold or the establishment for which
control is to be transferred.

 

“Subordinated Debt” shall mean Indebtedness of Borrower which is subordinated to
the Obligations in right and time of payment on terms and conditions and
pursuant to documentation satisfactory to the Administrative Agent (which shall
include the Senior Subordinated Notes); provided, however, that no Indebtedness
will be deemed to be subordinate for purposes of this Agreement merely by virtue
of lack of a security interest in any collateral.

 

“Subordination Provisions” see Section 10(m).

 

“Subsidiary” shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.  Unless the context clearly requires otherwise, all references to
any Subsidiary shall mean a Subsidiary of Borrower.

 

“Surety Instruments” shall mean all letters of credit (including standby and
commercial), bankers’ acceptances, bank guarantees, surety bonds and similar
instruments.

 

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“Survey” shall mean a survey of any Mortgaged Real Property (and all
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state, province or country where such Mortgaged Real
Property is located, (ii) dated (or redated) not earlier than six months prior
to the date of delivery thereof unless there shall have occurred within the six
months prior to such date of delivery any exterior construction on the site of
such Mortgaged Real Property, in which event such survey shall be dated (or
redated) after the completion of such construction or, if such construction
shall not have been completed as of such date of delivery, not earlier than 20
days prior to such date of delivery, (iii) certified by the surveyor (in a
manner reasonably acceptable to the Administrative Agent) to the Administrative
Agent and the Title Company and (iv) complying in all respects with the minimum
detail requirements of the American Land Title Association as such requirements
are in effect on the date of preparation of such survey.

 

“Swap Contract” means any agreement (including any master agreement and any
agreement, whether or not in writing, relating to any single transaction) that
is an interest rate swap agreement, basis swap, forward rate agreement,
commodity swap, commodity option, equity or equity index swap or option, bond
option, interest rate option, foreign exchange agreement, rate cap, collar or
floor agreement, currency swap agreement, cross-currency rate swap agreement,
swap option, currency option or any other similar agreement (including any
option to enter into any of the foregoing).

 

“Swing Loan Commitment” shall mean the obligation of Fleet National Bank to make
or continue Swing Loans hereunder in an aggregate principal amount up to but not
exceeding $10,000,000, as the same may be reduced or terminated pursuant to
Section 2.5 or Section 10, it being understood that the Swing Loan Commitment is
part of the Revolving Credit Commitment of the Swing Loan Lender, rather than a
separate, independent commitment.

 

“Swing Loan Lender” shall mean Fleet National Bank, and its successors and
assigns in such capacity.

 

“Swing Loan Maturity Date” shall mean the Revolving Credit Commitment
Termination Date.

 

“Swing Loan Note” shall mean the promissory note made by Borrower evidencing the
Swing Loans, in the form of Exhibit A-2.

 

“Swing Loans” see Section 2.1(b).

 

“Syndication Agent” see the introduction to this Agreement.

 

“Taking” shall mean any taking of any Mortgaged Real Property or Real Property
of any Obligor or any of its Subsidiaries or any part thereof, in or by
condemnation or other eminent domain proceedings pursuant to any law, general or
special, or by reason of the temporary requisition of the use or occupancy of
any Mortgaged Real Property or Real Property of any Obligor or any of its
Subsidiaries or any part thereof, by any Governmental Authority, civil or
military.  Taking shall not include any Casualty Event.

 

“Tax Benefit” see Section 5.6(a).

 

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“Title Company” shall mean Chicago Title Insurance Company or such other title
insurance or abstract company as shall be mutually agreeable to Borrower and the
Administrative Agent.

 

“Total Debt” shall mean at any date, the aggregate amount of Indebtedness
(including Revolving Credit Loans, Swing Loans and Letter of Credit Liabilities)
of Borrower and the Consolidated Subsidiaries as of such date (other than
Indebtedness described in clauses (b), (g), and (j) of the definition of
Indebtedness), determined on a consolidated basis in accordance with GAAP.

 

“Transaction Documents” shall mean any operative document relating to the
Transactions, including but not limited to the Credit Documents and each of the
Related Documents with respect thereto, in each case, including all schedules,
exhibits, appendices, annexes and attachments and amendments thereto and, in
each case, as amended and in effect from time to time in accordance with their
respective terms and this Agreement.

 

“Transactions” shall mean the borrowings hereunder and the other transactions
contemplated hereby to occur on the Closing Date.

 

“Type” see Section 1.3.

 

“UCC” shall mean the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts.

 

“Unfunded Liabilities” shall mean, with respect to any Plan at any time, the
amount (if any) by which (a) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (b) the fair market
value of all Plan assets allocable to such liabilities under Title I of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan.

 

“Unrestricted Subsidiary” means (a) any Subsidiary that at the time of
determination shall be an Unrestricted Subsidiary (as designated by the Board of
Directors of the Borrower, as provided below), and (b) any Subsidiary of an
Unrestricted Subsidiary; provided, however, that in no event shall any Guarantor
be an Unrestricted Subsidiary.  The Board of Directors of the Borrower may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Borrower
nor any Restricted Subsidiary is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) no default with respect to any
Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Borrower or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity,
(iii) any Investment in such Subsidiary made as a result of designating such
Subsidiary an Unrestricted Subsidiary will not violate the provisions of this
Agreement, (iv) neither the Borrower nor any Restricted Subsidiary has a
contract, agreement, arrangement, understanding or obligation of any kind,
whether written or oral, with such Subsidiary other than those that might be
obtained at the time from Persons who are not Affiliates of the Borrower, and
(v) neither the Borrower nor any Restricted Subsidiary has any obligation (1) to
subscribe for additional shares of Capital Stock or other equity interest in
such Subsidiary, or (2) to maintain or preserve such Subsidiary’s financial
condition or to cause such Subsidiary to

 

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achieve certain levels of operating results.  Any such designation by the Board
of Directors of the Borrower shall be evidenced to the Administrative Agent by
filing a board resolution with the Administrative Agent giving effect to such
designation.  The Board of Directors of the Borrower may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if immediately after giving
effect to such designation, there would be no Default or Event of Default under
this Agreement and the Borrower could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 1008 of the Senior
Subordinated Note Documents.

 

“Unutilized Revolving Credit Commitment” shall mean, for any Revolving Credit
Lender, at any time, the excess of such Revolving Credit Lender’s Revolving
Credit Commitment at such time over the sum of (a) the aggregate outstanding
principal amount of Revolving Credit Loans made by such Revolving Credit Lender,
(b) such Revolving Credit Lender’s Revolving Credit Commitment Percentage of the
aggregate amount of Letter of Credit Liabilities at such time, and (c) with
respect to the Swing Loan Lender only, the aggregate principal amount of Swing
Loans then outstanding.

 

“Wholly Owned Subsidiary” shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors’ qualifying shares or shares required to be held by foreign nationals)
are directly or indirectly owned or controlled by such Person or one or more
Wholly Owned Subsidiaries of such Person or by such Person and one or more
Wholly Owned Subsidiaries of such Person.  Unless the context clearly requires
otherwise, all references to any Wholly Owned Subsidiary shall mean a Wholly
Owned Subsidiary of Borrower.

 

1.2           Accounting Terms and Determinations.  Except as otherwise provided
in this Agreement, all computations and determinations as to accounting or
financial matters shall be made in accordance with GAAP, and all accounting or
financial terms shall have the meanings ascribed to such terms by GAAP as in
effect on the Closing Date.  All financial statements to be delivered pursuant
to this Agreement shall be prepared in accordance with GAAP.  All financial
covenants are to be calculated in accordance with GAAP as in effect on the
Closing Date unless such modifications are agreed to by the parties hereto.

 

1.3           Types of Loans.  Loans hereunder are distinguished by “Type”.  The
“Type” of a Loan refers to whether such Loan is an Alternate Base Rate Loan or a
LIBOR Loan, each of which constitutes a Type.

 

1.4           Rules of Construction.

 

(a)           In this Agreement and each other Credit Document, unless the
context clearly requires otherwise (or such other Credit Document clearly
provides otherwise), references to (i) the plural include the singular, the
singular the plural and the part the whole; (ii) Persons include their
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons; (iii)
agreements (including this Agreement), promissory notes and other contractual
instruments include subsequent amendments, assignments, and other modifications
thereto, but only to the extent such amendments, assignments or other
modifications thereto are not prohibited by their terms or the terms of any
Credit Document; (iv) statutes and related regulations include any amendments of
same and any successor statutes and regulations; and (v) time shall be a
reference to Boston, Massachusetts time.  Where any provision herein refers to
action to be taken by any

 

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Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

 

(b)           In this Agreement and each other Credit Document, unless the
context clearly requires otherwise (or such other Credit Document clearly
provides otherwise), (i) “amend” shall mean “amend, amend and restate,
supplement or modify”; and “amended” and “amendment” shall have meanings
correlative to the foregoing; (a) in the computation of periods of time from a
specified date to a later specified date, “from” shall mean “from and
including”; “to” and “until” shall mean “to but excluding”; and “through” shall
mean “to and including”; (ii) “hereof,” “herein” and “hereunder” (and similar
terms) in this Agreement or any other Credit Document refer to this Agreement or
such other Credit Document, as the case may be, as a whole and not to any
particular provision of this Agreement or such other Credit Document; (iii)
“including” (and similar terms) shall mean “including without limitation” (and
similarly for similar terms); (iv) “or” has the inclusive meaning represented by
the phrase “and/or”; (b) “satisfactory to” any Creditor shall mean in form,
scope and substance and on terms and conditions satisfactory to such Creditor;
and (v) references to “the date hereof” shall mean the Closing Date.

 

(c)           In this Agreement unless the context clearly requires otherwise,
any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or
Schedule, as the case may be, attached to this Agreement and constituting a part
hereof, and (ii) a Section or other subdivision is to a Section or such other
subdivision of this Agreement.

 

(d)           No doctrine of construction of ambiguities in agreements or
instruments against the interests of the party controlling the drafting thereof
shall apply to any Credit Document.

 

Section 2.                                            Commitments, Loans, Notes,
Prepayments, Replacement of Revolving Credit Lenders and Annual Cleandown.

 

2.1           Loans.

 

(a)           Revolving Credit Loans.

 

(i)            Each Revolving Credit Lender severally agrees, on the terms and
conditions of this Agreement, to make revolving credit loans (the “Revolving
Credit Loans”) to Borrower in Dollars during the period from and including the
Closing Date to but not including the Revolving Credit Commitment Termination
Date in an aggregate principal amount at any one time outstanding not exceeding
the amount of the Revolving Credit Commitment of such Revolving Credit Lender as
in effect from time to time; provided, however, that in no event shall the sum
of the aggregate principal amount of (without duplication) all Revolving Credit
Loans then outstanding, plus the aggregate principal amount of Swing Loans then
outstanding, plus the aggregate amount of all Letter of Credit Liabilities at
any time exceed the lesser of (i) the aggregate amount of the Revolving Credit
Commitments as in effect at such time and (ii) the Borrowing Base as in effect
at such time.  Subject to the terms and conditions of this Agreement, during
such period Borrower may borrow, repay and reborrow the amount of the Revolving
Credit Commitments by means of Alternate Base Rate Loans and LIBOR Loans and may
Convert Revolving Credit Loans of one Type into Revolving Credit Loans of
another Type (as provided in Section 2.10) or

 

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Continue Revolving Credit Loans of one Type as Revolving Credit Loans of the
same Type (as provided in Section 2.10).

 

(ii)           Borrower may at any time request that the Revolving Credit
Lenders provide all or a portion of the Increased Facility Amount, provided that
(A) at the time of making the request, and after giving effect to the requested
increase, the Borrower is in compliance with the financial covenants set forth
in Section 9.11 of this Agreement and (B) no Default or Event of Default has
occurred and is continuing, and (C) the offer to provide the Increased Facility
Amount shall be made first to all Revolving Credit Lenders on a pro rata basis.
No Revolving Credit Lender shall have any obligation to make available any such
increase in the Revolving Credit Commitments.  To the extent existing Revolving
Credit Lenders decline to make available all of the Increased Facility Amount,
Borrower may approach New Lenders to provide such increase provided that the
conditions to obtaining the Increased Facility Amount set forth in this Section
2.1(a)(ii) have been satisfied; provided, however, that any such New Lenders
shall be acceptable to the Administrative Agent and, upon the making of a
Revolving Credit Commitment pursuant to the Increased Facility Amount, shall be
treated as Revolving Credit Lenders for all purposes of this Agreement.  If and
to the extent agreed to be extended by any Revolving Credit Lender or New
Lender, the Increased Facility Amount shall become available under, and part of,
the Revolving Credit Commitments.

 

(iii)          Limit on LIBOR Loans.  No more than ten (10) separate Interest
Periods in respect of LIBOR Loans may be outstanding at any one time. No LIBOR
Loans shall be made on the Closing Date.

 

(b)           Swing Loans.  Subject to the terms and conditions of this
Agreement, upon request of Borrower, the Swing Loan Lender agrees to make one or
more swing loans to Borrower from time to time from and including the Closing
Date, to but excluding the Swing Loan Maturity Date, up to but not exceeding the
amount of the Swing Loan Lender’s Swing Loan Commitment as then in effect. 
(Such swing loans referred to in this Section 2.1(b) now or hereafter made by
the Swing Loan Lender to Borrower from and including and after the Closing Date
are hereinafter collectively called the “Swing Loans”.)  Prior to the Swing Loan
Maturity Date, Borrower may borrow, repay and reborrow Swing Loans up to the
Swing Loan Commitment in accordance with the terms of this Agreement, provided
that no Swing Loan shall remain outstanding for more than ten days.  The Swing
Loan Lender shall not make any Swing Loans on or after the Swing Loan Maturity
Date.  Notwithstanding anything to the contrary contained in this Section 2.1(b)
or elsewhere in this Agreement, the Swing Loan Lender shall not, pursuant to
this Section 2.1(b) or otherwise, make any Swing Loan to or for the account of
Borrower, and Borrower shall not be entitled to borrow, pursuant to this Section
2.1(b), if, after giving full effect to the requested Swing Loan, the aggregate
outstanding amount of Revolving Credit Loans, plus the aggregate outstanding
amount of Swing Loans, plus the aggregate outstanding Letter of Credit
Liabilities would exceed the lesser of (i) the aggregate amount of the Revolving
Credit Commitments as in effect at such time and (ii) the Borrowing Base as in
effect at such time.  Notwithstanding anything herein or elsewhere to the
contrary, the Swing Loans will be made and maintained only as Alternate Base
Rate Loans.  The Swing Loan Lender shall not make any Swing Loan after receiving
a written notice from Borrower or the Majority Revolving Credit Lenders stating
that a Default or an Event of Default exists and is continuing until such time
as the Swing Loan Lender shall have received written notice of (i) rescission of
all such notices from the party or parties originally delivering such

 

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notice, (ii) the waiver of such Default or Event of Default by the Majority
Revolving Credit Lenders, or (iii) the Administrative Agent’s good faith
determination that such Default or Event of Default has ceased to exist.  Swing
Loans shall be made and repaid in minimum amounts of $50,000 and integral
multiples of $10,000 above such amount.

 

Upon the occurrence of a Default, each Revolving Credit Lender shall be deemed
to have purchased (and each Revolving Credit Lender hereby irrevocably agrees to
purchase on a pro rata basis (based upon each Revolving Credit Lender’s
Revolving Credit Commitment)) an irrevocable risk participation in all
outstanding Swing Loans, together with all accrued interest thereon, without any
further action by or on behalf of the Swing Loan Lender, any other Revolving
Credit Lender, Borrower or any other Person.  Upon one Business Day’s notice
from the Swing Loan Lender, each other Revolving Credit Lender shall deliver to
the Swing Loan Lender an amount equal to its respective participation in such
Swing Loan (as determined pursuant to the immediately preceding sentence) in
cash. If any Revolving Credit Lender fails to make available to the Swing Loan
Lender the amount of such Revolving Credit Lender’s participation as provided in
this paragraph, the Swing Loan Lender shall be entitled to recover such amount
on demand from such Revolving Credit Lender, together with interest thereon at
the Federal Funds Rate until such amount is paid in full in cash.  In the event
the Swing Loan Lender receives a payment from Borrower or any other Obligor of
any amount in which the Revolving Credit Lenders have purchased participations
as provided in this paragraph, the Swing Loan Lender shall distribute (after
first applying any such payment to any fees, costs and expenses of the Swing
Loan Lender) to each Revolving Credit Lender its pro rata share of such
payment.  Anything contained in this Agreement or otherwise to the contrary
notwithstanding, (A) each Revolving Credit Lender’s obligation to purchase a
participation in each unpaid Swing Loan shall be absolute and unconditional and
shall not be affected by any circumstances, including, without limitation, (1)
any setoff, counterclaim, recoupment, defense or other right which such
Revolving Credit Lender may now or hereafter have against the Swing Loan Lender,
Borrower or any other Person for any reason whatsoever, (2) the occurrence or
continuation of a Default or an Event of Default, (3) any Material Adverse
Change in the condition of Borrower or any Subsidiary, (4) any breach or default
of this Agreement or any of the Security Documents by any Person other than by
the Swing Loan Lender, or (5) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing, and (B) the Swing
Loan Lender shall not have any obligation to make any Swing Loans if, at the
time of Borrower’s request for the Swing Loan, (1) Borrower fails for whatever
reason to satisfy any of the conditions precedent set forth in Section 7.2 or
(2) any Revolving Credit Lender fails for whatever reason to comply with its
obligations under this Section 2.1(b).

 

2.2           Borrowings.  Borrower shall give the Administrative Agent notice
of each borrowing hereunder as provided in Section 4.5.  The form of such notice
of borrowing shall be substantially in the form of Exhibit H.  Not later than
12:00 noon Boston, Massachusetts time on the date specified for each borrowing
hereunder, each Revolving Credit Lender shall make available the amount of the
Loan or Loans to be made by it on such date to the Administrative Agent, at an
account specified by the Administrative Agent maintained at the Principal
Office, in immediately available funds, for account of Borrower.  Each borrowing
of Revolving Credit Loans shall be made by each Revolving Credit Lender pro rata
based on such Revolving Credit Lender’s Revolving Credit Commitment Percentage. 
The amounts so received by the Administrative Agent shall, subject to the terms
and conditions of this Agreement, be made available to Borrower by depositing
the same, in immediately available funds, in an account of Borrower maintained
with the Administrative Agent at the Principal Office designated by Borrower.

 

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2.3           Letters of Credit.  Subject to the terms and conditions hereof,
the Revolving Credit Commitments may be utilized, upon the request of Borrower,
in addition to the Revolving Credit Loans provided for by Section 2.1(a), for
standby and commercial letters of credit (herein collectively called “Letters of
Credit”) issued by the Issuing Lender for the account of Borrower; provided,
however, that in no event shall (i) the aggregate amount of all Letter of Credit
Liabilities, plus the aggregate principal amount of the Revolving Credit Loans
then outstanding, plus the aggregate principal amount of Swing Loans then
outstanding exceed at any time the lesser of (x) the Revolving Credit
Commitments as in effect at such time and (y) the Borrowing Base as in effect at
such time, (ii) the sum of the aggregate principal amount of Revolving Credit
Loans then outstanding made by any Revolving Credit Lender, plus such Revolving
Credit Lender’s pro rata share (based on the Revolving Credit Commitments) of
the aggregate principal amount of Swing Loans then outstanding, plus such
Revolving Credit Lender’s pro rata share (based on the Revolving Credit
Commitments) of the aggregate amount of all Letter of Credit Liabilities exceed
such Revolving Credit Lender’s Revolving Credit Commitment as in effect at such
time, (iii) the outstanding aggregate amount of all Letter of Credit Liabilities
exceed $25 million, (iv) the face amount of any Letter of Credit be less than
$10,000, (v) the expiration date of any Letter of Credit extend beyond the
earlier of (x) the fifth Business Day preceding the Revolving Credit Commitment
Termination Date (unless cash collateralized (or backstopped by irrevocable
letters of credit) beyond such date on terms and conditions and pursuant to
documentation satisfactory to the Majority Revolving Credit Lenders) and (y) the
date twelve months following the date of such issuance for standby Letters of
Credit or 270 days after the date of such issuance for commercial Letters of
Credit, unless the Majority Revolving Credit Lenders have approved such expiry
date in writing (but never beyond the fifth Business Day prior to the Revolving
Credit Commitment Termination Date); provided, however, that any standby Letter
of Credit may be automatically extended for periods of up to one year (but never
beyond the fifth Business Day preceding the Revolving Credit Commitment
Termination Date) so long as such Letter of Credit provides that the Issuing
Lender retains an option satisfactory to the Issuing Lender, to terminate such
Letter of Credit prior to each extension date, unless all of the Revolving
Credit Lenders have approved such expiry date in writing, or (vi) the Issuing
Lender issue any Letter of Credit after it has received notice from Borrower or
the Majority Revolving Credit Lenders stating that a Default or Event of Default
exists until such time as the Issuing Lender shall have received written notice
of (x) rescission of such notice from the Majority Revolving Credit Lenders, (y)
waiver of such Default or Event of Default in accordance with this Agreement or
(z) the Administrative Agent’s good faith determination that such Default or
Event of Default has ceased to exist.  Without limiting the foregoing, Existing
Letters of Credit shall be deemed to be Letters of Credit issued under this
Agreement and shall be entitled to all of the benefits hereof.

 

The following additional provisions shall apply to Letters of Credit:

 

(a)           Borrower shall give the Administrative Agent at least three
Business Days’ irrevocable prior notice (effective upon receipt) specifying the
date (which shall be no later than thirty days preceding the Revolving Credit
Commitment Termination Date) each Letter of Credit is to be issued and
describing in reasonable detail the proposed terms of such Letter of Credit
(including the beneficiary thereof) (including whether such Letter of Credit is
to be a commercial Letter of Credit or a standby Letter of Credit). Upon receipt
of any such notice, the Administrative Agent shall advise the Issuing Lender of
the contents thereof.

 

(b)           On each day during the period commencing with the issuance by the
Issuing Lender of any Letter of Credit and until such Letter of Credit shall
have expired or been terminated, the Revolving Credit Commitment of each
Revolving Credit Lender shall be deemed to be utilized for all purposes hereof
in an amount equal to such

 

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Revolving Credit Lender’s Revolving Credit Commitment Percentage of the then
undrawn face amount of such Letter of Credit.  Each Revolving Credit Lender
(other than the Issuing Lender) agrees that, upon the issuance of any Letter of
Credit hereunder, it shall automatically acquire a participation in the Issuing
Lender’s liability under such Letter of Credit in an amount equal to such
Revolving Credit Lender’s Revolving Credit Commitment Percentage of such
liability, and each Revolving Credit Lender (other than the Issuing Lender)
thereby shall absolutely, unconditionally and irrevocably assume, as primary
obligor and not as surety, and shall be unconditionally obligated to the Issuing
Lender to pay and discharge when due, its Revolving Credit Commitment Percentage
of the Issuing Lender’s liability under such Letter of Credit.  The Issuing
Lender shall be deemed to hold a Letter of Credit Liability in an amount equal
to its retained interest in the related Letter of Credit after giving effect to
such acquisition by the Revolving Credit Lenders other than the Issuing Lender
of their participation interests.

 

(c)           Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify Borrower (through the Administrative Agent) of the amount to be
paid by the Issuing Lender as a result of such demand and the date on which
payment is to be made by the Issuing Lender to such beneficiary in respect of
such demand.  Borrower hereby unconditionally agrees to pay and reimburse the
Issuing Lender for the amount of each demand for payment under such Letter of
Credit not later than the next Business Day after the date on which the Issuing
Lender notifies Borrower that payment is to be made by the Issuing Lender to the
beneficiary thereunder.

 

(d)           Forthwith upon its receipt of a notice referred to in clause (c)
of this Section 2.3, Borrower shall advise the Issuing Lender whether or not
Borrower intends to borrow hereunder to finance its obligation to reimburse the
Issuing Lender for the amount of the related demand for payment and, if it does,
submit a notice of such borrowing as provided in Section 4.5.  In the event that
Borrower fails to so advise the Administrative Agent not later than one Business
Day prior to the date payment from Borrower is due to the Issuing Lender by
virtue of a drawing under a Letter of Credit, Borrower shall be deemed to have
given notice of borrowing for a Revolving Credit Loan which is an Alternate Base
Rate Loan in the exact amount owing to the Issuing Lender and the Administrative
Agent shall act accordingly.  If Borrower has given such notice indicating that
it does not intend to borrow hereunder or if Borrower fails to reimburse the
Issuing Lender for a demand for payment under a Letter of Credit by the date of
notice of such payment (or the next Business Day if received after 12:00 noon
(Boston, Massachusetts time) on such date), the Administrative Agent shall give
each Revolving Credit Lender prompt notice of the amount of the demand for
payment, specifying such Lender’s Revolving Credit Commitment Percentage of the
amount of the related demand for payment.

 

(e)           Each Revolving Credit Lender (other than the Issuing Lender) shall
pay to the Administrative Agent for account of the Issuing Lender at the
Principal Office in Dollars and in immediately available funds, the amount of
such Revolving Credit Lender’s Revolving Credit Commitment Percentage of any
payment under a Letter of Credit upon notice by the Issuing Lender (through the
Administrative Agent) to such Revolving Credit Lender requesting such payment
and specifying such amount.  Each such Revolving Credit Lender’s obligation to
make such payments to the Administrative Agent for account of the Issuing Lender
under this clause (e), and the Issuing Lender’s right to receive the same, shall
be absolute and unconditional and shall not be affected by any circumstance
whatsoever, including (i) the failure of any other Revolving Credit Lender to
make its payment under this clause (e), (ii) the financial condition of Borrower

 

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or the existence of any Default or (iii) the termination of the Revolving Credit
Commitments.  Each such payment to the Issuing Lender shall be made without any
offset, abatement, withholding or reduction whatsoever.  Nothing in this clause
(e) shall be deemed to prejudice the right of any Revolving Credit Lender to
recover from the Issuing Lender in the event of a wrongful payment of the kind
described in the proviso of the last paragraph of this Section 2.3, with respect
to the issuance of a Letter of Credit in breach of any restriction on such
issuance under this Section 2.3, or with respect to the gross negligence or
willful misconduct of the Issuing Lender in respect of any Letter of Credit.

 

(f)            Upon the making of each payment by a Revolving Credit Lender to
the Issuing Lender pursuant to clause (e) above in respect of any Letter of
Credit, such Revolving Credit Lender shall, automatically and without any
further action on the part of the Administrative Agent, the Issuing Lender or
such Revolving Credit Lender, acquire (i) a participation in an amount equal to
such payment in the Reimbursement Obligation owing to the Issuing Lender by
Borrower hereunder and under the Letter of Credit Documents relating to such
Letter of Credit and (ii) a participation in a percentage equal to such
Revolving Credit Lender’s Revolving Credit Commitment Percentage in any interest
or other amounts payable by Borrower hereunder and under such Letter of Credit
Documents in respect of such Reimbursement Obligation.  Upon receipt by the
Issuing Lender from or for the account of Borrower of any payment in respect of
any Reimbursement Obligation or any such interest or other amounts (including by
way of setoff or application of proceeds of any collateral security) the Issuing
Lender shall promptly pay to the Administrative Agent for account of each
Revolving Credit Lender entitled thereto, such Revolving Credit Lender’s
Revolving Credit Commitment Percentage of such payment, each such payment by the
Issuing Lender to be made in the same money and funds in which received by the
Issuing Lender.  In the event any payment received by the Issuing Lender and so
paid to the Revolving Credit Lenders hereunder is rescinded or must otherwise be
returned by the Issuing Lender, each Revolving Credit Lender shall, upon the
request of the Issuing Lender (through the Administrative Agent), repay to the
Issuing Lender (through the Administrative Agent) the amount of such payment
paid to such Revolving Credit Lender, with interest at the rate specified in
clause (i) of this Section 2.3.

 

(g)           Borrower shall pay to the Administrative Agent for the account of
the Revolving Credit Lenders in respect of each Letter of Credit a letter of
credit commission in an amount equal to (x) in the case of commercial Letters of
Credit, the rate per annum equal to two-thirds of the Applicable Margin for
LIBOR Loans in effect at the time of issuance thereof or (y) in the case of
standby Letters of Credit, the rate per annum equal to the Applicable Margin for
LIBOR Loans in effect from time to time, multiplied by (z) the daily average
undrawn face amount of each such Letter of Credit for the period from and
including the date of issuance of such Letter of Credit (i) in the case of a
Letter of Credit which expires in accordance with its terms, to and including
such expiration date and (ii) in the case of a Letter of Credit which is drawn
in full or is otherwise terminated other than on the stated expiration date of
such Letter of Credit, to but excluding the date such Letter of Credit is drawn
in full or is terminated, such fee to be non-refundable and to be paid in
arrears quarterly, on each Quarterly Date and on the earlier of the Revolving
Credit Commitment Termination Date or the date of the termination of the
Revolving Credit Commitments or the date of such termination, expiration or the
Business Day subsequent to notice of a drawing.  In addition, Borrower shall pay
to the Administrative Agent for account of the Issuing Lender only in respect of
each Letter of Credit a fronting fee in an amount to be agreed upon by the
Borrower and the Issuing Lender, such fronting fee to be payable on the date of
issuance of such Letter of Credit, plus all

 

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charges, costs and expenses in the amounts customarily charged by the Issuing
Lender from time to time in like circumstances with respect to the issuance of
each Letter of Credit and drawings and other transactions relating thereto.

 

(h)           Promptly following the end of each calendar month, the Issuing
Lender shall deliver (through the Administrative Agent) to each Revolving Credit
Lender and Borrower a notice describing the aggregate amount of all Letters of
Credit outstanding at the end of such month.  Upon the request of any Revolving
Credit Lender from time to time, the Issuing Lender shall deliver any other
information reasonably requested by such Revolving Credit Lender with respect to
each Letter of Credit then outstanding.

 

(i)            To the extent that any Revolving Credit Lender fails to pay an
amount required to be paid pursuant to clause (e) or (f) of this Section 2.3 on
the due date therefor, such Revolving Credit Lender shall pay interest to the
Issuing Lender (through the Administrative Agent) on such amount from and
including such due date to but excluding the date such payment is made (i)
during the period from and including such due date to but excluding the date
three Business Days thereafter, at a rate per annum equal to the Federal Funds
Rate (as in effect from time to time) and (ii) thereafter, at a rate per annum
equal to the post-default rate (as in effect from time to time) pursuant to
Section 3.2(b).

 

(j)            The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder that would extend the expiry date
or increase the face amount thereof shall be subject to the same conditions
applicable under this Section 2.3 to the issuance of new Letters of Credit, and
no such modification or supplement shall be issued hereunder unless either (i)
the respective Letter of Credit affected thereby would have complied with such
conditions had it originally been issued hereunder in such modified or
supplemented form or (ii) each Revolving Credit Lender shall have consented
thereto.

 

(k)           Notwithstanding the foregoing, the Issuing Lender shall not be
under any obligation to issue any Letter of Credit if at the time of such
issuance, any order, judgment or decree of any Governmental Authority or
arbitrator shall purport by its terms to enjoin or restrain the Issuing Lender
from issuing such Letter of Credit or any requirement of law applicable to the
Issuing Lender or any request or directive (whether or not having the force of
law) from any Governmental Authority shall prohibit, or request that the Issuing
Lender refrain from, the issuance of letters of credit generally or such Letter
of Credit in particular or shall impose upon such Issuing Lender with respect to
such Letter of Credit any restriction or reserve or capital requirement (for
which the Issuing Lender is not otherwise compensated) not in effect on the
Closing Date.

 

The obligations of Borrower under this Agreement and any Letter of Credit
Document to reimburse the Issuing Lender for a drawing under a Letter of Credit,
and to repay any drawing under a Letter of Credit converted into Revolving
Credit Loans, shall be unconditional and irrevocable, and shall be paid strictly
in accordance with the terms of this Agreement and each such other Letter of
Credit Document under all circumstances, including the following:  (i) any lack
of validity or enforceability of this Agreement or any Letter of Credit
Document; (ii) the existence of any claim, setoff, defense or other right that
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by the
Letter of Credit Documents or any unrelated transaction; (iii) any draft,
demand, certificate or other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or

 

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insufficient in any respect or any statement therein being untrue or inaccurate
in any respect; or any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit; or any
defense based upon the failure of any drawing under a Letter of Credit to
conform to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such drawing; or (iv) any
other circumstance or happening whatsoever, whether or not similar to any of the
foregoing, including any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Borrower or a Guarantor; provided,
however, that Borrower shall not be obligated to reimburse the Issuing Lender
for any wrongful payment determined by a court of competent jurisdiction to have
been made by the Issuing Lender as a result of acts or omissions constituting
willful misconduct or gross negligence on the part of the Issuing Lender or
which is not in accordance with the standard of care specified in the Uniform
Commercial Code of the Commonwealth of Massachusetts.  To the extent that any
provision of any Letter of Credit Document is inconsistent with the provisions
of this Section 2.3, the provisions of this Section 2.3 shall control.

 

2.4           Extension of Revolving Credit Commitment Termination Date.

 

(a)           At Borrower’s option, subject to satisfaction of the following
terms and conditions, Borrower shall have the option to extend the Revolving
Credit Commitment Termination Date from the Initial Revolving Credit Commitment
Termination Date to the Extended Revolving Credit Commitment Termination Date:

 

(i)            Borrower shall have notified the Administrative Agent in writing
no later than thirty (30) days after the first anniversary of the Closing Date
of the Borrower’s election to request the extension;

 

(ii)           On the date of the notification as provided in clause (i) above
and on the Initial Revolving Credit Commitment Termination Date, no Default or
Event of Default is then occurring and no Event of Default has occurred; and

 

(iii)          One hundred percent (100.0%) of the Revolving Credit Lenders
consent in writing to the requested extension within sixty (60) Business Days
after the date of the Administrative Agent’s receipt of the Borrower’s
notification pursuant to clause (i), above.  The failure of any Revolving Credit
Lender to furnish such written consent within such time period shall be deemed a
denial of the Borrower’s extension request.

 

(b)           No extension shall be effective unless and until the
Administrative Agent has confirmed, in writing, the Borrower’s compliance with
the conditions precedent to the extension of the Initial Revolving Credit
Commitment Termination Date set forth in Section 2.4(a).  To the extent that one
hundred percent (100.0%) of the Revolving Credit Lenders do not consent to the
extension request, Borrower shall have the option of: (i) reducing the aggregate
principal amount of the Revolving Credit Commitments at the Initial Revolving
Credit Commitment Termination Date by an amount equal to the aggregate principal
amount of the Revolving Credit Commitments of the non-consenting Revolving
Credit Lenders; provided, however, that in no event shall the aggregate
principal amount of the reduction in the Revolving Credit Commitments  be more
than $25 million (in which case, if all other conditions are met, the extension
shall be effective as to the reduced amount); (ii) replacing the non-consenting
Revolving Credit Lenders in accordance with the terms of Section 2.12 (in which
case, if all other conditions are met, the extension shall be effective upon
such replacement); or (iii) withdrawing such extension request; provided,
however, that after any such withdrawal Borrower may

 

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again request an extension under the terms of this Section 2.4 within the time
period specified in subsection (a).

 

(c)           In the event that the Borrower elects to reduce the aggregate
principal amount of the Revolving Credit Commitments pursuant to clause (i) of
Section 2.4(b) above, the Borrower, in connection therewith, shall pay in cash
to (i) each nonconsenting Revolving Credit Lender an amount equal to the sum of
(A) the principal of, and all accrued interest on, all outstanding Loans of the
non-consenting Revolving Credit Lender, (B) all Reimbursement Obligations owing
to such non-consenting Revolving Credit Lender, together with all then unpaid
interest with respect thereto at such time, and (C) all accrued, but theretofore
unpaid, fees owing to the non-consenting Revolving Credit Lender pursuant to
Section 2.6, and (ii) the Issuing Lender an amount equal to such non-consenting
Revolving Credit Lender’s Revolving Credit Commitment Percentage of any
Reimbursement Obligations (which at such time remains a Reimbursement
Obligation) to the extent such amount was not theretofore funded by such
non-consenting Revolving Credit Lender.  Upon such payment, the Revolving Credit
Commitment Percentages of the consenting Revolving Credit Lenders shall be
adjusted accordingly to reflect the termination of the Revolving Credit
Commitments of the non-consenting Revolving Credit Lenders.

 

2.5           Termination and Reductions of Commitments and Overadvance Period.

 

(a)           The aggregate amount of the Revolving Credit Commitments shall be
automatically and permanently reduced to zero on the Revolving Credit Commitment
Termination Date.

 

(b)           Borrower shall have the right, at any time or from time to time
(i) so long as no Revolving Credit Loans or Letter of Credit Liabilities will be
outstanding as of the date specified for termination, to terminate the Revolving
Credit Commitments, and (ii) to reduce the aggregate amount of the then
Unutilized Revolving Credit Commitments of all the Revolving Credit Lenders;
provided, however, that (x) Borrower shall give notice of each such termination
or reduction as provided in Section 4.5, and (y) each partial reduction shall be
in an aggregate amount at least equal to $1.0 million (or in integral multiples
of $500,000 in excess thereof).

 

(c)           Borrower shall have the right, at any time, to terminate the
Overadvance Period, provided, however, that (x) Borrower shall give notice of
such termination as provided in Section 4.5, and (y) Excess Availability on a
pro forma basis from the date of the Administrative Agent’s receipt of the
notice described in clause (i) hereof through November 30, 2002 shall, at all
times, be at least $15,000,000.

 

(d)           The Revolving Credit Commitments and/or Overadvance Period, as
applicable, once terminated may not be reinstated and any amount of the
Revolving Credit Commitments that has been reduced may not be reinstated.

 

2.6           Fees.

 

(a)           Borrower shall pay to the Administrative Agent for the account of
each Revolving Credit Lender a commitment fee on the daily average amount of
such Revolving Credit Lender’s Unutilized Revolving Credit Commitment, for the
period from and including the Closing Date to but not including the earlier of
the date such Revolving Credit Commitment is terminated or the Revolving Credit
Commitment Termination Date, at a rate per annum equal to the Applicable
Revolving Credit Fee Percentage.  Any

 

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accrued commitment fee under this Section 2.6(a) shall be payable in arrears on
each Quarterly Date and on the earlier of the date the Revolving Credit
Commitments are terminated or the Revolving Credit Commitment Termination Date.

 

(b)           Borrower shall pay to the Administrative Agent for its account and
the account of the Lead Arranger certain other fees pursuant to the terms of the
Fee Letter.

 

2.7           Lending Offices.  The Loans of each Type made by each Revolving
Credit Lender shall be made and maintained at such Revolving Credit Lender’s
Applicable Lending Office for Loans of such Type.

 

2.8           Several Obligations of Revolving Credit Lenders.  The failure of
any Revolving Credit Lender to make any Loan to be made by it on the date
specified therefor shall not relieve any other Revolving Credit Lender of its
obligation to make its Loan on such date, but neither any Revolving Credit
Lender nor the Administrative Agent shall be responsible for the failure of any
other Revolving Credit Lender to make a Loan to be made by such other Revolving
Credit Lender, and (except as otherwise provided in Section 4.6) no Revolving
Credit Lender shall have any obligation to the Administrative Agent or any other
Revolving Credit Lender for the failure by such Revolving Credit Lender to make
any Loan required to be made by such Revolving Credit Lender.

 

2.9           Notes; Register.

 

(a)           The Revolving Credit Loans made or to be made by each Revolving
Credit Lender shall be evidenced by one or more promissory notes of Borrower,
substantially in the form of Exhibit A-1, dated the Closing Date, payable to
such Revolving Credit Lender and otherwise duly completed.

 

(b)           The Swing Loans made by Fleet National Bank shall be evidenced by
a single promissory note of Borrower substantially in the form of Exhibit A-2,
dated the Closing Date, payable to Fleet National Bank and otherwise duly
completed.

 

(c)           The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan made by each Revolving Credit Lender to
Borrower, and each payment made on account of the principal thereof, shall be
recorded by such Revolving Credit Lender on its books and, prior to any transfer
of any Note evidencing the Loans held by it, endorsed by such Revolving Credit
Lender on the schedule attached to such Note or any continuation thereof;
provided, however, that the failure of such Revolving Credit Lender to make any
such recordation or endorsement shall not affect the obligations of Borrower to
make a payment when due of any amount owing hereunder or under such Note.

 

(d)           Borrower hereby designates the Administrative Agent to serve as
Borrower’s agent, solely for purposes of this Section 2.9, to maintain a
register (the “Register”) on which it will record the name and address of each
Revolving Credit Lender, the Revolving Credit Commitment from time to time of
each of the Revolving Credit Lenders, the principal amount of the Loans made by
each of the Revolving Credit Lenders and each repayment in respect of the
principal amount of the Loans of each Revolving Credit Lender.  Failure to make
any such recordation or any error in such recordation shall not affect
Borrower’s obligations in respect of such Loans.  The entries in the Register
shall be conclusive, in the absence of manifest error, and Borrower, the
Administrative Agent and the Revolving Credit Lenders shall treat each Person
whose name is recorded in the Register as the owner of a Loan or other
obligation hereunder as

 

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the owner thereof for all purposes of this Agreement and the other Credit
Documents, notwithstanding any notice to the contrary.  The Register shall be
available for inspection by Borrower or any Revolving Credit Lender at any
reasonable time and from time to time upon reasonable prior notice.

 

2.10         Optional Prepayments and Conversions or Continuations of Loans. 
Subject to Section 4.4, Borrower shall have the right to prepay Loans, or to
Convert Loans of one Type into Loans of another Type or to Continue Loans of one
Type as Loans of the same Type, at any time or from time to time to be applied
as specified by Borrower; provided, however, that: (a) Borrower shall give the
Administrative Agent notice of each such prepayment, Conversion or Continuation
as provided in Section 4.5 (and, upon the date specified in any such notice of
prepayment, the amount to be prepaid shall become due and payable hereunder);
and (b) if LIBOR Loans are prepaid or Converted other than on the last day of an
Interest Period for such Loans, Borrower shall at such time pay all expenses and
costs required by Section 5.5.  Each notice of Conversion or Continuation shall
be substantially in the form of Exhibit I.

 

Notwithstanding the foregoing, and without limiting the rights and remedies of
the Revolving Credit Lenders under Section 10, in the event that any Event of
Default shall have occurred and be continuing, the Administrative Agent may (and
at the request of the Majority Revolving Credit Lenders shall) suspend the right
of Borrower to Convert any Loan into a LIBOR Loan, or to Continue any Loan as a
LIBOR Loan, in which event all Loans shall be Converted (on the last day(s) of
the respective Interest Periods therefor) or Continued, as the case may be, as
Alternate Base Rate Loans.

 

2.11         Mandatory Prepayments.

 

(a)           Revolving Credit Extension Reductions.  Until the Revolving Credit
Commitment Termination Date, Borrower shall from time to time immediately prepay
the Swing Loans and the Revolving Credit Loans (and/or provide cover for Letter
of Credit Liabilities as specified in Section 2.11(b)) in such amounts as shall
be necessary so that at all times the aggregate outstanding amount of the
Revolving Credit Loans, plus the aggregate outstanding amount of Swing Loans,
plus the aggregate outstanding Letter of Credit Liabilities shall not exceed the
lesser of (i) the Borrowing Base or (ii) the aggregate Revolving Credit
Commitments, each as in effect at such time, such amount to be applied, first,
to Swing Loans, second, to Revolving Credit Loans outstanding and, third, as
cover for Letter of Credit Liabilities outstanding as specified in Section
2.11(b). Notwithstanding the foregoing, if the amount of any prepayment of Loans
required under this Section 2.11 shall be in excess of the amount of the
Alternate Base Rate Loans at the time outstanding, only the portion of the
amount of such prepayment as is equal to the amount of such outstanding
Alternate Base Rate Loans shall be immediately prepaid and, at the election of
Borrower, the balance of such required prepayment shall be either (i) deposited
in the Collateral Account and applied to the prepayment of LIBOR Loans on the
last day of the then next-expiring Interest Period for LIBOR Loans or (ii)
prepaid immediately, together with any amounts owing to the Revolving Credit
Lenders under Section 5.5.  Notwithstanding any such deposit in the Collateral
Account, interest shall continue to accrue on such Loans until prepayment. 
Interest on such amount held in the Collateral Account shall be for the account
of Borrower (after deduction of reasonable fees and expenses).

 

(b)           Cover for Letter of Credit Liabilities.  In the event that
Borrower shall be required pursuant to this Section 2.11 to provide cover for
Letter of Credit Liabilities, Borrower shall effect the same by paying to the
Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained

 

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by the Administrative Agent in the Collateral Account (as provided in the
Security Agreement as collateral security in the first instance for the Letter
of Credit Liabilities) in an amount not to exceed the face amount of all
unexpired Letters of Credit in respect of which such cover was required to be
provided until such time as all Letters of Credit shall have been terminated and
all of the Letter of Credit Liabilities paid in full.

 

2.12         Replacement of Revolving Credit Lenders.  Borrower shall have the
right, if no Default or Event of Default then exists, to replace a Revolving
Credit Lender (the “Replaced Lender”) with one or more other Eligible Persons
reasonably acceptable to the Administrative Agent (collectively, the
“Replacement Lender”) if (a) such Revolving Credit Lender is charging Borrower
increased costs pursuant to Section 5.1 or Section 5.6 in excess of those being
charged generally by the other Revolving Credit Lenders or such Revolving Credit
Lender becomes incapable of making LIBOR Loans as provided in Section 5.3,
and/or (b) as provided in Section 12.4(b), such Revolving Credit Lender refuses
to consent to certain proposed amendments, waivers or modifications with respect
to this Agreement or the other Credit Documents, and/or (c) such Revolving
Credit Lender shall have failed to fund its portion of a Loan it is obligated to
fund under Section 2.1, and/or (d) as provided in Section 2.4(b), such Revolving
Credit Lender refuses to consent to Borrower’s request to extend the Initial
Revolving Credit Commitment Termination Date; provided, however, that (i) at the
time of any replacement pursuant to this Section 2.12, the Replacement Lender
shall enter into one or more assignment agreements (and with all fees payable
pursuant to Section 12.6 to be paid by the Replacement Lender) pursuant to which
the Replacement Lender shall acquire all of the Revolving Credit Commitments and
outstanding Loans of, and in each case Letter of Credit Interests by, the
Replaced Lender and, in connection therewith, shall pay to (x) the Replaced
Lender, an amount equal to the sum of (A) the principal of, and all accrued
interest on, all outstanding Loans of the Replaced Lender, (B) all Reimbursement
Obligations owing to such Replaced Lender, together with all then unpaid
interest with respect thereto at such time, and (C) all accrued, but theretofore
unpaid, fees owing to the Replaced Lender pursuant to Section 2.6, and (y) the
Issuing Lender an amount equal to such Replaced Lender’s Revolving Credit
Commitment Percentage of any Reimbursement Obligations (which at such time
remains a Reimbursement Obligation) to the extent such amount was not
theretofore funded by such Replaced Lender, and (ii) all Obligations of Borrower
then owing to the Replaced Lender (other than those specifically described in
clause (i) above in respect of which the assignment purchase price has been, or
is concurrently being, paid) shall be paid in full to such Replaced Lender
concurrently with such replacement.  Upon the execution of the respective
assignment agreement, the payment of amounts referred to in clauses (i) and (ii)
above and, if so requested by the Replacement Lender, delivery to the
Replacement Lender of Notes executed by Borrower, the Replacement Lender shall
become a Revolving Credit Lender hereunder and the Replaced Lender shall cease
to constitute a Revolving Credit Lender hereunder and be released of all its
obligations as a Revolving Credit Lender, except with respect to indemnification
provisions applicable to the Replaced Lender under this Agreement, which shall
survive as to such Replaced Lender.

 

2.13         Annual Cleandown.  For a consecutive fifteen-day period between the
first day of December and the last day of January of each calendar year,
beginning in December 2002, the sum of the aggregate principal amount of
Revolving Credit Loans outstanding, plus the aggregate outstanding principal
amount of Swing Loans, shall not exceed (a) $35 million for the period December,
2002 through January, 2003, and (b) $20 million for all similar annual periods
thereafter.

 

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Section 3.               Payments of Principal and Interest.

 

3.1           Repayment of Loans.  Borrower hereby promises to pay in cash to
the Administrative Agent for the account of each Revolving Credit Lender the
entire outstanding principal amount of such Lender’s Revolving Credit Loans, and
each Revolving Credit Loan shall mature, on the Revolving Credit Commitment
Termination Date (unless sooner accelerated pursuant to Section 10 hereof). 
Borrower hereby promises to pay to the Swing Loan Lender for its account the
entire outstanding principal amount of the Swing Loans, and the Swing Loans
shall mature, on the Swing Loan Maturity Date.

 

3.2           Interest.

 

(a)           Borrower hereby promises to pay to the Administrative Agent for
the account of each Revolving Credit Lender interest on the unpaid principal
amount of each Loan made by such Revolving Credit Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:

 

(i)            during such periods as such Loan is an Alternate Base Rate Loan,
the Alternate Base Rate (as in effect from time to time), plus the Applicable
Margin and

 

(ii)           during such periods as such Loan is a LIBOR Loan, for each
Interest Period relating thereto, the LIBOR Rate for such Loan for such Interest
Period, plus the Applicable Margin.

 

(b)           During the continuance of any Event of Default (and whether or not
the Administrative Agent exercises its rights on account thereof), all Revolving
Credit Loans shall bear interest, at the option of the Administrative Agent or
at the instruction of the Majority Revolving Credit Lenders, at a rate which is
the aggregate of the applicable rate (including the Applicable Margin) for
Alternate Base Rate Loans and/or LIBOR Loans, as applicable, plus two percent
(2%) per annum.  Interest which accrues under this paragraph shall be payable on
demand.

 

(c)           Accrued interest on each Loan shall be payable (i) in the case of
an Alternate Base Rate Loan, monthly in arrears on the last day of each calendar
month, (ii) in the case of a LIBOR Loan, on the last day of each Interest Period
therefor and, if such Interest Period is longer than three months, at
three-month intervals following the first day of such Interest Period and (iii)
in the case of any LIBOR Loan, upon the payment or prepayment thereof or the
Conversion of such Loan to a Loan of another Type (but only on the principal
amount so paid, prepaid or Converted), except that interest payable at the rate
set forth in Section 3.2(b) shall be payable from time to time on demand. 
Promptly after the determination of any interest rate provided for herein or any
change therein, the Administrative Agent shall give notice thereof to the
Revolving Credit Lenders to which such interest is payable and to Borrower.

 

(d)           All agreements among Borrower, the Guarantors, the Administrative
Agent and the Revolving Credit Lenders are hereby expressly limited so that, in
no contingency or event whatsoever, whether by reason of acceleration of
maturity of the indebtedness evidenced hereby or otherwise, shall the amount
paid or agreed to be paid to the Administrative Agent or the Revolving Credit
Lenders for the use or the forbearance of the indebtedness evidenced hereby
exceed the maximum permissible under applicable law.  As used herein, the term
“applicable law”, shall mean the law in

 

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effect as of the date hereof, provided, however, that in the event there is a
change in the law which results in a higher permissible rate of interest, then
this Agreement, the Notes and the other Credit Documents shall be governed by
such new law as of its effective date.  In this regard, it is expressly agreed
that it is the intent of Borrower, the Administrative Agent and the Revolving
Credit Lenders in the execution, delivery and acceptance of this Agreement to
contract in strict compliance with the laws of the Commonwealth of Massachusetts
from time to time in effect.  If, under or from any circumstances whatsoever,
fulfillment of any provision hereof or of any of the Credit Documents or the
Security Documents at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by applicable law, then
the obligation to be fulfilled shall automatically be reduced to the limit of
such validity, and if under or from any circumstances whatsoever the
Administrative Agent or the Revolving Credit Lenders should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced by the Notes and not to the payment of interest.  This
provision shall control every other provision of all agreements among Borrower,
the Guarantors, the Administrative Agent and the Revolving Credit Lenders.

 

Section 4.               Payments; Pro Rata Treatment; Computations; Etc.

 

4.1           Payments.

 

(a)           Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
Borrower under this Agreement and the Notes, and, except to the extent otherwise
provided therein, all payments to be made by the Obligors under any other Credit
Document, shall be made in Dollars, in immediately available funds, without
deduction, set-off or counterclaim, to the Administrative Agent at its account
at the Principal Office, not later than 1:00 p.m. Boston, Massachusetts time on
the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day).

 

(b)           Borrower shall, at the time of making each payment under this
Agreement or any Note for the account of any Revolving Credit Lender, specify to
the Administrative Agent (which shall so notify the intended recipient(s)
thereof) the Loans, Reimbursement Obligations or other amounts payable by
Borrower hereunder to which such payment is to be applied (and in the event that
Borrower fails to so specify, or if an Event of Default has occurred and is
continuing, the Administrative Agent may distribute such payment to the
Revolving Credit Lenders for application in such manner as it or the Majority
Revolving Credit Lenders, subject to Section 4.2, may determine to be
appropriate).

 

(c)           Except to the extent otherwise provided in the second sentence of
Section 2.3(g), each payment received by the Administrative Agent under this
Agreement or any Note for the account of any Revolving Credit Lender shall be
paid by the Administrative Agent to such Revolving Credit Lender, in immediately
available funds, (x) if the payment was actually received by the Administrative
Agent prior to 1:00 p.m. (Boston, Massachusetts time) on any day, on such day
and (y) if the payment was actually received by the Administrative Agent after
1:00 p.m. (Boston, Massachusetts time) on any day, on the following Business Day
(it being understood that to the extent that any such payment is not made in
full by the Administrative Agent, the Administrative Agent shall pay to such
Revolving Credit Lender, upon demand, interest

 

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at the Federal Funds Rate from the date such amount was required to be paid to
such Revolving Credit Lender pursuant to the foregoing clauses until the date
the Administrative Agent pays such Revolving Credit Lender the amount).

 

(d)           If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.

 

4.2           Pro Rata Treatment.  Except to the extent otherwise provided
herein:  (a) each borrowing of Loans from the Revolving Credit Lenders under
Section 2.1 shall be made by, and each payment of commitment fees under Section
2.6 in respect of Revolving Credit Commitments shall be for account of, and each
termination or reduction of the amount of the Revolving Credit Commitments under
Section 2.5 shall be applied to the respective Revolving Credit Commitments of,
the Revolving Credit Lenders, pro rata according to the amounts of their
respective Revolving Credit Commitments; provided, however, that Swing Loans
shall be made only by, and interest thereon shall be paid by Borrower only to,
the Swing Loan Lender (subject to such Revolving Credit Lender’s obligations in
respect of any participation therein purchased by the other Revolving Credit
Lenders as provided in Section 2.1(b)); (b) except as otherwise provided in
Section 5.4, LIBOR Loans having the same Interest Period shall be allocated pro
rata among the Revolving Credit Lenders according to the amounts of their
respective Revolving Credit Commitments (in the case of the making of Loans) or
their respective Revolving Credit Loans (in the case of Conversions and
Continuations of Loans); (c) each payment or prepayment of principal of
Revolving Credit Loans by Borrower shall be made for account of the relevant
Revolving Credit Lenders pro rata in accordance with the respective unpaid
outstanding principal amounts of the Loans held by them; and (d) each payment of
interest on Revolving Credit Loans by Borrower shall be made for account of the
Revolving Credit Lenders pro rata in accordance with the amounts of interest on
such Loans then due and payable to the respective Revolving Credit Lenders.

 

4.3           Computations.  Interest on LIBOR Loans shall be computed on the
basis of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable and interest
on Alternate Base Rate Loans and Reimbursement Obligations shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable.  Computations of commitment fees and Letter of Credit
fees shall be based upon a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable.  Notwithstanding the foregoing, for
each day that the Alternate Base Rate is calculated by reference to the Federal
Funds Rate, interest on Alternate Base Rate Loans and Reimbursement Obligations
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day).

 

4.4           Minimum Amounts.  Except for mandatory prepayments made pursuant
to Section 2.11 and Conversions or prepayments made pursuant to Section 5.4, and
prepayments of the entire principal balance of the Loans, each borrowing,
Conversion and prepayment of principal of Loans (other than Swing Loans, for
which the minimum amounts thereof are in Section 2.1(b)) shall be in an amount
at least equal to (1) $500,000 and in integral multiples of $100,000 in excess
thereof with respect to Alternate Base Rate Loans and (2) $1,000,000 and in
integral multiples of $100,000 in excess thereof with respect to LIBOR Loans
(borrowings, Conversions or prepayments of or into Loans of different Types or,
in the case of LIBOR Loans, having different Interest Periods at the same time
hereunder to be deemed separate borrowings, Conversions and prepayments for
purposes of the foregoing, one for each Type or Interest

 

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Period).  Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of LIBOR Loans having the same Interest Period shall
be in an amount at least equal to $1,000,000 and in multiples of $100,000 in
excess thereof and, if any LIBOR Loans or portions thereof would otherwise be in
a lesser principal amount for any period, such Loans or portions, as the case
may be, shall be Alternate Base Rate Loans during such period.

 

4.5           Certain Notices.  Notices by Borrower to the Administrative Agent
of terminations or reductions of the Revolving Credit Commitments, of
borrowings, Conversions, Continuations and optional prepayments of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by the Administrative Agent not later than
11:00 a.m. Boston, Massachusetts time on the number of Business Days prior to
the date of the relevant termination, reduction, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified in
the table below:

 

NOTICE PERIODS

 

Notice

 

Number of Business Days Prior

 

 

 

Termination or reduction of Revolving Credit Commitments

 

2

Borrowing or optional prepayment of, or Conversions into, Alternate Base Rate
Loans (including Swing Loans)

 

same day

Borrowing or optional prepayment of, Conversions into, Continuations as, or
duration of Interest Periods for, LIBOR Loans

 

3

 

Each such notice of termination or reduction shall specify the amount of the
Revolving Credit Commitments to be terminated or reduced.  Each such notice of
borrowing, Conversion, Continuation or prepayment shall specify the Loans to be
borrowed, Converted, Continued or prepaid and the amount (subject to Section
4.4) and Type of each Loan to be borrowed, Converted, Continued or prepaid and
the date of borrowing, Conversion, Continuation or prepayment (which shall be a
Business Day).  Each such notice of the duration of an Interest Period shall
specify the Loans to which such Interest Period is to relate.  The
Administrative Agent shall promptly notify the Revolving Credit Lenders of the
contents of each such notice.  In the event that Borrower fails to select the
Type of Loan, or the duration of any Interest Period for any LIBOR Loan, within
the time period and otherwise as provided in this Section 4.5, such Loan (if
outstanding as a LIBOR Loan) will be automatically Converted into an Alternate
Base Rate Loan on the last day of the then current Interest Period for such Loan
or (if outstanding as an Alternate Base Rate Loan) will remain as, or (if not
then outstanding) will be made as, an Alternate Base Rate Loan.

 

4.6           Non-Receipt of Funds by the Administrative Agent.  Unless the
Administrative Agent shall have received written notice from a Revolving Credit
Lender or Borrower (the “Payor”) prior to the date on which the Payor is to make
payment to the Administrative Agent of (in the case of a Revolving Credit
Lender) the proceeds of a Loan to be made by such Revolving Credit Lender
hereunder or (in the case of Borrower) a payment to the Administrative Agent for
the account of one or more of the Revolving Credit Lenders hereunder (such
payment being herein called the “Required Payment”), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available

 

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to the intended recipient(s) on such date; and, if the Payor has not in fact
made the Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date (the “Advance Date”) such amount was so made
available by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to the Federal Funds Rate for
such day and, if such recipient(s) shall fail promptly to make such payment, the
Administrative Agent shall be entitled to recover such amount, on demand, from
the Payor, together with interest as aforesaid; provided, however, that if
neither the recipient(s) nor the Payor shall return the Required Payment to the
Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment as follows (without double
recovery):

 

(a)           if the Required Payment shall represent a payment to be made by
Borrower to the Revolving Credit Lenders, Borrower and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment at the rate set forth in Section 3.2(b) (without
duplication of the obligation of Borrower under Section 3.2 to pay interest on
the Required Payment at the rate set forth in Section 3.2(b)), it being
understood that the return by the recipient(s) of the Required Payment to the
Administrative Agent shall not limit such obligation of Borrower under Section
3.2 to pay interest at the rate set forth in Section 3.2(b) in respect of the
Required Payment and

 

(b)           if the Required Payment shall represent proceeds of a Loan to be
made by the Revolving Credit Lenders to Borrower, the Payor and Borrower shall
each be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment pursuant to Section 3.2(a), it being understood that the
return by Borrower of the Required Payment to the Administrative Agent shall not
limit any claim Borrower may have against the Payor in respect of such Required
Payment.

 

4.7           Right of Setoff; Sharing of Payments, Etc.

 

(a)           Each Obligor agrees that, in addition to (and without limitation
of) any right of setoff, banker’s lien or counterclaim a Revolving Credit Lender
may otherwise have, each Revolving Credit Lender shall be entitled, at its
option (to the fullest extent permitted by law), to set off and apply any
deposit (general or special, time or demand, provisional or final), or other
indebtedness, held by it for the credit or account of such Obligor at any of its
offices, in Dollars or in any other currency, against any principal of or
interest on any of such Revolving Credit Lender’s Loans, Reimbursement
Obligations or any other amount payable to such Revolving Credit Lender
hereunder that is not paid when due (regardless of whether such deposit or other
indebtedness is then due to such Obligor), in which case it shall promptly
notify such Obligor and the Administrative Agent thereof; provided, however,
that such Revolving Credit Lender’s failure to give such notice shall not affect
the validity thereof.

 

(b)           Each of the Revolving Credit Lenders agrees that, if it should
receive (other than pursuant to Section 5) any amount hereunder (whether by
voluntary payment, by realization upon security, by the exercise of the right of
setoff or banker’s lien, by counterclaim or cross action, by the enforcement of
any right under the Credit Documents, or otherwise) which is applicable to the
payment of the principal of, or interest on, the Loans, Reimbursement
Obligations or fees, of a sum which with respect to the related sum or sums
received by other Revolving Credit Lenders is in a greater proportion than the
total of such amounts then owed and due to such Revolving Credit

 

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Lender bears to the total of such amounts then owed and due to all of the
Revolving Credit Lenders immediately prior to such receipt, then such Revolving
Credit Lender receiving such excess payment shall purchase for cash without
recourse or warranty from the other Revolving Credit Lenders an interest in the
Obligations of the respective Obligor to such Revolving Credit Lenders in such
amount as shall result in a proportional participation by all of the Revolving
Credit Lenders in such amount; provided, however, that if all or any portion of
such excess amount is thereafter recovered from such Revolving Credit Lender,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.  Borrower consents to the foregoing
arrangements.

