Exhibit 10.1

 

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CREDIT AGREEMENT

 

Dated as of January 6, 2006

 

among

 

THE ROWE COMPANIES,

ROWE FURNITURE, INC., and

STOREHOUSE, INC.,

 

as Borrowers,

 

THE OTHER CREDIT PARTIES SIGNATORY HERETO,

 

as Credit Parties,

 

THE LENDERS SIGNATORY HERETO

 

FROM TIME TO TIME,

 

as Lenders,

 

and

 

GENERAL ELECTRIC CAPITAL CORPORATION,

 

as Agent and Lender

 

and

 

GE CAPITAL MARKETS, INC.

 

as Lead Arranger

 

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INDEX OF APPENDICES

Annex A (Recitals)

   -   

Definitions

    

Annex B (Section 1.2)

   -   

Letters of Credit

    

Annex C (Section 1.8)

   -   

Cash Management System

    

Annex D (Section 2.1(a))

   -   

Closing Checklist

    

Annex E (Section 4.1(a))

   -   

Financial Statements and Projections — Reporting

    

Annex F (Section 4.1(b))

   -   

Collateral Reports

    

Annex G (Section 6.10)

   -   

Financial Covenants

    

Annex H (Section 9.9(a))

   -   

Lenders’ Wire Transfer Information

    

Annex I (Section 11.10)

   -   

Notice Addresses

    

Annex J (from Annex A -

Commitments definition)

       

Commitments as of Closing Date

    

Exhibit 1.1(a)(i)

   -   

Form of Notice of Revolving Credit Advance

    

Exhibit 1.1(a)(ii)

   -   

Form of Revolving Note

    

Exhibit 1.1(b)

   -   

Form of Tranche B Note

    

Exhibit 1.1(c)(ii)

   -   

Form of Swing Line Note

    

Exhibit 1.5(e)

   -   

Form of Notice of Conversion/Continuation

    

Exhibit 4.1(b)

   -   

Form of Borrowing Base Certificate

    

Exhibit 9.1(a)

   -   

Form of Assignment Agreement

    

Exhibit B-1

   -   

Application for Standby Letter of Credit

    

Exhibit B-2

   -   

Application for Documentary Letter of Credit

    

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TABLE OF CONTENTS

 

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1.    AMOUNT AND TERMS OF CREDIT    2      1.1.    Credit Facilities    2     
1.2.    Letters of Credit    7      1.3.    Prepayments    7      1.4.    Use of
Proceeds    9      1.5.    Interest and Applicable Margins    9      1.6.   
Eligible Accounts    13      1.7.    Eligible Inventory    15      1.8.    Cash
Management Systems    17      1.9.    Fees    17      1.10.    Receipt of
Payments    18      1.11.    Application and Allocation of Payments    18     
1.12.    Loan Account and Accounting    19      1.13.    Indemnity    20     
1.14.    Access    21      1.15.    Taxes    22      1.16.    Capital Adequacy;
Increased Costs; Illegality    22      1.17.    Single Loan    24 2.   
CONDITIONS PRECEDENT    24      2.1.    Conditions to the Initial Loans    24  
   2.2.    Further Conditions to Each Loan    26 3.    REPRESENTATIONS AND
WARRANTIES    26      3.1.    Corporate Existence; Compliance with Law    26  
   3.2.    Executive Offices, Collateral Locations, FEIN    27      3.3.   
Corporate Power, Authorization, Enforceable Obligations    27      3.4.   
Financial Statements and Projections    28      3.5.    Material Adverse Effect
   28      3.6.    Ownership of Property; Liens    29      3.7.    Labor Matters
   29      3.8.    Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness    30

 

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TABLE OF CONTENTS

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     3.9.    Government Regulation    30      3.10.    Margin Regulations    30
     3.11.    Taxes    30      3.12.    ERISA    31      3.13.    No Litigation
   32      3.14.    Brokers    32      3.15.    Intellectual Property    32     
3.16.    Full Disclosure    32      3.17.    Environmental Matters    33     
3.18.    Insurance    33      3.19.    Deposit and Disbursement Accounts    34  
   3.20.    Government Contracts    34      3.21.    Customer and Trade
Relations    34      3.22.    Bonding; Licenses    34      3.23.    Solvency   
34 4.    FINANCIAL STATEMENTS AND INFORMATION    34      4.1.    Reports and
Notices    34      4.2.    Communication with Accountants    35 5.   
AFFIRMATIVE COVENANTS    35      5.1.    Maintenance of Existence and Conduct of
Business    35      5.2.    Payment of Charges    35      5.3.    Books and
Records    36      5.4.    Insurance; Damage to or Destruction of Collateral   
36      5.5.    Compliance with Laws    38      5.6.    Supplemental Disclosure
   38      5.7.    Intellectual Property    38      5.8.    Environmental
Matters    38      5.9.    Landlords’ Agreements, Mortgagee Agreements, Bailee
Letters and Real Estate Purchases    39      5.10.    Further Assurances    39

 

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     5.11.    Additional Subsidiaries    40      5.12.    Environmental Reports
and Surveys    40      5.13.    Life Insurance Policy Acknowledgements    40  
   5.14.    Cash Equity Contribution    41 6.    NEGATIVE COVENANTS    41     
6.1.    Mergers, Subsidiaries, Etc    41      6.2.    Investments; Loans and
Advances    41      6.3.    Indebtedness    42      6.4.    Employee Loans and
Affiliate Transactions    42      6.5.    Capital Structure and Business    43  
   6.6.    Guaranteed Indebtedness    43      6.7.    Liens    43      6.8.   
Sale of Stock and Assets    43      6.9.    ERISA    44      6.10.    Financial
Covenants    44      6.11.    Hazardous Materials    44      6.12.   
Sale-Leasebacks    44      6.13.    Restricted Payments    44      6.14.   
Change of Corporate Name, State of Incorporation or Location; Change of Fiscal
Year    45      6.15.    No Impairment of Intercompany Transfers    45     
6.16.    Real Estate Purchases    45      6.17.    Rowe Companies and Certain
Subsidiaries    45      6.18.    Cancellation of Indebtedness    45      6.19.
   No Speculative Transactions    45 7.    TERM    45      7.1.    Termination
   45      7.2.    Survival of Obligations Upon Termination of Financing
Arrangements    46 8.    EVENTS OF DEFAULT; RIGHTS AND REMEDIES    46      8.1.
   Events of Default    46

 

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     8.2.    Remedies    48      8.3.    Duties in the Case of Enforcement    49
     8.4.    Waivers by Credit Parties    49 9.    ASSIGNMENT AND
PARTICIPATIONS; APPOINTMENT OF AGENT    50      9.1.    Assignment and
Participations    50      9.2.    Appointment of Agent    52      9.3.   
Agent’s Reliance, Etc    53      9.4.    GE Capital and Affiliates    53     
9.5.    Lender Credit Decision    54      9.6.    Indemnification    54     
9.7.    Successor Agent    54      9.8.    Setoff and Sharing of Payments    55
     9.9.    Advances; Payments; Non-Funding Lenders; Information; Actions in
Concert    56 10.    SUCCESSORS AND ASSIGNS    58      10.1.    Successors and
Assigns    58 11.    MISCELLANEOUS    58      11.1.    Complete Agreement;
Modification of Agreement    58      11.2.    Amendments and Waivers    59     
11.3.    Fees and Expenses    62      11.4.    No Waiver    64      11.5.   
Remedies    64      11.6.    Severability    64      11.7.    Conflict of Terms
   64      11.8.    Confidentiality    64      11.9.    GOVERNING LAW    65     
11.10.    Notices    66      11.11.    Section Titles    66      11.12.   
Counterparts    66      11.13.    WAIVER OF JURY TRIAL    66

 

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     11.14.    Press Releases and Related Matters    67      11.15.   
Reinstatement    67      11.16.    Advice of Counsel    67      11.17.    No
Strict Construction    67 12.    CROSS-GUARANTY    68      12.1.   
Cross-Guaranty    68      12.2.    Waivers by Borrowers    68      12.3.   
Benefit of Guaranty    68      12.4.    Waiver of Subrogation, Etc    69     
12.5.    Election of Remedies    69      12.6.    Limitation    69      12.7.   
Contribution with Respect to Guaranty Obligations    70      12.8.    Liability
Cumulative    71

 

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EXECUTION VERSION

 

This CREDIT AGREEMENT (this “Agreement”), dated as of January 6, 2006 among THE
ROWE COMPANIES, a Nevada corporation (“Rowe Companies”), Rowe Furniture, Inc., a
Virginia corporation (“Rowe Furniture”) and Storehouse, Inc., a Georgia
corporation (“Storehouse”) (Rowe Companies, Rowe Furniture and Storehouse are
sometimes collectively referred to herein as the “Borrowers” and individually as
a “Borrower”); the other Credit Parties signatory hereto; GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, “GE
Capital”), for itself, as Lender, and as Agent for Lenders; GE CAPITAL MARKETS,
INC. (“GECMG”), as Lead Arranger and Bookrunner; and the other Lenders signatory
hereto from time to time.

 

RECITALS

 

WHEREAS, Borrowers have requested that Lenders extend revolving and term credit
facilities to Borrowers of up to Fifty-Seven Million Dollars ($57,000,000) in
the aggregate for the purpose of refinancing certain indebtedness of Borrowers
and to provide (a) working capital financing for Borrowers, (b) funds for other
general corporate purposes of Borrowers and (c) funds for other purposes
permitted hereunder; and for these purposes, Lenders are willing to make certain
loans and other extensions of credit to Borrowers of up to such amount upon the
terms and conditions set forth herein; and

 

WHEREAS, Borrowers have agreed to secure all of their obligations under the Loan
Documents by granting to Agent, for the benefit of Agent and Lenders, a security
interest in and lien upon all of their existing and after-acquired personal and
real property (other than the Stock of their respective Subsidiaries); and

 

WHEREAS, each of Rowe Properties, Inc., a California corporation (“Rowe
Properties”) and Rowe Diversified, Inc., a Delaware corporation (“Rowe
Diversified”) is willing to guarantee all of the Obligations of Borrowers to
Agent and Lenders under the Loan Documents and to secure such Obligations
pursuant to the Collateral Documents; and

 

WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A and, for purposes of this Agreement and the other
Loan Documents, the rules of construction set forth in Annex A shall govern. All
Annexes, Disclosure Schedules, Exhibits and other attachments (collectively,
“Appendices”) hereto, or expressly identified to this Agreement, are
incorporated herein by reference, and taken together with this Agreement, shall
constitute but a single agreement. These recitals shall be construed as part of
the Agreement.

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NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:

 

1. AMOUNT AND TERMS OF CREDIT

 

1.1. Credit Facilities.

 

(a) Revolving Credit Facility.

 

(i) Subject to the terms and conditions hereof, each Revolving Lender agrees to
make available to Borrowers from time to time until the Commitment Termination
Date its Pro Rata Share of advances (each, a “Revolving Credit Advance”). The
Pro Rata Share of the Revolving Loan of any Revolving Lender shall not at any
time exceed its separate Revolving Loan Commitment. The obligations of each
Revolving Lender hereunder shall be several and not joint. Until the Commitment
Termination Date, Borrowers may borrow, repay and reborrow under this
Section 1.1(a); provided that the amount of any Revolving Credit Advance to be
made at any time shall not exceed Borrowing Availability at such time; and
provided further that, prior to the Borrowers’ satisfaction of the covenants
contained in Section 5.14, the sum of the aggregate Revolving Loan and Swing
Line Loan then outstanding, after giving effect to such Revolving Credit
Advance, shall not exceed $45,000,000. Borrowing Availability may be reduced by
Reserves imposed by Agent in its reasonable credit judgment. Each Revolving
Credit Advance shall be made on notice by Borrower Representative on behalf of
the Borrowers to one of the representatives of Agent identified in Schedule 1.1
at the address specified therein. Any such notice must be given no later than
(1) 12 noon (New York time) on the Business Day of the proposed Revolving Credit
Advance, in the case of an Index Rate Loan, or (2) 12 noon (New York time) on
the date which is three (3) Business Days prior to the proposed Revolving Credit
Advance, in the case of a LIBOR Loan. Each such notice (a “Notice of Revolving
Credit Advance”) must be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(a)(i), and shall include the
information required in such Exhibit and such other information as may be
required by Agent. If the Borrowers desire to have the Revolving Credit Advances
bear interest by reference to a LIBOR Rate, Borrower Representative must comply
with Section 1.5(e).

 

(ii) Except as provided in Section 1.12, the Borrowers shall execute and deliver
to each Revolving Lender a note to evidence the Revolving Loan Commitment of
that Revolving Lender. Each note shall be in the principal amount of the
Revolving Loan Commitment of the applicable Revolving Lender, dated the Closing
Date and substantially in the form of Exhibit 1.1(a)(ii) (each a “Revolving
Note” and, collectively, the “Revolving Notes”). Each Revolving Note shall
represent the joint and several obligation of the Borrowers to pay the amount of
the applicable Revolving Lender’s Revolving Loan Commitment or, if less, such
Revolving Lender’s Pro Rata Share of the aggregate unpaid principal amount of
all outstanding Revolving Credit Advances to the Borrowers together with
interest thereon as prescribed in Section 1.5. The entire unpaid balance of the
aggregate Revolving Loan and all other non-contingent Obligations shall be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date.

 

(iii) Anything in this Agreement to the contrary notwithstanding, at the request
of Borrower Representative, in its discretion Agent may (but shall have

 

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absolutely no obligation to), make Revolving Credit Advances to Borrowers on
behalf of Revolving Lenders in amounts that cause the outstanding balance of the
aggregate Revolving Loan to exceed the Borrowing Base (less the Swing Line Loan)
(any such excess Revolving Credit Advances are herein referred to collectively
as “Overadvances”); provided that (A) no such event or occurrence shall cause or
constitute a waiver of Agent’s, Swing Line Lender’s or Revolving Lenders’ right
to refuse to make any further Overadvances, Swing Line Advances or Revolving
Credit Advances, or incur any Letter of Credit Obligations, as the case may be,
at any time that an Overadvance exists, and (B) no Overadvance shall result in a
Default or Event of Default based on Borrowers’ failure to comply with
Section 1.3(b)(i) for so long as Agent permits such Overadvance to be
outstanding, but solely with respect to the amount of such Overadvance. In
addition, Overadvances may be made even if the conditions to lending set forth
in Section 2 have not been met. All Overadvances shall constitute Index Rate
Loans, shall bear interest at the Default Rate and shall be payable on the
earlier of demand or the Commitment Termination Date. Except as otherwise
provided in Section 1.11(b), (1) the authority of Agent to make Overadvances is
limited to an aggregate amount not to exceed $5,000,000 at any time, (2) no
Overadvance shall remain outstanding for more than ninety (90) consecutive days,
(3) no more than two (2) Overadvances shall be made in any 180 day period,
(4) no Overadvance shall cause the aggregate Revolving Loan to exceed the
Maximum Amount, and (5) any Overadvance may be revoked prospectively by a
written notice to Agent signed by the Requisite Lenders.

 

(b) Tranche B Loan.

 

(i) Subject to the terms and conditions hereof, each Tranche B Lender agrees to
make a term loan (collectively, the “Tranche B Loan”) on the Closing Date to the
Borrowers in the amount of the Tranche B Lender’s Tranche B Loan Commitment. The
obligations of each Tranche B Lender hereunder shall be several and not joint.
Each such Tranche B Loan shall be evidenced by a promissory note substantially
in the form of Exhibit 1.1(b) (each a “Tranche B Note” and collectively the
“Tranche B Notes”), and, except as provided in Section 1.12, all of the
Borrowers shall jointly execute and deliver the Tranche B Note to the applicable
Tranche B Lender. Each Tranche B Note shall represent the joint and several
obligation of the Borrowers to pay the applicable Tranche B Lender’s Tranche B
Loan Commitment, together with interest thereon as prescribed in Section 1.5.

 

(ii) The aggregate outstanding principal balance of the Tranche B Loan shall be
due and payable in full in immediately available funds on the Commitment
Termination Date, if not sooner paid in full. No payment with respect to the
Tranche B Loan may be reborrowed.

 

(iii) Each payment of principal with respect to the Tranche B Loan shall be paid
to Agent for the ratable benefit of each Tranche B Lender making a Tranche B
Loan, ratably in proportion to each such Tranche B Lender’s respective Tranche B
Loan Commitment.

 

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(iv) At any time during any Buyout Exercise Period, the Tranche B Lenders may
(but shall not be obligated to) give notice to the Agent (the “Buyout Acceptance
Notice”) of their intent to cause the assignment to the Tranche B Lenders, or
their designee, by the Revolving Lenders, of all right, title and interest in,
to, arising under or in respect of all Obligations of the Revolving Lenders.
Such assignments shall be effected on the Business Day which is not more than
three (3) Business Days following the delivery of the Buyout Acceptance Notice
to the Tranche B Lender by the execution, by the Revolving Lenders, of an
Assignment Agreement in exchange for the payment, in immediately available
funds, of the amount of all of the Obligations in respect of the Revolving Loans
(as of the date on which such assignment is made) including, without limitation,
principal, accrued interest, cash collateral in an amount equal to 105% of the
aggregate undrawn face amount of any issued and outstanding Letter of Credit,
accrued Fees (other than the Fee relating to the Revolving Loans required to be
paid pursuant to Section 1.9(c)) which shall be subject to the last sentence of
this Section 1.1(b)(iv)), expenses and other amounts payable to the Revolving
Lenders in respect of the Revolving Loans hereunder. The Tranche B Lenders’
buyout right under this Section 1.1(b)(iv) may only be exercised completely with
respect to all of the Obligations of the Revolving Lenders. If the Tranche B
Lenders do not deliver a Buyout Acceptance Notice within the Buyout Exercise
Period, then the buyout right of the Tranche B Lenders hereunder shall expire
and be of no force and effect. The grant of the option to purchase hereunder
shall not operate to restrict any Revolving Lender from assigning or otherwise
transferring any or all of the Commitments or Obligations owing to such
Revolving Lender or any of such Revolving Lender’s rights or interests under the
Loan Documents. Following the Tranche B Lenders’ exercise of the buyout right
under this Section 1.1(b)(iv) in the event a Fee relating to the Revolving Loans
required to be paid pursuant to Section 1.9(c) shall be payable within the
twelve (12) month period immediately following the date of delivery of a Buyout
Trigger Notice, the Tranche B Lenders shall (i) not waive or alter the
provisions of Section 1.9(c) in a manner that would reduce the amount of such
Fee payable with respect to the permanent reduction or termination of the
Revolving Loan Commitment and (ii) after repayment of the Obligations in respect
of the Revolving Credit Advances and Letter of Credit Obligations and the
Tranche B Loan, upon receipt of any such Fee with respect to the permanent
reduction or termination of the Revolving Loan Commitment, pay such amounts to
the Agent for the accounts of the Revolving Lenders in accordance with each
Revolving Lender’s Pro Rata Share as of the date of exercise of the buyout right
under this Section 1.1(b)(iv).

 

(c) Swing Line Facility.

 

(i) Agent shall notify the Swing Line Lender upon Agent’s receipt of any Notice
of Revolving Credit Advance for an Index Rate Loan. Subject to the terms and
conditions hereof, the Swing Line Lender may, in its discretion, make

 

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available from time to time until the Commitment Termination Date advances
(each, a “Swing Line Advance”) in accordance with any such notice. The
provisions of this Section 1.1(c) shall not relieve Revolving Lenders of their
obligations to make Revolving Credit Advances under Section 1.1(a); provided
that if the Swing Line Lender makes a Swing Line Advance pursuant to any such
notice, such Swing Line Advance shall be in lieu of any Revolving Credit Advance
that otherwise may be made by Revolving Credit Lenders pursuant to such notice.
The aggregate amount of Swing Line Advances outstanding shall not exceed at any
time the lesser of (A) the Swing Line Commitment and (B) the lesser of the
Maximum Amount and (except for Overadvances) the Borrowing Base, in each case,
less the outstanding balance of the Revolving Loan at such time (“Swing Line
Availability”). Until the Commitment Termination Date, Borrowers may from time
to time borrow, repay and reborrow under this Section 1.1(c). Each Swing Line
Advance shall be made pursuant to a Notice of Revolving Credit Advance delivered
to Agent by Borrower Representative on behalf of the Borrowers in accordance
with Section 1.1(a). Any such notice must be given no later than 12 noon (New
York time) on the Business Day of the proposed Swing Line Advance. Unless the
Swing Line Lender has received at least one Business Day’s prior written notice
from Requisite Lenders instructing it not to make a Swing Line Advance, the
Swing Line Lender shall, notwithstanding the failure of any condition precedent
set forth in Sections 2.2, be entitled to fund that Swing Line Advance, and to
have each Revolving Lender make Revolving Credit Advances in accordance with
Section 1.1(c)(iii) or purchase participating interests in accordance with
Section 1.1(c)(iv). Notwithstanding any other provision of this Agreement or the
other Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan.
Borrowers shall repay the aggregate outstanding principal amount of the Swing
Line Loan upon demand therefor by Agent.

 

(ii) The Borrowers shall execute and deliver to the Swing Line Lender a
promissory note to evidence the Swing Line Commitment. Such note shall be in the
principal amount of the Swing Line Commitment of the Swing Line Lender, dated
the Closing Date and substantially in the form of Exhibit 1.1(c)(ii) (the “Swing
Line Note”). The Swing Line Note shall represent the joint and several
obligation of the Borrowers to pay the amount of the Swing Line Commitment or,
if less, the aggregate unpaid principal amount of all outstanding Swing Line
Advances together with interest thereon as prescribed in Section 1.5. The entire
unpaid balance of the Swing Line Loan and all other noncontingent Obligations
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date if not sooner paid in full.

 

(iii) The Swing Line Lender, at any time and from time to time no less
frequently than once weekly shall on behalf of the Borrowers (and each Borrower
hereby irrevocably authorizes the Swing Line Lender to so act on its behalf)
request each Revolving Lender (including the Swing Line Lender) to make a
Revolving Credit Advance to the Borrowers (which shall be an Index Rate Loan) in
an amount equal to that Revolving Lender’s Pro Rata Share of the principal

 

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amount of the Borrowers’ Swing Line Loan (the “Refunded Swing Line Loan”)
outstanding on the date such notice is given. Unless any of the events described
in Sections 8.1(h) or 8.1(i) has occurred (in which event the procedures of
Section 1.1(c)(iv) shall apply) and regardless of whether the conditions
precedent set forth in this Agreement to the making of a Revolving Credit
Advance are then satisfied, each Revolving Lender shall disburse directly to
Agent, its Pro Rata Share of a Revolving Credit Advance on behalf of the Swing
Line Lender prior to 3:00 p.m. (New York time) in immediately available funds on
the Business Day next succeeding the date that notice is given. The proceeds of
those Revolving Credit Advances shall be immediately paid to the Swing Line
Lender and applied to repay the Refunded Swing Line Loan of the Borrowers.

 

(iv) If, prior to refunding a Swing Line Loan with a Revolving Credit Advance
pursuant to Section 1.1(c)(iii), one of the events described in Sections 8.1(h)
or 8.1(i) has occurred, then, subject to the provisions of Section 1.1(c)(v)
below, each Revolving Lender shall, on the date such Revolving Credit Advance
was to have been made for the benefit of the Borrowers, purchase from the Swing
Line Lender an undivided participation interest in the Swing Line Loan to the
Borrowers in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon
request, each Revolving Lender shall promptly transfer to the Swing Line Lender,
in immediately available funds, the amount of its participation interest.

 

(v) Each Revolving Lender’s obligation to make Revolving Credit Advances in
accordance with Section 1.1(c)(iii) and to purchase participation interests in
accordance with Section 1.1(c)(iv) shall be absolute and unconditional and shall
not be affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right that such Revolving Lender may have against
the Swing Line Lender, any Borrower or any other Person for any reason
whatsoever; (B) the occurrence or continuance of any Default or Event of
Default; (C) any inability of any Borrower to satisfy the conditions precedent
to borrowing set forth in this Agreement at any time or (D) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. If any Revolving Lender does not make available to Agent or the
Swing Line Lender, as applicable, the amount required pursuant to Sections
1.1(c)(iii) or 1.1(c)(iv), as the case may be, the Swing Line Lender shall be
entitled to recover such amount on demand from such Revolving Lender, together
with interest thereon for each day from the date of non-payment until such
amount is paid in full at the Federal Funds Rate for the first two Business Days
and at the Index Rate thereafter.