 

(c)           Borrower agrees that any Revolving Credit Lender so purchasing
such a participation may exercise all rights of setoff, banker’s lien,
counterclaim or similar rights with respect to such participation as fully as if
such Revolving Credit Lender were a direct holder of Loans or other amounts (as
the case may be) owing to such Revolving Credit Lender in the amount of such
participation.

 

(d)           Nothing contained herein shall require any Revolving Credit Lender
to exercise any such right or shall affect the right of any Revolving Credit
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of any Obligor.  If, under any
applicable bankruptcy, insolvency or other similar law, any Revolving Credit
Lender receives a secured claim in lieu of a setoff to which this Section 4.7
applies, such Revolving Credit Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Revolving Credit Lenders entitled under this Section 4.7 to share
in the benefits of any recovery on such secured claim.

 

Section 5.               Yield Protection, Etc.

 

5.1           Additional Costs.

 

(a)           If the adoption of, or any change in, any Requirement of Law or in
the interpretation or application thereof or compliance by any Revolving Credit
Lender with any request or directive (whether or not having the force of law)
from any central bank or other Governmental Authority or the NAIC made
subsequent to the Closing Date:

 

(i)            shall subject any Revolving Credit Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Letter of Credit or any
Revolving Credit Lender’s participation therein, any Letter of Credit Document
or any LIBOR Loan made by it or change the basis of taxation of payments to such
Revolving Credit Lender in respect thereof by any Governmental Authority (except
for taxes covered by Section 5.6 and changes in the rate of tax on the overall
net income of such Revolving Credit Lender by any Governmental Authority);

 

(ii)           shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Revolving Credit Lender which is not otherwise included in the
determination of the LIBOR Rate hereunder; or

 

(iii) shall impose on such Revolving Credit Lender any other condition;

 

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and the result of any of the foregoing is to increase the cost to such Revolving
Credit Lender, by an amount which such Revolving Credit Lender deems to be
material, of making, converting into, continuing or maintaining LIBOR Loans or
issuing or participating in Letters of Credit or to reduce any amount receivable
hereunder in respect thereof then, in any such case, Borrower shall promptly pay
such Revolving Credit Lender, upon its demand, any additional amounts necessary
to compensate such Revolving Credit Lender for such increased cost or reduced
amount receivable.  If any Revolving Credit Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall promptly notify
Borrower, through the Administrative Agent, of the event by reason of which it
has become so entitled.  A certificate as to any additional amounts setting
forth the calculation of such additional amounts pursuant to this Section 5.1
submitted by such Revolving Credit Lender, through the Administrative Agent, to
Borrower shall be conclusive in the absence of clearly demonstrable error. This
covenant shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder.

 

(b)           In the event that any Revolving Credit Lender shall have
determined that the adoption after the Closing Date of any law, rule, regulation
or guideline regarding capital adequacy (or any change after the Closing Date
therein or in the interpretation or application thereof) or compliance by any
Revolving Credit Lender or any corporation controlling such Revolving Credit
Lender with any request or directive after the Closing Date regarding capital
adequacy (whether or not having the force of law) from any central bank or
Governmental Authority or the NAIC, including, without limitation, the issuance
of any final rule, regulation or guideline, does or shall have the effect of
reducing the rate of return on such Revolving Credit Lender’s or such
corporation’s capital as a consequence of its obligations hereunder or under any
Letter of Credit to a level below that which such Revolving Credit Lender or
such corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Revolving Credit Lender’s or such corporation’s
policies with respect to capital adequacy) by an amount deemed by such Revolving
Credit Lender to be material, then from time to time, after submission by such
Revolving Credit Lender to Borrower (with a copy to the Administrative Agent) of
a prompt written request therefor, Borrower shall promptly pay to such Revolving
Credit Lender such additional amount or amounts as will compensate such
Revolving Credit Lender for such reduction.

 

5.2           Limitation on Types of Loans.  Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any LIBOR Base Rate for
any Interest Period:

 

(i)            the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits referred
to in the definition of “LIBOR Base Rate” in Section 1.1 are not being provided
in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for LIBOR Loans as provided herein; or

 

(ii)           if the Majority Revolving Credit Lenders determine, which
determination shall be conclusive, that the relevant rates of interest referred
to in the definition of “LIBOR Base Rate” in Section 1.1 upon the basis of which
the rate of interest for LIBOR Loans for such Interest Period is to be
determined are not likely adequate to cover the cost to the applicable Revolving
Credit Lenders of making or maintaining LIBOR Loans for such Interest Period,

 

then the Administrative Agent shall give Borrower and each Revolving Credit
Lender prompt notice thereof, and so long as such condition remains in effect,
the affected Revolving Credit

 

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Lenders shall be under no obligation to make additional LIBOR Loans, to Continue
LIBOR Loans or to Convert Alternate Base Rate Loans into LIBOR Loans and
Borrower shall, on the last day(s) of the then current Interest Period(s) for
the outstanding LIBOR Loans, either prepay such Loans or Convert such Loans into
Alternate Base Rate Loans in accordance with Section 2.10.

 

5.3           Illegality.  Notwithstanding any other provision of this
Agreement, in the event that any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Revolving
Credit Lender or its Applicable Lending Office to honor its obligation to make
or maintain LIBOR Loans hereunder (and, in the sole opinion of such Revolving
Credit Lender, the designation of a different Applicable Lending Office would
either not avoid such unlawfulness or would be disadvantageous to such Revolving
Credit Lender), then such Revolving Credit Lender shall promptly notify Borrower
thereof (with a copy to the Administrative Agent) and such Revolving Credit
Lender’s obligation to make or Continue, or to Convert Loans of any other Type
into, LIBOR Loans shall be suspended until such time as such Revolving Credit
Lender may again make and maintain LIBOR Loans (in which case the provisions of
Section 5.4 shall be applicable).

 

5.4           Treatment of Affected Loans.  If the obligation of any Revolving
Credit Lender to make LIBOR Loans or to Continue, or to Convert Alternate Base
Rate Loans into, LIBOR Loans shall be suspended pursuant to Section 5.3, such
Revolving Credit Lender’s LIBOR Loans shall be automatically Converted into
Alternate Base Rate Loans on the last day(s) of the then current Interest
Period(s) for such LIBOR Loans (or on such earlier date as such Revolving Credit
Lender may specify to Borrower with a copy to the Administrative Agent as is
required by law) and, unless and until such Revolving Credit Lender gives notice
as provided below that the circumstances specified in Section 5.3 which gave
rise to such Conversion no longer exist:

 

(a)           to the extent that such Revolving Credit Lender’s LIBOR Loans have
been so Converted, all payments and prepayments of principal which would
otherwise be applied to such Revolving Credit Lender’s LIBOR Loans shall be
applied instead to its Alternate Base Rate Loans; and

 

(b)           all Loans which would otherwise be made or Continued by such
Revolving Credit Lender as LIBOR Loans shall be made or Continued instead as
Alternate Base Rate Loans and all Alternate Base Rate Loans of such Revolving
Credit Lender which would otherwise be Converted into LIBOR Loans shall remain
as Alternate Base Rate Loans.

 

If such Revolving Credit Lender gives notice to Borrower with a copy to the
Administrative Agent that the circumstances specified in Section 5.3 which gave
rise to the Conversion of such Revolving Credit Lender’s LIBOR Loans pursuant to
this Section 5.4 no longer exist (which such Revolving Credit Lender agrees to
do promptly upon such circumstances ceasing to exist) at a time when LIBOR Loans
are outstanding, such Revolving Credit Lender’s Alternate Base Rate Loans shall
be automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding LIBOR Loans, to the extent necessary so that,
after giving effect thereto, all Loans held by the Revolving Credit Lenders
holding LIBOR Loans and by such Revolving Credit Lender are held pro rata (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Revolving Credit Commitments.

 

5.5           Compensation.

 

(a)           Borrower agrees to indemnify each Revolving Credit Lender and to
hold each Revolving Credit Lender harmless from any loss or expense which such
Revolving

 

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Credit Lender may sustain or incur as a consequence of (1) default by Borrower
in payment when due of the principal amount of or interest on any LIBOR Loan,
(2) default by Borrower in making a borrowing of, Conversion into or
Continuation of LIBOR Loans after Borrower has given a notice requesting the
same in accordance with the provisions of this Agreement, (3) default by
Borrower in making any prepayment after Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (4) the making of a payment
or a prepayment of LIBOR Loans on a day which is not the last day of an Interest
Period with respect thereto (whether by acceleration or otherwise), including in
each case, any such loss (including loss of margin) or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained.

 

(b)           For the purpose of calculation of all amounts payable to a
Revolving Credit Lender under this Section 5.5 each Revolving Credit Lender
shall be deemed to have actually funded its relevant LIBOR Loan through the
purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to
the amount of the LIBOR Loan and having a maturity comparable to the relevant
Interest Period; provided, however, that each Revolving Credit Lender may fund
each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this
subsection.  Any Revolving Credit Lender requesting compensation pursuant to
this Section 5.5 will furnish to the Administrative Agent and Borrower a
certificate setting forth the basis and amount of such request and such
certificate, absent manifest error, shall be conclusive.  This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.

 

5.6           Net Payments.

 

(a)           All payments made by Borrower or the Guarantors hereunder or under
any Note and the Guarantees will be made without setoff, counterclaim or other
defense. Except as provided in Section 5.6(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any Governmental Authority or by any
political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income or net profits of a
Revolving Credit Lender (i) pursuant to the laws of the jurisdiction in which it
is organized or the jurisdiction in which the principal office or Applicable
Lending Office of such Revolving Credit Lender is located or any subdivision
thereof or therein or (ii) as a result of a present or former connection between
the Administrative Agent or such Revolving Credit Lender and the Governmental
Authority imposing such net income or net profits tax (other than any such
connection arising solely from the Administrative Agent or such Revolving Credit
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement, the Guarantees or any Note)) and all
interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as “Covered Taxes”).  If any Covered Taxes are so
levied or imposed, Borrower and each Guarantor, as the case may be, agrees to
pay the full amount of such Covered Taxes, and such additional amounts as may be
necessary so that every payment of all amounts due under this Agreement, the
Guarantees or under any Note, after withholding or deduction for or on account
of any Covered Taxes, will not be less than the amount provided for herein or in
such Note.  If any amounts are payable in respect of Covered Taxes pursuant to
the preceding sentence, Borrower agrees to reimburse each Revolving Credit
Lender, upon the written request of such Revolving

 

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Credit Lender, (i) for taxes imposed on or measured by the net income or net
profits of such Revolving Credit Lender pursuant to the laws of the jurisdiction
in which such Revolving Credit Lender is organized or in which the principal
office or Applicable Lending Office of such Revolving Credit Lender is located
or under the laws of any political subdivision or taxing authority of any such
jurisdiction by reason of the making of payments in respect of Covered Taxes
pursuant to this Section (including pursuant to this sentence) and (ii) for any
withholding of taxes as such Revolving Credit Lender shall determine are payable
by, or withheld from, such Revolving Credit Lender in respect of amounts paid in
respect of Covered Taxes to or on behalf of such Revolving Credit Lender
pursuant to the preceding sentence and in respect of any amounts paid to or on
behalf of such Revolving Credit Lender pursuant to this sentence; provided,
however, that Borrower’s obligations shall be reduced by any Tax Benefit
described in the following paragraph.  Borrower or the Guarantors, as the case
may be, will furnish to the Administrative Agent within 45 days after the date
the payment of any Covered Taxes is due pursuant to applicable law certified
copies of tax receipts or other documentation evidencing such payment by
Borrower.  Borrower and the Guarantors agree to indemnify and hold harmless each
Revolving Credit Lender, and reimburse such Revolving Credit Lender upon its
written request, for the amount of any Covered Taxes so levied or imposed and
paid by such Revolving Credit Lender and any liability (including penalties,
additions to tax, interest and expenses) arising therefrom or with respect
thereto.

 

If Borrower or any Guarantor pays any additional amount under this Section 5.6
to a Revolving Credit Lender and such Revolving Credit Lender determines in its
reasonable discretion that it has actually received or realized in connection
therewith any refund or any reduction of, or credit against, its tax liabilities
in or with respect to the taxable year in which the additional amount is paid (a
“Tax Benefit”), such Revolving Credit Lender shall pay to Borrower or such
Guarantor, as the case may be, an amount that the Revolving Credit Lender shall,
in its reasonable discretion, determine is equal to the net benefit, after tax,
which was obtained by the Revolving Credit Lender in such year as a consequence
of such Tax Benefit; provided, however, that (i) such Revolving Credit Lender
shall not be required to make any payment under this paragraph of this Section
5.6(a) if an Event of Default shall have occurred and be continuing; (ii) any
taxes that are imposed on a Revolving Credit Lender as a result of a
disallowance or reduction (including through the expiration of any tax credit
carryover or carryback of such Revolving Credit Lender that otherwise would not
have expired) of any Tax Benefit with respect to which such Revolving Credit
Lender has made a payment to Borrower or any Guarantor pursuant to this
paragraph of this Section 5.6(a) shall be treated as a tax for which Borrower or
any Guarantor is obligated to indemnify such Revolving Credit Lender pursuant to
this Section 5.6 without any exclusions or defenses; and (iii) nothing in this
paragraph of this Section 5.6(a) shall require the Revolving Credit Lender to
disclose any confidential information to Borrower or any Guarantor (including,
without limitation, its tax returns).

 

(b)           Each Revolving Credit Lender that is not a United States person
(as such term is defined in Section 7701(a)(30) of the Code) (a “Non-U.S.
Lender”) agrees to deliver to Borrower and the Administrative Agent on or prior
to the Closing Date, or in the case of a Revolving Credit Lender that is an
assignee or transferee of an interest under this Agreement pursuant to Section
12.6 (unless the respective Revolving Credit Lender was already a Revolving
Credit Lender hereunder immediately prior to such assignment or transfer), on
the date of such assignment or transfer to such Revolving Credit Lender, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8ECI or W-8BEN (or successor forms) certifying to such Revolving Credit
Lender’s entitlement to a complete exemption from, or reduction in rate of,
United

 

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States withholding tax with respect to payments to be made under this Agreement
and under any Note (or, with respect to any assignee Revolving Credit Lender, at
least as extensive as the assigning Revolving Credit Lender), or (ii) if the
Revolving Credit Lender is not a “bank” within the meaning of Section
881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form
W-8ECI or W-8BEN (or successor forms) pursuant to clause (i) above, (x) a
certificate substantially in the form of Exhibit G (any such certificate, a
“Section 5.6 Certificate”) and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8BEN (or successor form) certifying to
such Revolving Credit Lender’s entitlement to a complete exemption from, or
reduction in rate of, United States withholding tax with respect to payments to
be made under this Agreement and under any Note (or, with respect to any
assignee Revolving Credit Lender, at least as extensive as the assigning
Revolving Credit Lender). In addition, each Revolving Credit Lender agrees that
from time to time after the Closing Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to Borrower and the Administrative Agent two
new accurate and complete original signed copies of Internal Revenue Service
Form W-8ECI or W-8BEN (or successor forms), or Form W-8BEN and a Section 5.6
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Revolving Credit Lender to
a continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify Borrower and the Administrative Agent of its inability to deliver any
such Form or Certificate, in which case such Revolving Credit Lender shall not
be required to deliver any such form or certificate pursuant to this Section
5.6(b).  Notwithstanding the foregoing, no Revolving Credit Lender shall be
required to deliver any such form or certificate if a change in treaty, law or
regulation has occurred prior to the date on which such delivery would otherwise
be required that renders any such form or certificate inapplicable or would
prevent the Revolving Credit Lender from duly completing and delivering any such
form or certificate with respect to it and such Revolving Credit Lender so
advises Borrower.  Each Person that shall become a Participant pursuant to
Section 12.6 shall, upon the effectiveness of the related transfer, be required
to provide all the forms and statements required pursuant to this Section
5.6(b), provided that in the case of a Participant such Participant shall
furnish all such required forms and statements to the Revolving Credit Lender
from which the related participation shall have been purchased. Borrower shall
not be required to indemnify any Non-U.S. Lender, or to pay any additional
amounts to any Non-U.S. Lender, in respect of U.S. federal withholding tax
pursuant to paragraph (a) above to the extent that (i) the obligation to
withhold amounts with respect to U.S. federal withholding tax existed on the
date such Non-U.S. Lender became a party to this Agreement (or, in the case of a
Non-U.S. Participant, on the date such Participant became a Participant
hereunder); provided, however, that this clause (i) shall not apply to the
extent that (x) the indemnity payments or additional amounts any Revolving
Credit Lender (or Participant) would be entitled to receive (without regard to
this clause (i)) do not exceed the indemnity payment or additional amounts that
the person making the assignment, participation or transfer to such Revolving
Credit Lender (or Participant) would have been entitled to receive in the
absence of such assignment, participation or transfer, or (y) such assignment,
participation or transfer had been requested by Borrower, (ii) the obligation to
pay such additional amounts would not have arisen but for a failure by such
Non-U.S. Lender or Non-U.S. Participant to comply with the provisions of this
Section 5.6(b) or (iii) any of the representations or certifications made by a
Non-U.S. Lender or Non-U.S. Participant pursuant to this Section 5.6(b) above
are incorrect at the time a payment hereunder is made, other than by reason of
any change in treaty, law or regulation or interpretation thereof having effect
after the date such representations or certifications were made. 
Notwithstanding anything to the

 

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contrary contained in the preceding sentence or elsewhere in this Section 5.6
and except as set forth in Section 12.6(b), Borrower agrees to pay additional
amounts and to indemnify each Revolving Credit Lender in the manner set forth in
Section 5.6(a) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any amounts deducted or withheld by it
as described in the immediately preceding sentence as a result of any changes
after the Closing Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of Covered Taxes.

 

(c)           In addition, Borrower agrees to pay 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 under the Notes or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or the Notes (hereinafter referred to as “Other Taxes”).

 

Section 6.               Guarantee.

 

6.1           The Guarantee.  The Guarantors hereby jointly and severally
guarantee as a primary obligor and not as a surety to each Revolving Credit
Lender and the Administrative Agent and their respective successors and assigns
the prompt payment in full in cash when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest (including any
interest that would accrue but for the provisions of the Bankruptcy Code after
any bankruptcy or insolvency petition under the Bankruptcy Code) on the Loans
made by the Revolving Credit Lenders to, and the Notes held by each Revolving
Credit Lender of, Borrower and all other amounts and Obligations from time to
time owing to the Revolving Credit Lenders or the Administrative Agent by
Borrower under this Agreement and under the Notes and by any Obligor under any
of the other Credit Documents, and all obligations of Borrower or any Subsidiary
to any Revolving Credit Lender or any Affiliate of any Revolving Credit Lender
in respect of any Swap Contract and all Obligations owing to the Issuing Lender
under the Letter of Credit Documents, in each case strictly in accordance with
the terms thereof (such obligations being herein collectively called the
“Guaranteed Obligations”).  The Guarantors hereby jointly and severally agree
that if Borrower shall fail to pay in full when due (whether at stated maturity,
by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors
will promptly pay the same, without any demand or notice whatsoever, and that in
the case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.

 

6.2           Obligations Unconditional.  The obligations of the Guarantors
under Section 6.1 are absolute, irrevocable and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of Borrower under this Agreement, the Notes or
any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
Guarantor (except for payment in full).  Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Guarantors hereunder which shall
remain absolute, irrevocable and unconditional under any and all circumstances
as described above:

 

(a)           at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;

 

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(b)           any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to herein
or therein shall be done or omitted;

 

(c)           the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement, the
Notes or any other Credit Document or any other agreement or instrument referred
to herein or therein shall be amended, modified or waived in any respect or any
other guarantee of any of the Guaranteed Obligations or any security therefor
shall be released or exchanged in whole or in part or otherwise dealt with;

 

(d)           any lien or security interest granted to, or in favor of, the
Administrative Agent or any Revolving Credit Lender or Revolving Credit Lenders
as security for any of the Guaranteed Obligations shall fail to be perfected;

 

(e)           the release of any other Guarantor; or

 

(f)            the exercise of the Increased Facility Amount.

 

The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Administrative
Agent or any Revolving Credit Lender exhaust any right, power or remedy or
proceed against Borrower under this Agreement or the Notes or any other
agreement or instrument referred to herein or therein, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.  The Guarantors waive any and all notice of the creation, renewal,
extension, waiver, termination or accrual of any of the Guaranteed Obligations
and notice of or proof of reliance by any Revolving Credit Lender upon this
guarantee or acceptance of this guarantee, and the Guaranteed Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this guarantee, and all dealings between Borrower and
the Revolving Credit Lenders shall likewise be conclusively presumed to have
been had or consummated in reliance upon this guarantee.  This guarantee shall
be construed as a continuing, absolute, irrevocable and unconditional guarantee
of payment without regard to any right of offset with respect to the Guaranteed
Obligations at any time or from time to time held by the Revolving Credit
Lenders, and the obligations and liabilities of the Guarantors hereunder shall
not be conditioned or contingent upon the pursuit by the Revolving Credit
Lenders or any other Person at any time of any right or remedy against Borrower
or against any other Person which may be or become liable in respect of all or
any part of the Guaranteed Obligations or against any collateral security or
guarantee therefor or right of offset with respect thereto.  This guarantee
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms upon the Guarantors and the successors and assigns
thereof, and shall inure to the benefit of the Revolving Credit Lenders, and
their respective successors and assigns, notwithstanding that from time to time
during the term of this Agreement there may be no Guaranteed Obligations
outstanding.

 

6.3           Reinstatement.  The obligations of the Guarantors under this
Section 6 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of Borrower in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise.  The Guarantors jointly and severally agree that
they will indemnify the Administrative Agent and each Revolving Credit Lender on
demand for all reasonable costs and expenses (including reasonable fees of
counsel) incurred by the Administrative Agent or such Revolving Credit Lender in
connection with such rescission or

 

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restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law,
other than any costs or expenses resulting from the gross negligence or bad
faith of such Creditor.

 

6.4           Subrogation; Subordination.  Each Guarantor hereby agrees that
until the indefeasible payment and satisfaction in full in cash of all
Guaranteed Obligations and the expiration and termination of the Revolving
Credit Commitments of the Revolving Credit Lenders under this Agreement it shall
not exercise any right or remedy arising by reason of any performance by it of
its guarantee in Section 6.1, whether by subrogation or otherwise, against
Borrower or any other Guarantor of any of the Guaranteed Obligations or any
security for any of the Guaranteed Obligations.  The payment of any amounts due
with respect to any indebtedness of Borrower or any other Guarantor now or
hereafter owing to any Guarantor by reason of any payment by such Guarantor
under the Guarantee in this Section 6 is hereby subordinated to the prior
indefeasible payment in full in cash of the Guaranteed Obligations.  Each
Guarantor agrees that it will not demand, sue for or otherwise attempt to
collect any such indebtedness of Borrower to such Guarantor until the
Obligations shall have been indefeasibly paid in full in cash. If,
notwithstanding the foregoing sentence, any Guarantor shall prior to the
indefeasible payment in full in cash of the Guaranteed Obligations collect,
enforce or receive any amounts in respect of such indebtedness, such amounts
shall be collected, enforced and received by such Guarantor as trustee for the
Administrative Agent and the Revolving Credit Lenders and be paid over to the
Administrative Agent on account of the Guaranteed Obligations without affecting
in any manner the liability of such Guarantor under the other provisions of the
guaranty contained herein.

 

6.5           Remedies.  The Guarantors jointly and severally agree that, as
between the Guarantors and the Revolving Credit Lenders, the obligations of
Borrower under this Agreement and the Notes may be declared to be forthwith due
and payable as provided in Section 10 (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 10)
for purposes of Section 6.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by Borrower)
shall forthwith become due and payable by the Guarantors for purposes of Section
6.1.

 

6.6           Continuing Guarantee.  The guarantee in this Section 6 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.

 

6.7           General Limitation on Guarantee Obligations.  In any action or
proceeding involving any state corporate law, or any state or federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under Section 6.1 would
otherwise be held or determined to be void, voidable, invalid or unenforceable,
or subordinated to the claims of any other creditors, on account of the amount
of its liability under Section 6.1, then, notwithstanding any other provision to
the contrary, the amount of such liability shall, without any further action by
such Guarantor, any Revolving Credit Lender, the Administrative Agent or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.

 

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Section 7.               Conditions Precedent.

 

7.1           Effectiveness of This Agreement and Initial Extension of Credit
Under This Agreement.  The obligation of the Revolving Credit Lenders to make
any initial extension of credit hereunder (whether by making a Loan or issuing a
Letter of Credit) is subject to the satisfaction of the conditions precedent
that:

 

(a)           Documentation and Evidence of Certain Matters.  The Administrative
Agent shall have received the following documents, each duly executed where
appropriate (with sufficient conformed copies for each Revolving Credit Lender),
each of which shall be reasonably satisfactory in form and substance to the
Administrative Agent (and to the extent specified below, to each Revolving
Credit Lender):

 

(i)            Corporate Documents.  Certified true and complete copies of the
charter and by-laws (or equivalent documents) of each Obligor and of all
corporate authority for each Obligor (including board of director resolutions
and evidence of the incumbency, including specimen signatures, of officers) with
respect to the execution, delivery and performance of such of the Credit
Documents to which such Obligor is intended to be a party and each other
document to be delivered by such Obligor from time to time in connection
herewith and the extensions of credit hereunder and the consummation of the
Transactions, certified as of the Closing Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary of Borrower.

 

(ii)           Officer’s Certificate; Compliance Certificate.  A Compliance
Certificate in the form of Exhibit L hereto and an Officer’s Certificate of
Borrower, dated the Closing Date, (A) to the effect set forth in clauses (i) and
(ii) of Section 7.2(a), (B) to the effect that all conditions precedent to the
making of such extension of credit have been satisfied, (C) to the effect that
execution and delivery of this Agreement, and borrowings under this Agreement,
do not cause a default or breach under the Senior Subordinated Notes Documents
and showing reasonably detailed calculations thereof, and (D) that there has
been no Material Adverse Change since the last audited financial statements
furnished the Revolving Credit Lenders.

 

(iii)          Opinion of Counsel.  Opinion of Fulbright & Jaworski, L.L.P.,
counsel to the Obligors, in form and substance satisfactory to the
Administrative Agent (and each Obligor hereby instructs such counsel to deliver
such opinion to the Revolving Credit Lenders and the Administrative Agent).

 

(iv)          The Credit Agreement.  This Agreement, (i) executed and delivered
by a duly authorized officer of Borrower, with a counterpart for each Revolving
Credit Lender, and (ii) executed and delivered by a duly authorized officer of
each Revolving Credit Lender and the Administrative Agent.

 

(v)           Notes.  The Notes, duly completed and executed for each Revolving
Credit Lender and Swing Loan Lender.

 

(vi)          Transaction Documents.  All other Transaction Documents duly
executed and completed by the parties thereto.

 

(b)           Date of Closing.  Such extension of credit shall be made on or
before September 30, 2002.

 

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(c)           Borrowing Base Certificate.  The Administrative Agent and the
Revolving Credit Lenders shall have received, and the Majority Revolving Credit
Lenders shall be satisfied (as to form and substance) with, a Borrowing Base
Certificate prepared as of the last Business Day of the month immediately
preceding the Closing Date.  In the event the Borrowing Base has changed or, in
Borrower’s reasonable judgment, is expected to change, as of the Closing Date,
Borrower shall deliver to the Administrative Agent and the Revolving Credit
Lenders an additional Borrowing Base Certificate on the Closing Date.

 

(d)           Appraisal.  The Administrative Agent shall have received such
Inventory and other appraisals as the Administrative Agent may reasonably
request, each in form and substance satisfactory to the Administrative Agent,
the costs of any such appraisals to be borne by the Borrower.

 

(e)           Environmental Report.  The Administrative Agent shall have
received a satisfactory environmental site assessment report or reports for each
Mortgaged Real Property, addressed to the Administrative Agent or accompanied by
satisfactory reliance letters addressed to the Administrative Agent allowing the
Administrative Agent to rely fully on said report or reports as if addressed to
the Administrative Agent.  All costs related to said site assessment shall be
borne by the Borrower.

 

(f)            Approvals.  All governmental (domestic and foreign) and other
third-party approvals and consents necessary in connection with the Transactions
and the other transactions contemplated hereby (without the imposition of any
materially burdensome or materially adverse conditions) shall have been obtained
and shall be in full force and effect (or there shall be a plan reasonably
satisfactory to the Administrative Agent for the obtaining thereof).

 

(g)           No Material Adverse Change.  The Administrative Agent shall be
reasonably satisfied that any financial statements delivered to it fairly
present the business and financial condition of the Borrower and its
Subsidiaries, and that there has been no Material Adverse Change or any
condition or event that could reasonably be expected to result in a Material
Adverse Change with respect to Borrower since the date of the most recently
delivered financial statements.

 

(h)           Certain Other Changes.

 

(i)            No material changes in governmental regulations or policies
affecting the Obligors, the Administrative Agent, the Lead Arranger or any
Revolving Credit Lender involved in this transaction shall have occurred prior
to the Closing Date.

 

(ii)           There shall not have occurred prior to the Closing Date any
disruption or material adverse change in the financial or capital markets in
general that would, in the reasonable opinion of the Administrative Agent, have
a material adverse effect on the market for loan syndications or adversely
affect the syndication of the Revolving Credit Loans.

 

(i)            No Action or Proceeding.  There shall not exist any threatened or
pending Proceeding by or before any Governmental Authority, (i) challenging the
consummation of any of the Transactions or which would restrain, prevent or
impose materially burdensome conditions on the Transactions, individually or in
the aggregate, or any other transaction contemplated hereunder, (ii) seeking to
prohibit the ownership or operation

 

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by Borrower or any Subsidiary of all or a material portion of any of their
businesses or assets or (iii) seeking to obtain, or having resulted in the entry
of, any judgment, order or injunction that (a) would restrain, prohibit or
impose materially adverse conditions on the ability of the Revolving Credit
Lenders to make the Loans under the Credit Documents, (b) could be reasonably
expected to result in a Material Adverse Change with respect to Borrower (and
before and after giving effect to the Transactions), (c) could reasonably be
expected to affect the legality, validity or enforceability of any Credit
Document or any documents relating thereto or could reasonably be expected to
have a Material Adverse Effect, or (d) is seeking any material damages as a
result thereof.

 

(j)            Payment of Fees and Expenses.  All accrued fees and expenses
(including the reasonable fees and expenses of counsel to the Lead Arranger and
the Administrative Agent) of the Lead Arranger and the Administrative Agent in
connection with the Credit Documents shall have been paid.

 

(k)           Filings and Lien Searches.

 

(i)            The Administrative Agent shall have received results of searches
or other evidence reasonably satisfactory to the Administrative Agent (in each
case dated as of a date reasonably satisfactory to the Administrative Agent)
indicating the absence of Liens, except for Permitted Liens, on the assets of
the Obligors, except for which termination statements and releases reasonably
satisfactory to the Administrative Agent are being tendered concurrently with
the making of the first Revolving Credit Loan hereunder.

 

(ii)           The Obligors shall have authorized, executed and delivered
evidence of the completion of all filings with respect to the Security Agreement
and delivery of such other documents as may be necessary or desirable, to
perfect the Liens created, or purported to be created, by the Security
Agreement.

 

(l)            Conditions Relating to Mortgaged Real Property and Real
Property.  On or prior to the Closing Date, each Obligor to enter into a
Mortgage shall have caused to be delivered to Administrative Agent, on behalf of
the Revolving Credit Lenders, the following documents and instruments:

 

(i)            a Mortgage encumbering each Mortgaged Real Property in favor of
the Administrative Agent, for the benefit of the Revolving Credit Lenders, in
form for recording in the recording office of each jurisdiction where each such
Mortgaged Real Property is situated, together with such other documentation as
shall be required to create a lien under applicable law, all of which shall be
in form and substance reasonably satisfactory to the Administrative Agent, which
Mortgage and other instruments shall be effective to create a Lien on such
Mortgaged Real Property subject to no Liens other than Prior Liens (or Permitted
Liens) applicable to such Mortgaged Real Property;

 

(ii)           with respect to each Mortgaged Real Property, Borrower shall use
its best efforts to obtain such consents, approvals, estoppels, tenant
subordination agreements or other instruments as reasonably necessary or as
reasonably required by the Administrative Agent to consummate the transactions
contemplated hereby or to grant the Lien contemplated by the Mortgage; and

 

(iii)          the following documents and instruments:

 

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(1)           with respect to each Mortgage, a policy (or commitment to issue a
policy) of title insurance insuring (or committing to insure) the Lien of such
Mortgage as a valid Lien on the real property and fixtures described therein in
an amount not less than the fair market value thereof which policy (or
commitment) shall (a) be issued by the Title Company, (b) include such
reinsurance arrangements, if any (with provisions for direct access), as shall
be reasonably acceptable to the Administrative Agent, (c) have been supplemented
by such endorsements, to the extent available, as shall be reasonably requested
by the Administrative Agent, (d) such affidavits and instruments of
indemnification as shall be reasonably required to induce the Title Company to
issue the policy or policies (or commitment) and endorsements contemplated in
this subparagraph (iii) and (e) contain no exceptions to title other than
exceptions for (x) Liens of the type described in clauses (a), (b), (c), (d),
(f), and (m) of the definition of Permitted Liens, (y) any Lien of the type
described in clause (p) of the definition of Permitted Liens to the extent the
original Lien is permitted hereunder and (z) the Prior Liens applicable to such
Mortgaged Real Property;

 

(2)           with respect to each Mortgaged Real Property, to the extent
requested by the Administrative Agent, a Survey;

 

(3)           with respect to each Mortgaged Real Property, policies or
certificates of insurance as required by the Mortgage relating thereto;

 

(4)           with respect to each Mortgaged Real Property, UCC, judgment and
tax lien searches in the county and state jurisdictions in which such Mortgaged
Real Property is located naming the applicable Obligor as debtor;

 

(5)           evidence acceptable to the Administrative Agent of payment by
Borrower of all title insurance premiums, search and examination charges, survey
costs, mortgage recording taxes and related charges required for the recording
of the Mortgages and issuance of the title insurance policies referred to in
subclause (iii)(1) of this Section 7.1(l);

 

(6)           with respect to each Mortgaged Real Property, an Officer’s
Certificate or other evidence satisfactory to the Administrative Agent that as
of the date thereof (a) other than the Real Property associated with the
warehouse currently under construction at 14303 Inwood Road in Farmer’s Branch,
Texas, there has been issued and is in effect, to the extent required, a valid
and proper certificate of occupancy or local or foreign equivalent for the use
then being made of such Mortgaged Real Property, (b) there has not occurred any
material Destruction of any Mortgaged Real Property that has not been restored
and there is not pending any Taking of any Mortgaged Real Property and (c) to
the best knowledge of Borrower, except as may be disclosed in the Survey of such
Mortgaged Real Property delivered pursuant to subclause (iii)(2) of this Section
7.1(l), there are no disputes regarding boundary lines, location, encroachment
or possession of such Mortgaged Real Property and no state of facts existing
which could give rise to any such claim.

 

(m)          No Default or Event of Default under the Credit Agreement. 
Immediately prior to the Closing Date (and after giving effect to the first
Loans made hereunder), no Default or Event of Default shall have occurred and be
continuing.

 

(n)           Repayment of Existing Indebtedness.  The Administrative Agent
shall have received a payoff letter from the Borrower’s existing lenders, as
well as a tender of releases and discharges of all collateral security for the
Borrower’s existing credit facilities, each in form and substance satisfactory
to the Administrative Agent.  Such Indebtedness shall be repaid
contemporaneously with the making of the first Loan hereunder.

 

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(o)           Material Contracts.  Prior and after giving effect to this
Agreement, the Borrower and its Subsidiaries shall not be in default of any
material contract to which any of them is a party.

 

(p)           Insurance.  The Borrower shall have delivered to the
Administrative Agent certificates and other evidence of insurance (including,
without limitation, insurance covering the Property), naming the Administrative
Agent as mortgagee or additional insured, as applicable and otherwise in
conformance with the terms of this Agreement and the other Credit Documents.

 

7.2           Initial and Subsequent Extensions of Credit Under This Agreement. 
The obligation of the Revolving Credit Lenders to make any Loan or otherwise
extend any credit to Borrower upon the occasion of each borrowing or other
extension of credit (whether by making a Loan or issuing a Letter of Credit)
hereunder (including the initial borrowing) is subject to the further conditions
precedent that:

 

(a)           No Default or Event of Default; Representations and Warranties
True; Borrowing Base Not Exceeded.  Both immediately prior to the making of such
Loan or other extension of credit and also after giving pro forma effect thereto
and to the intended use thereof:

 

(i)            no Default or Event of Default shall have occurred and be
continuing.  Without limiting the generality of the foregoing, after giving
effect to such Loan or extension of credit, the Borrower shall not be in
violation of Section 1008 of the Senior Subordinated Note Documents or Section
9.11(c) of this Agreement;

 

(ii)           the representations and warranties made by the Obligors in
Section 8, and by each Obligor in each of the other Credit Documents to which it
is a party, shall be true and complete in all material respects on and as of the
date of the making of such Loan or other extension of credit with the same force
and effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of such
specific date); and

 

(iii)          for each Loan and each Letter of Credit issuance, both the
Borrowing Base (as determined upon the most recent Borrowing Base Certificate
delivered hereunder) and the aggregate Revolving Credit Commitments, after
giving effect to the requested Loan or Letter of Credit, shall exceed the sum of
all Revolving Credit Loans then outstanding, plus the aggregate principal amount
of Swing Loans then outstanding, plus the aggregate amount of all Letter of
Credit Liabilities then outstanding.

 

(b)           No Legal Bar.  The Loans and the use of proceeds thereof shall not
contravene, violate or conflict with, nor involve any Revolving Credit Lender in
a violation of, any law, rule, injunction, or regulation or determination of any
court of law or other Governmental Authority.

 

Each notice of borrowing or request for the issuance of a Letter of Credit by
Borrower hereunder shall constitute a certification by Borrower to the effect
set forth in clause (a) above (both as of the date of such notice or request
and, unless Borrower otherwise notifies the Administrative Agent prior to the
date of such borrowing or issuance, as of the date of such borrowing or
issuance).

 

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Each notice submitted by Borrower hereunder for an extension of credit hereunder
shall constitute a representation and warranty by Borrower, as of the date of
such notice and as of the relevant borrowing date or date of issuance of a
Letter of Credit, as applicable, that the applicable conditions in Sections 7.1
and 7.2 have been satisfied in accordance with the terms hereof.

 

Section 8.               Representations and Warranties.  Each Obligor
represents and warrants to the Creditors that on the Closing Date and at and as
of each Funding Date (in each case immediately before and immediately after
giving effect to the transactions to occur on such date (including the
Transactions)) and at and as of the date of each other extension of credit
hereunder:

 

8.1           Corporate Existence.  Each Obligor and each Subsidiary:  (a) is a
corporation, partnership or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization; (b) has
all requisite corporate or other power and authority, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its Property and carry on its business as now being conducted; and (c) is
qualified to do business and is in good standing in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure to be so qualified and in good standing would reasonably be
expected to (either individually or in the aggregate) have a Material Adverse
Effect.

 

8.2           Financial Condition; Etc.

 

(a)           Borrower has heretofore delivered to the Revolving Credit Lenders
(i) the audited consolidated balance sheets of Borrower and the Subsidiaries as
of December 31, 2001 and the related statements of earnings, changes in
stockholders’ equity and cash flows for the fiscal years ended on those dates,
together with reports thereon by Arthur Anderson LLP, certified public
accountants, and (ii) the unaudited consolidated balance sheets of Borrower and
the Subsidiaries as of June 30, 2002, and the related statements of earnings and
cash flows for the fiscal periods ended on June 30, 2002.  All of said financial
statements, including in each case the related schedules and notes, are true,
complete (in the case of year-end financial statements) and correct in all
material respects, have been prepared in accordance with GAAP consistently
applied and present fairly the financial position of Borrower and the
Subsidiaries as of the respective dates of said balance sheets and the results
of their operations for the respective periods covered thereby, subject (in the
case of interim statements) to period-end audit adjustments and the absence of
footnotes.

 

(b)           Except as set forth in Schedule 8.2, as of the Closing Date, no
Obligor or any Subsidiary has any material contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or anticipated losses from
any unfavorable commitments.

 

(c)           Except as set forth in the financial statements referred to in
Section 8.2(a), since June 30, 2002, there has been no Material Adverse Change,
or any event, change or circumstance which could reasonably be expected to cause
or evidence, either individually or together with any other events, changes or
circumstances, a Material Adverse Change.

 

8.3           Litigation.  Except as disclosed in Schedule 8.3, there are no
Proceedings or investigations now pending or, to the knowledge of the Obligors,
threatened against or directly affecting any Obligor or any Subsidiary or any of
their respective Property that, if adversely

 

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determined could (either individually or in the aggregate) be reasonably
expected to have a Material Adverse Effect.

 

8.4           No Breach; No Default.

 

(a)           None of the execution, delivery and performance by each Obligor of
any Credit Document or any Transaction Document to which it is a party and the
consummation of the transactions herein and therein contemplated will (i)
conflict with or result in a breach of, or require any consent (which has not
been obtained and is in full force and effect) under, the charter or by-laws of
any Obligor, or any applicable law or regulation, or any order, writ, injunction
or decree of any Governmental Authority binding on any Obligor, or any term or
provision of any agreement or instrument to which any Obligor or any of its
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject (other than consents which may be
required pursuant to the terms of any Lease), or (ii) constitute (with due
notice or lapse of time or both) a default under any such agreement or
instrument, or (iii) result in the creation or imposition of any Lien (except
for the Liens created pursuant to the Security Documents) upon any Property of
any Obligor or any of its Subsidiaries pursuant to the terms of any such
agreement or instrument, except with respect to each of the foregoing which
would not (either individually or in the aggregate) reasonably be expected to
have a Material Adverse Effect.

 

(b)           No Obligor or any Subsidiary is in default under or with respect
to any contractual obligation or any order, award or decree of any Governmental
Authority or arbitrator binding upon it or any of its Property in any respect
which would reasonably be expected to have a Material Adverse Effect.

 

(c)           No Default or Event of Default has occurred and is continuing.

 

8.5           Action.  Each Obligor has all necessary corporate power, authority
and legal right to execute, deliver and perform its obligations under each
Credit Document and each Transaction Document to which it is a party and to
consummate the transactions herein and therein contemplated; the execution,
delivery and performance by each Obligor of each Credit Document and each
Transaction Document to which it is a party and the consummation of the
transactions herein and therein contemplated have been duly authorized by all
necessary corporate action on its part; and this Agreement has been duly and
validly executed and delivered by each Obligor and constitutes, and each of the
Notes, the other Credit Documents and the Transaction Documents to which it is a
party when executed and delivered by such Obligor (in the case of the Notes, for
value) will constitute, its legal, valid and binding obligation, enforceable
against such Obligor in accordance with its terms, except as such enforceability
may be limited by (a) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws of general applicability from time to
time in effect affecting the enforcement of creditors’ rights and remedies and
(b) the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

8.6           Approvals.  No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority or any securities
exchange are necessary for the execution, delivery or performance by any Obligor
of the Credit Documents or Transaction Documents to which it is a party or for
the legality, validity or enforceability hereof or thereof or for the
consummation of the transactions herein and therein contemplated, except for
filings and recordings in respect of the Liens created pursuant to the Security
Documents.

 

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8.7           ERISA.  Each member of the ERISA Group (x) has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and (y) is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code with respect to each
Benefit Arrangement.  No member of the ERISA Group has (i) sought a waiver of
the minimum funding standard under Section 412 of the Code in respect of any
Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which failure or amendment has
resulted or could reasonably be expected to result in the imposition of a Lien
or the posting of a bond or other security under ERISA or the Code, (iii)
incurred any accumulated funding deficiency (whether or not waived) with respect
to any Plan, (iv) any direct or indirect withdrawal liability with respect to
any Multiemployer Plan, or any direct or indirect potential withdrawal liability
if it were to withdraw from a Multiemployer Plan as of the date of determination
or (v) incurred any liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA or contributions in the normal
course.  The sum of the amount of unfunded benefit liabilities (within the
meaning of Section 4001(a)(18) of ERISA) under all Plans (excluding each Plan
with an amount of unfunded benefit liabilities of zero or less) is not more than
$1.0 million.  There are no actions, liens, suits or claims pending or
threatened (other than routine claims for benefits) with respect to any Benefit
Arrangement that could reasonably be expected to have a Material Adverse
Effect.  Borrower and each Subsidiary and any Foreign Plans are in compliance in
all material respects with all applicable laws and regulations with respect to
the Foreign Plans and the terms of the Foreign Plans, and all required
contributions have been made to the Foreign Plans.  For purposes hereof, the
term “Foreign Plans” shall mean any employee benefit plan, program, policy,
arrangement or agreement maintained or contributed to by, or entered into with,
Borrower or any Subsidiary with respect to employees employed outside the United
States.

 

8.8           Taxes.  Except as set forth in Schedule 8.8, each Obligor and each
Subsidiary has filed or caused to be filed all U.S. federal income tax returns
and all other material tax returns, domestic or foreign, required to be filed by
it and has paid all material taxes payable by it which have become due or any
assessments made against it or any of its Property and all other material taxes,
fees or other charges imposed on it or any of its Property (including the
Mortgaged Real Property) by any Governmental Authority (other than those which,
in the aggregate, are not substantial in amount or those the amount or validity
of which are currently being contested in good faith by appropriate proceedings
and with respect to which reserves in conformity with GAAP have been provided on
the books of each Obligor or the Subsidiaries, as the case may be); and no tax
lien has been filed and, to the knowledge of the Obligors, no action, suit,
proceeding, investigation, audit or claim is being asserted or has been
threatened by any authority with respect to any such tax, fee or other charge,
except where the existence of such would not (individually or in the aggregate)
have a Material Adverse Effect.  No Obligor or any Subsidiary has entered into
an agreement or waiver extending any statute of limitations relating to the
payment or collection of taxes of any Obligor or any Subsidiary, except where
the existence of such would not (individually or in the aggregate) have a
Material Adverse Effect.

 

8.9           Investment Company Act; Public Utility Holding Company Act; Other
Restrictions.  No Obligor or any Subsidiary is an “investment company”, or a
company “controlled” by an “investment company”, within the meaning of the
United States Investment Company Act of 1940, as amended.  No Obligor or any
Subsidiary is a “holding company”, or an “affiliate” of a “holding company” or a
“subsidiary company” of a “holding company”, within the meaning of the United
States Public Utility Holding Company Act of 1935, as amended.  No Obligor is
subject to regulation under any law or regulation of any Governmental Authority
(other than Regulation X of the Board of Governors of the Federal Reserve
System) which limits its ability to incur Indebtedness.

 

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8.10         Senior Subordinated Notes.  The subordination provisions contained
in the Senior Subordinated Note Documents are enforceable against Borrower, each
Subsidiary party thereto, and the subordinating creditors thereunder, and all
Obligations are within the definition of “Senior Indebtedness” or “Guarantor
Senior Indebtedness”, as the case may be, included in such subordination
provisions.

 

8.11         Environmental Matters.  Except as disclosed in Schedule 8.11 and
except as would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect:  (i) each Obligor and the Subsidiaries are
in compliance with and in the last five years have been in compliance with, and
are not subject to liability under, any Environmental Laws applicable to them
and there are no Environmental Laws, including such Laws which have been
formally proposed for public comment, which would reasonably be expected to
result in material expenditures by any Obligor or any Subsidiary, and no such
Environmental Laws would reasonably be expected to interfere in any material way
with current or projected operations of any Obligor or any Subsidiary; (ii) no
Obligor or any Subsidiary has received notice that it or any of their respective
predecessors interests has been identified as a potentially responsible party
under the United States Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (“CERCLA”), or any similar law of any
Governmental Authority, nor has any Obligor or any Subsidiary received notice
that any Hazardous Materials that it or any of their respective predecessors in
interest has used, generated, stored, treated, handled, transported or disposed
of, or arranged for disposal or treatment of, have been found at any site at
which any Person is conducting or plans to conduct any action pursuant to any
Environmental Law, and no Obligor or any Subsidiary, or to the knowledge of the
Obligors, any of their respective predecessors in interest, has disposed of,
arranged for the disposal or treatment of, or otherwise released Hazardous
Materials at any site at which any Person is conducting or plans to conduct any
action under Environmental Law; (iii) no properties now or formerly owned,
leased or operated by any Obligor or any Subsidiary or, to the knowledge of the
Obligors, any of their respective predecessors in interest, are (x) listed or,
to the knowledge of any Obligor or Subsidiary, at any Property proposed for
listing on the National Priorities List under CERCLA or (y) listed on the
Comprehensive Environmental Response, Compensation and Liability Information
System List promulgated pursuant to CERCLA or (z) included on any similar lists
maintained by any Governmental Authority; (iv) there are no past or present
events, conditions, activities, practices or actions, or any agreements,
judgments, decrees or orders by which any Obligor or any Subsidiary is bound,
which would reasonably be expected to prevent any Obligor’s or any Subsidiary’s
compliance with any Environmental Law, or which would reasonably be expected to
give rise to any liability of any Obligor or any Subsidiary under any
Environmental Law, including, without limitation, liability under CERCLA or
similar state or foreign laws; (v) no Lien has been asserted or recorded, or to
the knowledge of the Obligors, threatened, under any Environmental Law with
respect to any asset, facility, inventory or property currently owned, leased or
operated by any Obligor or any Subsidiary; (vi) there are no underground storage
tanks or related piping at any Property owned, operated or, to the knowledge of
any Obligor or Subsidiary, at any Property leased by any Obligor or any
Subsidiary; (vii) to the knowledge of any Obligor or any Subsidiary no such
tanks or related piping has been removed from such properties; and (viii) no
Obligor or any Subsidiary is subject to any Proceeding alleging the violation
of, or liability under, any Environmental Law and, to the knowledge of the
Obligors, no such Proceeding is threatened.

 

8.12         Environmental Investigations.  All material environmental
investigations, studies, audits or assessments which have been conducted and
which are in the possession, custody or control of any Obligor or any Subsidiary
relating (i) to the current or prior business, operations, facilities or
Properties of any Obligor or any Subsidiary or any of their respective
predecessors in interest or (ii) to any facility or Property of any Obligor now
or previously owned, operated, leased or used by any Obligor or any Subsidiary
or any of their respective predecessors in

 

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interest have been made available to the Administrative Agent and the Revolving
Credit Lenders.

 

8.13         Use of Proceeds.  Neither Borrower nor any Subsidiary is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of buying or
carrying Margin Stock and no part of the proceeds of any extension of credit
hereunder will be used to purchase or carry any Margin Stock.  Borrower will use
the proceeds of all Revolving Credit Loans to refinance existing senior
indebtedness or for working capital and other uses permitted under this
Agreement.  Borrower may also use the proceeds of Revolving Credit Loans to (i)
effect repurchases, redemptions or other acquisitions of Borrower’s Equity
Interests made pursuant to and in compliance with Section 9.10(c) and (ii) repay
existing Senior Subordinated Notes in accordance with the terms of Section 9.15.

 

8.14         Subsidiaries.  As of the Closing Date (after giving effect to the
Transactions), Borrower does not have any Subsidiaries or interests in
partnerships, joint ventures or business trusts other than the entities set
forth in Schedule 8.14.  Borrower owns, as of the Closing Date, the percentage
of the issued and outstanding Equity Interests or other evidences of the
ownership of each Subsidiary, partnership or joint venture listed on Schedule
8.14 as set forth on such Schedule.  Such Schedule 8.14 identifies each
Restricted Subsidiary and each Unrestricted Subsidiary of the Borrower as of the
Closing Date. No such Subsidiary, partnership or joint venture has issued any
securities convertible into shares of its Equity Interests (or other evidence of
ownership) or any Equity Rights to acquire such shares or securities convertible
into such shares (or other evidence of ownership), and the outstanding stock and
securities (or other evidence of ownership) of such Subsidiaries, partnerships
or joint ventures are owned by Borrower and the Subsidiaries free and clear of
all Liens and Equity Rights of others of any kind whatsoever, except for Liens
pursuant to the Security Documents.

 

8.15         Properties.  Except for Permitted Liens or as otherwise
contemplated or provided in the Mortgage, the other Security Documents or this
Agreement, each of the Obligors has good and marketable title to and beneficial
ownership of all Properties owned by it, including all Property reflected in the
most recent financial statements delivered pursuant to this Agreement (except as
sold or otherwise disposed of since the date of such financial statements in the
ordinary course of business and in accordance with this Agreement).  Title to
each such Property that is not Collateral is held by the Obligors and each of
their respective Subsidiaries free and clear of all Liens except for Permitted
Liens.  Title to such Property that constitutes Collateral is held by the
Obligors free and clear of all Liens other than Prior Liens and other Liens
expressly permitted by the applicable Security Document.

 

8.16         Security Interest; Absence of Financing Statements.  The Security
Documents, once executed and delivered, will create, in favor of the
Administrative Agent for the benefit of the Revolving Credit Lenders, as
security for the obligations purported to be secured thereby, a valid and
enforceable, and upon filing or recording with the appropriate Governmental
Authorities or the taking of other appropriate action, depending upon the type
of Collateral, perfected first priority security interest in and Lien upon all
of the Collateral, superior to and prior to the rights of all third persons
other than the holders of Prior Liens and subject to no other Liens except Prior
Liens and other liens specifically permitted by the terms of the applicable
Security Document.

 

Except with respect to Permitted Liens which are subordinate to the Liens of the
Security Documents, Prior Liens and the Liens created by the Security Documents,
there is no financing statement, security agreement, chattel mortgage, real
estate mortgage or other document filed or recorded with any filing records,
registry, or other public office, that purports to cover, affect or

 

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give notice of any present or possible future Lien on, or security interest in,
any assets or Property of Borrower or any Subsidiary or rights thereunder.

 

8.17         Compliance with Laws.  Each Obligor is in material compliance with
all applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Authority in all jurisdictions in which it is presently doing
business, and each Obligor will comply and cause each of its Subsidiaries to
comply with all such laws and regulations which may be imposed in the future in
jurisdictions in which it or such Subsidiary may then be doing business, in each
case other than those the non-compliance with which would not (individually or
in the aggregate) reasonably be expected to have a Material Adverse Effect. 
Additionally, there does not exist any judgment, order or injunction prohibiting
or imposing material adverse conditions upon the Transactions, or the
performance by any Obligor of its obligations under the Credit Documents, the
Transaction Documents and all applicable laws.

 

8.18         True and Complete Disclosure.  The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of any
of the Obligors to any Creditor in connection with the negotiation, preparation
or delivery of this Agreement and the other Credit Documents or included herein
or therein or delivered pursuant hereto or thereto, including pursuant to any
information memorandum distributed in connection with the syndication of the
Revolving Credit Commitments, whether prior to or after the Closing Date, when
taken as a whole, do not, as of the date such information was furnished, contain
any untrue statement of material fact or omit to state a material fact necessary
in order to make the statements herein or therein, in light of the circumstances
under which they were made, not materially misleading. The projections and pro
forma financial information furnished at any time by any Obligor to any Creditor
pursuant to this Agreement have been prepared in good faith based on assumptions
believed by Borrower to be reasonable at the time made, it being recognized by
the Revolving Credit Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount and no Obligor,
however, makes any representation as to the ability of Borrower or any
Subsidiary to achieve the results set forth in any such projections.  Borrower
understands that all such statements, representations and warranties shall be
deemed to have been relied upon by the Revolving Credit Lenders as a material
inducement to make each extension of credit hereunder.

 

8.19         Solvency.  As of the Closing Date and each other date of an
extension of credit hereunder immediately prior to and immediately following
such extension of credit each Obligor is and will be Solvent.

 

Section 9.               Covenants.  Each Obligor covenants and agrees with the
Creditors that, so long as any Commitment, Loan or Letter of Credit Liability is
outstanding and until payment in full of all amounts payable by Borrower
hereunder:

 

9.1           Financial Statements, Etc.  Borrower (for itself and on behalf of
the Guarantors) shall deliver to the Administrative Agent in sufficient
quantities to distribute to each of the Revolving Credit Lenders:

 

(a)           Quarterly Financials.  As soon as available and in any event
within 45 days after the end of each of the first three quarterly fiscal periods
of each fiscal year, consolidated and consolidating statements of income and
cash flow of Borrower and its Consolidated Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheet of Borrower
and its Consolidated Subsidiaries as at the end of such period, setting forth in
each case in comparative form (i) the corresponding

 

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consolidated and consolidating statements of income for the corresponding period
in the preceding fiscal year and (ii) the corresponding budget or plan for such
period, accompanied by a certificate of the chief financial officer of Borrower,
which certificate shall state that said consolidated and consolidating financial
statements fairly present the consolidated and consolidating financial condition
and results of operations of Borrower and its Consolidated Subsidiaries in
accordance with GAAP, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments and absence of footnotes);

 

(b)           Annual Financials.  As soon as available and in any event within
90 days after the end of each fiscal year, consolidated and consolidating
statements of income, retained earnings and cash flow of Borrower and its
Consolidated Subsidiaries for such year and the related consolidated and
consolidating balance sheet of Borrower and its Consolidated Subsidiaries as at
the end of such year, setting forth in each case in comparative form (i) the
corresponding consolidated and consolidating figures as of the end of and for
the preceding fiscal year and (ii) the corresponding budget or plan for such
period, and accompanied by an opinion, without material qualification, thereon
of independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated and consolidating financial
statements fairly present the consolidated and consolidating financial condition
and results of operations of Borrower and its Consolidated Subsidiaries as at
the end of, and for, such fiscal year in accordance with GAAP, and a certificate
of such accountants stating that, in making the examination necessary for their
opinion, they obtained no knowledge of any Default; Borrower shall supply such
additional information and detail as to any item or items contained on any such
statement that Revolving Credit Lenders may reasonably require; all such
information will be prepared in accordance with GAAP;

 

(c)           Other Financial Information.  Promptly upon delivery thereof to
the shareholders of any Obligor or any Subsidiary (other than Wholly Owned
Subsidiaries) generally, copies of all financial statements and reports and
proxy statements so delivered which Borrower sends to all holders of securities
of the same class and within five (5) days after the same are filed, copies of
all financial statements and reports which Borrower may make to or file with any
securities regulatory commission or the Securities and Exchange Commission or
any successor or analogous Governmental Authority;

 

(d)           Interest Rate Certificates.  Together with the financial
statements delivered pursuant to clause (a) or (b) of this Section 9.1, an
Interest Rate Certificate;

 

(e)           Notice of Default.  Within two (2) Business Days after a
Responsible Officer of Borrower or any Subsidiary knows or should have known
that any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that Borrower has taken and proposes to
take with respect thereto;

 

(f)            Environmental Matters.  Written notice of any Environmental Claim
received by the Borrower or any of its Subsidiaries materially affecting any
Obligor or any Subsidiary, any Mortgaged Real Property or the operations of
Borrower or any Subsidiary, and of any notice received by the Borrower or any of
its Subsidiaries of (i) the occurrence of any release, spill or discharge of any
Hazardous Material that is reportable under any Environmental Law or the
commencement of any clean-up pursuant to or in accordance with any Environmental
Law of any Hazardous Material at, on, under or within the Mortgaged Real
Property or any part thereof, or any other condition, circumstance, occurrence
or event, any of which could reasonably be expected to result

 

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in a material liability of Borrower or any Subsidiary under any Environmental
Law; or (ii) any matters relating to Hazardous Materials or Environmental Laws
that may impair, or threaten to impair, Revolving Credit Lenders’ security
interest in the Mortgaged Real Property or any Obligor’s ability to perform any
of its material obligations under this Agreement when such performance is due;

 

(g)           Auditors’ Reports.  Promptly upon receipt thereof, copies of all
material reports submitted to Borrower by independent certified public
accountants in connection with each annual, interim or special audit of the
books of Borrower made by such accountants, including any management letter
commenting on Borrower’s internal controls submitted by such accountants to
management in connection with their annual audit, if the matters stated in such
report are reasonably likely to have a Material Adverse Effect;

 

(h)           Annual Budgets.  An annual budget in reasonable detail and
financial projections made in good faith, within 60 days after the end of each
fiscal year of Borrower, commencing with the fiscal year ending December 31,
2002;

 

(i)            Borrowing Base Audits.  Periodically at the request of the
Administrative Agent or the Majority Revolving Credit Lenders, a report, the
scope and cost of which shall be reasonably acceptable to the Revolving Credit
Lenders and Borrower (the reasonable cost and expense of which shall be for the
sole account of Borrower), of an independent collateral auditor (which may be,
or be affiliated with, one of the Revolving Credit Lenders) with respect to the
Inventory included in the Borrowing Base as at the end of a monthly accounting
period, which report shall indicate that, based upon a review by such auditors
of the Inventory (including verification as to the value, location and
respective types), the information set forth in the Borrowing Base Certificate
delivered by Borrower as at the end of such accounting period is accurate and
complete in all material respects;

 

(j)            Borrowing Base Certificate.

 

(i)            As soon as available and in any event no later than 12:00 noon on
the third Business Day after the end of each week during the Overadvance Period
until the Borrower terminates the Overadvance Period in accordance with the
provisions of Section 2.5(c) hereof, a Borrowing Base Certificate as of the last
day of the immediately preceding week; if Borrower fails to deliver any such
Borrowing Base Certificate within three (3) Business Days after the end of any
such week, then the Borrowing Base shall be deemed to be $0 until such time as
Borrower shall deliver such required Borrowing Base Certificate;

 

(ii)           As soon as available and in any event within 5 Business Days
after the end of each monthly accounting period (ending on the last day of each
calendar month) commencing with the first monthly accounting period after the
termination of the Overadvance Period in accordance with the provisions of
Section 2.5(c) hereof, a Borrowing Base Certificate as of the last day of such
monthly accounting period; if Borrower fails to deliver any such Borrowing Base
Certificate within 5 Business Days after the end of any such month, then the
Borrowing Base shall be deemed to be $0 until such time as Borrower shall
deliver such required Borrowing Base Certificate;

 

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(iii)          Each Borrowing Base Certificate shall have attached to it such
additional schedules and/or other information as the Administrative Agent may
reasonably request;

 

(iv)          Borrower shall notify the Administrative Agent promptly upon
becoming aware of any event or condition that could reasonably be expected to
have a Material Adverse Effect on the Borrowing Base;

 

(k)           Lien Matters.  Written notice of (i) the incurrence of any
material Lien (other than Prior Liens) on, or claim asserted against any
material item of the Collateral known to the Borrower or any of its
Subsidiaries, or (ii) the occurrence of any other event known to the Borrower or
any of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect on the aggregate value of the Collateral;

 

(l)            Notice of Material Adverse Change.  Written notice of any
occurrence of any event or condition which has had or resulted in or is
reasonably likely to have or result in a Material Adverse Change or a Material
Adverse Effect;

 

(m)          Governmental Filings.  Promptly after request by the Administrative
Agent or any Revolving Credit Lender, copies of any other material reports or
documents that were filed by any Obligor with any Governmental Agency;

 

(n)           ERISA Information.  If and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any “reportable event” (as
defined in Section 4043 of ERISA) with respect to any Plan which could
reasonably be expected to constitute grounds for a termination of such Plan
under Title IV of ERISA or other action by the PBGC with respect to the Plan, or
knows that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver of the
minimum funding standard under Section 412 of the Code, a copy of such
application; (v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal (or deemed withdrawal under Section
4092(e) of ERISA) from any Plan pursuant to Section 4063 of ERISA, a copy of
such notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which failure or amendment has
resulted or could reasonably be expected to result in the imposition of a Lien
or the posting of a bond or other security under ERISA or the Code, an Officer’s
Certificate setting forth details as to such occurrence and action, if any,
which Borrower or the applicable member of the ERISA Group is required or
proposes to take;

 

(o)           Notice of Warehouse Lease Termination.  Within two (2) Business
Days after a Responsible Officer of Borrower or any Subsidiary knows or should
have known that the lessor for any of the Borrower’s or its Subsidiaries’
warehouses intends to terminate, or has terminated, the Borrower’s or its
Subsidiaries’ lease, a notice thereof describing the same in reasonable detail
and, together with such notice or as soon thereafter as possible, a description
of the action that Borrower has taken and proposes to take with respect thereto;
and

 

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(p)           Miscellaneous.  Promptly, such financial and other information
regarding Borrower and the Subsidiaries as any Creditor may from time to time
reasonably request.

 

Borrower will furnish to the Administrative Agent and each of the Revolving
Credit Lenders, at the time it furnishes each set of financial statements
pursuant to paragraph (a) or (b) above, a certificate of a senior financial
officer of Borrower in the form of Exhibit L hereto  (i) to the effect that no
Default has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the action
that Borrower has taken and proposes to take with respect thereto) and (ii)
setting forth in reasonable detail the computations necessary to determine
whether Borrower is in compliance with Sections 9.7, 9.8, 9.9, 9.10 and 9.11 as
of the end of the respective quarterly fiscal period or fiscal year.

 

9.2           Litigation, Etc.  Borrower shall promptly give to the
Administrative Agent and each Revolving Credit Lender notice of all Proceedings
and any material development in respect of such Proceedings, affecting Borrower
or any Subsidiary, except Proceedings which could not reasonably be expected to
have (individually or in the aggregate) a Material Adverse Effect.

 

9.3           Existence; Compliance with Law; Payment of Taxes; Inspection
Rights; Performance of Obligations; Etc.  Each Obligor and each Subsidiary
shall, (i) preserve and maintain its legal existence and all of its material
rights, privileges and franchises, the loss of which could reasonably be
expected to have a Material Adverse Effect (provided, however, that nothing in
this Section 9.3 shall prohibit any transaction expressly permitted under
Section 9.6); (ii) comply with the requirements of all applicable laws
(including ERISA and the rules and regulations thereunder), rules, regulations
and orders of Governmental Authorities if failure to comply with such
requirements would (individually or in the aggregate) have a Material Adverse
Effect; (iii) timely file true, accurate and complete tax returns required by
all Governmental Authorities and pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its Property prior to the date on which penalties attach thereto (except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained in accordance with GAAP) if such failure to file
or pay and discharge would (individually or in the aggregate) have a Material
Adverse Effect; (iv) maintain all of its Properties used or useful in its
business in good working order and condition, ordinary wear and tear excepted,
except to the extent that the failure to do so with respect to any such Property
would not individually or in the aggregate be reasonably likely to have a
Material Adverse Effect; (v) permit representatives of the Administrative Agent,
during normal business hours, to examine, copy and make extracts from its books
and records, to inspect its Properties, and to discuss its business and affairs
with its officers, all to the extent reasonably requested by the Administrative
Agent; (vi)  permit representatives of the Administrative Agent to appraise any
or all of the Collateral, at such intervals and by such appraisers as the
Administrative Agent may reasonably request; (vii) perform in all material
respects all of its obligations under the terms of each mortgage, indenture,
security agreement, other debt instrument and material contract by which it is
bound or to which it is a party, except where such failure to so perform, singly
or in the aggregate with all other such failures, would not have a Material
Adverse Effect; and (viii) keep proper books of record and accounts, in which
full and correct entries shall be made of all financial transactions and the
Property and business of each Obligor and its Subsidiaries in all material
respects in accordance with GAAP in effect from time to time or in all material
respects as otherwise required by applicable rules and regulations of any
Governmental Authority having jurisdiction over such Obligor or its
Subsidiaries, as relevant.

 

9.4           Insurance.  Borrower and each Subsidiary shall keep insured by
financially sound and reputable insurers all Property of a character usually
insured by corporations engaged in the

 

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same or similar business similarly situated against loss or damage of the kinds
and in the amounts customarily insured against by such corporations and carry
such other insurance as is usually carried by such corporations, including, in
any event, business interruption insurance or insurance of inventory at retail
consistent with past practice and, if real property subject to a Mortgage in
favor of the Administrative Agent and such real property is located in an area
designated by the Secretary of Housing and Urban Development as a special flood
hazard area, flood insurance in an amount not to exceed that available for one
hundred percent (100%) reinsurance by the Federal Emergency Management Agency.

 

All policies of insurance required to be maintained by Borrower or any
Subsidiary must name the Administrative Agent on behalf of Revolving Credit
Lenders as mortgagees (in the case of property insurance) or additional insured
(in the case of liability insurance), as applicable, and must provide that no
cancellation or modification of the policies will be made without thirty (30)
days’ prior written notice to the Administrative Agent.

 

Each policy of insurance obtained or maintained by Borrower or any Subsidiary
shall: (i) be written by financially responsible companies selected by Borrower
and having an A.M. Best rating of “A” or better and being in a financial size
category of XII or larger, or by other companies reasonably acceptable to the
Administrative Agent; (ii) waive all rights of subrogation of the insurers
against the Creditors; (iii) waive any right of the insurers to set-off or
counterclaim or to make any other deduction, whether by way of attachment or
otherwise, as against any Creditor; (iv) waive all claims for insurance premiums
or commissions or additional premiums or assessments against the Creditors; and
(v) provide that, except in the case of third-party liability insurance, the
proceeds of any loss affecting real or personal property or interests shall be
applied in accordance with the terms of the applicable Security Document.

 

Borrower will advise the Administrative Agent promptly of any material policy
cancellation, reduction or amendment.

 

Borrower will not and will not permit any Subsidiary to materially modify any of
the provisions of any policy with respect to casualty insurance without
delivering the original copy of the endorsement reflecting such modification to
the Administrative Agent.

 

9.5           Limitation on Lines of Business.  No Obligor or Subsidiary shall
directly or indirectly, engage to any material extent in any line or lines of
business activity other than the business of the type conducted by Borrower and
the Subsidiaries as of the Closing Date.

 

9.6           Limitation on Fundamental Changes; Limitation on Acquisitions;
Limitation on Dispositions.  No Obligor or Subsidiary shall, directly or
indirectly, (i) enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), (ii) acquire any business or Property from, or
Equity Interests of, or be a party to any acquisition of, any Person, or effect
any Acquisition, or (iii) effect any Disposition or convey, sell, lease, assign,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or a substantial part of its business or Property, whether now
owned or hereafter acquired, including receivables and leasehold interests. 
Notwithstanding the foregoing provisions of this Section 9.6, each of the
following shall be permitted:

 

(a)           purchases of inventory and other Property to be sold or used in
the ordinary course of business (including Capital Expenditures);

 

(b)           the pledge of the Collateral pursuant to the Security Documents;

 

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(c)           any Subsidiary may be merged or consolidated or dissolved or
liquidated with or into:  (i) Borrower if Borrower shall be the continuing or
surviving corporation, (ii) any Wholly Owned Subsidiary which is an Obligor;
provided, however, that a Wholly Owned Subsidiary which is an Obligor shall be
the continuing or surviving corporation or (iii) if such Subsidiary effecting
such transaction is not an Obligor, another Subsidiary which is not an Obligor;

 

(d)           any Subsidiary may sell, lease, transfer or otherwise dispose of
any or all of its Property (upon voluntary liquidation or otherwise) to Borrower
or to any Wholly Owned Subsidiary which is an Obligor or, if such Subsidiary
effecting such transaction is not an Obligor, to another Subsidiary which is not
an Obligor;

 

(e)           Dispositions of used, worn out, obsolete or surplus Property by
Borrower or any Subsidiary, all in the ordinary course of business, including
the termination, sale or abandonment of leases for retail sites not favorable to
Borrower, if in the ordinary course of business and on ordinary business  terms;

 

(f)            Borrower or any Subsidiary may sell or discount, in each case
without recourse, accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection thereof and
may sell for less than face value notes or accounts receivables in connection
with trade discounts in the ordinary course of business or consistent with past
practice;

 

(g)           Borrower or any Subsidiary may effect any Disposition for fair
market value not to exceed (i) $500,000 in the aggregate in any fiscal year of
Borrower and (ii) in addition to that permitted by subclause (i) of this Section
9.6(g) (which shall not count against this subclause (ii)), $2.0 million in the
aggregate from and after the Closing Date;

 

(h)           Investments permitted by Section 9.9;

 

(i)            any Wholly Owned Subsidiary that is a Foreign Subsidiary may
sell, lease, transfer or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to another Wholly Owned Subsidiary that is a
Foreign Subsidiary;

 

(j)            any Foreign Subsidiary may be merged or consolidated with or into
any one or more Wholly Owned Subsidiaries that are Foreign Subsidiaries
(provided that a Wholly Owned Subsidiary that is a Foreign Subsidiary shall be
the continuing or surviving corporation);

 

(k)           the sale by any Foreign Subsidiary of its accounts receivable;
provided, however, that the terms of each such sale are satisfactory in form and
substance to the Administrative Agent;

 

(l)            any Acquisition; provided, however, that (i) no Default or Event
of Default exists or will result therefrom, (ii) on a pro forma basis, after
giving effect to such Acquisition(s), Borrower would have been in compliance
with Section 9.11 on the last day of the most recently completed fiscal quarter
(assuming, for purposes of Section 9.11, that such Acquisition had occurred on
the first day of the Measurement Period ending on such last day) as evidenced in
an Officer’s Certificate delivered to the Administrative Agent and each
Revolving Credit Lender at least 10 days prior to the consummation thereof
(which shall have attached thereto reasonably detailed backup data and
calculations showing such compliance), (iii) the aggregate amount of the
consideration (which for each Acquisition shall be measured at the date of
consummation

 

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thereof and which shall include Indebtedness and other liabilities incurred or
assumed, working capital deficits and deferred payments) paid for all
Acquisitions consummated since the Closing Date shall not exceed $5.0 million,
and (iv) such Acquisition shall be effected through Borrower or a Wholly Owned
Subsidiary which is an Obligor and (unless the Acquisition relates to the
acquisition of assets) the Person acquired shall be merged with or into a Wholly
Owned Subsidiary which is an Obligor or shall be at the time of consummation
thereof a Wholly Owned Subsidiary which is an Obligor (it being understood that
proceeds of Loans shall not be used to finance hostile acquisitions);

 

(m)          the sale by the Borrower of Real Property; provided, however, that
(i) the aggregate of the Net Available Proceeds and other consideration received
therefrom do not exceed $7,500,000 in the aggregate from and after the Closing
Date, and (ii) reasonably contemporaneously with such sale, the Net Available
Proceeds therefrom are used to purchase or lease additional Real Property (and
to the extent purchased, a Mortgage shall be granted to the Administrative Agent
thereon to secure the Obligations); and

 

(n)           any Acquisition the consideration for which is paid with the Net
Available Proceeds of any Disposition permitted by Section 9.6(g) or (m) and to
the extent such Net Available Proceeds have not been used to effect Capital
Expenditures, any Acquisition permitted by this Section 9.6 or otherwise
expended by Borrower or any Subsidiary; provided, however, that (i) no Default
or Event of Default exists or would result therefrom, (ii) on a pro forma basis,
immediately after giving effect to any such Acquisition, Borrower would be in
compliance with all financial covenants set forth in Section 9.11 on the last
day of the most recently ended fiscal quarter (assuming, for purposes of Section
9.11, that such Acquisition had occurred on the first day of the Measurement
Period ending on such last day) as evidenced in an Officer’s Certificate
delivered to the Revolving Credit Lenders at least 10 days prior to the
consummation of such Acquisition (which shall have attached thereto reasonably
detailed backup data and calculations showing such compliance), and (iii) such
Acquisition shall be effected through Borrower or a Wholly Owned Subsidiary of
Borrower which is an Obligor and the Person acquired shall be merged with or
into a Wholly Owned Subsidiary which is an Obligor or shall be at the time of
consummation thereof a Wholly Owned Subsidiary which is an Obligor.

 

To the extent the Majority Revolving Credit Lenders waive the provisions of this
Section 9.6 with respect to the sale or other disposition of any Collateral, or
any Collateral is sold or otherwise disposed of as permitted by this Section
9.6, such Collateral in each case shall be sold or otherwise disposed of free
and clear of the Liens created by the Security Documents and the Administrative
Agent shall take such actions as are appropriate in connection therewith.

 

9.7           Limitation on Liens and Related Matters.  No Obligor or Subsidiary
shall, directly or indirectly, create, incur, assume or suffer to exist any Lien
upon or with respect to any Collateral except for Prior Liens and other Liens
expressly permitted by the applicable Security Document.  No Obligor or
Subsidiary shall, directly or indirectly, create, incur, assume or suffer to
exist any Lien upon or with respect to any of their respective Property that
does not constitute Collateral, whether now owned or hereafter acquired, or sell
any such property or assets subject to an understanding or agreement, contingent
or otherwise, to repurchase such property or assets or assign any right to
receive income, or file or permit the filing of any financing statement under
the UCC or any other similar notice of Lien under any similar recording or
notice statute, except the following, which are herein collectively referred to
as “Permitted Liens”:

 

(a)           Liens in existence on the Closing Date and identified in Schedule
9.7;

 

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(b)           Liens imposed by any Governmental Authority for taxes, assessments
or charges not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of Borrower or the affected Subsidiary, as the case may be, in
accordance with GAAP;

 

(c)           Liens in respect of Property of Borrower or any Subsidiary (i)
imposed by law, (ii) to the extent such Liens exist as of the Closing Date,
imposed by contract, or (iii) to the extent such Liens are imposed by contract
after the Closing Date (in which case Borrower shall use its best efforts to
provide that any such Lien is created in a commercially reasonable amount and
manner), in each case which were incurred in the ordinary course of business,
such as carriers’, warehousemen’s, landlords’ and mechanics’ Liens and other
similar Liens arising in the ordinary course of business, in each case for sums
the payment of which is not delinquent or, if delinquent, is not then required
by Section 9.3;

 

(d)           pledges or deposits under worker’s compensation, unemployment
insurance and other social security legislation or the deposits securing the
liability to insurance carriers;

 

(e)           pledges or deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;

 

(f)            easements, rights-of-way, restrictions or minor defects or
irregularities in title incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Real Property or minor imperfections in title thereto
which, in the aggregate, are not material in amount, and which do not in any
case materially detract from the value of the Real Property subject thereto or
interfere with the ordinary conduct of the business of Borrower or any
Subsidiary; and precautionary UCC filings by lessors and bailees in the ordinary
course of business;

 

(g)           Liens upon tangible personal Property acquired after the Closing
Date by Borrower or any Subsidiary, each of which Liens either (i) existed on
such Property before the time of its acquisition and was not created in
anticipation thereof, or (ii) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the cost
of such Property or improvements thereon; provided, however, that (x) no such
Lien shall extend to or cover any Property of any Obligor or any Subsidiary
other than the Property so acquired and improvements thereon and (y) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed 100% of the fair market value of such Property at the time such Lien was
created;

 

(h)           Liens existing on any Property of any Person at the time such
Person becomes a Subsidiary or is merged or consolidated with or into a
Subsidiary and, in each case, not created in contemplation of or in connection
with such event; provided, however, that such Liens do not extend to any other
Property of any Obligor or any Subsidiary;

 

(i)            Liens (excluding Liens on Collateral) not otherwise permitted
hereunder securing obligations not at any time exceeding in the aggregate $1.0
million;

 

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(j)            Liens securing obligations under Swap Contracts with any
Revolving Credit Lender or any Affiliate of a Revolving Credit Lender so long as
the Obligations are secured by the same collateral on a pari passu basis;

 

(k)           Liens consisting of judgment or judicial attachment Liens
(including prejudgment attachment) the enforcement of which is effectively
stayed or payment of which is covered in full (subject to a customary
deductible) by insurance or which do not otherwise result in an Event of Default
under Section 10(h);

 

(l)            Liens securing obligations in respect of Capital Leases solely on
Property subject to such Capital Leases;

 

(m)          Liens arising from filing UCC financing statements for
precautionary purposes relating solely to true leases of personal property
permitted by this Agreement under which Borrower or any of its Subsidiaries is a
lessee;

 

(n)           Liens encumbering customary initial deposits and margin deposits,
and other Liens incurred in the ordinary course of business that are within the
general parameters customary in the industry;

 

(o)           Liens arising out of consignment or similar arrangements for the
sale of goods entered into by the Borrower or any Subsidiary in the ordinary
course of business in accordance with past practices;

 

(p)           any extension, renewal or replacement of the foregoing; provided,
however, that the Liens permitted under this subsection (p) shall not cover any
additional Indebtedness or Property (other than like Property substituted for
Property covered by such Lien);

 

(q)           interests of lessors under leases and restrictions and
encumbrances on the interests of such lessors;

 

(r)            Liens in favor of banks which arise under Article IV of the UCC
on items in collection and the documents relating thereto and proceeds thereof;

 

(s)           Liens in favor of customs and revenue authorities arising as a
matter of law to secure customs duties in connection with the importation of
goods; and

 

(t)            interests of licensors of patents, trademarks and other
intellectual property.

 

Except with respect to (i) specific Property encumbered pursuant to a Lien
permitted to be incurred pursuant to this Section 9.7 or (ii) specific Property
to be sold pursuant to an executed agreement with respect to a Disposition
consummated in accordance with this Agreement, no Obligor will, nor will any of
them permit any of their respective Subsidiaries to, directly or indirectly,
enter into any agreement after the Closing Date (other than the Credit
Documents) prohibiting or restricting in any manner (directly or indirectly and
including by way of covenant, representation or warranty or event of default)
the creation or assumption of any Lien upon its Property, whether now owned or
hereafter acquired except for customary restrictions on the creation of Liens
contained in leases and licenses affecting the Property leased or licensed
thereunder.

 

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9.8           Limitation on Indebtedness.  No Obligor or Subsidiary shall,
directly or indirectly, create, incur or suffer to exist or be or become liable
for any Indebtedness, except (each of which shall be given independent effect):

 

(a)           Indebtedness under the Credit Documents;

 

(b)           Indebtedness outstanding on the Closing Date and listed in
Schedule 9.8 and specified on Schedule 9.8 as to remain outstanding after the
Closing Date;

 

(c)           Indebtedness of Borrower or any Wholly Owned Subsidiary owing to
Borrower or any Wholly Owned Subsidiary which is an Obligor; provided, however,
that (i) if requested by the Majority Revolving Credit Lenders, such
Indebtedness shall be evidenced by an Intercompany Note which shall be pledged
to the Administrative Agent on behalf of the Revolving Credit Lenders pursuant
to the Security Agreement and (ii) such Indebtedness shall not be held by any
Person other than Borrower or a Wholly Owned Subsidiary which is an Obligor and
shall not be subordinate to any other Indebtedness or other obligation of the
obligor other than the Loans and the Senior Subordinated Notes;

 

(d)           Indebtedness of Borrower and the Subsidiaries secured by Liens
permitted under Section 9.7(g) or (l) not exceeding in the aggregate $2.0
million at any one time outstanding;

 

(e)           Indebtedness of Borrower represented by the Senior Subordinated
Notes in an aggregate principal amount of $69 million less any prepayments or
repayments thereof on and after the Closing Date and any senior subordinated
guarantees thereof by Guarantors in accordance with the terms of the Senior
Subordinated Note documents as in effect on the Closing Date;

 

(f)            unsecured subordinated Indebtedness of Borrower in an amount not
to exceed $10 million at any time outstanding; provided, however, that (i) the
maturity of any principal payments thereunder shall be no earlier than one year
after the Revolving Credit Commitment Termination Date and such Indebtedness
shall not require by its terms any prepayments of any principal amount
thereunder prior to one year after the Revolving Credit Commitment Termination
Date, (ii) such Indebtedness is subordinated to the Obligations substantially on
the terms set forth in Exhibit J, (iii) no Default or Event of Default shall
exist at the time of issuance of such Indebtedness or would arise therefrom,
(iv) such Indebtedness shall not provide for any payment of interest in cash so
long as any Loans or Reimbursement Obligations are then outstanding, or any
Commitment to make extensions of Credit is then in existence remain outstanding
or any Revolving Credit Commitments remain in effect hereunder, and (v) the
terms and provisions thereof (including covenants, interest rate, defaults,
prepayment terms and maturities) shall be acceptable to the Administrative Agent
in its sole discretion;

 

(g)           unsecured Indebtedness incurred by any Foreign Subsidiary not to
exceed $1.0 million in the aggregate at any time outstanding;

 

(h)           Indebtedness arising from honoring a check, draft or similar
instrument against insufficient funds; provided, however, that such Indebtedness
is extinguished within two Business Days of its incurrence;

 

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(i)            unsecured Indebtedness of Borrower or any Subsidiary which is an
Obligor incurred in the ordinary course of business in an aggregate principal
amount not to exceed $5.0 million at any time outstanding;

 

(j)            Indebtedness represented by amounts declared, payable as, or set
apart for, Dividend Payments permitted by Section 9.10;

 

(k)           Swap Contracts entered into in the ordinary course of business and
designed to protect the Obligors against fluctuations in interest rates,
currency exchange rates, commodity prices or similar risks;

 

(l)            any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this subsection (l), a “Refinancing”) of any
Indebtedness permitted by clauses (b), (d), (e), (f), (g), (i), or (p) of this
Section 9.8, including any successive Refinancings; provided, however, that (i)
no Default or Event of Default shall have occurred and be continuing or would
arise therefrom, (ii) any such Refinancing of Indebtedness shall (w) not be on
financial and other terms, in the reasonable judgment of Administrative Agent,
that are more onerous than the Indebtedness being refinanced, (x) not have a
stated maturity or weighted average life that is shorter than the Indebtedness
being refinanced, (y) be at least as subordinate to the Obligations as the
Indebtedness being refinanced (and unsecured if the refinanced Indebtedness is
unsecured), and (z) be in principal amount that does not exceed the principal
amount so refinanced, plus the lesser of (1) the stated amount of any premium or
other payment required to be paid in connection with such Refinancing pursuant
to the terms of the Indebtedness being refinanced and (2) the amount of premium
or other payment actually paid at such time to refinance the Indebtedness, plus,
in either case, the amount of reasonable expenses of Borrower or any Subsidiary
incurred in connection with such Refinancing, (iii) the obligor on such
Refinancing Indebtedness shall be Borrower or the original obligor on such
Indebtedness being refinanced (with any guarantor on the Indebtedness being
refinanced permitted to guarantee the Refinancing Indebtedness and Borrower
likewise permitted to guarantee such Refinancing Indebtedness of Guarantors),
and (iv) the incurrence of such Refinancing Indebtedness shall not increase the
overall Indebtedness of Borrower and the Subsidiaries;

 

(m)          the guarantee of the Obligations pursuant to Section 6 and
guarantees by Guarantors of the Senior Subordinated Notes pursuant to the Senior
Subordinated Note documents as in effect on the Closing Date;

 

(n)           Contingent Obligations of Borrower or any Subsidiary in respect of
Indebtedness or other liabilities of Borrower or any Wholly Owned Subsidiary
which is an Obligor to the extent that the existence of such Indebtedness or
other liabilities is not prohibited under this Agreement;

 

(o)           Contingent Obligations in connection with Dispositions permitted
under Section 9.6, arising in connection with indemnification and other
agreements in respect of any contract relating to such Disposition, not to
exceed the consideration received by Borrower or any Subsidiary in connection
with such sale and excluding in all cases any Contingent Obligation with respect
to any obligation of any third person incurred in connection with the
acquisition of the Property which is the subject of such Disposition; and

 

(p)           Acquired Indebtedness not to exceed $5.0 million in the aggregate.

 

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All intercompany debt shall be unsecured and subordinate in right of payment to
the Obligations.

 

No Obligor shall directly or indirectly make any optional prepayment,
redemption, retirement or defeasance, whether in cash, property, securities or a
combination thereof, on account of the principal amount of any Indebtedness,
other than (1) Refinancings permitted by Section 9.8(l), (2) the Loans, and (3)
repurchases, redemptions or other acquisitions of the Senior Subordinated Notes
permitted by Section 9.15.

 

9.9           Limitation on Investments; Limitation on Creation of
Subsidiaries.  No Obligor or Subsidiary shall, directly or indirectly, make or
permit to remain outstanding any Investments, except:

 

(a)           operating deposit accounts and certificates of deposit with banks
in the ordinary course of business;

 

(b)           Permitted Investments;

 

(c)           Investments by Borrower or any Subsidiary in any Wholly Owned
Subsidiary that is an Obligor and Investments by any Subsidiary in Borrower;

 

(d)           Investments outstanding on the Closing Date and identified with
particularity in Schedule 9.9 and any renewals, extensions, modifications and
replacements thereof that do not increase the amount thereof;

 

(e)           Investments that constitute Indebtedness permitted under Section
9.8;

 

(f)            Investments by Borrower in Swap Contracts entered into as bona
fide hedges and not for speculative purposes;

 

(g)           advances, loans or extensions of credit by Borrower or any
Subsidiary to employees of Borrower or any Subsidiary; provided, however, that
the aggregate amount of all such loans, advances and extensions of credit shall
not at any time exceed in the aggregate $3.0 million (without giving effect to
any write-down or write-off thereof) and, provided, further, that no Investment
shall be made pursuant to this clause (g) if any Event of Default exists;

 

(h)           extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;

 

(i)            pledges or deposits required in the ordinary course of business
in connection with workmen’s compensation, unemployment insurance and other
social security or similar legislation;

 

(j)            pledges or deposits in connection with (i) the non-delinquent
performance of bids, trade contracts (other than for borrowed money), leases or
statutory obligations, (ii) contingent obligations on surety or appeal bonds,
and (iii) other non-delinquent obligations of a like nature, in each case
incurred in the ordinary course of business;

 

(k)           Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent

 

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obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business;

 

(l)            Borrower and the Subsidiaries may hold additional Investments in
any non-Wholly Owned Subsidiary or Foreign Subsidiary to the extent that such
Investments reflect an increase in the stockholders’ equity of such Subsidiary
resulting from retained earnings of such Subsidiary;

 

(m)          any Foreign Subsidiary may make Investments in or to any other
Foreign Subsidiary;

 

(n)           Capital Expenditures;

 

(o)           Investments by Borrower or any Subsidiary in any non-Wholly Owned
Subsidiary or any Subsidiary which is not an Obligor to the extent made in the
ordinary course to fund or support the ordinary course operations of such
Subsidiary so long as no Event of Default shall have occurred and be continuing;
provided, however, that (i) the amount of such Investments made pursuant to this
clause (o) shall not exceed $1.0 million in the aggregate outstanding at any
time (without giving effect to any write-down or write-off thereof) and (ii)
upon the request of the Majority Revolving Credit Lenders all such Investments
evidenced by Intercompany Notes shall be pledged to the Administrative Agent
pursuant to the Security Agreement and provided, further that no Investment
shall be made pursuant to this clause (o) if any Event of Default exists
immediately prior to or after the making of such Investment;

 

(p)           Investments for the creation of any Wholly Owned Foreign
Subsidiary which is a foreign sales corporation consisting of de minimis
capitalization;

 

(q)           Borrower or any Subsidiary may hold the Equity Interests,
partnership interests or other ownership or equity interest therein of any
Subsidiary existing on the Closing Date or created or acquired thereafter in
accordance with the provisions hereof and any additional Equity Interests,
partnership interests or ownership or equity interests issued in exchange
therefor or as a dividend thereon;

 

(r)            Investments consisting of non-cash consideration received in the
form of securities, notes or similar obligations in connection with a
Disposition permitted by Section 9.6(g); provided, however, that (i) the
aggregate amount of such non-cash consideration received in connection with any
such Disposition shall not exceed 15% of the total consideration received in
connection with such Disposition and (ii) such non-cash consideration is pledged
pursuant to the appropriate Security Document;

 

(s)           Investments by or through Borrower or any Wholly Owned Subsidiary
which is an Obligor made in order to consummate Acquisitions effected in
accordance with Section 9.6(l), or (n); provided, however, that no Default or
Event of Default exists or will result therefrom;

 

(t)            Investments by Foreign Subsidiaries in high quality investments
of the type similar to Permitted Investments made outside the United States;

 

(u)           Investments made by or through Borrower or any Wholly Owned
Subsidiary which is an Obligor with the Net Available Proceeds of any
Disposition effected in accordance with Section 9.6(g) or (n), to the extent
such Net Available Proceeds have not been used to effect Capital Expenditures,
any Acquisition permitted by

 

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Section 9.6 or otherwise expended by Borrower or any Subsidiary; provided,
however, that (i) no Default or Event of Default exists or would result
therefrom, and (ii) such Investment shall be effected through Borrower or a
Wholly Owned Subsidiary which is an Obligor and, if an Acquisition, shall comply
with Section 9.6; and

 

(v)           in addition to the foregoing, other Investments not exceeding $5.0
million in the aggregate outstanding at any time (without giving effect to any
write-downs or write-offs thereof), net of any returns of capital, cash
dividends and distributions received in respect thereof and net cash proceeds of
sales thereof and; provided, however, that no Investment shall be made pursuant
to this clause (w) if any Event of Default exists.

 

No Obligor shall, nor shall any of them permit any Subsidiary to, directly or
indirectly, create or acquire any Subsidiary without the prior written consent
of the Administrative Agent, which consent shall not be unreasonably withheld,
provided, however, that the provisions of this Section 9.9 shall not require the
Administrative Agent’s consent for the creation or acquisition of wholly-owned
direct and indirect Subsidiaries of Borrower so long as, with respect to any
such acquisition, it complies with the provisions of Section 9.6.

 

9.10         Limitation on Dividend Payments.  No Obligor or Subsidiary shall,
directly or indirectly, declare or make any Dividend Payment at any time, except
that:

 

(a)           any Subsidiary may declare and make Dividend Payments to the
extent made pro rata to all holders of the Equity Interests thereof;

 

(b)           so long as no Default or Event of Default then exists or would
arise therefrom, Borrower may repurchase, redeem or otherwise acquire or retire
for value shares of Equity Interests or Equity Rights of Borrower from employees
who have died (or their estates or beneficiaries) or whose employment has
terminated; provided, however, that such payment shall not exceed $1.5 million
in any fiscal year; and

 

(c)           so long as no Default or Event of Default then exists or would
arise therefrom, Borrower may make repurchases, redemptions or other
acquisitions of its Equity Interests; provided, however, that, after giving pro
forma effect to each such repurchase, redemption or other acquisition:

 

(i)   the amount of all such repurchases, redemptions or other acquisitions
shall not exceed, in the aggregate, $25.0 million since the Closing Date;

 

(ii)  Borrower shall be in compliance with all covenants and agreements set
forth herein (including Section 9.11); and

 

(iii) within two Business Days of each such repurchase, redemption or other
acquisition, Borrower shall deliver to the Administrative Agent an Officers’
Certificate stating compliance with this Section 9.10(c).

 

9.11         Financial Covenants.

 

(a)           Maximum Leverage Ratio.  Borrower shall not permit the Leverage
Ratio at any date set forth in the table below to exceed the ratio set forth
opposite such date in the table below:

 

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Date

 

Ratio

 

 

 

Closing Date through
September 30, 2002

 

2.50: 1.00

 

 

 

December 31, 2002

 

1.75: 1.00

 

 

 

March 31, 2003

 

1.75: 1.00

 

 

 

June 30, 2003

 

1.75: 1.00

 

 

 

September 30, 2003

 

2.00: 1.00

 

 

 

December 31, 2003 and each March 31, June 30, September 30 and December 31
thereafter

 

1.50: 1.00

 

(b)           Minimum Fixed Charge Coverage Ratio.  Borrower shall not permit
the ratio of (x) Consolidated EBITDA plus Consolidated Rental Expense less
Capital Expenditures for any Measurement Period on or after the Closing Date to
(y) Fixed Charges for such Measurement Period on or after the Closing Date at
the end of any fiscal quarter to be less than 1.50:1.00.

 

(c)           Minimum Interest Coverage Ratio.  Borrower shall not permit the
Consolidated Minimum Interest Coverage Ratio for the four full fiscal quarters
taken as one period (and after giving pro forma effect to (A) the incurrence of
any Indebtedness (including, without limitation, the Loans) and (if applicable)
the application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the application of such
proceeds occurred, on the first day of such four quarter period, (B) the
incurrence, repayment, or retirement of any other Indebtedness of the Borrower
and its Restricted Subsidiaries since the first day of such four quarter period
(except that in making such computation, the amount of Loans and Letter of
Credit Liabilities shall be computed based upon the average daily balance of
such Loans and Letter of Credit Liabilities during such four quarter period),
and (C) the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business acquired or disposed of by the Borrower or its Restricted Subsidiaries,
as the case may be, since the first day of such four quarter period, as if such
acquisition or disposition occurred on the first day of such four quarter
period) to be less than 2.00:1.00.

 

(d)           Minimum Tangible Net Worth.  Borrower shall not permit its
Consolidated Tangible Net Worth to be less than the sum of (1) $27,000,000, plus
(ii) fifty percent (50%) of the cumulative consolidated net income (but in no
event less than zero) of the Borrower and its Consolidated Subsidiaries
calculate on a consolidated basis in accordance with GAAP from and after July 1,
2002, plus (iii) seventy-five percent (75%) of the Net Available Proceeds of any
Equity Issuance from and after July 1, 2002.

 

(e)           Measuring Dates.  The covenants in clauses (a), (b), (c) and (d)
of this Section 9.11 shall be measured as of the Closing Date and the end of
each fiscal quarter thereafter and will apply to Borrower and the Subsidiaries
(or Restricted Subsidiaries, as applicable) on a consolidated basis; in
addition, the covenant set forth in clause (c) of this Section 9.11 shall be
measured as of each date that the Borrower requests a Loan or the issuance of a
Letter of Credit.

 

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9.12         Pledge of Additional Collateral.  Promptly, and in any event within
30 days, after the acquisition of any Property of the type that would have
constituted Collateral at the Closing Date (including the Equity Interests of
any Subsidiary hereafter created or acquired) other than Real Property (the
“Additional Collateral”), each Obligor and each Wholly Owned Subsidiary (other
than any Foreign Subsidiary) shall take all action reasonably necessary or
desirable, including the execution and delivery of all such agreements,
assignments, documents and instruments (including amendments to the Credit
Documents) and the filing of appropriate financing statements under the
provisions of the UCC or applicable governmental requirements in each of the
offices where such filing is necessary or appropriate, to grant the
Administrative Agent for the benefit of the Revolving Credit Lenders a duly
perfected first priority Lien (subject to Prior Liens) on such Property pursuant
to and to the full extent required by the Security Documents and this Agreement;
provided, however, that not more than 65% of the Equity Interests of any “first
tier” Foreign Subsidiary need be pledged and no Equity Interests of any Foreign
Subsidiary which is not a “first-tier” Foreign Subsidiary need be pledged.

 

In the event that, after the Closing Date, Borrower or any Domestic Subsidiary
acquires or holds a fee interest in any Real Property with a market or book
value of $3.5 million or more, the Obligors and each Wholly Owned Subsidiary
shall reasonably promptly (i) take such actions and execute such documents as
the Administrative Agent shall reasonably require to confirm the Lien of an
existing Mortgage, if applicable, or to create a new Mortgage on such additional
Real Property and (ii) cause to be delivered to the Administrative Agent, on
behalf of the Revolving Credit Lenders, the documents and instruments reasonably
requested by the Administrative Agent, including, without limitation, the items
set forth in Section 7.1 in respect of Mortgaged Real Property.

 

The costs of all actions taken by the parties in connection with the pledge of
Additional Collateral or in connection with any Mortgage, including reasonable
costs of counsel for the Administrative Agent, shall be paid by the Obligors
promptly following written demand.

 

9.13         Security Interests.

 

(a)           Each Obligor and each Subsidiary authorizes the Administrative
Agent, at Borrower’s expense, to execute, acknowledge and deliver, or cause the
execution, acknowledgment and delivery of, and thereafter register, file or
record, or cause to be registered, filed or recorded, in an appropriate
governmental office, financing statements and any other document or instrument
supplemental to or confirmatory of the Security Documents or otherwise deemed by
the Administrative Agent reasonably necessary or desirable for the continued
validity, perfection and priority of the Liens on the Collateral covered
thereby.

 

(b)           Each Obligor and each Subsidiary shall deliver or cause to be
delivered to the Administrative Agent from time to time such other
documentation, consents, authorizations, approvals and orders in form and
substance reasonably satisfactory to the Administrative Agent as the
Administrative Agent shall reasonably deem necessary to perfect or maintain the
Liens on the Collateral.

 

9.14         Compliance with Environmental Laws.  (a) Each Obligor and each
Subsidiary shall comply with all Environmental Laws, and will keep or cause all
Real Property to be kept free of any Liens under Environmental Laws, unless
failure to do so would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; (b) in the event of the presence of
any Hazardous Material at, on, under or emanating from any Real Property which
would reasonably be expected to result in liability under or a violation of any
Environmental Law, in each case which would, either individually or in the
aggregate,

 

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reasonably be expected to have a Material Adverse Effect, each Obligor and each
Subsidiary shall undertake, and/or cause any of their respective tenants or
occupants to undertake, at their sole expense, any action required pursuant to
Environmental Laws to mitigate and eliminate any such adverse effect; provided,
however, that no Obligor or Subsidiary shall be required to comply with any
order or directive which is being contested in good faith and by proper
proceedings so long as it has maintained adequate reserves with respect to such
compliance to the extent required in accordance with GAAP; (c) each Obligor
shall promptly notify the Administrative Agent of the occurrence of any event
specified in clause (b) of this Section 9.14 and shall periodically thereafter
keep the Administrative Agent informed of any material actions taken in response
to such event and the results of such actions; and (d) at the written request of
the Administrative Agent, each Obligor will provide, at such Obligor’s sole cost
and expense, an environmental site assessment (including, without limitation,
the results of any subsurface testing, conducted if the Administrative Agent
directs that such testing be conducted) concerning any Real Property now or
hereafter owned, leased or operated by such Obligor or any Subsidiary, conducted
by an environmental consulting firm proposed by such Obligor and reasonably
acceptable to the Administrative Agent indicating the presence or absence of
Hazardous Materials and the potential cost of any required investigation or
other response or any corrective action in connection with any Hazardous
Materials on, at, under or emanating from such Real Property; provided, however,
that such request may be made only if (i) there has occurred and is continuing
an Event of Default, or (ii) the Administrative Agent reasonably believes that
such Obligor or any Subsidiary or any such Real Property is not in material
compliance with Environmental Law which could reasonably be expected to have a
Material Adverse Effect, or (iii) circumstances exist that reasonably could be
expected to form the basis of an Environmental Claim against such Obligor, any
Subsidiary or any such Real Property which could reasonably be expected to have
a Material Adverse Effect.  If any Obligor fails to provide the same within 60
days after such request was made, the Administrative Agent may but is under no
obligation to order the same, and each Obligor shall grant and hereby grants to
the Administrative Agent and its agents access to such Real Property and
specifically grants the Administrative Agent an irrevocable non-exclusive
license, subject to the rights of tenants, to undertake such an assessment, all
at such Obligor’s sole cost and expense.

 

9.15         Limitation on Prepayments of Senior Subordinated Notes, Etc. 
Borrower shall not, and shall not cause or permit any Subsidiary to make (or
give any notice in respect of) any voluntary or optional payment or prepayment
or redemption or acquisition for value of the Senior Subordinated Notes
(including, without limitation, by way of depositing with any trustee with
respect thereto money or securities before such Indebtedness is due for the
purpose of paying such Indebtedness when due); provided, that so long as no
Default or Event of Default then exists or would arise therefrom, Borrower may
make purchases, redemptions, or other acquisitions of its Senior Subordinated
Notes at any time after January 1, 2003 (but not prior thereto); provided
further, that, after giving pro forma effect to each such repurchase,
redemption, or other acquisition:

 

(a)           Excess Availability after giving effect to such payment and on a
pro forma basis for the following twelve months shall be no less than
$20,000,000 ;

 

(b)           Borrower’s most recent annual audited financial statements
demonstrate that the Borrower’s Leverage Ratio is at least 0.25 less than the
then applicable Leverage Ratio set forth in Section 9.11(a) of this Agreement. 
For purposes of clarity, if the required Leverage Ratio under Section 9.11(a)
was 2.0:1.0, in order to make payments hereunder, the Borrower’s then Leverage
Ratio would be required to be 1.75:1.00 or less;

 

(c)           Borrower shall be in compliance with all covenants and agreements
set forth herein (including Section 9.11); and

 

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(d)           within two Business Days of each such repurchase, redemption or
other acquisition, Borrower shall deliver to the Administrative Agent an
Officer’s Certificate stating compliance with this Section 9.15.

 

9.16         Limitation on Transactions with Affiliates.  No Obligor or
Subsidiary shall, directly or indirectly: enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any Property, the rendering of any service, or a merger or
consolidation), with any Affiliate (an “Affiliate Transaction”) unless such
Affiliate Transaction is otherwise not prohibited under this Agreement, is in
the ordinary course of the Obligor’s business and is on fair and reasonable
terms that are not less favorable to the Obligor than those that would be
obtainable at the time in an arm’s-length transaction with a Person who is not
such an Affiliate; provided, however, that so long as no Default or Event of
Default shall have occurred and be continuing, the following shall be
permitted:  (a) Dividend Payments permitted by Section 9.10; (b) the payment of
reasonable and customary regular fees to directors of Borrower or any Subsidiary
who are not employees of Borrower or any Subsidiary; (c) any transaction with an
officer or member of the board of directors of Borrower or any Subsidiary in the
ordinary course of business involving compensation, indemnity or employee
benefit arrangements; (d) loans or advances to employees permitted by Section
9.9; (e) transactions and agreements in existence on the Closing Date and listed
and described with particularity in Schedule 9.16 (the “Existing Affiliate
Agreements”) and the transactions contemplated by each of the Existing Affiliate
Agreements; (f) payments made pursuant to management agreements with Madison
Dearborn not to exceed $500,000 for each fiscal year of Borrower; (g) employment
agreements and arrangements (including, without limitation, benefits) approved
by the board of directors of Borrower; (h) any employee benefit plan available
to employees of Borrower generally; (i) transactions with Obligors; and (j)
transactions in the ordinary course of business with Subsidiaries and other
transactions with Subsidiaries not prohibited hereunder.

 

9.17         Limitation on Accounting Changes; Limitation on Investment Company
Status. No Obligor or Subsidiary shall make or permit, any change in (i)
accounting policies or reporting practices, except immaterial changes and except
as required by generally accepted accounting principles or (ii) its fiscal year
end (December 31 of each year); provided, however, that the Obligors and
Subsidiaries may change their fiscal year end to a retail calendar year end as
long as the Administrative Agent and the Borrower have theretofore agreed upon a
modification and adjustment of the financial performance covenants set forth in
Section 9.11 hereof to reflect the change of such fiscal year.  No Obligor shall
be or become an investment company subject to the registration requirements
under the United States Investment Company Act of 1940, as amended.

 

9.18         Limitation on Modifications of Certain Documents, Etc.  No Obligor
or Subsidiary shall, directly or indirectly, consent to any modification,
supplement or waiver of, or amend or modify, any of the provisions of (i) any
term or provision of the subordination provisions of any Indebtedness incurred
pursuant to Section 9.8(f), (ii) any Senior Subordinated Note Document or (iii)
in any manner which could reasonably be expected to be materially adverse to the
Revolving Credit Lenders, its certificate of incorporation or its by-laws (or
any other organizational document), or any agreement entered into with respect
to its Equity Interests.

 

9.19         Limitation on Certain Restrictions Affecting Subsidiaries.  No
Obligor or Subsidiary shall, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any direct or indirect encumbrance or
restriction on the ability of any such Subsidiary to (a) pay dividends or make
any other distributions on such Subsidiary’s Equity Interests or any other
interest or participation in its profits owned by Borrower or any Subsidiary, or
pay any

 

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Indebtedness or any other obligation owed to Borrower or any Subsidiary, (b)
make Investments in or to Borrower or any Subsidiary, or (c) transfer any of its
Property to Borrower or any Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) the Credit
Documents, (iii) the Senior Subordinated Note Documents as in effect on the
Closing Date, (iv) such restrictions with respect to the transfer of those
assets subject to a Lien permitted under Section 9.7, (v) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
or license of Borrower or any Subsidiary, (vi) with respect to restrictions
described in clause (c) only, restrictions in any agreement relating to any
Disposition which is permitted under this Agreement, and (vii) Acquired
Indebtedness; provided, however, that with regard to this clause (vii), (1) such
restriction applies solely to the Person acquired or to a newly formed Wholly
Owned Subsidiary with only de minimis assets formed expressly to make the
acquisition in question and (if such Acquisition is of Equity Interests) the
Person acquired does not merge at any time while such restriction is in effect
with or into Borrower or any Subsidiary of Borrower other than any such newly
formed Wholly Owned Subsidiary and (2) such Person acquired or such newly formed
Subsidiary shall be a Guarantor.

 

9.20         Additional Obligors.  Promptly, but in any event within 30 days of
Borrower or any Subsidiary creating or acquiring a Wholly Owned Subsidiary
(other than a Foreign Subsidiary) after the Closing Date (each such Subsidiary
referred to herein as an “Additional Obligor” and collectively as the
“Additional Obligors”), Borrower shall cause each such Subsidiary to execute and
deliver all such agreements, guarantees, documents and certificates (including
any amendments to the Credit Documents and a Joinder Agreement substantially in
the form of Exhibit K) as the Administrative Agent may reasonably request and do
such other acts and things as the Administrative Agent may reasonably request in
order to have such Subsidiary guarantee the Obligations in accordance with the
terms of the Credit Documents.

 

9.21         Limitation on Designated Senior Indebtedness.  Borrower will not
and will not permit any Subsidiary to, designate or permit the designation of
any Indebtedness (other than the Obligations) as “Designated Senior
Indebtedness” or “Designated Guarantor Senior Indebtedness” for purposes of, and
as defined in, the Senior Subordinated Notes Documents.

 

9.22         Limitation on Change of Principal Place of Business or Corporate
Name.  Each Obligor shall not change its principal place of business or its
corporate name unless it shall have (a) given the Administrative Agent at least
thirty days’ advance written notice of such change, and (b) filed in all
necessary jurisdictions such documents as may be necessary to continue without
impairment or interruption the perfection and priority of the liens on the
Collateral in favor of the Administrative Agent pursuant to the Security
Documents.

 

9.23         Replacement Documentation.  Upon receipt of an affidavit of an
officer of the Administrative Agent as to the loss, theft, destruction or
mutilation of any Note or any other Security Document which is not of public
record, and, in the case of any such mutilation, upon surrender and cancellation
of any such Note or other Security Document, Borrower will issue, in lieu
thereof, a replacement Note or other Security Document in the same principal
amount and otherwise of like tenor upon receipt by Borrower of a suitable
indemnity.

 

Section 10.             Events of Default.  If one or more of the following
events (herein called “Events of Default”) shall occur and be continuing:

 

(a)           (i) Borrower shall default in the payment when due (whether at
stated maturity upon prepayment or repayment or acceleration or otherwise) of
any principal of any Loan, or (ii) Borrower shall default in the payment when
due of interest on any Loan or any Reimbursement Obligation or any fee or any
other amount payable by it hereunder

 

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or under any other Credit Document when due and such default under this clause
(ii) shall have continued unremedied for five (5) or more Business Days; or

 

(b)           Any Obligor or any Subsidiary (the Obligors and such Subsidiaries
herein collectively called the “Relevant Parties” and each, a “Relevant Party”)
shall default in the payment when due of any principal of or interest on any of
its Indebtedness (other than the Loans) aggregating $5.0 million or more, beyond
the period of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created, after giving effect to any consents or waivers
relating thereto; or any event specified in any note, agreement, indenture or
other document evidencing or relating to any Indebtedness aggregating $5.0
million or more if the effect of such event (after giving effect to any consents
or waivers relating thereto) is to cause, or (with the giving of any notice or
the lapse of time or both) to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by redemption,
purchase, offer to purchase or otherwise), prior to its stated maturity; or any
Relevant Party shall default in the payment when due of any amount aggregating
$1.0 million or more under any Swap Contract; or

 

(c)           Any representation or warranty made or deemed made in any Credit
Document (or in any modification or supplement thereto) by any Relevant Party or
in any certificate furnished to any Creditor pursuant to the provisions thereof,
shall prove to have been false or misleading as of the time made, deemed made or
furnished in any material respect; or

 

(d)           Any Obligor shall default in the performance of any of its
obligations under any of Sections 9.1(e) or 9.5 through 9.12 and 9.14 through
9.23; or any Obligor shall default in the performance of any of its obligations
under Section 5.2 of the Security Agreement; or Borrower shall default in the
performance of its obligations under Section 9.1(d) or (j) and such default
shall continue unremedied for five (5) Business Days; or any Obligor shall
default in the performance of any of its other obligations in this Agreement,
the Security Documents or the Letter of Credit Documents and such default shall
continue unremedied for a period of thirty days after written notice thereof to
such Obligor or Borrower by the Administrative Agent; or

 

(e)           Any Relevant Party shall not, or shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become due;
or

 

(f)            Any Relevant Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the Bankruptcy Code (as now or hereafter in effect), (iv)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts, (v) fail to controvert within 60 days or in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code, or (vi) take any corporate action
by its board of directors or analogous governing body for the purpose of
effecting any of the foregoing; or

 

(g)           A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator

 

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or the like of such Relevant Party or of all or any substantial part of its
assets, or (iii) similar relief in respect of such Relevant Party under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and either (1) such proceeding shall not be actively
contested by such Relevant Party, or (2) such proceeding or case shall continue
undismissed, undischarged or unbonded, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days; or an order for relief against any
Relevant Party shall be entered in an involuntary case under the Bankruptcy
Code; or

 

(h)           A final judgment or judgments for the payment of money in excess
of $10.0 million in the aggregate (exclusive of judgment amounts to the extent
covered by insurance) or a final judgment or judgments which is reasonably
likely to have a Material Adverse Effect shall be rendered by one or more
courts, administrative tribunals or other bodies having jurisdiction against any
Relevant Party and the same shall not be discharged (or provision shall not be
made for such discharge), vacated or bonded pending appeal, or a stay of
execution thereof shall not be procured, within 45 days from the date of entry
thereof and such Relevant Party shall not, within said period of 45 days, or
such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or

 

(i)            Any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $2.5 million which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the meaning of
Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans
which could reasonably be expected to cause one or more members of the ERISA
Group to incur a payment obligation in excess of $2.5 million; or

 

(j)            Any Change of Control; or

 

(k)           Any Security Document after delivery thereof at any time shall
cease to be in full force and effect or shall for any reason fail to create or
cease to maintain a valid and duly perfected first priority security interest in
and Lien upon (subject to Prior Liens and Permitted Liens (but only to the
extent that the law or regulation creating or authorizing such Permitted Lien
provides that such Permitted Lien must be superior to the Lien and security
interest created and evidenced by the Security Documents)) any portion of the
Collateral, except for (A) released Collateral or (B) any Collateral in which a
security interest may not be perfected by the filing of UCC financing statements
or by possession of such Collateral and possession of such Collateral by the
Administrative Agent is not required by the Security Documents or this
Agreement; or

 

(l)            Any Guarantee ceases to be in full force and effect or any of the
Guarantors repudiates, or attempts to repudiate, any of its obligations under
any of the Guarantees (except Guarantors released from their obligations under
Section 6.2); or

 

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(m)          The subordination provisions relating to any Senior Subordinated
Note Document (the “Subordination Provisions”) shall fail to be enforceable by
the Revolving Credit Lenders (which have not effectively waived the benefits
thereof) in accordance with the terms thereof, or any Obligation shall fail to
constitute Senior Indebtedness or Guarantor Senior Indebtedness (as defined in
the Senior Subordinated Note Documents), or Borrower or any Subsidiary shall,
directly or indirectly, disavow or contest in any manner any of the
Subordination Provisions; or

 

(n)           The occurrence of any uninsured Casualty Event with respect to any
material portion of the Collateral;

 

THEREUPON:  (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 10, the Administrative Agent may, and upon
written direction of the Majority Revolving Credit Lenders shall, by notice to
Borrower, terminate the Revolving Credit Commitments and/or declare the
principal amount then outstanding of, and the accrued interest on, the Loans,
the Reimbursement Obligations and all other amounts payable by Borrower
hereunder and under the Notes (including any amounts payable under Section 5.5
or 5.6) to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by Borrower,
reduce any claim to judgment, take any other action permitted by law and/or take
any action permitted to be taken by the Security Documents during the existence
of an Event of Default; and (2) in the case of the occurrence of an Event of
Default referred to in clause (f) or (g) of this Section 10, the Revolving
Credit Commitments shall automatically be terminated and the principal amount
then outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by Borrower hereunder and under the
Notes (including any amounts payable under Section 5.5 or 5.6) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by Borrower.

 

In addition, Borrower agrees, upon the occurrence and during the continuance of
any Event of Default if the Administrative Agent has declared the principal
amount then outstanding of, and accrued interest on, the Revolving Credit Loans,
and all other amounts payable to the Revolving Credit Lenders hereunder and
under the Notes evidencing such Loans to be due and payable, it may and shall,
if requested by the Majority Revolving Credit Lenders through the Administrative
Agent (and, in the case of any Event of Default referred to in clause (f) or (g)
of this Section 10 with respect to any Relevant Party, forthwith, without any
demand or the taking of any other action by the Administrative Agent or such
Revolving Credit Lenders) provide cover for the Letter of Credit Liabilities by
paying to the Administrative Agent immediately available funds in an amount
equal to the then aggregate undrawn face amount of all Letters of Credit, which
funds shall be held by the Administrative Agent in the Collateral Account as
collateral security in the first instance for the Letter of Credit Liabilities
and be subject to withdrawal only as provided in the Security Agreement.

 

Section 11.             The Administrative Agent.

 

11.1         General Provisions.  Each of the Revolving Credit Lenders and the
Issuing Lender hereby irrevocably appoints the Administrative Agent as its agent
and authorizes the Administrative Agent to take such actions on its behalf and
to exercise such powers as are delegated to the Administrative Agent by the
terms hereof, together with such actions and powers as are reasonably incidental
thereto.

 

The Revolving Credit Lender or other financial institution serving as the
Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Revolving Credit

 

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Lender as any other Revolving Credit Lender and may exercise the same as though
it were not the Administrative Agent, and such bank and its Affiliates may
accept deposits from, lend money to and generally engage in any kind of business
with Borrower or any Subsidiary or other Affiliate thereof as if it were not the
Administrative Agent hereunder.

 

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein.  Without limiting the generality of the foregoing,
(a) the Administrative Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default or Event of Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing by the Majority
Revolving Credit Lenders (or such other number or percentage of the Revolving
Credit Lenders as shall be necessary under the circumstances as provided in
Section 12.4), and (c) except as expressly set forth herein, the Administrative
Agent shall not have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to Borrower or any Subsidiary that
is communicated to or obtained by the financial institution serving as
Administrative Agent or any of its Affiliates in any capacity.  The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Majority Revolving Credit Lenders (or
such other number or percentage of the Revolving Credit Lenders as shall be
necessary under the circumstances as provided in Section 12.4) or in the absence
of its own gross negligence or willful misconduct.  The Administrative Agent
shall be deemed not to have knowledge of any Default or Event of Default unless
and until written notice thereof is given to the Administrative Agent by
Borrower or a Revolving Credit Lender, and the Administrative Agent shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement or any
other Credit Document, (ii) the contents of any certificate, report or other
document delivered hereunder or under any other Credit Document or in connection
herewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
Credit Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Section 7 or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.

 

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon.  The Administrative Agent may consult with legal counsel (who
may be counsel for Borrower), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.

 

The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent.  The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Affiliates, directors, officers, employees, agents and advisors
(“Related Parties”).  The exculpatory provisions of the preceding paragraphs
shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such subagent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.

 

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Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Revolving Credit Lenders, the Issuing Lender and Borrower.  Upon
any such resignation, the Majority Revolving Credit Lenders shall have the
right, in consultation with Borrower, to appoint a successor, subject to the
approval of Borrower, whose consent shall not be unreasonably withheld; provided
that such Borrower approval shall not be necessary if an Event of Default shall
have occurred and be continuing.  If no successor shall have been so appointed
by the Majority Revolving Credit Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Revolving Credit Lenders and the Issuing Lender, appoint a successor
Administrative Agent.  Upon the acceptance of its appointment as Administrative
Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. The fees payable by Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between Borrower and such successor.  After
the Administrative Agent’s resignation hereunder, the provisions of this Section
11 shall continue in effect for the benefit of such retiring Administrative
Agent, its sub-agents and their respective Related Parties in respect of any
actions taken or omitted to be taken by any of them while it was acting as
Administrative Agent.

 

Each Revolving Credit Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Revolving Credit Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement.  Each Revolving
Credit Lender also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Revolving Credit Lender and based on
such documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any related agreement or any document furnished hereunder
or thereunder.

 

11.2         Indemnification.  Each Revolving Credit Lender agrees to indemnify
and hold harmless the Administrative Agent and the Lead Arranger (to the extent
not promptly reimbursed under Section 12.3, but without limiting the obligations
of Borrower under Section 12.3), ratably in accordance with the aggregate
principal amount of the Loans and Reimbursement Obligations held by the
Revolving Credit Lenders (or, if no Loans or Reimbursement Obligations are at
the time outstanding, ratably in accordance with their respective Revolving
Credit Commitments), for any and all liabilities (including pursuant to any
Environmental Law), obligations, losses, damages, penalties, actions, judgments,
deficiencies, suits, costs, expenses (including reasonable attorney’s fees) or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Administrative Agent or the Lead Arranger (including
by any Revolving Credit Lender) arising out of or by reason of any investigation
in or in any way relating to or arising out of any Credit Document or any other
documents contemplated by or referred to therein for any action taken or omitted
to be taken by the Administrative Agent or the Lead Arranger under or in respect
of any of the Credit Documents or other such documents or the transactions
contemplated thereby (including the costs and expenses that Borrower is
obligated to pay under Section 12.3, including any payments under any indemnity
that the Administrative Agent is required to issue in its individual capacity in
connection with the payoff of Borrower’s prior lender and including also any
payments under any indemnity that the Administrative Agent is required to issue
to any Revolving Credit Lender referred to in Section 4.1(c) of the Security
Agreement, or to any bank referred to in Section 4.2 of the Security Agreement
to which remittances in respect of Accounts, as defined therein, are to be made,
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the

 

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enforcement of any of the terms hereof or thereof or of any such other
documents; provided, however, that no Revolving Credit Lender shall be liable
for any of the foregoing to the extent they are determined by a court of
competent jurisdiction in a final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of the party to be indemnified.
The agreements set forth in this Section 11.2 shall survive the payment of all
Loans and other obligations hereunder and shall be in addition to and not in
lieu of any other indemnification agreements contained in any other Credit
Document.

 

11.3         Consents Under Other Credit Documents.  Except as otherwise
provided in this Agreement and the other Credit Documents, the Administrative
Agent may, with the prior consent of the Majority Revolving Credit Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the other Credit Documents.

 

11.4         Collateral Sub-Agents.  Each Revolving Credit Lender by its
execution and delivery of this Agreement agrees, as contemplated by Section 4.3
of the Security Agreement, that, in the event it shall hold any Permitted
Investments referred to therein, such Permitted Investments shall be held in the
name and under the control of such Revolving Credit Lender, and such Revolving
Credit Lender shall hold such Permitted Investments as a collateral subagent for
the Administrative Agent thereunder.  Borrower by its execution and delivery of
this Agreement hereby consents to the foregoing.

 

11.5         Other Agents.  Notwithstanding the provisions of this Agreement or
any of the other Credit Documents, the Lead Arrangers, the Documentation Agents,
and the Syndication Agent shall have no powers, rights, duties, responsibilities
or liabilities with respect to this Agreement and the other Credit Documents.

 

Section 12.             Miscellaneous.

 

12.1         Rights and Remedies.  No failure on the part of any Creditor to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under any Credit Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege under any Credit Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.

 

12.2         Notices.  All notices, requests and other communications provided
for herein and under the Security Documents (including any modifications of, or
waivers, requests or consents under, this Agreement) shall be given or made in
writing (including by facsimile) delivered to the intended recipient at the
“Address for Notices” specified below its name on the signature pages hereof;
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party.  Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by facsimile or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.  Any Notice
of Borrowing or Notice of Continuation/Conversion shall be deemed to have been
received when actually received.

 

12.3         Expenses, Indemnification, Etc.

 

(a)           The Obligors, jointly and severally, agree to pay or reimburse:

 

(i)            the Lead Arranger and the Administrative Agent for all of their
reasonable out-of-pocket costs and expenses (including the reasonable fees and
expenses of counsel) in connection with (1) the negotiation, preparation,

 

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execution and delivery of the Credit Documents, including this Agreement, and
the extension of credit hereunder and (2) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of any Credit Document
(whether or not consummated or effective);

 

(ii)           each of the Revolving Credit Lenders and the Administrative Agent
for all reasonable out-of-pocket costs and expenses of the Revolving Credit
Lenders and the Administrative Agent (including the reasonable fees and expenses
of legal counsel) in connection with (1) any Default or Event of Default and any
enforcement or collection proceedings resulting therefrom, including all manner
of participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (2) the enforcement of this Section
12.3; and

 

(iii)          each of the Revolving Credit Lenders and the Administrative Agent
for all reasonable costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection of
any security interest contemplated by any Credit Document or any other document
referred to therein.