 

(d) Reliance on Notices; Appointment of Borrower Representative. Agent shall be
entitled to rely upon, and shall be fully protected in relying upon, any Notice
of Revolving Credit Advance, Notice of Conversion/Continuation or similar notice
believed by Agent to be genuine. Agent may assume that each Person executing and
delivering any notice in accordance herewith was duly authorized, unless the
responsible individual acting thereon for Agent has actual knowledge to the
contrary. Each Borrower hereby designates Rowe Companies as its representative
and agent on its behalf for the purposes

 

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of issuing Notices of Revolving Credit Advances and Notices of
Conversion/Continuation, giving instructions with respect to the disbursement of
the proceeds of the Loans, selecting interest rate options, requesting Letters
of Credit, giving and receiving all other notices and consents hereunder or
under any of the other Loan Documents and taking all other actions (including in
respect of compliance with covenants) on behalf of any Borrower or Borrowers
under the Loan Documents. Borrower Representative hereby accepts such
appointment. Agent and each Lender may regard any notice or other communication
pursuant to any Loan Document from Borrower Representative as a notice or
communication from all Borrowers, and may give any notice or communication
required or permitted to be given to any Borrower or Borrowers hereunder to
Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower
agrees that each notice, election, representation and warranty, covenant,
agreement and undertaking made on its behalf by Borrower Representative shall be
deemed for all purposes to have been made by such Borrower and shall be binding
upon and enforceable against such Borrower to the same extent as if the same had
been made directly by such Borrower.

 

1.2. Letters of Credit. Subject to and in accordance with the terms and
conditions contained herein and in Annex B, Borrower Representative, on behalf
of the Borrowers, shall have the right to request, and Revolving Lenders agree
to incur, or purchase participations in, Letter of Credit Obligations in respect
of each Borrower.

 

1.3. Prepayments.

 

(a) Voluntary Prepayments; Reductions in Revolving Loan Commitments. Borrowers
may at any time on at least five (5) Business Days’ prior written notice by
Borrower Representative to Agent permanently reduce (but not terminate) the
Revolving Loan Commitment; provided that (i) any such prepayments or reductions
shall be in a minimum amount of $5,000,000 and integral multiples of $250,000 in
excess of such amount, (ii) the Revolving Loan Commitment shall not be reduced
to an amount less than $40,000,000 and (iii) after giving effect to such
reductions, Borrowers shall comply with Section 1.3(b)(i). Borrowers may at any
time on at least five (5) Business Days’ prior written notice by Borrower
Representative to Agent voluntarily prepay all or part of the Tranche B Loan;
provided that (i) any such prepayments or reductions shall be in a minimum
amount of $1,000,000 and integral multiples of $250,000 in excess of such amount
and (ii) unless the Revolving Lenders have been paid in full and the Revolving
Loan Commitment as to all Revolving Lenders has been terminated, the Borrower
may not voluntary prepay all or a part of the Tranche B Loan if (A) a Default or
an Event of Default shall have occurred and be continuing or (B) after giving
pro forma effect to any such proposed prepayment of the Tranche B Loan, the
Borrowers would have Borrowing Availability in an amount of less than
$15,000,000. In addition, Borrowers may at any time on at least ten (10) days’
prior written notice by Borrower Representative to Agent terminate the Revolving
Loan Commitment; provided that upon such termination, all Loans and other
Obligations shall be immediately due and payable in full and all Letter of
Credit Obligations shall be cash collateralized or otherwise satisfied in
accordance with Annex B hereto. Any voluntary prepayment and any reduction or
termination of the Revolving Loan Commitment must be accompanied by payment of
the Fee required by

 

7

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Section 1.9(c), if any, plus the payment of any LIBOR funding breakage costs in
accordance with Section 1.13(b). Upon any such reduction or termination of the
Revolving Loan Commitment, each Borrower’s right to request Revolving Credit
Advances, or request that Letter of Credit Obligations be incurred on its
behalf, or request Swing Line Advances, shall simultaneously be permanently
reduced or terminated, as the case may be; provided that a permanent reduction
of the Revolving Loan Commitment shall not require a corresponding pro rata
reduction in the L/C Sublimit. Each notice of partial prepayment shall designate
the Loans or other Obligations to which such prepayment is to be applied.
subject to the terms hereof.

 

(b) Mandatory Prepayments.

 

(i) If at any time the aggregate outstanding balances of the Revolving Loan and
the Swing Line Loan exceed the lesser of (A) the Maximum Amount and (B) the
Borrowing Base, Borrowers shall immediately repay the aggregate outstanding
Revolving Credit Advances to the extent required to eliminate such excess. If
any such excess remains after repayment in full of the aggregate outstanding
Revolving Credit Advances, Borrowers shall provide cash collateral for the
Letter of Credit Obligations in the manner set forth in Annex B to the extent
required to eliminate such excess. Notwithstanding the foregoing, any
Overadvance made pursuant to Section 1.1(a)(iii) shall be repaid in accordance
with Section 1.1(a)(iii).

 

(ii) Immediately upon receipt by any Credit Party of any cash proceeds of any
asset disposition, Borrowers shall prepay the Loans in an amount equal to all
such proceeds, net of (A) commissions and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by Borrowers in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens on such asset (to the extent such Liens constitute Permitted Encumbrances
hereunder), if any, and (D) an appropriate reserve for income taxes in
accordance with GAAP in connection therewith. Any such prepayment shall be
applied in accordance with Section 1.3(c). The following shall not be subject to
mandatory prepayment under this clause (ii): (1) proceeds of sales of Inventory
in the ordinary course of business; (2) asset disposition proceeds of less than
$250,000 in the aggregate in any Fiscal Year and (3) asset disposition proceeds
that are reinvested in Equipment, Fixtures or Real Estate within one hundred and
eighty (180) days following receipt thereof; provided that Borrower notifies
Agent of its intent to reinvest at the time such proceeds are received and when
such reinvestment occurs.

 

(iii) If any Credit Party issues Stock, no later than the Business Day following
the date of receipt of the proceeds thereof, the Borrowers shall prepay the
Loans (and cash collateralize Letter of Credit Obligations) in an amount equal
to all such proceeds, net of underwriting discounts and commissions and other
reasonable costs paid to non-Affiliates in connection therewith. Any such
prepayment shall be applied in accordance with Section 1.3(c). The following

 

8

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shall not be subject to prepayment under this clause (iii): (1) proceeds of
Stock issuances to employees of Rowe Companies and its Subsidiaries, and
(2) proceeds of Stock issuances to Persons that hold Stock of Rowe Companies in
an amount less than $500,000 in the aggregate.

 

(iv) Prepayments from insurance or condemnation proceeds in accordance with
Section 5.4(c) shall be applied in accordance with Section 1.3(c).

 

(c) Application of Certain Mandatory Prepayments. Any prepayments made by any
Borrower pursuant to Sections 1.3(b)(ii), (iii) or (iv) above shall be applied
as follows: first, to Fees and reimbursable expenses of Agent then due and
payable pursuant to any of the Loan Documents; second, to interest then due and
payable on the Swing Line Loan; third, to the principal balance of the Swing
Line Loan outstanding until the same has been repaid in full; fourth, to
interest then due and payable on Revolving Credit Advances; fifth, to the
principal balance of Revolving Credit Advances outstanding until the same has
been paid in full; sixth, to any Letter of Credit Obligations to provide cash
collateral therefor in the manner set forth in Annex B until all such Letter of
Credit Obligations have been fully cash collateralized in the manner set forth
in Annex B; seventh, to interest then due and payable on the Tranche B Loan;
eighth, to prepay the principal outstanding on the Tranche B Loan, until the
Tranche B Loan shall have been prepaid in full. Neither the Revolving Loan
Commitment nor the Swing Line Commitment shall be permanently reduced by the
amount of any such prepayments.

 

(d) No Implied Consent. Nothing in this Section 1.3 shall be construed to
constitute Agent’s or any Lender’s consent to any transaction that is not
permitted by other provisions of this Agreement or the other Loan Documents.

 

1.4. Use of Proceeds. Borrowers shall utilize the proceeds of the Loans solely
for the Refinancing (and to pay any Related Transaction expenses), and for the
financing of Borrowers’ ordinary working capital and general corporate needs.
Disclosure Schedule (1.4) contains a description of Borrowers’ sources and uses
of funds as of the Closing Date, including Loans and Letter of Credit
Obligations to be made or incurred on that date, and a funds flow memorandum
detailing how funds from each source are to be transferred to particular uses.

 

1.5. Interest and Applicable Margins.

 

(a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in
accordance with the various Loans being made by each Lender, in arrears on each
applicable Interest Payment Date, at the following rates: (i) with respect to
the Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index
Margin per annum or, at the election of Borrower Representative, the applicable
LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum; (ii) with
respect to the Tranche B Loan, the Index Rate plus the Applicable Tranche B Loan
Index Margin per annum or, at the election of Borrower Representative, the
applicable LIBOR Rate plus the Applicable Tranche B LIBOR Margin per annum; and
(iii) with respect to the Swing Line Loan, the Index Rate plus the Applicable
Revolver Index Margin per annum.

 

9

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As of the Closing Date:

 

Applicable Revolver Index Margin

   0.25 %

Applicable Revolver LIBOR Margin

   1.75 %

Applicable Tranche B Loan Index Margin

   4.00 %

Applicable Tranche B Loan LIBOR Margin

   5.50 %

Applicable Standby L/C Margin

   1.75 %

Applicable Documentary L/C Margin

   1.50 %

Applicable Unused Line Fee Margin

   0.375 %

 

Notwithstanding the foregoing the Applicable Unused Line Fee Margin shall be
0.25% at all times on and after June 30, 2006.

 

The Applicable Revolver Index Margin, the Applicable Revolver LIBOR Margin, the
Applicable Standby L/C Margin and the Applicable Documentary L/C Margin shall be
adjusted (up or down) prospectively on a quarterly basis as determined by the
Borrowers’ daily average Borrowing Availability during the immediately preceding
calendar quarter; provided, however that prior to June 30, 2006, such Applicable
Margins shall be calculated by reference to Level IV set forth in the grid below
for such Applicable Margin. Adjustments in Applicable Margins shall be
determined by reference to the following grids:

 

If average Borrowing Availability is:

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

  

Level of Applicable Margins:

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

< $5,000,000

   Level I

< $10,000,000 but > $5,000,000

   Level II

< $15,000,000 but > $10,000,000

   Level III

> $15,000,000

   Level IV

 

10

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     Applicable Margins:

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

       Level I

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

    Level II

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

    Level III

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

    Level IV

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

 

Applicable Revolver Index Margin

   1.00 %   0.75 %   0.50 %   0.25 %

Applicable Revolver LIBOR Margin

   2.50 %   2.25 %   2.00 %   1.75 %

Applicable Standby L/C Margin

   2.50 %   2.25 %   2.00 %   1.75 %

Applicable Documentary L/C Margin

   2.25 %   2.00 %   1.75 %   1.50 %

 

All adjustments in the Applicable Revolver Index Margin, Applicable Revolver
LIBOR Margin, Applicable Standby L/C Margin and Applicable Documentary L/C
Margin shall be implemented quarterly on a prospective basis, for each calendar
quarter commencing on the first day of each calendar quarter based on the daily
average amount of Borrowing Availability during the immediately preceding
calendar quarter. Within five (5) Business Days after the end of each calendar
quarter, Borrower Representative shall deliver to Agent and Lenders a
certificate (the “Borrowing Availability Certificate”) signed by its Vice
President-Treasury Management which shall include a calculation of the daily
average amount of Borrowing Availability during the prior calendar quarter and,
setting forth in reasonable detail the basis for the continuance of, or any
change in, the Applicable Revolver Index Margin, Applicable Revolver LIBOR
Margin, Applicable Standby L/C Margin and Applicable Documentary Margin.
Notwithstanding the foregoing, in the event that Borrowers and their
Subsidiaries shall have on a consolidated basis, determined as of the end of the
most recently ended Fiscal Quarter, a Fixed Charge Coverage Ratio for the
12-month period then ended of not less than 1.1:1.0, then (x) in the event that
the Applicable Revolver Index Margin, Applicable Revolver LIBOR Margin,
Applicable Standby L/C Margin and Applicable Documentary L/C Margin would (based
on a calculation of Borrowing Availability) be set at Level II in the foregoing
grid, such Applicable Margins shall, commencing with the Business Day following
delivery of the Compliance Certificate evidencing such Fixed Charge Coverage
Ratio, be set at Level III of the foregoing grid and (y) in then event that the
Applicable Revolver Index Margin, Applicable Revolver LIBOR Margin, Applicable
Standby L/C Margin and Applicable Documentary L/C Margin would (based on a
calculation of Borrowing Availability) be set at Level III in the foregoing
grid, such Applicable Margins shall, commencing on the first Business Day
following delivery of the Compliance Certificate evidencing such Fixed Charge
Coverage Ratio, be set at Level IV of the foregoing grid. Failure to timely
deliver such Borrowing Availability Certificate shall, in addition to any other
remedy provided for in this Agreement, result in an increase in the Applicable
Revolver Index Margin, Applicable Revolver LIBOR Margin, Applicable Standby L/C
Margin and Applicable Documentary L/C Margin to Level I set forth in the
foregoing grid, until the first day of the first calendar quarter following the
delivery of such Borrowing Availability Certificate demonstrating that such an
increase is not required. If an Event of Default has occurred and is continuing
at the time any reduction in the Applicable Revolver Index Margin, Applicable
Revolver LIBOR

 

11

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Margin, Applicable Standby L/C Margin and Applicable Documentary L/C Margin is
to be implemented, that reduction shall be deferred until the first day of the
first calendar quarter following the date on which such Event of Default is
waived or cured.

 

(b) If any payment on any Loan becomes due and payable on a day other than a
Business Day, the maturity thereof will be extended to the next succeeding
Business Day (except as set forth in the definition of LIBOR Period) and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.

 

(c) All computations of Fees calculated on a per annum basis and interest shall
be made by Agent on the basis of a 360-day year, in each case for the actual
number of days occurring in the period for which such interest and Fees are
payable. The Index Rate is a floating rate determined for each day. Each
determination by Agent of an interest rate and Fees hereunder shall be
presumptive evidence of the correctness of such rates and Fees.

 

(d) So long as an Event of Default has occurred and is continuing under
Section 8.1(a), (h) or (i) or so long as any other Event of Default has occurred
and is continuing and at the election of Agent (or upon the written request of
Requisite Lenders or the Requisite Tranche B Lenders in accordance with
Section 8.2(a)) confirmed by written notice from Agent to Borrower
Representative, the interest rates applicable to the Loans and the Letter of
Credit Fees shall be increased by two percentage points (2.00%) per annum above
the rates of interest or the rate of such Fees otherwise applicable hereunder
unless Agent or Requisite Lenders elect to impose a smaller increase (the
“Default Rate”), and all outstanding Obligations shall bear interest at the
Default Rate applicable to such Obligations; provided that only the Requisite
Tranche B Lenders may elect to impose a smaller increase with respect to the
Default Rate as it applies to the Tranche B Loans and any Fees owing to the
Tranche B Lenders. Interest and Letter of Credit Fees at the Default Rate shall
accrue from the initial date of such Event of Default until that Event of
Default is cured or waived and shall be payable upon demand.

 

(e) Subject to the conditions precedent set forth in Section 2.2, Borrower
Representative shall have the option to (i) request that any Revolving Credit
Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of
outstanding Loans (other than the Swing Line Loan) from Index Rate Loans to
LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan upon payment of
an administrative fee of $250 to the Agent and subject to payment of LIBOR
breakage costs in accordance with Section 1.13(b) if such conversion is made
prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue
all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan
upon the expiration of the applicable LIBOR Period and the succeeding LIBOR
Period of that continued Loan shall commence on the first day after the last day
of the LIBOR Period of the Loan to be continued. Any Loan or group of Loans
having the same proposed LIBOR Period to be made or continued as, or converted
into, a LIBOR Loan must be in a minimum amount of $5,000,000 and integral
multiples of $500,000 in excess of such amount. Any such election must be made
by 12 noon (New York time) on the third Business Day prior to (1) the date of
any proposed Advance

 

12

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which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period
with respect to any LIBOR Loans to be continued as such, or (3) the date on
which Borrower Representative wishes to convert any Index Rate Loan to a LIBOR
Loan for a LIBOR Period designated by Borrower Representative in such election.
If no election is received with respect to a LIBOR Loan by 12 noon (New York
time) on the third Business Day prior to the end of the LIBOR Period with
respect thereto (or if a Default or an Event of Default has occurred and is
continuing or if the additional conditions precedent set forth in Section 2.2
shall not have been satisfied), that LIBOR Loan shall be converted to an Index
Rate Loan at the end of its LIBOR Period. Borrower Representative must make such
election by notice to Agent in writing, by telecopy or overnight courier. In the
case of any conversion or continuation, such election must be made pursuant to a
written notice (a “Notice of Conversion/Continuation”) in the form of Exhibit
1.5(e).

 

(f) Notwithstanding anything to the contrary set forth in this Section 1.5, if a
court of competent jurisdiction determines in a final order that the rate of
interest payable hereunder exceeds the highest rate of interest permissible
under law (the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time thereafter the
rate of interest payable hereunder is less than the Maximum Lawful Rate,
Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by Agent, on behalf of Lenders,
is equal to the total interest that would have been received had the interest
rate payable hereunder been (but for the operation of this paragraph) the
interest rate payable since the Closing Date as otherwise provided in this
Agreement. In no event shall the total interest received by any Lender pursuant
to the terms hereof exceed the amount that such Lender could lawfully have
received had the interest due hereunder been calculated for the full term hereof
at the Maximum Lawful Rate.

 

1.6. Eligible Accounts. All of the Accounts owned by each Borrower and reflected
in the most recent Borrowing Base Certificate delivered by the Borrowers to
Agent shall be “Eligible Accounts” for purposes of this Agreement, except any
Account to which any of the exclusionary criteria set forth below applies. Agent
shall have the right to establish, modify or eliminate Reserves against Eligible
Accounts from time to time in its reasonable credit judgment. In addition, Agent
reserves the right, at any time and from time to time after the Closing Date, to
adjust any of the criteria set forth below and to establish new criteria, and to
adjust advance rates with respect to Eligible Accounts, in its reasonable credit
judgment, reflecting changes in the collectibility or realization values of such
Accounts arising or discovered by Agent after the Closing Date subject to the
approval of all Revolving Lenders and the Requisite Tranche B Lenders in the
case of adjustments, new criteria or changes in advance rates which have the
effect of making more credit available than available on the Closing Date;
provided that, unless a Default or an Event of Default shall have occurred and
be continuing, no adjustments, new criteria or changes in advance rates which
have the effect of making less credit available shall be made absent a Material
Adverse Effect. Eligible Accounts shall not include any Account of any Borrower:

 

(a) that does not arise from the sale of goods or the performance of services by
such Borrower in the ordinary course of its business;

 

13

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

(b) (i) upon which such Borrower’s right to receive payment is not absolute or
is contingent upon the fulfillment of any condition whatsoever or (ii) as to
which such Borrower is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process or (iii) if the Account
represents a progress billing consisting of an invoice for goods sold or used or
services rendered pursuant to a contract under which the Account Debtor’s
obligation to pay that invoice is subject to such Borrower’s completion of
further performance under such contract or is subject to the equitable lien of a
surety bond issuer;

 

(c) to the extent that any defense, counterclaim, chargebacks, setoff or dispute
is asserted as to such Account;

 

(d) that is not a true and correct statement of bona fide indebtedness incurred
in the amount of the Account for merchandise sold to or services rendered and
accepted by the applicable Account Debtor;

 

(e) with respect to which an invoice, reasonably acceptable to Agent in form and
substance, has not been sent to the applicable Account Debtor;

 

(f) that (i) is not owned by such Borrower or (ii) is subject to any Lien of any
other Person, other than Liens in favor of Agent, on behalf of itself and
Lenders;

 

(g) that arises from a sale to any director, officer, other employee or
Affiliate of any Credit Party, or to any entity that has any common officer or
director with any Credit Party;

 

(h) that is the obligation of an Account Debtor that is the United States
government or a political subdivision thereof, or any state, county or
municipality or department, agency or instrumentality thereof unless Agent, in
its sole discretion, has agreed to the contrary in writing and such Borrower, if
necessary or desirable, has complied with respect to such obligation with the
Federal Assignment of Claims Act of 1940, or any applicable state, county or
municipal law restricting assignment thereof;

 

(i) that is the obligation of an Account Debtor located outside the United
States of America, other than Puerto Rico or Canada unless payment thereof is
assured by a letter of credit assigned and delivered to Agent, reasonably
satisfactory to Agent as to form, amount and issuer;

 

(j) Accounts subject to contra-accounts or to the extent such Borrower or any
Subsidiary thereof is liable for goods sold or services rendered by the
applicable Account Debtor to such Borrower or any Subsidiary thereof but only to
the extent of the potential offset;

 

(k) that arises with respect to goods that are delivered on a bill-and-hold,
cash-on-delivery basis or placed on consignment, guaranteed sale or other terms
by reason of which the payment by the Account Debtor is or may be conditional;

 

14

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

(l) that is in default; provided, that, without limiting the generality of the
foregoing, an Account shall be deemed in default upon the occurrence of any of
the following:

 

(i) the Account is not paid within the earlier of: sixty (60) days following its
due date or ninety (90) days following its original invoice date;

 

(ii) the Account Debtor obligated upon such Account suspends business, makes a
general assignment for the benefit of creditors or fails to pay its debts
generally as they come due; or

 

(iii) a petition is filed by or against any Account Debtor obligated upon such
Account under any bankruptcy law or any other federal, state or foreign
(including any provincial) receivership, insolvency relief or other law or laws
for the relief of debtors;

 

(m) that is the obligation of an Account Debtor if fifty percent (50%) or more
of the Dollar amount of all Accounts owing by that Account Debtor are ineligible
under the other criteria set forth in this Section 1.6;

 

(n) as to which Agent’s Lien thereon, on behalf of itself and Lenders, is not a
first priority perfected Lien;

 

(o) breaches any of the representations or warranties in the Loan Documents
pertaining to Accounts;

 

(p) to the extent such Account is evidenced by a judgment, Instrument or Chattel
Paper;

 

(q) to the extent that such Account, together with all other Accounts owing by
such Account Debtor and its Affiliates as of any date of determination exceed
ten percent (10%) of all Eligible Accounts;

 

(r) that is an obligation of an Account Debtor that is a credit card issuer; or

 

(s) that is payable in any currency other than Dollars.