 

(b)           The Obligors, jointly and severally, hereby agree to indemnify
each Creditor and their respective Affiliates, directors, trustees, officers,
employees and agents (each, an “Indemnitee”) from, and hold each of them
harmless against, and that no Indemnitee will have any liability for, any and
all Losses incurred by any of them (including any and all Losses incurred by the
Administrative Agent, the Lead Arranger or the Issuing Lender to any Revolving
Credit Lender, whether or not any Creditor is a party thereto) directly or
indirectly arising out of or by reason of or relating to the negotiation,
execution, delivery, performance, administration or enforcement of any Credit
Document, any of the Transactions contemplated by the Credit Documents, any
breach by any Obligor of any representation, warranty, covenant or other
agreement contained in any of the Credit Documents, the use or proposed use of
any of the Loans or Letters of Credit or the use of any collateral security for
the Loans (including the exercise by any Creditor of the rights and remedies or
any power of attorney with respect thereto and any action or inaction in respect
thereof), but excluding any such Losses to the extent arisen from the gross
negligence or bad faith of the Indemnitee.

 

Without limiting the generality of the foregoing, the Obligors, jointly and
severally, will indemnify each Creditor and each other Indemnitee from, and hold
each Creditor and each other Indemnitee harmless against, any Losses described
in the preceding sentence arising under any Environmental Law as a result of (A)
the past, present or future operations of Borrower or any Subsidiary (or any
predecessor in interest to Borrower or any Subsidiary), (B) the past, present or
future condition of any site or facility owned, operated or leased at any time
by Borrower or any Subsidiary (or any such predecessor in interest), or (C) any
Release or threatened Release of any Hazardous Materials at, under or from any
such site or facility, including any such Release or threatened Release that
shall occur during any period when any Creditor shall be in possession of any
such site or facility following the exercise by such Creditor of any of its
rights and remedies hereunder or under any of the Security Documents; provided,
however, that the indemnity hereunder shall be subject to the exclusions from
indemnification set forth in the preceding sentence.

 

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To the extent that the undertaking to indemnify and hold harmless set forth in
this Section 12.3 or any other provision of any Credit Document providing for
indemnification is unenforceable because it is violative of any law or public
policy or otherwise, the Obligors, jointly and severally, shall contribute the
maximum portion that each of them is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all indemnified liabilities
incurred by any of the Persons indemnified hereunder.

 

The Obligors also agree that no Indemnitee shall have any liability (whether
direct or indirect, in contract or tort or otherwise) for any Losses to any
Obligor or any Obligor’s security holders or creditors resulting from, arising
out of, in any way related to or by reason of any matter referred to in any
indemnification or expense reimbursement provisions set forth in this Agreement
or any other Credit Document, except to the extent that any Loss resulted from
the gross negligence or bad faith of such Indemnitee.

 

The Obligors agree that, without the prior written consent of the Administrative
Agent and the Majority Revolving Credit Lenders which consent shall not be
unreasonably withheld, no Obligor will settle, compromise or consent to the
entry of any judgment in any pending or threatened Proceeding in respect of
which indemnification is reasonably likely to be sought under the
indemnification provisions of this Section 12.3 (whether or not any Indemnitee
is an actual or potential party to such Proceeding), unless such settlement,
compromise or consent includes an unconditional written release of each
Indemnitee from all liability arising out of such Proceeding and does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any Indemnitee and does not involve any payment of money or
other value by any Indemnitee or any injunctive relief or factual findings or
stipulations binding on any Indemnitee.

 

12.4         Amendments, Etc.

 

(a)           Any provision of this Agreement or any other Credit Document may
be amended, modified or supplemented by an instrument in writing signed by the
Obligors and the Majority Revolving Credit Lenders, or by the Obligors and the
Administrative Agent acting with the written consent of the Majority Revolving
Credit Lenders, and any provision of this Agreement may be waived by an
instrument in writing signed by the Obligors and the Majority Revolving Credit
Lenders, or by the Obligors and the Administrative Agent acting with the written
consent of the Majority Revolving Credit Lenders and Borrower; provided,
however, that:

 

(i)            no amendment, modification, supplement or waiver shall, unless by
an instrument signed by all of the Revolving Credit Lenders or by the
Administrative Agent acting with the written consent of each Revolving Credit
Lender (with Obligations directly affected in the case of clause (I)):  (I)
extend the scheduled final maturity of any Loan or Note, or extend the stated
expiration date of any Letter of Credit beyond the Revolving Credit Commitment
Termination Date, or reduce the rate of interest (other than any waiver of any
increase in the interest rate applicable to any of the Loans pursuant to clause
(b) of Section 3.2) or fees thereon, or extend the time of payment of interest
or fees thereon, or reduce the principal amount thereof, (II) extend the final
maturity of any of the Revolving Credit Commitments (or reinstate any Commitment
terminated pursuant to Section 10), (III) change the currency in which any
Obligation is payable, (IV) amend the terms of this Section 12.4 or Section 4.7,
5 or 11.3, (V) reduce the percentages specified in the definition of the term
“Majority Revolving Credit Lenders” or amend any provision of any Credit
Document requiring the consent of all the Revolving Credit Lenders or reduce

 

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any other percentage of the Revolving Credit Lenders required to make any
determinations or waive any rights hereunder or to modify any provision hereof
(it being understood that, the Increased Facility Amount, if extended by any
Revolving Credit Lender, shall be, and with the consent of the Majority
Revolving Credit Lenders, other additional extensions of credit pursuant to this
Agreement may be, included in the determination of the Majority Revolving Credit
Lenders without notice to or consent of any other Revolving Credit Lender or the
Administrative Agent on substantially the same basis as the Revolving Credit
Commitments (and related extensions of credit) are included on the Closing
Date), (VI) release any Guarantor from its obligations under Section 6 (unless
permitted by this Agreement), (VII) consent to the assignment or transfer by any
Obligor of any of its rights and obligations under any Credit Document, (VIII)
release all or substantially all the Collateral or terminate the Lien under any
Credit Document in respect of all or substantially all the Collateral (except as
permitted by the Credit Documents) or agree to additional obligations (other
than the Obligations and the Increased Facility Amount) being secured by the
Collateral, (IX) amend Section 12.3 or any other indemnification and expense
reimbursement provision set forth in any Credit Document, (X)increase the Normal
Advance Rate in excess of sixty-five percent (65%) of the aggregate value or
Eligible Inventory or in excess of eighty-five percent (85%) of the Appraised
Inventory Liquidation Value of Eligible Inventory, it being understood, however,
that: (a) the foregoing shall not prevent the Administrative Agent, in its
administration of the Revolving Credit Loans, from restoring any component of
the Borrowing Base which had been lowered by the Administrative Agent back to
the value of such component, as stated in this Agreement or to an intermediate
value, or (XI) increase the aggregate principal amount available to be borrowed
under this Agreement other than in accordance with the requirements for the
Increased Facility Amount.

 

(ii)           no such amendment, modification, supplement or waiver shall
increase the Revolving Credit Commitments of any Revolving Credit Lender over
the amount thereof then in effect without the consent of such Revolving Credit
Lender (it being understood that amendments, modifications or waivers of
conditions precedent, covenants, Default or Events of Default shall not
constitute an increase of the Commitment of any Revolving Credit Lender);

 

(iii)          any modification or supplement of or waiver with respect to
Section 11 which affects the Administrative Agent in its capacity as such shall
require the consent of the Administrative Agent;

 

(iv)          no consent of any Revolving Credit Lender need be obtained, and
the Administrative Agent is hereby authorized, to release any Lien securing the
Obligations on Property which is the subject of any Disposition permitted by
this Agreement and the other Credit Documents;

 

(v)           no reduction of the percentage specified in the definition of
“Majority Revolving Credit Lenders” shall be made without the consent of each
Revolving Credit Lender (it being understood that the Increased Facility Amount,
if extended by any Revolving Credit Lender, shall be, and with the consent of
the Majority Revolving Credit Lenders, other additional extensions of credit
pursuant to this Agreement may be, included in any such definition without
notice to or consent of any other Revolving Credit Lender or the Administrative
Agent on

 

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substantially the same terms as the Revolving Credit Commitments (and related
extensions of credit) are included on the Closing Date);

 

(vi)          no amendment, modification or waiver shall make any change to
Section 2.1(e) or the definitions of “Swing Loan Commitment”, “Swing Loan
Maturity Date” or “Swing Loans” or the Swing Loan Note without the consent of
the Swing Loan Lender; and

 

(vii)         no amendment, modification or waiver shall affect the rights or
duties of the Issuing Lender in its capacity as such or alter the obligation of
any Revolving Credit Lender pursuant to Section 2.3(e) or 2.3(f) without the
consent of the Issuing Lender.

 

(b)           If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
Section 12.4(a)(i) (other than clause (I) of such section), the consent of the
Majority Revolving Credit Lenders is obtained but the consent of one or more of
such other Revolving Credit Lenders whose consent is required is not obtained,
then Borrower shall have the right to replace each such non-consenting Revolving
Credit Lender or Revolving Credit Lenders (so long as all non-consenting
Revolving Credit Lenders are so replaced) with one or more Replacement Lenders
pursuant to Section 2.12 so long as at the time of such replacement, each such
Replacement Lender consents to the proposed change, waiver, discharge or
termination; provided, however, that Borrower shall not have the right to
replace a Revolving Credit Lender solely as a result of the exercise of such
Revolving Credit Lender’s rights (and the withholding of any required consent by
such Revolving Credit Lender) pursuant to clause (I) of Section 12.4(a)(i).

 

12.5         Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.

 

12.6         Assignments and Participations.

 

(a)           No Obligor may assign its respective rights or obligations
hereunder or under the Notes or any other Credit Document without the prior
written consent of all of the Revolving Credit Lenders.

 

(b)           Each Revolving Credit Lender may assign to any Eligible Person any
of its Loans, its Notes, its Letter of Credit Interests and its Revolving Credit
Commitments (but only with the consent (which shall not be unreasonably withheld
or delayed) of Borrower and the Administrative Agent and, in the case of the
Revolving Credit Commitments, the Issuing Lender); provided, however, that (i)
no such consent by Borrower, the Issuing Lender or the Administrative Agent
shall be required in the case of any assignment to another Revolving Credit
Lender or any Revolving Credit Lender’s Affiliate (in which case, the assignee
and assignor Revolving Credit Lenders shall give notice of the assignment to the
Administrative Agent); (ii) no consent of Borrower need be obtained if any
Default or Event of Default shall have occurred and be continuing; (iii) each
assignment, other than to a Revolving Credit Lender or any Revolving Credit
Lender’s Affiliate (unless Borrower and the Administrative Agent otherwise
agree), shall be in an aggregate amount at least equal to $5.0 million unless
the assigning Revolving Credit Lender’s exposure is reduced to $0; (iv) subject
to (i) above, assignments under the Revolving Facility will require the consent
of the Issuing Lender, such consent not to be unreasonably withheld; and (v) in
no event may any such assignment be made to any Obligor or any of its Affiliates
without consent of all Revolving Credit Lenders.  Any

 

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assignment of a Loan shall be effective only upon appropriate entries with
respect thereto being made in the Register (and each Note shall expressly so
provide).  Any assignment or transfer of a Loan shall be registered on the
Register only upon surrender for registration of assignment or transfer of the
Note evidencing such Loan (if a Note was issued in respect thereof), accompanied
by an instrument in writing substantially in the form of Exhibit E, and upon
consent thereto by Borrower, the Administrative Agent and the Issuing Lender to
the extent required above, one or more new Notes in the same aggregate principal
amount shall be issued to the designated assignee and the old Notes shall be
returned by the Administrative Agent to Borrower marked “cancelled”.  Upon
execution and delivery by the assignee to Borrower and the Administrative Agent
of an instrument in writing substantially in the form of Exhibit E, and upon
consent thereto by Borrower, the Administrative Agent and the Issuing Lender to
the extent required above, and in the case of a Loan, upon appropriate entries
being made in the Register the assignee shall have, to the extent of such
assignment (unless otherwise provided in such assignment with the consent of the
Administrative Agent), the obligations, rights and benefits of a Revolving
Credit Lender hereunder holding the Commitment(s), Loans (or portions thereof)
and Letter of Credit Interests assigned to it (in addition to the Commitment(s),
Letter of Credit Interests and Loans, if any, theretofore held by such assignee)
and the assigning Revolving Credit Lender shall, to the extent of such
assignment, be released from the Commitment(s) (or portion(s) thereof) so
assigned.  At the time of each assignment pursuant to this Section 12.6(b) to a
Person which is not already a Revolving Credit Lender hereunder and which is not
a United States person (as such term is defined in Section 7701(a)(3) of the
Code) for federal income tax purposes, the respective assignee Revolving Credit
Lender shall provide to Borrower and the Administrative Agent the appropriate
Internal Revenue Service Forms (and, if applicable, a Section 5.6 Certificate)
described in Section 5.6(b).  Upon any such assignment (other than to a
Revolving Credit Lender or any Affiliate of a Revolving Credit Lender and other
than in connection with the Lead Arranger’s initial syndication of the Loans the
Lead Arranger’s next succeeding five assignments) the assignee Revolving Credit
Lender shall pay a fee of $3,500 to the Administrative Agent.  Upon any such
assignment, certain rights and obligations of the assigning Revolving Credit
Lender shall survive as set forth in Section 12.7.

 

(c)           A Revolving Credit Lender may sell or agree to sell to one or more
other Eligible Persons a participation in all or any part of any Loans and
Letter of Credit Interests held by it, or in its Revolving Credit Commitments,
in which event each purchaser of a participation (a “Participant”) shall be
entitled to the rights and benefits of the provisions of Section 5 (provided,
however, that no Participant shall be entitled to receive any greater amount
pursuant to Section 5 than the transferor Revolving Credit Lender would have
been entitled to receive in respect of the participation effected by such
transferor Revolving Credit Lender had no participation occurred) with respect
to its participation in such Loans, Letter of Credit Interests and Revolving
Credit Commitments as if such Participant were a “Revolving Credit Lender” for
purposes of said Section, but, except as otherwise provided in Section 4.7(c),
shall not have any other rights or benefits under this Agreement or any Note or
any other Credit Document (the Participant’s rights against such Revolving
Credit Lender in respect of such participation to be those set forth in the
agreements executed by such Revolving Credit Lender in favor of the
Participant).  All amounts payable by Borrower to any Revolving Credit Lender
under Section 5 in respect of Loans, Letter of Credit Interests and its
Revolving Credit Commitments, shall be determined as if such Revolving Credit
Lender had not sold or agreed to sell any participation in such Loans, Letter of
Credit Interests and Revolving Credit Commitments, and as if such Revolving
Credit Lender were funding each of such Loan, Letter of Credit Interests and
Revolving Credit Commitments in the

 

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same way that it is funding the portion of such Loan, Letter of Credit Interests
and Revolving Credit Commitments in which no participations have been sold.  In
no event shall a Revolving Credit Lender that sells a participation agree with
the Participant to take or refrain from taking any action hereunder or under any
other Credit Document, except that such Revolving Credit Lender may agree with
the Participant that it will not, without the consent of the Participant, agree
to any modification or amendment set forth in subclauses (I), (II), (III) or
(VIII) of clause (a)(i) of the proviso to Section 12.4.

 

(d)           In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.6, any Revolving Credit Lender may
assign and pledge all or any portion of its Loans and its Notes to any Federal
Reserve Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank and, in the case of a Revolving
Credit Lender that is an investment fund, any such Revolving Credit Lender may
assign or pledge any portion of its Loans and its Notes to its trustee in
support of its obligations to its trustee, without notice to or consent of
Borrower or the Administrative Agent.  No such assignment shall release the
assigning Revolving Credit Lender from its obligations hereunder.

 

(e)           A Revolving Credit Lender may furnish any information concerning
Borrower or any Subsidiary in the possession of such Revolving Credit Lender
from time to time to assignees and participants (including prospective assignees
and participants) subject, however, to the provisions of Section 12.12.  In
addition, the Administrative Agent may furnish any information concerning any
Obligor or any of its Affiliates in the Administrative Agent’s possession to any
Affiliate of the Administrative Agent.  The Obligors shall assist any Revolving
Credit Lender (at such Revolving Credit Lender’s cost and expense) in
effectuating any assignment or participation pursuant to this Section 12.6 in
whatever manner such Revolving Credit Lender reasonably deems necessary,
including participation in meetings with prospective transferees.

 

12.7         Survival.  The obligations of the Obligors under Sections 5.1, 5.5,
5.6 and 12.3, the obligations of each Guarantor under Section 6.3, and the
obligations of the Revolving Credit Lenders under Sections 5.6 and 11.2, shall
survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Revolving Credit Commitments and, in the case of any
Revolving Credit Lender that may assign any interest in its Revolving Credit
Commitments, Loans or Letter of Credit Interest hereunder, shall (to the extent
relating to such time as it was a Revolving Credit Lender) survive the making of
such assignment, notwithstanding that such assigning Revolving Credit Lender may
cease to be a “Revolving Credit Lender” hereunder.  In addition, each
representation and warranty made, or deemed to be made by a notice of any
extension of credit, herein or pursuant hereto shall survive the execution and
delivery of this Agreement and the Notes and the making of any extension of
credit hereunder.

 

12.8         Captions.  The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.

 

12.9         Counterparts; Interpretation; Effectiveness.  This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof.  Except as provided in
Section 7.2, this Agreement shall

 

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become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.

 

12.10       Governing Law; Submission to Jurisdiction.

 

(a)           Each Credit Document shall be governed by, and construed in
accordance with, the law of the Commonwealth of Massachusetts, without regard to
the principles of conflicts of laws thereof (except in the case of the other
Credit Documents, to the extent otherwise expressly stated therein).  Each
Obligor hereby irrevocably and unconditionally:  (i) submits for itself and its
property in any Proceeding relating to any Credit Document to which it is a
party, or for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the courts of the Commonwealth of
Massachusetts, the courts of the United States of America for the District of
Massachusetts, and appellate courts from any thereof; (b) consents that any such
Proceeding may be brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such Proceeding in any such court or
that such Proceeding was brought in an inconvenient court and agrees not to
plead or claim the same; (c) agrees that service of process in any such
Proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to Borrower
at its address set forth in Section 12.2 or at such other address of which the
Administrative Agent shall have been  notified pursuant thereto; and (d) agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction.

 

(b)           Each Obligor hereby irrevocably appoints and designates CT
Corporation System, as its true and lawful attorney and duly authorized agent
for service of legal process of such Obligor.

 

12.11       Waivers.

 

(a)           The Borrower (and all other Obligors) make each of the waivers
included in Section 12.11(b), below, knowingly, voluntarily, and intentionally,
and understands that the Administrative Agent and each Revolving Credit Lender,
in establishing the facilities contemplated hereby and in providing loans and
other financial accommodations to or for the account of the Borrower as provided
herein, whether now or in the future, is relying on such waivers.

 

(b)           EACH BORROWER, AND EACH SUCH OBLIGOR RESPECTIVELY WAIVES THE
FOLLOWING:

 

(i)            Except as otherwise specifically required hereby, notice of
non-payment, demand, presentment, protest and all forms of demand and notice,
both with respect to the Obligations and the Collateral.

 

(ii)           Except as otherwise specifically required hereby, the right to
notice and/or hearing prior to the Administrative Agent’s exercising of the
Administrative Agent’s rights upon default.

 

96

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(iii)          THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN
WHICH THE ADMINISTRATIVE AGENT OR ANY REVOLVING CREDIT LENDER IS OR BECOMES A
PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE
ADMINISTRATIVE AGENT OR ANY REVOLVING CREDIT LENDER OR IN WHICH THE
ADMINISTRATIVE AGENT OR ANY REVOLVING CREDIT LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF, ANY
RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON AND THE
ADMINISTRATIVE AGENT AND EACH REVOLVING CREDIT LENDER LIKEWISE WAIVES THE RIGHT
TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY.

 

(iv)          Any defense, counterclaim, set-off, recoupment, or other basis on
which the amount of any Obligation, as stated on the books and records of the
Administrative Agent, could be reduced or claimed to be paid otherwise than in
accordance with the tenor of and written terms of such Liability.

 

(v)           Any claim to consequential, special, or punitive damages.

 

12.12       Confidentiality.  Each Creditor agrees to take normal and reasonable
precautions to maintain the confidentiality of information provided to it by
Borrower or any Subsidiary in connection with this Agreement to the extent it is
not a matter of general public knowledge or it was not previously known to the
Revolving Credit Lender at the time such information was provided to it or if
previously known, had become known to the Revolving Credit Lender or provided to
it in violation of an agreement of confidentiality; provided, however, that any
Creditor may disclose such information (a) at the request of any bank regulatory
or securities authority or the NAIC or in connection with an examination of such
Creditor by any such authority or the NAIC, (b) pursuant to subpoena or other
court process, (c) when required to do so in accordance with the provisions of
any applicable law, (d) at the discretion of any other Governmental Authority,
(e) to such Creditor’s Affiliates, independent auditors and other professional
advisors, (f) to any transferee or potential transferee or participant or
potential participant or to any direct or indirect contractual counterparties in
swap agreements or to the professional advisors of such swap counterparties or
(g) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or any other Credit Document or
the enforcement of rights hereunder or thereunder; provided, however, that the
recipient of the information agrees to comply with the provisions of this
Section 12.12.

 

12.13       Independence of Representations, Warranties and Covenants.  The
representations, warranties and covenants contained herein shall be independent
of each other and no exception to any representation, warranty or covenant shall
be deemed to be an exception to any other representation, warranty or covenant
contained herein unless expressly provided, nor shall any such exception be
deemed to permit any action or omission that would be in contravention of
applicable law.

 

12.14       Severability.  Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.

 

[Signature Pages Follow]

 

97

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

By: 

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and Chief
Financial Officer

 

 

 

Address for Notices:

 

 

 

Tuesday Morning Corporation

 

14621 Inwood Road

 

Addison, TX 75001-3768

 

Attention: Mark E. Jarvis

 

Telecopier No.: (972) 392-1558

 

Telephone No.: (972) 934-7251

 

98

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TMI HOLDINGS, INC.

 

 

 

 

By: 

 

 

Name:

Alan Oppenheimer

 

Title:

President

 

 

 

 

 

Address for Notices:

 

 

 

1105 North Market Street, Suite 1300

 

Wilmington, Delaware 19801

 

Attention: Mark E. Jarvis

 

Telecopier No.: (972) 392-1558

 

Telephone No.: (972) 934-7251

 

99

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TUESDAY MORNING, INC.

 

 

 

 

By: 

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

Address for Notices:

 

c/o Tuesday Morning Corporation

 

14621 Inwood Road

 

Addison, TX 75001-3768

 

Attention: Mark E. Jarvis

 

Telecopier No.: (972) 392-1558

 

Telephone No.: (972) 934-7251

 

100

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FRIDAY MORNING, INC.

 

 

 

 

By: 

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and
Treasurer

 

 

 

Address for Notices:

 

c/o Tuesday Morning Corporation

 

14621 Inwood Road

 

Addison, TX 75001-3768

 

Attention: Mark E. Jarvis

 

Telecopier No.: (972) 392-1558

 

Telephone No.: (972) 934-7251

 

101

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DAYS OF THE WEEK, INC.

 

 

 

 

By: 

 

 

Name:

Mark E. Jarvis

 

Title:

Secretary

 

 

 

Address for Notices:

 

c/o Tuesday Morning Corporation

 

14621 Inwood Road

 

Addison, TX  75001-3768

 

Attention: Mark E. Jarvis

 

Telecopier No.: (972) 392-1558

 

Telephone No.: (972) 934-7251

 

102

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NIGHTS OF THE WEEK, INC.

 

 

By: 

 

 

Name:

Alan Oppenheimer

 

Title:

President

 

 

 

 

 

Address for Notices:

 

1105 North Market Street, Suite 1300

 

Wilmington, Delaware 19801

 

Attention: Mark E. Jarvis

 

Telecopier No.: (972) 392-1558

 

Telephone No.: (972) 934-7251

 

103

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TUESDAY MORNING PARTNERS, LTD.

 

 

By: 

Days of the Week, Inc., its General Partner

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Secretary

 

 

 

 

 

Address for Notices:

 

c/o Tuesday Morning Corporation

 

14621 Inwood Road

 

Addison, TX  75001-3768

 

Attention: Mark E. Jarvis

 

Telecopier No.: (972) 392-1558

 

Telephone No.: (972) 934-7251

 

104

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FLEET NATIONAL BANK, as
Administrative Agent and Issuing Lender

 

 

By: 

 

 

Name:

Linda H. Thomas

 

Title:

Managing Director

 

 

 

 

 

Address for Notices:

 

 

 

Fleet National Bank

 

Retail and Apparel Group

 

100 Federal Street, MA DE 10009A

 

Boston, MA 02110

 

Attention: Linda H. Thomas

 

Telecopier No.: (617) 434-6685

 

Telephone No.: (617) 434-7000

 

105

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REVOLVING CREDIT LENDERS

 

 

 

FLEET NATIONAL BANK, as a Revolving
Credit Lender

 

 

 

 

By: 

 

 

Name:

Linda H. Thomas

 

Title:

Managing Director

 

 

 

Lending Office for all Loans:

 

 

 

Fleet National Bank

 

Retail and Apparel Group

 

100 Federal Street, MA DE 10009A

 

Boston, MA 02110

 

 

 

Address for Notices:

 

 

 

 

Fleet National Bank

 

Retail and Apparel Group

 

100 Federal Street, MA DE 10009A

 

Boston, MA 02110

 

Attention: Linda H. Thomas

 

Telecopier No.: (617) 434-6685

 

Telephone No.: (617) 434-7000

 

106

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WELLS FARGO BANK, N.A., as a
Revolving Credit Lender and Syndication
Agent

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

Wells Fargo Bank, N.A.

 

1445 Ross Avenue, Suite 400

 

Dallas, Texas 75202

 

 

 

Address for Notices:

 

 

 

Wells Fargo Bank, N.A.

 

1445 Ross Avenue, Suite 400

 

Dallas, Texas 75202

 

Attention: Jason Weighter

 

Telecopier No.: (214) 969-0906

 

Telephone No.: (214) 740-1519

 

107

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LASALLE BANK NATIONAL
ASSOCIATION, as a Revolving Credit
Lender and Documentation Agent

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

LaSalle Bank National Association

 

135 South LaSalle Street

 

Chicago, Illinois 60603

 

 

 

Address for Notices:

 

 

 

 

LaSalle Bank National Association

 

135 South LaSalle Street

 

Chicago, Illinois 60603

 

Attention: Keith Cable

 

Telecopier No.: (312) 904-6242

 

Telephone No.: (312) 904-7621

 

108

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U.S. BANK NATIONAL ASSOCIATION,
as a Revolving Credit Lender and
Documentation Agent

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

U.S. Bank National Association

 

One U.S. Bank Plaza

 

St. Louis, Missouri 63101

 

 

 

 

Address for Notices:

 

 

 

 

U.S. Bank National Association

 

One U.S. Bank Plaza

 

St. Louis, Missouri 63101

 

Attention: Amanda Smith

 

Telecopier No.: (314) 418-3859

 

Telephone No.: (314) 418-3638

 

109

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WACHOVIA BANK, NATIONAL
ASSOCIATION, as a Revolving Credit
Lender and Documentation Agent

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

Wachovia Bank, National Association

 

201 S College St.

 

17th Floor (NC 1183)

 

Charlotte, North Carolina 28288

 

 

 

Address for Notices:

 

 

 

 

Wachovia Bank, National Association

 

1339 Chestnut Street, 12th Floor

 

PA 4843

 

Philadelphia, Pennsylvania 19107

 

Attention: Stephen Dorosh

 

Telecopier No.: (267) 321-6700

 

Telephone No.: (267) 321-6610

 

110

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BANK LEUMI USA, as a Revolving Credit
Lender

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

 

Bank Leumi USA

 

579 Fifth Avenue

 

New York, New York 10017

 

 

 

 

Address for Notices:

 

 

 

 

Bank Leumi USA

 

579 Fifth Avenue

 

New York, New York 10017

 

Attention: Aliz Sadan

 

Telecopier No.: (212) 497-4317

 

Telephone No.: (212) 407-4350

 

111

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FIRST AMERICAN BANK, as a Revolving
Credit Lender

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

First American Bank

 

8401 N. Central Expressway, Suite 500

 

Dallas, Texas 75225

 

 

 

Address for Notices:

 

 

 

 

First American Bank

 

8401 N. Central Expressway, Suite 500

 

Dallas, Texas 75225

 

Attention: Paul Voorhies

 

Telecopier No.: (972) 419-3589

 

Telephone No.: (972) 419-3362

 

112

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GENERAL ELECTRIC CAPITAL
CORPORATION, as a Revolving Credit
Lender

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

 

General Electric Capital Corporation

 

Commercial Finance

 

6 High Ridge Park, Bldg. 6C

 

Stamford, Connecticut 06927—5100

 

 

 

 

Address for Notices:

 

 

 

 

General Electric Capital Corporation

 

Commercial Finance

 

6 High Ridge Park, Bldg. 6C

 

Stamford, Connecticut 06927-5100

 

Attention: Robert Obolewicz

 

Telecopier No.: (203) 316-7978

 

Telephone No.: (203) 316-7739

 

113

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NATIONAL CITY BANK, as a Revolving
Credit Lender

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

National City Bank

 

155 East Broad Street

 

Columbus, Ohio 43215-0077

 

 

 

 

Address for Notices:

 

 

 

National City Bank

 

155 East Broad Street

 

Columbus, Ohio 43215-0077

 

Attention: Michael J. Durbin

 

Telecopier No.: (614) 463-8572

 

Telephone No.: (614) 463-8844

 

114

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PB CAPITAL CORPORATION, as a
Revolving Credit Lender

 

 

By: 

 

 

Name:

 

 

Title:

 

 

 

 

Lending Office for all Loans:

 

 

 

 

PB Capital Corporation

 

590 Madison Avenue

 

New York, New York 10022

 

 

 

 

Address for Notices:

 

 

 

 

PB Capital Corporation

 

590 Madison Avenue

 

New York, New York 10022

 

Attention: Nina Zhou

 

Telecopier No.: (212) 756-5536

 

Telephone No.: (212) 756-5627

 

115

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ANNEX A

 

TUESDAY MORNING CORPORATION ALLOCATIONS

 

 

 

Allocation

 

Institution

 

Revolving Credit
Commitments

 

Fleet National Bank

 

$

27,000,000

 

 

 

 

 

 

Wells Fargo Bank, N.A.

 

$

18,000,000

 

 

 

 

 

LaSalle Bank National Association

 

$

15,000,000

 

 

 

 

 

U.S. Bank National Association

 

$

15,000,000

 

 

 

 

 

Wachovia Bank, National Association

 

$

15,000,000

 

 

 

 

 

Bank Leumi USA

 

$

9,000,000

 

 

 

 

 

First American Bank

 

$

9,000,000

 

 

 

 

 

General Electric Capital Corporation

 

$

9,000,000

 

 

 

 

 

National City Bank

 

$

9,000,000

 

 

 

 

 

PB Capital Corporation

 

$

9,000,000

 

 

 

 

 

Total

 

$

135,000,000.00

 

 

116

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SCHEDULE 1.1(a)

 

REVOLVING CREDIT LOANS

 

Tier

 

Leverage Ratio

 

LIBOR Loans

 

Alternate
Base Rate Loans

 

I

 

>2.25:1.0

 

2.00

%

0.50

%

II

 

³1.75:1.0 but <2.25:1.0

 

1.75

%

0.25

%

III

 

³1.00:1.0 but <1.75:1.0

 

1.50

%

0.00

%

IV

 

³0.50:1.0 but <1.00:1.0

 

1.25

%

0.00

%

V

 

<0.50:1.0

 

1.00

%

0.00

%

 

APPLICABLE REVOLVING CREDIT FEE PERCENTAGE

 

Tier

 

Leverage Ratio

 

Applicable Revolving
Credit Fee Percentage

 

I

 

>2.25:1.0

 

0.500

%

II

 

³1.75:1.0 but <2.25:1.0

 

0.500

%

III

 

³1.00:1.0 but <1.75:1.0

 

0.375

%

IV

 

³0.50:1.0 but <1.00 to 1.0

 

0.300

%

V

 

<0.50:1.0

 

0.250

%

 

117

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SCHEDULE 1.1(b)

 

GUARANTORS

 

TMI Holdings, Inc.

 

Tuesday Morning, Inc.

 

Friday Morning, Inc.

 

Days of the Week, Inc.

 

Nights of the Week, Inc.

 

Tuesday Morning Partners, Ltd.

 

118

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SCHEDULE 1.1(c)

 

EXISTING LETTERS OF CREDIT

 

1.             $2,793,000.00 Standby Letter of Credit

Beneficiary: Royal Insurance Company of America

Expires: 12/31/02

 

2.             $100,000.00 Standby Letter of Credit

Beneficiary: Liberty Mutual Insurance Company

Expires: 12/31/02

 

3.             $1,100,000.00 Standby Letter of Credit

Beneficiary: Royal Indemnity Company

Expires: 12/31/02

 

119

--------------------------------------------------------------------------------

 

Schedule 8.2

 

CERTAIN CONTINGENT OBLIGATIONS

 

None.

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

Schedule 8.3

 

LITIGATION

 

Attached Hereto.

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

Schedule 8.8

 

CERTAIN TAX MATTERS

 

1.                                       The Borrower’s consolidated tax returns
for 1998, 1999 and 2000 are currently being audited by the Internal Revenue
Service.

 

2.                                       The Borrower has extended the statute
of limitations for the payment and collection of taxes relating to its
consolidated tax return for 1998.

 

 

 

 

 

--------------------------------------------------------------------------------

 

Schedule 8.11

 

ENVIRONMENTAL MATTERS

 

The Borrower’s property located at 14325-14327 Gillis Road, Farmers Branch,
Dallas County, Texas formerly operated two onsite underground storage tanks
(“UST”) for the private storage and distribution of gasoline and diesel fuel. 
These tanks were registered under the operation of Texas Cartage & Wholesale. 
According to Texas Natural Resource Conservation Commission (“TNRCC”) records,
the two tanks consisted of 8,000 (gasoline) and 10,000 (diesel) gallon
capacities.  The 10,000 gallon diesel UST is reported to have been removed from
the ground on August 31, 1993, and the 8,000 gallon gasoline UST was removed on
August 31, 1995.  According to TNRCC records, the property is included on the
leaking petroleum storage tank database in relation to subsurface petroleum
hydrocarbon impacts identified at the time of the August 31, 1993 removal.  This
release involved minor soil contamination only, and has been issued final
closure from the TNRCC requiring no further assessment or remedial action. 
There were no reportable releases identified at the time of the subsequent
removal on August 31, 1995.  There are currently no onsite USTs in operation on
the property which would serve as a continuing source of potential environmental
concern to the property.

 

4404 Beltwood Parkway South, Farmers Branch, Texas.  An updated environmental is
in progress for this property.  This property formerly operated a 4,000 gallon
UST which was removed in 1992.  TNRCC removal records are forthcoming.  The EPA
also has reviewed the property in the mid-1980s.  This report has been
requested.

 

14303 Inwood Road, Farmers Branch, Texas.  Six USTs were previously located on
the property.  One of these tanks was leaking.  All were removed.  The TNRCC
database indicated no apparent groundwater contamination and the case was issued
a final closure letter on August 28, 1997.  The ASTs are located on the property
and used by the Tuesday Morning.

 

 

 

--------------------------------------------------------------------------------

 

Schedule 8.14

 

SUBSIDIARIES OF BORROWER

 

TMI Holdings, Inc., a Delaware corporation1

 

Holder

 

Shares of Common Stock

 

Borrower

 

10

 

Total Authorized

 

10,000

 

 

Tuesday Morning, Inc., a Texas corporation1

 

Holder

 

Shares of Common Stock

 

TMI Holdings, Inc.

 

10

 

Total Authorized

 

100

 

 

Friday Morning, Inc., a Texas corporation1

 

Holder

 

Shares of Common Stock

 

Tuesday Morning, Inc.

 

1000

 

Total Authorized

 

1,000,000

 

 

Days of the Week, Inc., a Delaware corporation1

 

Holder

 

Shares of Common Stock

 

Tuesday Morning, Inc.

 

100

 

Total Authorized

 

1,000

 

 

Nights of the Week, Inc., a Delaware corporation1

 

Holder

 

Shares of Common Stock

 

Tuesday Morning, Inc.

 

100

 

Total Authorized

 

1,000

 

 

Tuesday Morning Partners, Ltd., a Texas limited partnership1

 

Partner

 

Capacity

 

Ownership Interest

 

Days of the Week, Inc.

 

General Partner

 

1

%

Nights of the Week, Inc.

 

Limited Partner

 

99

%

Total

 

 

 

100

%

 

____________________

1 As of the Closing Date, each of the Borrower’s Subsidiaries is a Restricted
Subsidiary as defined in the Credit Agreement.

 

--------------------------------------------------------------------------------

 

Schedule 9.7

 

CERTAIN EXISTING LIENS

 

 

LIEN SEARCHES

 

 

A.

 

TUESDAY MORNING, INC.

 

 

 

 

STATE

 

SEARCHED THROUGH

 

STATUS

 

FILE NO./ FILE DATE

 

SECURED PARTY

 

PROPERTY DESRIPTION COMMENTS

 

1.

 

Colorado

 

7-25-02 UCC/Federal Tax Lien

 

Received

 

942073132 / 10-3-94 Assignment 10-3-94 Continuation 12-31-97

 

Sanwa Business Credit Corporation

 

Certain equipment listed on Exhibit A — Pos Terminal, Software

 

2.

 

Delaware

 

7-10-02 UCC/Federal Tax Lien

 

Received

 

20450134 / 1-25-02

 

Xerox Corporation

 

1 Xerox DC2045P and 1 Xerox DC2000Z18 together with all parts, attachments,
additions, replacements and repairs.

 

3.

 

Texas

 

8-1-02 UCC

 

Received

 

97-00259406 12-22-97

 

Resource Net International

 

1 each of 622R H3 Tape Machine

 

4.

 

 

 

 

 

 

 

98-00011942 1-20-98

 

Resource Net International

 

1 each of 622R H3 Tape Machine

 

5.

 

 

 

 

 

 

 

99-00015446 1-25-99

 

Xerox Corporation

 

1 Xerox DC230SLX, together with all parts, attachments, additions, replacements
and repairs.

 

6.

 

Virginia

 

8-5-02 UCC

 

Received

 

0202117374 / 2-11-02

 

Silver Real Estate Company LLC

 

All fixtures and equipment excluding computers and computer equipment located at
any time in the premises leased by the Debtor from the Secured Party at the
location in Gateway Design Shopping Center and all Debtor’s equity and interest
therein.

 

B.

 

TUESDAY MORNING CORP.

 

 

 

 

 

STATE

 

SEARCHED THROUGH

 

STATUS

 

FILE NO./ FILE DATE

 

SECURED PARTY

 

PROPERTY DESCRIPTION COMMENTS

 

7.

 

Delaware

 

7-10-02

 

Received

 

Same as Tuesday Morning,Inc.

 

 

 

 

 

8.

 

Maryland

 

7-31-02

 

Received

 

142777786 / 10-4-94

 

Sanwa Business Credit Corporation

 

Certain equipment listed on Exhibit A — Pos Terminal, Software

 

9.

 

Texas

 

8-1-02

 

Received

 

Same as Tuesday Morning, Inc.

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

C.

 

TUESDAY MORNING PARTNERS, LTD

 

 

 

 

 

STATE

 

SEARCHED THROUGH

 

STATUS

 

FILE NO./ FILE DATE

 

SECURED PARTY

 

PROPERTY DESCRIPTION COMMENTS

 

10.

 

Texas

 

8-2-02

 

Received

 

99-00116336/ 6-8-99

 

Compass Bank

 

All buildings, structures, improvements on property, fixtures, fittings,
building materials, supplies, machinery, equipment, furniture, furnishings,
personal property, rights in timber, minerals, oil, gas, and other hydrocarbon
substances, easements, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water rights and powers, estates,
leases, rights, titles, interest, privileges, liberties, tenements,
hereditaments, appurtanances, reversions, remainders, rents, issues, profits,
royalties, security deposits, issues, revenues, judgments, awards of damages,
settlements, books, records, plats, surveys, plans, specifications, contracts,
agreements, leases, licenses, permits, authorizations, present and future
accounts, contract rights, general intangibles, chattel paper, documents, cash
and non-cash proceeds and all products of any of the foregoing relating to the
tract of land lying and situated in the Elisha Fike Survey, Abstract No. 478,
Dallas County, Texas, and being part of lot 3, all of lots 4 and 5 and part of
lot 6, block 4 of the third installment of section 4 of the Metropolitan
Industrial Park Addition, as shown on plat recorded in volume 74041, page 645,
Deed Records, Dallas County, Texas, as more particularly described on Exhibit A
to the financing statement.

 

 

 

--------------------------------------------------------------------------------

 

 

 

 

 

COUNTY LIEN SEARCHES

 

 

 

 

 

 

TUESDAY MORNING, INC.

 

 

 

 

Jurisdiction

 

Searches

 

Searched Through

 

File No./ File Date /Secured Party

 

Property Description / Comments

 

1.

 

Anne Arundel County MD

 

UCC/Federal & State Tax Liens/Judgment Liens

 

6-30-95 UCC-1s 6-19-02 UCC-3s 8-25-02 All else

 

293966 /12-19-1994 Sanwa Business Credit Corporation

 

Certain equipment on Exhibit A pursuant to a Lease Agreement.

 

2.

 

Baltimore County MD

 

UCC/Federal & State Tax Liens/Judgment Liens

 

6-30-95 UCC-1s 9-8-02 UCC-3s 9-5-02 All else

 

467970 /12-20-1994 Sanwa Business Credit Corporation

 

Certain equipment on Exhibit A pursuant to a Lease Agreement.

 

3.

 

Howard County MD

 

UCC/Federal & State Tax Liens/Judgment Liens

 

6-30-95 UCC-1s 9-9-02 UCC-3s 8-30-02 All else

 

16487 /12-19-1994 Sanwa Business Credit Corporation

 

Certain equipment on Exhibit A pursuant to a Lease Agreement.

 

4.

 

Montgomery County MD

 

UCC/Federal & State Tax Liens/Judgment Liens

 

6-30-95 UCC-1s 9-6-02 UCC-3s 8-30-02 All else

 

23845 /12-20-1994 Sanwa Business Credit Corporation

 

Certain equipment on Exhibit A pursuant to a Lease Agreement.

 

5.

 

Prince George’s County MD

 

UCC/Federal & State Tax Liens/Judgment Liens

 

6-30-95 UCC-1s 9-2-02 UCC-3s 9-6-02 All else

 

475791 /12-21-1994 Sanwa Business Credit Corporation

 

Certain equipment on Exhibit A pursuant to a Lease Agreement.

 

6.

 

Lamar County MS

 

UCC/Federal & State Tax Liens/Judgment Liens

 

9-9-02

 

19285-U / 5-14-1999 State of Mississippi

 

State Tax Lien

 

7.

 

Wake County NC

 

UCC/Federal & State Tax Liens/Judgment Liens

 

9-10-02

 

97CVM8339 /  6-25-1997 Labor World

 

Judgment Lien Amount owed: $1421.83

 

8.

 

Fredericksburg City VA

 

UCC/Federal & State Tax Liens/Judgment Liens

 

9-13-02

 

02-22 / 2-11-02 Silver Real Estate Company

 

All fixtures and equipment excluding computers and computer equipment leased by
the Debtor from the Secured Party.

 

 

 

--------------------------------------------------------------------------------

 

Schedule 9.8

 

CERTAIN INDEBTEDNESS TO REMAIN OUTSTANDING

 

1.             The obligations relating to the Senior Subordinated Notes will
remain outstanding after the Closing Date.

 

2.             Real estate mortgages with Compass Bank to remain outstanding
after the Closing Date.

 

3.             Foreign currency forward exchange contracts with Fleet to remain
outstanding after the Closing Date.

 

 

 

--------------------------------------------------------------------------------

 

Schedule 9.9

 

INVESTMENTS

 

1.             Foreign currency forward exchange contracts with Fleet.

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

Schedule 9.16

 

EXISTING AFFILIATE AGREEMENTS

 

None.

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

Exhibit A-1

 

[Form of Revolving Credit Note]

 

REVOLVING CREDIT NOTE

 

$

 

September 27, 2002

 

 

Boston, Massachusetts

 

1.                                       Promise To Pay.

 

FOR VALUE RECEIVED, TUESDAY MORNING CORPORATION, a Delaware corporation having
an address at 14621 Inwood Road, Dallas, Texas 75224 (hereinafter, the
“Borrower”), hereby promises to pay to the order of
                                                  , having an address at
                              (hereinafter, a “Revolving Credit Lender”), for
the account of its Applicable Lending Office provided for by the Credit
Agreement referred to below, at the Principal Office of the Administrative
Agent, the principal sum of                                             DOLLARS
($                        ) (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Revolving Credit Loans made by the Revolving
Credit Lender to Borrower under the Credit Agreement), in lawful money of the
United States of America and in immediately available funds, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of each such Revolving Credit Loan, at such office,
in like money and funds, for the period commencing on the date of such Revolving
Credit Loan until such Revolving Credit Loan shall be paid in full, at the rates
per annum and on the dates provided in the Credit Agreement.

 

The date, amount, Type, interest rate and duration of Interest Period (if
applicable) of each Revolving Credit Loan made by the Revolving Credit Lender to
Borrower, and each payment made on account of the principal thereof, shall be
recorded by the Revolving Credit Lender on its books; provided, however, that
the failure of the Revolving Credit Lender to make any such recordation shall
not affect the obligations of Borrower to make a payment when due of any amount
owing under the Credit Agreement or hereunder.

 

2.                                       Credit Agreement.

 

This Note is issued pursuant to, and is subject to the terms, provisions and
conditions of, a certain Credit Agreement, dated as of September 27, 2002 (as
modified and supplemented and in effect from time to time, the “Credit
Agreement”), among Borrower, the Guarantors party thereto from time to time, the
Revolving Credit Lenders party thereto from time to time, and Fleet National
Bank, as Administrative Agent, and evidences Revolving Credit Loans made by the
Revolving Credit Lender thereunder. Capitalized terms used but not defined in
this Note have the respective meanings assigned to them in the Credit
Agreement.  This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement.

 

--------------------------------------------------------------------------------

 

3.                                       Acceleration; Event of Default.

 

The principal of, and interest on, this Note shall be payable as provided in the
Credit Agreement and shall be subject to prepayment and acceleration as provided
therein. Upon the occurrence and during the continuance of an Event of Default,
the Revolving Credit Lender shall have, in addition to any rights and remedies
contained herein, any and all rights and remedies set forth in the Credit
Agreement or any other Credit Document.

 

4.                                       Certain Waivers, Consents and
Agreements.

 

Borrower  hereby: (a) waives presentment, demand and protest; (b) waives any
defenses based upon and specifically assents to any and all extensions and
postponements of the time for payment, changes in terms and conditions and all
other indulgences and forbearances which may be granted by the Administrative
Agent or the holder to any party now or hereafter liable for the indebtedness
evidenced hereby; (c) agrees to any substitution, exchange, release, surrender
or other delivery of any security or collateral now or hereafter held hereunder
or in connection with the Credit Agreement, or any of the other Credit
Documents, and to the addition or release of any other party or person primarily
or secondarily liable; (d) agrees that if any security or collateral given to
secure this Note or the indebtedness evidenced hereby or to secure any of the
obligations set forth or referred to in the Credit Agreement, or any of the
other Credit Documents, shall be found to be unenforceable in full or to any
extent, or if the Administrative Agent or any other party shall fail to duly
perfect or protect such collateral, the same shall not relieve or release
Borrower nor vitiate any other security or collateral given by Borrower for any
obligations evidenced hereby or thereby; (e) agrees, to the extent provided for
in the Credit Agreement, to pay all reasonable and documented costs and expenses
actually incurred by the Administrative Agent and the Revolving Credit Lender or
any other holder of this Note in connection with the administration and
enforcement of indebtedness evidenced hereby, including, without limitation, all
reasonable attorneys’ fees and costs, for the implementation of the Revolving
Credit Loan, the collection of the indebtedness evidenced hereby and the
enforcement of rights and remedies hereunder or under the other Credit
Documents, whether or not suit is instituted; and (f) consents to all of the
terms and conditions contained in this Note, the Credit Agreement, and all other
instruments now or hereafter executed evidencing or governing all or any portion
of the security or collateral for this Note and for such Credit Agreement, or
any one or more of the other Credit Documents.

 

5.                                       Delay Not A Bar.

 

No delay or omission on the part of the Administrative Agent or the holder in
exercising any right hereunder or any right under any instrument or agreement
now or hereafter executed in connection herewith, or any agreement or instrument
which is given or may be given to secure the indebtedness evidenced hereby or by
the Credit Agreement, or any other agreement now or hereafter executed in
connection herewith or therewith shall operate as a waiver of any such right or
of any other right of such holder, nor shall any delay, omission or waiver on
any one occasion be deemed to be a bar to or waiver of the same or of any other
right on any future occasion.

 

2

--------------------------------------------------------------------------------

 

6.                                       Partial Invalidity.

 

The invalidity or unenforceability of any provision hereof, of the Credit
Agreement, of the other Credit Documents, or of any other instrument, agreement
or document now or hereafter executed in connection with this Note shall not
impair or vitiate any other provision of any of such instruments, agreements and
documents, all of which provisions shall be enforceable to the fullest extent
now or hereafter permitted by law.

 

7.                                       Use of Proceeds.

 

All proceeds of the Revolving Credit Loan shall be used solely for the purposes
more particularly provided for and limited by the Credit Agreement.

 

8.                                       Notices.

 

Any notices given with respect to this Note shall be given in the manner
provided for in the Credit Agreement.

 

9.                                       Governing Law and Consent to
Jurisdiction.

 

a.                                       Substantial Relationship.  It is
understood and agreed that all of the Credit Documents were delivered in the
Commonwealth of Massachusetts, which Commonwealth the parties agree has a
substantial relationship to the parties and to the underlying transactions
embodied by the Credit Documents.

 

b.                                      Governing Law.  This Note shall in all
respects be governed, construed, applied and enforced in accordance with the
internal laws of the Commonwealth of Massachusetts without regard to principles
of conflicts of law.

 

c.                                       Consent to Jurisdiction.  Borrower
hereby irrevocably and unconditionally:  (i) submits for itself and its property
in any Proceeding relating to any Credit Document to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the Commonwealth of
Massachusetts, the courts of the United States of America for the District of
Massachusetts, and appellate courts from any thereof; (ii) consents that any
such Proceeding may be brought in such courts and waives any objection that it
may now or hereafter have to the venue of any such Proceeding in any such court
or that such Proceeding was brought in an inconvenient court and agrees not to
plead or claim the same; (iii) agrees that service of process in any such
Proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to Borrower
at its address set forth in Section 12.2 of the Credit Agreement or at such
other address of which the Administrative Agent shall have been  notified
pursuant thereto; and (iv) agrees that nothing herein shall

 

3

--------------------------------------------------------------------------------

 

affect the right to effect service of process in any other manner permitted by
law or shall limit the right to sue in any other jurisdiction.

 

10.           Waiver of Jury Trial.

 

BORROWER, THE ADMINISTRATIVE AGENT AND THE REVOLVING CREDIT LENDER (BY
ACCEPTANCE OF THIS NOTE) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY
IN WHICH THE ADMINISTRATIVE AGENT OR ANY REVOLVING CREDIT LENDER IS OR BECOMES A
PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE
ADMINISTRATIVE AGENT OR ANY REVOLVING CREDIT LENDER OR IN WHICH THE
ADMINISTRATIVE AGENT OR ANY REVOLVING CREDIT LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF, ANY
RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON.

 

11.           No Oral Change.

 

This Note and the other Credit Documents may only be amended, terminated,
extended or otherwise modified by a writing signed by the party against which
enforcement is sought in accordance with the terms and conditions of the Credit
Agreement.  In no event shall any oral agreements, promises, actions, inactions,
knowledge, course of conduct, course of dealing, or the like be effective to
amend, terminate, extend or otherwise modify this Note or any of the other
Credit Documents.

 

12.           Rights of the Administrative Agent and Holder.

 

This Note and the rights and remedies provided for herein may be enforced by the
Administrative Agent, the holder, or any subsequent holder hereof which is a
Revolving Credit Lender.  Wherever the context permits each reference to the
term “holder” herein shall mean and refer to the holder,  or the then subsequent
holder of this Note which is a Revolving Credit Lender.

 

13.           Right to Assign; Pledge.

 

The Revolving Credit Lender may at any time pledge all or any portion of its
rights under the Credit Documents including any portion of this Note to any of
the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341.  No such pledge or enforcement thereof shall
release the Revolving Credit Lender from its obligations under any of the Credit
Documents.  Except as permitted by Section 12.6 of the Credit Agreement, this
Note may not be assigned by the Revolving Credit Lender to any other Person.

 

4

--------------------------------------------------------------------------------

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and
Chief Financial Officer

 

 

 

5

--------------------------------------------------------------------------------

 

Exhibit A-2

 

[Form of Swing Loan Note]

 

SWINGLOAN NOTE

 

$10,000,000.00

 

September 27, 2002

 

 

Boston, Massachusetts

 

1.                                       Promise To Pay.

 

FOR VALUE RECEIVED, TUESDAY MORNING CORPORATION, a Delaware corporation having
an address at 14621 Inwood Road, Dallas, Texas 75224 (hereinafter, the
“Borrower”), hereby promises to pay to FLEET NATIONAL BANK, a national banking
association having an address at 100 Federal Street, Boston, Massachusetts 02110
(hereinafter, the “Swing Loan Lender”), for the account of its Applicable
Lending Office provided for by the Credit Agreement referred to below, at the
Principal Office of the Administrative Agent, the principal sum of TEN MILLION
DOLLARS ($10,000,000.00) (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Swing Loans made by the Swing Loan Lender to
Borrower under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Swing Loan, at such office, in like money and
funds, for the period commencing on the date of such Swing Loan until such Swing
Loan shall be paid in full, at the rates per annum and on the dates provided in
the Credit Agreement.

 

The date, amount and interest rate of each Swing Loan made by the Swing Loan
Lender to Borrower, and each payment made on account of the principal thereof,
shall be recorded by the Swing Loan Lender on its books; provided, however, that
the failure of the Swing Loan Lender to make any such recordation shall not
affect the obligations of Borrower to make a payment when due of any amount
owing under the Credit Agreement or hereunder in respect of the Swing Loans made
by the Swing Loan Lender.

 

2.                                       Credit Agreement.

 

This Note is issued pursuant to, and is subject to the terms, provisions and
conditions of, a certain Credit Agreement, dated as of September 27, 2002 (as
modified and supplemented and in effect from time to time, the “Credit
Agreement”), among Borrower, the Guarantors party thereto from time to time, the
Revolving Credit Lenders party thereto from time to time, and Fleet National
Bank, as Administrative Agent, and evidences Swing Loans made by the Swing Loan
Lender thereunder. Capitalized terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.  This Note is one
of the Swing Loan Notes referred to in the Credit Agreement.

 

--------------------------------------------------------------------------------

 

3.                                       Acceleration; Event of Default.

 

The principal of, and interest on, this Note shall be payable as provided in the
Credit Agreement and shall be subject to prepayment and acceleration as provided
therein. Upon the occurrence and during the continuance of an Event of Default,
the Swing Loan Lender shall have, in addition to any rights and remedies
contained herein, any and all rights and remedies set forth in the Credit
Agreement or any other Credit Document.

 

4.                                       Certain Waivers, Consents and
Agreements.

 

Borrower  hereby: (a) waives presentment, demand and protest; (b) waives any
defenses based upon and specifically assents to any and all extensions and
postponements of the time for payment, changes in terms and conditions and all
other indulgences and forbearances which may be granted by the Administrative
Agent or the holder to any party now or hereafter liable for the indebtedness
evidenced hereby; (c) agrees to any substitution, exchange, release, surrender
or other delivery of any security or collateral now or hereafter held hereunder
or in connection with the Credit Agreement, or any of the other Credit
Documents, and to the addition or release of any other party or person primarily
or secondarily liable; (d) agrees that if any security or collateral given to
secure this Note or the indebtedness evidenced hereby or to secure any of the
obligations set forth or referred to in the Credit Agreement, or any of the
other Credit Documents, shall be found to be unenforceable in full or to any
extent, or if the Administrative Agent or any other party shall fail to duly
perfect or protect such collateral, the same shall not relieve or release
Borrower nor vitiate any other security or collateral given by Borrower for any
obligations evidenced hereby or thereby; (e) agrees, to the extent provided for
in the Credit Agreement, to pay all reasonable and documented costs and expenses
actually incurred by the Administrative Agent and the Swing Loan Lender or any
other holder of this Note in connection with the administration and enforcement
of indebtedness evidenced hereby, including, without limitation, all reasonable
attorneys’ fees and costs, for the implementation of the Swing Loan, the
collection of the indebtedness evidenced hereby and the enforcement of rights
and remedies hereunder or under the other Credit Documents, whether or not suit
is instituted; and (f) consents to all of the terms and conditions contained in
this Note, the Credit Agreement, and all other instruments now or hereafter
executed evidencing or governing all or any portion of the security or
collateral for this Note and for such Credit Agreement, or any one or more of
the other Credit Documents.

 

5.                                       Delay Not A Bar.

 

No delay or omission on the part of the Administrative Agent or the holder in
exercising any right hereunder or any right under any instrument or agreement
now or hereafter executed in connection herewith, or any agreement or instrument
which is given or may be given to secure the indebtedness evidenced hereby or by
the Credit Agreement, or any other agreement now or hereafter executed in
connection herewith or therewith shall operate as a waiver of any such right or
of any other right of such holder, nor shall any delay, omission or waiver on
any one occasion be deemed to be a bar to or waiver of the same or of any other
right on any future occasion.

 

2

--------------------------------------------------------------------------------

 

6.                                       Partial Invalidity.

 

The invalidity or unenforceability of any provision hereof, of the Credit
Agreement, of the other Credit Documents, or of any other instrument, agreement
or document now or hereafter executed in connection with this Note shall not
impair or vitiate any other provision of any of such instruments, agreements and
documents, all of which provisions shall be enforceable to the fullest extent
now or hereafter permitted by law.

 

7.                                       Use of Proceeds.

 

All proceeds of the Swing Loan shall be used solely for the purposes more
particularly provided for and limited by the Credit Agreement.

 

8.                                       Notices.

 

Any notices given with respect to this Note shall be given in the manner
provided for in the Credit Agreement.

 

9.                                       Governing Law and Consent to
Jurisdiction.

 

a.                                       Substantial Relationship.  It is
understood and agreed that all of the Credit Documents were delivered in the
Commonwealth of Massachusetts, which Commonwealth the parties agree has a
substantial relationship to the parties and to the underlying transactions
embodied by the Credit Documents.

 

b.                                      Governing Law.  This Note shall in all
respects be governed, construed, applied and enforced in accordance with the
internal laws of the Commonwealth of Massachusetts without regard to principles
of conflicts of law.

 

c.                                       Consent to Jurisdiction.  Borrower
hereby irrevocably and unconditionally:  (i) submits for itself and its property
in any Proceeding relating to any Credit Document to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the Commonwealth of
Massachusetts, the courts of the United States of America for the District of
Massachusetts, and appellate courts from any thereof; (ii) consents that any
such Proceeding may be brought in such courts and waives any objection that it
may now or hereafter have to the venue of any such Proceeding in any such court
or that such Proceeding was brought in an inconvenient court and agrees not to
plead or claim the same; (iii) agrees that service of process in any such
Proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to Borrower
at its address set forth in Section 12.2 of the Credit Agreement or at such
other address of which the Administrative Agent shall have been  notified
pursuant thereto; and (iv) agrees that nothing herein shall

 

3

--------------------------------------------------------------------------------

 

affect the right to effect service of process in any other manner permitted by
law or shall limit the right to sue in any other jurisdiction.

 

10.           Waiver of Jury Trial.

 

BORROWER, THE ADMINISTRATIVE AGENT AND THE SWING LOAN LENDER (BY ACCEPTANCE OF
THIS NOTE) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE
ADMINISTRATIVE AGENT OR THE SWING LOAN LENDER IS OR BECOMES A PARTY (WHETHER
SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE ADMINISTRATIVE AGENT OR
THE SWING LOAN LENDER OR IN WHICH THE ADMINISTRATIVE AGENT OR THE SWING LOAN
LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF
OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY
OTHER PERSON.

 

11.           No Oral Change.

 

This Note and the other Credit Documents may only be amended, terminated,
extended or otherwise modified by a writing signed by the party against which
enforcement is sought in accordance with the terms and conditions of the Credit
Agreement.  In no event shall any oral agreements, promises, actions, inactions,
knowledge, course of conduct, course of dealing, or the like be effective to
amend, terminate, extend or otherwise modify this Note or any of the other
Credit Documents.

 

12.           Rights of the Administrative Agent and Holder.

 

This Note and the rights and remedies provided for herein may be enforced by the
Administrative Agent, the holder, or any subsequent holder hereof which is a
Swing Loan Lender. Wherever the context permits each reference to the term
“holder” herein shall mean and refer to the holder,  or the then subsequent
holder of this Note which is a Swing Loan Lender.

 

13.           Right to Assign; Pledge.

 

The Swing Loan Lender may at any time pledge all or any portion of its rights
under the Credit Documents including any portion of this Note to any of the
twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341.  No such pledge or enforcement thereof shall
release the Swing Loan Lender from its obligations under any of the Credit
Documents.  Except as permitted by Section 12.6 of the Credit Agreement, this
Note may not be assigned by the Swing Loan Lender to any other Person.

 

4

--------------------------------------------------------------------------------

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and
Chief Financial Officer

 

5

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Exhibit B

 

[Form of Intercompany Note]

 

PROMISSORY NOTE

 

 

$

 

                                  , 20     

 

 

Boston, Massachusetts

 

1.                                       Promise To Pay.

 

FOR VALUE RECEIVED, [Name of Payor], a                           corporation
(hereinafter, the “Payor”), hereby promises to pay on demand to the order of
[Name of Payee] (hereinafter, the “Payee”), in lawful money of the United States
of America in immediately available funds, at such location in the United States
of America as Payee shall from time to time designate, the unpaid principal
amount of all loans and advances made by Payee to Payor.  Payor promises also to
pay interest on the unpaid principal amount of all such loans and advances in
like money at said location from the date of such loans and advances until paid
at a rate per annum (determined based upon a 360 day year and actual days
elapsed) equal to the aggregate of the then applicable rate under the Credit
Agreement (as defined herein) (including the Applicable Margin) for Alternate
Base Rate Loans.