 

1.7. Eligible Inventory. All of the Inventory owned by the Borrowers and
reflected in the most recent Borrowing Base Certificate delivered by the
Borrowers to Agent shall be “Eligible Inventory” for purposes of this Agreement,
except any Inventory to which any of the exclusionary criteria set forth below
applies. Agent shall have the right to establish, modify or eliminate Reserves
against Eligible Inventory from time to time in its reasonable credit judgment.
In addition, Agent reserves the right, at any time and from time to time after
the Closing Date, to adjust any of the criteria set forth below and to establish
new criteria and to adjust advance rates with respect to Eligible Inventory, in
its reasonable credit judgment reflecting changes in the salability or
realization values of Inventory arising or discovered by Agent after the Closing
Date, subject to the approval of all Revolving Lenders and the Requisite Term B
Lenders in the case of adjustments, new criteria or changes in advance rates
which have

 

15

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

the effect of making more credit available than available on the Closing Date;
provided that, unless a Default or an Event of Default shall have occurred and
be continuing, no adjustments, new criteria or changes in advance rates which
have the effect of making less credit available shall be made absent a Material
Adverse Effect (it being understood that a change of the calculation of the net
orderly liquidation value (or the component percentages thereof) of any
Inventory based on appraisals obtained by the Agent pursuant to the terms hereof
shall not constitute a change in the advance rates). Eligible Inventory shall
not include any Inventory of any Borrower that:

 

(a) is not owned by such Borrower free and clear of all Liens and rights of any
other Person (including the rights of a purchaser that has made progress
payments and the rights of a surety that has issued a bond to assure such
Borrower’s performance with respect to that Inventory), except the Liens in
favor of Agent, on behalf of itself and Lenders, and Permitted Encumbrances in
favor of landlords and bailees to the extent permitted in Section 5.9 hereof
(subject to Reserves established by Agent in accordance with Section 5.9
hereof);

 

(b) (i) is not located on premises owned, leased or rented by such Borrower and
set forth in Disclosure Schedule (3.2), or (ii) is stored at a leased location,
unless Agent has given its prior consent thereto and unless either (x) a
reasonably satisfactory landlord waiver has been delivered to Agent, or
(y) Reserves reasonably satisfactory to Agent have been established (if required
by the Agent in its discretion) with respect thereto or (iii) is stored with a
bailee or warehouseman unless a reasonably satisfactory, acknowledged bailee
letter has been received by Agent and Reserves reasonably satisfactory to Agent
have been established with respect thereto, or (iv) is located at an owned
location subject to a mortgage in favor of a lender other than Agent unless a
reasonably satisfactory mortgagee waiver has been delivered to Agent, or (v) is
located at any location if the aggregate book value of Inventory at any such
location is less than $100,000;

 

(c) is placed on consignment or is in transit, other than Inventory in transit
(i) that is fully insured against loss with Agent named as loss payee, (ii) as
to which a Reserve has been established by the Agent (if required by the Agent
in its discretion) to reflect any customs, freight and duty charges and
(iii) which has been fully paid for;

 

(d) is covered by a negotiable document of title, unless such document has been
delivered to Agent with all necessary endorsements, free and clear of all Liens
except those in favor of Agent and Lenders;

 

(e) is obsolete, slow moving (in excess of one year’s supply), unsalable,
shopworn, seconds, damaged or unfit for sale;

 

(f) consists of display items or packing or shipping materials, manufacturing
supplies or replacement parts;

 

(g) consists of goods which have been returned by the buyer;

 

16

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(h) is not of a type held for sale in the ordinary course of such Borrower’s
business;

 

(i) is not subject to a first priority lien in favor of Agent on behalf of
itself and Lenders, subject to Permitted Encumbrances as set forth in clause
(e) of the definition thereof (subject to reserves satisfactory to Agent);

 

(j) breaches any of the representations or warranties pertaining to Inventory
set forth in the Loan Documents;

 

(k) consists of any costs associated with “freight-in” charges, except
“freight-in” charges that are directly capitalized to a specific product and are
included in the cost of Inventory in the most recent appraisal of Inventory
obtained by the Agent pursuant to the terms hereof;

 

(l) consists of Hazardous Materials or goods that can be transported or sold
only with licenses that are not readily available;

 

(m) is not covered by casualty insurance reasonably acceptable to Agent; or

 

(n) is subject to any patent or trademark license requiring the payment of
royalties or fees (except with respect to royalties or fees related to
(i) Inventory sold under the “Jonathan Adler” name and (ii) marks and Inventory
subject to license agreements among Credit Parties so long as, in each case,
such royalties and fees are subordinated to the payment of the Obligations
pursuant to terms and conditions satisfactory to the Agent and do not interfere
with the Agent’s ability to sell such Inventory) or requiring the consent of the
licensor for a sale thereof by Agent (unless such consent has been obtained in
form and substance satisfactory to the Agent),

 

1.8. Cash Management Systems. On or prior to the Closing Date, Credit Parties
will establish and will maintain until the Termination Date, the cash management
systems described in Annex C (the “Cash Management Systems”).

 

1.9. Fees.

 

(a) Borrowers shall pay to GE Capital the Fees specified in the Fee Letter.

 

(b) As additional compensation for the Revolving Lenders, Borrowers shall pay to
Agent, for the ratable benefit of such Lenders, in arrears, on the first
Business Day of each month prior to the earliest of the Commitment Termination
Date and the Termination Date and on the Commitment Termination Date or the
Termination Date, whichever shall first occur, a Fee for Borrowers’ non-use of
available funds in an amount equal to the Applicable Unused Line Fee Margin per
annum (calculated on the basis of a 360 day year for actual days elapsed)
multiplied by the difference between (x) the Maximum Amount (as it may be
reduced from time to time) and (y) the average for the period of the daily
closing balances of the aggregate Revolving Loan and the Swing Line Loan
outstanding during the period for which such Fee is due.

 

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(c) If Borrowers pay after acceleration or prepay all or any portion of the
Tranche B Loan or prepay the Revolving Loan and reduce or terminate the
Revolving Loan Commitment at any time on or prior to the second anniversary of
the Closing Date, whether voluntarily or involuntarily and whether before or
after acceleration of the Obligations, or if any of the Commitments are
otherwise terminated prior to the second anniversary of the Closing Date,
Borrowers shall pay to Agent, for the benefit of the applicable Lenders as
liquidated damages and compensation for the costs of being prepared to make
funds available hereunder an amount equal to the Applicable Percentage (as
defined below) multiplied by the sum of (i) the principal amount of the Tranche
B Loan paid after acceleration or prepaid, and (ii) the amount of the reduction
of the Revolving Loan Commitment. As used herein, the term “Applicable
Percentage” shall mean (x) 0.50%, in the case of a prepayment on or prior to the
first anniversary of the Closing Date and (y) 0.25%, in the case of a prepayment
after the first anniversary of the Closing Date but on or prior to the second
anniversary thereof. The Credit Parties agree that the Applicable Percentages
are a reasonable calculation of Lenders’ lost profits in view of the
difficulties and impracticality of determining actual damages resulting from an
early termination of the Commitments. Notwithstanding the foregoing, no
prepayment fee shall be payable by Borrowers upon a mandatory prepayment made
pursuant to Sections 1.3(b)(i), (ii), (iii) or (iv) or 1.16(c); provided that
Borrowers do not permanently reduce or terminate the Revolving Loan Commitment
upon any such prepayment and, in the case of prepayments made pursuant to
Sections 1.3(b)(ii) and 1.3(b)(iii), the transaction giving rise to the
applicable prepayment is not prohibited under Section 6.

 

(d) Borrowers shall pay to Agent, for the ratable benefit of Revolving Lenders,
the Letter of Credit Fee as provided in Annex B.

 

1.10. Receipt of Payments. Borrowers shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability as of any
date, all payments shall be deemed received on the Business Day on which
immediately available funds therefor are received in the Collection Account
prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New York
time on any Business Day or on a day that is not a Business Day shall be deemed
to have been received on the following Business Day.

 

1.11. Application and Allocation of Payments.

 

(a) (i) So long as no Event of Default has occurred and is continuing,
(A) payments consisting of proceeds of Accounts received in the ordinary course
of business shall be applied, first, to the Swing Line Loan and, second, the
Revolving Loan; (B) voluntary prepayments shall be applied in accordance with
the provisions of Section 1.3(a); and (C) mandatory prepayments shall be applied
as set forth in Sections 1.3(b) and 1.3(c). All payments and prepayments applied
to a particular Loan shall be applied ratably to the portion thereof held by
each Lender as determined by its Pro Rata Share of such Loan.

 

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(ii) As to any other payment not specified in clause (i) above, and as to all
payments made when an Event of Default has occurred and is continuing or
following the Commitment Termination Date, each Borrower hereby irrevocably
waives the right to direct the application of any and all payments received from
or on behalf of such Borrower and all payments shall be applied to amounts then
due and payable in the following order: (1) to Fees of the Agent and Agent’s
expenses reimbursable hereunder; (2) to interest, including Post-Petition
Interest, on the Swing Line Loan; (3) to principal payments on the Swing Line
Loan; (4) to interest on the Revolving Loans and any Fees accruing or relating
to the Revolving Loans (other than the Fee relating to the Revolving Loans
required to be paid pursuant to Section 1.9(c)), ratably in proportion to the
interest or fees accrued as to each Revolving Loan (including Post-Petition
Interest); (5) to principal payments on the Revolving Loans (other than Letter
of Credit Obligations not then due and payable) and outstanding Letter of Credit
Obligations then due and payable, ratably to the aggregate, combined principal
balance of the Revolving Loans and outstanding Letter of Credit Obligations and,
with respect to any amounts remaining after such application, to provide cash
collateral for Letter of Credit Obligations not then due and payable in the
manner described in clause (c) of Annex B; (6) to interest on the Tranche B Loan
(including Post-Petition Interest) and any Fees accruing or relating to the
Tranche B Loan (other than the Fee required to be paid pursuant to
Section 1.9(c) relating to the Tranche B Loan), ratably in proportion to the
interest or Fees accrued as to the Tranche B Loan; (7) to principal payments on
the Tranche B Loan ratably on the aggregate balance of the Tranche B Loan;
(8) to all other Obligations relating to the Revolving Loans, including expenses
of the Lenders (other than the Fee required to be paid pursuant to
Section 1.9(c) relating to the Revolving Loans); (9) to all other Obligations
relating to the Tranche B Loan, including expenses of the Tranche B Lenders
(other than the Fee required to be paid pursuant to Section 1.9(c) relating to
the Tranche B Loan); (10) to Obligations to the extent that they relate to cash
management or similar services; (11) to the Fee required to be paid pursuant to
Section 1.9(c) with respect to the Revolving Loans; (12) to the Fee required to
be paid pursuant to Section 1.9(c) with respect to the Tranche B Loan; and
(13) to all other Obligations, including expenses of Lenders to the extent
reimbursable under Section 11.3.

 

(b) Agent is authorized to, and at its sole election may, charge to the
Revolving Loan balance on behalf of each Borrower and cause to be paid all Fees,
expenses, Charges, costs (including insurance premiums in accordance with
Section 5.4(a)) and interest and principal, other than principal of the
Revolving Loan, owing by Borrowers under this Agreement or any of the other Loan
Documents if and to the extent Borrowers fail to pay promptly any such amounts
as and when due, even if the amount of such charges would exceed Borrowing
Availability at such time. At Agent’s option and to the extent permitted by law,
any charges so made shall constitute part of the Revolving Loan hereunder.

 

1.12. Loan Account and Accounting. Agent shall maintain a loan account (the
“Loan Account”) on its books to record: all Advances and the Tranche B Loan, all
payments made by

 

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Borrowers, and all other debits and credits as provided in this Agreement with
respect to the Loans or any other Obligations. All entries in the Loan Account
shall be made in accordance with Agent’s customary accounting practices as in
effect from time to time. The balance in the Loan Account, as recorded on
Agent’s most recent printout or other written statement, shall, absent error, be
presumptive evidence of the amounts due and owing to Agent and Lenders by each
Borrower; provided that any failure to so record or any error in so recording
shall not limit or otherwise affect any Borrower’s duty to pay the Obligations.
Agent shall render to Borrower Representative a monthly accounting of
transactions with respect to the Loans setting forth the balance of the Loan
Account as to the Borrowers for the immediately preceding month. Unless Borrower
Representative notifies Agent in writing of any objection to any such accounting
(specifically describing the basis for such objection), within thirty (30) days
after the date thereof, each and every such accounting shall be presumptive
evidence of all matters reflected therein. Only those items expressly objected
to in such notice shall be deemed to be disputed by Borrowers. Any failure by
the Borrower’s Representative to make an objection shall not prejudice its right
to make a subsequent objection relating to a previous error. Notwithstanding any
provision herein contained to the contrary, any Lender may elect (which election
may be revoked) to dispense with the issuance of Notes to that Lender and may
rely on the Loan Account as evidence of the amount of Obligations from time to
time owing to it.

 

1.13. Indemnity.

 

(a) Each Credit Party that is a signatory hereto shall jointly and severally
indemnify and hold harmless each of Agent, Lenders and their respective
Affiliates, and each such Person’s respective officers, directors, employees,
attorneys, agents and representatives (each, an “Indemnified Person”), from and
against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable attorneys’ fees and disbursements
and other costs of investigation or defense, including those incurred upon any
appeal) that may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental Liabilities
and legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any of the Loan Documents
(collectively, “Indemnified Liabilities”); provided, that no such Credit Party
shall be liable for any indemnification to an Indemnified Person to the extent
that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from that Indemnified Person’s gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED
UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER. NOTHING HEREIN IS INTENDED TO PROVIDE

 

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INDEMNIFICATION TO AGENT OR ANY LENDER FOR ANY BREACH OF ITS OBLIGATIONS, DUTIES
OR RESPONSIBILITIES UNDER THE LOAN DOCUMENTS CONSTITUTING BAD FAITH OR GROSS
NEGLIGENCE.

 

(b) To induce Lenders to provide the LIBOR Rate option on the terms provided
herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last
day of any applicable LIBOR Period (whether that repayment is made pursuant to
any provision of this Agreement or any other Loan Document or occurs as a result
of acceleration, by operation of law or otherwise); (ii) any Borrower shall
default in payment when due of the principal amount of or interest on any LIBOR
Loan; (iii) any Borrower shall refuse to accept any borrowing of, or shall
request a termination of, any borrowing of, conversion into or continuation of,
LIBOR Loans after Borrower Representative has given notice requesting the same
in accordance herewith; or (iv) any Borrower shall fail to make any prepayment
of a LIBOR Loan after Borrower Representative has given a notice thereof in
accordance herewith, then Borrowers shall jointly and severally indemnify and
hold harmless each Lender from and against all losses, costs and expenses
resulting from or arising from any of the foregoing. Such indemnification shall
include any loss (including loss of margin) or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate deposits
from which such funds were obtained. For the purpose of calculating amounts
payable to a Lender under this subsection, each 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 that
LIBOR Loan and having a maturity comparable to the relevant LIBOR Period;
provided, that each 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. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower Representative with its
written calculation of all amounts payable pursuant to this Section 1.13(b), and
such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.

 

1.14. Access. Each Credit Party that is a party hereto shall, during its normal
business hours, from time to time upon two (2) Business Days’ prior notice as
frequently as Agent reasonably determines to be appropriate: (a) provide Agent
and any of its officers, employees and agents access to its properties,
facilities, advisors, officers and employees of each Credit Party and to the
Collateral, (b) permit Agent, and any of its officers, employees and agents, to
inspect, audit and make extracts from any Credit Party’s books and records, and
(c) permit Agent, and its officers, employees and agents, to inspect, review,
evaluate and make test verifications and counts of the Accounts, Inventory, Real
Estate and other Collateral of any Credit Party. If an Event of Default has
occurred and is continuing, each such Credit Party shall provide such access to
Agent and to each Lender at all times and without advance notice. Furthermore,
so long as any Event of Default has occurred and is continuing, Borrowers shall
provide Agent and each Lender with access to their suppliers and customers. Each
Credit Party shall make available to Agent and its counsel reasonably promptly
originals or copies of all books and records that Agent may reasonably request.
Each Credit Party shall deliver any

 

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document or instrument necessary for Agent, as it may from time to time
reasonably request, to obtain records from any service bureau or other Person
that maintains records for such Credit Party, and shall maintain duplicate
records or supporting documentation on media, including computer tapes and discs
owned by such Credit Party. Agent will give Lenders at least five (5) days’
prior written notice of regularly scheduled audits. Representatives of other
Lenders may accompany Agent’s representatives on regularly scheduled audits at
no charge to Borrowers.

 

1.15. Taxes.

 

(a) Any and all payments by each Borrower hereunder (including any payments made
pursuant to Section 12) or under the Notes shall be made, in accordance with
this Section 1.15, free and clear of and without deduction for any and all
present or future Taxes. If any Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder (including any sum payable
pursuant to Section 12) or under the Notes, (i) the sum payable shall be
increased as much as shall be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 1.15) Agent or Lenders, as applicable, receive an amount equal to
the sum they would have received had no such deductions been made, (ii) such
Borrower shall make such deductions, and (iii) such Borrower shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law. Within thirty (30) days after the date of any payment of Taxes,
Borrower Representative shall furnish to Agent the original or a certified copy
of a receipt evidencing payment thereof.

 

(b) Each Credit Party that is a signatory hereto shall jointly and severally
indemnify and, within ten (10) days of demand therefor, pay Agent and each
Lender for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 1.15) paid by Agent or such
Lender, as appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted.

 

(c) Each Lender organized under the laws of a jurisdiction outside the United
States (a “Foreign Lender”) as to which payments to be made under this Agreement
or under the Notes are exempt from United States withholding tax under an
applicable statute or tax treaty shall provide to Borrower Representative and
Agent a properly completed and executed IRS Form W-8ECI or Form W-8BEN or other
applicable form, certificate or document prescribed by the IRS or the United
States certifying as to such Foreign Lender’s entitlement to such exemption (a
“Certificate of Exemption”). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Borrower
Representative and Agent prior to becoming a Lender hereunder. No foreign Person
may become a Lender hereunder if such Person fails to deliver a Certificate of
Exemption in advance of becoming a Lender.

 

1.16. Capital Adequacy; Increased Costs; Illegality.

 

(a) If any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar

 

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requirements or compliance by any Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not
having the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender’s capital as a consequence of its obligations hereunder, then Borrowers
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower Representative and to Agent shall be
presumptive evidence of the matters set forth therein.

 

(b) If, due to either (i) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) or (ii) the compliance
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), in each case adopted after
the Closing Date, there shall be any increase in the cost to any Lender of
agreeing to make or making, funding or maintaining any Loan, then Borrowers
shall from time to time, upon demand by such Lender (with a copy of such demand
to Agent), pay to Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to Borrower Representative and
to Agent by such Lender, shall be presumptive evidence of the matters set forth
therein. Each Lender agrees that, as promptly as practicable after it becomes
aware of any circumstances referred to above which would result in any such
increased cost, the affected Lender shall, to the extent not inconsistent with
such Lender’s internal policies of general application, use reasonable
commercial efforts to minimize costs and expenses incurred by it and payable to
it by Borrowers pursuant to this Section 1.16(b).

 

(c) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender’s
reasonable opinion, materially adversely affecting it or its Loans or the income
obtained therefrom, on notice thereof and demand therefor by such Lender to
Borrower Representative through Agent, (i) the obligation of such Lender to
agree to make or to make or to continue to fund or maintain LIBOR Loans shall
terminate and (ii) the Borrowers shall forthwith prepay in full all outstanding
LIBOR Loans owing to such Lender, together with interest accrued thereon, unless
Borrower Representative on behalf of the Borrowers, within five (5) Business
Days after the delivery of such notice and demand, converts all LIBOR Loans into
Index Rate Loans.

 

(d) Within sixty (60) days after receipt by Borrower Representative of written
notice and demand from any Lender (an “Affected Lender”) for payment of
additional

 

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amounts or increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b),
or notice that it cannot continue to fund or maintain any LIBOR Loans as
provided in Section 1.16(c), Borrower Representative may, at its option, notify
Agent and such Affected Lender of its intention to replace the Affected Lender.
So long as no Default or Event of Default has occurred and is continuing,
Borrower Representative, with the consent of Agent, may obtain, at Borrowers’
expense, a replacement Lender (“Replacement Lender”) for the Affected Lender,
which Replacement Lender must be reasonably satisfactory to Agent. If Borrowers
obtain a Replacement Lender within ninety (90) days following notice of their
intention to do so, the Affected Lender must sell and assign its Loans and
Commitments to such Replacement Lender for an amount equal to the principal
balance of all Loans held by the Affected Lender and all accrued interest and
Fees with respect thereto through the date of such sale and such assignment
shall not require the payment of an assignment fee to Agent; provided, that
Borrowers shall have reimbursed such Affected Lender for the additional amounts
or increased costs that it is entitled to receive under this Agreement through
the date of such sale and assignment. Notwithstanding the foregoing, Borrowers
shall not have the right to obtain a Replacement Lender for an Affected Lender
who would be entitled to additional amounts or increased costs if such Affected
Lender rescinds its demand for increased costs or additional amounts within 15
days following its receipt of Borrowers’ notice of intention to replace such
Affected Lender. Furthermore, if Borrowers give a notice of intention to replace
and do not so replace such Affected Lender within ninety (90) days thereafter,
Borrowers’ rights under this Section 1.16(d) shall terminate with respect to
such Affected Lender and Borrowers shall promptly pay all increased costs or
additional amounts demanded by such Affected Lender pursuant to Sections
1.15(a), 1.16(a) and 1.16(b).

 

1.17. Single Loan. All Loans to the Borrowers and all of the other Obligations
of the Borrowers arising under this Agreement and the other Loan Documents shall
constitute one general obligation of the Borrowers secured, until the
Termination Date, by all of the Collateral.

 

2. CONDITIONS PRECEDENT

 

2.1. Conditions to the Initial Loans. No Lender shall be obligated to make any
Loan or incur any Letter of Credit Obligations on the Closing Date, or to take,
fulfill, or perform any other action hereunder, until the following conditions
have been satisfied or provided for in a manner reasonably satisfactory to
Agent, or waived in writing by Agent and Requisite Lenders:

 

(a) Credit Agreement; Loan Documents. This Agreement or counterparts hereof
shall have been duly executed by, and delivered to, Borrowers, each other Credit
Party, Agent and Lenders; and Agent shall have received such documents,
instruments, agreements and legal opinions as Agent shall reasonably request in
connection with the transactions contemplated by this Agreement and the other
Loan Documents, including all those listed in the Closing Checklist attached
hereto as Annex D, each in form and substance reasonably satisfactory to Agent.

 

(b) Repayment of Prior Lender Obligations; Satisfaction of Outstanding L/Cs.
(i) Agent shall have received a fully executed original of a pay-off letter
reasonably satisfactory to Agent confirming that all of the Prior Lender
Obligations will

 

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be repaid in full from the proceeds of the Tranche B Loan and the initial
Revolving Credit Advance and all Liens upon any of the property of Borrowers or
any of their Subsidiaries in favor of any Prior Lender shall be terminated by
such Prior Lender immediately upon such payment; and (ii) all letters of credit
issued or guaranteed by any Prior Lender shall have been cash collateralized,
supported by a guaranty of Agent or supported by a Letter of Credit issued
pursuant to Annex B, as mutually agreed upon by Agent, Borrowers and such Prior
Lender.

 

(c) Approvals. Agent shall have received (i) satisfactory evidence that the
Credit Parties have obtained all required consents and approvals of all Persons
including all requisite Governmental Authorities, to the execution, delivery and
performance of this Agreement and the other Loan Documents and the consummation
of the Related Transactions or (ii) an officer’s certificate in form and
substance reasonably satisfactory to Agent affirming that no such consents or
approvals are required.

 

(d) Opening Availability. The Eligible Accounts, Eligible Inventory, Eligible
Real Estate and Eligible Life Insurance Policies supporting the initial
Revolving Credit Advance and the initial Letter of Credit Obligations incurred
and the amount of the Reserves to be established on the Closing Date shall be
sufficient in value, as determined by Agent, to provide Borrowers, collectively,
with Borrowing Availability, after giving effect to the initial Revolving Credit
Advance made to the Borrowers, the incurrence of any initial Letter of Credit
Obligations and the consummation of the Related Transactions (on a pro forma
basis, with trade payables being paid currently (which, for the purposes hereof,
shall include up to $1,000,000 of such payables that are not more than 5 days
past due), and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales or deterioration of working capital)
of at least $14,700,000.

 

(e) Payment of Fees. Borrowers shall have paid the Fees required to be paid on
the Closing Date in the respective amounts specified in Section 1.9 (including
the Fees specified in the Fee Letter), and shall have reimbursed Agent for all
fees, costs and expenses of closing presented as of the Closing Date.

 

(f) Capital Structure: Other Indebtedness. The capital structure of each Credit
Party and the terms and conditions of all Indebtedness of each Credit Party
shall be acceptable to Agent in its sole discretion.

 

(g) Due Diligence. Agent shall have completed its business and legal due
diligence, including a roll forward of the Collateral audit, with results
reasonably satisfactory to Agent.

 

(h) Consummation of Related Transactions. Agent shall have received final and
complete copies of each of the other Related Transactions Documents, each of
which shall be in full force and effect in form and substance reasonably
satisfactory to Agent. The Related Transactions shall have been consummated in
accordance with the terms of the Related Transactions Documents.

 

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2.2. Further Conditions to Each Loan. Except as otherwise expressly provided
herein, no Lender shall be obligated to fund any Advance, convert or continue
any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if, as of the
date thereof:

 

(a) (i) any representation or warranty by any Credit Party contained herein or
in any other Loan Document is untrue or incorrect as of such date as determined
by Agent or Requisite Lenders, except to the extent that such representation or
warranty expressly relates to an earlier date and except for changes therein
expressly permitted or expressly contemplated by this Agreement and
(ii) (A) with respect to Revolving Loans, Agent or Requisite Lenders have
determined not to make such Advance, convert or continue any Loan as LIBOR Loan
or incur such Letter of Credit Obligation as a result of the fact that such
warranty or representation is untrue or incorrect or (B) with respect to the
Tranche B Loan, Agent or Requisite Tranche B Lenders have determined not to
convert or continue any Loan as LIBOR Loan as a result of the fact that such
warranty or representation is untrue or incorrect;

 

(b) (i) any Default or Event of Default has occurred and is continuing or would
result after giving effect to any Advance (or the incurrence of any Letter of
Credit Obligation), and (ii) (A) with respect to Revolving Loans, Agent or
Requisite Lenders shall have determined not to make any Advance, convert or
continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation as a
result of that Default or Event of Default or (B) with respect to the Tranche B
Loan, Agent or Requisite Tranche B Lenders shall have determined not to convert
or continue any Loan as a LIBOR Loan as a result of that Default or Event of
Default; or

 

(c) after giving effect to any Advance (or the incurrence of any Letter of
Credit Obligations), the outstanding principal amount of the aggregate Revolving
Loan would exceed the lesser of the Borrowing Base and the Maximum Amount, in
each case, less the then outstanding principal amount of the Swing Line Loan,

 

The request and acceptance by any Borrower of the proceeds of any Advance, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan shall be deemed to constitute, as of the
date thereof, (i) a representation and warranty by Borrowers that none of the
conditions described in clauses (a)(i), (b)(i) or (c) of this Section 2.2 exist
and are continuing and (ii) a reaffirmation by Borrowers of the cross-guaranty
provisions set forth in Section 12 and of the granting and continuance of
Agent’s Liens, on behalf of itself and Lenders, pursuant to the Collateral
Documents.

 

3. REPRESENTATIONS AND WARRANTIES

 

To induce Lenders to make the Loans and to incur Letter of Credit Obligations,
the Credit Parties executing this Agreement, jointly and severally, make the
following representations and warranties to Agent and each Lender with respect
to all Credit Parties, each and all of which shall survive the execution and
delivery of this Agreement.

 

3.1. Corporate Existence; Compliance with Law. Each Credit Party (a) is a
corporation, limited liability company or limited partnership duly organized,
validly existing and

 

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in good standing under the laws of its respective jurisdiction of incorporation
or organization set forth in Disclosure Schedule (3.1); (b) is duly qualified to
conduct business and is in good standing in each other jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not result in
exposure to losses or liabilities which could reasonably be expected to have a
Material Adverse Effect; (c) has the requisite power and authority and the legal
right to own, pledge, mortgage or otherwise encumber and operate its properties,
to lease the property it operates under leases and to conduct its business as
now conducted or proposed to be conducted; (d) subject to specific
representations regarding Environmental Laws, has all licenses, permits,
consents or approvals from or by, and has made all material filings with, and
has given all notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct; (e) is in
compliance with its charter and bylaws or partnership or operating agreement, as
applicable; and (f) subject to specific representations set forth herein
regarding ERISA, Environmental Laws, tax and other laws, is in compliance with
all applicable provisions of law, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

 

3.2. Executive Offices, Collateral Locations, FEIN. As of the Closing Date, each
Credit Party’s name as it appears in official filings in its state of
incorporation or organization, state of incorporation or organization,
organization type, organization number, if any, issued by its state
incorporation or organization, and the current location of each Credit Party’s
chief executive office and the warehouses and premises at which any Collateral
is located are set forth in Disclosure Schedule (3.2), none of such locations
has changed within the four (4) months preceding the Closing Date and each
Credit Party has only one state of incorporation or organization. In addition,
Disclosure Schedule (3.2) lists the federal employer identification number of
each Credit Party.

 

3.3. Corporate Power, Authorization, Enforceable Obligations. The execution,
delivery and performance by each Credit Party of the Loan Documents to which it
is a party and the creation of all Liens provided for therein: (a) are within
such Person’s power; (b) have been duly authorized by all necessary corporate,
limited liability company or limited partnership action; (c) do not contravene
any provision of such Person’s charter, bylaws or partnership or operating
agreement as applicable; (d) do not violate any law or regulation, or any order
or decree of any court or Governmental Authority; (e) do not conflict with or
result in the breach or termination of, constitute a default under or accelerate
or permit the acceleration of any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which such
Person is a party or by which such Person or any of its property is bound;
(f) do not result in the creation or imposition of any Lien upon any of the
property of such Person other than those in favor of Agent, on behalf of itself
and Lenders, pursuant to the Loan Documents; and (g) do not require the consent
or approval of any Governmental Authority or any other Person, except those
referred to in Section 2.1(c), all of which will have been duly obtained, made
or complied with prior to the Closing Date. Each of the Loan Documents shall be
duly executed and delivered by each Credit Party that is a party thereto and
each such Loan Document shall constitute a legal, valid and binding obligation
of such Credit Party enforceable against it in accordance with its terms.

 

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3.4. Financial Statements and Projections. Except for the Projections, all
Financial Statements concerning Rowe Companies and its Subsidiaries that are
referred to below have been prepared in accordance with GAAP consistently
applied throughout the periods covered (except as disclosed therein and except,
with respect to unaudited Financial Statements, for the absence of footnotes and
normal year-end audit adjustments) and present fairly in all material respects
the financial position of the Persons covered thereby as at the dates thereof
and the results of their operations and cash flows for the periods then ended.

 

(a) Financial Statements. The following Financial Statements attached hereto as
Disclosure Schedule (3.4(a)) have been delivered on the date hereof:

 

(i) The audited consolidated and unaudited consolidating balance sheets at
November 30, 2003 and November 28, 2004 and the related statements of income and
cash flows of Rowe Companies and its Subsidiaries for the Fiscal Years then
ended, certified by BDO Seidman, LLP.

 

(ii) The unaudited consolidated and consolidating balance sheet(s) at August 28,
2005 and the related statement(s) of income and cash flows of Rowe Companies and
its Subsidiaries for the three (3) Fiscal Quarters then ended.

 

(b) Pro Forma. The Pro Forma delivered on the date hereof and attached hereto as
Disclosure Schedule (3.4(b)) was prepared by Rowe Companies giving pro forma
effect to the Related Transactions, was based on the unaudited consolidated and
consolidating balance sheets of Borrowers and their Subsidiaries dated
August 28, 2005, and was prepared in accordance with GAAP, with only such
adjustments thereto as would be required in accordance with GAAP.

 

(c) Projections. The Projections delivered on the date hereof and attached
hereto as Disclosure Schedule (3.4(c)) have been prepared by Rowe Companies on a
basis consistent with its historical financial statements, and reflect
projections (a) for the period beginning on November 28, 2005 through
December 3, 2006, on a quarterly basis, and (b) for the next two years
thereafter, on an annual basis, in each case, including future payments when due
of known contingent liabilities. The Projections are based upon the same
accounting principles as those used in the preparation of the financial
statements described above and the estimates and assumptions stated therein, all
of which Borrowers believe to be reasonable and fair in light of current
conditions and current facts known to Borrowers and, as of the Closing Date,
reflect Borrowers’ good faith and reasonable estimates of the future financial
performance of Borrowers for the period set forth therein. The Projections are
not a guaranty of future performance, and actual results may differ from the
Projections.

 

3.5. Material Adverse Effect. Between August 28, 2005 and the Closing Date:
(a) no Credit Party has incurred any obligations, contingent or noncontingent
liabilities, liabilities for Charges, long-term leases or unusual forward or
long-term commitments that are not reflected in the Pro Forma and that, alone or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect, (b) no contract, lease or other agreement or instrument has been entered
into by any Credit Party or has become binding upon any Credit Party’s assets
and no law or

 

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regulation applicable to any Credit Party has been adopted that has had or could
reasonably be expected to have a Material Adverse Effect, and (c) no Credit
Party is in default and to the best of Borrowers’ knowledge no third party is in
default under any material contract, lease or other agreement or instrument,
that alone or in the aggregate could reasonably be expected to have a Material
Adverse Effect. Since August 28, 2005 no event has occurred, that alone or
together with other events, could reasonably be expected to have a Material
Adverse Effect.

 

3.6. Ownership of Property; Liens. As of the Closing Date, the real estate
(“Real Estate”) listed in Disclosure Schedule (3.6) constitutes all of the real
property owned, leased, subleased, or used by any Credit Party. Each Credit
Party owns good and marketable fee simple title to all of its owned Real Estate,
and valid and marketable leasehold interests in all of its leased Real Estate,
all as described on Disclosure Schedule (3.6), and copies of all such leases or
a summary of terms thereof reasonably satisfactory to Agent have been delivered
to Agent. Disclosure Schedule (3.6) further describes any Real Estate with
respect to which any Credit Party is a lessor, sublessor or assignor as of the
Closing Date. Each Credit Party also has good and marketable title to, or valid
leasehold interests in, all of its personal property and assets. As of the
Closing Date, none of the properties and assets of any Credit Party are subject
to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Credit Party that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Each Credit Party has received all deeds, assignments, waivers,
consents, nondisturbance and attornment or similar agreements, bills of sale and
other documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Credit Party’s right, title and
interest in and to all such Real Estate and other properties and assets.
Disclosure Schedule (3.6) also describes any purchase options, rights of first
refusal or other similar contractual rights pertaining to any Real Estate. As of
the Closing Date, no portion of any Credit Party’s Real Estate has suffered any
material damage by fire or other casualty loss that has not heretofore been
repaired and restored in all material respects to its original condition or
otherwise remedied. As of the Closing Date, all material permits required to
have been issued or appropriate to enable the Real Estate to be lawfully
occupied and used for all of the purposes for which it is currently occupied and
used have been lawfully issued and are in full force and effect.

 

3.7. Labor Matters. Except as set forth on Disclosure Schedule 3.7, as of the
Closing Date (a) no strikes or other material labor disputes against any Credit
Party are pending or, to any Credit Party’s knowledge, threatened; (b) hours
worked by and payment made to employees of each Credit Party comply with the
Fair Labor Standards Act and each other federal, state, local or foreign law
applicable to such matters; (c) all payments due from any Credit Party for
employee health and welfare insurance have been paid or accrued as a liability
on the books of such Credit Party; (d) no Credit Party is a party to or bound by
any collective bargaining agreement, management agreement, consulting agreement,
employment agreement, bonus, restricted stock, stock option, or stock
appreciation plan or agreement or any similar plan, agreement or arrangement
(and true and complete copies of any agreements described on Disclosure Schedule
(3.7) have been delivered to Agent); (e) there is no organizing activity
involving any Credit Party pending or, to any Credit Party’s knowledge,
threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Credit Party’s knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party has made a pending demand for

 

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recognition; and (g) there are no material complaints or charges against any
Credit Party pending or, to the knowledge of any Credit Party, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.

 

3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.
Except as set forth in Disclosure Schedule (3.8), as of the Closing Date, no
Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person. All
of the issued and outstanding Stock of each Credit Party (other than Rowe
Companies) is owned by a Credit Party and in the amounts set forth in Disclosure
Schedule (3.8). Except for outstanding options to purchase Stock of Rowe
Companies previously awarded to employees and directors, as of the Closing Date,
there are no outstanding rights to purchase, options, warrants or similar rights
or agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries. All outstanding Indebtedness and
Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for
the Obligations) is described in Section 6.3 (including Disclosure Schedule
(6.3)).

 

3.9. Government Regulation. No Credit Party is an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company,” as such terms are defined in the Investment Company Act of
1940. No Credit Party is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or any other federal or state
statute that restricts or limits its ability to incur Indebtedness or to perform
its obligations hereunder. The making of the Loans by Lenders to Borrowers, the
incurrence of the Letter of Credit Obligations on behalf of Borrowers, the
application of the proceeds thereof and repayment thereof and the consummation
of the Related Transactions will not violate any provision of any such statute
or any rule, regulation or order issued by the Securities and Exchange
Commission applicable to any Credit Party.

 

3.10. Margin Regulations. No Credit Party is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” as such
terms are defined in Regulation U of the Federal Reserve Board as now and from
time to time hereafter in effect (such securities being referred to herein as
“Margin Stock”). No Credit Party owns any Margin Stock, and none of the proceeds
of the Loans or other extensions of credit under this Agreement will be used,
directly or indirectly, for the purpose of purchasing or carrying any Margin
Stock, for the purpose of reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a “purpose credit” within the meaning of
Regulations T, U or X of the Federal Reserve Board. No Credit Party will take or
permit to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.

 

3.11. Taxes. All federal, state and other material tax returns, reports and
statements, including information returns, required by any Governmental
Authority to be filed by any Credit Party have been filed with the appropriate
Governmental Authority, and all Charges have been paid prior to the date on
which any fine, penalty, interest or late charge may be added thereto for

 

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nonpayment thereof excluding Charges or other amounts being contested in
accordance with Section 5.2(b) and unless the failure to so file or pay would
not reasonably be expected to result in fines, penalties or interest in excess
of $100,000 in the aggregate. Proper and accurate amounts have been withheld by
each Credit Party from its respective employees for all periods in full and
complete compliance with all applicable federal, state, local and foreign laws
and such withholdings have been timely paid to the respective Governmental
Authorities. Disclosure Schedule (3.11) sets forth as of the Closing Date those
taxable years for which any Credit Party’s tax returns are currently being
audited by the IRS or any other applicable Governmental Authority, and any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as described in Disclosure Schedule
(3.11), as of the Closing Date, no Credit Party has executed or filed with the
IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. Except as described in Disclosure Schedule (3.11),
none of the Credit Parties and their respective predecessors are liable for any
Charges: (a) under any agreement (including any tax sharing agreements) or
(b) to each Credit Party’s knowledge, as a transferee. As of the Closing Date,
no Credit Party has agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
would reasonably be expected to have a Material Adverse Effect.

 

3.12. ERISA.

 

(a) Disclosure Schedule (3.12) lists, as of the Closing Date, (i) all ERISA
Affiliates and (ii) all Plans and separately identifies all Pension Plans,
including Title IV Plans, Multiemployer Plans, and all Retiree Welfare Plans.
Copies of all such listed Plans, together with a copy of the latest form IRS/DOL
5500-series, as applicable, for each such Plan, have been delivered to Agent.
Except with respect to Multiemployer Plans, each Qualified Plan has been
determined by the IRS to qualify under Section 401 of the IRC, the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the IRC, and nothing has occurred that would cause
the loss of such qualification or tax-exempt status. Each Plan is in compliance
in all material respects with the applicable provisions of ERISA, the IRC and
its terms, including the timely filing of all reports required under the IRC or
ERISA. Neither any Credit Party nor ERISA Affiliate has failed to make any
material contribution or pay any material amount due as required by either
Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. No
“prohibited transaction,” as defined in Section 406 of ERISA and Section 4975 of
the IRC, has occurred with respect to any Plan, that would subject any Credit
Party to a material tax on prohibited transactions imposed by Section 502(i) of
ERISA or Section 4975 of the IRC.

 

(b) Except as set forth in Disclosure Schedule (3.12): (i) no Title IV Plan has
any material Unfunded Pension Liability; (ii) no ERISA Event has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge of
any Credit Party, threatened material claims (other than claims for benefits in
the normal course), sanctions, actions or lawsuits, asserted or instituted
against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no
Credit Party or ERISA Affiliate has incurred or reasonably expects to incur any
material liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; and (v) within the last five years no Title

 

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IV Plan of any Credit Party or ERISA Affiliate has been terminated, whether or
not in a “standard termination” as that term is used in Section 4041 of ERISA,
nor has any Title IV Plan of any Credit Party or any ERISA Affiliate (determined
at any time within the last five years) with material Unfunded Pension
Liabilities been transferred outside of the “controlled group” (within the
meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate
(determined at such time).

 

3.13. No Litigation. No action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Credit Party, threatened
against any Credit Party, before any Governmental Authority or before any
arbitrator or panel of arbitrators (collectively, “Litigation”), (a) that
challenges any Credit Party’s right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) that
has a reasonable risk of being determined adversely to any Credit Party and
that, if so determined, could reasonably be expected to have a Material Adverse
Effect. Except as set forth on Disclosure Schedule (3.13), as of the Closing
Date there is no Litigation pending or, to any Credit Party’s knowledge,
threatened, that seeks damages in excess of $250,000 or injunctive relief
against, or alleges criminal misconduct of, any Credit Party.

 

3.14. Brokers. No broker or finder brought about the obtaining, making or
closing of the Loans or the Related Transactions, and no Credit Party or
Affiliate thereof has any obligation to any Person in respect of any finder’s or
brokerage fees in connection therewith.

 

3.15. Intellectual Property. As of the Closing Date, each Credit Party owns or
has rights to use all Intellectual Property necessary to continue to conduct its
business as now conducted by it or presently proposed to be conducted by it, and
each Patent, Trademark, registered Copyright and License is listed, together
with application or registration numbers, as applicable, in Disclosure Schedule
(3.15). Each Credit Party conducts its business and affairs without infringement
of or interference with any Intellectual Property of any other Person in any
material respect. Except as set forth in Disclosure Schedule (3.15), no Credit
Party is aware of any material infringement claim by any other Person with
respect to any Intellectual Property.

 

3.16. Full Disclosure. No information contained in this Agreement, any of the
other Loan Documents, Financial Statements or Collateral Reports or other
written reports from time to time prepared by any Credit Party and delivered
hereunder or any written statement prepared by any Credit Party and furnished by
or on behalf of any Credit Party to Agent or any Lender pursuant to the terms of
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. Projections from time to time delivered hereunder are or
will be based upon the estimates and assumptions stated therein, all of which
Borrowers believed at the time of delivery to be reasonable and fair in light of
current conditions and current facts known to Borrowers as of such delivery
date, and reflect Borrowers’ good faith and reasonable estimates of the future
financial performance of Borrowers and of the other information projected
therein for the period set forth therein. Such Projections are not a guaranty of
future performance and actual results may differ from those set forth in such
Projections. The Liens granted to Agent, on behalf of itself and Lenders,
pursuant to the Collateral Documents will at all times be fully perfected first
priority Liens in and to the Collateral described therein, subject, as to
priority, only to Permitted Encumbrances.

 

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3.17. Environmental Matters.

 

(a) Except as set forth in Disclosure Schedule (3.17), as of the Closing Date:
(i) the Real Estate is free of contamination from any Hazardous Material except
for such contamination that would not adversely impact the value or
marketability of such Real Estate and that would not result in Environmental
Liabilities of the Credit Parties that could reasonably be expected to exceed
$100,000; (ii) no Credit Party has caused or suffered to occur any material
Release of Hazardous Materials on, at, in, under, above, to, from or about any
of its owned Real Estate or, to its knowledge, any leased Real Estate; (iii) the
Credit Parties are and have been in compliance with all Environmental Laws,
except for such noncompliance that would not result in Environmental Liabilities
which could reasonably be expected to exceed $100,000; (iv) the Credit Parties
have obtained, and are in compliance with, all Environmental Permits required to
be obtained be them by Environmental Laws for the operations of their respective
businesses as presently conducted or as proposed to be conducted, except where
the failure to so obtain or comply with such Environmental Permits would not
result in Environmental Liabilities that could reasonably be expected to exceed
$100,000, and all such Environmental Permits are valid, uncontested and in good
standing; (v) no Credit Party is involved in operations or knows of any facts,
circumstances or conditions, including any Releases of Hazardous Materials, that
are likely to result in any Environmental Liabilities of such Credit Party which
could reasonably be expected to exceed $100,000; (vi) there is no Litigation
arising under or related to any Environmental Laws, Environmental Permits or
Hazardous Material that seeks damages, penalties, fines, costs or expenses in
excess of $100,000 or injunctive relief against, or that alleges criminal
misconduct by, any Credit Party; (vii) no notice has been received by any Credit
Party identifying it as a “potentially responsible party” or requesting
information under CERCLA or analogous state statutes, and to the knowledge of
the Credit Parties, there are no facts, circumstances or conditions that may
result in any Credit Party being identified as a “potentially responsible party”
under CERCLA or analogous state statutes; and (viii) the Credit Parties have
provided to Agent copies of all existing environmental reports, reviews and
audits and all written information pertaining to actual or potential
Environmental Liabilities, in each case relating to any Credit Party.

 

(b) Each Credit Party hereby acknowledges and agrees that Agent (i) is not now,
and has not ever been, in control of any of the Real Estate or any Credit
Party’s affairs, and (ii) does not have the capacity through the provisions of
the Loan Documents or otherwise to influence any Credit Party’s conduct with
respect to the ownership, operation or management of any of its Real Estate or
compliance with Environmental Laws or Environmental Permits.

 

3.18. Insurance. Disclosure Schedule (3.18) lists all insurance policies of any
nature maintained, as of the Closing Date, for current occurrences by each
Credit Party, as well as a summary of the terms of each such policy.

 

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3.19. Deposit and Disbursement Accounts. Disclosure Schedule (3.19) lists all
banks and other financial institutions at which any Credit Party maintains
deposit or other accounts as of the Closing Date, including any Disbursement
Accounts, and such Schedule correctly identifies the name, address and telephone
number of each depository, the name in which the account is held, a description
of the purpose of the account, and the complete account number therefor.

 

3.20. Government Contracts. Except as set forth in Disclosure Schedule (3.20),
as of the Closing Date, no Credit Party is a party to any contract or agreement
with any Governmental Authority and no Credit Party’s Accounts are subject to
the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any similar
state or local law.

 

3.21. Customer and Trade Relations. Except as set forth in Disclosure Schedule
(3.21), as of the Closing Date, there exists no actual or, to the knowledge of
any Credit Party, threatened termination or cancellation of, or any material
adverse modification or change in: the business relationship of any Credit Party
with any customer or group of customers whose purchases during the preceding 12
months caused them to be ranked among the ten largest customers of such Credit
Party; or the business relationship of any Credit Party with any supplier
essential to its operations.

 

3.22. Bonding; Licenses. Except as set forth on Disclosure Schedule 3.22, as of
the Closing Date, no Credit Party is a party to or bound by any surety bond
agreement or binding requirement with respect to products or services sold by it
or any trademark or patent license agreement with respect to products sold by
it.

 

3.23. Solvency. Both before and after giving effect to (a) the Loans and Letter
of Credit Obligations to be made or incurred on the Closing Date or such other
date as Loans and Letter of Credit Obligations requested hereunder are made or
incurred, (b) the disbursement of the proceeds of such Loans pursuant to the
instructions of Borrower Representative; (c) the Refinancing and the
consummation of the other Related Transactions; and (d) the payment and accrual
of all transaction costs in connection with the foregoing, each Credit Party is
and will be Solvent.

 

4. FINANCIAL STATEMENTS AND INFORMATION

 

4.1. Reports and Notices.

 

(a) Each Credit Party executing this Agreement hereby agrees that from and after
the Closing Date and until the Termination Date, it shall deliver to Agent or to
Agent and Lenders, as required, the Financial Statements, notices, Projections
and other information at the times, to the Persons and in the manner set forth
in Annex E.

 

(b) Each Credit Party executing this Agreement hereby agrees that, from and
after the Closing Date and until the Termination Date, it shall deliver to Agent
or to Agent and Lenders, as required, the various Collateral Reports (including
Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the times, to the
Persons and in the manner set forth in Annex F.

 

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4.2. Communication with Accountants. Each Credit Party executing this Agreement
authorizes (a) Agent and (b) so long as an Event of Default has occurred and is
continuing, each Lender, to communicate directly with its independent certified
public accountants, including BDO Seidman, LLP, and authorizes and shall
instruct those accountants and advisors to communicate to Agent and each Lender
information relating to any Credit Party with respect to the business, results
of operations and financial condition of any Credit Party.

 

5. AFFIRMATIVE COVENANTS

 

Each Credit Party executing this Credit Agreement jointly and severally agrees
as to all Credit Parties that from and after the date hereof and until the
Termination Date:

 

5.1. Maintenance of Existence and Conduct of Business. Each Credit Party shall:
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence and its material rights and franchises;
continue to conduct its business substantially as now conducted or as otherwise
permitted hereunder; at all times maintain, preserve and protect all of its
assets and properties used or useful in the conduct of its business, and keep
the same in good repair, working order and condition in all material respects
(taking into consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and transact business
only in such corporate and trade names as are set forth in Disclosure Schedule
(5.1). Nothing herein shall preclude a Credit Party from merging into another
Credit Party or a Borrower from acquiring all or substantially all of the assets
from another Credit Party, in each case, to the extent permitted under
Section 6.1.

 

5.2. Payment of Charges.

 

(a) Subject to Section 5.2(b), each Credit Party shall pay and discharge or
cause to be paid and discharged promptly all Charges payable by it, including
(i) Charges imposed upon it, its income and profits, or any of its property
(real, personal or mixed) and all Charges with respect to tax, social security
and unemployment withholding with respect to its employees, (ii) lawful claims
for labor, materials, supplies and services or otherwise, and (iii) all storage
or rental charges payable to warehousemen or bailees, in each case, before any
thereof shall become past due, except in the case of clauses (ii) and
(iii) where the failure to pay or discharge such Charges would not result in
aggregate liabilities in excess of $200,000.