 

2.                                       Credit Agreement.

 

This Note is one of the Intercompany Notes referred to in that certain Credit
Agreement, dated as of September 27, 2002 (as modified and supplemented and in
effect from time to time, the “Credit Agreement”), among Tuesday Morning
Corporation, a Delaware corporation (the “Borrower”), the Guarantors party
thereto from time to time, the Revolving Credit Lenders party thereto from time
to time, and Fleet National Bank, as Administrative Agent, and shall be pledged
by Payee to the Administrative Agent, for the benefit of the Secured Parties (as
defined in the Security Agreement), pursuant to the Security Agreement. 
Capitalized terms used but not defined in this Note have the respective meanings
assigned to them in the Credit Agreement.  Payee hereby acknowledges and agrees
that the Administrative Agent may exercise all rights provided in the Credit
Agreement and the Security Agreement with respect to this Note.

 

3.                                       Subordination.

 

Anything in this Note to the contrary notwithstanding, the indebtedness
evidenced by this Note shall be subordinate and junior in right of payment, to
the extent and in the manner hereinafter set forth, to all Obligations of Payor
under the Credit Agreement, [including, without limitation,

 

--------------------------------------------------------------------------------

 

under Payor’s guarantee of the Obligations under the Credit Agreement] (such
Obligations and other indebtedness and obligations in connection with any
renewal, refunding, restructuring or refinancing thereof, including interest
thereon accruing after the commencement of any proceedings referred to in clause
(i) below, whether or not such interest is an allowed claim in such proceeding,
being hereinafter collectively referred to as “Senior Indebtedness”):

 

(i)            In the event of any Event of Default, or any insolvency or
bankruptcy proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to Payor or to its
creditors, as such, or to its property, or in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of Payor, whether or not
involving insolvency or bankruptcy, then (x) the holders of Senior Indebtedness
shall be paid in full in cash in respect of all amounts constituting Senior
Indebtedness before Payee is entitled to receive (whether directly or
indirectly), or make any demands for, any payment on account of this Note and
(y) until the holders of Senior Indebtedness are paid in full in cash in respect
of all amounts constituting Senior Indebtedness, any payment or distribution to
which the Payee would otherwise be entitled (other than debt securities of Payor
that are subordinated, to at least the same extent as this Note, to the payment
of all Senior Indebtedness then outstanding (such securities being hereinafter
referred to as “Restructured Debt Securities”)) shall be made to the holders of
Senior Indebtedness.

 

(ii)           If any payment or distribution of any character, whether in cash,
securities or other property (other than Restructured Debt Securities), in
respect of this Note shall (despite these subordination provisions) be received
by Payee in violation of clause (i) before all Senior Indebtedness shall have
been paid in full in cash, such payment or distribution shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness (or their representatives), ratably according to the
respective aggregate amounts remaining unpaid thereon, to the extent necessary
to pay all Senior Indebtedness in full in cash.

 

To the fullest extent permitted by law, no present or future holder of Senior
Indebtedness shall be prejudiced in its right to enforce the subordination of
this Note by any act or failure to act on the part of Payor or by any act or
failure to act on the part of such holder or any trustee or agent of such
holder. Payee and Payor hereby agree that the subordination of this Note is for
the benefit of the Creditors, the Creditors are obligees under this Note to the
same extent as if their names were written herein as such and the Administrative
Agent may, on behalf of the Creditors, proceed to enforce the subordination
provisions herein.

 

Nothing contained in the subordination provisions set forth above is intended
to, or will, impair, as between the Payor and Payee, the obligations of the
Payor, which are absolute and unconditional, to pay to the Payee the principal
of and interest on this Note as and when due and

 

--------------------------------------------------------------------------------

*To be inserted if Payor is not the Borrower.

 

2

--------------------------------------------------------------------------------

 

payable in accordance with its terms, or is intended to, or will, affect the
relative rights of the Payee and other creditors of the Payor other than the
holders of Senior Indebtedness. After the payment in full in cash of the Senior
Indebtedness, Payee shall be subrogated to the rights of the holders of the
Senior Indebtedness to the extent that payments to which Payee would have been
entitled hereunder in the absence of the subordination provisions set forth
above were paid instead to the holders of such Senior Indebtedness. For purposes
of giving effect to the subrogation rights contemplated in the previous
sentence, but only for such purposes, payments made to the holders of the Senior
Indebtedness that, in the absence of the subordination provisions set forth
above would have been paid instead to Payee, shall not constitute payments of
such Senior Indebtedness.

 

4.                                       Evidence of Intercompany Loans.

 

Payee is hereby authorized to record all loans and advances made by it to Payor
(all of which shall be evidenced by this Note), and all repayments or
prepayments thereof, in its books and records, such books and records
constituting prima facie evidence of the accuracy of the information contained
therein.

 

5.                                       Certain Waivers, Consents and
Agreements.

 

Payor hereby: (a) waives presentment, demand and protest; (b) waives any
defenses based upon and specifically assents to any and all extensions and
postponements of the time for payment, changes in terms and conditions and all
other indulgences and forbearances which may be granted by the Payee or the
holder to any party now or hereafter liable for the indebtedness evidenced
hereby; (c) agrees to any substitution, exchange, release, surrender or other
delivery of any security or collateral now or hereafter held hereunder, and to
the addition or release of any other party or person primarily or secondarily
liable; (d) agrees that, if any security or collateral given to secure this Note
or the indebtedness evidenced hereby shall be found to be unenforceable in full
or to any extent, or if the Payee or any other party shall fail to duly perfect
or protect such collateral, the same shall not relieve or release Payor nor
vitiate any other security or collateral given by Payor for any obligations
evidenced hereby or thereby; (e) agrees to pay all reasonable and documented
costs and expenses actually incurred by the Payee or any other holder of this
Note in connection with the administration and enforcement of indebtedness
evidenced hereby, including, without limitation, all reasonable attorneys’ fees
and costs, for the collection of the indebtedness evidenced hereby and the
enforcement of rights and remedies hereunder, whether or not suit is instituted;
and (f) consents to all of the terms and conditions contained in this Note and
all other instruments now or hereafter executed evidencing or governing all or
any portion of the security or collateral for this Note.

 

6.                                       Delay Not A Bar.

 

No delay or omission on the part of the Payee or the holder in exercising any
right hereunder or any right under any instrument or agreement now or hereafter
executed in connection herewith, or any agreement or instrument which is given
or may be given to secure the indebtedness evidenced hereby, or any other
agreement now or hereafter executed in connection herewith shall operate as

 

3

--------------------------------------------------------------------------------

 

a waiver of any such right or of any other right of such holder, nor shall any
delay, omission or waiver on any one occasion be deemed to be a bar to or waiver
of the same or of any other right on any future occasion.

 

7.                                       Partial Invalidity.

 

The invalidity or unenforceability of any provision hereof, or of any other
instrument, agreement or document now or hereafter executed in connection with
this Note, shall not impair or vitiate any other provision of any of such
instruments, agreements and documents, all of which provisions shall be
enforceable to the fullest extent now or hereafter permitted by law.

 

8.                                       Governing Law.

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.

 

9.                                       Waiver of Jury Trial.

 

PAYOR AND PAYEE (BY ACCEPTANCE OF THIS NOTE) MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE
OR CONTROVERSY IN WHICH THE PAYEE IS OR BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST THE PAYEE OR IN WHICH THE PAYEE IS JOINED
AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT
OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE PAYOR OR ANY OTHER PERSON.

 

10.           No Oral Change.

 

This Note may only be amended, terminated, extended or otherwise modified by a
writing signed by the party against which enforcement is sought.  In no event
shall any oral agreements, promises, actions, inactions, knowledge, course of
conduct, course of dealing, or the like be effective to amend, terminate, extend
or otherwise modify this Note.

 

4

--------------------------------------------------------------------------------

 

 

[NAME OF PAYOR]

 

 

 

 

 

By:

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

[NAME OF PAYEE]

 

 

 

 

 

By:

 

 

Name:

 

 

 

Title:

 

 

 

5

--------------------------------------------------------------------------------

 

Exhibit C-1

 

[Form of Interest Rate Certificate]

 

INTEREST RATE CERTIFICATE

 

Fiscal [quarter/year] ended                , 20   

 

Reference is made to the Credit Agreement, dated as of September 27, 2002 (as
such may be amended, modified or supplemented, the “Credit Agreement”), among
Tuesday Morning Corporation, a Delaware corporation (the “Borrower”), the
Guarantors party thereto from time to time, the Revolving Credit Lenders party
thereto from time to time, and Fleet National Bank, as Administrative Agent. 
Capitalized terms used herein and not defined shall have the meanings assigned
to them in the Credit Agreement.

 

Pursuant to Section 9.1(d) of the Credit Agreement, the undersigned hereby
certifies that, to the best of [his/her] knowledge, attached hereto as Annex 1
is a true and accurate calculation of the Leverage Ratio as at the end of the
fiscal [quarter/year] ended                , 20   , determined in accordance
with the requirements of the Credit Agreement.

 

IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly
executed and delivered as of the             day of                , 20       .

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

 

 

Title:

 

 

 

--------------------------------------------------------------------------------

 

Annex 1

 

Maximum Leverage Ratio

 

 

 

 

 

 

 

 

 

(i)  Total Debt

 

 

 

 

 

 

 

 

 

Indebtedness for Borrowed Money

 

$                

 

 

Plus

 

 

 

 

Letter of Credit Liabilities

 

$                

 

 

Plus

 

 

 

 

Non-Contingent obligations with  respect to Surety Instruments

 

$                

 

 

Plus

 

 

 

 

Obligations under notes, bonds, debentures and similar instruments

 

$                

 

 

Plus

 

 

 

 

Obligations under Conditional Sale  or other Title Retention Agreements

 

$                

 

 

Plus

 

 

 

 

Capital Lease Obligations

 

$                

 

 

Plus

 

 

 

 

Guaranteed payments and redemptions

 

$                

 

 

Plus

 

 

 

 

Indebtedness Secured by Liens

 

$                

 

 

 

 

 

 

 

Total Debt:

 

 

 

$                

 

 

 

 

 

(ii)  Consolidated EBITDA

 

 

 

 

 

 

 

 

 

Consolidated Net Income

 

$                

 

 

Plus

 

 

 

 

Income Tax Expense

 

$                

 

 

Plus

 

 

 

 

Depreciation and Amortization

 

$                

 

 

Plus

 

 

 

 

Consolidated Interest Expense

 

$                

 

 

 

 

 

 

 

Consolidated EBITDA

 

 

 

$                

 

 

 

 

 

Ratio of Total Debt to Consolidated EBITDA ((i) divided by (ii)):

 

 

 

 

 

 

 

 

 

Required:

Actual:

 

 

 

 

 

--------------------------------------------------------------------------------

 

Exhibit C-2

 

[Form of Borrowing Base Certificate]

 

BORROWING BASE CERTIFICATE

 

[Weekly/Monthly] accounting period ended              , 20    

 

Reference is made to the Credit Agreement, dated as of September 27, 2002 (as
modified and supplemented and in effect from time to time, the “Credit
Agreement”), among Tuesday Morning Corporation, a Delaware corporation (the
“Borrower”), the Guarantors from time to time party thereto, the Revolving
Credit Lenders from time to time party thereto, and Fleet National Bank, as
Administrative Agent. Capitalized terms used herein and not defined shall have
the meanings assigned to them in the Credit Agreement.

 

Pursuant to Section 9.1(j) of the Credit Agreement, the undersigned, a senior
financial officer of Borrower, hereby certifies that, to the best of [his/her]
knowledge, attached hereto as Annex 1 is a true and accurate calculation of the
Borrowing Base as at the end of the [weekly/monthly] accounting period ended
                 , 20      , determined in accordance with the requirements of
the Credit Agreement.

 

All Inventory covered by this certificate has been produced in compliance with
the minimum wage and overtime requirements of the Fair Labor Standards Act of
1938, as amended.

 

IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly
executed and delivered as of the                   day of
                           , 20        .

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

 

 

Title:

 

 

 

--------------------------------------------------------------------------------

 

Annex 1

 

This Certificate is given pursuant to §9.1(j) of the Credit Agreement dated
September 27, 2002 (as amended and in effect) among Tuesday Morning Corporation,
a Delaware corporation (the “Borrower”), the Guarantors from time to time party
thereto, the Revolving Credit Lenders from time to time party thereto, and Fleet
National Bank, as Administrative Agent, and is true, accurate and complete as of
                         , 200       .

 

The Borrower hereby represents and warrants as of the above date as follows:

 

1.

 

Total Inventory
(at lower of cost or market, calculated on a FIFO basis)

 

 

 

$                         

 

 

 

 

 

 

 

 

 

Minus

 

 

 

 

 

 

 

 

 

 

 

2.

 

Ineligible Inventory

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory not consisting of finished goods:

 

$                         

 

 

 

 

 

 

 

 

 

 

 

Inventory in transit from abroad (except as permitted  under the Credit
Agreement):

 

$                         

 

 

 

 

 

 

 

 

 

:

 

Damaged or defective inventory:

 

$                         

 

 

 

 

 

 

 

 

 

 

 

Other ineligible inventory (specified below):

 

$                         

 

 

 

 

 

 

 

 

 

 

 

Total Ineligible Inventory

 

 

 

$                         

 

 

 

 

 

 

 

 

 

Minus

 

 

 

 

 

 

 

 

 

 

 

3.

 

UNICAP Costs

 

 

 

$                         

 

 

 

 

 

 

 

4.

 

Eligible Inventory (Line 1 minus Line 2 minus Line 3)

 

 

 

$                         

 

 

 

 

 

 

 

 

 

Minus

 

 

 

 

 

 

 

 

 

 

 

5.

 

Inventory Reserves (detailed below, if any)

 

 

 

$                         

 

 

 

 

 

 

 

6.

 

Net Eligible Inventory (Line 4 minus Line 5)

 

 

 

$                         

 

 

 

 

 

 

 

7.

 

Advances against Net Eligible Inventory
(65% of Line 6)

 

 

 

$                         

 

 

 

 

 

 

 

8.

 

Overadvance (Initially $20,000,000, to be reduced in the amounts and at the
times per Credit Agreement)

 

 

 

$                         

 

 

 

 

 

 

 

 

 

Minus

 

 

 

 

 

 

 

 

 

 

 

9.

 

Availability Reserves (detailed below, if any)

 

 

 

$                         

 

 

 

 

 

 

 

10.

 

Availability (Line 7 plus Line 8 minus Line 9)

 

 

 

$                         

 

 

 

 

 

 

 

11.

 

Amount of Loans outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving Credit Loans

 

$                         

 

 

 

 

 

 

 

 

 

 

 

Swing Loans

 

$                         

 

 

 

 

 

 

 

 

 

 

 

Total Loans:

 

 

 

$                         

 

 

 

 

 

 

 

12.

 

Amount of Letters of Credit outstanding

 

 

 

$                         

 

 

 

 

 

 

 

13.

 

Net Availability/(Impermissible Overadvance)

 

 

 

$                         

 

 

(Line 10 minus Line11 minus Line 12))

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

 

 

Title:

 

 

 

 

 

Dated:                , 200  

 

2

--------------------------------------------------------------------------------

 

Exhibit D

 

[Form of Security Agreement]

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (“Agreement”) made this 27th day of September, 2002 by
each of

 

TUESDAY MORNING CORPORATION, a Delaware corporation (the “Borrower”); and

 

EACH OF THE SUBSIDIARIES party hereto (the “Guarantors”)

 

in favor of FLEET NATIONAL BANK, a national banking association, as
administrative agent (in such capacity, the “Administrative Agent”) for itself
and the other lenders (collectively, with Fleet in such capacity, the “Revolving
Credit Lenders”) who are or hereafter become parties to the Credit Agreement
referred to below.

 

The Borrower, the Guarantors, the Revolving Credit Lenders and the
Administrative Agent are parties to a certain Credit Agreement dated as of the
date hereof (hereinafter, as such may be modified, amended, renewed, restated,
extended or supplemented from time to time, the “Credit Agreement”), providing,
subject to the terms and conditions thereof, for extensions of credit (by the
making of loans and the issuance of letters of credit) to be made by the
Revolving Credit Lenders to the Borrower.

 

To induce the Revolving Credit Lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Debtor (as
hereinafter defined) has agreed to pledge, mortgage and grant a security
interest in the Pledged Collateral (as hereinafter defined) as security for the
Secured Obligations (as hereinafter defined).  Accordingly, the parties hereto
agree as follows:

 

ARTICLE I Definitions.  Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings provided for in the Credit Agreement.  As
used herein, the following terms have the following meanings or are defined in
the section of this Agreement so indicated.

 

“Account Debtor” has the meaning given that term in the UCC.

 

“Accounts” shall include, without limitation, “accounts” as defined in the UCC,
and also all:  accounts, accounts receivable, receivables, and rights to payment
(whether or not earned by performance) for: property that has been or is to be
sold, leased, licensed, assigned, or otherwise disposed of; services rendered or
to be rendered; a policy of insurance issued or to be issued; a secondary
obligation incurred or to be incurred; arising out of the use of a credit or
charge card or information contained on or used with that card; winnings in a
lottery or other game of chance; and also all Inventory which gave rise thereto,
and all rights associated with such Inventory, including the right of stoppage
in

 

--------------------------------------------------------------------------------

 

transit; all reclaimed, returned, rejected or repossessed Inventory (if any) the
sale of which gave rise to any Account.

 

“Agreement” see the introduction hereto.

 

“Chattel Paper” has the meaning given that term in the UCC, and also includes
all chattel paper, whether tangible or electronic.

 

“Collateral Account” see Section 4.01(a) hereof.

 

“Commercial Tort Claim” has the meaning given that term in the UCC.

 

“Contracts” shall mean all contracts, undertakings, or other agreements,
including, without limitation, all documents, agreements and instruments
relating to any Acquisition, as the same may be amended from time to time, and
including, without limitation, (a) all rights of any Debtor to receive moneys
due and to become due thereunder or in connection therewith, (b) all rights of
any Debtor to damages arising out of or for breach or default in respect
thereof, and (c) all rights of any Debtor to exercise remedies thereunder.

 

“Copyright Collateral” shall mean all Copyrights, whether now owned or hereafter
acquired by any Debtor, including each Copyright identified in Annex 2 hereto.
Notwithstanding the foregoing, the Copyright Collateral does not and shall not
include any Copyright that would be rendered invalid, abandoned, void or
unenforceable by reason of its being included as part of Copyright Collateral.

 

“Copyrights” shall mean all copyrights, copyright registrations and applications
for copyright registrations, including, without limitation, all renewals and
extensions thereof, the right to recover for all past, present and future
infringements thereof, and all other rights of any kind whatsoever accruing
thereunder or pertaining thereto.

 

“Debtor” shall mean each of the Borrower and each Guarantor.

 

“Deposit Account” has the meaning given that term in the UCC, and also includes
all demand, time, savings, passbook, or similar accounts maintained with a bank.

 

“Documents” has the meaning given that term in the UCC, and also includes all
documents of title or other receipts of any Debtor covering, evidencing or
representing Inventory or Equipment

 

“Equipment” includes, without limitation, “equipment” as defined in the UCC, and
also all furniture, store fixtures, Motor Vehicles, rolling stock, machinery,
office equipment, plant equipment, tools, dies, molds,  and other goods,
property, and assets which are used and/or were purchased for use in the
operation or furtherance of a Debtor’s business, and any and all accessions or
additions thereto, and substitutions therefor.

 

“Fixtures” has the meaning given that term in the UCC.

 

2

--------------------------------------------------------------------------------

 

“General Intangibles” includes, without limitation, “general intangibles” as
defined in the UCC, and also all: Payment Intangibles; rights to payment for
credit extended; deposits; amounts due to any Debtor; credit memoranda in favor
of any Debtor; warranty claims; tax refunds and abatements; insurance refunds
and premium rebates; all means and vehicles of investment or hedging, including,
without limitation, options, warrants, and futures contracts; records; customer
lists; telephone numbers; goodwill; causes of action; judgments; payments under
any settlement or other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission; licenses;
franchises; license agreements, including all rights of any Debtor to enforce
same; permits, certificates of convenience and necessity, and similar rights
granted by any governmental authority; Intellectual Property; internet addresses
and domain names; developmental ideas and concepts; proprietary processes;
blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs;
manuals; technical data; computer software programs (including the source and
object codes therefor), computer records, computer software, rights of access to
computer record service bureaus, service bureau computer contracts, and computer
data; tapes, disks, semi-conductors chips and printouts; trade secrets rights,
mask work rights and interests, and derivative works and interests; user,
technical reference, and other manuals and materials; and all other general
intangible property of any Debtor in the nature of intellectual property;
proposals; cost estimates, and reproductions on paper, or otherwise, of any and
all concepts or ideas, and any matter related to, or connected with, the design,
development, manufacture, sale, marketing, leasing, or use of any or all
property produced, sold, or leased, by any Debtor or credit extended or services
performed, by any Debtor, whether intended for an individual customer or the
general business of any Debtor, or used or useful in connection with research by
any Debtor.

 

“Goods” has the meaning given that term in the UCC, and all accessions or
additions thereto, and also includes all things movable when a security interest
therein attaches and also all computer programs embedded in goods and any
supporting information provided in connection with a transaction relating to the
program if (i) the program is associated with the goods in such manner that it 
customarily is considered part of the goods or (ii) by becoming the owner of the
goods, a Person acquires a right to use the program in connection with the
goods.

 

“Instruments” has the meaning given that term in the UCC, and also includes all
promissory notes, drafts, bills of exchange and trade acceptances;

 

“Intellectual Property” shall mean, collectively, all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets; (b) all licenses or user or other agreements granted to any
Debtor with respect to any of the foregoing, in each case whether now or
hereafter owned or used including, without limitation, the licenses or other
agreements with respect to the Copyright Collateral, the Patent Collateral or
the Trademark Collateral, listed in Annex 5 hereto; (c) all information,
customer lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys, engineering
reports, test reports, manuals, materials standards, processing standards,
performance standards, catalogs, computer and automatic machinery software and
programs; (d) all field repair data, sales data and other information relating
to sales or service of products now or hereafter manufactured; (e) all
accounting information and all media in which or on which any information or

 

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knowledge or data or records may  be recorded or stored and all computer
programs used for the compilation or printout of such information, knowledge,
records or data; (f) all licenses, consents, permits, variances, certifications
and approvals of governmental agencies now or hereafter held by any Debtor; and
(g) all causes of action, claims and warranties now or hereafter owned or
acquired by the Debtors in respect of any of the items listed above.

 

“Interests” shall mean, as to any Debtor (i) all right, title and interest, now
existing or hereafter acquired, of such Debtor in any LLC but not any of its
obligations from time to time as a member (unless the Administrative Agent shall
become a member as a result of its express exercise of remedies herein) of any
LLC; (ii) any and all moneys due and to become due to such Debtor now or in the
future by way of a distribution made to such Debtor in its capacity as a member
of or an owner of any LLC; (iii) any other Property of any LLC to which such
Debtor now or in the future may be entitled in its capacity as a member of or an
owner of any LLC by way of distribution, return of capital or otherwise; (iv)
any other claim in respect of any LLC to which such Debtor now or in the future
may be entitled in its capacity as a member of or an owner of any LLC and its
Property, including any rights under any operating agreement or other agreement
governing or pertaining to such interests; (v) the certificates, if any,
representing all such rights and interests; (vi) all rights of such Debtor under
each limited liability company or operating agreement of each LLC; and (vii) to
the extent not otherwise included, all proceeds of any of the foregoing.

 

“Inventory” includes, without limitation, “inventory” as defined in the UCC and
also all: (a) Goods which are leased by a Person as lessor; are held by a Person
for sale or lease or to be furnished under a contract of service; are furnished
by a Person under a contract of service; or consist of raw materials, work in
process, or materials used or consumed in a business; (b) Goods of said
description in transit; (c) Goods of said description which are returned,
repossessed and rejected; (d) Goods of said description which are obtained by
any Debtor in exchange for such Inventory; (e) packaging, advertising, and
shipping materials related to any of the foregoing; (f) all names, marks, and
General Intangibles affixed or to be affixed or associated thereto; and (g)
Documents which represent any of the foregoing.

 

“Investment Property” has the meaning given that term in the UCC.

 

“Issuers” shall mean, collectively, the respective corporations identified
beneath the names of the Debtors on Annex 1A hereto under the caption “Issuer,”
together with any corporation created or acquired after the date hereof, the
capital stock of which is required to be pledged hereunder pursuant to this
Agreement or the Credit Agreement.

 

“Letter-of-Credit Right” has the meaning given that term in UCC and also refers
to any right to payment or performance under a Letter of Credit, whether or not
the beneficiary has demanded or is at the time entitled to demand payment or
performance, and whether or not evidenced by a writing.

 

“LLC” shall mean, collectively, the respective limited liability companies
identified beneath the name of the Debtors on Annex 1A hereto under the caption
“LLC”, together with any limited liability company created or acquired after the
date hereof, the

 

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Interests in which are required to be pledged hereunder pursuant to this
Agreement or the Credit Agreement.

 

“Motor Vehicles” shall mean motor vehicles, tractors, trailers and other like
property, whether or not the title thereto is governed by a certificate of title
or ownership.

 

“Partnership” shall mean, collectively, the respective partnerships identified
beneath the name of the Debtors on Annex 1A hereto under the caption
“Partnership”, together with any partnerships created or acquired after the date
hereof, the Partnership Interests in which are required to be pledged hereunder
pursuant to this Agreement or the Credit Agreement.

 

“Partnership Interests” shall mean, as to any Debtor (i) all right, title and
interest, now existing or hereafter acquired, of such Debtor in any Partnership
but not any of its obligations from time to time as a partner (unless the
Administrative Agent shall become a partner as a result of its express exercise
of remedies herein) of any Partnership; (ii) any and all moneys due and to
become due to such Debtor now or in the future by way of a distribution made to
such Debtor in its capacity as a member of or an owner of any Partnership; (iii)
any other Property of any Partnership to which such Debtor now or in the future
may be entitled in its capacity as a member of or an owner of any Partnership by
way of distribution, return of capital or otherwise; (iv) any other claim in
respect of any Partnership to which such Debtor now or in the future may be
entitled in its capacity as a member of or an owner of any Partnership and its
Property, including any rights under any partnership agreement or other document
governing or pertaining to such interests; (v) the certificates, if any,
representing all such rights and interests; (vi) all rights of such Debtor under
each partnership agreement or limited partnership agreement of each Partnership;
and (vii) to the extent not otherwise included, all proceeds of any of the
foregoing.

 

“Patent Collateral” shall mean all Patents, whether now owned or hereafter
acquired by any Debtor, including each Patent identified in Annex 3 hereto.
Notwithstanding the foregoing, the Patent Collateral does not and shall not
include any Patent that would be rendered invalid, abandoned, void or
unenforceable by reason of its being included as part of Patent Collateral.

 

“Patents” shall mean all patents and patent applications, including, without
limitation, the inventions and improvements described and claimed therein
together with the reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, all income, royalties, damages and payments now
or hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past or future infringements
thereof, the right to sue for past, present and future infringements thereof,
and all rights corresponding thereto throughout the world.

 

“Payment Intangible” has the meaning given that term in the UCC and also refers
to any general intangible under which the Account Debtor’s primary obligation is
a monetary obligation.

 

“Permitted Encumbrances” shall mean (a) with respect to the Securities
Collateral, the Intellectual Property Collateral, the Collateral Account and the
proceeds of each of the foregoing, Liens of the type described in clause (b),
(h), (k) and (t) of the definition of

 

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Permitted Liens and (b) with respect to all other Pledged Collateral, Liens of
the type described in clauses (a), (b), (c), (g) (other than with respect to
Inventory), (h) (other than with respect to Inventory), (j), (k), (l), (m), (n),
(o), (r) and (s) of the definition of Permitted Liens.

 

“Pledged Collateral” see Section 3 hereof.

 

“Pledged Interests” see Section 3.01(d) hereof.

 

“Pledged Obligations” shall mean all of each Debtor’s right, title and interest,
if any, in and to any and all obligations owed to such Debtor by any Person,
whether now existing or hereafter incurred, and in and to all collateral granted
to such Debtor or for the benefit of such Debtor as collateral security for such
obligations.

 

“Pledged Securities” shall mean the Pledged Interests and the Pledged Stock,
collectively.

 

“Pledged Stock” see Section 3(a) hereof.

 

“Prior Liens” shall mean (a) the Liens set forth on Schedule 3 hereto and (b)
with respect to each applicable type of Pledged Collateral, Permitted
Encumbrances, but only to the extent that the law or regulation creating or
authorizing such Lien provides that such Lien must be superior to the Lien and
security interest created and evidenced by this Agreement.

 

“Proceeds” includes, without limitation, “Proceeds” as defined in the UCC and
each type of property described in Section 3.01 hereof.

 

“Secured Obligations” shall mean, collectively, (a) the principal of and
interest (including any interest that would accrue but for the provisions of the
Bankruptcy Code) on the Loans made by the Revolving Credit Lenders to, and the
Notes held by each Revolving Credit Lender of, Borrower and all other
Obligations and amounts from time to time owing to the Secured Parties by
Borrower under the Credit Documents, including, without limitation, all
Reimbursement Obligations and interest thereon, (b) all obligations of Borrower
or any other Obligor arising under any Swap Contract between Borrower or any
other Obligor and any Revolving Credit Lender or any Affiliate of any Revolving
Credit Lender, (c) all obligations of the Guarantors under the Credit Agreement
and the other Credit Documents (including, without limitation, in respect of
their Guarantees under Section 6 of the Credit Agreement), (d) all obligations
of the Debtors to the Administrative Agent and the other Secured Parties
hereunder, and (e) any and all direct or indirect liabilities, debts, and
obligations of each Debtor to the Administrative Agent or any Affiliate of the
Administrative Agent, each of every kind, nature, and description owing on
account of any service or accommodation provided to, or for the account of any
Debtor pursuant to this or any other Credit Document, including cash management
services, treasury services and automated clearinghouse transfers.

 

“Secured Parties” shall mean the Creditors and any other Person to whom the
Obligations are owing, including, without limitation, any Affiliate of the
Administrative Agent who provides any service or accommodation to, or for the
account of, any Debtor

 

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pursuant to any Credit Document, including cash management services, treasury
services and automated clearinghouse transfers.

 

“Securities Act” shall mean the United States Securities Act of 1933, as
amended.

 

“Securities Collateral” shall mean, collectively, the Pledged Collateral
described in clauses (a) through (e) of Section 3 hereof and the proceeds of and
to any such property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records, invoices and other
papers.

 

“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.

 

“Trademark Collateral” shall mean all Trademarks, whether now owned or hereafter
acquired by any Debtor, including each Trademark identified in Annex 4 hereto.
Notwithstanding the foregoing, the Trademark Collateral does not and shall not
include any Trademark that would be rendered invalid, abandoned, void or
unenforceable by reason of its being included as part of the Trademark
Collateral.

 

“Trademarks” shall mean all trade names, trademarks and service marks, logos,
trademark and service mark registrations, and applications for trademark and
service mark registrations, including, without limitation, all renewals of
trademark and service mark registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service mark.

 

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the Commonwealth of Massachusetts.

 

“Voting Powers” see Section 5.04(a)(2) hereof.

 

ARTICLE II Representations, Warranties and Covenants.  Each Debtor represents,
warrants, covenants and agrees with the Secured Parties that:

 

2.1.1        Such Debtor is the sole beneficial (and, with respect to the
Pledged Securities, record) owner of, or holds valid and subsisting leases or
licenses to, the Pledged Collateral in which it purports to grant a security
interest pursuant to Section 3 hereof and no Lien exists or will exist upon such
Pledged Collateral at any time (and no right or option to acquire the same
(other than those, if any, arising in the ordinary course of business with
respect to Dispositions permitted under the Credit Agreement) exists in favor of
any other Person), except for Prior Liens, Permitted Encumbrances and the pledge
and security interest in favor of the Administrative Agent for the benefit of
the Secured Parties created or provided for herein, which pledge and security
interest shall constitute a first priority perfected pledge and security
interest in and to all of such Pledged Collateral, subject only to Prior Liens,
and, except for permitted Dispositions, each Debtor will make no assignment,
pledge, hypothecation or transfer of, or create or permit to exist any security
interest in or other Lien on, the Pledged Collateral, other

 

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than Prior Liens, Permitted Encumbrances and the Lien pursuant hereto; and,
subject to Section 5.04 hereof, will cause any and all Pledged Securities, to
the extent certificated, whether for value paid by any Debtor or otherwise, to
be forthwith deposited with the Administrative Agent and pledged or assigned
hereunder.

 

2.1.2        The Pledged Stock represented by the certificates identified under
the name of such Debtor in Annex 1A hereto is, and all other Pledged Stock in
which such Debtor shall hereafter grant a security interest pursuant to Section
3 hereof will be, duly authorized, validly existing, fully paid and
non-assessable and none of such Pledged Stock is or will be subject to any
contractual restriction, or any restriction under the charter or by-laws of the
respective Issuer of such Pledged Stock, upon the transfer of such Pledged Stock
(except for any such restriction contained herein or in the Credit Agreement or
as permitted by the Credit Agreement).

 

2.1.3        The Pledged Stock represented by the certificates identified under
the name of such Debtor in Annex 1A hereto constitutes (x) with respect to each
Subsidiary other than a Foreign Subsidiary, all of the issued and outstanding
shares of capital stock of any class of such Subsidiary beneficially owned by
such Debtor and (y) with respect to each first tier Foreign Subsidiary, all of
the issued and outstanding shares of capital stock of any class of such Foreign
Subsidiary beneficially owned by such Debtor which in the aggregate represent
not less than (and, subject to Section 3.01(a) hereof, not more than) 65% of the
total combined voting power of all classes of capital stock of any such Foreign
Subsidiary (in each case, whether or not registered in the name of such Debtor),
and said Annex 1A correctly identifies, as at the date hereof, or, with respect
to any Subsidiary created or acquired after the date hereof, as of the date of
pledge hereunder, the respective Issuers of such Pledged Stock, the respective
class and par value of the shares comprising such Pledged Stock and the
respective number of shares (and registered owners thereof) represented by each
such certificate.

 

2.1.4        The Pledged Obligations identified on Annex 1B hereto constitute
all of the Pledged Obligations of such corporations as identified on Annex 1B
hereto, and, other than the Pledged Obligations, no Debtor owns, directly or
indirectly, any other Pledged Obligations of any Subsidiary (other than a
Foreign Subsidiary).

 

2.1.5        Annexes 2, 3 and 4 hereto, respectively, set forth under the name
of such Debtor a complete and correct list of all Copyrights, Patents and
Trademarks owned by such Debtor on the date hereof, which have been registered
or for which an application for registration has been made.  Except pursuant to
licenses and other user agreements entered into by such Debtor in the ordinary
course of business that are listed in Annex 5 hereto, (i) such Debtor owns and
possesses the right to use, and has done nothing to authorize or enable any
other Person to use, any Copyright, Patent or Trademark listed in said Annexes
2, 3 and 4, and (ii) all registrations listed in said Annexes 2, 3 and 4 are
valid and in full force and effect.  Except as may be set forth in said Annex 5,
such Debtor owns and possesses the right to use all Copyrights, Patents and
Trademarks material to its business.

 

2.1.6        Annex 5 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property.

 

2.1.7        To such Debtor’s knowledge: (i) except as set forth in Annex 5
hereto, there is no violation by others of any right of such Debtor with respect
to any Copyright, Patent or Trademark listed in Annexes 2, 3 and 4 hereto,
respectively, under the name of such Debtor, and (ii) such Debtor is not
infringing in any respect upon any Copyright, Patent or Trademark of any

 

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other Person; and no proceedings have been instituted or are pending against
such Debtor or, to such Debtor’s knowledge, threatened, and no claim against
such Debtor has been received by such Debtor, alleging any such violation,
except as may be set forth in said Annex 5.

 

2.1.8        Any goods now or hereafter produced by such Debtor or any of its
Subsidiaries included in the Pledged Collateral have been and will be produced
by such Debtor in compliance with the applicable requirements of the Fair Labor
Standards Act of 1938, as amended, except where the failure to comply could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.

 

2.1.9        The Interests of each Debtor identified under the name of such
Debtor on Annex 1A hereto pledged hereunder, and in respect of which a security
interest has been granted hereunder, constitute all of the issued and
outstanding Interests, limited liability company interests or other ownership or
equity interests in any LLC owned by the Debtors; the Partnership Interests of
each Debtor identified under the name of such Debtor on Annex 1A hereto pledged
hereunder, and in respect of which a security interest has been granted
hereunder, constitute all of the issued and outstanding Partnership Interests or
other ownership or equity interests in any Partnership owned by the Debtors; and
none of the Pledged Interests is or will be subject to any contractual
restriction, or any restriction under the organizational or other formation
documents of the respective issuer of such Pledged Interests upon the transfer
of such Pledged Interests (except for any such restriction contained herein or
in the Credit Agreement or as permitted by the Credit Agreement).  The Pledged
Interests have been duly authorized and validly issued, and all payments
required to be made by any holder of such Pledged Interests in respect of such
interests have been made.

 

2.1.10      Each Debtor has the corporate power and authority to grant the
security interest in the Pledged Collateral pursuant to this Agreement and has
taken all necessary corporate action to grant the security interest in the
Pledged Collateral pursuant to this Agreement.

 

2.1.11      None of the Pledged Stock constitutes margin stock, as defined in
Regulation G or Regulation U of the Board of Governors of the Federal Reserve
System.

 

2.1.12      Other than Prior Liens and Permitted Encumbrances, no security
agreement, financing statement, equivalent security or lien instrument or
continuation statement covering all or part of the Pledged Collateral is on file
or of record in any public office, except such as may have been, or will be,
filed in favor of the Administrative Agent for the benefit of the Secured
Parties pursuant to this Agreement.

 

2.1.13      Upon filing of the financing statements in the offices referred to
on Schedule 1 hereto, the security interest created by this Agreement in all
Pledged Collateral other than the Pledged Securities and other Pledged
Collateral which is either not disclosed in the financing statements or as to
which filing a financing statement is not the sole perfection method will
constitute a valid, perfected first priority security interest (subject to Prior
Liens) in such Pledged Collateral to the extent provided in the UCC, enforceable
in accordance with its terms against all creditors of such Debtor and any
Persons purporting to purchase any such Pledged Collateral from such Debtor,
except as enforcement of such security interest may be affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally or general equitable
principles (whether considered in a proceeding in equity or at law), and except
that the priority of any security interest is subject to the priority rules
established by the UCC and the enforceability of any security interest against

 

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other creditors and purchasers is subject to the provisions of the UCC and of
the Credit Agreement and other Credit Documents that provide in certain
circumstances for purchasers and other creditors to take free of a prior
perfected or unperfected security interest or otherwise limit the
enforceability, priority or effect of any such security interest.

 

2.1.14      The Interests in each LLC and the Partnership Interests in each
Partnership are not represented by certificates.

 

2.1.15      Each Debtor’s principal place of business, chief executive office
and the place where its records concerning the Pledged Collateral are kept is at
the address listed on Schedule 2 hereto, and such Pledgor will not change such
principal place of business or chief executive office or remove such records
without giving the Administrative Agent at least 30 days prior written notice
thereof and taking such action to maintain the perfection or priority of the
Administrative Agent’s security interest in the Pledged Collateral as is
necessary or reasonably requested by the Administrative Agent; and such Debtor
will not change its name, identity or structure in any manner, or take any other
action, which might make any financing statement filed in respect of the Pledged
Collateral seriously misleading unless it shall have given the Administrative
Agent at least 30 days prior written notice thereof.

 

2.1.16      No consent or approval of any Governmental Authority or any
securities exchange or any other Person was or is necessary for the validity of
the security interest granted herein and the pledge effected hereby.

 

2.1.17      By virtue of the execution and delivery by the Debtors of this
Agreement, when the Pledged Securities, certificates, instruments or other
documents representing or evidencing such Pledged Securities are delivered to
the Administrative Agent in accordance with this Agreement, duly endorsed or, in
the case of Pledged Interests or Pledged Securities constituting uncertificated
securities, when the steps required by Articles 8 and 9 of the UCC have been
taken to perfect the Administrative Agent’s security interest therein for the
benefit of the Secured Parties, the security interest created by this Agreement
in all Pledged Securities will constitute a valid, perfected first priority
security interest in the Pledged Securities to the extent provided in the UCC,
enforceable in accordance with its terms against all creditors of such Debtor
and any Person purporting to purchase any such Pledged Collateral from such
Debtor, except as enforcement of such security interest may be affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors’ rights generally or
general equitable principles (whether considered in a proceeding in equity or at
law), and except that the priority of any security interest is subject to the
priority rules established by the UCC and the enforceability of any security
interest against other creditors and purchasers is subject to the provisions of
the UCC and of the Credit Agreement and other Credit Documents that provide in
certain circumstances for purchasers and other creditors to take free of a prior
perfected or unperfected security interest or otherwise limit the
enforceability, priority or effect of any such security interest.

 

2.1.18      There are no restrictions upon the voting rights associated with, or
upon the transfer of, any of the Pledged Securities.  The Pledged Securities are
not subject to any put, call, option or other right in favor of any other Person
whatsoever.

 

2.1.19      Neither the execution and delivery of this Agreement by each Debtor,
nor the consummation of the transactions herein contemplated, nor the
fulfillment of the terms hereof (i) violates any Debtor’s, or any of its
Subsidiaries’, charter or by-laws or any organizational or other

 

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formation document of any Issuer, LLC or Partnership, (ii) violates the terms of
any agreement, indenture, mortgage, deed of trust, equipment lease, instrument
or other document to which any Debtor, or any of its Subsidiaries, is a party,
or by which any of them may be bound or to which any of their Property may be
subject, which violation or conflict, individually or in the aggregate, would
have a Material Adverse Effect, or a material adverse effect on the value of the
Pledged Collateral taken as a whole or a material adverse effect on the security
interests hereunder (it being understood that each Debtor makes no
representation that upon foreclosure the fair market value or fair value or any
particular value would be realized), or (iii) conflicts with any law, order,
rule or regulation applicable to any Debtor, or any of its Subsidiaries, of any
Governmental Authority having jurisdiction over any Debtor, or any of its
Subsidiaries, or their Property, or (iv) results in or requires the creation or
imposition of any Lien (other than the Lien contemplated hereby) upon or with
respect to any of the Property now owned or hereafter acquired by any Debtor, or
any of its Subsidiaries.

 

2.1.20      Upon reasonable request to a Debtor, the Administrative Agent shall
have full and free access during normal business hours to all of the books,
correspondence and records of such Debtor relating to the Pledged Collateral,
and the Administrative Agent and its representatives may examine the same, take
extracts therefrom and make photocopies thereof, and such Debtor agrees to
render to the Administrative Agent, at such Debtor’s cost and expense, such
clerical and other assistance as may be reasonably requested by the
Administrative Agent with regard thereto.

 

2.1.21      In the event that the Administrative Agent desires to exercise any
remedies, voting or consensual rights or attorney-in-fact powers set forth in
this Agreement and determines it necessary to obtain any approvals or consents
of any Governmental Authority or any other Person therefor, then, upon the
reasonable request of the Administrative Agent, each Debtor agrees to use its
diligent best efforts to assist and aid the Administrative Agent to obtain as
soon as practicable any necessary approvals for the exercise of any such
remedies, rights and powers.

 

2.1.22      There are no voting trusts or other agreements or understandings to
which any Debtor is a party or by which it may be bound with respect to voting,
managerial consent, election or other rights of any Debtor relating to the
Pledged Securities.

 

2.1.23      No Debtor is in default in the payment of any portion of any
mandatory capital contribution, if any, required to be made under any agreement
to which such Debtor is a party relating to its Interests or Partnership
Interests, and no Debtor is in violation of any other material provisions of any
such agreement to which such Debtor is a party, or otherwise in default or
violation thereunder; no Interest or Partnership Interest is subject to any
defense, offset or counterclaim, nor have any of the foregoing been asserted or
alleged against any Debtor by any Person with respect thereto and as of the date
hereof, there are no certificates, instruments, documents or other writings
(other than the operating agreements, partnership agreements and certificates,
if any, delivered to the Administrative Agent) which evidence any Interest or
Partnership Interest of any Debtor.

 

2.1.24      No Debtor is the holder of any Commercial Tort Claim.

 

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ARTICLE III  Pledged Collateral; Registration of Pledge of Pledged Interests;
Acknowledgments; Delivery of Pledged Securities and Pledged Obligations.

 

SECTION 3.1         As collateral security for the prompt payment in full when
due (whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations owing by such Debtor, each Debtor hereby pledges and mortgages to
the Administrative Agent, for the benefit of the Secured Parties as hereinafter
provided, and grants to the Administrative Agent, for the benefit of the Secured
Parties as hereinafter provided, a security interest in, all of such Debtor’s
right, title and interest in the following property, whether now owned by such
Debtor or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as “Pledged Collateral”):

 

3.1.1        The shares of common and/or preferred stock of the Issuers
represented by the certificates identified in Annex 1A hereto under the name of
such Debtor and each other corporation hereafter acquired or formed by any
Debtor and all other shares of capital stock of whatever class of the Issuers
now or hereafter owned by such Debtor and all Equity Rights of any such Issuer
which is a first tier Foreign Subsidiary owned by any Debtor, in each case
together with the certificates evidencing the same, subject, in the case of any
Foreign Subsidiary, to the limitation that shares of capital stock of any such
Issuer which represent in excess of 65% of the combined voting power of all
classes of capital stock of such Issuer shall not be pledged and that no shares
of any Foreign Subsidiary which is not a first tier Foreign Subsidiary shall be
pledged; provided, however, that if following a change in the relevant sections
of the Code or the regulations, rules, rulings, notices or other official
pronouncements issued or promulgated thereunder which would permit a pledge of
66-2/3% or more of the total combined voting power of all classes of capital
stock of any Foreign Subsidiary entitled to vote without causing the
undistributed earnings of such Foreign Subsidiary as determined for United
States Federal income taxes to be treated as a deemed dividend to the Debtors
for United States Federal income tax purposes, then the 65% limitation set forth
above shall no longer be applicable and the Debtors shall duly pledge and
deliver to the Administrative Agent such of the capital stock not theretofore
required to be pledged hereunder (collectively, the “Pledged Stock”);

 

3.1.2        All shares, securities, moneys or Property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of capital
upon or in respect of the Pledged Stock, or resulting from a split-up, revision,
reclassification or other like change of the Pledged Stock or otherwise received
in exchange therefor, and any subscription warrants, rights or options issued to
the holders of, or otherwise in respect of, the Pledged Stock;

 

3.1.3        All Pledged Obligations identified on Annex 1B hereto under the
name of any Debtor; provided, however, if following a change in the relevant
sections of the Code or the regulations, rules, rulings, notices or other
official pronouncements issued or promulgated thereunder which would permit a
pledge of any promissory note issued by any Foreign Subsidiary without causing
the undistributed earnings of such Foreign Subsidiary as determined for United
States Federal income taxes to be treated as a deemed dividend to the Debtor for
United States Federal income tax purposes, then each Debtor shall duly pledge
and deliver to the Administrative Agent such of the Pledged Obligations of each
Foreign Subsidiary not theretofore required to be pledged hereunder;

 

3.1.4        All Interests or Partnership Interests now or hereinafter owned by
any Debtor and any limited liability company interest, partnership interest or
other ownership or equity securities or certificate (including, without
limitation, any certificate representing a distribution in

 

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connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in exchange
for Interests or Partnership Interests, or otherwise in respect thereof
(collectively, the “Pledged Interests”);

 

3.1.5        Without affecting the obligations of such Debtor under any
provision prohibiting such action hereunder or under the Credit Agreement, in
the event of any consolidation or merger in which an Issuer, LLC or Partnership
is not the surviving corporation, all shares of each class of the capital stock
of the successor corporation or interests or certificates of the successor
limited liability company or partnership owned by the Debtors (unless such
successor is such Debtor itself) formed by or resulting from such consolidation
or merger;

 

3.1.6        All Accounts;

 

3.1.7        All General Intangibles;

 

3.1.8        All Payment Intangibles;

 

3.1.9        All Supporting Obligations;

 

3.1.10      All books, records, and information relating to the Pledged
Collateral and/or to the operation of each Debtor’s business, and all rights of
access to such books, records, and information, and all property in which such
books, records, and information are stored, recorded, and maintained;

 

3.1.11      All Investment Property, Instruments, Documents, Deposit Accounts,
money, policies and certificates of insurance, deposits, impressed accounts,
compensating balances, cash, or other property.

 

3.1.12      All Chattel Paper;

 

3.1.13      All Letter-of-Credit Rights;

 

3.1.14      All Inventory;

 

3.1.15      All Equipment;

 

3.1.16      All Contracts;

 

3.1.17      All Goods;

 

3.1.18      the balance from time to time in the Collateral Account;

 

3.1.19      all Fixtures;

 

3.1.20      All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing
(3.01(a) through 3.01(s)) or otherwise;

 

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3.1.21      All liens, guaranties, rights, remedies, and privileges pertaining
to any of the foregoing (3.01(a) through 3.01(t)), including the right of
stoppage in transit; and

 

3.1.22      all other tangible and intangible personal property and fixtures of
such Debtor, including, without limitation, all Proceeds, products, accessions,
rents, profits, income, benefits, substitutions and replacements of and to any
of the property of such Debtor described in the preceding clauses of this
Section 3.01 (including, without limitation, any proceeds of insurance thereon
and all causes of action, claims and warranties now or hereafter held by any
Debtor in respect of any of the items listed above) and, to the extent related
to any property described in said clauses or such Proceeds, products and
accessions, all books, correspondence, credit files, records, invoices and other
papers, including without limitation all tapes, cards, computer runs and other
papers and documents in the possession or under the control of such Debtor or
any computer bureau or service company from time to time acting for such Debtor.

 

It is intended that the Pledged Collateral extends to and covers all assets of
each Debtor. Notwithstanding the foregoing, the Pledged Collateral does not and
shall not include any Contract, lease or license (or any property subject to any
such lease or license) to which any Debtor is a party which would be rendered
void or unenforceable by reason of its being included as part of the Pledged
Collateral or which is not assignable by its terms, or any property subject to a
purchase money security interest permitted under the Credit Agreement which
under the terms of such purchase money security interest or related
documentation may not be further encumbered or transferred, unless a consent to
the assignment has been received by such Debtor and/or the Administrative Agent;
provided that the Proceeds realized from any of the foregoing shall be deemed to
constitute Pledged Collateral.

 

SECTION 3.2         Concurrently with the execution of this Agreement and with
the creation or acquisition of any securities or interests in any Issuer, LLC or
Partnership, the securities or interests in which are required pursuant to the
terms hereof or of the Credit Agreement to be pledged hereunder, each Debtor
shall deliver to the Administrative Agent an Acknowledgment in the form of
Exhibit A hereto of each Issuer, LLC or Partnership whose securities or
interests are Pledged Securities hereunder.

 

SECTION 3.3         Each Debtor hereby delivers to the Administrative Agent all
of the certificates evidencing the Pledged Stock owned by such Debtor which is
represented by certificates, endorsed in blank or accompanied with appropriate
undated stock powers executed in blank.  If at any time any Pledged Stock which
is not represented by a certificate shall be represented by one or more
certificates, then each Debtor shall promptly deliver the same to the
Administrative Agent accompanied by stock powers duly executed in blank, with
signature properly guaranteed.  All other shares of Pledged Stock subsequently
acquired by each Debtor shall be pledged to the Administrative Agent and, if
represented by a certificate, certificates representing the same shall be
delivered to the Administrative Agent contemporaneously with the acquisition
thereof, accompanied by stock powers duly executed in blank, with signature
properly guaranteed.

 

SECTION 3.4         This Agreement constitutes an authenticated record,  and
each Debtor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Pledged Collateral, in such filing offices as the Administrative
Agent shall deem appropriate, and the Debtors shall execute and deliver to the
Administrative Agent such financing or continuation statements, and amendments
thereto, promptly upon the reasonable request of the Administrative Agent and
shall

 

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pay the Administrative Agent’s reasonable costs and expenses incurred in
connection therewith. Each Debtor hereby further authorizes the Administrative
Agent to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Pledged Collateral without the
signature of such Debtor, and each Debtor agrees that a carbon, photographic, or
other reproduction of this Agreement or of a financing statement signed by such
Debtor shall be sufficient as a financing statement and may be filed as a
financing statement in any and all jurisdictions.

 

SECTION 3.5         Each Debtor has caused the Lien of the Administrative Agent,
for the benefit of the Secured Parties, in and to the Interests and the
Partnership Interests to be registered upon the books of the issuers of such
Interests and Partnership Interests.  If at any time any Interests or
Partnership Interests shall be represented by one or more certificates or by any
documents that are instruments (as defined in the UCC), then the appropriate
Debtor shall promptly deliver the same to the Administrative Agent accompanied
by duly executed transfer powers endorsed in blank respecting such certificates
or documents, with signature properly guaranteed.

 

SECTION 3.6         Each Debtor hereby delivers to the Administrative Agent, for
the benefit of the Secured Parties, all of the promissory notes, instruments and
agreements evidencing the Pledged Obligations held by such Debtor in suitable
form for transfer by endorsement and delivery or accompanied by duly executed
instruments of transfer or assignment in blank.  If any Debtor shall become
entitled to receive, or shall receive, any promissory notes, instruments or
agreements constituting Pledged Collateral after the date hereof (including,
without limitation, any certificate representing any distribution in connection
with any recapitalization, reclassification or increase or reduction of capital,
or issued in connection with any reorganization of the obligor on any Pledged
Obligations) in respect of the Pledged Obligations, such Debtor agrees: (i) to
accept the same as the agent of the Administrative Agent, (ii) to hold the same
in trust on behalf of and for the benefit of the Administrative Agent and the
Secured Parties, and (iii) to deliver any and all promissory notes, instruments
or agreements evidencing the same to the Administrative Agent, for the benefit
of the Secured Parties, within ten (10) days following the receipt thereof by
such Debtor, in the exact form received, with the endorsement in blank of such
Debtor when necessary and with an appropriate undated instrument of transfer or
assignment duly executed in blank (with signature properly guaranteed), to be
held by the Administrative Agent, for the benefit of the Secured Parties,
subject to the terms of this Agreement, as additional Pledged Collateral.

 

SECTION 3.7         Each delivery of such Pledged Securities or Pledged
Obligations after the date hereof shall be accompanied by a schedule describing
the securities and/or indebtedness theretofore and then being pledged hereunder,
which schedule shall be attached hereto and made a part hereof.  Each schedule
so delivered shall supersede any prior schedules so delivered.

 

ARTICLE IV  Cash Proceeds of Collateral.

 

SECTION 4.1         Collateral Account.

 

4.1.1        There is hereby established with the Administrative Agent a cash
collateral account (the “Collateral Account”) in the name and under the control
of the Administrative Agent (1) into which there shall be deposited from time to
time (i) the cash proceeds (including pursuant to any Disposition thereof) of
any of the Pledged Collateral, (ii) the cash proceeds of any Taking or
Destruction or loss of title with respect to any Real Property (including
proceeds of

 

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Casualty Events and proceeds of insurance covering the Pledged Collateral or any
Real Property), and (iii) any cash in respect of any Pledged Collateral which
the Administrative Agent is entitled to pursuant to Section 5.04 hereof, and (2)
into which the Debtors may from time to time deposit any additional amounts that
any of them wishes to pledge to the Administrative Agent for the benefit of the
Secured Parties as additional collateral security hereunder and which, as
provided in Section 10 of the Credit Agreement, it is required to pledge as
additional collateral security hereunder.

 

4.1.2        The balance from time to time in the Collateral Account shall
constitute part of the Pledged Collateral hereunder and shall not constitute
payment of the Secured Obligations until applied as hereinafter provided.  So
long as no Event of Default has occurred and is continuing, the Administrative
Agent shall, subject to the further provisions hereof, remit the collected
balance outstanding to the credit of the Collateral Account to or upon the order
of the respective Debtor as such Debtor shall from time to time instruct;
provided, however, that any amounts deposited in the Collateral Account in
respect of any Casualty Events, Takings, Destructions or loss of title with
respect to Real Property shall be disbursed to the relevant Debtor in periodic
installments upon submission of reasonable evidence that such amount is to be
applied as permitted by the Mortgage, and any amounts deposited in the
Collateral Account in respect of prepayments or reductions of Loans or
Commitments under Section 2.11 of the Credit Agreement which are to be applied
to LIBOR Loans as provided in Section 2.10(b) of the Credit Agreement shall be
held by the Administrative Agent until the end of the respective Interest
Periods of such LIBOR Loans at which time, whether or not an Event of Default
has occurred, the Administrative Agent shall cause such monies to be applied to
such LIBOR Loans. However, at any time following the occurrence and during the
continuance of an Event of Default, the Administrative Agent may (and, if so
instructed by the Revolving Credit Lenders as specified in the Credit Agreement,
shall) in its (or their) sole and absolute discretion apply or cause to be
applied (subject to collection) the balance from time to time outstanding to the
credit of the Collateral Account to the payment of the Secured Obligations in
the manner specified in Section 5.09 hereof.  The balance from time to time in
the Collateral Account shall be subject to withdrawal only as provided herein.

 

SECTION 4.2         Proceeds of Accounts.  At any time after the occurrence and
during the continuance of an Event of Default, each Debtor shall, upon the
request of the Administrative Agent, instruct all Account Debtors and other
Persons obligated in respect of all Accounts to make all payments in respect of
the Accounts either (a) directly to the Administrative Agent (by instructing
that such payments be remitted to a post office box which shall be in the name
and under the control of the Administrative Agent), or (b) to one or more other
banks in the United States of America (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of the Administrative Agent) under arrangements, in form and substance
satisfactory to the Administrative Agent, pursuant to which such Debtor shall
have irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to the Administrative
Agent for deposit into the Collateral Account.  All payments made to the
Administrative Agent as provided in the preceding sentence shall be immediately
deposited in the Collateral Account.  In addition to the foregoing, each Debtor
agrees that, at any time after the occurrence and during the continuance of an
Event of Default, if the proceeds of any Pledged Collateral hereunder (including
the payments made in respect of Accounts) shall be received by it, such Debtor
shall as promptly as possible deposit such proceeds into the Collateral Account.
 Until so deposited, all such proceeds shall be held in trust by such Debtor for
and as the property of the Administrative Agent and the Secured Parties and
shall not be commingled with any other funds or property of such Debtor.

 

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SECTION 4.3         Investment of Balance in Collateral Account.  Amounts on
deposit in the Collateral Account shall be invested from time to time in such
Permitted Investments as the Borrower (or, after the occurrence and during the
continuance of an Event of Default, the Administrative Agent) shall determine,
which Permitted Investments shall be held in the name and be under the control
of the Administrative Agent; provided, however, that (i) at any time after the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if so instructed by the Revolving Credit Lenders as specified in
the Credit Agreement, shall) in its (or their) sole and absolute discretion at
any time and from time to time elect to liquidate any such Permitted Investments
and to apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof, and (ii) if
requested by the Borrower, such Permitted Investments may be held in the name
and under the control of one or more of the Revolving Credit Lenders (and, in
that connection, each Revolving Credit Lender, pursuant to Section 11.4 of the
Credit Agreement, has agreed that such Permitted Investments shall be held by
such Lender as a collateral sub-agent for the Administrative Agent hereunder).

 

SECTION 4.4         Cover for Letter of Credit Liabilities.  Amounts deposited
into the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 10 thereof shall be held by the
Administrative Agent in a separate sub-account (designated “Letter of Credit
Liabilities Sub-Account”) and all amounts held in such sub-account shall
constitute collateral security first for the Letter of Credit Liabilities
outstanding from time to time, and second as collateral security for the other
Secured Obligations hereunder, which funds shall be retained by the
Administrative Agent in the Collateral Account (as provided in this Agreement as
collateral security in the first instance for the Letter of Credit Liabilities)
until such time as all Letters of Credit shall have been terminated and all of
the Letter of Credit Liabilities paid in full.

 

ARTICLE V  Covenants; Further Assurances; Remedies.  In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Debtors
hereby jointly and severally agree with each Secured Party and the
Administrative Agent as follows:

 

SECTION 5.1         Delivery and Other Perfection.  Each Debtor shall:

 

5.1.1        if there shall be received by such Debtor any of the
above-described shares, securities or property required to be pledged by such
Debtor under clauses (a), (b), (c), (d) and (e) of Section 3.01 hereof or any
distribution of capital shall be made on or in respect of the Pledged Interests
or any Property shall be distributed upon or with respect to the Pledged
Interests pursuant to the recapitalization or reclassification of the capital of
any LLC or Partnership, or pursuant to the reorganization thereof, forthwith
either (x) transfer and deliver to the Administrative Agent such shares,
capital, Property or securities so received by such Debtor (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by the Administrative Agent, pursuant to the terms of
this Agreement, as part of the Pledged Collateral, or (y) take such other action
as the Administrative Agent shall reasonably deem necessary or appropriate to
duly record the Lien created hereunder in such shares, securities, capital or
Property in said clauses (a), (b), (c), (d) and (e) and until such time of
transfer hold such shares, securities, money, property or capital in trust for
the sole benefit of the Secured Parties, segregated from the other property of
each Debtor;

 

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5.1.2        deliver and pledge to the Administrative Agent, for the benefit of
the Secured Parties, any and all Instruments, endorsed and/or accompanied by
such instruments of assignment and transfer in such form and substance as the
Administrative Agent may request; provided, however, that so long as no Event of
Default shall have occurred and be continuing, such Debtor may retain for
collection in the ordinary course any Instruments received by such Debtor in the
ordinary course of business and the Administrative Agent shall, promptly upon
request of such Debtor, make appropriate arrangements for making any other
Instrument pledged by such Debtor available to such Debtor for purposes of
presentation, collection or renewal (any such arrangement to be effected, to the
extent deemed appropriate by the Administrative Agent, against trust receipt or
like document);

 

5.1.3        maintain the security interest created by this Agreement as a first
priority perfected security interest subject only to Prior Liens and defend such
security interest against claims and demands of all Persons whomsoever and give,
execute, deliver, file and/or record any financing statement, continuation
statement, notice, instrument, document, agreement or other papers that may be
necessary or desirable (in the reasonable judgment of the Administrative Agent)
to create, preserve, perfect or validate the security interest granted pursuant
hereto or to enable the Administrative Agent to exercise and enforce its rights
hereunder with respect to such pledge and security interest, including, without
limitation, after the occurrence and during the continuance of an Event of
Default, causing any or all of the Securities Collateral to be transferred of
record into the name of the Administrative Agent or its nominee (and the
Administrative Agent agrees that if any Securities Collateral is transferred
into its name or the name of its nominee, the Administrative Agent will
thereafter promptly give to the respective Debtor copies of any notices and
communications received by it with respect to the Securities Collateral) and if
any amount payable under or in connection with any of the Interests or
Partnership Interests shall be or become evidenced by any Instrument (including
any promissory note) or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as Pledged Collateral
pursuant to this Agreement;

 

5.1.4        keep full and accurate books and records relating to the Pledged
Collateral, and stamp or otherwise mark all such material books and records in
such manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;

 

5.1.5        furnish to the Administrative Agent upon its request, but not more
than quarterly, statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
respectively, and such other reports in connection with such Copyright
Collateral, Patent Collateral and Trademark Collateral, as the Administrative
Agent may reasonably request, all in reasonable detail;

 

5.1.6        promptly notify the Administrative Agent in writing of the details
of any Commercial Tort Claim, and take such actions as the Administrative Agent
shall request in order to grant to the Administrative Agent, for the ratable
benefit of the Secured Parties, a perfected and first priority security interest
therein and in the Proceeds thereof;

 

5.1.7        promptly upon the reasonable request of the Administrative Agent,
following receipt by the Administrative Agent of any statements, schedules or
reports pursuant to clause (e) above, modify this Agreement by amending Annexes
2, 3 and/or 4 hereto, as the case may be, to include any Copyright, Patent or
Trademark that becomes part of the Pledged Collateral under this Agreement;

 

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5.1.8        permit representatives of the Administrative Agent, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Pledged Collateral;

 

5.1.9        permit representatives of the Administrative Agent to appraise any
or all of the Pledged Collateral, at such intervals and by such appraisers as
the Administrative Agent may reasonably request;

 

5.1.10      upon the occurrence and during the continuance of any Event of
Default, permit representatives of the Administrative Agent to be present at
such Debtor’s place of business to receive copies of all communications and
remittances relating to the Pledged Collateral, and forward copies of any
notices or communications received by such Debtor with respect to the Pledged
Collateral, all in such manner as the Administrative Agent may require;

 

5.1.11      upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent, promptly notify (and such
Debtor hereby authorizes the Administrative Agent so to notify) each Account
Debtor in respect of any Accounts or Instruments that such Pledged Collateral
has been assigned to the Administrative Agent for the benefit of the Secured
Parties hereunder, and that any payments due or to become due in respect of such
Pledged Collateral are to be made directly to the Administrative Agent; and

 

5.1.12      to the extent permitted by law, pay, and save the Administrative
Agent and the Secured Parties harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other similar taxes which may be payable or determined to be payable
with respect to any of the Pledged Collateral or in connection with any of the
transactions contemplated by this Agreement.

 

SECTION 5.2         Other Financing Statements and Liens.  Without the prior
written consent of the Administrative Agent (granted with the authorization of
the Revolving Credit Lenders as specified in the Credit Agreement), no Debtor
shall file or suffer to be on file, or authorize or permit to be filed or to be
on file, in any jurisdiction, any financing statement or like instrument with
respect to the Pledged Collateral in which the Administrative Agent is not named
as the sole secured party for the benefit of the Secured Parties other than with
respect to Prior Liens and Permitted Encumbrances.

 

SECTION 5.3         Preservation of Rights.  Regardless of whether or not there
shall have occurred any Event of Default, the Administrative Agent may institute
and maintain, or cause in its name or in the name of the Debtors to be
instituted and maintained, such suits and proceedings as the Administrative
Agent may reasonably deem to be necessary or expedient to prevent any impairment
of the security interest in or perfection of the Pledged Collateral in
contravention of the terms of the Credit Documents.  Without limiting their
right to make dispositions or abandonments of Collateral to the extent permitted
by the Credit Agreement, the Debtors agree not to knowingly take or permit to be
taken any action which would impair the Pledged Collateral or the Administrative
Agent’s rights in the Pledged Collateral.  The Administrative Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Pledged Collateral.

 

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SECTION 5.4         Special Provisions Relating to Certain Collateral.

 

5.4.1        Pledged Securities and Pledged Obligations.

 

(1)           The Debtors will cause the Pledged Stock to constitute at all
times, with respect to (x) any Issuer other than a Foreign Subsidiary, all of
the shares of each class of capital stock of each such Issuer then owned by any
Debtor, and (y) any first tier Foreign Subsidiary, such amount of the shares of
capital stock of each such Issuer as will (subject to Section 3(a) hereof)
result in not less than (nor greater than) 65% of the total combined voting
power of all classes of capital stock of any such Issuer.

 

(2)           So long as no Event of Default shall have occurred and be
continuing, the Debtors shall have the right to exercise all voting, consensual,
partnership, managerial and membership rights and powers and other powers of
ownership pertaining to the Pledged Securities (collectively, the “Voting
Powers”) for all purposes not inconsistent with the terms of this Agreement, the
other Credit Documents or any other instrument or agreement referred to herein
or therein; provided, however, that each Debtor agrees that no vote shall be
cast or membership or partnership right exercised or other action taken which
materially impair the Pledged Securities (other than pursuant to a transaction
expressly permitted under the Credit Agreement) or which would be inconsistent
with or result in any violation of any provision of any of this Agreement or any
other Credit Document.  The Administrative Agent shall execute and deliver to
the Debtors, or cause to be executed and delivered to the Debtors, all such
proxies, powers of attorney, dividend and other orders, and all such
instruments, in each case without recourse or warranty, as the Debtors may
reasonably request for the purpose of enabling the Debtors to exercise the
Voting Powers that they are entitled to exercise pursuant to this Section
5.04(a)(2).  Upon the occurrence and during the continuance of an Event of
Default, at the Administrative Agent’s sole and absolute option and following
written notice from the Administrative Agent to the Debtors (such written notice
to be effective immediately upon the giving thereof as provided below), all
rights of the Debtors to exercise the Voting Powers they are entitled to
exercise pursuant to this Section 5.04(a)(2), and the obligations of the
Administrative Agent under this Section 5.04(a)(2), shall cease, and all such
Voting Powers shall thereupon become transferred to and vested in the
Administrative Agent, which shall have the sole and exclusive right and
authority to exercise such Voting Powers, including, without limitation, the
right to act by shareholder, partner, member or other interestholder consent. 
Such authorization shall constitute an irrevocable voting proxy from each Debtor
to the Administrative Agent or, at the Administrative Agent’s option, to the
Administrative Agent’s nominee.

 

(3)           Subject to Section 5.04(a)(4) below, the Debtors shall be entitled
to receive and retain any dividends or distributions on the Pledged Securities
to the extent that the payment of such dividends is permitted by the Credit
Agreement.

 

(4)           If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Administrative Agent or
any Revolving Credit Lender exercises any available right to declare any Secured

 

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Obligation due and payable or seeks or pursues any other relief or remedy
available to it under applicable law or under this Agreement, the Credit
Agreement, the Notes or any other agreement relating to such Secured Obligation,
all dividends and other distributions on the Pledged Securities shall be paid
directly to the Administrative Agent and retained by it as part of the Pledged
Collateral, subject to the terms of this Agreement, and, if the Administrative
Agent shall so request in writing, the Debtors jointly and severally agree to
execute and deliver to the Administrative Agent appropriate additional dividend,
distribution and other orders and documents to that end; provided, however, that
if such Event of Default is cured, any such dividend or distribution theretofore
paid to the Administrative Agent shall (except to the extent theretofore applied
to the Secured Obligations) promptly be returned by the Administrative Agent to
the Debtors, without interest and without recourse or warranty.

 

(5)           The Administrative Agent, on behalf of the Secured Parties, shall
have the right (in its sole and absolute discretion) to hold the Pledged
Securities in its own name as pledgee, the name of its nominee (as pledgee or as
sub-agent) or the name of the applicable Debtor, endorsed or assigned in blank
or in favor of the Administrative Agent.  The applicable Debtor will promptly
give to the Administrative Agent copies of any notices or other communications
received by it with respect to Pledged Securities registered in the name of such
Pledgor.  The Administrative Agent shall at all times have the right to exchange
the certificates representing Pledged Securities for certificates of smaller or
larger denominations for any reasonable purpose consistent with this Agreement.

 

(6)           Upon the occurrence and during the continuance of an Event of
Default, in order to fully effectuate the Administrative Agent’s Voting Powers
pertaining to the Pledged Securities, such Debtor, upon the request of the
Administrative Agent, shall secure (if not already secured by the Administrative
Agent) executed resignations of the officers, directors or representatives of
any members committee of or the officers or directors of the general partner of
each issuer whose securities constitute Pledged Securities in order that the
Administrative Agent may elect or appoint the officers, directors or
representatives of such members committee of or the officers or directors of the
general partner of such issuer.  After the occurrence and during the continuance
of any such Event of Default, this Section 5.04(a)(6) shall constitute and grant
an irrevocable proxy which shall become effective and shall entitle the
Administrative Agent, at its election, to vote the Pledged Securities upon any
and all corporate, limited liability company or partnership matters; provided,
however, that the foregoing proxy shall be construed so that, and shall be
limited to the extent necessary so that, the Administrative Agent shall not be
or become liable as a general partner or member.

 

(7)           So long as no Event of Default has occurred and be continuing, and
to the extent not prohibited by the Credit Agreement, each Debtor shall be
entitled to receive and retain principal and interest payments, if any, paid on
the Pledged Obligations.

 

(8)           Upon the occurrence and during the continuance of an Event of
Default, (i) all rights of each Debtor to receive or demand, as the case may be,

 

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principal and interest payments which such Debtor is authorized to receive or
demand pursuant to Section 5.04(a)(7) shall cease, and all such rights shall
thereupon become vested in the Administrative Agent, which shall have the sole
and exclusive right and authority to receive or demand, as the case may be, and
retain such principal and interest payments (and all other payments in respect
of the Pledged Obligations); in addition, all principal and interest payments
(and all other payments in respect of the Pledged Obligations) which are
received by any Debtor contrary to the provisions of this Section 5.07(a)(8)
shall be received in trust for the benefit of the Administrative Agent, shall be
segregated from other property or funds of such Debtor and shall be forthwith
delivered to the Administrative Agent as Pledged Collateral in the same form as
so received (with any necessary endorsement), and (ii) all rights of each Debtor
to exercise any rights and powers (including the right to receive and retain
payments on the Pledged Obligations) which it would otherwise be entitled to
exercise pursuant to Section 5.04(a)(7) shall cease, and all such rights shall
thereupon become vested in the Administrative Agent, for the benefit of the
Secured Parties, which shall have the sole and exclusive right and authority to
exercise all such rights and powers until such Event of Default shall have been
cured or waived in accordance with the Credit Agreement, at which time all such
rights shall thereupon become revested in such Debtor and amounts not applied to
Loans shall be remitted to such Debtor.  Any and all money and other Property
paid over to or received by the Administrative Agent as Pledged Collateral and
retained by the Administrative Agent pursuant to the provisions of this Section
5.04(a)(8) shall be retained by the Administrative Agent in the Collateral
Account upon receipt of money or other property and shall be applied in
accordance with the provisions of Section 5.09 hereof.  Upon the occurrence and
during the continuance of an Event of Default, each Debtor further agrees that
so long as the Pledged Obligations continue to be Pledged Collateral under this
Agreement, such Debtor will not permit any of the notes, instruments or other
agreements evidencing the Pledged Obligations to be amended, modified or changed
in any way, nor will such Obligor accept any waiver, indulgence, modification or
other departure by any obligor under such Pledged Obligations from any provision
of the Pledged Obligations, without first obtaining written consent of the
Administrative Agent.

 

(9)           Each Debtor hereby represents and warrants that it has made its
own arrangements for keeping informed of changes or potential changes affecting
the Pledged Securities and the Pledged Obligations (including, without
limitation, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights of the
Pledged Securities), and each Debtor agrees that the Administrative Agent shall
have no responsibility or liability for informing such Debtor of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto.

 

(10)         The Administrative Agent may, upon the occurrence and during the
continuation of an Event of Default, without notice and at its option, transfer
or register the Pledged Securities and the Pledged Obligations or any part
thereof, into its or its nominee’s name, or endorse any of the Pledged
Obligations for negotiation, without any indication that such Pledged Collateral
is subject to the security interest hereunder.

 

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5.4.2        Intellectual Property.

 

(1)           For the purpose of enabling the Administrative Agent, during the
continuance of an Event of Default, to exercise rights and remedies under
Section 5.05 hereof at such time as the Administrative Agent shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, each
Debtor hereby grants to the Administrative Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to such Debtor) to use, assign, license or sublicense any of
the Intellectual Property now owned or hereafter acquired by such Debtor,
wherever the same may be 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.

 

(2)           Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 9.6 of the Credit Agreement that limit the
right of the Debtors to dispose of their respective property, so long as no
Material Adverse Effect would result therefrom, the Debtors will be permitted to
exploit, use, enjoy, protect, license, sublicense, assign, abandon, sell,
dispose of or take other actions with respect to the Intellectual Property in
the ordinary course of the business of the Debtors.  In furtherance of the
foregoing, unless a Material Adverse Effect would result therefrom, the
Administrative Agent shall from time to time, upon the request of the respective
Debtor, execute and deliver any instruments, certificates or other documents, in
the form so requested, that such Debtor shall have certified are appropriate (in
its judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to Section 5.04(b)(1) as to any
specific Intellectual Property).  Further, upon the payment in full of all of
the Secured Obligations (other than contingent obligations and indemnities which
survive) and cancellation or termination of the Revolving Credit Commitments and
Letter of Credit Liabilities or earlier expiration of this Agreement or release
of the Pledged Collateral, the Administrative Agent shall grant back to the
Debtors the license granted pursuant to Section 5.04(b)(1).  The exercise of
rights and remedies under Section 5.05 hereof by the Administrative Agent shall
not terminate the rights of the holders of any licenses or sublicenses
theretofore granted by the Debtors in accordance with the first sentence of this
Section 5.04(b)(2).

 

5.4.3        Motor Vehicles.  At any time after the occurrence and during the
continuance of an Event of Default, each Debtor shall, upon the request of the
Administrative Agent, deliver to the Administrative Agent originals of the
certificates of title or ownership for the Motor Vehicles, and any other
Equipment covered by certificates of title or ownership, owned by it with the
Administrative Agent listed as lienholder.

 

SECTION 5.5         Events of Default; Remedies; Etc.  During the period during
which an Event of Default shall have occurred and be continuing:

 

5.5.1        each Debtor shall, at the request of the Administrative Agent,
assemble the Pledged Collateral owned by it at such place or places in the
contiguous United States, reasonably convenient to both the Administrative Agent
and such Debtor, designated in its request;

 

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5.5.2        the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Pledged Collateral and
may extend the time of payment, arrange for payment in installments, or
otherwise modify the terms, of any of the Pledged Collateral;

 

5.5.3        the Administrative Agent shall have all of the rights and remedies
with respect to the Pledged Collateral of a secured party under the UCC and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be asserted, including, without limitation, the right, to the maximum extent
permitted by law, to exercise all voting, consensual and other powers of
ownership  pertaining to the Pledged Collateral as if the Administrative Agent
were the sole and absolute owner thereof (and each Debtor agrees to take all
such action as may be appropriate to give effect to such right);

 

5.5.4        the Administrative Agent in its sole and absolute discretion may,
in its name or in the name of the Debtors or otherwise, demand, sue for, collect
or receive any money or property at any time payable or receivable on account of
or in exchange for any of the Pledged Collateral, but shall be under no
obligation to do so; and

 

5.5.5        the Administrative Agent may, upon ten business days’ prior written
notice to the Debtors of the time and place, with respect to the Pledged
Collateral or any part thereof that shall then be or shall thereafter come into
the possession, custody or control of the Administrative Agent, the Revolving
Credit Lenders or any of their respective agents, sell, lease, assign or
otherwise dispose of all or any part of such Pledged Collateral, at such place
or places as the Administrative Agent deems best, and for cash or for credit or
for future delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Administrative Agent or any Revolving Credit Lender or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Pledged Collateral
so disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption (statutory
or otherwise), of the Debtors, any such demand, notice and right or equity being
hereby expressly waived and released.  In the event of any sale, assignment, or
other disposition of any of the Trademark Collateral, the goodwill connected
with and symbolized by the Trademark Collateral subject to such disposition
shall be included, and the Debtors shall supply to the Administrative Agent or
its designee, for inclusion in such sale, assignment or other disposition, all
Intellectual Property relating to such Trademark Collateral.  The Administrative
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the sale may be so adjourned, subject to notice as may be required by
law.  In case any sale of all or any part of the Pledged Collateral is made on
credit or for future delivery, the Pledged Collateral so sold may be retained by
the Administrative Agent until the sale price is paid in full by the purchaser
or purchasers thereof, but the Administrative Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Collateral so sold and, in case of any such failure, such
Pledged Collateral may be sold again upon like notice.  For purposes of
redemption only, (i) a written agreement to purchase the Pledged Collateral or
any portion thereof shall be treated as a sale thereof, (ii) the Administrative
Agent shall be free to carry out such sale pursuant to such agreement, and (iii)
no Debtor shall be entitled to the return of the Pledged Collateral or

 

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any portion thereof subject thereto, notwithstanding the fact that after the
Administrative Agent shall have entered into such an agreement all Events of
Default shall have been remedied and the Obligations paid in full.  As an
alternative to exercising the power of sale herein conferred upon it, the
Administrative Agent may proceed by a suit or suits at law or in equity to
foreclose upon the Pledged Collateral and to sell the Pledged Collateral or any
portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court appointed
receiver.  Any sale pursuant to the provisions of this Section 5.05 shall be
deemed to conform to the commercially reasonable standards as provided in
Section 9-610 of the UCC or its equivalent in other jurisdictions.  If, under
mandatory requirements of applicable law, the Administrative Agent shall be
required to make disposition of the Pledged Collateral within a period of time
that does not permit the giving of notice to the Debtors as herein before
provided, the Administrative Agent need give the Debtors only such notice of
disposition as shall be reasonably practicable in view of such mandatory
requirements of law.

 

The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance
with Section 5.09 hereof.

 

The Debtors recognize that, by reason of certain prohibitions contained in the
Securities Act, and applicable state securities laws, the Administrative Agent
may be compelled, with respect to any sale of all or any part of the Pledged
Securities or Pledged Obligations, to limit purchasers to those who will agree,
among other things, to acquire such Pledged Collateral for their own account,
for investment and not with a view to the distribution or resale thereof.  The
Debtors acknowledge that any such private sales may be at prices and on terms
less favorable to the Administrative Agent and the Debtors than those obtainable
through a public sale without such restrictions, and, notwithstanding such
circumstances, agree that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Administrative Agent shall
have no obligation to engage in public sales and no obligation to delay the sale
of any Pledged Securities or Pledged Obligations for the period of time
necessary to permit the respective Issuer or issuer thereof to register it for
public sale.

 

Anything herein to the contrary notwithstanding, in any such event the
Administrative Agent, in its sole and absolute discretion, (i) may proceed to
make a private sale of the Pledged Securities notwithstanding that a
registration statement for the purpose of registering such Pledged Securities or
part thereof shall have been filed under such Securities Act, (ii) may approach
and negotiate with a single possible purchaser to effect such sale, and (iii)
may restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment, and not with a view
to the distribution or sale of such Pledged Securities or part thereof.  In the
event of any such sale, the Administrative Agent shall incur no responsibility
or liability to any Debtor for selling all or any part of the Pledged Securities
at a price which the Administrative Agent may in good faith deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might be realized if the sale were deferred until the registration
as aforesaid.

 

Each of the Debtors further agrees to use its diligent best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Securities or Pledged Obligations
pursuant to this Section 5.05 valid and binding and in compliance with any and
all other applicable Requirements of Law, but none of the Debtors shall have an
obligation to register or qualify such sale under any federal or state
securities laws.  Each of the Debtors further agrees that a breach of any of the
covenants contained in this Section 5.05

 

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will cause irreparable injury to the Administrative Agent and the Secured
Parties, that the Administrative Agent and the Secured Parties have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 5.05 shall be specifically enforceable
against such Debtor, and, to the extent permitted by law, such Debtor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred and is continuing.

 

SECTION 5.6         Deficiency.  If the proceeds of sale, collection or other
realization of or upon the Pledged Collateral pursuant to Section 5.05 hereof
are insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, the Debtors shall remain liable for
any deficiency.

 

SECTION 5.7         Removals, Name Change, Etc.  Without at least 30 days’ prior
written notice to the Administrative Agent, no Debtor shall (i) maintain any of
its books and records with respect to the Pledged Collateral at any office or
maintain its principal place of business at any place other than at the address
set forth in Schedule 2 hereto, or permit any Inventory or Equipment to be
located anywhere, other than at one of the locations identified in Annex 6
hereto or at the premises of a Person processing or storing such Inventory (if
as to any Inventory or Equipment with an aggregate fair market value in excess
of $1.0 million such Person has executed UCC Financing Statements naming such
Debtor as secured party (which financing statements are hereby assigned to the
Administrative Agent) or such Person has executed a supplier subordination
agreement satisfactory to the Majority Revolving Credit Lenders in form and
substance) or in transit from one of such locations to another, or (ii) change
its corporate name, or the name under which it does business, from the name
shown on the signature pages hereto.

 

SECTION 5.8         Private Sale.  No Secured Party shall incur liability as a
result of the sale of the Pledged Collateral, or any part thereof, at any
private sale pursuant to Section 5.05 hereof conducted in a commercially
reasonable manner.  Each Debtor hereby waives any claims against any Secured
Party arising by reason of the fact that the price at which the Pledged
Collateral may have been sold at any such private sale held in a commercially
reasonable manner was less than the price that might have been obtained at a
public sale or was less than the aggregate amount of the Secured Obligations,
even if the Administrative Agent accepts the first offer received and does not
offer the Pledged Collateral to more than one offeree.

 

SECTION 5.9         Application of Proceeds.  Except as otherwise herein
expressly provided and except as provided below in this Section 5.09, the
proceeds of any collection, sale or other realization of all or any part of the
Pledged Collateral pursuant hereto, and any other cash at the time held by the
Administrative Agent under Section 4 hereof or this Section 5, shall be applied
by the Administrative Agent:

 

First, to the payment of the reasonable costs and expenses of such collection,
sale or other realization, including out-of-pocket costs and expenses of the
Administrative Agent and the fees and expenses of its agents and counsel, and
all reasonable expenses incurred and advances made by the Administrative Agent
in connection therewith;

 

Next, to the indefeasible payment in full in cash of the Secured Obligations
(other than Swap Obligations), in accordance with the terms of the Credit
Agreement;

 

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Next, to the indefeasible payment in full in cash pro rata of the Swap
Obligations in accordance with the terms of the Swap Contracts; and

 

Finally, to the payment to the respective Debtor, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.

 

As used in this Section 5, “proceeds” of Pledged Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Pledged Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Debtors or any issuer of or obligor on
any of the Pledged Collateral.  Notwithstanding the foregoing, the proceeds of
any cash or other amounts held in the “Letter of Credit Liabilities Sub-Account”
of the Collateral Account pursuant to Section 4.04 hereof shall be applied first
to the Letter of Credit Liabilities outstanding from time to time, and second to
the other Secured Obligations in the manner provided above in this Section 5.09.

 

SECTION 5.10       Attorney-in-Fact.  Without limiting any rights or powers
granted by this Agreement to the Administrative Agent while no Event of Default
has occurred and is continuing, upon the occurrence and during the continuance
of any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of each Debtor for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, upon and during the
continuance of any Event of Default, so long as the Administrative Agent shall
be entitled under this Section 5 to make collections in respect of the Pledged
Collateral, the Administrative Agent shall have the right and power to receive,
endorse and collect all checks made payable to the order of any Debtor
representing any dividend, payment or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same. 
Each Debtor agrees, in the absence of willful wrongdoing or gross negligence,
that neither the Administrative Agent nor any of its agents, designees or
attorneys-in-fact will be liable for any acts of commission or omission, or for
any error of judgment or mistake of fact or law with respect to the exercise of
the power of attorney granted under this Section 5.10.

 

SECTION 5.11       Perfection.  Prior to or concurrently with the execution and
delivery of this Agreement and upon the acquisition or creation of any
securities of or interests in any Issuer, LLC or Partnership the securities or
interests in which are required to be pledged hereunder, (i) the Administrative
Agent is authorized to file such financing statements and other documents in
such offices as the Administrative Agent may deem appropriate to perfect the
security interests granted by Section 3 of this Agreement, (ii) deliver to the
Administrative Agent all certificates identified in Annex 1A hereto, accompanied
by undated stock powers duly executed in blank, and (iii) deliver to the
Administrative Agent all Pledged Obligations identified on Schedule 1B hereto.

 

SECTION 5.12       Termination.  When all Secured Obligations shall have been
paid in full in cash (other than surviving indemnities and other contingent
obligations) and the Revolving Credit Commitments of the Revolving Credit
Lenders under the Credit Agreement and all Letter of Credit Liabilities shall
have expired or been terminated, this Agreement shall terminate, and the
Administrative Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Pledged Collateral and money received in respect
thereof, to or on the order of the respective Debtor and

 

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to be released and canceled all licenses and rights referred to in Section
5.04(b) hereof.  The Administrative Agent shall also execute and deliver to the
respective Debtor upon such termination or upon the sale or other disposition of
Property permitted by Section 9.6 of the Credit Agreement such UCC termination
statements, certificates for terminating the Liens on the Motor Vehicles and
such other documentation as shall be reasonably requested by the respective
Debtor to effect the termination and release of the Liens on the Pledged
Collateral.

 

SECTION 5.13       Expenses.  The Debtors jointly and severally agree to pay to
the Administrative Agent (and, to the extent provided in the Credit Agreement,
each of the Secured Parties) all reasonable out-of-pocket expenses (including
reasonable expenses for legal services of every kind) of, or incident to, the
enforcement of any of the provisions of this Section 5, or performance by the
Administrative Agent or any Secured Party of any obligations of the Debtors in
respect of the Pledged Collateral which the Debtors have failed or refused to
perform, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Pledged
Collateral, and for the care of the Pledged Collateral and defending or
asserting rights and claims of the Administrative Agent or any Secured Party in
respect thereof, by litigation or otherwise, including expenses of insurance,
and all such expenses shall be Secured Obligations to the Administrative Agent
and the Secured Parties secured under Section 3 hereof.

 

SECTION 5.14       Further Assurances.  Each Debtor agrees that, from time to
time upon the written request of the Administrative Agent, such Debtor will
execute and deliver such further documents and do such other acts and things as
the Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.

 

SECTION 5.15       Irrevocable Authorization and Instruction to Issuers, LLCs
and Partnerships.  Each of the Debtors hereby authorizes and instructs each
Issuer, LLC and Partnership to comply with any instruction received by it from
the Administrative Agent in writing that (a) states that an Event of Default has
occurred and is continuing, and (b) is otherwise in accordance with the terms of
this Agreement and any other Credit Document to which it is a party, without any
other or further instructions from such Debtor, and such Debtor agrees that each
Issuer, LLC and Partnership shall be fully protected in so complying.

 

SECTION 5.16       Effect of Sale, etc.

 

5.16.1      Any sale or resales pursuant to the provisions of this Agreement,
whether under any right or power granted hereby or thereby or pursuant to any
legal proceedings, shall operate to divest, to the full extent permitted by
applicable law, each Debtor of all right, title, interest, claim and demand
whatsoever either at law or in equity, of, in and to the Pledged Collateral, or
any part thereof, so sold, and any Property so sold shall, to the full extent
permitted by applicable law, be free and clear of any and all rights of
redemption by, through or under such Debtor.  At any such sale any Revolving
Credit Lender may bid for and purchase the Pledged Collateral sold, to the full
extent permitted by applicable law, and may make payment therefor as set forth
in clause (b) of this Section 5.16, and any such Revolving Credit Lender so
purchasing any such Pledged Collateral, upon compliance with the terms of sale,
may hold, retain and dispose of such Pledged Collateral without further
accountability.

 

5.16.2      The receipt by the Administrative Agent, or by any Person authorized
under any judicial proceedings to make such sale, of the proceeds of any such
sale shall be a sufficient discharge to any purchaser of the Pledged Collateral,
or of any part thereof, sold as aforesaid; and

 

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no such purchaser shall be bound to see to the application of such proceeds, or
be bound to inquire as to the authorization, necessity or propriety of any such
sale.  In the event that, at any such sale, any Revolving Credit Lender is the
successful purchaser, it shall be entitled, for the purpose of making settlement
or payment, to use and apply such Pledged Collateral to the Secured Obligations
by crediting thereon the amount apportionable and applicable thereto out of the
net proceeds of such sale.

 

ARTICLE VI  Miscellaneous.

 

SECTION 6.1         No Waiver.  No failure on the part of the Administrative
Agent or any of its agents to exercise, and no course of dealing with respect
to, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise by the 
Administrative Agent or any of its agents of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.

 

SECTION 6.2         Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the law of the Commonwealth of Massachusetts
without regard to principles of conflicts of law thereof.

 

SECTION 6.3         Notices.  All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at its “Address for Notices” specified pursuant to Section 12.2 of the
Credit Agreement and shall be deemed to have been given at the times specified
in said Section 12.2.

 

SECTION 6.4         Waivers, Etc.  The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each Debtor
and the Administrative Agent (with the consent of the Revolving Credit Lenders
as specified in the Credit Agreement). Any such amendment or waiver shall be
binding upon each Secured Party, each holder of any of the Secured Obligations
and each Debtor.

 

SECTION 6.5         Successors and Assigns.  This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of each
Debtor, the Secured Parties and each holder of any of the Secured Obligations
(provided, however, that no Debtor shall assign or transfer its rights or
obligations hereunder without the prior written consent of the Administrative
Agent).

 

SECTION 6.6         Captions.  The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.

 

SECTION 6.7         Counterparts.  This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

 

SECTION 6.8         Agents.  The Administrative Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.

 

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SECTION 6.9         Severability.  If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible, and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.

 

SECTION 6.10       Administrative Agent Not a Member.  Nothing contained in this
Agreement shall be construed or interpreted (a) to transfer to the
Administrative Agent or any Secured Party any of the obligations of a partner of
a Partnership or a member or manager of any LLC, or (b) to constitute the
Administrative Agent or any Secured Party a partner of a Partnership or a member
or manager of any LLC.

 

SECTION 6.11       Restoration of Rights and Remedies.  If the Administrative
Agent shall have instituted any proceeding to enforce any right or remedy under
this Agreement and such proceeding shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the Administrative Agent,
then and in every such case the Administrative Agent and the Debtors and the
Secured Parties shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions under this
Agreement and under the other Credit Documents, and thereafter all rights and
remedies of the Administrative Agent shall continue as though no such proceeding
had been instituted.

 

SECTION 6.12       Cumulative Remedies.  No remedy under this Agreement is
intended to be exclusive of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given under this
Agreement or otherwise existing; nor shall the giving, taking or enforcement of
any other or additional security, collateral or guaranty for the payment or
performance of the Secured Obligations operate to prejudice, waive or affect the
security of this Agreement or any rights, powers or remedies under this
Agreement, nor shall the Administrative Agent or any Secured Party be required
to look first to, enforce or exhaust any such other or additional security,
collateral or guaranties.

 

SECTION 6.13       Waivers by Debtors.

 

6.13.1      The Debtors make each of the waivers included in Section 6.13 (b),
below, knowingly, voluntarily, and intentionally, and understand that the
Administrative Agent and each Secured Party, in establishing the facilities
contemplated by the Credit Agreement and in providing loans and other financial
accommodations to or for the account of the Borrower as provided in the Credit
Agreement, whether now or in the future, is relying on such waivers.

 

6.13.2      EACH DEBTOR WAIVES THE FOLLOWING:

 

(i)            THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN
WHICH THE ADMINISTRATIVE AGENT OR ANY SECURED PARTY IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE ADMINISTRATIVE
AGENT OR ANY SECURED PARTY OR IN WHICH THE ADMINISTRATIVE AGENT OR ANY SECURED
PARTY IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR
IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE DEBTORS OR ANY OTHER
PERSON AND THE

 

30

--------------------------------------------------------------------------------

 

ADMINISTRATIVE AGENT AND EACH SECURED PARTY LIKEWISE WAIVES THE RIGHT TO A JURY
IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).

 

(ii)           Except as otherwise provided in this Agreement, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, NOTICE OF JUDICIAL HEARING IN CONNECTION WITH THE
ADMINISTRATIVE AGENT’S TAKING POSSESSION OR THE ADMINISTRATIVE AGENT’S
DISPOSITION OF ANY OF THE PLEDGED COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY
AND ALL PRIOR NOTICES AND HEARINGS FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND
ANY SUCH RIGHT THAT THE DEBTORS WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR
ANY STATUTE OF THE UNITED STATES OR OF ANY STATE THEREOF, and, to the full
extent permitted by applicable law, each Debtor hereby further waives:

 

(A)          all damages occasioned by such taking of possession except any
damages which are the direct result of the Administrative Agent’s gross
negligence, bad faith or willful misconduct;

 

(B)           all other requirements as to the time, place and terms of sale or
other requirements, with respect to the enforcement of the Administrative
Agent’s and the Secured Parties’ rights and powers hereunder; and

 

(C)           all rights of redemption, appraisement, valuation, stay,
marshaling of assets, extension or moratorium, existing at law or in equity, by
statute or otherwise, now or hereafter in force, in order to prevent or delay
the enforcement of this Agreement or the sale or other disposition of the
Pledged Collateral or any portion thereof, and each Debtor, for itself and all
who may claim under it, insofar as it now or hereafter lawfully may, hereby
waives all such rights.

 

(iii)          Each Debtor hereby waives notice of acceptance of this Agreement
and of extensions of credit under the Credit Documents or under any other
agreement, note, document or instrument now or at any time or times hereafter
executed by such Debtor and delivered to the Administrative Agent or any Secured
Party.  Each Debtor further waives presentment and demand for payment of any of
the Secured Obligations, protest and notice of dishonor or default with respect
to any of the Secured Obligations, and all other notices to which such Debtor
might otherwise be entitled, except as otherwise expressly provided in this
Agreement or in the other Credit Documents.

 

(iv)          Each Debtor (to the extent that it may lawfully do so) covenants
that it will not at any time insist upon or plead, or in any manner claim or
take the benefit or advance of, any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now or at any time
hereafter in force that, but for this waiver, might be applicable to any sale
made under any judgment, order or decree based on this Agreement or any other
Credit Document; and each Debtor (to the extent that it may lawfully do so)
hereby expressly waives

 

31

--------------------------------------------------------------------------------

 

and relinquishes all benefit and advance of any and all such laws and hereby
covenants that it will not hinder, delay or impede the execution of any power in
this Agreement or therein granted and delegated to the Administrative Agent, but
that it will suffer and permit the execution of every such power as though no
such law or laws had been made or enacted.

 

SECTION 6.14       Additional Collateral.  Without notice or consent of any
Debtor and without impairment of the security interests and rights created by
this Agreement, the Administrative Agent may accept from any person or persons
additional collateral or other security for the Secured Obligations.  Neither
the creation of the security interests created hereunder nor the acceptance of
any such additional collateral or security shall prevent the Administrative
Agent from resorting to such additional collateral or security or to the Pledged
Collateral, in any order without affecting the Administrative Agent’s rights
hereunder.

 

SECTION 6.15       Obligations Absolute.  Subject to non-waivable provisions of
applicable law, the liability of each Debtor under this Agreement shall remain
in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by: (a) any change in
the time, place or manner of payment of all or any of the Secured Obligations,
or in any other term of the Credit Documents, the Notes, any waiver, indulgence,
renewal, extension, amendment or modification of or addition, consent or
supplement to or deletion from or any other action or inaction under or in
respect of the Notes or any other Credit Document or any assignment or transfer
thereof; (b) any lack of validity or enforceability, in whole or in part, of the
Notes or any other Credit Document; (c) any furnishing of any additional
security for the Secured Obligations or any acceptance thereof or any release or
non-perfection of any security interest in the Pledged Collateral; (d) any
limitation on any party’s liability or obligations under the Notes or any other
Credit Document; (e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to a
Debtor, or any action taken with respect to this Agreement by any trustee or
receiver, or by any court, in any such proceeding, whether or not any Debtor
shall have notice or knowledge of any of the foregoing; (f) any exchange,
release or amendment or waiver of or consent to departure from any agreement
pursuant to which a Lien is created in favor of the Administrative Agent for the
benefit of the Secured Parties, pursuant to which a person other than any Debtor
has granted a security interest; or (g) to the extent permitted by law, any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Debtor.

 

[Signature Pages Follow]

 

32

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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed and delivered as of the day and year first above written.

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and
Chief Financial Officer

 

 

 

 

 

 

 

TMI HOLDINGS, INC.

 

 

 

 

 

 

By:

 

 

Name:

Alan Oppenheimer

 

Title:

President

 

 

 

 

 

 

 

TUESDAY MORNING, INC.

 

 

 

 

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and
Chief Financial Officer

 

 

 

 

 

 

 

FRIDAY MORNING, INC.

 

 

 

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and
Treasurer

 

 

 

 

 

 

 

DAYS OF THE WEEK, INC.

 

 

 

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Secretary

 

33

--------------------------------------------------------------------------------

 

 

NIGHTS OF THE WEEK, INC.

 

 

 

 

 

 

 

By:

 

 

Name:

Alan Oppenheimer

 

Title:

President

 

 

 

 

 

 

 

TUESDAY MORNING PARTNERS, LTD.

 

 

 

 

By:

Days of the Week, Inc., its General Partner

 

 

 

 

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Secretary

 

 

 

 

 

 

 

FLEET NATIONAL BANK, as Administrative
Agent

 

 

 

 

 

 

By:

 

 

Name:

Linda H. Thomas

 

Title:

Managing Director

 

34

--------------------------------------------------------------------------------

 

 

ANNEX 1A TO

 

SECURITY AGREEMENT

 

PLEDGED STOCK

 

TUESDAY MORNING CORPORATION

 

Issuer

 

Certificate
Nos.

 

Registered
Owner

 

Number of Shares

 

 

 

 

 

 

 

 

 

TMI Holdings, Inc.

 

1

 

Tuesday Morning
Corporation

 

10

 

 

TMI HOLDINGS, INC.

 

Issuer

 

Certificate
Nos.

 

Registered
Owner

 

Number of Shares

 

 

 

 

 

 

 

 

 

Tuesday Morning Inc.

 

2

 

TMI Holdings, Inc.

 

10

 

 

TUESDAY MORNING, INC.

 

Issuer

 

Certificate
Nos.

 

Registered
Owner

 

Number of Shares

 

 

 

 

 

 

 

 

 

Friday Morning, Inc.

 

1

 

Tuesday Morning, Inc.

 

1000

 

 

 

 

 

 

 

 

 

Days of the Week, Inc.

 

1

 

Tuesday Morning, Inc.

 

100

 

 

 

 

 

 

 

 

 

Nights of the Week, Inc.

 

1

 

Tuesday Morning, Inc.

 

100

 

 

35

--------------------------------------------------------------------------------

 

PLEDGED INTERESTS

 

DAYS OF THE WEEK, INC.

 

 

 

 

 

 

 

Partnership

 

Partnership Interests

 

 

 

 

 

Tuesday Morning Partners, Ltd.

 

1.0% General Partnership Interest

 

 

NIGHTS OF THE WEEK, INC.

 

 

 

 

 

 

 

Partnership

 

Partnership Interests

 

 

 

 

 

Tuesday Morning Partners, Ltd.

 

99.0% Limited Partnership Interest

 

 

36

--------------------------------------------------------------------------------

 

 

ANNEX 1B TO

 

SECURITY AGREEMENT

 

PLEDGED OBLIGATIONS

 

TUESDAY MORNING CORPORATION:

 

 

 

 

 

 

 

 

 

 

 

 

 

Name of Obligor

 

Original
Principal
Amount

 

Date of
Note

 

Final
Maturity
Date

 

 

 

 

 

 

 

 

 

TMI Holdings, Inc.

 

$

93,000,000

 

11/01/2001

 

11/01/2011

 

 

TMI HOLDINGS, INC.:

 

 

 

 

 

 

 

 

 

 

 

 

 

Name of Obligor

 

Original
Principal
Amount

 

Date of
Note

 

Final
Maturity
Date

 

 

 

 

 

 

 

 

 

Tuesday Morning, Inc.

 

$

95,000,000

 

11/01/2001

 

11/01/2011

 

 

37

--------------------------------------------------------------------------------

 

 

ANNEX 2 TO

 

SECURITY AGREEMENT

 

COPYRIGHTS

 

None

 

38

--------------------------------------------------------------------------------

 

 

ANNEX 3 TO

 

SECURITY AGREEMENT

 

PATENTS

 

None

 

39

--------------------------------------------------------------------------------

 

 

ANNEX 4 TO

 

SECURITY AGREEMENT

 

TRADEMARKS

 

40

--------------------------------------------------------------------------------

 

 

ANNEX 5 TO

 

SECURITY AGREEMENT

 

LICENSE AND OTHER USER AGREEMENTS

 

41

--------------------------------------------------------------------------------

 

 

ANNEX 6 TO

 

SECURITY AGREEMENT

 

INVENTORY LOCATIONS

 

42

--------------------------------------------------------------------------------

 

 

SCHEDULE 1 TO

 

SECURITY AGREEMENT

 

Uniform Commercial Code Filings

 

State

 

Filing Office

 

Document Filed

 

 

43

--------------------------------------------------------------------------------

 

 

SCHEDULE 2 TO

 

SECURITY AGREEMENT

 

Principal Place of Business, Chief Executive Office and Location of Records

 

44

--------------------------------------------------------------------------------

 

 

SCHEDULE 3 TO

 

SECURITY AGREEMENT

 

Prior Liens

 

45

--------------------------------------------------------------------------------

 

 

EXHIBIT A TO

 

SECURITY AGREEMENT

 

ACKNOWLEDGMENT AND CONSENT

 

                                            (the “                 ”) hereby
acknowledges receipt of a copy of the foregoing Security Agreement (the
“Security Agreement”), and agrees to be bound thereby and to comply with the
terms thereof insofar as such terms are applicable to
it.                          agrees that the terms of paragraph 5.05 of the
Security Agreement shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it under or pursuant to or arising out of
Section 5.05 of the Security Agreement.   Capitalized terms used herein and not
defined herein shall have the meaning given to them in the Security Agreement.

 

Date:                     

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Title:

 

 

 

 

 

 

 

Address for notices:

 

46

--------------------------------------------------------------------------------

 

Exhibit E

 

[Form of Notice of Assignment]

 

NOTICE OF ASSIGNMENT

 

                            , 20      

 

Tuesday Morning Corporation
14621 Inwood Road
Dallas, Texas 75244

 

Attention: Mark E. Jarvis, Chief Financial Officer

 

Fleet National Bank
100 Federal Street
Boston, Massachusetts 02110

 

Attention:  Loan Administration

 

Re:                               Credit Agreement, dated as of September 27,
2002 (as amended, modified or supplemented, the “Credit Agreement”), among
Tuesday Morning Corporation, a Delaware corporation (“Borrower”), the Guarantors
party thereto from time to time, the Revolving Credit Lenders party thereto from
time to time, and Fleet National Bank, as Administrative Agent

 

Ladies and Gentlemen:

 

1.                                       Assignment and Assumption:

 

We hereby give notice that, effective as of the date hereof (the “Effective
Date”), [Name of Assignor] (the “Assignor”) has assigned its rights and
obligations with respect to           % (representing $              ) of the
Assignor’s outstanding Revolving Credit Commitment and Revolving Credit Loans
(such interest in such rights and obligations being hereinafter referred to as
the “Assigned Interest”) under the Credit Agreement to [Name of Assignee] (the
“Assignee”). The Assignee hereby agrees (i) to become a “Revolving Credit
Lender” pursuant to Section 12.6(b) of the Credit Agreement (if not already a
Revolving Credit Lender under the Credit Agreement) and (ii) agrees to assume
all the obligations of the Assignor thereunder with respect to the Assigned
Interest and comply with all of the provisions relating to a “Revolving Credit
Lender” under the Credit Documents.

 

--------------------------------------------------------------------------------

 

2.                                       Notice Addresses; Payment Instructions:

 

The address for notices, lending office(s) and payment instructions for the
Assignee are as follows:

 

Address for Notices:

 

 

                                                                  

 

                                                                  

 

                                                                  

 

Attention:                                

Telephone:                              

Telecopier:                              

 

Lending Office for Alternate Base Rate Loans:

 

                                                                  

 

                                                                  

 

                                                                  

 

 

Lending Office for Loans other than Alternate Base Rate Loans:

 

 

                                                                  

 

                                                                  

 

                                                                  

 

Payment Instructions:

 

 

                                                                  

 

                                                                  

 

                                                                  

 

3.                                       Representations by Assignor:

 

The Assignor represents that as of the Effective Date:

 

a.                                       The Assignor is the legal and
beneficial owner of the interest being assigned hereby free and clear of any
liens and encumbrances.

 

b.                                      The principal balance due to the
Assignor on account of the Revolving Credit Note held by the Assignor is
$                                   .

 

2

--------------------------------------------------------------------------------

 

4.                                       Exclusion of Warranties by Assignor:

 

The Assignor:

 

a.                                       Makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this any Credit Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Credit Document or any other instrument or document furnished pursuant
hereto.

 

b.                                      Makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any other Person primarily or secondarily liable in respect of any
of the Obligations, or the performance or observance by the Borrower or any
other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under any Credit Document or any other
instrument or document furnished pursuant hereto or thereto.

 

c.                                       Attaches the Revolving Credit Note of
which the Assignor is the holder and requests that the Administrative Agent
cause the Borrower’s exchange of such Note for new Revolving Credit Notes
payable to the Assignor and the Assignee reflecting the assignment referenced
above.

 

5.                                       Assignee’s Representations, Warranties
and Agreements:

 

The Assignee:

 

a.                                       Confirms that it has received a copy of
the Credit Agreement (and any amendment thereto), the most recent financial
statements then to have been delivered pursuant to the Credit Agreement, and
such other documents and information as the Assignee has deemed appropriate to
make its own credit analysis and decision to enter into this assignment and
assumption.

 

b.                                      Confirms and represents that,
independently and without reliance upon the Assignor, the Administrative Agent
or any other Revolving Credit Lender, and based on such documents and
information as the Assignee deems appropriate, has made such Person’s own credit
decision to join in the credit facility contemplated by the Credit Documents and
to become a “Revolving Credit Lender”.

 

c.                                       Confirms and represents that the
Assignee will continue to make such Person’s own credit decisions in taking or
not taking action under the Credit Agreement and other Credit Documents
independently and without reliance upon the Assignor, the Administrative Agent
or any other Revolving Credit Lender and based on such documents and information
as the Assignee shall deem appropriate at the time.

 

3

--------------------------------------------------------------------------------

 

d.                                      Appoints and authorizes the
Administrative Agent to take such action on behalf of the Assignee and to
exercise such powers under the Credit Documents as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such powers
as are reasonably incidental thereto.

 

e.                                       Agrees that the Assignee will perform,
in accordance with their terms, all of the obligations which, by the terms of
the Credit Agreement and all other Credit Documents are required to be performed
by it as a “Revolving Credit Lender” as if the Assignee had been a signatory
thereto and to any amendments thereof.

 

f.                                         Represents and warrants that it is
legally authorized to enter into this assignment and assumption and to perform
its obligations hereunder, under the Credit Agreement and under the Credit
Documents.

 

6.                                       Effect of Assignment and Assumption:

 

Following delivery, acceptance and recording by the Administrative Agent of this
assignment and assumption, from and after the Effective Date:

 

a.                                       The Assignee shall be a party to the
Credit Agreement and the other Credit Documents (and any amendments thereto) and
to the extent of the Assigned Interest, have the rights and obligations of a
Revolving Credit Lender thereunder.

 

b.                                      The Assignor shall be released from the
Assignor’s obligations under the Credit Agreement and the other Credit Documents
to the extent of the Assigned Interest.

 

c.                                       The Administrative Agent shall make all
payments in respect of the interest in the Revolving Credit Loans assigned
hereby (including payments of principal, interest, and applicable fees) to the
Assignee.

 

d.                                      The Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to the Effective Date by
the Administrative Agent or with respect to the making of this assignment and
assumption directly between themselves.

 

7.                                       Massachusetts Law:

 

This assignment and assumption shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts.

 

Please sign and return the enclosed copy of this letter to the undersigned to
indicate your receipt hereof, and your consent to or notice of (as applicable)
the above-mentioned assignment and assumption, and your agreement to the release
of the Assignor from its obligations under the Credit Agreement with respect to
the Assigned Interest. As a condition to the effectiveness of the
above-mentioned

 

4

--------------------------------------------------------------------------------

 

assignment and assumption, the Assignee hereby agrees to pay to the
Administrative Agent on the date hereof an assignment fee of $3,500.00, except
as provided in the Credit Agreement.

 

 

Very truly yours,

 

 

 

 

[NAME OF ASSIGNOR]

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

 

Title:

 

 

 

5

--------------------------------------------------------------------------------

 

ACKNOWLEDGED OR CONSENTED TO
(AS APPLICABLE):

 

FLEET NATIONAL BANK,
as Administrative Agent

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

FLEET NATIONAL BANK,
as Issuing Lender

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

TUESDAY MORNING CORPORATION,
as Borrower

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

6

--------------------------------------------------------------------------------

 

Exhibit F

 

[Form of Mortgage]

 

 

REVOLVING CREDIT DEED OF TRUST,
ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND FIXTURE FILING

 

BY

 

FRIDAY MORNING, INC.,
TUESDAY MORNING, INC. and TUESDAY MORNING PARTNERS, LTD.

 

Grantor,

 

TO

 

Thomas M. Horton,
as Trustee,
for the benefit of

 

FLEET NATIONAL BANK,
as Administrative Agent,

 

Beneficiary

 

Relating to Premises in:

 

Dallas County, Texas

 

$160,000,000.00

 

Dated as of: September 27, 2002

 

 

After recording, please return this instrument to:

 

Riemer & Braunstein LLP

 

--------------------------------------------------------------------------------

 

3 Center Plaza
Boston, Massachusetts 02108
Attention: David S. Berman, Esquire

 

i

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

Section

Heading

 

 

 

ARTICLE I

 

 

 

 

 

WARRANTIES, REPRESENTATIONS AND COVENANTS OF GRANTOR

 

 

 

 

SECTION 1.1

Payment

 

SECTION 1.2

Authority and Validity

 

SECTION 1.3

Good Title

 

SECTION 1.4

Recording Documentation To Assure Security Interest: Fees and Expenses

 

SECTION 1.5

Payment of Taxes, Insurance Premiums, Assessments; Compliance with Law and
Insurance Requirements

 

SECTION 1.6

Certain Tax Law Changes

 

SECTION 1.7

Required Insurance Policies

 

SECTION 1.8

Failure To Make Certain Payments

 

SECTION 1.9

Inspection

 

SECTION 1.10

Grantor To Maintain Improvements

 

SECTION 1.11

Grantor’s Obligations with Respect to Leases

 

SECTION 1.12

Transfer Restrictions

 

SECTION 1.13

Destruction: Condemnation

 

SECTION 1.14

Alterations

 

SECTION 1.15

Hazardous Material

 

SECTION 1.16

No Claims Against Beneficiary

 

SECTION 1.17

Utility Services

 

 

 

ARTICLE II

 

 

 

 

 

ASSIGNMENT OF LEASES: SECURITY AGREEMENT: ASSIGNMENT AGREEMENT

 

 

 

 

SECTION 2.1

Assignment of Leases, Rents, Issues and Profits

 

SECTION 2.2

Security Interest in Personal Property

 

 

 

ARTICLE III

 

 

 

 

EVENTS OF DEFAULT AND REMEDIES

 

 

 

 

SECTION 3.1

Events of Default

 

SECTION 3.2

Remedies in Case of an Event of Default

 

SECTION 3.3

Sale of Property if Event of Default Occurs; Proceeds of Sale

 

SECTION 3.4

Additional Remedies in Case of an Event of Default

 

SECTION 3.5

Legal Proceedings After an Event of Default .

 

SECTION 3.6

Remedies Not Exclusive

 

 

 

ARTICLE IV

 

 

 

 

CERTAIN DEFINITIONS

 

ii

--------------------------------------------------------------------------------

 

Section

Heading

 

ARTICLE V

 

 

 

 

MISCELLANEOUS

 

 

 

 

SECTION 5.1

Severability of Provisions

 

SECTION 5.2

Notices

 

SECTION 5.3

Covenants To Run with the Land

 

SECTION 5.4

Headings

 

SECTION 5.5

Limitation on Interest Payable

 

SECTION 5.6

Indemnity

 

SECTION 5.7

GOVERNING LAW; TERMS

 

SECTION 5.8

No Merger

 

SECTION 5.9

Modification in Writing

 

SECTION 5.11

No Credit for Payment of Taxes or Impositions

 

SECTION 5.12

Stamp and Other Taxes

 

SECTION 5.13

Estoppel Certificates

 

SECTION 5.14

Additional Security

 

SECTION 5.15

Release

 

SECTION 5.16

Certain Expenses of Beneficiary

 

SECTION 5.17

Expenses of Collection

 

SECTION 5.18

Business Days

 

SECTION 5.19

Relationship

 

SECTION 5.20

Concerning Beneficiary

 

SECTION 5.21

Future Advances

 

SECTION 5.22

Waiver of Stay

 

SECTION 5.23

Continuing Security Interest: Assignment

 

SECTION 5.24

Beneficiary’s Right To Sever Indebtedness

 

SECTION 5.25

Concerning Trustee

 

 

 

SIGNATURES

 

 

 

ACKNOWLEDGMENTS

 

 

 

SCHEDULE A LEGAL DESCRIPTION

 

 

 

SCHEDULE B PRIOR LIENS

 

iii

--------------------------------------------------------------------------------

 

REVOLVING CREDIT DEED OF TRUST,
ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND FIXTURE FILING

 

REVOLVING CREDIT DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND
FIXTURE FILING (“Deed of Trust”), dated as of September 27, 2002, made by FRIDAY
MORNING, INC., a Texas corporation, TUESDAY MORNING, INC., a Texas corporation,
and TUESDAY MORNING PARTNERS, LTD., a Texas Limited Partnership, each having an
office at 14621 Inwood Road, Dallas, Texas 75224, collectively and singly,
jointly and severally, as grantor, assignor and debtor (collectively, in such
capacities and together with any successors in such capacities, “Grantor,” as
that term is further defined below), in favor of Thomas M. Horton, as trustee,
having an office at 6500 East Mockingbird Lane, Suite 115, Dallas, Texas 75214
(together with its successors in such capacity, the “Trustee”) for the benefit
of FLEET NATIONAL BANK, having an office at 100 Federal Street, Boston,
Massachusetts 02110, as beneficiary, assignee and secured party (in such
capacities and together with any successors in such capacities, “Beneficiary”)
as Administrative Agent for the lending institutions (the “Lenders”) from time
to time party to the Credit Agreement (as hereinafter defined).

 

R E C I T A L S :

 

A.            Pursuant to a certain credit agreement, dated as of September 27,
2002 (as amended, amended and restated, supplemented, or otherwise modified from
time to time, the “Credit Agreement” capitalized terms used herein and not
defined shall have the meanings assigned to them in the Credit Agreement),
between, among others,  Grantor, the Guarantors party thereto from time to time,
the Lenders party thereto from time to time, and Fleet National Bank, as
Administrative Agent and Issuing Lender, the Lenders have agreed (i) to make to
or for the account of the Grantor a certain Revolving Credit Loan up to an
aggregate principal amount of $160,000,000.00 and (ii) to issue certain Letters
of Credit for the account of Grantor.

 

B.            It is contemplated that Grantor or one or more of its Subsidiaries
may enter into one or more Swap Contracts with one or more of the Lenders or
their respective Affiliates (all obligations of Grantor now existing or
hereafter arising under such Swap Contracts with any Lender or any Affiliate of
a Lender, collectively, the “Swap Obligations”).

 

C.            Grantor is the owner of the Property (as hereinafter defined).

 

D.            It is a condition to the obligations of the Lenders to make the
Loans under the Credit Agreement and a condition to the Issuing Lender issuing
Letters of Credit under the Credit Agreement or entering into the Swap Contracts
that Grantor execute and deliver the applicable Credit Documents, including this
Deed of Trust.

 

E.             This Deed of Trust is given by Grantor in favor of Beneficiary
for its benefit, the benefit of its Affiliates, and the benefit of the Lenders
(and any Affiliate of any Lender with respect to Swap Obligations)
(collectively, the “Secured Parties”) to secure the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic

 

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stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), of (i)
all Obligations of Grantor or any Subsidiary of Grantor now existing or
hereafter arising under or in respect of the Credit Agreement, all Swap
Obligations of Grantor now existing or hereafter arising under or in respect of
any Swap Contract (including, without limitation, Grantor’s obligation to pay
principal, interest and all other charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the Obligations contained in the Credit Agreement and the obligations
contained in any Swap Contract), any and all direct or indirect liabilities,
debts and obligations of Grantor to the Beneficiary or any Affiliate of the
Beneficiary, each of every kind, nature, and description owing on account of any
service or accommodation provided to, or for the account of Grantor pursuant to
any Credit Document, including cash management services, treasury services and
automated clearinghouse transfers, and (ii) without duplication of the amounts
described in clause (i), all Obligations of Grantor now existing or hereafter
arising under or in respect of this Deed of Trust or any other Security
Document, including, without limitation, with respect to all charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other payments
related to or in respect of the Obligations contained in this Deed of Trust or
in any other Security Document, in each case whether in the regular course of
business or otherwise (the obligations described in clauses (i) and (ii),
collectively, the “Secured Obligations”)

 

G R A N T I N G  C L A U S E S :

 

For and in consideration of the sum of Ten Dollars ($10.00) and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Grantor, subject to the terms of this Deed of Trust, hereby grants, mortgages,
bargains, sells, assigns and conveys unto Trustee, in trust, with powers of
sale, and hereby creates for the benefit of Beneficiary, a security interest in
and upon, all Grantor’s right, title and interest in, to and under the following
property, whether now owned or held or hereafter acquired from time to time
(collectively, the “Property”):

 

A.            Any and all present estates or interest of Grantor in the land
described in Schedule A, together with all Grantor’s reversionary rights in and
to any and all easements, rights-of-way, sidewalks, strips and gores of land,
drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer
rights, waters, water courses, water rights, and all power, air, light and other
rights, estates, titles, interests, privileges, liberties, servitudes, licenses,
tenements, hereditaments and appurtenances whatsoever, in any way belonging,
relating or appertaining thereto, or any part thereof, or which hereafter shall
in any way belong, relate or be appurtenant thereto (collectively, the “Land”);

 

B.            Any and all estates or interests of Grantor in the buildings,
structures and other improvements and any and all Alterations (as hereinafter
defined) now or hereafter located or erected on the Land, including, without
limitation, attachments, walks and ways (collectively, the “Improvements”
together with the Land, the “Premises”);

 

C.            Any and all interests of Grantor in all permits, certificates,
approvals and authorizations, however characterized, issued or in any way
furnished in connection with the operation or maintenance of the Premises,
whether necessary or not for the operation and use of the Premises, including,
without limitation, building permits, certificates of occupancy, environmental
certificates, industrial permits or licenses and certificates of operation,
excluding, however, any of the foregoing which may not be mortgaged or pledged
as collateral security under the provisions of any applicable law, rule or
regulation of any applicable Governmental Authority;

 

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D.            Any and all interest of Grantor in all machinery, apparatus,
equipment, fittings, fixtures, improvements and articles of personal property of
every kind and nature whatsoever now or hereafter attached or affixed to the
Premises or used in connection with the use and enjoyment of the Premises or the
maintenance or operation thereof, including, without limitation, all utility
systems, fire sprinkler and alarm systems, HVAC equipment, boilers, electronic
data processing, telecommunications or computer equipment, refrigeration,
electronic monitoring, water or lighting systems, power, sanitation, waste
removal, elevators, maintenance or other systems or equipment, and all other
articles used or useful in connection with the maintenance or operation of any
part of the Premises (collectively, the “Equipment”);

 

E.             All Grantor’s right, title and interest as landlord, franchisor,
licensor or grantor, in all leases and sub-leases of space, franchise
agreements, licenses, occupancy or concession agreements now existing or
hereafter entered into relating in any manner to the Premises or the Equipment
and any and all amendments, modifications, supplements and renewals of any
thereof (each such lease, license or agreement, together with any such
amendment, modification, supplement or renewal, a “Lease”), whether now in
effect or hereafter coming into effect, including, without limitation, all
rents, additional rents, cash, guaranties, letters of credit, bonds, sureties or
securities deposited thereunder to secure performance of the lessee’s,
franchisee’s, licensee’s or obligee’s obligations thereunder, revenues,
earnings, profits and income, advance rental payments, payments incident to
assignment, sublease or surrender of a Lease, claims for forfeited deposits and
claims for damages, now due or hereafter to become due, with respect to any
Lease, any indemnification against, or reimbursement for, sums paid and costs
and expenses incurred by Grantor under any Lease or otherwise, and any award in
the event of the bankruptcy of any tenant under or guarantor of a Lease
(collectively, the “Rents”);

 

F.             All general intangibles and contract rights relating to the
Premises and the Equipment and all reserves, deferred payments, deposits,
refunds and claims of every kind or character relating thereto (collectively,
the “Contract Rights”) ;

 

G.            All drawings, plans, specifications, file materials, operating and
maintenance records, catalogues, tenant lists, correspondence, advertising
materials, operating manuals, warranties, guaranties, appraisals, studies and
data relating to the Premises or the Equipment or the construction of any
Alteration or the maintenance of any Permit (as hereinafter defined); and

 

H.            All proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation or other awards or payments and refunds
of real estate taxes and assessments, including interest thereon (collectively,
“Proceeds”);

 

TO HAVE AND TO HOLD the Property together with the rights, privileges and
appurtenances thereto belonging unto (i) Trustee, its substitutes or successors,
forever, to the extent the same constitutes real property or an interest
therein, and (ii) Beneficiary, to the extent the same does not constitute real
property or an interest therein, in either case for the benefit of Beneficiary
and Beneficiary’s successors and assigns forever, for the purpose of securing
payment and performance by Grantor of the Secured Obligations, and Grantor
hereby binds itself and its successors and assigns to warrant and forever defend
the Property unto each of Trustee and Beneficiary, their substitutes, successors
and assigns, as the case may be, against the claim or claims of all persons
claiming or to claim the same or any part thereof.

 

This Deed of Trust is intended to constitute: (i) a security agreement, fixture
filing and financing statement under the UCC, (ii) a deed of trust under the
Texas Property Code, as amended, and (iii) a notice of assignment of rents or
profits under the Texas Property Code, as amended.  This Deed of Trust is also
intended to operate and be construed as an absolute present

 

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assignment of the rents, issues and profits of the Property, Grantor hereby
agreeing that Beneficiary is entitled to receive the rents, issues and profits
of the Property prior to an Event of Default and without entering upon or taking
possession of the Property.  Some of the items included within the Property are
or are to become “fixtures” (as that term is defined in the UCC) on the Land
and, as provided under the UCC, this Deed of Trust, upon being filed for record
in the real property records of Dallas County, Texas, shall operate also as a
“fixture filing” and financing statement upon such of the items which are or may
become fixtures.