 

(b) Each Credit Party may in good faith contest, by appropriate proceedings, the
validity or amount of any Charges, Taxes or claims described in Section 5.2(a);
provided, that (i) adequate reserves with respect to such contest are maintained
on the books of such Credit Party, in accordance with GAAP; (ii) no Lien shall
be imposed to secure payment of such Charges (other than payments to
warehousemen and/or bailees) that is superior to any of the Liens securing the
Obligations and such contest is maintained and prosecuted continuously and with
diligence and operates to suspend collection or enforcement of such Charges;
(iii) none of the Collateral becomes subject to forfeiture or loss as a result
of such contest; and (iv) such Credit Party shall promptly pay or discharge such
contested Charges, Taxes or claims and all additional charges, interest,

 

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penalties and expenses, if any, and shall deliver to Agent evidence reasonably
acceptable to Agent of such compliance, payment or discharge, if such contest is
terminated or discontinued adversely to such Credit Party or the conditions set
forth in this Section 5.2(b) are no longer met.

 

5.3. Books and Records. Each Credit Party shall keep adequate books and records
with respect to its business activities in which proper entries, reflecting all
financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financial Statements attached as Disclosure Schedule
(3.4(a)).

 

5.4. Insurance; Damage to or Destruction of Collateral.

 

(a) The Credit Parties shall, at their sole cost and expense, maintain the
policies of insurance described on Disclosure Schedule (3.18) as in effect on
the date hereof or otherwise in form and amounts and with insurers reasonably
acceptable to Agent. Such policies of insurance (or the loss payable and
additional insured endorsements delivered to Agent) shall contain provisions
pursuant to which the insurer agrees to provide thirty (30) days prior written
notice to Agent in the event of any non-renewal, cancellation or amendment of
any such insurance policy. If any Credit Party at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required
above, or to pay all premiums relating thereto, Agent may at any time or times
thereafter obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto that Agent deems advisable;
provided that, so long as the Credit Parties immediately certify that they have
obtained and continue to maintain such policies of insurance, the Agent shall
not obtain such policies unless the Credit Parties have failed to provide the
Agent with satisfactory evidence of such insurance within three (3) Business
Days after written request to the Credit Parties. Agent shall have no obligation
to obtain insurance for any Credit Party or pay any premiums therefor. By doing
so, Agent shall not be deemed to have waived any Default or Event of Default
arising from any Credit Party’s failure to maintain such insurance or pay any
premiums therefor. All sums so disbursed, including reasonable attorneys’ fees,
court costs and other charges related thereto, shall be payable on demand by
Borrowers to Agent and shall be additional Obligations hereunder secured by the
Collateral.

 

(b) Agent reserves the right at any time upon any change in any Credit Party’s
risk profile (including any change in the product mix maintained by any Credit
Party or any laws affecting the potential liability of such Credit Party) to
require additional forms and limits of insurance to, in Agent’s opinion,
adequately protect both Agent’s and Lenders’ interests in all or any portion of
the Collateral and to ensure that each Credit Party is protected by insurance in
amounts and with coverage customary for its industry. If reasonably requested by
Agent, each Credit Party shall deliver to Agent from time to time a report of a
reputable insurance broker, reasonably satisfactory to Agent, with respect to
its insurance policies.

 

(c) Each Credit Party shall deliver to Agent, in form and substance reasonably
satisfactory to Agent, endorsements to (i) all “all risk” and business
interruption insurance naming Agent, on behalf of itself and Lenders, as loss
payee, and (ii) all

 

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general liability and other liability policies (excluding policies covering
directors and officers insurance and insurance covering employee claims) naming
Agent, on behalf of itself and Lenders, as additional insured. Each Credit Party
irrevocably makes, constitutes and appoints Agent (and all officers, employees
or agents designated by Agent), so long as any Default or Event of Default has
occurred and is continuing or the anticipated insurance proceeds exceed
$1,000,000, as such Credit Party’s true and lawful agent and attorney-in-fact
for the purpose of making, settling and adjusting claims under such “all risk”
policies of insurance, endorsing the name of such Credit Party on any check or
other item of payment for the proceeds of such “all risk” policies of insurance
and for making all determinations and decisions with respect to such “all risk”
policies of insurance. Agent shall have no duty to exercise any rights or powers
granted to it pursuant to the foregoing power-of-attorney. Borrower
Representative shall promptly notify Agent of any loss, damage, or destruction
to the Collateral in the amount of $250,000 or more, whether or not covered by
insurance. After deducting from such proceeds (i) the expenses incurred by Agent
in the collection or handling thereof, and (ii) amounts required to be paid to
creditors (other than Lenders) having Permitted Encumbrances, Agent shall apply
such proceeds to the reduction of the Obligations in accordance with
Section 1.3(c). Notwithstanding the foregoing, if the casualty giving rise to
such insurance proceeds could not reasonably be expected to have a Material
Adverse Effect and such insurance proceeds do not exceed $1,000,000 in the
aggregate, Agent shall permit the applicable Credit Party to replace, restore,
repair or rebuild the property; provided that if such Credit Party shall not
have completed or entered into binding agreements to complete such replacement,
restoration, repair or rebuilding within 180 days of such casualty, Agent shall
apply such insurance proceeds to the Obligations in accordance with
Section 1.3(c). All insurance proceeds that are to be made available to any
Borrower to replace, repair, restore or rebuild the Collateral shall be applied
by Agent to reduce the outstanding principal balance of the Revolving Loan of
the Borrowers (which application shall not result in a permanent reduction of
the Revolving Loan Commitment). All insurance proceeds made available to any
Credit Party that is not a Borrower to replace, repair, restore or rebuild
Collateral shall be deposited in a cash collateral account. Thereafter, such
funds shall be made available to that Borrower or Credit Party to provide funds
to replace, repair, restore or rebuild the Collateral as follows: (i) Borrower
Representative shall request a Revolving Credit Advance or a release from the
cash collateral account be made to such Borrower or Credit Party in the amount
requested to be released and (ii) so long as the conditions set forth in
Section 2.2 have been met, Revolving Lenders shall make such Revolving Credit
Advance or Agent shall release funds from the cash collateral account. To the
extent not used to replace, repair, restore or rebuild the Collateral, such
insurance proceeds shall be applied in accordance with Section 1.3(c).

 

(d) The Credit Parties will pay all premiums when due on the Life Insurance
Policies and properly notify the Agent in writing of the death of any individual
covered by the Life Insurance Policies. In the event of the death of such
individual, regardless of whether an Event of Default shall have occurred and be
continuing, each Credit Party agrees that the Agent may, upon three Business
Days prior written notice to the Borrower Representative, apply the proceeds of
the Life Insurance Policies as a mandatory prepayment of the amounts payable
hereunder and the other Loan Documents in such order of priority as is
contemplated in Section 1.11(a)(ii).

 

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5.5. Compliance with Laws. Each Credit Party shall comply with all federal,
state, local and foreign laws and regulations applicable to it, including those
relating to ERISA, labor laws, and Environmental Laws and Environmental Permits,
except to the extent that the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

5.6. Supplemental Disclosure. From time to time as may be reasonably requested
by Agent (which request will not be made more frequently than once each year
absent the occurrence and continuance of an Event of Default) or at Credit
Parties’ election, the Credit Parties shall supplement each Disclosure Schedule
hereto, or any representation herein or in any other Loan Document, with respect
to any matter hereafter arising that, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation, or be
or be deemed a waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Agent and Requisite Lenders
in writing, and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.

 

5.7. Intellectual Property. Each Credit Party will conduct its business and
affairs without infringement of or interference with any Intellectual Property
of any other Person in any material respect and shall comply in all material
respects with the terms of its Licenses.

 

5.8. Environmental Matters. Each Credit Party shall and shall cause each Person
within its control to: (a) conduct its operations and keep and maintain its Real
Estate in compliance with all Environmental Laws and Environmental Permits other
than noncompliance that could not reasonably be expected to have a Material
Adverse Effect; (b) implement any and all investigation, remediation, removal
and response actions that are appropriate or necessary to maintain the value and
marketability of the Real Estate or to otherwise comply with Environmental Laws
and Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate in all material
respects; (c) notify Agent promptly after such Credit Party becomes aware of any
violation of Environmental Laws or Environmental Permits or any Release on, at,
in, under, above, to, from or about any Real Estate that is reasonably likely to
result in Environmental Liabilities in excess of $100,000; and (d) promptly
forward to Agent a copy of any order, notice, request for information or any
communication or report received by such Credit Party in connection with any
such violation or Release or any other matter relating to any Environmental Laws
or Environmental Permits that could reasonably be expected to result in
Environmental Liabilities in excess of $100,000, in each case whether or not the
Environmental Protection Agency or any Governmental Authority has taken or
threatened any action in connection with any such violation, Release or other
matter.

 

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If Agent at any time has a reasonable basis to believe that there may be a
violation of any Environmental Laws or Environmental Permits by any Credit Party
or any Environmental Liability arising thereunder, or a Release of Hazardous
Materials on, at, in, under, above, to, from or about any of its Real Estate,
that, in each case, could reasonably be expected to have a Material Adverse
Effect, then each Credit Party shall, upon Agent’s written request (i) cause the
performance of such environmental audits including subsurface sampling of soil
and groundwater, and preparation of such environmental reports, at Borrowers’
expense, as Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance reasonably acceptable to Agent, and
(ii) permit Agent or its representatives to have access to all Real Estate for
the purpose of conducting such environmental audits and testing as Agent deems
appropriate, including subsurface sampling of soil and groundwater. Borrowers
shall reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.

 

5.9. Landlords’ Agreements, Mortgagee Agreements, Bailee Letters and Real Estate
Purchases. Each Credit Party shall use commercially reasonable efforts to obtain
a landlord’s agreement, mortgagee agreement or bailee letter, as applicable,
from the lessor of each leased property, mortgagee of owned property or bailee
with respect to any warehouse, processor or converter facility or other location
where Collateral is stored or located (except Storehouse retail locations),
which agreement or letter shall contain a waiver or subordination of all Liens
or claims that the landlord, mortgagee or bailee may assert against the
Collateral at that location, and shall otherwise be reasonably satisfactory in
form and substance to Agent. With respect to such locations or warehouse space
leased or owned as of the Closing Date and thereafter, other than Storehouse
retail locations, if Agent has not received a landlord or mortgagee agreement or
bailee letter as of the Closing Date (or, if later, as of the date such location
is acquired or leased), any Borrower’s Eligible Inventory at that location
shall, in Agent’s discretion, be excluded from the Borrowing Base or be subject
to such Reserves as may be established by Agent in its reasonable credit
judgment. After the Closing Date, no real property or warehouse space shall be
leased by any Credit Party, other than Storehouse retail locations, and no
Inventory shall be shipped to a processor or converter under arrangements
established after the Closing Date without the prior written consent of Agent
(which consent, in Agent’s discretion, may be conditioned upon the exclusion
from the Borrowing Base of Eligible Inventory at that location or the
establishment of Reserves acceptable to Agent) or, unless and until a reasonably
satisfactory landlord agreement or bailee letter, as appropriate, shall first
have been obtained with respect to such location. Each Credit Party shall timely
and fully pay and perform its obligations under all leases and other agreements
with respect to each leased location or public warehouse where any Collateral is
or may be located. To the extent otherwise permitted hereunder, if any Credit
Party proposes to acquire a fee ownership interest in Real Estate after the
Closing Date, it shall first provide to Agent a mortgage or deed of trust
granting Agent a first priority Lien on such Real Estate, together with
environmental audits, mortgage title insurance commitment, real property survey,
local counsel opinion(s), and, if required by Agent, supplemental casualty
insurance and flood insurance, and such other documents, instruments or
agreements reasonably requested by Agent, in each case, in form and substance
reasonably satisfactory to Agent.

 

5.10. Further Assurances. Each Credit Party executing this Agreement agrees that
it shall and shall cause each other Credit Party to, at such Credit Party’s
expense and upon the

 

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reasonable request of Agent, duly execute and deliver, or cause to be duly
executed and delivered, to Agent such further instruments and do and cause to be
done such further acts as may be necessary or proper in the reasonable opinion
of Agent to carry out more effectively the provisions and purposes of this
Agreement and each Loan Document.

 

5.11. Additional Subsidiaries. Each Credit Party shall notify the Agent at the
time that any Person becomes a Subsidiary of such Credit Party, and promptly
thereafter (and in any event within thirty (30) days), cause such Person to
(a) become a Guarantor by executing and delivering to the Agent a Guaranty or
such other document as the Agent shall deem appropriate for such purpose,
(b) deliver to the Agent all corporate or similar documents and certificates,
all in form, content and scope reasonably satisfactory to the Agent, (c) deliver
all favorable opinions of counsel to such Person (which shall cover, among other
things, the legality, validity, binding effect and enforceability of the
documentation referred to in clause (a)), all in form, content and scope
reasonably satisfactory to the Agent, and (d) take all steps as may be necessary
or advisable in the opinion of the Agent to grant to the Agent, for the benefit
of the Lenders and the Agent, on a perfected, first-priority basis, a Lien on
all of its assets as collateral security for such Guaranty, pursuant to security
documents, mortgages, pledges and other documents in form and substance
satisfactory to the Agent.

 

5.12. Environmental Reports and Surveys. (a) Within thirty (30) days of the
Closing Date, the Credit Parties shall deliver to the Agent Phase II
Environmental Site Assessment Reports, consistent with American Society for
Testing and Materials (ASTM) Standard E 1527-00 (or the current ASTM standard
for Phase II environmental site assessment reports), and applicable state
requirements, on all of the Real Estate listed on Schedule B-2(i), prepared by
environmental engineers reasonably satisfactory to Agent, all in form and
substance reasonably satisfactory to Agent, in its sole discretion, (b) within
sixty (60) days of the Closing Date, the Credit Parties shall deliver to the
Agent (i) Phase II Environmental Site Assessment Reports, consistent with
American Society for Testing and Materials (ASTM) Standard E 1527-00 (or the
current ASTM standard for Phase II environmental site assessment reports), and
applicable state requirements, on all of the Real Estate listed on Schedule
B-2(ii) hereto, prepared by environmental engineers reasonably satisfactory to
Agent, all in form and substance reasonably satisfactory to Agent, in its sole
discretion and (ii) an updated survey for the property located at 2700 Central
Avenue, Poplar Bluff, MO, indicating no encroachments and otherwise in form and
substance satisfactory to the Agent. The Credit Parties shall implement all
reasonable remediation recommendations set forth in such Phase II environmental
site assessment reports within fifteen (15) days of receipt of such reports
(unless otherwise waived by the Agent in its sole discretion) and shall complete
such remediation within sixty (60) days of receipt of such reports; provided
that such remediation with respect to the Real Estate listed on Schedule B-2(i)
shall be completed within thirty (30) days of such reports.

 

5.13. Life Insurance Policy Acknowledgements. The assignments of the Life
Insurance Policies shall be delivered to the insurer thereof within one
(1) Business Day of the Closing Date. Within thirty (30) days of the Closing
Date, the Credit Parties shall deliver to Agent, or cause to be delivered to
Agent, acknowledgments of each such assignment, acknowledged, in writing, by the
applicable insurer.

 

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5.14. Cash Equity Contribution. The Agent shall have received satisfactory
evidence that on or prior to February 10, 2006, the Borrowers shall have
received (a) net cash proceeds from an equity investment of not less than
$9,500,000 and (b) a commitment for an additional equity investment in an amount
that will result in the Borrowers’ receipt of net cash proceeds of not less than
$2,000,000, in each case, on terms and conditions reasonably satisfactory to the
Agent.

 

6. NEGATIVE COVENANTS

 

Each Credit Party executing this Agreement jointly and severally agrees as to
all Credit Parties that from and after the date hereof until the Termination
Date:

 

6.1. Mergers, Subsidiaries, Etc. No Credit Party shall directly or indirectly,
by operation of law or otherwise, (a) form any Subsidiary without complying with
the provisions of Section 5.11, (b) or acquire any Subsidiary, or (c) merge
with, consolidate with, acquire all or substantially all of the assets or Stock
of, or otherwise combine with or acquire, any Person, except that any Credit
Party may merge with another Credit Party and any Borrower may acquire all or
substantially all of the assets or Stock of another Credit Party, provided that
(i) Borrower Representative shall be the survivor of any such merger to which it
is a party and (ii) when any Credit Party is merging with a Borrower, the
Borrower shall be the continuing and surviving Person.

 

6.2. Investments; Loans and Advances. Except as permitted under Sections 6.3 or
6.4, no Credit Party shall make or permit to exist any investment in, or make,
accrue or permit to exist loans or advances of money to, any Person, through the
direct or indirect lending of money, holding of securities or otherwise, except
that: (a) Borrowers may hold investments comprised of notes payable, or stock or
other securities issued by Account Debtors to any Borrower pursuant to
negotiated agreements with respect to settlement of such Account Debtor’s
Accounts in the ordinary course of business consistent with past priorities;
(b) each Credit Party may maintain its existing investments in its Subsidiaries
as of the Closing Date; (c) so long as no Default or Event of Default has
occurred and is continuing and there is no outstanding Revolving Loan balance,
Borrowers may make investments, subject to Control Letters in favor of Agent for
the benefit of Lenders or otherwise subject to a perfected security interest in
favor of Agent for the benefit of Lenders, in (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency thereof maturing within one year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one year from the date of creation
thereof and currently having the highest rating obtainable from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.,
(iii) certificates of deposit maturing no more than one year from the date of
creation thereof issued by commercial banks incorporated under the laws of the
United States of America, each having combined capital, surplus and undivided
profits of not less than $300,000,000 and having a senior unsecured rating of
“A” or better by a nationally recognized rating agency (an “A Rated Bank”),
(iv) time deposits maturing no more than thirty (30) days from the date of
creation thereof with A Rated Banks and (v) mutual funds that invest solely in
one or more of the investments described in clauses (i) through (iv) above, and
(d) other investments not exceeding (for all Credit Parties) $100,000 in the
aggregate at any time outstanding.

 

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6.3. Indebtedness.

 

(a) No Credit Party shall create, incur, assume or permit to exist any
Indebtedness, except (without duplication) (i) Indebtedness secured by purchase
money security interests with respect to Equipment and Fixtures and Capital
Leases permitted in Section 6.7(c), (ii) the Loans and the other Obligations,
(iii) unfunded pension fund and other employee benefit plan obligations and
liabilities to the extent they are permitted to remain unfunded under applicable
law, (iv) existing Indebtedness described in Disclosure Schedule (6.3) and
refinancings thereof or amendments or modifications thereto that do not have the
effect of increasing the principal amount thereof or changing the amortization
thereof (other than to extend the same) and that are otherwise on terms and
conditions no less favorable to any Credit Party, Agent or any Lender, as
determined by Agent, than the terms of the Indebtedness being refinanced,
amended or modified; and (v) Indebtedness consisting of intercompany loans and
advances made by any Borrower to any other Borrower; provided, that: (A) at the
time any such intercompany loan or advance is made by any Credit Party to any
other Credit Party and after giving effect thereto, each such Credit Party shall
be Solvent and (B) no Default or Event of Default would occur and be continuing
after giving effect to any such proposed intercompany loan.

 

(b) No Credit Party shall, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness prior to its scheduled due date, other
than (i) subject to the terms hereof, the Obligations; (ii) Indebtedness secured
by a Permitted Encumbrance if the asset securing such Indebtedness has been sold
or otherwise disposed of in accordance with Sections 6.8(b) or (c);
(iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancing thereof
in accordance with Section 6.3(a)(iv); and (iv) other Indebtedness not in excess
(for all Credit Parties) of $250,000.

 

6.4. Employee Loans and Affiliate Transactions.

 

(a) Except as otherwise expressly permitted in this Section 6 with respect to
Affiliates, no Credit Party shall enter into or be a party to any transaction
with any other Credit Party or any Affiliate thereof except (i) in the ordinary
course of and pursuant to the reasonable requirements of such Credit Party’s
business and upon fair and reasonable terms that are no less favorable to such
Credit Party than would be obtained in a comparable arm’s length transaction
with a Person not an Affiliate of such Credit Party and (ii) the transactions
described in Disclosure Schedule (6.4(a)). In addition, if any such transaction
or series of related transactions involves payments in excess of $750,000 in the
aggregate, the terms of these transactions must be disclosed in advance to Agent
and Lenders.

 

(b) No Credit Party shall enter into any lending or borrowing transaction with
any employees of any Credit Party, except loans to its respective employees in
the ordinary course of business consistent with past practices for travel and
entertainment expenses, relocation costs and similar purposes and stock option
financing up to a maximum (for all Credit Parties) of $250,000 to any employee
and up to a maximum of $1,000,000 in the aggregate at any one time outstanding.

 

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(c) No Credit Party shall increase the direct or indirect aggregate compensation
(excluding stock options) of the ten most highly compensated employees of the
Credit Parties, taken as a whole, by more than 100% per annum in excess of the
current compensation level for those employees, expressed as an aggregate dollar
amount and set forth in Disclosure Schedule (6.4(c)).

 

6.5. Capital Structure and Business. If all or part of a Credit Party’s Stock is
pledged to Agent, that Credit Party shall not issue additional Stock. No Credit
Party shall amend its charter or bylaws in a manner that would adversely affect
Agent or Lenders or such Credit Party’s duty or ability to repay the
Obligations. No Credit Party shall engage in any business other than the
businesses currently engaged in by it.

 

6.6. Guaranteed Indebtedness. No Credit Party shall create, incur, assume or
permit to exist any Guaranteed Indebtedness except (a) by endorsement of
instruments or items of payment for deposit to the general account of any Credit
Party, and (b) for Guaranteed Indebtedness incurred for the benefit of any other
Credit Party if the primary obligation is expressly permitted by this Agreement.

 

6.7. Liens. No Credit Party shall create, incur, assume or permit to exist any
Lien on or with respect to its Accounts or any of its other properties or assets
(whether now owned or hereafter acquired) except for (a) Permitted Encumbrances;
(b) Liens in existence on the date hereof and summarized on Disclosure Schedule
(6.7) securing the Indebtedness described on Disclosure Schedule (6.3) and
permitted refinancings, extensions and renewals thereof, including extensions or
renewals of any such Liens; provided that the principal amount of the
Indebtedness so secured is not increased and the Lien does not attach to any
other property; (c) Liens created after the date hereof by conditional sale or
other title retention agreements (including Capital Leases) or in connection
with purchase money Indebtedness with respect to Equipment and Fixtures acquired
by any Credit Party in the ordinary course of business, involving the incurrence
of an aggregate amount of purchase money Indebtedness and Capital Lease
Obligations of not more than $3,000,000 outstanding at any one time for all such
Liens (provided that such Liens attach only to the assets subject to such
purchase money debt and such Indebtedness is incurred within twenty (20) days
following such purchase and does not exceed 100% of the purchase price of the
subject assets); and (d) other Liens securing Indebtedness not exceeding (for
all Credit Parties) $250,000 in the aggregate at any time outstanding, so long
as such Liens do not attach to any Accounts, Inventory, Real Estate, Life
Insurance Policies or the Stock of any Subsidiary of a Credit Party. In
addition, no Credit Party shall become a party to any agreement, note, indenture
or instrument, or take any other action, that would prohibit the creation of a
Lien on any of its properties or other assets in favor of Agent, on behalf of
itself and Lenders, as additional collateral for the Obligations, except
operating leases, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto.

 

6.8. Sale of Stock and Assets. No Credit Party shall sell, transfer, convey,
assign or otherwise dispose of any of its properties or other assets, including
the Stock of any of its Subsidiaries (whether in a public or a private offering
or otherwise) or any of its Accounts, other

 

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than (a) the sale of Inventory in the ordinary course of business, and (b) the
sale or other disposition by a Credit Party of Equipment, Fixtures or Real
Estate that are obsolete or no longer used or useful in such Credit Party’s
business and having a book value not exceeding $250,000 in the aggregate in any
Fiscal Year; (c) the sale or other disposition of other Equipment and Fixtures
having a book value not exceeding (for all Credit Parties) $250,000 in the
aggregate in any Fiscal Year; (d) the sale or other disposition of assets by a
Credit Party to a Borrower; and (e) so long as no Event of Default has occurred
and is continuing, sales by Storehouse of its private label credit card
receivables pursuant to the Private Label Credit Card Arrangements.