 

C O V E N A N T S :

 

Grantor warrants, represents and covenants to and for the benefit of Beneficiary
as follows:

 

ARTICLE I

 

WARRANTIES, REPRESENTATIONS AND COVENANTS OF GRANTOR

 

SECTION 1.1         Payment. Grantor shall pay as and when the same shall become
due, whether at its stated maturity, by acceleration or otherwise, each and
every amount payable by Grantor under the Credit Documents and the Swap
Contracts.

 

SECTION 1.2         Authority and Validity. Grantor represents, warrants and
covenants that (i) Grantor is duly authorized to execute and deliver this Deed
of Trust, and all corporate and governmental consents, authorizations and
approvals necessary or required therefor have been duly and effectively taken or
obtained, (ii) this Deed of Trust is a legal, valid, binding and enforceable
obligation of Grantor, and (iii) Grantor has full corporate power and lawful
authority to execute and deliver this Deed of Trust and to deed of trust and
grant a security interest in the Property as contemplated herein.

 

SECTION 1.3         Good Title.

 

1.3.1        Grantor represents, warrants and covenants that (i) Grantor has
good and marketable fee simple title to the Premises and the landlord’s interest
and estate under or in respect of the Leases and good title to the interest it
purports to own in and to each of the Permits, the Equipment and the Contract
Rights, in each case subject to no deed of trust, mortgage, pledge, security
interest, encumbrance, lien, lease, license, easement, assignment, collateral
assignment or charge of any kind, including, without limitation, any conditional
sale or other title retention agreement or lease in the nature thereof, any
filing or agreement to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute or any subordination arrangement in favor
of any party other than Grantor (collectively, “Liens”; each, a “Lien”), except
for those Liens identified on Schedule B (collectively, the “Prior Liens”), (ii)
Grantor will keep in effect all rights and appurtenances to or that constitute a
part of the Property, (iii) Grantor will protect, preserve and defend its
interest in the Property and title thereto, (iv) subject to Section 1.5.5,
Grantor will comply with each of the terms, conditions and provisions of any
obligation of Grantor which is secured by the Property or the noncompliance with
which may result in the imposition of a Lien on the Property, (v) Grantor will
appear and defend the Lien and security interests created and evidenced hereby
and the validity and priority of this Deed of Trust in any action or proceeding
affecting or purporting to affect the Property or any of the rights of
Beneficiary hereunder, (vi) this Deed of Trust creates and constitutes a valid
and enforceable Lien on the Property, and, to the extent any of the Property
shall consist of personalty, a security interest in the Property, which Lien and
security interest are and will be subject only to (a) Prior Liens (but not to
extensions, amendments, supplements or replacements of Prior Liens unless
consented to by Beneficiary) and (b) Liens hereafter created and which,

 

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pursuant to the provisions of Section 1.12, are superior to the Lien and
security interests created and evidenced hereby, and Grantor does now and will
forever warrant and defend to Beneficiary and all its successors and assigns
such title and the validity and priority of the Lien and security interests
created and evidenced hereby against the claims of all persons and parties
whomsoever, (vii) there has been issued and there remain in effect each and
every certificate of occupancy or use or other Permit currently required for the
existing use and occupancy by Grantor and, to the best of Grantor’s knowledge,
its tenants of the Premises, in each case other than Permits the absence of
which would not result in a material impairment of the occupancy or use rights
with respect thereto and (viii) the Premises comply in all material respects
with all local zoning, land use, set back or other development and use
requirements of Governmental Authorities.

 

1.3.2        Grantor, as soon as practicable but in no event more than two (2)
Business Days after obtaining knowledge of the pendency of any proceedings for
the eviction of Grantor from the Property or any part thereof by paramount title
or otherwise questioning Grantor’s title to the Property as warranted in this
Deed of Trust, or of any condition that might reasonably be expected to give
rise to any such proceedings, shall notify Beneficiary thereof. Beneficiary may
participate in such proceedings, and Grantor will deliver or cause to be
delivered to Beneficiary all instruments requested by Beneficiary to permit such
participation. In any such proceedings Beneficiary may be represented by counsel
satisfactory to Beneficiary at the expense of Grantor. If, upon the resolution
of such proceedings, Grantor shall suffer a loss of the Property or any part
thereof or interest therein and title insurance proceeds shall be payable in
connection therewith, such proceeds are hereby assigned to and shall be, at the
option of the Beneficiary, (i) held by Beneficiary as additional collateral to
secure the performance by Grantor or the Secured Obligations and (ii) applied as
an optional prepayment under Section 2.10 of the Credit Agreement.

 

SECTION 1.4         Recording Documentation To Assure Security Interest: Fees
and Expenses.

 

1.4.1        Grantor shall, forthwith after the execution and delivery of this
Deed of Trust and thereafter, from time to time, cause this Deed of Trust and
any financing statement, continuation statement or similar instrument relating
thereto or to any property intended to be subject to the Lien of this Deed of
Trust to be filed, registered and recorded in such manner and in such places as
may be required by any present or future law in order to publish notice of and
fully to protect the validity and priority thereof or the Lien hereof purported
to be created upon the Property and the interest and rights of Beneficiary
therein. Grantor shall pay or cause to be paid all taxes and fees incident to
such filing, registration and recording, and all expenses incident to the
preparation, execution and acknowledgment thereof, and of any instrument of
further assurance required by Trustee or Beneficiary, and all Federal or state
stamp taxes or other taxes, duties and charges arising out of or in connection
with the execution and delivery of such instruments.

 

1.4.2        Grantor shall, at the sole cost and expense of Grantor, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, deeds of trust, assignments, notices of assignment, transfers,
financing statements, continuation statements and assurances as Trustee or
Beneficiary shall from time to time request, which may be necessary in the
reasonable judgment of the requesting party from time to time to assure,
perfect, convey, assign, mortgage, transfer and confirm unto Beneficiary, the
property and rights hereby conveyed or assigned or which Grantor may be or may
hereafter become bound to convey or assign to Beneficiary or for carrying out
the intention or facilitating the performance of the terms of this Deed of Trust
or the filing, registering or recording of this Deed of Trust. In the event
Grantor shall fail after demand to execute any instrument required to be
executed by Grantor under this subsection 1.4.2, Beneficiary may execute the
same as the attorney-in-fact for Grantor, such power of attorney being coupled
with an interest and irrevocable.

 

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SECTION 1.5         Payment of Taxes, Insurance Premiums, Assessments;
Compliance with Law and Insurance Requirements.

 

1.5.1        Unless and to the extent contested by Grantor in accordance with
the provisions of subsection 1.5.5 hereof, Grantor shall pay and discharge, or
cause to be paid and discharged, from time to time when the same shall become
due, all real estate and other taxes, special assessments, levies, permits,
inspection and license fees, all premiums for insurance, all water and sewer
rents and charges and all other public charges imposed upon or assessed against
the Property or any part thereof or upon the Rents. Grantor shall, upon
Beneficiary’s request, deliver to Beneficiary, receipts evidencing the payment
of all such taxes, assessments, levies, fees, rents and other public charges
imposed upon or assessed against the Property or any part thereof or the Rents.

 

1.5.2        From and after the occurrence and during the continuance of an
Event of Default (as hereinafter defined), at the option and upon the request of
Beneficiary, Grantor shall deposit with Beneficiary, on the first day of each
month, an amount estimated by Beneficiary to be equal to one-twelfth of the
annual taxes, assessments and other items required to be discharged by Grantor
under subsection 1.5.1. Such amounts shall be held by Beneficiary without
interest to Grantor and applied to the payment of the obligations in respect of
which such amounts were deposited, in such priority as Beneficiary shall
reasonably determine, on or before the respective dates on which such
obligations or any part thereof would become delinquent. Nothing contained in
this Section 1.5 shall (i) affect any right or remedy of Trustee or Beneficiary
under any provision of this Deed of Trust or of any statute or rule of law to
pay any such amount as provided above from its own funds and to add the amount
so paid, together with interest at a rate per annum (the “Default Rate”) equal
to the highest rate then payable under the Credit Agreement during such time
that any amount remains outstanding, to the Secured Obligations or (ii) relieve
Grantor of its obligations to make or provide for the payment of the annual
taxes, assessments and other charges required to be discharged by Grantor under
subsection 1.5.1. Grantor hereby grants to Beneficiary a security interest in
all sums held pursuant to this subsection 1.5.2 to secure payment and
performance of the Secured Obligations. During the continuance of any Event of
Default, Beneficiary may, at its option, apply all or any part of the sums held
pursuant to this subsection 1.5.2 to payment and performance of the Secured
Obligations. Grantor shall redeposit with Beneficiary an amount equal to all
amounts so applied as a condition to the cure, if any, of such Event of Default
in addition to fulfillment of any other required conditions.

 

1.5.3        Unless and to the extent contested by Grantor in accordance with
the provisions of subsection 1.5.5, Grantor shall timely pay, or cause to be
paid, all lawful claims and demands of mechanics, materialmen, laborers,
government agencies administering worker’s compensation insurance, old age
pensions and social security benefits, and all other claims, judgments, demands
or amounts of any nature which, if unpaid, might result in, or permit the
creation of, a Lien on the Property or any part thereof, or on the Rents or
which might result in forfeiture of all or any part of the Property.

 

1.5.4        Grantor shall maintain, or cause to be maintained, in full force
and effect all permits, certificates, authorizations, consents, approvals,
licenses, franchises or other instruments now or hereafter required by any
Governmental Authority to operate or use and occupy the Premises and the
Equipment for its intended uses (collectively, “Permits”; each, a “Permit”)
other than Permits the absence of which would not result in a material
impairment of the occupancy or use rights with respect thereto. Unless and to
the extent contested by Grantor in accordance with the provisions of subsection
1.5.5 hereof, Grantor shall comply with all requirements set forth in the
Permits and all requirements of any law, ordinance, rule, regulation or

 

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similar statute or case law (collectively, “Requirements of Law”) of any
Governmental Authority applicable to all or any part of the Property or the
condition, use or occupancy of all or any part thereof or any recorded deed of
restriction, declaration, covenant running with the land or otherwise, now or
hereafter in force other than noncompliance which would not result in a material
impairment of the condition, use or occupancy thereof. Grantor shall not
initiate, join in, or consent to any material change in the zoning or any other
permitted use classification of the Premises without the prior written consent
of Beneficiary, which consent shall not be unreasonably withheld or delayed.

 

1.5.5        Grantor may, at its own expense, contest the amount or
applicability of any of the obligations described in subsections 1.5.1, 1.5.3 or
1.5.4 by appropriate legal proceedings, prosecution of which operates to prevent
the collection or enforcement thereof and the sale or forfeiture of the Property
or any part thereof to satisfy such obligations; provided, however, that in
connection with such contest, Grantor shall, at the option of Beneficiary, have
made provision for the payment or performance of such contested obligation on
Grantor’s books if and to the extent required by GAAP or deposited with
Beneficiary to hold for the benefit of Grantor a sum sufficient to pay and
discharge such obligation and Beneficiary’s estimate of all interest and
penalties related thereto. Any such deposit (and any income earned thereon) not
otherwise used to pay such obligation, interest or penalties shall be promptly
returned to Grantor.  Notwithstanding the foregoing provisions of this
subsection 1.5.5, (i) no contest of any such obligations may be pursued by
Grantor if such contest would expose Trustee, Beneficiary or any Lender to any
possible criminal liability or, unless Grantor shall have furnished a bond or
other security therefor satisfactory to Beneficiary or such Lender, as the case
may be, any additional civil liability for failure to comply with such
obligations and (ii) if at any time payment or performance of any obligation
contested by Grantor pursuant to this subsection 1.5.5 shall become necessary to
prevent the delivery of a tax or similar deed conveying the Property or any
portion thereof because of nonpayment or nonperformance, Grantor shall pay or
perform the same, in sufficient time to prevent the delivery of such tax or
similar deed or such termination or forfeiture.

 

1.5.6        Grantor shall not take any action that could be the basis for
termination, revocation or denial of any insurance coverage required to be
maintained under this Deed of Trust or that could be the basis for a defense to
any claim under any insurance policy maintained in respect of the Premises or
the Equipment, and Grantor shall otherwise comply in all respects with the
requirements of any insurer that issues a policy of insurance in respect of the
Premises or the Equipment; provided, however, that Grantor may, at its own
expense and after notice to Beneficiary, (i) contest the applicability or
enforceability of any such requirements by appropriate legal proceedings,
prosecution of which does not constitute a basis for cancellation or revocation
of any insurance coverage required under Section 1.7 hereof or (ii) cause the
insurance policy containing any such requirement to be replaced by a new policy
complying with the provisions of Section 1.7.

 

1.5.7        Grantor shall, promptly upon receipt of any written notice
regarding any failure by Grantor to pay or discharge any of the obligations
described in subsection 1.5.1, 1.5.3, 1.5.4 or 1.5.6, furnish a copy of such
notice to Beneficiary.

 

1.5.8        In the event that the proceeds of any tax claim are paid after
Beneficiary has exercised its right to foreclose the Lien of this Deed of Trust,
such proceeds shall be paid to Beneficiary to satisfy any deficiency remaining
after such foreclosure. Beneficiary shall retain its interest in the proceeds of
any tax claim during any redemption period. The amount of any such proceeds in
excess of any deficiency claim of Beneficiary shall reasonably promptly be
released to Grantor.

 

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SECTION 1.6         Certain Tax Law Changes. In the event of the passage after
the date of this Deed of Trust of any law deducting from the value of real
property, for the purpose of taxation, amounts in respect of any Lien thereon or
changing in any way the laws for the taxation of deeds of trust or debts secured
by deeds of trust for state or local purposes or the manner of the collection of
any such taxes, and imposing a tax, either directly or indirectly, on this Deed
of Trust, any Swap Contract or any other Credit Document, Grantor shall promptly
pay to Beneficiary such amount or amounts as may be necessary from time to time
to pay such tax.

 

SECTION 1.7         Required Insurance Policies.

 

1.7.1                        Grantor shall maintain in respect of the Premises
and the Equipment the following insurance coverages or such other coverages as
may be acceptable to Beneficiary pursuant to Section 9.4 of the Credit Agreement
(it being understood that the insurance coverages in existence as of the Closing
Date are acceptable to Beneficiary):

 

(i)            Physical hazard insurance on an “all risk” basis covering,
without limitation, hazards commonly covered by fire and extended coverage,
lightning, windstorm, civil commotion, hail, riot, strike, water damage,
sprinkler leakage, collapse and malicious mischief, in an amount equal to the
full replacement cost of the Improvements and all Equipment, with such
deductibles as Beneficiary may from time to time may reasonably require, and, if
Beneficiary shall not have imposed any such requirements, with such deductibles
as would be maintained by a prudent operator of property similar in use and
configuration to the Premises and located in the locality where the Premises are
located. “Full replacement cost” means the Cost of Construction (as hereinafter
defined) to replace the Improvements and the Equipment, exclusive of
depreciation, excavation, foundation and footings, as determined from time to
time (but not less frequently than once every twelve (12) months) by a Person
selected by Grantor and reasonably acceptable to Beneficiary;

 

(ii)           Comprehensive general liability insurance against claims for
bodily injury, death or property damage occurring on, in or about the Premises
and any adjoining streets, sidewalks and passageways, and covering any and all
claims, including, without limitation, all legal liability to the extent
insurable imposed upon Beneficiary and all court costs and attorneys’ fees,
arising out of or connected with the possession, use, leasing, operation or
condition of the Premises with policy limits and deductibles in such amounts as
Beneficiary may from time to time reasonably require, and, if Beneficiary shall
not have imposed such requirements, in such amounts as from time to time would
be maintained by a prudent operator of property similar in use and configuration
to the Premises and located in the locality where the Premises are located;

 

(iii)          Worker’s compensation insurance as required by the laws of the
state where the Premises are located to protect Grantor and Beneficiary against
claims for injuries sustained in the course of employment at the Premises;

 

(iv)          Explosion insurance in respect of any boilers and similar
apparatus located on the Premises or comprising any Equipment, with policy
limits and deductibles in such amounts as Beneficiary may from time to time
reasonably require, and, if Beneficiary shall not have imposed any such
requirements, in such amounts as would be maintained by a prudent operator of
property similar in use and configuration to the Premises and the Equipment and
located in the locality where the Premises and Equipment are located; and

 

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(v)           If the Premises are located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards pursuant to
the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, each as amended, pursuant to the National Flood Insurance Reform Act of
1994 or otherwise, or any successor laws, flood insurance with policy limits and
deductibles in such amounts as Beneficiary may from time to time reasonably
require, and, if Beneficiary shall not have imposed any such requirements, in
such amounts as would be maintained by a prudent operator of property similar in
use and configuration to the Premises and located in the locality where the
Premises are located.

 

1.7.2        All insurance policies required by this Section 1.7 shall be in
form reasonably satisfactory to Beneficiary. All insurance policies in respect
of the coverages required by subsections 1.7.1(i), 1.7.1(iv) and, if applicable,
1.7.1(v), shall be in amounts at least sufficient to prevent coinsurance
liability, and all losses thereunder shall be payable to Beneficiary, as loss
payee, pursuant to a standard non-contributory mortgagee endorsement. All
insurance policies in respect of the coverages required by subsections 1.7.1(u)
and, if applicable, 1.7.1(vii) shall name Beneficiary as an additional insured.
Each policy of insurance required under this Section 1.7 shall provide that it
may not be modified, reduced, cancelled or otherwise terminated without at least
thirty (30) days’ prior written notice to Beneficiary and shall permit
Beneficiary to pay any premium therefor within thirty (30) days after receipt of
any notice stating that such premium has not been paid when due. All insurance
policies required hereunder shall provide that all losses thereunder shall be
payable notwithstanding any act or negligence of Grantor or its agents or
employees which otherwise might have resulted in a forfeiture of all or a part
of such insurance payments. The policy or policies of such insurance or
certificates of insurance evidencing the required coverages, and all renewals or
extensions thereof, shall be delivered to Beneficiary. Settlement of any claim
under any of the insurance policies referred to in this Section 1.7, if such
claim involves (in the reasonable judgment of Beneficiary) loss in excess of
$250,000 or more, shall require the prior written approval of Beneficiary, and
Grantor shall use reasonable efforts to cause each such policy to contain a
provision to such effect.

 

1.7.3        At least ten (10) days prior to the expiration of any insurance
policy required by this Section 1.7, a policy or policies renewing or extending
such expiring policy or renewal or extension certificates or other reasonable
evidence of renewal or extension and that the applicable policies are in full
force and effect shall be delivered to Beneficiary.

 

1.7.4        Grantor shall not purchase separate insurance policies concurrent
in form or contributing in the event of loss with those policies required to be
maintained under this Section 1.7, unless Beneficiary is included thereon as a
named insured and, if applicable, with loss payable to Beneficiary under an
endorsement containing the provisions described in subsection 1.7.2. Grantor
shall promptly notify Beneficiary whenever any such separate insurance policy is
obtained and shall promptly deliver to Beneficiary the policy or certificate
evidencing such insurance.

 

1.7.5        Grantor shall, as soon as practicable but in no event more than two
(2) Business Days after receipt of any written notice of any failure by Grantor
to pay any insurance premium in respect of any insurance policy required to be
maintained under this Section 1.7, furnish a copy of such notice to Beneficiary.

 

1.7.6        In the event that the proceeds of any insurance claim are paid
after Beneficiary has exercised its right to foreclose the Lien of this Deed of
Trust, such proceeds shall be paid to Beneficiary to satisfy any deficiency
remaining after such foreclosure. Beneficiary shall retain its interest in the
policies of insurance required to be maintained pursuant to this Deed of Trust
during any redemption period.

 

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SECTION 1.8         Failure To Make Certain Payments. If Grantor shall fail to
perform any of the covenants contained in this Deed of Trust, including, without
limitation, Grantor’s covenants to (i) pay the premiums in respect of all
required insurance coverages, (ii) pay taxes and assessments, (iii) make
repairs, (iv) discharge liens and encumbrances, or (v) pay or perform any
obligations of Grantor under the Leases, Beneficiary may, but shall not be
obligated to, make advances to perform such covenant on Grantor’s behalf, and
all sums so advanced shall be included in the Secured Obligations and, to the
extent permitted by applicable law, shall be secured hereby. Grantor shall repay
on demand all sums so advanced by Beneficiary on behalf of Grantor, with
interest at the Default Rate from the date of payment by Beneficiary to the date
of reimbursement. Neither the provisions of this Section 1.8 nor any action
taken by Beneficiary pursuant to the provisions of this Section 1.8 shall
prevent any such failure to observe any covenant contained in this Deed of Trust
from constituting an Event of Default. Beneficiary shall not be bound to inquire
into the validity of any tax, lien or imposition which Grantor fails to pay as
and when required hereby and which Grantor does not contest in accordance with
the terms hereof.

 

SECTION 1.9         Inspection. Grantor shall permit Beneficiary, by its agents,
accountants and attorneys, to visit and inspect the Premises during normal
business hours at such reasonable times as may be requested by Beneficiary. 
Pursuant to Section 9.3(vi) of the Credit Agreement, Grantor shall permit
representatives of the Beneficiary to appraise any or all of the Property, at
such intervals and by such appraisers as the Beneficiary may reasonably request

 

SECTION 1.10       Grantor To Maintain Improvements. If Grantor shall not commit
or suffer any waste on the Premises or with respect to any Equipment or make any
change in the use of the Premises or any Equipment. Grantor represents and
warrants that (i) the Premises are served by all utilities required or necessary
for the current use thereof, (ii) all streets necessary to serve the Premises
are completed and serviceable and have been dedicated and accepted as such by
the appropriate Governmental Authorities, and (iii) Grantor has access to the
Premises from public roads sufficient to allow Grantor and its tenants and
invitees to conduct its and their businesses at the Premises in accordance with
sound commercial practices. Grantor shall, at all times, maintain the Premises
and Equipment in reasonably good, safe and insurable operating order, condition
and repair and shall make all material repairs, structural or nonstructural,
when necessary.  Any alteration of the occupancy or use of all or any part of
the Premises which results in any cost in excess of $2,000,000.00 shall require
the prior written consent of the Beneficiary. Grantor shall do all other acts
which from the character or use of the Premises and Equipment may be necessary
or appropriate to maintain and preserve their value. Grantor shall not remove,
demolish or alter the design or structural character of any material Improvement
now or hereafter erected upon all or any part of the Premises, or permit any
such removal, demolition or alteration, without the prior written consent of
Beneficiary, except that items constituting Equipment may be removed if such
removal is temporary and for the purpose of making repairs or such items are
immediately replaced with similar items of Equipment having a value and utility
for their intended purposes that is approximately equal to or more than the
value and such utility of the Equipment so removed.

 

SECTION 1.11       Grantor’s Obligations with Respect to Leases.

 

1.11.1      Subject to the provisions of subsection 1.11.2 herein, Grantor will
manage and operate the Property in a reasonably prudent manner and will not
enter into any Lease or Leases of all or any part of the Premises which (a)
Lease or Leases are not made subordinate to the Lien of this Deed of Trust, and
(b) Lease or Leases would, in the aggregate, consist of more than 30,000 square
feet of gross leasable area without the prior written consent of Beneficiary,
which consent shall not be unreasonably withheld, conditioned or delayed.

 

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1.11.2      Grantor shall not:

 

(i)            receive or collect, or permit the receipt or collection of, any
rental or other payments under any Lease more than one month in advance of the
respective period in respect of which they are to accrue, except that (a) in
connection with the execution and delivery of any Lease or of any amendment to
any Lease, rental payments thereunder may be collected and received in advance
in an amount not in excess of one month's rent and/or a reasonable security
deposit may be required thereunder and (b) Grantor may receive and collect
escalation and other charges in accordance with the terms of each Lease;

 

(ii)           assign, transfer or hypothecate (other than to Beneficiary
hereunder) any rental or other payment under any Lease whether then due or to
accrue in the future, the interest of Grantor as lessor under any Lease or the
rents, issues, revenues, profits or other income of the Property;

 

(iii)          enter into any Lease after the date hereof that does not contain
terms, with respect to clauses (a) and (b) below, to the effect that, and, with
respect to clauses (c) through (f) below, substantially to the effect that:

 

(a)      such Lease and the rights of the tenant thereunder (including, without
limitation, any options to purchase or rights of first offer or refusal) shall
be subject and subordinate to the rights of Beneficiary under and the Lien of
this Deed of Trust;

 

(b)      such Lease has been assigned as collateral security by Grantor as
landlord thereunder to Beneficiary under this Deed of Trust;

 

(c)      in the case of any foreclosure hereunder, the rights and remedies of
the tenant in respect of any obligations of any successor landlord thereunder
shall be limited to the equity interest of such successor landlord in the
Premises and any successor landlord shall not (1) be liable for any act,
omission or default of any prior landlord under the Lease, (2) be required to
make or complete any tenant improvements or capital improvements or repair,
restore, rebuild or replace the demised premises or any part thereof in the
event of damage, casualty or condemnation or (3) be required to pay any amounts
to tenant arising under the Lease prior to such successor landlord taking
possession;

 

(d)      the tenant’s obligation to pay rent and any additional rent shall not
be subject to any abatement, deduction, counterclaim or setoff as against any
beneficiary or purchaser upon the foreclosure of any of the Premises or the
giving or granting of a deed in lieu thereof by reason of a landlord default
occurring prior to such foreclosure or delivery of such deed and such
beneficiary or purchaser will not be bound by any advance payments of rent in
excess of one month or any security deposits unless such security was actually
received by Beneficiary (or in the case of a letter of credit, was properly
transferred in negotiable form) ;

 

(e)      the tenant agrees to attorn, at the option of Beneficiary or any
purchaser of the Premises, upon a foreclosure of the Premises or the giving or
granting of a deed in lieu thereof; and

 

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(f)       the tenant agrees to give notice to Beneficiary of any default by
landlord under the Lease and Beneficiary shall have a reasonable time to cure,
should Beneficiary so elect, any default of landlord prior to tenant exercising
any rights of tenant to terminate or cancel such Lease.

 

(iv)          enter into any amendment or modification of any Lease or Leases
aggregating to more than 30,000 square feet of gross leasable area which would
change the unexpired term thereof or decrease the amount of the rents or other
amounts payable thereunder or impair the value or utility of the Property or the
security provided by this Deed of Trust;

 

(v)           enter into any further lease or sublease of the property subject
to any Lease without the prior written consent of Beneficiary, unless such Lease
is not amended in any material respect and the primary obligor under such Lease
is not released in any respect from its responsibilities and liabilities under
such Lease as a result of such lease or sublease;

 

(vi)          terminate (whether by exercising any contractual right of Grantor
to recapture leased space or otherwise) or permit the termination of any Lease
or accept surrender of all or any portion of the space demised under any Lease
prior to the end of the term thereof or accept assignment of any Lease to
Grantor unless:

 

(a)      the tenant under such Lease has not paid the equivalent of two months’
rent and Grantor has made reasonable efforts to collect such rent; or

 

(b)      Grantor shall deliver to Beneficiary an Officer’s Certificate to the
effect that Grantor has entered into a new Lease (or Leases) for the space
covered by the terminated or assigned Lease with a term (or terms) which
expire(s) no earlier than the date on which the terminated or assigned Lease was
to expire (excluding renewal options), and with a tenant (or tenants) having a
creditworthiness (as reasonably determined by Grantor) sufficient to pay the
rent and other charges due under the new Lease (or Leases), and which provided
that the tenant(s) shall pay rent, including all operating expenses and other
amounts payable under the new Lease (or Leases) without any material abatement
or concession; or

 

(vii)         waive, excuse, condone or in any manner discharge or release any
tenants of or from the obligations of such tenants under their respective Leases
or guarantors of tenants from obligations under any guarantees of the Leases
except in the ordinary and prudent course of business with due regard for the
security afforded Beneficiary thereby.

 

1.11.3      Grantor shall timely perform and observe all the terms, covenants
and conditions required to be performed and observed by Grantor under each Lease
and shall at all times do all things necessary to require performance by the
lessee, franchisee, licensee or grantee under each Lease of all obligations,
covenants and agreements by such party to be performed thereunder. Grantor shall
promptly notify Beneficiary of the receipt of any notice from any lessee under
any Lease claiming that Grantor is in default in the performance or observance
of any of the terms, covenants or conditions thereof to be performed or observed
by Grantor and will cause a copy of each such notice to be promptly delivered to
Beneficiary.

 

SECTION 1.12       Transfer Restrictions. Except as provided in Section 1.11,
Grantor may not, without the prior written consent of Beneficiary, further
mortgage, encumber, hypothecate,

 

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sell, convey or assign all or any part of the Property or suffer any of the
foregoing to occur by operation of law or otherwise. Notwithstanding the
provisions of the foregoing sentence, so long as no Event of Default shall have
occurred and be continuing, Grantor shall have the right to suffer, in respect
of the Property, (i) Liens in respect of amounts payable or obligations to be
performed by Grantor pursuant to subsections 1.5.1, 1.5.3 and 1.5.4; provided,
however, that such amounts are not yet due and payable or are being contested in
accordance with the provisions of subsection 1.5.5 and (ii) Liens of the type
described in subclauses (a), (b), (c), d), (f), (k), (m), (o), (q), (s) and, to
the extent the original Lien is permitted hereunder, (p) of Section 9.7 of the
Credit Agreement. Each of the Liens and other transfers permitted by this
Section 1.12 shall in all respects be subject and subordinate in priority to the
Lien and security interests created and evidenced hereby except to the extent
the law or regulation creating or authorizing such Lien provides that such Lien
must be superior to the Lien and security interest created and evidenced hereby.

 

SECTION 1.13       Destruction: Condemnation.

 

1.13.1      Destruction; Insurance Proceeds. If there shall occur any material
damage to, or material loss or material destruction of, the Improvements,
Equipment, or any part of any thereof (each, a “Destruction”), Grantor shall
promptly send to Beneficiary a notice setting forth the nature and extent of
such Destruction. The proceeds of any insurance payable in respect of such
Destruction are hereby assigned and shall be paid to Beneficiary. All such
proceeds, together with any interest earned thereon, less the amount of any
expenses incurred in litigating, arbitrating, compromising or settling any claim
arising out of such Destruction (the “Net Proceeds”), shall be applied in
accordance with the provisions of subsections 1.13.3, 1.13.4 and 1.13.5.

 

1.13.2      Condemnation; Assignment of Award. If there shall occur any taking
of the Property or any part thereof, in or by condemnation or other eminent
domain proceedings pursuant to any law, general or special, or by reason of the
temporary requisition of the use or occupancy of the Property or any part
thereof, by any Governmental Authority, civil or military (each, a “Taking”),
Grantor shall notify Beneficiary as soon as practicable but in no event more
than two (2) Business Days after receiving notice of such Taking or commencement
of proceedings therefor. Beneficiary may participate in any proceedings or
negotiations which might result in any Taking, and Grantor shall deliver or
cause to be delivered to Beneficiary all instruments requested by it to permit
such participation. Beneficiary may be represented by counsel satisfactory to it
at the expense of Grantor in connection with any such participation. Grantor
shall pay all reasonable fees, costs and expenses incurred by Beneficiary in
connection with any Taking and in seeking and obtaining any award or payment on
account thereof. Any proceeds, award or payment in respect of any Taking are
hereby assigned and shall be paid to Beneficiary. Grantor shall take all steps
necessary to notify the condemning authority of such assignment. Such proceeds,
award or payment, together with any interest earned thereon, less the amount of
any expenses incurred in litigating, arbitrating, compromising or settling any
claim arising out of such Taking (the “Net Award”), shall be applied in
accordance with the provisions of subsections 1.13.3, 1.13.4 and 1.13.5.

 

1.13.3      Restoration. So long as no Event of Default shall have occurred and
be continuing, in the event there shall be a Net Award or Net Proceeds in an
amount less than or equal to $1,000,000, Grantor shall have the right, at
Grantor's option, to apply such Net Award or Net Proceeds to the payment of the
Secured Obligations in accordance with the provisions of Sections 2.10(a) (i)
and 2.10(a) (vi), as applicable, of the Credit Agreement or to perform a
restoration as described in Sections 2.10(a) (i) and 2.10(a) (vi), as
applicable, of the Credit Agreement (each, a “Restoration”) of the Premises and
Equipment. In the event Grantor elects to perform a Restoration, Grantor shall
give written notice (each, a “Restoration Election Notice”)

 

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of such election to Beneficiary within thirty (30) days after the date that
Grantor receives notice of collection by Beneficiary of the applicable Net
Proceeds or Net Award, as the case may be. In the event Beneficiary does not
receive a Restoration Election Notice within such 30-day period, Beneficiary may
apply any such Net Proceeds or Net Award held by Beneficiary to the payment of
the Secured Obligations in accordance with the provisions of Section 2.10(b) of
the Credit Agreement or, at the option of Beneficiary, may continue to hold such
Net Proceeds or Net Award as additional collateral to secure the performance by
Grantor of the Secured Obligations. In the event Grantor elects to perform any
Restoration contemplated by this subsection 1.13.3, Beneficiary shall release
such Net Award or Net Proceeds to Grantor as soon as practicable following
receipt of a Restoration Election Notice but in no event more than fifteen (15)
days following such receipt. Grantor shall, within fifteen (15) days following
the date of its receipt of any proceeds in respect of a Destruction or Taking,
as the case may be, commence and diligently continue to perform the Restoration
of that portion or portions of the Improvements and Equipment subject to such
Destruction or affected by such Taking so that, upon the completion of the
Restoration, the Premises and Equipment will be in the same condition and shall
be of at least equal value and utility for its intended purposes as the Premises
and Equipment was immediately prior to such Destruction or Taking. Grantor shall
so complete such Restoration with its own funds to the extent that the amount of
any Net Award or Net Proceeds is insufficient for such purpose.

 

1.13.4      Major Restoration. In the event there shall be a Net Award or Net
Proceeds other than as described in subsection 1.13.3, Grantor shall have the
option (absent the occurrence and continuance of an Event of Default) to apply
such Net Award or Net Proceeds, as the case may be, to the payment of the
Secured Obligations in accordance with the provisions of Sections 2.10(i) and
2.10(vi), as applicable, of the Credit Agreement or to perform a Restoration of
the Property as contemplated by and in accordance with the provisions of
Sections 2.10(i) and 2.10(vi), as applicable, of the Credit Agreement. In the
event a Restoration is to be performed under this subsection 1.13.4, Beneficiary
shall not release any part of the Net Award or the Net Proceeds except in
accordance with the provisions of subsection 1.13.5, and Grantor shall, prior to
commencing any work to effect a Restoration of the Premises and Equipment,
promptly (but in no event later than ninety (90) days following any Destruction
or Taking) furnish to Beneficiary:

 

(i)            complete plans and specifications (the “Plans and
Specifications”) for the Restoration;

 

(ii)           a certificate (an “Architect’s Certificate”) of an independent,
reputable architect or engineer acceptable to Beneficiary and licensed in the
state where the Premises are located (a) listing all permits and approvals
required by law in connection with the Restoration, (b) stating that all permits
and approvals required by law to commence work in connection with the
Restoration have been obtained, (c) stating that the Plans and Specifications
have been reviewed and approved by the signatory thereto, (d) stating such
signatory’s estimate (an “Estimate”) of the costs of completing the Restoration
and (e) stating that upon completion of such Restoration in accordance with the
Plans and Specifications, the value and utility of the Premises and the
Equipment will be approximately equal to or greater than the value and utility
thereof immediately prior to the Destruction or Taking relating to such
Restoration; and

 

(iii)          if the Estimate exceeds the Net Proceeds or Net Award, as the
case may be, a surety bond for, guarantee of, or irrevocable letter of credit (a
“Letter of Credit”) or other irrevocable and unconditional commitment to provide
funds (each, a “Commitment”) for the payment of the excess cost of such
Restoration, payable to or in favor of Beneficiary, as Collateral Agent, which
bond, guaranty, Letter of Credit or Commitment (A) shall be signed by a surety
or sureties or guarantor(s), as the case may

 

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be, acceptable to Beneficiary and, in the case of a Letter of Credit or
Commitment, shall be provided by a Lender or other financial institution having
capital and surplus in excess of $500 million as shown in its most recent
available statement of financial condition and (B) shall be in an amount not
less than the excess of the amount of the Estimate over the amount of the Net
Award or Net Proceeds, as the case may be, then held by Beneficiary for
application toward the cost of such Restoration.

 

Beneficiary shall have the right to review and approve the Plans and
Specifications and to grant such waivers from the other requirements of the
preceding claims (i), (ii) and (iii) as Beneficiary may in its discretion deem
appropriate. Promptly upon any approval of the Plans and Specifications by
Beneficiary, Grantor shall commence and diligently continue to perform the
Restoration in accordance with such approved Plans and Specifications. Grantor
shall so complete such Restoration with its own funds to the extent that the
amount of any Net Award or Net Proceeds is insufficient for such purpose.

 

1.13.5      Restoration Advances Following Destruction or Taking of Property. In
the event Grantor have elected to perform a Restoration of the Premises and
Equipment as provided in subsection 1.13.4, Beneficiary shall apply any Net
Proceeds or the Net Award held by Beneficiary on account of the applicable
Destruction or Taking to the payment of the cost of performing such Restoration
and shall pay portions of the same, from time to time, to Grantor or, at
Beneficiary’s option, exercised from time to time, directly to the contractors,
subcontractors, materialmen, laborers, engineers, architects, and other persons
rendering services or material for such Restoration, subject to the following
conditions (except as the same may be waived by the Beneficiary in its
discretion):

 

(i)            Each request for payment shall be made on at least ten (10) days’
prior notice to Beneficiary and shall be accompanied by an Architect’s
Certificate stating (a) that all the Restoration work then completed has been
done in compliance with the Plans and Specifications, as approved by
Beneficiary, and in accordance with all provisions of law, (b) the sums
requested are required to reimburse Grantor for payments by Grantor to, or are
due to, the contractors, subcontractors, materialmen, laborers, engineers,
architects, or other persons rendering services or materials for the
Restoration, and that, when added to the sums, if any, previously paid out by
Beneficiary, such sums do not exceed the cost of the Restoration to the date of
such Architect's Certificate, (c) whether or not the Estimate continues to be
accurate, and if not, what the entire cost of such Restoration is then estimated
to be, and (d) that the amount of the Net Proceeds or Net Award, as the case may
be, remaining after giving effect to such payment will be sufficient on
completion of the Restoration to pay for the same in full (including, in detail,
an estimate by trade of the remaining costs of completion);

 

(ii)           Each request for payment shall be accompanied by an opinion of
counsel to Grantor (which counsel shall be independent and acceptable to
Beneficiary), or a title insurance policy, binder or endorsement in form and
substance satisfactory to Beneficiary confirming that (a) all Liens (other than
Prior Liens) covering that part of the Restoration previously paid for, if any,
have been waived and (b) there has not been filed with respect to all or any
part of the Premises any Lien (other than Prior Liens) which is not discharged
of record and which could have priority over the Lien of this Deed of Trust in
respect of any part of the Secured Obligations; and

 

(iii)          The final request for any payment after the Restoration has been
completed shall be accompanied by an Architect’s Certificate listing all
certificates, permits, licenses, waivers, other documents, or any combination of
the foregoing required by

 

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law in connection with or as a result of such Restoration and stating that all
of the same have been obtained.

 

In the event that there shall be any surplus after application of the Net Award
or the Net Proceeds to Restoration of the Improvements and the Equipment, such
surplus shall be, at the option of Beneficiary, (i) held by Beneficiary as
additional collateral to secure the performance by Grantor of the Secured
Obligations and (ii) applied as an optional prepayment under Section 2.10 of the
Credit Agreement.

 

SECTION 1.14       Alterations. Grantor shall not, without the prior written
consent of Beneficiary, make any addition, modification or change (each, an
“Alteration”), structural or nonstructural, to the Premises that costs more to
effect than $5,000,000 in the aggregate. Whether or not Beneficiary has
consented to the making of any Alteration, Grantor shall (i) complete each
Alteration promptly, in a good and workmanlike manner and in compliance with all
applicable local laws, ordinances and requirements and (ii) pay when due all
claims for labor performed and materials furnished in connection with such
Alteration, unless contested in accordance with the provisions of subsection
1.5.5.

 

SECTION 1.15       Hazardous Material. Each and every obligation, representation
and warranty of Grantor contained in Sections 8.11, 8.12 and 9.14 of the Credit
Agreement is incorporated herein mutatis mutandis with respect to the Property.

 

SECTION 1.16       No Claims Against Beneficiary. Nothing contained in this Deed
of Trust shall constitute any consent or request by Beneficiary, express or
implied, for the performance of any labor or services or the furnishing of any
materials or other property in respect of the Premises or any part thereof, nor
as giving Grantor any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against
Beneficiary in respect thereof or any claim that any Lien based on the
performance of such labor or services or the furnishing of any such materials or
other property is prior to the Lien of this Deed of Trust.

 

SECTION 1.17       Utility Services. Grantor shall pay, or cause to be paid,
when due all charges for all public or private utility services, all public or
private rail and highway services, all public or private communication services,
all sprinkler systems, all protective services and any other services of
whatever kind or nature at any time rendered to or in connection with the
Premises or any part thereof, shall comply with all contracts relating to any
such services and shall do all other things required for the maintenance and
continuance of all such services to the extent required to fulfill the
obligations set forth in Section 1.10.

 

ARTICLE II

 

ASSIGNMENT OF LEASES: SECURITY AGREEMENT: ASSIGNMENT AGREEMENT

 

SECTION 2.1         Assignment of Leases, Rents, Issues and Profits.

 

2.1.1        Grantor absolutely, presently and irrevocably assigns, transfers
and sets over to Beneficiary, and grants to Beneficiary subject to the terms and
conditions hereof, all Grantor’s estate, right, title, interest, claim and
demand as landlord to collect rent and other sums due under all existing Leases
and any other Leases, including, without limitation, all extensions of the terms
of the Leases (such assigned rights, “Grantor’s Interest”), as follows:

 

(i)            the immediate and continuing right to receive and collect Rents
payable by all tenants or other parties pursuant to the Leases;

 

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(ii)           all claims, rights, powers, privileges and remedies of Grantor,
whether provided for in any Lease or arising by statute or at law or in equity
or otherwise, consequent on any failure on the part of any tenant to perform or
comply with any term of any Lease;

 

(iii)          all rights to take all actions upon the happening of a default
under any Lease as shall be permitted by such Lease or by law, including,
without limitation, the commencement, conduct and consummation of proceedings at
law or in equity; and

 

(iv)          the full power and authority, in the name of Grantor or otherwise,
to enforce, collect, receive and receipt for any and all of the foregoing and to
do any and all other acts and things whatsoever which Grantor or any landlord is
or may be entitled to do under the Leases.

 

2.1.2        Any Rents receivable by Beneficiary hereunder, after payment of all
proper costs and charges, shall be applied to all amounts due and owing under
and as provided in this Deed of Trust and the Credit Agreement. Beneficiary
shall be accountable to Grantor only for Rents actually received by Beneficiary
pursuant to this assignment. The collection of such Rents and the application
thereof shall not cure or waive any Event of Default or waive, modify or affect
notice of Event of Default or invalidate any act done pursuant to such notice.

 

2.1.3        So long as no Event of Default shall have occurred and be
continuing, Grantor shall have a license to collect and apply the Rents and to
enforce the obligations of tenants under the Leases and to grant all consents
and approvals and take any other action of the landlord under the Leases.
Immediately upon the occurrence and during the continuance of any Event of
Default, the license granted in the immediately preceding sentence shall cease
and terminate, with or without any notice, action or proceeding or the
intervention of a receiver appointed by a court. Upon such Event of Default and
during the continuance thereof, Beneficiary may, to the fullest extent permitted
by the Leases, (i) exercise any of Grantor’s rights under the Leases, (ii)
enforce the Leases, (iii) demand, collect, sue for, attach, levy, recover,
receive, compromise and adjust, and make, execute and deliver receipts and
releases for all Rents or other payments that may then be or may thereafter
become due, owing or payable with respect to the Leases and (iv) generally, do,
execute and perform any other reasonable act, deed, matter or thing whatsoever
that ought to be done, executed and performed in and about or with respect to
the Leases, as fully as allowed or authorized by Grantor’s Interest.

 

2.1.4        Upon the occurrence and during the continuance of an Event of
Default, Grantor shall, at the direction of Beneficiary, further authorize and
direct the tenant under each Lease to pay directly to, or as directed by,
Beneficiary all Rents accruing or due under its Lease without proof to the
tenant of the occurrence and continuance of such Event of Default. In the
absence of such authorization by the Grantor, Grantor hereby authorizes the
tenant under each Lease to rely upon and comply with any notice or demand from
Beneficiary for payment of Rents to Beneficiary and Grantor shall have no claim
against any tenant for Rents paid by such tenant to Beneficiary pursuant to such
notice or demand.

 

2.1.5        Grantor at its sole cost and expense shall use commercially
reasonable efforts to enforce the Leases in accordance with their terms. Neither
this Deed of Trust nor any action or inaction on the part of Beneficiary shall
release any tenant under any Lease, any guarantor of any Lease or Grantor from
any of their respective obligations under the Leases or constitute an assumption
of any such obligation on the part of Beneficiary. No action or failure to act
on the part of Grantor shall adversely affect or limit the rights of Beneficiary
under this Deed of Trust or, through this Deed of Trust, under the Leases.

 

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2.1.6        All rights, powers and privileges of Beneficiary herein set forth
are coupled with an interest and are irrevocable, subject to the terms and
conditions hereof, and Grantor shall not take any action under the Leases or
otherwise which is inconsistent with this Deed of Trust or any of the terms
hereof and any such action inconsistent herewith or therewith shall be void.
Grantor shall, from time to time, upon request of Beneficiary, execute all
instruments and further assurances and all supplemental instruments and take all
such action as Beneficiary from time to time may reasonably request in order to
perfect, preserve and protect the interests intended to be assigned to
Beneficiary hereby.

 

2.1.7        Grantor shall not, unilaterally or by agreement, subordinate,
amend, modify, extend, discharge, terminate, surrender, waive or otherwise
change any term of any of the Leases in any manner which would violate this Deed
of Trust. If the Leases shall be amended as permitted hereby, they shall
continue to be subject to the provisions hereof without the necessity of any
further act by any of the parties hereto.

 

2.1.8        Nothing contained herein shall operate or be construed to (i)
obligate Trustee or Beneficiary to perform any of the terms, covenants or
conditions contained in the Leases or otherwise to impose any obligation upon
Trustee or Beneficiary with respect to the Leases (including, without
limitation, any obligation arising out of any covenant of quiet enjoyment
contained in the Leases in the event that any tenant under a Lease shall have
been joined as a party defendant in any action by which the estate of such
tenant shall be terminated) or (ii) place upon Trustee or Beneficiary any
responsibility for the operation, control, care, management or repair of the
Premises until such time, if any, that Trustee or Beneficiary takes actual
possession of the Premises.

 

SECTION 2.2         Security Interest in Personal Property.

 

2.2.1        This Deed of Trust shall constitute a security agreement and shall
create and evidence a security interest or common law Lien in all the Equipment
and in all the other items of Property in which a security interest may be
granted or a common law pledge created pursuant to the Uniform Commercial Code
as in effect in the state in which the Premises are located or under the common
law in such state (collectively, “Personal Property”).

 

2.2.2        Upon the occurrence and during the continuance of any Event of
Default, in addition to the remedies set forth in Article III, Beneficiary shall
have the power to sell the Personal Property in accordance with the Uniform
Commercial Code as enacted in the state in which the Premises are located or
under other applicable law. It shall not be necessary that any Personal Property
offered be physically present at any such sale or constructively in the
possession of Beneficiary or the person conducting the sale.

 

2.2.3        Upon the occurrence and during the continuance of any Event of
Default,eneficiary may sell the Personal Property or any part thereof at public
or private sale with notice to Grantor as hereinafter provided. The proceeds of
any such sale, after deducting all reasonable expenses of Beneficiary in taking,
storing, repairing and selling the Personal Property (including, without
limitation, reasonable attorneys' fees and legal expenses), shall be applied in
the manner set forth in subsection 3.3.3. At any sale, public or private, of the
Personal Property or any part thereof, Beneficiary may purchase any or all of
the Personal Property offered at such sale.

.

2.2.4        Beneficiary shall give Grantor reasonable notice of any sale of any
of the Personal Property pursuant to the provisions of this Section 2.2.
Notwithstanding the provisions of Section 5.2, any such notice shall
conclusively be deemed to be reasonable and effective if such notice is

 

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mailed at least ten (10) days prior to any sale, by first class or certified
mail, postage prepaid, to Grantor at its address determined in accordance with
the provisions of Section 5.2.

 

2.2.5        In the event of any conflicts between the terms and conditions of
this Section 2.2 and that certain security agreement, dated as of the date
hereof, between Grantor, as debtor, and Beneficiary, as secured party, the terms
and conditions of the Security Agreement shall govern.

 

ARTICLE III

 

EVENTS OF DEFAULT AND REMEDIES

 

SECTION 3.1         Events of Default. It shall be an Event of Default hereunder
if there shall have occurred and be continuing an Event of Default as defined in
the Credit Agreement.

 

SECTION 3.2         Remedies in Case of an Event of Default. If any Event of
Default shall have occurred and be continuing, Beneficiary may at its option, in
addition to any other action permitted under this Deed of Trust or the Credit
Agreement or by law, statute or in equity, take one or more of the following
actions:

 

3.2.1        by written notice to Grantor, declare the entire unpaid amount of
the Secured Obligations to be due and payable immediately;

 

3.2.2        personally, or by its agents or attorneys, (i) enter into and upon
and take possession of all or any part of the Premises together with the books,
records and accounts of Grantor relating thereto and, exclude Grantor, its
agents and servants wholly therefrom, (ii) use, operate, manage and control the
Premises and the Equipment and conduct the business thereof, (iii) maintain and
restore the Premises and the Equipment, (iv) make all necessary or proper
repairs, renewals and replacements and such useful Alterations thereto and
thereon as Beneficiary may deem advisable, (v) manage, lease and operate the
Premises and carry on the business thereof and exercise all rights and powers of
Grantor with respect thereto or (vi) collect and receive all earnings, revenues,
rents, issues, profits and income of the Property and every part thereof.
Beneficiary shall be under no liability for or by reason of any such taking of
possession, entry, removal or holding, operation or management except that any
amounts so received by Beneficiary shall be applied as follows:

 

FIRST:  to pay costs and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) of so entering upon, taking possession of,
holding, operating and managing the Property or any part thereof, and any taxes,
assessments or other charges which Beneficiary may consider necessary or
desirable to pay, and any other amounts due to Beneficiary;

 

SECOND:  without duplication of amounts applied pursuant to clause FIRST above,
to the indefeasible payment in full in cash of the Secured Obligations (other
than Swap Obligations) in accordance with the terms of the Credit Agreement;

 

THIRD:  without duplication of amounts applied pursuant to clauses FIRST and
SECOND above, to the indefeasible payment in full in cash pro rata of the Swap
Obligations in accordance with the terms of the Swap Contracts; and

 

FOURTH:  the balance, if any, to the Person lawfully entitled thereto (including
Grantor or its successors or assigns), if all conditions to the release of this
Deed of Trust shall have been fulfilled, but if any such condition shall not
have been

 

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fulfilled, to be held by Beneficiary and thereafter applied to any future
payments required to be made in accordance with clauses FIRST, SECOND and THIRD
above.

 

3.2.3        with or without entry, personally or by its agents or attorneys,
(i) sell the Property and all estate, right, title and interest, claim and
demand therein at one or more sales in one or more parcels, in accordance with
the provisions of Section 3.3 or (ii) institute and prosecute proceedings for
the complete or partial foreclosure of the Lien and security interests created
and evidenced hereby; or

 

3.2.4        take such steps or direct Trustee to take such steps to protect and
enforce its rights whether by action, suit or proceeding at law or in equity for
the specific performance of any covenant, condition or agreement in the Credit
Agreement and the other Credit Documents, or in aid of the execution of any
power granted in this Deed of Trust, or for any foreclosure hereunder, or for
the enforcement of any other appropriate legal or equitable remedy or otherwise
as Beneficiary shall elect.

 

SECTION 3.3         Sale of Property if Event of Default Occurs; Proceeds of
Sale.

 

3.3.1        If any Event of Default shall have occurred and be continuing,
Beneficiary may institute an action to foreclose this Deed of Trust or take such
other action as may be permitted and available to Beneficiary at law or in
equity for the enforcement of the Credit Agreement and realization on the
Property and proceeds thereon through power of sale or to final judgment and
execution thereof for the Secured Obligations, and in furtherance thereof
Beneficiary may sell the Property at one or more sales, as an entirety or in
parcels, at such time and place, upon such terms and after such notice thereof
as may be required or permitted by law or statute or in equity. Beneficiary may
execute and deliver to the purchaser at such sale a conveyance of the Property
in fee simple and an assignment or conveyance of all Grantor’s Interest in the
Leases and the Property, each of which conveyances and assignments shall contain
recitals as to the Event of Default upon which the execution of the power of
sale herein granted depends, and Grantor hereby constitutes and appoints
Beneficiary the true and lawful attorney in fact of Grantor to make any such
recitals, sale, assignment and conveyance, and all of the acts of Beneficiary as
such attorney in fact are hereby ratified and confirmed. Grantor agrees that
such recitals shall be binding and conclusive upon Grantor and that any
assignment or conveyance to be made by Beneficiary shall divest Grantor of all
right, title, interest, equity and right of redemption, including any statutory
redemption, in and to the Property. The power and agency hereby granted are
coupled with an interest and are irrevocable by death or dissolution, or
otherwise, and are in addition to any and all other remedies which Beneficiary
may have hereunder, at law or in equity. So long as the Secured Obligations, or
any part thereof, remain unpaid, Grantor agrees that possession of the Property
by Grantor, or any person claiming under Grantor, shall be as tenant, and, in
case of a sale under power or upon foreclosure as provided in this Deed of
Trust, Grantor and any person in possession under Grantor, as to whose interest
such sale was not made subject, shall, at the option of the purchaser at such
sale, then become and be tenants holding over, and shall forthwith deliver
possession to such purchaser, or be summarily dispossessed in accordance with
the laws applicable to tenants holding over. In case of any sale under this Deed
of Trust by virtue of the exercise of the powers herein granted, or pursuant to
any order in any judicial proceeding or otherwise, the Property may be sold as
an entirety or in separate parcels in such manner or order as Beneficiary in its
sole discretion may elect. One or more exercises of powers herein granted shall
not extinguish or exhaust such powers, until the entire Property is sold or all
amounts secured hereby are paid in full.

 

3.3.2        In the event of any sale made under or by virtue of this Article
III, the entire principal of, and interest in respect of the Secured
Obligations, if not previously due and payable,

 

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shall, at the option of Beneficiary, immediately become due and payable,
anything in this Deed of Trust to the contrary notwithstanding.

 

3.3.3        The proceeds of any sale made under or by virtue of this Article
III, together with any other sums which then may be held by Trustee or
Beneficiary under this Deed of Trust, whether under the provisions of this
Article III or otherwise, shall be applied as follows:

 

FIRST:  to pay the reasonable costs and expenses incurred by Trustee or
Beneficiary in enforcing its remedies under this Deed of Trust;

 

SECOND:  to pay the reasonable costs and expenses of the sale and of any
receiver of the Property or any part thereof appointed pursuant to subsection
3.5.2;

 

THIRD:  without duplication of the amounts applied pursuant to clauses FIRST and
SECOND above, to the indefeasible payment in full in cash of the Secured
Obligations (other than Swap Obligations) in accordance with the terms of the
Credit Agreement;

 

FOURTH:  without duplication of the amounts applied pursuant to clauses FIRST,
SECOND and THIRD above, to the indefeasible payment in full in cash pro rata of
the Swap Contracts Obligations in accordance with the terms of the Swap
Contracts; and

 

FIFTH:  the balance, if any, to the Person lawfully entitled thereto (including
Grantor or its successors or assigns)

 

3.3.4        Beneficiary (on behalf of any Lender or on its own behalf) or any
Lender or any of their respective Affiliates may bid for and acquire the
Property or any part thereof at any sale made under or by virtue of this Article
III and, in lieu of paying cash therefor, may make settlement for the purchase
price by crediting against the purchase price the unpaid amounts (whether or not
then due) owing to Beneficiary, or such Lender in respect of the Secured
Obligations, after deducting from the sales price the expense of the sale and
the reasonable costs of the action or proceedings and any other sums that
Beneficiary or such Lender is authorized to deduct under this Deed of Trust.

 

3.3.5        Beneficiary may adjourn from time to time any sale by it to be made
under or by virtue of this Deed of Trust by announcement at the time and place
appointed for such sale or for such adjourned sale or sales, and, Beneficiary,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.

 

3.3.6        If the Premises is comprised of more than one parcel of land,
Beneficiary may take any of the actions authorized by this Section 3.3 in
respect of any or a number of individual parcels.

 

SECTION 3.4         Additional Remedies in Case of an Event of Default.

 

3.4.1        Beneficiary shall be entitled to recover judgment as aforesaid
either before, after or during the pendency of any proceedings for the
enforcement of the provisions of this Deed of Trust, and the right of
Beneficiary to recover such judgment shall not be affected by any entry or sale
hereunder, or by the exercise of any other right, power or remedy for the
enforcement of the provisions of this Deed of Trust, or the foreclosure of, or
absolute conveyance pursuant to, this Deed of Trust. In case of proceedings
against Grantor in insolvency or bankruptcy or any proceedings for its
reorganization or involving the liquidation of its assets, Beneficiary shall be

 

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entitled to prove the whole amount of principal and interest and other payments,
charges and costs due in respect of the Secured Obligations to the full amount
thereof without deducting therefrom any proceeds obtained from the sale of the
whole or any part of the Property; provided, however, that in no case shall
Beneficiary receive a greater amount than the aggregate of such principal,
interest and such other payments, charges and costs (with interest at the
Default Rate) from the proceeds of the sale of the Property and the distribution
from the estate of Grantor.

 

3.4.2        Any recovery of any judgment by Beneficiary and any levy of any
execution under any judgment upon the Property shall not affect in any manner or
to any extent the Lien and security interests created and evidenced hereby upon
the Property or any part thereof, or any conveyances, powers, rights and
remedies of Beneficiary hereunder, but such conveyances, powers, rights and
remedies shall continue unimpaired as before.

 

3.4.3        Any moneys collected by Beneficiary under this Section 3.4 shall be
applied in accordance with the provisions of subsection 3.3.3.

 

SECTION 3.5         Legal Proceedings After an Event of Default.

 

3.5.1        After the occurrence of any Event of Default and immediately upon
the commencement of any action, suit or legal proceedings to obtain judgment for
the Secured Obligations or any part thereof, or of any proceedings to foreclose
the Lien and security interest created and evidenced hereby or otherwise enforce
the provisions of this Deed of Trust or of any other proceedings in aid of the
enforcement of this Deed of Trust, Grantor shall enter its voluntary appearance
in such action, suit or proceeding.

 

3.5.2        Upon the occurrence and during the continuance of an Event of
Default, Beneficiary shall be entitled forthwith as a matter of right,
concurrently or independently of any other right or remedy hereunder either
before or after declaring the Secured Obligations or any part thereof to be due
and payable, to the appointment of a receiver without giving notice to any party
and without regard to the adequacy or inadequacy of any security for the Secured
Obligations or the solvency or insolvency of any person or entity then legally
or equitably liable for the Secured Obligations or any portion thereof. Grantor
hereby consents to the appointment of such receiver. Notwithstanding the
appointment of any receiver, Beneficiary shall be entitled as pledgee to the
possession and control of any cash, deposits or instruments at the time held by
or payable or deliverable under the terms of the Credit Agreement to
Beneficiary.

 

3.5.3        Grantor shall not (i) at any time insist upon, or plead, or in any
manner whatsoever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Property or any part thereof, wherever enacted, now or at any time hereafter in
force, which may affect the covenants and terms of performance of this Deed of
Trust, (ii) claim, take or insist on any benefit or advantage of any law now or
hereafter in force providing for the valuation or appraisal of the Property, or
any part thereof, prior to any sale or sales of the Property which may be made
pursuant to this Deed of Trust, or pursuant to any decree, judgment or order of
any court of competent jurisdiction or (iii) after any such sale or sales, claim
or exercise any right under any statute heretofore or hereafter enacted to
redeem the property so sold or any part thereof. To the extent permitted by
applicable law, Grantor hereby expressly (i) waives all benefit or advantage of
any such law or laws, including, without limitation, any statute of limitations
applicable to this Deed of Trust, (ii) WAIVES ANY AND ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING RELATED TO THE ENFORCEMENT OF THIS DEED OF
TRUST, (iii) waives any objection which it may now or hereafter have to the
laying of venue of any action, suit or proceeding brought in connection with
this Deed of Trust and further waives and agrees not to plead that any such
action, suit or proceeding brought in any such court has been brought in an
inconvenient forum

 

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and (iv) covenants not to hinder, delay or impede the execution of any power
granted or delegated to Beneficiary by this Deed of Trust but to suffer and
permit the execution of every such power as though no such law or laws had been
made or enacted. Beneficiary shall not be liable for any incorrect or improper
payment made pursuant to this Article III in the absence of gross negligence or
willful misconduct.

 

Beneficiary may request Trustee to proceed with foreclosure, and in such event
Trustee is hereby authorized and empowered, and it shall be Trustee’s special
duty, upon such request of Beneficiary, to sell the Property, or any part
thereof, to the highest bidder or bidders for cash or credit, as directed by
Beneficiary, at the location at the county courthouse specified by the
commissioner’s court of the county in the State of Texas wherein the Land then
subject to the lien hereof is situated or, if no such location is specified by
the commissioner’s court, then at the location specified in Beneficiary’s notice
of such sale to Grantor; provided, that if the Land is situated in more than one
county, then such sale of the Property, or part thereof, may be made in any
county in the State of Texas wherein any part of the Land then subject to the
lien hereof is situated. Any such sale shall be made at public outcry, between
the hours of ten o’clock (10:00) a.m. and four o’clock (4:00) p.m. on the first
(1st) Tuesday in any month. Written or printed notice of such sale shall be
posted at the courthouse door in the county, or if more than one, then in each
of the counties, wherein the Land then subject to the lien hereof is situated.
Such notice shall designate the county where the Property, or part thereof, will
be sold and the earliest time at which the sale will occur, and such notice
shall be posted at least twenty-one (21) days prior to the date of sale. Such
notice shall also be filed with the county clerk in the county, or if more than
one, then in each of the counties wherein the Land is located. Beneficiary
shall, at least twenty-one (21) days preceding the date of sale, serve written
notice of the proposed sale by certified mail on each debtor obligated to pay
the Secured Obligations according to the records of Beneficiary. After such
sale, Trustee shall make to the purchaser or purchasers thereunder good and
sufficient assignments, deeds, bills of sale, and other instruments, in the name
of Grantor, conveying the Property, or part thereof, so sold to the purchaser or
purchasers with general warranty of title by Grantor. The sale of a part of the
Property shall not exhaust the power of sale, but sales may be made from time to
time until the Secured Obligations are paid and performed in full. It shall not
be necessary to have present or to exhibit at any such sale any of the Personal
Property.