 

6.9. ERISA. No Credit Party shall, or shall cause or permit any ERISA Affiliate
to, cause or permit to occur (i) an event that could result in the imposition of
a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or (ii) an
ERISA Event to the extent such ERISA Event would reasonably be expected to
result in taxes, penalties and other liabilities in an aggregate amount in
excess (for all Credit Parties) of $250,000 in the aggregate.

 

6.10. Financial Covenants. Borrowers shall not breach or fail to comply with any
of the Financial Covenants.

 

6.11. Hazardous Materials. No Credit Party shall cause or permit a Release of
any Hazardous Material on, at, in, under, above, to, from or about any of the
Real Estate where such Release would (a) violate in any respect, or form the
basis for any Environmental Liabilities under, any Environmental Laws or
Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities that could not reasonably be
expected to have a Material Adverse Effect and Releases existing on the Closing
Date and disclosed on Disclosure Schedule 3.17 so long has the Credit Parties
implement all remediation measures required pursuant to the terms hereof.

 

6.12. Sale-Leasebacks. No Credit Party shall engage in any sale-leaseback,
synthetic lease or similar transaction involving any of its assets.

 

6.13. Restricted Payments. No Credit Party shall make any Restricted Payment,
except (a) intercompany loans and advances between Borrowers to the extent
permitted by Section 6.3, (b) dividends and distributions by Subsidiaries of any
Borrower paid to such Borrower, (c) employee loans permitted under
Section 6.4(b), (d) payments of principal and interest of intercompany loans and
advances made in accordance with Section 6.3; (e) required redemption of Stock
under the Rowe Companies Employee Stock Ownership Plan in an aggregate amount
not to exceed $100,000 in any Fiscal Year; (f) distributions made in the form of
additional preferred stock or non-cash accruals on preferred stock; and (g) cash
dividends and distributions made in connection with any preferred stock issued
by any Borrower after the Closing Date in an aggregate amount in any Fiscal Year
not to exceed (for all Credit Parties) the lesser of (i) an amount equal to 10%
of the value of such preferred stock and (ii) $2,000,000; provided, that (x) no
Event of Default has occurred and is continuing or would result after giving
effect to any Restricted Payment pursuant to clause (g) above, and (y) Borrowers
collectively shall have Borrowing Availability of at least $10,000,000 after
giving effect to any Restricted Payment pursuant to clause (g) above.

 

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6.14. Change of Corporate Name, State of Incorporation or Location; Change of
Fiscal Year. No Credit Party shall (a) change its name as it appears in official
filings in the state of its incorporation or other organization (b) change its
chief executive office, principal place of business, corporate offices or
warehouses or locations at which Collateral is held or stored, or the location
of its records concerning the Collateral, (c) change the type of entity that it
is, (d) change its organization identification number, if any, issued by its
state of incorporation or other organization, or (e) change its state of
incorporation or organization or incorporate or organize in any additional
jurisdictions, in each case without at least thirty (30) days prior written
notice to Agent and after Agent’s written acknowledgment that any reasonable
action requested by Agent in connection therewith, including to continue the
perfection of any Liens in favor of Agent, on behalf of Lenders, in any
Collateral, has been completed or taken, and provided that any such new location
shall be in the continental United States. No Credit Party shall change its
Fiscal Year.

 

6.15. No Impairment of Intercompany Transfers. No Credit Party shall directly or
indirectly enter into or become bound by any agreement, instrument, indenture or
other obligation (other than this Agreement and the other Loan Documents) that
could directly or indirectly restrict, prohibit or require the consent of any
Person with respect to the payment of dividends or distributions or the making
or repayment of intercompany loans by a Subsidiary of any Borrower to any
Borrower or between Borrowers.

 

6.16. Real Estate Purchases. No Credit Party shall purchase a fee simple
ownership interest in Real Estate with an aggregate purchase price in excess
(for all Credit Parties) of $250,000.

 

6.17. Rowe Companies and Certain Subsidiaries. (a) Rowe Companies shall not
engage in any trade or business, or own any assets (other than Stock of its
Subsidiaries) or incur any Indebtedness or Guaranteed Indebtedness (other than
the Obligations and other Indebtedness permitted under this Agreement) and
(b) none of Rowe Sylmar, Rowe Jessup, Rowe Salem nor Rowe Wood Products shall
engage in any trade or business, or own any assets (other than Stock of their
Subsidiaries) or incur any Indebtedness or Guaranteed Indebtedness.

 

6.18. Cancellation of Indebtedness. No Credit Party shall cancel any claim or
debt owing to it, except for reasonable consideration negotiated on an arm’s
length basis and in the ordinary course of its business consistent with past
practices.

 

6.19. No Speculative Transactions. No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it provided any such transaction is consistent
with Credit Parties’ hedging policies existing as of the Closing Date, and,
provided that, no Credit Party shall change any of its hedging policies existing
as of the Closing Date.

 

7. TERM

 

7.1. Termination. The financing arrangements contemplated hereby shall be in
effect until the Commitment Termination Date or the Termination Date, whichever
shall occur first, and the Loans and all other Obligations shall be
automatically due and payable in full on such date.

 

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7.2. Survival of Obligations Upon Termination of Financing Arrangements. Except
as otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Credit Parties or the rights of Agent and Lenders
relating to any unpaid portion of the Loans or any other Obligations, due or not
due, liquidated, contingent or unliquidated, or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is required after the Commitment Termination Date or the
Termination Date. Except as otherwise expressly provided herein or in any other
Loan Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that the
provisions of Section 11, the payment obligations under Sections 1.15 and 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.

 

8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

8.1. Events of Default. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an “Event of
Default” hereunder:

 

(a) Any Borrower (i) fails to make any payment of principal of, or interest on,
or Fees owing in respect of, the Loans or any of the other Obligations when due
and payable, or (ii) fails to pay or reimburse Agent or Lenders for any expense
reimbursable hereunder or under any other Loan Document within ten (10) days
following Agent’s or such Lenders’ demand for such reimbursement or payment of
expenses (it being understood that a Lender may only demand such reimbursement
or payment of expenses to the extent that such reimbursement or payment of
expenses is owed to such Lender).

 

(b) Any Credit Party fails or neglects to perform, keep or observe any of the
provisions of Sections 1.4, 1.8, 5.4(a) 5.12, 5.13, 5.14 or 6, or any of the
provisions set forth in Annexes C or G, respectively.

 

(c) Any Borrower fails or neglects to perform, keep or observe any of the
provisions of Section 4.1 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for three (3) Business Days
or more.

 

(d) Any Credit Party fails or neglects to perform, keep or observe any other
provision of this Agreement or of any of the other Loan Documents (other than
any provision embodied in or covered by any other clause of this Section 8.1)
and the same shall remain unremedied for thirty (30) days or more.

 

(e) A default or breach occurs under any other agreement, document or instrument
to which any Credit Party is a party that is not cured within any applicable
grace period therefor, and such default or breach (i) involves the failure to
make any

 

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payment when due in respect of any Indebtedness or Guaranteed Indebtedness
(other than the Obligations) of any Credit Party in excess of $500,000 in the
aggregate (including (x) undrawn committed or available amounts and (y) amounts
owing to all creditors under any combined or syndicated credit arrangements), or
(ii) causes, or permits any holder of such Indebtedness or Guaranteed
Indebtedness or a trustee to cause, Indebtedness or Guaranteed Indebtedness or a
portion thereof in excess of $500,000 in the aggregate to become due prior to
its stated maturity or prior to its regularly scheduled dates of payment, or
cash collateral in respect thereof to be demanded, in each case, regardless of
whether such default is waived, or such right is exercised, by such holder or
trustee.

 

(f) Any information contained in any Borrowing Base Certificate is untrue or
incorrect in any respect (other than (i) inadvertent, immaterial errors not
exceeding $100,000 in the aggregate in any Borrowing Base Certificate) and
(ii) errors understating the Borrowing Base), or any representation or warranty
herein or in any Loan Document or in any written statement, report, financial
statement or certificate (other than a Borrowing Base Certificate) made or
delivered to Agent or any Lender by any Credit Party is untrue or incorrect in
any material respect as of the date when made or deemed made.

 

(g) Assets of any Credit Party with a fair market value of $500,000 or more are
attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of any Credit Party and such condition continues for
thirty (30) days or more.

 

(h) A case or proceeding is commenced against any Credit Party seeking a decree
or order in respect of such Credit Party (i) under the Bankruptcy Code, or any
other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for such Credit Party or for any substantial
part of any such Credit Party’s assets, or (iii) ordering the winding-up or
liquidation of the affairs of such Credit Party, and such case or proceeding
shall remain undismissed or unstayed for sixty (60) days or more or a decree or
order granting the relief sought in such case or proceeding is granted by a
court of competent jurisdiction.

 

(i) Any Credit Party (i) files a petition seeking relief under the Bankruptcy
Code, or any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) consents to or fails to contest in a timely and appropriate
manner the institution of proceedings thereunder or the filing of any such
petition or the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for such
Credit Party or for any substantial part of any such Credit Party’s assets,
(iii) makes an assignment for the benefit of creditors, (iv) takes any action in
furtherance of any of the foregoing; or (v) admits in writing its inability to,
or is generally unable to, pay its debts as such debts become due.

 

(j) A final judgment or judgments for the payment of money in excess of $500,000
in the aggregate at any time are outstanding against one or more of the Credit
Parties (which judgments are not covered by insurance policies as to which
liability has

 

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been accepted by the insurance carrier), and the same are not, within thirty
(30) days after the entry thereof, discharged or execution thereof stayed or
bonded pending appeal, or such judgments are not discharged prior to the
expiration of any such stay.

 

(k) Any material provision of any Loan Document for any reason ceases to be
valid, binding and enforceable in accordance with its terms (or any Credit Party
shall challenge the enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such assertion, that
any provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms), or any Lien
created under any Loan Document ceases to be a valid and perfected first
priority Lien (except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby.

 

(l) Any Change of Control occurs.

 

(m) Any event occurs, whether or not insured or insurable, as a result of which
revenue-producing activities cease or are substantially curtailed at facilities
of Borrowers generating more than 20% of Borrowers’ consolidated revenues for
the Fiscal Year preceding such event and such cessation or curtailment continues
for more than thirty (30) days.

 

(n) Any Event of Default under and as defined in any Mortgage which would
reasonably be expected to impair or adversely affect Agent’s ability to realize
upon the Real Estate subject to such Mortgage shall occur and be continuing.

 

8.2. Remedies.

 

(a) If any Event of Default has occurred and is continuing, Agent may (and at
the written request of the Requisite Lenders shall), without notice, suspend the
Revolving Loan facility with respect to additional Advances and/or the
incurrence of additional Letter of Credit Obligations, whereupon any additional
Advances and additional Letter of Credit Obligations shall be made or incurred
in Agent’s sole discretion (or in the sole discretion of the Requisite Lenders,
if such suspension occurred at their direction) so long as such Default or Event
of Default is continuing. If any Event of Default has occurred and is
continuing, Agent may (and shall, (i) at the written request of Requisite
Lenders, or (ii) following the Standstill Termination Date, at the written
request of either the Requisite Lenders or the Requisite Tranche B Lenders)
without notice except as otherwise expressly provided herein, increase the rate
of interest applicable to the Loans and the Letter of Credit Fees to the Default
Rate.

 

(b) If any Event of Default has occurred and is continuing, (i) Agent may (and
shall, at the written request of Requisite Lenders), without notice:
(A) terminate the Revolving Loan facility with respect to further Advances or
the incurrence of further Letter of Credit Obligations or (B) reduce the
Revolving Loan Commitment from time to time; and (ii) Agent may (and shall,
(x) at the written request of Requisite Lenders, or (y) following the Standstill
Termination Date, at the written request of either the Requisite Lenders or the
Requisite Tranche B Lenders), without notice: (A) declare all or any

 

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portion of the Obligations, including all or any portion of any Loan to be
forthwith due and payable, and require that the Letter of Credit Obligations be
cash collateralized in the manner set forth in Annex B, all without presentment,
demand, protest or further notice of any kind, all of which are expressly waived
by Borrowers and each other Credit Party; or (B) exercise any rights and
remedies provided to Agent under the Loan Documents or at law or equity,
including all remedies provided under the Code; provided, that upon the
occurrence of an Event of Default specified in Sections 8.1(h) or (i), the
Commitments shall be immediately terminated and all of the Obligations,
including the aggregate Revolving Loan, shall become immediately due and payable
without declaration, notice or demand by any Person.

 

8.3. Duties in the Case of Enforcement. In case one or more Events of Default
have occurred and shall be continuing, and whether or not acceleration of the
Obligations shall have occurred, the Agent shall, if (a) so requested by the
Requisite Lenders or, following the Standstill Termination Date, the Requisite
Tranche B Lenders and (b) the Lenders have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of this Agreement and the
other Collateral Documents authorizing the sale or other disposition of all or
any part of the Collateral and exercise all or any such other legal and
equitable and other rights or remedies as it may have in respect of such
Collateral. The Requisite Lenders or, following the Standstill Termination Date
if the Requisite Lenders have not already done so, the Requisite Tranche B
Lenders may direct the Agent in writing as to the method and the extent of any
such sale or other disposition, the Lenders hereby agreeing to indemnify and
hold the Agent harmless from all liabilities incurred in respect of all actions
taken or omitted in accordance with such directions other than liabilities
resulting from the Agent’s gross negligence or willful misconduct, provided that
(i) the Agent need not comply with any such direction to the extent that the
Agent reasonably believes the Agent’s compliance with such direction to be
unlawful or commercially unreasonable in any applicable jurisdiction and
(ii) the Tranche B Lenders shall have no right to instruct the Agent as to the
exercise of any rights or remedies to the extent that the Agent is diligently
exercising its rights and remedies at the direction of the Requisite Lenders.

 

8.4. Waivers by Credit Parties. Except as otherwise provided for in this
Agreement or by applicable law, each Credit Party waives (including for purposes
of Section 12): (a) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Agent on which any
Credit Party may in any way be liable, and hereby ratifies and confirms whatever
Agent may do in this regard, (b) all rights to notice and a hearing prior to
Agent’s taking possession or control of, or to Agent’s replevy, attachment or
levy upon, the Collateral or any bond or security that might be required by any
court prior to allowing Agent to exercise any of its remedies, and (c) the
benefit of all valuation, appraisal, marshaling and exemption laws.

 

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9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

 

9.1. Assignment and Participations.

 

(a) Subject to the terms of this Section 9.1, any Lender may make an assignment
to a Qualified Assignee or any other Person of, or sell participations in, at
any time or times, the Loan Documents, Loans, Letter of Credit Obligations and
any Commitment or any portion thereof or interest therein, including any
Lender’s rights, title, interests, remedies, powers or duties thereunder. Any
assignment by a Lender shall: (i) require the consent of Agent (which consent
shall not be unreasonably withheld or delayed with respect to a Qualified
Assignee) and the execution of an assignment agreement (an “Assignment
Agreement”) substantially in the form attached hereto as Exhibit 9.1(a) and
otherwise in form and substance reasonably satisfactory to, and acknowledged by,
Agent; (ii) be conditioned on such assignee Lender representing to the assigning
Lender and Agent that it is purchasing the applicable Loans to be assigned to it
for its own account, for investment purposes and not with a view to the
distribution thereof; (iii) after giving effect to any such partial assignment,
the assignee Lender shall have Commitments in an amount at least equal to
$5,000,000 and the assigning Lender shall have retained Commitments in an amount
at least equal to $5,000,000; (iv) include a payment to Agent of an assignment
fee of $3,500; and (v) so long as no Event of Default has occurred and is
continuing, require the consent of Borrower Representative, which shall not be
unreasonably withheld or delayed; provided that no such consent by the Borrower
Representative shall be required for an assignment to a Qualified Assignee. In
the case of an assignment by a Lender under this Section 9.1, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as all other Lenders hereunder. The assigning Lender shall be
relieved of its obligations hereunder with respect to its Commitments or
assigned portion thereof from and after the date of such assignment. Each
Borrower hereby acknowledges and agrees that any assignment shall give rise to a
direct obligation of Borrowers to the assignee and that the assignee shall be
considered to be a “Lender”. In all instances, each Lender’s liability to make
Loans hereunder shall be several and not joint and shall be limited to such
Lender’s Pro Rata Share of the applicable Commitment. In the event Agent or any
Lender assigns or otherwise transfers all or any part of the Obligations, Agent
or any such Lender shall so notify Borrowers and Borrowers shall, upon the
request of Agent or such Lender, execute new Notes in exchange for the Notes, if
any, being assigned. Notwithstanding the foregoing provisions of this
Section 9.1(a), any Lender may at any time pledge the Obligations held by it and
such Lender’s rights under this Agreement and the other Loan Documents to a
Federal Reserve Bank or a Person which otherwise then qualifies as a Qualified
Assignee in respect of a warehousing, “repo” or similar arrangement, and any
Lender that is an investment fund may assign the Obligations held by it and such
Lender’s rights under this Agreement and the other Loan Documents to another
investment fund managed by the same investment advisor; provided, that no such
pledge to a Federal Reserve Bank or such other Person shall release such Lender
from such Lender’s obligations hereunder or under any other Loan Document.

 

(b) Any participation by a Lender of all or any part of its Commitments shall be
made with the understanding that all amounts payable by Borrowers hereunder
shall be determined as if that Lender had not sold such participation, and that
the holder of any such participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except actions directly
affecting (i) any reduction in the principal amount of, or interest rate or Fees
payable with respect to, any Loan in which such holder

 

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participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of Sections 1.13,
1.15, 1.16 and 9.8, each Borrower acknowledges and agrees that a participation
shall give rise to a direct obligation of Borrowers to the participant and the
participant shall be considered to be a “Lender”. Except as set forth in the
preceding sentence no Borrower or Credit Party shall have any obligation or duty
to any participant. Neither Agent nor any Lender (other than the Lender selling
a participation) shall have any duty to any participant and may continue to deal
solely with the Lender selling a participation as if no such sale had occurred.

 

(c) Except as expressly provided in this Section 9.1, no Lender shall, as
between Borrowers and that Lender, or Agent and that Lender, be relieved of any
of its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.

 

(d) Each Credit Party executing this Agreement shall assist any Lender permitted
to sell assignments or participations under this Section 9.1 as reasonably
required to enable the assigning or selling Lender to effect any such assignment
or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and,
if requested by Agent, the preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants. Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their respective affairs contained in any selling materials provided by them
and all other information provided by them and included in such materials,
except that any Projections delivered by Borrowers shall only be certified by
Borrowers as having been prepared by Borrowers in compliance with the
representations contained in Section 3.4(c).

 

(e) Any Lender may furnish any information concerning Credit Parties in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8.

 

(f) So long as no Event of Default has occurred and is continuing, no Lender
shall assign or sell participations in any portion of its Loans or Commitments
to a potential Lender or participant, if, as of the date of the proposed
assignment or sale, the assignee Lender or participant would be subject to
capital adequacy or similar requirements under Section 1.16(a), increased costs
under Section 1.16(b), an inability to fund LIBOR Loans under Section 1.16(c),
or withholding taxes in accordance with Section 1.15(a).

 

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(g) Notwithstanding anything to the contrary contained herein, any Lender (a
“Granting Lender”), may grant to a special purpose funding vehicle (an “SPC”),
identified as such in writing by the Granting Lender to Agent and Borrowers, the
option to provide to Borrowers all or any part of any Loans that such Granting
Lender would otherwise be obligated to make to Borrowers pursuant to this
Agreement; provided that (i) nothing herein shall constitute a commitment by any
SPC to make any Loan; and (ii) if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting Lender
shall be obligated to make such Loan pursuant to the terms hereof. The making of
a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender
to the same extent, and as if such Loan were made by such Granting Lender. No
SPC shall be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the Granting Lender). Any
SPC may (i) with notice to, but without the prior written consent of, Borrowers
and Agent and without paying any processing fee therefor assign all or a portion
of its interests in any Loans to the Granting Lender or to any financial
institutions (consented to by Borrowers and Agent) providing liquidity and/or
credit support to or for the account of such SPC to support the funding or
maintenance of Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guarantee or credit or liquidity enhancement to such
SPC. This Section 9.1(g) may not be amended without the prior written consent of
each Granting Lender, all or any of whose Loans are being funded by an SPC at
the time of such amendment. For the avoidance of doubt, the Granting Lender
shall for all purposes, including without limitation, the approval of any
amendment or waiver of any provision of any Loan Document or the obligation to
pay any amount otherwise payable by the Granting Lender under the Loan
Documents, continue to be the Lender of record hereunder.

 

9.2. Appointment of Agent. GE Capital is hereby appointed to act on behalf of
all Lenders as Agent under this Agreement and the other Loan Documents. The
provisions of this Section 9.2 are solely for the benefit of Agent and Lenders
and no Credit Party nor any other Person shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement and the other Loan Documents, Agent shall act solely
as an agent of Lenders and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
Credit Party or any other Person. Agent shall have no duties or responsibilities
except for those expressly set forth in this Agreement and the other Loan
Documents. The duties of Agent shall be mechanical and administrative in nature
and Agent shall not have, or be deemed to have, by reason of this Agreement, any
other Loan Document or otherwise a fiduciary relationship in respect of any
Lender. Except as expressly set forth in this Agreement and the other Loan
Documents, Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to any Credit Party or any of
their respective Subsidiaries or any Account Debtor that is communicated to or
obtained by GE Capital or any of its Affiliates in any capacity. Neither Agent
nor any of its Affiliates nor any of their respective officers, directors,
employees, agents or representatives shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages caused by
its or their own gross negligence or willful misconduct.

 

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If Agent shall request instructions from Requisite Lenders, Requisite Revolving
Lenders, Requisite Tranche B Lenders or all affected Lenders with respect to any
act or action (including failure to act) in connection with this Agreement or
any other Loan Document, then Agent shall be entitled to refrain from such act
or taking such action unless and until Agent shall have received instructions
from Requisite Lenders, Requisite Revolving Lenders, Requisite Tranche B Lenders
or all affected Lenders, as the case may be, and Agent shall not incur liability
to any Person by reason of so refraining. Agent shall be fully justified in
failing or refusing to take any action hereunder or under any other Loan
Document (a) if such action would, in the opinion of Agent, be contrary to law
or the terms of this Agreement or any other Loan Document, (b) if such action
would, in the opinion of Agent, expose Agent to Environmental Liabilities or
(c) if Agent shall not first be indemnified to its satisfaction against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting hereunder or under any other Loan Document in
accordance with the instructions of Requisite Lenders, Requisite Revolving
Lenders, Requisite Tranche B Lenders or all affected Lenders, as applicable.

 

Each Lender authorizes the Agent to release any Collateral, consent to any
matter and to otherwise take any action, in each case, which is either permitted
hereunder or which has been approved hereunder.

 

9.3. Agent’s Reliance, Etc. Neither Agent nor any of its Affiliates nor any of
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for damages caused by
its or their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, Agent: (a) may treat the payee of any Note as the
holder thereof until Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form reasonably satisfactory to Agent;
(b) may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.

 

9.4. GE Capital and Affiliates. With respect to its Commitments hereunder,
GE Capital shall have the same rights and powers under this Agreement and the
other Loan Documents as any other Lender and may exercise the same as though it
were not Agent; and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated, include GE Capital in its

 

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individual capacity. GE Capital and its Affiliates may lend money to, invest in,
and generally engage in any kind of business with, any Credit Party, any of
their Affiliates and any Person who may do business with or own securities of
any Credit Party or any such Affiliate, all as if GE Capital were not Agent and
without any duty to account therefor to Lenders. GE Capital and its Affiliates
may accept fees and other consideration from any Credit Party for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.

 

9.5. Lender Credit Decision. Each Lender acknowledges that it has, independently
and without reliance upon Agent or any other Lender and based on the Financial
Statements referred to in Section 3.4(a) and such other documents and
information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.

 

9.6. Indemnification. Lenders agree to indemnify Agent (to the extent not
reimbursed by Credit Parties and without limiting the obligations of Credit
Parties hereunder), ratably according to their respective Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against Agent
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted to be taken by Agent in connection
therewith; provided, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent’s gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including reasonable counsel fees) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Credit Parties.

 

9.7. Successor Agent. Agent may resign at any time by giving not less than
thirty (30) days’ prior written notice thereof to Lenders and Borrower
Representative. Upon any such resignation, the Requisite Lenders shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Requisite Lenders and shall have accepted such appointment
within thirty (30) days after the resigning Agent’s giving notice of
resignation, then the resigning Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a Lender, if a Lender is willing to accept such
appointment, or otherwise shall be a commercial bank or financial institution or
a subsidiary of a commercial bank or financial institution if such commercial
bank or financial institution is organized under the laws of the United States
of America or of any State thereof and has a combined capital and surplus of at
least $300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, within thirty (30) days after the date such notice of resignation was
given by the resigning Agent, such resignation shall

 

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become effective and the Requisite Lenders shall thereafter perform all the
duties of Agent hereunder until such time, if any, as the Requisite Lenders
appoint a successor Agent as provided above. Any successor Agent appointed by
Requisite Lenders hereunder shall be subject to the approval of Borrower
Representative, such approval not to be unreasonably withheld or delayed;
provided that such approval shall not be required if a Default or an Event of
Default has occurred and is continuing. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent shall succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning Agent. Upon the earlier of the acceptance of any appointment as Agent
hereunder by a successor Agent or the effective date of the resigning Agent’s
resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity rights or other rights in favor of such resigning Agent shall
continue. After any resigning Agent’s resignation hereunder, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was acting as Agent under this Agreement and the other
Loan Documents.

 

9.8. Setoff and Sharing of Payments. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default and
subject to Section 9.9(f), each Lender is hereby authorized at any time or from
time to time, without prior notice to any Credit Party or to any Person other
than Agent, any such notice being hereby expressly waived, to offset and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of any Borrower or Guarantor (regardless of whether such
balances are then due to such Borrower or Guarantor) and any other properties or
assets at any time held or owing by that Lender or that holder to or for the
credit or for the account of any Borrower or Guarantor against and on account of
any of the Obligations that are not paid when due; provided that the Lender
exercising such offset rights shall give notice thereof to the affected Credit
Party promptly after exercising such rights. Any Lender exercising a right of
setoff or otherwise receiving any payment on account of the Obligations in
excess of its Pro Rata Share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender’s
or holder’s Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share the amount so offset or otherwise received with each other
Lender or holder in accordance with their respective Pro Rata Shares (other than
offset rights exercised by any Lender with respect to Sections 1.13, 1.15 or
1.16). Each Revolving Lender’s obligation under this Section 9.8 shall be in
addition to and not in limitation of its obligations to purchase a participation
in an amount equal to its Pro Rata Share of the Swing Line Loans under
Section 1.1. Each Credit Party that is a Borrower or Guarantor agrees, to the
fullest extent permitted by law, that (a) any Lender may exercise its right to
offset with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amounts so offset to other
Lenders and holders and (b) any Lender so purchasing a participation in the
Loans made or other Obligations held by other Lenders or holders may exercise
all rights of offset, bankers’ lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender or holder were a direct holder
of the Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the offset amount or
payment otherwise received is thereafter recovered from the Lender that has
exercised the right of offset, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without interest.

 

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9.9. Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.

 

(a) Advances; Payments.

 

(i) Revolving Lenders shall refund or participate in the Swing Line Loan in
accordance with clauses (iii) and (iv) of Section 1.1(c). If the Swing Line
Lender declines to make a Swing Line Loan or if Swing Line Availability is zero,
Agent shall notify Revolving Lenders, promptly after receipt of a Notice of
Revolving Credit Advance and in any event prior to 1:00 p.m. (New York time) on
the date such Notice of Revolving Advance is received, by telecopy, telephone or
other similar form of transmission. Each Revolving Lender shall make the amount
of such Lender’s Pro Rata Share of such Revolving Credit Advance available to
Agent in same day funds by wire transfer to Agent’s account as set forth in
Annex H not later than 3:00 p.m. (New York time) on the requested funding date,
in the case of an Index Rate Loan, and not later than 12 noon (New York time) on
the requested funding date, in the case of a LIBOR Loan. After receipt of such
wire transfers (or, in the Agent’s sole discretion, before receipt of such wire
transfers), subject to the terms hereof, Agent shall make the requested
Revolving Credit Advance to the Borrower designated by Borrower Representative
in the Notice of Revolving Credit Advance. All payments by each Revolving Lender
shall be made without setoff, counterclaim or deduction of any kind.

 

(ii) Not less than once during each calendar week or more frequently at Agent’s
election (each, a “Settlement Date”), Agent shall advise each Lender by
telephone, or telecopy of the amount of such Lender’s Pro Rata Share of
principal, interest and Fees paid for the benefit of Lenders with respect to
each applicable Loan. Provided that each Lender has funded all payments or
Advances required to be made by it and has purchased all participations required
to be purchased by it under this Agreement and the other Loan Documents as of
such Settlement Date, Agent shall pay to each Lender such Lender’s Pro Rata
Share of principal, interest and Fees paid by Borrowers since the previous
Settlement Date for the benefit of such Lender on the Loans held by it. To the
extent that any Lender (a “Non-Funding Lender”) has failed to fund all such
payments and Advances or failed to fund the purchase of all such participations,
Agent shall be entitled to set off the funding short-fall against that
Non-Funding Lender’s Pro Rata Share of all payments received from Borrowers.
Such payments shall be made by wire transfer to such Lender’s account (as
specified by such Lender in Annex H or the applicable Assignment Agreement) not
later than 2:00 p.m. (New York time) on the next Business Day following each
Settlement Date.

 

(b) Availability of Lender’s Pro Rata Share. Agent may assume that each
Revolving Lender will make its Pro Rata Share of each Revolving Credit Advance
available to Agent on each funding date. If such Pro Rata Share is not, in fact,
paid to Agent by such Revolving Lender when due, Agent will be entitled to
recover such amount on demand from such Revolving Lender without setoff,
counterclaim or deduction of any kind. If any Revolving Lender fails to pay the
amount of its Pro Rata

 

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Share forthwith upon Agent’s demand, Agent shall promptly notify Borrower
Representative and Borrowers shall immediately repay such amount to Agent.
Nothing in this Section 9.9(b) or elsewhere in this Agreement or the other Loan
Documents shall be deemed to require Agent to advance funds on behalf of any
Revolving Lender or to relieve any Revolving Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Borrowers may
have against any Revolving Lender as a result of any default by such Revolving
Lender hereunder. To the extent that Agent advances funds to any Borrower on
behalf of any Revolving Lender and is not reimbursed therefor on the same
Business Day as such Advance is made, Agent shall be entitled to retain for its
account all interest accrued on such Advance until reimbursed by the applicable
Revolving Lender.

 

(c) Return of Payments.

 

(i) If Agent pays an amount to a Lender under this Agreement in the belief or
expectation that a related payment has been or will be received by Agent from
Borrowers and such related payment is not received by Agent, then Agent will be
entitled to recover such amount from such Lender on demand without setoff,
counterclaim or deduction of any kind.

 

(ii) If Agent determines at any time that any amount received by Agent under
this Agreement must be returned to any Borrower or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Loan Document, Agent will not
be required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.

 

(d) Non-Funding Lenders. The failure of any Non-Funding Lender to make any
Revolving Credit Advance or any payment required by it hereunder or to purchase
any participation in any Swing Line Loan to be made or purchased by it on the
date specified therefor shall not relieve any other Lender (each such other
Revolving Lender, an “Other Lender”) of its obligations to make such Advance or
purchase such participation on such date, but neither any Other Lender nor Agent
shall be responsible for the failure of any Non-Funding Lender to make an
Advance, purchase a participation or make any other payment required hereunder.
Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender
shall not have any voting or consent rights under or with respect to any Loan
Document or constitute a “Lender” or a “Revolving Lender” (or be included in the
calculation of “Requisite Lenders” or “Requisite Revolving Lenders”) for any
voting or consent rights under or with respect to any Loan Document. At Borrower
Representative’s request, Agent or a Person reasonably acceptable to Agent shall
have the right with Agent’s consent and in Agent’s sole discretion (but shall
have no obligation) to purchase from any Non-Funding Lender, and each
Non-Funding Lender agrees that it shall, at Agent’s request, sell and assign to
Agent or such Person, all of the Commitments of that Non-Funding Lender for an
amount equal

 

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to the principal balance of all Loans held by such Non-Funding Lender and all
accrued interest and fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.

 

(e) Dissemination of Information. Agent shall use reasonable efforts to provide
Lenders with any notice of Default or Event of Default received by Agent from,
or delivered by Agent to, any Credit Party, with notice of any Event of Default
of which Agent has actually become aware and with notice of any action taken by
Agent following any Event of Default; provided, that Agent shall not be liable
to any Lender for any failure to do so, except to the extent that such failure
is attributable to Agent’s gross negligence or willful misconduct. Lenders
acknowledge that Borrowers are required to provide Financial Statements and
Collateral Reports to Lenders in accordance with Annexes E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.

 

(f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of setoff) without first
obtaining the prior written consent of Agent and Requisite Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Notes shall be taken in concert and at the direction or with
the consent of Agent, the Requisite Lenders or the Requisite Tranche B Lenders,
as applicable.

 

10. SUCCESSORS AND ASSIGNS

 

10.1. Successors and Assigns. This Agreement and the other Loan Documents shall
be binding on and shall inure to the benefit of each Credit Party, Agent,
Lenders and their respective successors and assigns (including, in the case of
any Credit Party, a debtor-in-possession on behalf of such Credit Party), except
as otherwise provided herein or therein. No Credit Party may assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Agent and Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Agent and Lenders shall be void. The terms and provisions of
this Agreement are for the purpose of defining the relative rights and
obligations of each Credit Party, Agent and Lenders with respect to the
transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement or any of the
other Loan Documents.

 

11. MISCELLANEOUS

 

11.1. Complete Agreement; Modification of Agreement. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in Section 11.2. Any letter of interest, commitment letter, fee letter or
confidentiality agreement, if any, between any Credit Party and Agent or any
Lender or any of their respective Affiliates, predating this Agreement and
relating to a financing of substantially similar form, purpose or effect shall
be superseded by this Agreement. Notwithstanding the foregoing, the Fee Letter
shall survive the execution and delivery of this Agreement and shall continue to
be binding obligations of the parties.

 

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11.2. Amendments and Waivers.

 

(a) Except for actions expressly permitted to be taken by Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any
other Loan Document, or any consent to any departure by any Credit Party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent and Borrowers, and by Requisite Lenders, Requisite Revolving
Lenders, Requisite Tranche B Lenders or all affected Lenders, as applicable.
Except as otherwise set forth in this Agreement, all such amendments,
modifications, terminations or waivers requiring the consent of any Lenders
shall require the written consent of Requisite Lenders.

 

(b) No amendment, modification, termination or waiver of or consent with respect
to any provision of this Agreement that increases the percentage advance rates
set forth in the definition of the Borrowing Base, that makes less restrictive
the nondiscretionary criteria for exclusion from Eligible Accounts, Eligible
Inventory, Eligible Real Estate or Eligible Life Insurance Policies, that amend
or modifies the definition of Customer Deposit Reserve or Tranche B Availability
Reserve in a manner which would result in more credit being made available to
the Borrowers, or that eliminates the Customer Deposit Reserve or the Tranche B
Availability Reserve from the definition of Reserves, shall be effective unless
the same shall be in writing and signed by Agent, all Revolving Lenders, the
Requisite Tranche B Lenders and Borrowers. No amendment of any of the
definitions of Standstill Period, Buyout Exercise Period or Buyout Trigger
Notice shall be effective unless the same shall be in writing and signed by
Agent, all Revolving Lenders, the Requisite Tranche B Lenders and Borrowers.

 

(c) No amendment, modification, termination or waiver shall, unless in writing
and signed by Agent and each Lender directly affected thereby: (i) increase the
principal amount of any Lender’s Commitment (which action shall be deemed only
to affect those Lenders whose Commitments are increased and may be approved by
Requisite Lenders, including those Lenders whose Commitments are increased);
(ii) reduce the principal of, rate of interest on or Fees payable with respect
to any Loan or Letter of Credit Obligations of any affected Lender; provided,
however, that only the consent of the Requisite Lenders shall be necessary to
amend the definition of “Default Rate” or to waive any obligation of the
Borrowers to pay interest or Letter of Credit Fees at the Default Rate; provided
that the consent of the Requisite Tranche B Lenders shall be necessary to amend
the definition of “Default Rate” or to waive any obligation of the Borrowers to
pay interest or Fees at the Default Rate, in each case, solely as the Default
Rate applies to the Tranche B Loan or Fees owing to the Tranche B Lenders;
(iii) extend any scheduled payment date (other than payment dates of mandatory
prepayments under Section 1.3(b)(ii)-(iv)) or final maturity date of the
principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer,
extend or postpone any payment of interest or Fees as to any affected Lender;
(v) subject to the succeeding paragraph of this Section 11.2(c), release any
Guaranty or, except as otherwise permitted herein or in the other

 

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Loan Documents, release, or permit any Credit Party to sell or otherwise dispose
of, any Collateral with a value exceeding $2,500,000 in the aggregate (which
action shall be deemed to directly affect all Lenders); (vi) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Loans that shall be required for Lenders or any of them to take any action
hereunder; (vii) amend Section 1.11; and (viii) amend or waive this Section 11.2
or the definitions of the terms “Requisite Lenders”, “Requisite Revolving
Lenders” or “Requisite Tranche B Lenders” insofar as such definitions affect the
substance of this Section 11.2. Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent or L/C Issuer
under this Agreement or any other Loan Document shall be effective unless in
writing and signed by Agent or L/C Issuer, as the case may be, in addition to
Lenders required herein to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
pursuant to any Loan Document. No amendment, modification, termination or waiver
of any provision of any Note shall be effective without the written concurrence
of the holder of that Note. No notice to or demand on any Credit Party in any
case shall entitle such Credit Party or any other Credit Party to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
Section 11.2 shall be binding upon each holder of the Notes at the time
outstanding and each future holder of the Notes.

 

Notwithstanding anything contained in this Agreement (including, without
limitation, this Section 11.2), only the consent of the Requisite Revolving
Lenders shall be required to:

 

(i) consent to a sale of Collateral after the occurrence and during the
continuance of an Event of Default and the release of the Agent’s Lien on the
Collateral subject thereto (whether by the Agent, any Credit Party or any agent
acting on their behalf), so long as the proceeds thereof are applied in
accordance with Section 1.11(a) and, to the extent that any such proceeds are
applied to the Revolving Loans, the Revolving Loan Commitment is reduced by the
corresponding amount;

 

(ii) approve or consent to (A) the use of cash collateral in any Insolvency
Proceeding involving a Credit Party, (B) the use, sale or lease of any
Collateral by any Credit Party in any Insolvency Proceeding, (C) the incurrence
by any Credit Party of any Indebtedness during any Insolvency Proceeding so long
as the amount of such Indebtedness plus the aggregate principal outstanding
amount of any prepetition Revolving Loans does not exceed the sum of the
Borrowing Base at such time of incurrence plus $5,000,000 or (D) the release or
subordination of the Agent’s Lien on any of the Collateral in connection with
any of the foregoing;

 

(iii) waive any Default or Event of Default resulting from a failure of the
Credit Parties to comply with the provisions of Annex E or Annex F hereto which
continues for not more than ten (10) days;

 

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(iv) amend or modify Annex B or Annex C hereto; or

 

(v) except for the Loans to be made on the Closing Date, waive any condition
precedent set forth in Section 2.2 to the making of any Loan or the incurrence
of any Letter of Credit.

 

(d) If, in connection with any proposed amendment, modification, waiver or
termination (a “Proposed Change”):

 

(i) requiring the consent of all affected Lenders, the consent of the Requisite
Lenders is obtained, but the consent of other Lenders whose consent is required
is not obtained (any such Lender whose consent is not obtained as described in
this clause (i) and in clauses (ii), and (iii) below being referred to as a
“Non-Consenting Lender”);

 

(ii) requiring the consent of the Requisite Lenders, the consent of Lenders
holding 51% or more of the Commitments is obtained (or 51% of the aggregate
outstanding principal amount of all Loans if the Commitments have been
terminated), but the consent of the Requisite Lenders is not obtained;

 

(iii) requiring the consent of the Requisite Revolving Lenders, the consent of
Revolving Lenders holding 51% or more of the Revolving Loan Commitments is
obtained (or 51% of the aggregate outstanding principal amount of all Revolving
Loans if the Revolving Loan Commitments have been terminated), but the consent
of the Requisite Revolving Lenders is not obtained; or

 

(iv) requiring the consent of Requisite Tranche B Lenders, the consent of
Tranche B Lenders holding 51% or more of the aggregate Tranche B Commitments is
obtained, but the consent of the Requisite Tranche B Lenders is not obtained,

 

then, so long as Agent is not a Non-Consenting Lender, at Borrower
Representative’s request, Agent or a Person reasonably acceptable to Agent shall
have the right with Agent’s consent and in Agent’s sole discretion (but shall
have no obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent’s request, sell and
assign to Agent or such Person, all of the Commitments of such Non-Consenting
Lenders for an amount equal to the principal balance of all Loans held by the
Non-Consenting Lenders and all accrued interest and Fees with respect thereto
through the date of sale, such purchase and sale to be consummated pursuant to
an executed Assignment Agreement.

 

In connection with any Proposed Change, any Non-Consenting Lender shall have the
option upon written notice to the Agent to purchase from Consenting Lenders all
of the Obligations owing to such Consenting Lenders (other than contingent
indemnification and reimbursement obligations for which no claim has been made),
which notice shall indicate which Non-Consenting Lenders will purchase
Obligations (the “Purchasing Lenders”). Such notice from such Non-Consenting
Lender to the Agent shall be irrevocable. On the date specified by the
Non-Consenting Lender in such notice (which shall not be less than five
(5) business days, nor

 

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more than ten (10) business days after the receipt by the Agent of the notice
from the Non-Consenting Lender of its election to exercise such option),
Consenting Lenders shall sell to the Purchasing Lenders, and the Purchasing
Lenders shall purchase from the Consenting Lenders, Obligations (other than
contingent indemnification and reimbursement obligations for which no claim has
been made). Upon the date of such purchase and sale, the Purchasing Lenders
shall (i) pay to Agent, on behalf of the Agent and Consenting Lender, as the
purchase price therefor the full amount of all such Obligations then outstanding
and unpaid (including principal, interest, fees and expenses, including
reasonable attorneys’ fees and legal expenses but excluding any contingent
indemnity obligations), (ii) furnish or cause to be furnished to Agent cash
collateral, or back-to-back letters of credit in form and substance and from an
issuer reasonably satisfactory to Agent, in an aggregate amount equal to 105% of
the aggregate undrawn face amount of any issued and outstanding letters of
credit provided by any Consenting Lender (or any issued and outstanding letters
of credit that Agent has arranged to be provided by third parties pursuant to
this Agreement) to any Borrower or any other Credit Party and, in any event, use
commercially reasonable efforts to cause all such letters of credit to be
canceled or otherwise terminated within thirty (30) days after the date
specified by the Non-Consenting Lender in the notice referred to above
(provided, however, that Agent shall continue to receive the fees and expenses
set forth in clause (d) of Annex B in respect of such letters of credit for such
thirty (30) day period), and (iii) agree to reimburse the Consenting Lenders by
paying to Agent for the account of the Consenting Lenders on demand after the
date of such purchase and sale an amount equal to any loss, cost, damage or
expense (including reasonable attorneys’ fees and legal expenses) in accordance
with the terms of the Loan Documents, that were incurred (x) in such thirty
(30) day period in connection with any commissions, fees, costs or expenses paid
or incurred by any Consenting Lenders related to any issued and outstanding
letters of credit as described above and (y) within one hundred (100) days after
the date specified by the Non-Consenting Lender in the notice referred to above
in connection with any checks or other payments provisionally credited to the
Obligations sold by the Consenting Lenders, and/or as to which the Consenting
Lenders have not yet received final payment. Such purchase price and cash
collateral shall be remitted by wire transfer in federal funds to such bank
account of Agent as Agent may designate in writing to the Purchasing Lenders for
such purpose. Interest shall be calculated to but excluding the business day on
which such purchase and sale shall occur if the amounts so paid by the
Purchasing Lenders to the bank account designated by Agent are received in such
bank account prior to 1:00 p.m. (New York time). Such purchase shall be made
pursuant to an Assignment Agreement. Upon consummation of such purchase, the
Non-Consenting Lenders shall be deemed to have assumed all Commitments of such
Consenting Lenders and such Consenting Lender shall no longer be obligated to
extend credit hereunder to or for the benefit of Borrowers.

 

(e) Upon payment in full in cash and performance of all of the Obligations
(other than indemnification Obligations), termination of the Commitments and a
release of all claims against Agent and Lenders, and so long as no suits,
actions, proceedings or claims are pending or threatened against any Indemnified
Person asserting any damages, losses or liabilities that are Indemnified
Liabilities, Agent shall deliver to Borrowers termination statements, mortgage
releases and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.

 

11.3. Fees and Expenses. Borrowers shall reimburse (i) Agent for all fees, costs
and expenses (including the reasonable fees and expenses of all of its counsel,
advisors, consultants

 

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and auditors) and (ii) Agent (and with respect to clauses (d) and (e) below, all
Lenders) for all fees, costs and expenses, including the reasonable fees, costs
and expenses of counsel or other advisors (including environmental and
management consultants and appraisers), incurred in connection with:

 

(a) the negotiation, preparation and filing and/or recordation of the Loan
Documents;

 

(b) any amendment, modification or waiver of, consent with respect to, or
termination of, any of the Loan Documents or Related Transactions Documents or
advice in connection with the syndication and administration of the Loans made
pursuant hereto or its rights hereunder or thereunder;

 

(c) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Agent, any Lender, any Credit Party or any other Person and
whether as a party, witness or otherwise) in any way relating to the Collateral,
any of the Loan Documents or any other agreement to be executed or delivered in
connection herewith or therewith, including any litigation, contest, dispute,
suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against any or all of the Credit Parties
or any other Person that may be obligated to Agent by virtue of the Loan
Documents; including any such litigation, contest, dispute, suit, proceeding or
action arising in connection with any work-out or restructuring of the Loans
during the pendency of one or more Events of Default; provided that in the case
of reimbursement of counsel for Lenders other than Agent, such reimbursement
shall be limited to one counsel for all such Lenders; provided, further, that no
Person shall be entitled to reimbursement under this clause (c) in respect of
any litigation, contest, dispute, suit, proceeding or action to the extent any
of the foregoing results from such Person’s gross negligence or willful
misconduct or such Person’s bad faith breach of its obligations, duties or
responsibilities under any of the Loan Documents;

 

(d) any attempt to enforce any remedies of Agent against any or all of the
Credit Parties or any other Person that may be obligated to Agent or any Lender
by virtue of any of the Loan Documents, including any such attempt to enforce
any such remedies in the course of any work-out or restructuring of the Loans
during the pendency of one or more Events of Default; provided, that in the case
of reimbursement of counsel for Lenders other than Agent, such reimbursement
shall be limited to one counsel for all such Lenders;

 

(e) any workout or restructuring of the Loans during the pendency of one or more
Events of Default; and

 

(f) efforts to (i) monitor the Loans or any of the other Obligations,
(ii) evaluate, observe or assess any of the Credit Parties or their respective
affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of any of the Collateral;

 

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including, as to each of clauses (a) through (f) above, all reasonable
attorneys’ and other professional and service providers’ fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all expenses, costs, charges
and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
which shall be payable, on demand, by Borrowers to Agent. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
fees, costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.

 

11.4. No Waiver. Agent’s or any Lender’s failure, at any time or times, to
require strict performance by the Credit Parties of any provision of this
Agreement or any other Loan Document shall not waive, affect or diminish any
right of Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders, and directed to Borrowers specifying
such suspension or waiver.

 

11.5. Remedies. Agent’s and Lenders’ rights and remedies under this Agreement
shall be cumulative and nonexclusive of any other rights and remedies that Agent
or any Lender may have under any other agreement, including the other Loan
Documents, by operation of law or otherwise. Recourse to the Collateral shall
not be required.

 

11.6. Severability. Wherever possible, each provision of this Agreement and the
other Loan Documents shall be interpreted in such a manner as to be effective
and valid under applicable law, but if any provision of this Agreement or any
other Loan Document 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 provision or the remaining
provisions of this Agreement or such other Loan Document.

 

11.7. Conflict of Terms. Except as otherwise provided in this Agreement or any
of the other Loan Documents by specific reference to the applicable provisions
of this Agreement, if any provision contained in this Agreement conflicts with
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.