 

SECTION 3.6         Remedies Not Exclusive. No remedy conferred upon or reserved
to Trustee or Beneficiary by this Deed of Trust is intended to be exclusive of
any other remedy or remedies, and each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Deed of Trust or
now or hereafter existing at law or in equity. Any delay or omission of Trustee
or Beneficiary to exercise any right or power accruing on any Event of Default
shall not impair any such right or power and shall not be construed to be a
waiver of or acquiescence in any such Event of Default. Every power and remedy
given by this Deed of Trust may be exercised from time to time concurrently or
independently, when and as often as may be deemed expedient by Trustee or
Beneficiary in such order and manner as Trustee or Beneficiary, in its sole
discretion, may elect. If Trustee or Beneficiary accepts any moneys required to
be paid by Grantor under this Deed of Trust after the same become due, such
acceptance shall not constitute a waiver of the right either to require prompt
payment, when due, of all other sums secured by this Deed of Trust or to declare
an Event of Default with regard to subsequent defaults. If Beneficiary accepts
any moneys required to be paid by Grantor under this Deed of Trust in an amount
less than the sum then due, such acceptance shall be deemed an acceptance on
account only and on the condition that it shall not constitute a waiver of the
obligation of Grantor to pay the entire sum then due, and Grantor’s failure to
pay the entire sum then due shall be and continue to be a default hereunder
notwithstanding acceptance of such amount on account.

 

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ARTICLE IV

 

CERTAIN DEFINITIONS

 

The following terms shall have the following meanings:

 

“Cost of Construction” means the sum, so far as it relates to the
reconstructing, renewing, restoring or replacing of the Improvements, of (i)
obligations incurred or assumed by Grantor or undertaken by tenants pursuant to
the terms of the Leases for labor, materials and other expenses and to
contractors, builders and materialmen; (ii) the cost of contract bonds and of
insurance of all kinds that may reasonably be deemed by Grantor to be desirable
or necessary during the course of construction; (iii) the expenses incurred or
assumed by Grantor for test borings, surveys, estimates, any Plans and
Specifications and preliminary investigations thereof or, and for supervising
construction, as well as for the performance of all other duties required by or
reasonably necessary for proper construction; (iv) ad valorem property taxes
levied upon the Premises during performance of any Restoration; and (v) any
costs or other charges in connection with obtaining title insurance and counsel
opinions that may be required or necessary in connection with a Restoration.

 

“Grantor” shall mean individually and collectively, with all representations,
warranties and covenants herein contained to be applicable to Friday Morning,
Inc., Tuesday Morning, Inc., and Tuesday Morning Partners, Ltd. jointly, and
each of Friday Morning, Inc., Tuesday Morning, Inc., and Tuesday Morning
Partners, Ltd., singularly, as the context so provides.  Without limiting the
generality of the foregoing, (i) any representations contained herein of the
Grantor shall be applicable to Friday Morning, Inc., and/or Tuesday Morning,
Inc., and/or Tuesday Morning Partners, Ltd., as the context so provides, (ii)
any affirmative covenants contained herein shall be deemed to be covenants of
each of Friday Morning, Inc., Tuesday Morning, Inc., and Tuesday Morning
Partners, Ltd., and shall require performance by each of Friday Morning, Inc.,
Tuesday Morning, Inc., and Tuesday Morning Partners, Ltd., (iii) any negative
covenants contained therein shall be deemed to be covenants of each of Friday
Morning, Inc., Tuesday Morning, Inc., and Tuesday Morning Partners, Ltd., and
shall be breached if any one of Friday Morning, Inc., Tuesday Morning, Inc., and
Tuesday Morning Partners, Ltd., fails to comply therewith, (iv) the occurrence
of any Event of Default with respect to any one of Friday Morning, Inc., Tuesday
Morning, Inc., and Tuesday Morning Partners, Ltd., shall be deemed to be an
Event of Default hereunder, and (v) any Obligations of the Grantor shall be
deemed to include any Obligations of Friday Morning, Inc., Tuesday Morning,
Inc., and Tuesday Morning Partners, Ltd., or any Obligations of any one of them.

 

ARTICLE V

 

MISCELLANEOUS

 

SECTION 5.1         Severability of Provisions. Any provision of this Deed of
Trust which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

 

SECTION 5.2         Notices. Unless otherwise provided herein or in the Credit
Agreement, any notice or other communication herein required or permitted to be
given shall be given in the

 

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manner set forth in the Credit Agreement, if to Grantor or Beneficiary,
addressed to it at the address set forth in the Credit Agreement, or as to
either party at such other address as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section 5.2; provided, however, that notices to Beneficiary shall not be
effective until received by Beneficiary.

 

SECTION 5.3         Covenants To Run with the Land. All of the grants,
covenants, terms, provisions and conditions in this Deed of Trust shall run with
the Land and shall apply to, and bind the successors and assigns of, Grantor. If
there shall be more than one grantor, the covenants and warranties hereof shall
be joint and several.

 

SECTION 5.4         Headings. The Section headings used in this Deed of Trust
are for convenience of reference only and shall not affect the construction of
this Deed of Trust.

 

SECTION 5.5         Limitation on Interest Payable. It is the intention of the
parties to conform strictly to the usury laws, whether state or federal, that
are applicable to the transaction of which this Deed of Trust is a part. All
agreements between Grantor and Beneficiary whether now existing or hereafter
arising and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever shall the amount paid or agreed to be paid by
Grantor for the use, forbearance or detention of the money to be loaned under
the Credit Agreement or any related document, or for the payment or performance
of any covenant or obligation contained herein or in the Credit Agreement or any
related document, exceed the maximum amount permissible under applicable federal
or state usury laws. If under any circumstances whatsoever fulfillment of any
such provision, at the time performance of such provision shall be due, shall
involve exceeding the limit of validity prescribed by law, then the obligation
to be fulfilled shall be reduced to the limit of such validity. If under any
circumstances Grantor shall have paid an amount deemed interest by applicable
law, which would exceed the highest lawful rate, such amount that would be
excessive interest under applicable usury laws shall be applied to the reduction
of the principal amount owing in respect of the Secured Obligations and not to
the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal and any other amounts due hereunder, the excess shall be
refunded to Grantor. All sums paid or agreed to be paid for the use, forbearance
or detention of the principal under any extension of credit by Beneficiary
shall, to the extent permitted by applicable law, and to the extent necessary to
preclude exceeding the limit of validity prescribed by law, be amortized,
prorated, allocated and spread from the date of this Deed of Trust until payment
in full of the Secured Obligations so that the actual rate of interest on
account of such principal amounts is uniform throughout the term hereof.

 

SECTION 5.6         Indemnity. Each and every obligation of Grantor to indemnify
and hold harmless Beneficiary, as administrative agent under the Credit
Agreement, contained in Section 11 of the Credit Agreement is incorporated
herein mutatis mutandis as an obligation of Grantor hereunder to indemnify
Beneficiary and the officers, directors, employees, agents and affiliates of
Beneficiary.

 

SECTION 5.7         GOVERNING LAW; TERMS. THIS DEED OF TRUST SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
GRANTOR DESIGNATES AND APPOINTS CT CORPORATION SYSTEM AND SUCH OTHER PERSONS AS
MAY HEREAFTER BE SELECTED BY GRANTOR

 

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IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS
BEHALF, SERVICE OF ALL PROCESS IN ANY PROCEEDING BROUGHT AGAINST GRANTOR WITH
RESPECT TO THIS DEED OF TRUST, SERVICE BEING HEREBY ACKNOWLEDGED BY GRANTOR TO
BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO GRANTOR AT ITS ADDRESS PROVIDED FOR
IN SECTION 5.2 HEREOF EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW,
ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. IF ANY AGENT APPOINTED BY GRANTOR REFUSES TO ACCEPT SERVICE, GRANTOR
HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF BENEFICIARY TO BRING PROCEEDINGS
AGAINST GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.

 

SECTION 5.8         No Merger. The rights and estate created by this Deed of
Trust shall not, under any circumstances, be held to have merged into any other
estate or interest now owned or hereafter acquired by Beneficiary unless
Beneficiary shall have consented to such merger in writing.

 

SECTION 5.9         Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Deed of Trust,
nor consent to any departure by Grantor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Credit Agreement and
unless in writing and signed by Beneficiary. Any amendment, modification or
supplement of or to any provision of this Deed of Trust, any waiver of any
provision of this Deed of Trust and any consent to any departure by Grantor from
the terms of any provision of this Deed of Trust shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Deed of Trust or any other Credit
Document, no notice to or demand on Grantor in any case shall entitle Grantor to
any other or further notice or demand in similar or other circumstances.

 

SECTION 5.10       Liability Unimpaired.  Each Grantor’s liability hereunder and
under the other Credit Documents shall in no way be limited or impaired by, and
each Grantor hereby consents to and agrees to be bound by, any amendment or
modification of the provisions of any of the Credit Documents, or any other
instrument made to or with the Beneficiary or Lenders by any Grantor, and/or any
Guarantor.  In addition, each Grantor’s liability hereunder shall in no way be
limited or impaired by (i) any extensions of time for performance required by
any of said documents, (ii) any sale, assignment or foreclosure of any of the
Credit Documents or any sale or transfer of all or part of the Property, (iii)
any exculpatory provision in any of said instruments limiting Beneficiary’s and
Lenders’ recourse to the Property or to any other security, or limiting Lenders’
rights to a deficiency judgment against any Grantor, and/or any Guarantor, (iv)
the release of any Grantor, Guarantor, and/or any other person from performance
or observance of any of the agreements, covenants, terms or conditions contained
in any of said instruments by operation of law or otherwise, (v) the release in
whole or in part of any security for the Loan, (vi) Beneficiary’s failure to
record this Deed of Trust or file any UCC financing statements (or Beneficiary’s
improper recording or filing of any thereof) or to otherwise perfect, protect,
secure or insure any security interest or lien given as security for the Loan,
(vii) the invalidity, irregularity or unenforceability, in whole or in part, of
any of the Credit Documents or any other instrument or agreement executed or
delivered to Beneficiary or Lenders in connection with the Loan, (viii) any
determination by the title company limiting or denying title insurance coverage
under the title policy and/or any adverse impact on the priority of the Deed of
Trust, for any reason whatsoever, including, without limitation, the
restructuring of the Loan, or (ix) any other action or circumstance whatsoever
which constitutes, or might be construed to constitute, a legal

 

26

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or equitable discharge or defense of any Grantor for its obligations under any
of the Credit Documents, of each Guarantor under the Guarantee; and, in any such
case, whether with or without notice to any Grantor and with or without
consideration.

 

SECTION 5.11       No Credit for Payment of Taxes or Impositions. Grantor shall
not be entitled to any credit against the principal, premium, if any, or
interest payable under the Credit Agreement, and Grantor shall not be entitled
to any credit against any other sums which may become payable under the terms
thereof or hereof, by reason of the payment of any tax or other impositions on
the Property or any part thereof.

 

SECTION 5.12       Stamp and Other Taxes. Subject to the provisions of
subsection 1.5.5 relating to permitted contests, Grantor shall pay any United
States documentary stamp taxes, with interest and fines and penalties, and any
deed of trust recording taxes, with interest and fines and penalties, that may
hereafter be levied, imposed or assessed under or upon or by reason of this Deed
of Trust or the Secured Obligations or any instrument or transaction affecting
or relating to either thereof and in default thereof Beneficiary may advance the
same and the amount so advanced shall be payable by Grantor to Beneficiary
within ten (10) days after demand therefor, together with interest thereon at
the Default Rate.

 

SECTION 5.13       Estoppel Certificates. Grantor shall, from time to time, upon
thirty (30) days’ prior written request of Beneficiary, execute, acknowledge and
deliver to Beneficiary a certificate signed by an authorized officer or officers
stating that this Deed of Trust is unmodified and in full force and effect (or,
if there have been modifications, that this Deed of Trust is in full force and
effect as modified and setting forth such modifications).

 

SECTION 5.14       Additional Security. Without notice to or consent of Grantor
and without impairment of the Lien and rights created by this Deed of Trust,
Beneficiary may accept (but Grantor shall not be obligated to furnish) from
Grantor or from any other Person or Persons, additional security for the Secured
Obligations. Neither the giving of this Deed of Trust nor the acceptance of any
such additional security shall prevent Beneficiary from resorting, first, to
such additional security, and, second, to the security created by this Deed of
Trust without affecting Beneficiary’s Lien and rights under this Deed of Trust.

 

SECTION 5.15       Release. The Property shall be released from the Lien of this
Deed of Trust in accordance with the provisions of the Credit Agreement or at
such time as all Secured Obligations (other than surviving indemnities and
contingent obligations) have been paid in full and the Commitments of the
Lenders to make any Loan or issue any Letter of Credit under the Credit
Agreement shall have expired or been sooner terminated. Beneficiary, on the
written request and at the expense of Grantor, will execute and deliver such
proper instruments of release and satisfaction or assignment as may reasonably
be requested to evidence such release or assignment, and any such instrument,
when duly executed by Beneficiary and duly recorded by Grantor in the places
where this Deed of Trust is recorded, shall conclusively evidence the release or
assignment of this Deed of Trust.

 

SECTION 5.16       Certain Expenses of Beneficiary. If any action, suit or other
proceeding affecting the Property or any part thereof be commenced, in which
action, suit or proceeding Beneficiary is made a party or participates or in
which the right to use the Property or any part thereof is threatened, or in
which it becomes necessary in the reasonable judgment of Beneficiary to defend
or uphold the Lien of this Deed of Trust (including, without limitation, any
action, suit or proceeding to establish or uphold the compliance of the
Improvements with any Requirements of Law), then all reasonable amounts paid or
incurred by Beneficiary for the expense of any such action, suit or other
proceeding or to protect its rights therein (whether or not it is made or
becomes a party thereto) or otherwise to enforce or defend the rights and Lien
created by this

 

27

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Deed of Trust, shall be paid promptly by Grantor together with interest at the
Default Rate from the date of the payment or incurring thereof to the date of
repayment, and any such amount and the interest thereon shall be a Lien on the
Property, prior to any right, or right to, interest in, or claim upon the
Property attaching or accruing subsequent to or otherwise subordinate to the
Lien of this Deed of Trust, and the same shall be deemed to be secured hereby.
All other reasonable amounts paid, advanced or incurred by Beneficiary in order
to secure and protect the Lien of this Deed of Trust or other security provided
hereunder shall be a like Lien on the Property and be deemed to be secured
hereby.

 

SECTION 5.17       Expenses of Collection. Grantor will upon demand pay to
Beneficiary the amount of any and all expenses, including the reasonable fees
and reasonable expenses of its counsel and the fees and expenses of any experts
and agents, which Beneficiary may incur in connection with (i) the collection of
the Secured Obligations, (ii) the enforcement and administration of this Deed of
Trust, (iii) the custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Property, (iv) the exercise or enforcement of
any of the rights of Beneficiary or any Secured Party hereunder or (v) the
failure by Grantor to perform or observe any of the provisions hereof. All
amounts payable by Grantor under this Section 5.16 shall be due upon demand and
shall be part of the Secured Obligations. Grantor’s obligations under this
Section shall survive the termination of this Deed of Trust and the discharge of
Grantor’s other obligations hereunder.

 

SECTION 5.18       Business Days. In the event any time period or any date
provided in this Deed of Trust ends or falls on a day other than a Business Day,
then such time period shall be deemed to end and such date shall be deemed to
fall on the next succeeding Business Day, and performance herein may be made on
such Business Day, with the same force and effect as if made on such other day.

 

SECTION 5.19       Relationship. The relationship of Beneficiary to Grantor
hereunder is strictly and solely that of lender and borrower and grantor and
beneficiary and nothing contained in the Credit Agreement, this Deed of Trust,
any Swap Contract or any other document or instrument now existing and delivered
in connection therewith or otherwise in connection with the Secured Obligations
is intended to create, or shall in any event or under any circumstance be
construed as creating a partnership, joint venture, tenancy-in-common, joint
tenancy or other relationship of any nature whatsoever between Beneficiary and
Grantor other than as lender and borrower and grantor and beneficiary.

 

SECTION 5.20       Concerning Beneficiary.

 

5.20.1      Beneficiary shall be entitled to rely upon any written notice,
statement, certificate, order or other document or any telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person, and, with respect to all matters pertaining to this Deed
of Trust and its duties hereunder, upon advice of counsel selected by it.

 

5.20.2      With respect to any of its rights and obligations as a Lender,
Beneficiary shall have and may exercise the same rights and powers hereunder.
The term “Lenders,” “Lender” or any similar terms shall, unless the context
clearly otherwise indicates, include Beneficiary in its individual capacity as a
Lender. Beneficiary may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or other business with Grantor or any
entity related to or affiliated with Grantor to the same extent as if
Beneficiary were not acting as collateral agent.

 

5.20.3      If any item of Property also constitutes collateral granted to
Beneficiary under any other deed of trust, security agreement, pledge or
instrument of any type, in the event of any

 

28

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conflict between the provisions of this Deed of Trust and the provisions of such
other deed of trust, security agreement, pledge or instrument of any type in
respect of such collateral, Beneficiary, in its sole discretion, shall select
which provision or provisions shall control.

 

5.20.4      Beneficiary has been appointed as collateral agent pursuant to the
Credit Agreement. The actions of Beneficiary hereunder are subject to the
provisions of the Credit Agreement. Beneficiary shall have the right hereunder
to make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking action (including, without
limitation, the release or substitution of Property), in accordance with this
Deed of Trust and the Credit Agreement. Beneficiary may resign and a successor
Beneficiary may be appointed in the manner provided in the Credit Agreement.
Upon the acceptance of any appointment as Beneficiary by a successor
Beneficiary, that successor Beneficiary shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Beneficiary under this Deed of Trust, and the retiring Beneficiary shall
thereupon be discharged from its duties and obligations under this Deed of
Trust. After any retiring Beneficiary’s resignation, the provisions of this Deed
of Trust shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Deed of Trust while it was Beneficiary.

 

SECTION 5.21       Future Advances. This Deed of Trust may secure future
advances. The maximum aggregate amount of all advances of principal under the
Credit Agreement that may be outstanding hereunder at any time is
$160,000,000.00.

 

SECTION 5.22       Waiver of Stay.

 

5.22.1      Grantor agrees that in the event that Grantor or any property or
assets of Grantor shall hereafter become the subject of a voluntary or
involuntary proceeding under the Bankruptcy Code or Grantor shall otherwise be a
party to any federal or state bankruptcy, insolvency, moratorium or similar
proceeding to which the provisions relating to the automatic stay under Section
362 of the Bankruptcy Code or any similar provision in any such law is
applicable, then, in any such case, whether or not Beneficiary has commenced
foreclosure proceedings under this Deed of Trust, Beneficiary shall be entitled
to relief from any such automatic stay as it relates to the exercise of any of
the rights and remedies (including, without limitation, any foreclosure
proceedings) available to Beneficiary as provided in this Deed of Trust or in
any other Security Document.

 

5.22.2      Beneficiary shall have the right to petition or move any court
having jurisdiction over any proceeding described in subsection 5.21.1 for the
purposes provided therein, and Grantor agrees (i) not to oppose any such
petition or motion and (ii) at Grantor’s sole cost and expense, to assist and
cooperate with Beneficiary, as may be requested by Beneficiary from time to
time, in obtaining any relief requested by Beneficiary, including, without
limitation, by filing any such petitions, supplemental petitions, requests for
relief, documents, instruments or other items from time to time requested by
Beneficiary or any such court.

 

SECTION 5.23       Continuing Security Interest: Assignment. This Deed of Trust
shall create a continuing security interest in the Property and shall (i) be
binding upon Grantor, its successors and assigns and (ii) inure, together with
the rights and remedies of Beneficiary hereunder, to the benefit of Beneficiary
and the other Secured Parties and each of their respective successors,
transferees and assigns; no other Persons (including, without limitation, any
other creditor of Grantor) shall have any interest herein or any right or
benefit with respect hereto. Without limiting the generality of the foregoing
clause (ii), any Lender may assign or otherwise transfer any indebtedness held
by it secured by this Deed of Trust to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to

 

29

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such Lender, herein or otherwise, subject however, to the provisions of the
Credit Agreement and any applicable Swap Contract.

 

SECTION 5.24       Beneficiary’s Right To Sever Indebtedness.

 

5.24.1      Grantor acknowledges that (a) the Property does not constitute the
sole source of security for the payment and performance of the Secured
Obligations and that the Secured Obligations are also secured by property of
Grantor and its Affiliates in other jurisdictions (all such property,
collectively, the “Collateral”), (b) the number of such jurisdictions and the
nature of the transaction of which this instrument is a part are such that it
would have been impracticable for the parties to allocate to each item of
Collateral a specific loan amount and to execute in respect of such item a
separate credit agreement or swap contract and (c) Grantor intends that
Beneficiary have the same rights with respect to the Property, in foreclosure or
otherwise, that Beneficiary would have had if each item of Collateral had been
secured, mortgaged or pledged pursuant to a separate credit agreement or
interest rate agreement, deed of trust or security instrument. In furtherance of
such intent, Grantor agrees that Beneficiary may at any time by notice (an
“Allocation Notice”) to Grantor allocate a portion (the “Allocated
Indebtedness”) of the Secured Obligations to the Property and sever from the
remaining Secured Obligations the Allocated Indebtedness. From and after the
giving of an Allocation Notice with respect to the Property, the Secured
Obligations hereunder shall be limited to the extent set forth in the Allocation
Notice and (as so limited) shall, for all purposes, be construed as a separate
loan obligation of Grantor unrelated to the other transactions contemplated by
the Credit Agreement, any Swap Contract any other Credit Document or any
document related to any thereof. To the extent that the proceeds on any
foreclosure of the Property shall exceed the Allocated Indebtedness, such
proceeds shall belong to Grantor and shall not be available hereunder to satisfy
any Secured Obligations of Grantor other than the Allocated Indebtedness. In any
action or proceeding to foreclose the Lien of this Deed of Trust or in
connection with any power of sale foreclosure or other remedy exercised under
this Deed of Trust commenced after the giving by Beneficiary of an Allocation
Notice, the Allocation Notice shall be conclusive proof of the limits of the
Secured Obligations hereby secured, and Grantor may introduce, by way of defense
or counterclaim, evidence thereof in any such action or proceeding.
Notwithstanding any provision of this Section 5.23, the proceeds received by
Beneficiary pursuant to this Deed of Trust shall be applied by Beneficiary in
accordance with the provisions of subsection 3.3.3 hereof.

 

5.24.2      Grantor hereby waives to the greatest extent permitted under law the
right to a discharge of any of the Secured Obligations under any statute or rule
of law now or hereafter in effect which provides that foreclosure of the Lien of
this Deed of Trust or other remedy exercised under this Deed of Trust
constitutes the exclusive means for satisfaction of the Secured Obligations or
which makes unavailable a deficiency judgment or any subsequent remedy because
Beneficiary elected to proceed with a power of sale foreclosure or such other
remedy or because of any failure by Beneficiary to comply with laws that
prescribe conditions to the entitlement to a deficiency judgment. In the event
that, notwithstanding the foregoing waiver, any court shall for any reason hold
that Beneficiary is not entitled to a deficiency judgment, Grantor shall not (a)
introduce in any other jurisdiction such judgment as a defense to enforcement
against Grantor of any remedy in the Credit Agreement, any Swap Contract or any
other Credit Document or (b) seek to have such judgment recognized or entered in
any other jurisdiction, and any such judgment shall in all events be limited in
application only to the state or jurisdiction where rendered.

 

5.24.3      In the event any instrument in addition to the Allocation Notice is
necessary to effectuate the provisions of this Section 5.23, including, without
limitation, any amendment to this Deed of Trust, any substitute promissory note
or affidavit or certificate of any kind,

 

30

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Beneficiary may execute, deliver or record such instrument as the
attorney-in-fact of Grantor. Such power of attorney is coupled with an interest
and is irrevocable.

 

5.24.4      Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 5.23 shall be effective only to the maximum extent
permitted by law.

 

SECTION 5.25       Concerning Trustee. Trustee may resign by an instrument in
writing addressed to Beneficiary or be removed at any time with or without cause
by instrument in writing duly executed by Beneficiary. In case of the death,
resignation or removal of Trustee, a successor (each, a “Successor Trustee”) may
be appointed by Beneficiary by instrument of substitution complying with any
applicable requirements of law, and in the absence of any such requirement
without other formality than appointment and designation in writing. Such
appointment and designation shall be full evidence of the right and authority to
make the same and of all facts therein recited, and upon the making of any such
appointment and designation this conveyance shall vest in the Successor Trustee
all the estate and title of its predecessor in all the Property, and such
Successor Trustee shall thereupon succeed to all the rights, powers, privileges,
immunities and duties hereby conferred upon the prior Trustee. Except for gross
negligence or willful misconduct, Trustee shall not be liable for any act or
omission or error of judgment. Trustee may rely on any document believed by him
in good faith to be genuine. All money received by Trustee shall, until used or
applied as herein provided, be held in trust, but need not be segregated (except
to the extent required by law), and Trustee shall not be liable for interest
thereon.

 

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

 

31

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IN WITNESS WHEREOF, Grantor has caused this Deed of Trust to be duly executed
and delivered under seal the day and year first above written.

 

 

FRIDAY MORNING, INC.

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and
Treasurer

 

 

 

 

 

TUESDAY MORNING, INC.

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

TUESDAY MORNING PARTNERS, LTD.

 

 

 

By:

Days of the Week, Inc., its General Partner

 

 

 

 

 

By:

 

 

Name:

Mark E. Jarvis

 

Title:

Secretary

 

32

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ACKNOWLEDGMENT

 

STATE OF

§

 

§

COUNTY OF

§

 

This instrument was acknowledged before me on this        day of September 2002,
by Mark E. Jarvis, the Executive Vice President and Treasurer of Friday Morning,
Inc., a Texas corporation, on behalf of said corporation.

 

 

 

 

Notary Public

 

State of

 

ACKNOWLEDGMENT

 

STATE OF

§

 

§

COUNTY OF

§

 

This instrument was acknowledged before me on this        day of September 2002,
by Mark E. Jarvis, Executive Vice President and Chief Financial Officer of
Tuesday Morning, Inc., a Delaware corporation, on behalf of said corporation.

 

 

 

 

Notary Public

 

State of

 

(PERSONALIZED SEAL)

 

ACKNOWLEDGMENT

 

STATE OF

§

 

§

COUNTY OF

§

 

This instrument was acknowledged before me on this        day of September 2002,
by Mark E. Jarvis, Secretary of Days of the Week, Inc., which is General Partner
of Tuesday Morning Partners, Ltd., a Texas limited partnership, on behalf of
said limited partnership.

 

 

 

 

Notary Public

 

State of

 

(PERSONALIZED SEAL)

 

33

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Schedule A

 

[Legal Description]

 

[to come from title policies]

 

34

--------------------------------------------------------------------------------

 

Schedule B

 

1.             Those exceptions indicated in Lawyers Title Insurance Corporation
Commitment for Title Insurance No. 2002 CL 702688-Y;

 

2.             Those exceptions indicated in Lawyers Title Insurance Corporation
Commitment for Title Insurance No. 2002 CL 698111-Y; and

 

3.             That certain Deed of Trust and Security Agreement executed by
Tuesday Morning Partners, Ltd., a Texas limited partnership to Eugene F. Weimer,
Trustee(s), securing Compass Bank in the payment of one note in the principal
sum of $6,500,000.00, and other indebtedness and performance as therein
provided, which Deed of Trust is dated June 3, 1999, filed of record on June 7,
1999, and recorded in Volume 99111, Page 5285, Deed of Trust Records, Dallas
County, Texas.

 

35

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Exhibit G

 

[Form of Section 5.6 Certificate]

 

SECTION 5.6 CERTIFICATE

 

Reference is made to that certain Credit Agreement, dated as of September 27,
2002 (as such may be amended, modified or supplemented, the “Credit Agreement”),
among Tuesday Morning Corporation, a Delaware corporation (the “Borrower”), the
Guarantors party thereto from time to time, the Revolving Credit Lenders party
thereto from time to time, and Fleet National Bank, as Administrative Agent. 
Capitalized terms used herein and not defined shall have the meanings assigned
to them in the Credit Agreement.

 

[Name of non-U.S. Lender] (the “Revolving Credit Lender”) is providing this
certificate pursuant to subsection 5.6(b) of the Credit Agreement. Under
penalties of perjury, the Revolving Credit Lender hereby represents and warrants
that:

 

1.             The Revolving Credit Lender is the sole record and beneficial
owner of the Note(s) registered in its name in respect of which it is providing
this certificate, and it shall remain the sole beneficial owner of such Note(s)
registered in its name at all times during which it is the record holder of such
Note(s) registered in its name.

 

2.             The Revolving Credit Lender is not a “bank” for purposes of
Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the
“Code”).

 

3.             The Revolving Credit Lender is not a 10% shareholder of Borrower
within the meaning of Section 881(c)(3)(B) of the Code.

 

4.             The Revolving Credit Lender is not a controlled foreign
corporation related to Borrower within the meaning of Section 864(d) (4) of the
Code.

 

5.             The income from the Note(s) held by the Revolving Credit Lender
is not effectively connected with the conduct of a trade or business within the
United States.

 

6.             The Revolving Credit Lender has furnished Borrower with a
certificate of foreign status on Internal Revenue Service Form W-8ECI or W-8BEN 
(or the applicable successor form or certificate).

 

7.             The Revolving Credit Lender will promptly notify Borrower and the
Administrative Agent if any of the representations and warranties made herein
are no longer true and correct.

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
certificate.

 

 

 

[Name of Non-U.S. Lender]

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

Date:

 

2

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Exhibit H

 

[Form of Notice of Borrowing]

 

NOTICE OF BORROWING

 

Fleet National Bank,

as Administrative Agent

100 Federal Street

Boston, Massachusetts 02110

 

Ladies and Gentlemen:

 

The undersigned, Tuesday Morning Corporation, a Delaware corporation
(“Borrower”), refers to the Credit Agreement, dated as of September 27, 2002 (as
such may be amended, modified or supplemented, the “Credit Agreement”), among
Borrower, the Guarantors party thereto from time to time, the Revolving Credit
Lenders party thereto from time to time, and Fleet National Bank, as
Administrative Agent.  Capitalized terms used herein and not defined shall have
the meanings assigned to them in the Credit Agreement.

 

Borrower hereby gives you irrevocable notice, pursuant to Sections 2.2 and 4.5
of the Credit Agreement, that Borrower desires to make a borrowing (the
“Proposed Borrowing”) under the Credit Agreement, and in that connection sets
forth below the information relating to the Proposed Borrowing:

 

(A)          Proposed Borrowing:

 

(i)            The Business Day of the Proposed Borrowing is
                     , 20        ;

 

(ii)           The aggregate amount of the Proposed Borrowing is
$                            ;

 

(iii)          The Proposed Borrowing shall consist of a
$                     Revolving Credit Loan, of which $                        
are requested to be Alternate Base Rate Loans and $                      of
which are requested to be LIBOR Loans.  The amount of Revolving Credit Loans
that are requested to be LIBOR Loans are requested to have the following
Interest Period(s):                                       ;

 

(iv)          The proceeds of the Proposed Borrowing are to be deposited into
the accounts set forth in the attached letter and in the respective amounts set
forth therein.

 

(B)                               Borrower hereby certifies and represents that
the following statements are true on the date hereof, and will be true on the
date of the Proposed Borrowing:

 

(i)            All representations and warranties made by the Obligors in
Section 8 of the Credit Agreement, and by each Obligor in each of the other
Credit Documents, or any officers’ certificate, agreement, instrument,
certificate, document or other writing delivered to the Administrative Agent or
the Revolving Credit Lenders in connection therewith to which it is a party, are
true and complete in all material respects on and as of the date of the Proposed
Borrowing, with the same force and effect as if made on and as of such date
(except insofar as any such representation or warranty

 

--------------------------------------------------------------------------------

 

expressly relates to an earlier date, in which case it is true and complete as
of such date); and

 

(ii)           No Default or Event of Default has occurred and is continuing, or
would result from the Proposed Borrowing or from the application of the proceeds
therefrom, or would otherwise exist immediately after giving effect to the
Proposed Borrowing; and

 

(iii)          For each Revolving Credit Loan, both the Borrowing Base (as
determined upon the most recent Borrowing Base Certificate delivered under
Section 9.1(j) of the Credit Agreement) and the aggregate Revolving Credit
Commitments, after giving effect to the Proposed Borrowing, exceeds the sum of
all Revolving Credit Loans then outstanding, plus the aggregate principal amount
of Swing Loans then outstanding, plus the aggregate amount of all Letter of
Credit Liabilities then outstanding.

 

Dated:

TUESDAY MORNING CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

2

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Exhibit I

 

[Form of Notice of Conversion/Continuation]

 

NOTICE OF CONVERSION/CONTINUATION

 

Fleet National Bank,

as Administrative Agent

100 Federal Street

Boston, Massachusetts 02110

 

Ladies and Gentlemen:

 

The undersigned, Tuesday Morning Corporation, a Delaware corporation
(“Borrower”), refers to the Credit Agreement, dated as of September 27, 2002 (as
such may be amended, modified or supplemented, the “Credit Agreement”), among
Borrower, the Guarantors party thereto from time to time, the Revolving Credit
Lenders party thereto from time to time, and Fleet National Bank, as
Administrative Agent. Capitalized terms used herein and not defined shall have
the meanings assigned to them in the Credit Agreement.

 

Borrower hereby gives you irrevocable notice, pursuant to Sections 2.10 and 4.5
of the Credit Agreement, that Borrower desires:

 

(Check One):

 

o                                     To convert $                     in
principal amount of presently outstanding Alternate Base Rate Loans to LIBOR
Loans on                     , 20         The Interest Period for such LIBOR
Loans commencing on such date is requested to be a                   period.

 

o                                     To continue as LIBOR Loans
$                              in principal amount of presently outstanding
LIBOR Loans having an Interest Period the last day of which is
                           , 20        . The Interest Period for such LIBOR
Loans commencing on such Interest Payment Date is requested to be a
                         period.

 

Borrower hereby certifies that no Default or Event of Default has occurred and
is continuing, or would result from the proposed Conversion or Continuation or
from the application of the proceeds therefrom, or would otherwise exist
immediately after giving effect to the proposed Conversion or Continuation.

 

Dated:

TUESDAY MORNING CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

--------------------------------------------------------------------------------

 

Exhibit J

 

[FORM OF SUBORDINATION PROVISIONS]

 

1.             Definitions. Reference is made to the Credit Agreement, dated as
of September 27, 2002 (as amended, amended and restated or otherwise
supplemented or modified and in effect from time to time, the “Credit
Agreement”), by and among Tuesday Morning Corporation, a Delaware corporation
(“Borrower”), the Guarantors party thereto from time to time, the Revolving
Credit Lenders party thereto from time to time, and Fleet National Bank as
Administrative Agent. As used in this Subordinated Note, and unless the context
requires a different meaning, the following terms have the meanings indicated:

 

“Borrower” shall mean Tuesday Morning Corporation, a Delaware corporation, and
its successors.

 

“Credit Agreement Default” shall mean any Default as defined in the Credit
Agreement.

 

“Event of Default” shall have the meaning set forth in Section 2 hereof.

 

“Note” shall mean this Subordinated Note.

 

“Person” means an individual or a corporation, partnership, trust, incorporated
or unincorporated association, joint venture, joint stock company, government
(or any agency or political subdivision thereof) or other entity of any kind.

 

“Senior Debt” means the Borrower’s obligations for the principal of, premium, if
any, and interest (including post-petition interest in any liquidation or
dissolution of the Borrower or in a bankruptcy reorganization, insolvency,
receivership or similar providing with respect to the Borrower or its property
whether or not a claim for such interest is allowed or allowable in any such
proceeding) on, and fees and expenses of counsel and other professional fees
incurred in connection with collection, work-out or insolvency related matters,
and other amounts now or hereafter payable (whether by indemnification,
contribution, reimbursement or otherwise) on or in connection with the Credit
Agreement and the other Credit Documents.

 

2.             Events of Default. Prior to the irrevocable and indefeasible
repayment in full in cash of all Obligations under the Senior Debt and the
termination of all commitments thereunder (the “Termination Date”), if any of
the following events (“Events of Default”) shall occur and be continuing:

 

(i)            The Borrower shall fail to make any payment of principal on this
Note when the same becomes due and payable; or

 

(ii)           The Borrower shall fail to make any payment of interest on this
Note when the same becomes due and payable and such failure continues uncured
for more than thirty (30) days; or the Borrower shall fail to comply with any
other provision of this Note and such failure continues uncured for more than
sixty (60) days after written notice thereof to the Borrower specifying such
default and requiring that it be remedied; or

 

(iii)          The Borrower shall generally not pay its debts as such debts
become due, or shall make a general assignment for the benefit of creditors, or
any proceeding shall be

 

--------------------------------------------------------------------------------

 

instituted by or against the Borrower seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of its
property and in the case of any such proceeding instituted against the Borrower
such proceeding shall not be stayed or dismissed within sixty (60) days from the
date of institution thereof or the Borrower shall take any corporate action to
authorize any of the actions set forth above in this subsection (iii);

 

then, and in any such event (but subject to Section 4 hereof), the Holder, by
written notice to the Borrower and the Administrative Agent, may declare this
Note and all interest thereon payable, or, in the case of an Event of Default
specified in subsection (iii) above, this Note and all interest thereon shall
automatically become due and payable without action by the Holder, whereupon
this Note and all such interest shall on the fifth day following such notice
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 the
Borrower.

 

After the Termination Date, [Insert default provisions of Borrower’s choice]

 

3.             Cross Acceleration. Upon the acceleration of the Obligations
under the Credit Agreement (but subject to Section 4 hereof), the Holder may, by
written notice to the Borrower and the Administrative Agent, declare all unpaid
principal and accrued interest on this Note then outstanding to be due and
payable. Such declaration of acceleration by the Holder hereunder shall be
automatically annulled and rescinded if the holders of Senior Debt have
rescinded their declaration of acceleration of the Obligations within 120 days
thereof.

 

4.                                       Subordination.

 

4.1           Note Subordinated to Senior Debt.

 

The Borrower, for itself and its successors, and Holder, by acceptance of this
Note, agrees that the payment of the principal of, interest on and any other
amounts in respect of this Note by Borrower is subordinated, to the extent and
in the manner provided in this Section 4, to the prior irrevocable and
indefeasible payment in full in cash of all amounts of whatever nature payable
under Senior Debt.

 

This Section 4 will constitute a continuing offer to all persons who, in
reliance upon its provisions, become holders of, or continue to hold, Senior
Debt, and such provisions are made for the benefit of the holders of Senior
Debt, and such holders are made obligees under this Section and they and/or each
of them may enforce its provisions.

 

4.2           No Payment on Note in Certain Circumstances.

 

(i)            If there shall be any Credit Agreement Default, unless and until
such Credit Agreement Default shall have been cured or waived or shall have
ceased to exist (as evidenced in writing by the Administrative Agent), neither
Borrower or any other Person may make any payment on account of principal of or
interest on this Note, or any other amount of whatever nature in respect of this
Note, or acquire this Note for cash, property or securities, by set-off or
otherwise, or redeem, retire, purchase, or deposit moneys for defeasance of or
to acquire this Note, and Borrower shall not segregate and hold separate for the
benefit of the Holder money or other assets for any such payment or
distribution.

 

2

--------------------------------------------------------------------------------

 

(ii)           For so long as payment hereunder is prohibited pursuant to (i)
above, the Holder shall not demand, sue for, institute any bankruptcy or
insolvency proceeding, collect or receive or gain from any other Person with
respect to any payment of interest or principal on this Note or any other
amounts in respect of this Note.

 

(iii)          If any payment or distribution of assets of Borrower is received
by the Holder in respect of principal or interest on the Note at a time when
that payment or distribution should not have been made because of any provision
of Section 4, such payment or distribution will be received and held in trust
for benefit of and will be paid over to the Administrative Agent for the benefit
of the holders of any Senior Debt which is due and payable and remains unpaid or
unprovided for until all such Senior Debt has been irrevocably and indefeasibly
paid in full in cash, after giving effect to any concurrent payment or
distribution or provision therefore to the holders of such Senior Debt.

 

4.3           Note Subordinated to Prior Payment of All Senior Debt on
Dissolution, Liquidation or Reorganization.

 

Upon any general distribution of assets of Borrower, or upon any dissolution,
winding up, partial or total liquidation or financial restructuring or other
similar reorganization of Borrower (whether in bankruptcy, insolvency,
receivership or similar proceeding related to Borrower or its property or upon
an assignment for the benefit of creditors or otherwise) (a “Liquidation
Event”):

 

(i)            the Administrative Agent, for the benefit of the holders of all
Senior Debt, will first be entitled to receive irrevocable and indefeasible
payment in full in cash of the principal and interest due on Senior Debt and all
other amounts due in connection with Senior Debt before the Holder is entitled
to receive any payment on account of the principal of, interest on or any other
amounts in respect of this Note.

 

(ii)           any payment or distributions of assets of Borrower of any kind or
character, whether in cash, property or securities, to which the Holder would be
entitled except for the provisions of this Section 4 (including, without
limitation, distributions received by the Holder in respect of obligations
junior in right of payment to this Note) will be paid by the liquidating trustee
or agent of such other person making such a payment or distribution directly to
the Administrative Agent for the benefit of the holders of Senior Debt or their
representatives to the extent necessary to make irrevocable and indefeasible
payment in full in cash of all Senior Debt remaining unpaid, after giving effect
to any concurrent payment or distribution, to the holders of such Senior Debt or
provision for that payment or distribution; and

 

(iii)          if, notwithstanding the foregoing, upon a Liquidation Event any
payment or distribution of assets of Borrower of any kind or character, whether
in cash, property or securities is received by the Holder on account of
principal of or interest on this Note before all Senior Debt is irrevocably and
indefeasibly paid in full in cash, or effective provision made for such payment,
such payment or distribution will be received and held in trust for the benefit
of and will be paid over to the Administrative Agent for the benefit of the
holders of the Senior Debt remaining unpaid or unprovided for or their
representative for application to the payment of such Senior Debt until all such
Senior Debt has been irrevocably and indefeasibly paid in full in cash, after
giving effect to any concurrent payment or distribution or provision therefore
to the holders of such Senior Debt.

 

Borrower will give prompt written notice to the Holder of any dissolution,
winding up, liquidation or reorganization of it or any assignment for the
benefit of its creditors. The Administrative Agent may file proof of claims,
vote and take other actions as Administrative Agent

 

3

--------------------------------------------------------------------------------

 

deems appropriate with respect to any Liquidation Event and the Holder grants
Administrative Agent a power-of-attorney, coupled with an interest, to do any of
the foregoing.

 

4.4           Noteholder to be Subrogated to Rights of Holders of Senior Debt.

 

Upon the irrevocable and indefeasible payment in full in cash of all Senior
Debt, the Holder will be subrogated to the rights of the holders of Senior Debt
to receive payments or distributions of assets of Borrower applicable to the
Senior Debt until all amounts owing on such Senior Debt have been paid in full,
and for the purpose of such subrogation no such payments or distributions to the
holders of Senior Debt by or on behalf of Borrower or by or on behalf of the
Holder by virtue of this Section 4 which otherwise would have been made to the
Holder will, as between Borrower and the Holder, be deemed to be payment by
Borrower to or on account of the Senior Debt, it being understood that the
provisions of this Section 4 are and are intended to be solely for the purpose
of defining the relative rights of the Holder, on the one hand, and holders of
Senior Debt, on the other hand.

 

To the extent after payment in full of the Senior Debt payments or distributions
applicable to the Senior Debt made by Borrower from proceeds of security, by
setoff or otherwise are set aside or required to be paid to a trustee in
bankruptcy, liquidating trustee or receiver or similar person in respect of
Borrower as a preference under any bankruptcy, insolvency or similar law all
Senior Debt shall be reinstated for purposes of this Section 4.

 

4.5           Obligations of Borrower Unconditional.

 

Nothing contained in this Note is intended to or will impair, as between
Borrower and the Holder, the obligations of Borrower, which are absolute and
unconditional, to pay to the Holder the principal of and interest on this Note
as and when they become due and payable in accordance with their terms
(including, without limitation, the terms of this Section 4), or is intended to
or will affect the relative rights of the Holder and creditors of Borrower other
than the holders of the Senior Debt, nor, except as provided in this Section 4,
will anything herein or therein prevent the Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Note, subject to
the rights under this Section of the holders of Senior Debt in respect of cash,
property or securities of Borrower received upon the exercise of any such remedy
and subject to Section 4 and subject to the other rights of the holders of
Senior Debt pursuant to Section 4.

 

4.6           Subordination Rights Not Impaired by Acts or Omissions of Borrower
or Holders of Senior Debt.

 

No right of any present or future holders of any Senior Debt to enforce
subordination as provided herein will at any time in any way be prejudiced or
impaired by any act or failure to act on the part of Borrower or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
Borrower with the terms of this Note or the Credit Agreement, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
The holders of Senior Debt may extend, renew, modify, amend, supplement or
restate the terms of the Senior Debt or any security therefor and release, sell
or exchange such security, refinance, refund, replace and/or increase the Senior
Debt, and otherwise deal freely with Borrower, all without affecting the
liabilities and obligations of the parties to the Holder.

 

Without in any way limiting the generality of the foregoing, the holders of
Senior Debt may, at any time and from time to time, without the consent of or
notice to the Holder, without incurring responsibility to the Holder and without
impairing or releasing the subordination provided in this Note or the
obligations hereunder of the Holder to the holders of the Senior Debt, do any
one or more of the following:

 

4

--------------------------------------------------------------------------------

 

(i)            change the manner, place or terms of payment or extend the time
of payment of, increase the principal amount of, or renew or alter, Senior Debt,
or otherwise amend or supplement in any manner Senior Debt, or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding;

 

(ii)           sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt;

 

(iii)          release any Person liable in any manner for the payment or
collection of Senior Debt; and

 

(iv)          exercise or refrain from exercising any rights against Borrower
and any other Person.

 

4.7           No Change to Terms of Note.

 

Prior to the irrevocable and indefeasible repayment in full in cash of the
Senior Debt, the Holder and Borrower may not amend, modify, supplement, renew,
extend, increase, restate, refinance, refund or replace the Note or any other
document, instrument, certificate or instrument now or hereafter evidencing the
Note without the prior written consent of the Majority Revolving Credit Lenders
(as defined in the Credit Agreement).

 

4.8           Capitalization of Interest.

 

So long as any Lenders have any Revolving Credit Commitments (as defined in the
Credit Agreement) under the Credit Agreement or any amount is outstanding under
any of the Credit Documents (as defined in the Credit Agreement), all interest
accrued under this Note shall be capitalized, and no payment of interest shall
be made unless such payment is made solely by the issuance of additional Notes
(valued at 100% of the face amount thereof) identical to this Note in all
material terms and conditions.

 

5

--------------------------------------------------------------------------------

 

Exhibit K

 

[Form of Joinder Agreement]

 

JOINDER AGREEMENT

 

JOINDER AGREEMENT, dated as of                         , 20          , made by
each of the entities that are signatories hereto (the “Additional Obligors”), in
favor of Fleet National Bank, as Administrative Agent (in such capacity, the
“Administrative Agent”) for the several banks and other financial institutions
(the “Revolving Credit Lenders”) from time to time parties to the Credit
Agreement, dated as of September 27, 2002 (as the same may be amended,
supplemented, waived or otherwise modified from time to time, together with any
agreement extending the maturity of, or restructuring, refunding, refinancing or
increasing all or any portion of the Indebtedness under such agreement or any
successor agreement, the “Credit Agreement”), among Tuesday Morning Corporation,
a Delaware corporation (together with any assignee of its rights and obligations
thereunder as provided for therein, “Borrower”), the Guarantors party thereto
from time to time, the Revolving Credit Lenders party thereto from time to time,
and the Administrative Agent. Capitalized terms not defined herein have the
meanings given to them in the Credit Agreement.

 

W I T N E S S E T H :

 

WHEREAS, the parties to this Joinder Agreement wish to amend Annex A to the
Credit Agreement in the manner hereinafter set forth; and

 

WHEREAS, this Joinder Agreement is entered into pursuant to Section 9.20 of the
Credit Agreement;

 

NOW, THEREFORE, in consideration of the premises, the parties hereto hereby
agree as follows:

 

1.             Each of the undersigned Additional Obligors hereby acknowledges
that it has received and reviewed a copy of the Credit Agreement and the
Security Agreement dated as of September 27, 2002 among Borrower, the Guarantors
party thereto and the Administrative Agent (the “Security Agreement”), and
acknowledges and agrees to:

 

(a)           join the Credit Agreement as an Obligor and the Security Agreement
as a Debtor, as indicated with its signature below;

 

(b)           be bound by all covenants, agreements and acknowledgments
attributable to an Obligor in the Credit Agreement and to a Debtor in the
Security Agreement; and

 

(c)           perform all obligations and duties required of it as an Obligor
under the Credit Agreement and a Debtor under the Security Agreement.

 

2.             Each of the undersigned Additional Obligors hereby represents and
warrants that the representations and warranties made with respect to it in
Section 8 of the Credit Agreement and each of the other Credit Documents to
which such Additional Obligor is a party, by virtue of this Joinder Agreement or
otherwise, or which are contained in any certificate furnished by or on behalf
of such Additional Obligor are true and correct in all material respects on the
date hereof as if made on and as of the date hereof.

 

--------------------------------------------------------------------------------

 

3.             The address and jurisdiction of organization of each of the
Additional Obligors is set forth below its name on the signature pages hereto.

 

4.             THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

IN WITNESS WHEREOF, each of the undersigned has caused this Joinder Agreement to
be duly executed and delivered in Boston, Massachusetts by its proper and duly
authorized officer as of the date set forth below.

 

Dated:

                                     , as Obligor and Debtor

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

Jurisdiction of Incorporation:

 

 

 

 

ACKNOWLEDGED AND AGREED TO:

 

 

 

FLEET NATIONAL BANK,

 

as Administrative Agent

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

2

--------------------------------------------------------------------------------

 

Exhibit L

COMPLIANCE CERTIFICATE

 

Date of Certificate:                     

 

To:          Fleet National Bank, As Administrative Agent

100 Federal Street

Boston, Massachusetts 02110

 

Re:                               Credit Agreement dated as of September 27,
2002 (as amended from time to time, the “Credit Agreement”) by and among Tuesday
Morning Corporation, the Guarantors party thereto from time to time, the
Revolving Credit Lenders party thereto from time to time, and Fleet National
Bank, as Administrative Agent

 

The undersigned,                         , the duly elected and qualified Chief
Financial Officer of the Borrower, hereby certifies as of the date hereof the
following:

 

1.             No Defaults.  I have read a copy of the Credit Agreement.  Except
as disclosed on Schedule 1 hereto, no Default or Event of Default presently
exists under the Credit Agreement or any of the other Credit Documents.

 

2.             Financial Covenant Compliance. Attached hereto as Schedule 2 are
all relevant calculations needed to determine whether the Borrower is in
compliance with Sections 9.7, 9.8, 9.9, 9.10 and 9.11 of the Credit Agreement.

 

2.             No Material Changes, Etc.  Except as disclosed on Schedule 3
hereto, since [Date of most recent audited financial statements furnished to the
Administrative Agent and the Revolving Credit Lenders], there has occurred no
Materially Adverse Change nor has there occurred any event which has a Material
Adverse Effect.

 

Terms used herein which are defined in the Credit Agreement shall have the same
meaning herein as in the Credit Agreement.

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

--------------------------------------------------------------------------------

 

SCHEDULE 1

 

No Default or Event of Default exists under the Credit Agreement except for the
following:

 

[Insert specific Default or Event of Default, describing same in reasonable
detail and the action that the Borrower has taken and proposes to take with
respect thereto]

 

2

--------------------------------------------------------------------------------

 

SCHEDULE 2

 

§9.7         Liens

 

Since the date of the most recent Compliance Certificate furnished to the
Administrative Agent, the Obligors and their Subsidiaries have not created,
incurred, assume or suffered to exist any Lien upon or with respect to any
Collateral or other property except for Liens permitted under Sections 9.7(a),
(b), (c), (d), (f), (m), (n), (q), (r), (s), (t), and the following:

 

[Insert description of specific Liens, detailing the name of the secured party,
the assets subject to the Lien, the amount of the Obligations secured by the
Lien and the Section of the Credit Agreement under which such Lien is permitted]

 

§9.8         Indebtedness

 

Since the date of the most recent Compliance Certificate furnished to the
Administrative Agent, the Obligors and their Subsidiaries have not created,
incurred, assume, suffered to exist or become liable for any Indebtedness except
for Indebtedness permitted under Sections 9.8(a), (b), (c), (e), (h), (k) (but
only with respect to currency exchange rates, commodity prices or similar
risks),(m), (l) (but only relating to Indebtedness described in the immediately
preceding subsections) and the following:

 

[Insert description of specific Indebtedness, detailing the name of the holder
of the Indebtedness, the amount of the Indebtedness and the Section of the
Credit Agreement under which such Indebtedness is permitted]

 

§9.9         Investments

 

Since the date of the most recent Compliance Certificate furnished to the
Administrative Agent, the Obligors and their Subsidiaries have not made or
permitted to remain outstanding any Investments except for Investments permitted
under Sections 9.9 (a), (b), (h), (i), (j), (k), (n), (t) and the following:

 

[Insert description of specific Investments, detailing the nature of the
Investment and the Section of the Credit Agreement under which such Investment
is permitted]

 

§9.10       Dividends

 

Since the date of the most recent Compliance Certificate furnished to the
Administrative Agent, the Obligors and their Subsidiaries have not declared or
made any Dividend Payment except the following:

 

[Insert description of specific Dividend Payment, detailing the Section of the
Credit Agreement under which such Dividend Payment is permitted]

 

3

--------------------------------------------------------------------------------

 

§9.11(a)  Maximum Leverage Ratio

 

(i)            Total Debt

 

 

 

 

 

 

 

 

 

 

 

Indebtedness for Borrowed Money

 

$

 

 

 

 

Plus

 

 

 

 

 

Letter of Credit Liabilities

 

$

 

 

 

 

Plus

 

 

 

 

 

Non-Contingent obligations with  respect to Surety Instruments

 

$

 

 

 

 

Plus

 

 

 

 

 

Obligations under notes, bonds, debentures and similar instruments

 

$

 

 

 

 

Plus

 

 

 

 

 

Obligations under Conditional Sale  or other Title Retention Agreements

 

$

 

 

 

 

Plus

 

 

 

 

 

Capital Lease Obligations

 

$

 

 

 

 

Plus

 

 

 

 

 

Guaranteed payments and redemptions

 

$

 

 

 

 

Plus

 

 

 

 

 

Indebtedness Secured by Liens

 

$

 

 

 

 

 

 

 

 

 

 

Total Debt:

 

$

 

 

 

 

 

 

 

 

 

 

(ii)           Consolidated EBITDA

 

 

 

 

 

 

 

 

 

 

 

Consolidated Net Income

 

$

 

 

 

 

Plus

 

 

 

 

 

Income Tax Expense

 

$

 

 

 

 

Plus

 

 

 

 

 

Depreciation and Amortization

 

$

 

 

 

 

Plus

 

 

 

 

 

Consolidated Interest Expense

 

$

 

 

 

 

 

 

 

 

 

 

Consolidated EBITDA

 

 

 

$

 

 

 

 

 

 

 

 

Ratio of Total Debt to Consolidated EBITDA ((i) divided by (ii)):

 

 

 

 

 

 

 

 

 

 

 

Required:

Actual:

 

 

 

 

 

 

4

--------------------------------------------------------------------------------

 

§9.11(b)  Fixed Charge Coverage Ratio

 

Consolidated EBITDA

 

 

 

 

 

 

 

 

 

 

 

Consolidated Net Income

 

$

 

 

 

 

Plus

 

 

 

 

 

Income Tax Expense

 

$

 

 

 

 

Plus

 

 

 

 

 

Depreciation and Amortization

 

$

 

 

 

 

Plus

 

 

 

 

 

Consolidated Interest Expense

 

$

 

 

 

 

 

 

 

 

 

 

Consolidated EBITDA

 

 

 

$

 

 

 

 

 

 

 

 

Plus

 

 

 

 

 

 

 

 

 

 

 

Consolidated Rental Expense

 

 

 

 

 

 

 

 

 

 

 

Gross Consolidated Rental Expense

 

$

 

 

 

 

 

 

 

 

 

 

Minus

 

 

 

 

 

 

 

 

 

 

 

Consolidated Rental Income

 

$

 

 

 

 

 

 

 

 

 

 

Consolidated Rental Expense:

 

 

 

$

 

 

 

 

 

 

 

 

Minus

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures:

 

 

 

$

 

 

 

 

 

 

 

 

(i)                                      Sum of Consolidated EBITDA and
Consolidated Rental Expense minus Capital Expenditure

 

 

 

$

 

 

 

 

 

 

 

 

Fixed Charges:

 

 

 

 

 

 

 

 

 

 

 

Consolidated Interest Expense

 

$

 

 

 

 

 

 

 

 

 

 

Plus

 

 

 

 

 

 

 

 

 

 

 

Scheduled Principal Payments

 

$

 

 

 

 

 

 

 

 

 

 

Plus

 

 

 

 

 

 

 

 

 

 

 

Voluntary Prepayments

 

$

 

 

 

 

 

 

 

 

 

 

Plus

 

 

 

 

 

 

 

 

 

 

 

Consolidated Rental Expense

 

$

 

 

 

 

 

 

 

 

 

 

(ii)           Fixed Charges

 

 

 

$

 

 

 

5

--------------------------------------------------------------------------------

 

Ratio of Consolidated EBITDA and Consolidated Rental Expense to Fixed Charges
((i) divided by (ii)):

 

Required:               1.50:1.00

 

Actual:

 

 

 

 

§9.11(c)  Interest Coverage Ratio*

 

Consolidated Adjusted Net Income

 

 

 

 

 

 

 

 

 

 

 

Consolidated Net Income:

 

$

 

 

 

 

Minus

 

 

 

 

 

After Tax Extraordinary Gains:

 

$

 

 

 

 

Plus

 

 

 

 

 

After Tax Extraordinary Losses:

 

$

 

 

 

 

Minus

 

 

 

 

 

After Tax Gains from Asset Dispositions:

 

$

 

 

 

 

Plus

 

 

 

 

 

After Tax Losses from Asset Dispositions:

 

$

 

 

 

 

Minus

 

 

 

 

 

Net Income from Affiliates:

 

$

 

 

 

 

Plus

 

 

 

 

 

Net Losses from Affiliates:

 

$

 

 

 

 

Minus

 

 

 

 

 

Net Income from “Pooling” arrangements:

 

$

 

 

 

 

Plus

 

 

 

 

 

Net Losses from “Pooling” arrangements:

 

$

 

 

 

 

Minus

 

 

 

 

 

Net Income of Restricted Subsidiaries not subject to dividends:

 

$

 

 

 

 

 

 

 

 

 

 

(a)  Consolidated Adjusted Net Income:

 

 

 

$

 

 

 

 

 

 

 

 

(b)  Consolidated Adjusted Interest Expense:

 

 

 

$

 

 

 

 

 

 

 

 

(c)  Consolidated Adjusted Income Tax Expense:

 

 

 

$

 

 

 

 

 

 

 

 

(d)  Consolidated Adjusted Non-Cash Charges:

 

 

 

$

 

 

 

 

 

 

 

 

Sum of (a), (b), (c), and (d)

 

 

 

 

 

 

 

 

 

 

 

Ratio of sum of (a), (b)(c), and (d) to Consolidated Adjusted Interest Expense:

 

 

 

 

 

 

 

 

 

Required:               2.00:1.00

 

Actual:

 

 

 

 

 

--------------------------------------------------------------------------------

* Calculated for the four full fiscal quarters taken as one period (and after
giving pro forma effect to (A) the incurrence of any Indebtedness (including,
without limitation, the Loans) and (if applicable) the application of the net
proceeds therefrom, including to refinance other Indebtedness, as if such
Indebtedness was incurred, and the application of such proceeds occurred, on the
first day of such four quarter period, (B) the incurrence, repayment, or
retirement of any other Indebtedness of the Borrower and its Restricted
Subsidiaries since the first day of such four quarter period (except that in
making such computation, the amount of Loans and Letter of Credit Liabilities
shall be computed

 

6

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based upon the average daily balance of such Loans and Letter of Credit
Liabilities during such four quarter period), and (C) the acquisition (whether
by purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any company, entity or business acquired or disposed of by the
Borrower or its Restricted Subsidiaries, as the case may be, since the first day
of such four quarter period, as if such acquisition or disposition occurred on
the first day of such four quarter period).

 

§9.11(d)  Consolidated Tangible Net Worth

 

Total Assets:

 

$

 

 

 

 

Minus

 

 

 

 

 

Total Liabilities

 

$

 

 

 

 

Minus

 

 

 

 

 

Intangible Assets

 

$

 

 

 

 

Minus

 

 

 

 

 

Reserves

 

$

 

 

 

 

Minus

 

 

 

 

 

Minority Interests

 

$

 

 

 

 

Minus

 

 

 

 

 

Affiliate obligations

 

$

 

 

 

 

 

 

 

 

 

 

Actual Consolidated Tangible Net Worth:

 

 

 

$

 

 

 

 

 

 

 

 

Minimum Tangible Net Worth

 

$

27,000,000

 

 

 

Plus

 

 

 

 

 

50% of cumulative Consolidated Net Income after July 1, 2002

 

$

 

 

 

 

Plus

 

 

 

 

 

75% of Net Available Proceeds from Equity Issuances after July 1, 2002

 

$

 

 

 

 

 

 

 

 

 

 

Required Consolidated Tangible Net Worth:

 

 

 

$

 

 

 

Each of the foregoing has been calculated in accordance with the provisions of
the Credit Agreement. Supporting schedules for each of the foregoing
calculations are annexed hereto.

 

7

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SCHEDULE 3

 

Except as set forth below, since [Date of most recent audited financial
statement furnished to the Administrative Agent and the Revolving Credit
Lenders] there has occurred no Material Adverse Change nor has there occurred
any event which has a Material Adverse Effect.

 

8

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