 

11.8. Confidentiality. Agent and each Lender agree to use commercially
reasonable efforts (equivalent to the efforts Agent or such Lender applies to
maintaining the confidentiality of its own confidential information) to maintain
as confidential all confidential information provided to them by the Credit
Parties and designated as confidential for a period of two (2)

 

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years following receipt thereof, except that Agent and any Lender may disclose
such information (a) to Persons employed or engaged by Agent or such Lender;
(b) to any bona fide assignee or participant or potential assignee or
participant that has agreed to comply with the covenant contained in this
Section 11.8 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any Governmental Authority or reasonably believed by Agent or such Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any Litigation to which Agent or such
Lender is a party; or (f) that ceases to be confidential through no fault of
Agent or any Lender.

 

11.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN
DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND
AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW
YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED,
THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY;
PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.
EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY
WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN
ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

 

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11.10. Notices. (a) Addresses. All notices, demands, requests, directions and
other communications required or expressly authorized to be made by this
Agreement shall, whether or not specified to be in writing but unless otherwise
expressly specified to be given by any other means, be given in writing and
(i) addressed to (A) the party to be notified and sent to the address or
facsimile number indicated in Annex I, or (B) otherwise to the party to be
notified at its address specified on the signature page of any applicable
Assignment Agreement, (ii) posted to Intralinks® (to the extent such system is
available and set up by or at the direction of the Agent prior to posting) in an
appropriate location by uploading such notice, demand, request, direction or
other communication to www.intralinks.com, faxing it to 866-545-6600 with an
appropriate bar-coded fax coversheet or using such other means of posting to
Intralinks® as may be available and reasonably acceptable to the Agent prior to
such posting, (iii) posted to any other E-System set up by or at the direction
of Agent in an appropriate location or (iv) addressed to such other address as
shall be notified in writing (A) in the case of Borrowers, Agent and Swing Line
Lender, to the other parties hereto and (B) in the case of all other parties, to
Borrower Representative and Agent. Transmission by electronic mail (including
E-Fax, even if transmitted to the fax numbers set forth in clause (i) above)
shall not be sufficient or effective to transmit any such notice under this
clause (a) unless such transmission is an available means to post to any
E-System.

 

(b) Effectiveness. All communications described in clause (a) above and all
other notices, demands, requests and other communications made in connection
with this Agreement shall be effective and be deemed to have been received
(i) if delivered by hand, upon personal delivery, (ii) if delivered by overnight
courier service, one Business Day after delivery to such courier service,
(iii) if delivered by mail, when deposited in the mails, (iv) if delivered by
facsimile (other than to post to an E-System pursuant to clause (a)(ii) or
(a)(iii) above), upon sender’s receipt of confirmation of proper transmission,
and (v) if delivered by posting to any E-System, on the later of the date of
such posting in an appropriate location and the date access to such posting is
given to the recipient thereof in accordance with the standard procedures
applicable to such E-System. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any Person (other than Borrower Representative or Agent) designated in Annex
I to receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice.

 

11.11. Section Titles. The Section titles and Table of Contents contained in
this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.

 

11.12. Counterparts. This Agreement may be executed in any number of separate
counterparts, each of which shall collectively and separately constitute one
agreement.

 

11.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY

 

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(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFOR, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.

 

11.14. Press Releases and Related Matters. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the future issue any
press releases or other public disclosure using the name of GE Capital or its
affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days’ prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with GE Capital before issuing such press release or other public disclosure.
Each Credit Party consents to the publication by Agent or any Lender of
advertising material relating to the financing transactions contemplated by this
Agreement using Borrower’s name, product photographs, logo or trademark. Agent
reserves the right to provide to industry trade organizations information
necessary and customary for inclusion in league table measurements.

 

11.15. Reinstatement. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against any Credit
Party for liquidation or reorganization, should any Credit Party become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Credit Party’s assets, and shall continue to be effective or to be reinstated,
as the case may be, if at any time payment and performance of the Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.

 

11.16. Advice of Counsel. Each of the parties represents to each other party
hereto that it has discussed this Agreement and, specifically, the provisions of
Sections 11.9 and 11.13, with its counsel.

 

11.17. No Strict Construction. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.

 

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12. CROSS-GUARANTY

 

12.1. Cross-Guaranty. Each Borrower hereby agrees that such Borrower is jointly
and severally liable for, and hereby absolutely and unconditionally guarantees
to Agent and Lenders and their respective successors and assigns, the full and
prompt payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Obligations owed or hereafter owing to Agent and Lenders by
each other Borrower. Each Borrower agrees that its guaranty obligation hereunder
is a continuing guaranty of payment and performance and not of collection, that
its obligations under this Section 12 shall not be discharged until payment and
performance, in full, of the Obligations has occurred, and that its obligations
under this Section 12 shall be absolute and unconditional, irrespective of, and
unaffected by,

 

(a) the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement, any other Loan Document or any other
agreement, document or instrument to which any Borrower is or may become a
party;

 

(b) the absence of any action to enforce this Agreement (including this
Section 12) or any other Loan Document or the waiver or consent by Agent and
Lenders with respect to any of the provisions thereof;

 

(c) the existence, value or condition of, or failure to perfect its Lien
against, any security for the Obligations or any action, or the absence of any
action, by Agent and Lenders in respect thereof (including the release of any
such security);

 

(d) the insolvency of any Credit Party; or

 

(e) any other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.

 

Each Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations guaranteed hereunder.

 

12.2. Waivers by Borrowers. Each Borrower expressly waives all rights it may
have now or in the future under any statute, or at common law, or at law or in
equity, or otherwise, to compel Agent or Lenders to marshal assets or to proceed
in respect of the Obligations guaranteed hereunder against any other Credit
Party, any other party or against any security for the payment and performance
of the Obligations before proceeding against, or as a condition to proceeding
against, such Borrower. It is agreed among each Borrower, Agent and Lenders that
the foregoing waivers are of the essence of the transaction contemplated by this
Agreement and the other Loan Documents and that, but for the provisions of this
Section 12 and such waivers, Agent and Lenders would decline to enter into this
Agreement.

 

12.3. Benefit of Guaranty. Each Borrower agrees that the provisions of this
Section 12 are for the benefit of Agent and Lenders and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between any other Borrower and Agent or Lenders, the
obligations of such other Borrower under the Loan Documents.

 

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12.4. Waiver of Subrogation, Etc. Notwithstanding anything to the contrary in
this Agreement or in any other Loan Document, and except as set forth in
Section 12.7, each Borrower hereby expressly and irrevocably waives any and all
rights at law or in equity to subrogation, reimbursement, exoneration,
contribution, indemnification or set off and any and all defenses available to a
surety, guarantor or accommodation co-obligor. Each Borrower acknowledges and
agrees that this waiver is intended to benefit Agent and Lenders and shall not
limit or otherwise affect such Borrower’s liability hereunder or the
enforceability of this Section 12, and that Agent, Lenders and their respective
successors and assigns are intended third party beneficiaries of the waivers and
agreements set forth in this Section 12.4.

 

12.5. Election of Remedies. If Agent or any Lender may, under applicable law,
proceed to realize its benefits under any of the Loan Documents giving Agent or
such Lender a Lien upon any Collateral, whether owned by any Borrower or by any
other Person, either by judicial foreclosure or by non-judicial sale or
enforcement, Agent or any Lender may, at its sole option, determine which of its
remedies or rights it may pursue without affecting any of its rights and
remedies under this Section 12. If, in the exercise of any of its rights and
remedies, Agent or any Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against any Borrower or any
other Person, whether because of any applicable laws pertaining to “election of
remedies” or the like, each Borrower hereby consents to such action by Agent or
such Lender and waives any claim based upon such action, even if such action by
Agent or such Lender shall result in a full or partial loss of any rights of
subrogation that each Borrower might otherwise have had but for such action by
Agent or such Lender. Any election of remedies that results in the denial or
impairment of the right of Agent or any Lender to seek a deficiency judgment
against any Borrower shall not impair any other Borrower’s obligation to pay the
full amount of the Obligations. In the event Agent or any Lender shall bid at
any foreclosure or trustee’s sale or at any private sale permitted by law or the
Loan Documents, Agent or such Lender may bid all or less than the amount of the
Obligations and the amount of such bid need not be paid by Agent or such Lender
but shall be credited against the Obligations. The amount of the successful bid
at any such sale, whether Agent, Lender or any other party is the successful
bidder, shall be conclusively deemed to be the fair market value of the
Collateral and the difference between such bid amount and the remaining balance
of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this Section 12, notwithstanding that any present
or future law or court decision or ruling may have the effect of reducing the
amount of any deficiency claim to which Agent or any Lender might otherwise be
entitled but for such bidding at any such sale.

 

12.6. Limitation. Notwithstanding any provision herein contained to the
contrary, each Borrower’s liability under this Section 12 (which liability is in
any event in addition to amounts for which such Borrower is primarily liable
under Section 1) shall be limited to an amount not to exceed as of any date of
determination the greater of:

 

(a) the net amount of all Loans advanced to any other Borrower under this
Agreement and then re-loaned or otherwise transferred to, or for the benefit of,
such Borrower, which are then outstanding; and

 

(b) the amount that could be claimed by Agent and Lenders from such Borrower
under this Section 12 without rendering such claim voidable or avoidable under

 

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Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state
Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar
statute or common law after taking into account, among other things, such
Borrower’s right of contribution and indemnification from each other Borrower
under Section 12.7.

 

12.7. Contribution with Respect to Guaranty Obligations.

 

(a) To the extent that any Borrower shall make a payment under this Section 12
of all or any of the Obligations (other than Loans made to that Borrower for
which it is primarily liable) (a “Guarantor Payment”) that, taking into account
all other Guarantor Payments then previously or concurrently made by any other
Borrower, exceeds the amount that such Borrower would otherwise have paid if
each Borrower had paid the aggregate Obligations satisfied by such Guarantor
Payment in the same proportion that such Borrower’s “Allocable Amount” (as
defined below) (as determined immediately prior to such Guarantor Payment) bore
to the aggregate Allocable Amounts of each of the Borrowers as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the Obligations and termination of the
Commitments, such Borrower shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each other Borrower for the
amount of such excess, pro rata based upon their respective Allocable Amounts in
effect immediately prior to such Guarantor Payment.

 

(b) As of any date of determination, the “Allocable Amount” of any Borrower
shall be equal to the maximum amount of the claim that could then be recovered
from such Borrower under this Section 12 without rendering such claim voidable
or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law.

 

(c) This Section 12.7 is intended only to define the relative rights of
Borrowers and nothing set forth in this Section 12.7 is intended to or shall
impair the obligations of Borrowers, jointly and severally, to pay any amounts
as and when the same shall become due and payable in accordance with the terms
of this Agreement, including Section 12.1. Nothing contained in this
Section 12.7 shall limit the liability of any Borrower to pay the Loans made
directly or indirectly to that Borrower and accrued interest, Fees and expenses
with respect thereto for which such Borrower shall be primarily liable.

 

(d) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of the Borrower to which such
contribution and indemnification is owing.

 

(e) The rights of the indemnifying Borrowers against other Credit Parties under
this Section 12.7 shall be exercisable upon the full and indefeasible payment of
the Obligations and the termination of the Commitments.

 

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12.8. Liability Cumulative. The liability of Borrowers under this Section 12 is
in addition to and shall be cumulative with all liabilities of each Borrower to
Agent and Lenders under this Agreement and the other Loan Documents to which
such Borrower is a party or in respect of any Obligations or obligation of the
other Borrower, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.

 

BORROWERS THE ROWE COMPANIES By:  

/s/ Gene S. Morphis

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

Name:  

Gene S. Morphis

Title:  

Chief Financial Officer, Secretary and Treasurer

ROWE FURNITURE, INC. By:  

/s/ Garry W. Angle

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

Name:  

Garry W. Angle

Title:  

Assistant Secretary

STOREHOUSE, INC. By:  

/s/ Gene S. Morphis

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

Name:  

Gene S. Morphis

Title:  

Treasurer

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

GENERAL ELECTRIC CAPITAL

CORPORATION, as Agent

By:  

/s/ Michael S. Lustbader

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

Name:  

Michael S. Lustbader

Title:  

Duly Authorized

Signatory

 

2

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

REVOLVING LENDERS

GENERAL ELECTRIC CAPITAL

CORPORATION

By:  

/s/ Michael S. Lustbader

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

Name:  

Michael S. Lustbader

Title:  

Duly Authorized

Signatory

 

3

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

TRANCHE B LENDERS

GENERAL ELECTRIC CAPITAL

CORPORATION

By:  

/s/ Michael S. Lustbader

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

Name:  

Michael S. Lustbader

Title:  

Duly Authorized

Signatory

 

4

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

The following Persons are signatories to this Agreement in their capacity as
Credit Parties and not as Borrowers.

 

CREDIT PARTIES ROWE PROPERTIES, INC. By:  

/s/ Garry W. Angle

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

Name:   Garry W. Angle Title:   Treasurer ROWE DIVERSIFIED, INC. By:  

/s/ Gene S. Morphis

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

Name:   Gene S. Morphis Title:   Treasurer

 

5

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ANNEX A (Recitals)

to

CREDIT AGREEMENT

 

DEFINITIONS

 

Capitalized terms used in the Loan Documents shall have (unless otherwise
provided elsewhere in the Loan Documents) the following respective meanings, and
all references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to the
Agreement:

 

“Account Debtor” means any Person who may become obligated to any Credit Party
under, with respect to, or on account of, an Account, Chattel Paper or General
Intangibles (including a payment intangible).

 

“Accounting Changes” has the meaning ascribed thereto in Annex G.

 

“Accounts” means all “accounts,” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, or Instruments),
(including any such obligations that may be characterized as an account or
contract right under the Code), (b) all of each Credit Party’s rights in, to and
under all purchase orders or receipts for goods or services, (c) all of each
Credit Party’s rights to any goods represented by any of the foregoing
(including unpaid sellers’ rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all rights to payment due to any Credit Party for property sold, leased,
licensed, assigned or otherwise disposed of, for a policy of insurance issued or
to be issued, for a secondary obligation incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for
services rendered or to be rendered by such Credit Party or in connection with
any other transaction (whether or not yet earned by performance on the part of
such Credit Party), (e) all health care insurance receivables and (f) all
collateral security of any kind, given by any Account Debtor or any other Person
with respect to any of the foregoing.

 

“Adjusted Borrowing Availability” means, at any time, the amount of Revolving
Loans that the Borrower is permitted to borrower hereunder, after giving effect
to any and all other Advances and Letter of Credit Obligations and after taking
into account the covenant of the Borrower to maintain the Minimum Borrowing
Availability Amount pursuant to clause (c) of Annex G hereto.

 

“Advance” means any Revolving Credit Advance or Swing Line Advance, as the
context may require.

 

“Affiliate” means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian or
other fiduciary, 10% or more of the Stock having ordinary voting power in the
election of directors of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person, (c) each of

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such Person’s officers, directors, joint venturers and partners and (d) in the
case of Borrowers, the immediate family members, spouses and lineal descendants
of individuals who are Affiliates of any Borrower. For the purposes of this
definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that, in respect of any Borrower, the term
“Affiliate” shall specifically exclude Agent and each Lender.

 

“Agent” means GE Capital in its capacity as Agent for Lenders or its successor
appointed pursuant to Section 9.7.

 

“Agreement” means the Credit Agreement, dated as of January 6, 2006, by and
among Borrowers, the other Credit Parties party thereto, GE Capital, as Agent
and Lender and the other Lenders from time to time party thereto, as the same
may be amended, supplemented, restated or otherwise modified from time to time.

 

“Appendices” has the meaning ascribed to it in the recitals to the Agreement.

 

“Applicable Documentary L/C Margin” means the per annum fee, from time to time
in effect, payable with respect to outstanding Letter of Credit Obligations
consisting of undrawn documentary Letters of Credit and as determined by
reference to Section 1.5(a).

 

“Applicable Margins” means collectively the Applicable Documentary L/C Margin,
the Applicable Unused Line Fee Margin, the Applicable Revolver Index Margin, the
Applicable Standby L/C Margin, the Applicable Tranche B Loan Index Margin, the
Applicable Revolver LIBOR Margin and the Applicable Tranche B LIBOR Margin.

 

“Applicable Revolver Index Margin” means the per annum interest rate margin from
time to time in effect and payable in addition to the Index Rate applicable to
the Revolving Loan, as determined by reference to Section 1.5(a).

 

“Applicable Revolver LIBOR Margin” means the per annum interest rate from time
to time in effect and payable in addition to the LIBOR Rate applicable to the
Revolving Loan, as determined by reference to Section 1.5(a).

 

“Applicable Standby L/C Margin” means the per annum fee, from time to time in
effect, payable with respect to outstanding Letter of Credit Obligations
consisting of undrawn standby Letters of Credit and as determined by reference
to Section 1.5(a).

 

“Applicable Tranche B Loan Index Margin” means the per annum interest rate from
time to time in effect and payable in addition to the Index Rate applicable to
the Tranche B Loan, as determined by reference to Section 1.5(a).

 

“Applicable Tranche B LIBOR Margin” means the per annum interest rate from time
to time in effect and payable in addition to the LIBOR Rate applicable to the
Tranche B, as determined by reference to Section 1.5(a).

 

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“Applicable Unused Line Fee Margin” means the per annum fee, from time to time
in effect, payable in respect of Borrowers’ non-use of committed funds pursuant
to Section 1.9(b), which fee is determined by reference to Section 1.5(a).

 

“Assignment Agreement” has the meaning ascribed to it in Section 9.1(a).

 

“Bank of America Group” Bank of America, NA (as assignee of Fleet Capital
Corporation) as a lender and as agent for itself and other lenders.

 

“Bankruptcy Code” means the provisions of Title 11 of the United States Code, 11
U.S.C. §§101 et seq.

 

“BB & T” means Branch Banking and Trust Company of Virginia and its successors
and assigns.

 

“Blocked Accounts” has the meaning ascribed to it in Annex C.

 

“Borrower Representative” means Rowe Companies in its capacity as Borrower
Representative pursuant to the provisions of Section 1.1(d).

 

“Borrowers” and “Borrower” have the respective meanings ascribed thereto in the
recitals to the Agreement.

 

“Borrowing Availability” means as of any date of determination (a) as to all
Borrowers, the lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in
each case, less the sum of the aggregate Revolving Loan and Swing Line Loan then
outstanding, provided that an Overadvance in accordance with Section 1.1(a)(iii)
may cause the Revolving Loan and the Swing Line Loan to exceed the Borrowing
Base by the amount of such Overadvance.

 

“Borrowing Base” means, as of any date of determination by Agent, from time to
time, an amount equal to the sum at such time of:

 

(a) 85% of the book value of Eligible Accounts;

 

(b) 92.5% of the net orderly liquidation value of Eligible Inventory (based on
appraisals delivered on or prior to the Closing Date and any subsequent
appraisals obtained by the Agent pursuant to the terms hereof) consisting of
finished goods, as such percentage may be reduced pursuant to clause (c) of
Annex G;

 

(c) 85% of the net orderly liquidation value of Eligible Inventory (based on
appraisals delivered on or prior to the Closing Date and any subsequent
appraisals obtained by the Agent pursuant to the terms hereof) consisting of raw
materials and work in process;

 

(d) the lesser of (i) 50% of the fair market value of Eligible Real Estate,
based on appraisals delivered on or prior to the Closing Date and any subsequent
appraisals obtained by the Agent pursuant to the terms hereof and (ii) 25% of
the sum of (A) the aggregate Revolving Loan Commitments and (B) $7,000,000; and

 

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(e) 90% of the Net Cash Surrender Value of Eligible Life Insurance Policies,

 

in each case, less any Reserves.

 

“Borrowing Base Certificate” means a certificate to be executed and delivered
from time to time by each Borrower in the form attached to the Agreement as
Exhibit 4.1(b).

 

“Business Day” means any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the State of New York and in
reference to LIBOR Loans shall mean any such day that is also a LIBOR Business
Day.

 

“Buyout Exercise Period” means any time within five (5) days following the
Tranche B Lenders’ receipt of a Buyout Trigger Notice.

 

“Buyout Trigger Notice” means the Agent giving the Tranche B Lenders notice that
the Agent intends to grant, consent to, or otherwise approve, a sale or transfer
by the Credit Parties of Collateral (a) with a value exceeding $2,500,000 in the
aggregate amount and (b) at a time when an Event of Default has occurred and is
continuing.

 

“Capital Expenditures” means, with respect to any Person, all expenditures (by
the expenditure of cash or the incurrence of Indebtedness) by such Person during
any measuring period for any fixed assets or improvements or for replacements,
substitutions or additions thereto that have a useful life of more than one year
and that are required to be capitalized under GAAP.

 

“Capital Lease” means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.

 

“Capital Lease Obligation” means, with respect to any Capital Lease of any
Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.

 

“Cash Collateral Account” has the meaning ascribed to it Annex B.

 

“Cash Equivalents” has the meaning ascribed to it in Annex B.

 

“Cash Management Systems” has the meaning ascribed to it in Section 1.8.

 

“Change of Control” means any of the following: (a) any person or group of
persons (within the meaning of the Securities Exchange Act of 1934) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934,) of 25% or more of the issued and outstanding shares of capital Stock of
Rowe Companies having the right to vote for the election of directors of Rowe
Companies under ordinary circumstances; provided that, as to the holders of
preferred stock of the Rowe Companies, such percentage shall be 35%; (b) during
any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of Rowe Companies
(together with any new directors whose

 

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election by the board of directors of Rowe Companies or whose nomination for
election by the Stockholders of Rowe Companies was approved by a vote of at
least a majority of the directors then still in office who either were directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason other than death or disability to
constitute a majority of the directors then in office; or (c) Rowe Companies
ceases to own and control all of the economic and voting rights associated with
all of the outstanding capital Stock of any of its Subsidiaries.

 

“Charges” means all federal, state, county, city, municipal, local, foreign or
other governmental taxes (including taxes owed to the PBGC at the time due and
payable), levies, assessments, charges, liens, claims or encumbrances upon or
relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll,
income or gross receipts of any Credit Party, (d) any Credit Party’s ownership
or use of any properties or other assets, or (e) any other aspect of any Credit
Party’s business.

 

“Chattel Paper” means any “chattel paper,” as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Credit Party.

 

“Closing Date” means January 6, 2006

 

“Closing Checklist” means the schedule, including all appendices, exhibits or
schedules thereto, listing certain documents and information to be delivered in
connection with the Agreement, the other Loan Documents and the transactions
contemplated thereunder, substantially in the form attached hereto as Annex D.

 

“Code” means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with
respect to, Agent’s or any Lender’s Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or remedies
and for purposes of definitions related to such provisions.

 

“Collateral” means the property covered by the Security Agreement, the Mortgages
and the other Collateral Documents and any other property, real or personal,
tangible or intangible, now existing or hereafter acquired, that may at any time
be or become subject to a security interest or Lien in favor of Agent, on behalf
of itself and Lenders, to secure the Obligations, but specifically excluding the
leasehold rights and interests of Storehouse under its retail store leases.

 

“Collateral Documents” means the Security Agreement, the Guaranties, the
Mortgages, the Patent Security Agreements, the Trademark Security Agreements,
the Copyright Security Agreements and all similar agreements entered into
guaranteeing payment of, or granting a Lien upon property as security for
payment of, the Obligations.

 

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“Collateral Reports” means the reports with respect to the Collateral referred
to in Annex F.

 

“Collection Account” means that certain account of Agent, account number
502-328-54 in the name of Agent at Deutsche Bank Trust Company Americas in New
York, New York ABA No. 021 001 033, or such other account as may be specified in
writing by Agent as the “Collection Account.”.

 

“Commitment Termination Date” means the earliest of (a) January 6, 2009, (b) the
date of termination of Lenders’ obligations to make Advances and to incur Letter
of Credit Obligations or permit existing Loans to remain outstanding pursuant to
Section 8.2(b), and (c) the date of indefeasible prepayment in full by Borrowers
of the Loans and the cancellation and return (or stand-by guarantee) of all
Letters of Credit or the cash collateralization of all Letter of Credit
Obligations pursuant to Annex B, and the permanent reduction of all Commitments
to zero dollars ($0).

 

“Commitments” means (a) as to any Lender, the aggregate of such Lender’s
Revolving Loan Commitment (including without duplication the Swing Line Lender’s
Swing Line Commitment as a subset of its Revolving Loan Commitment) and Tranche
B Loan Commitment as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Lender and (b) as to all Lenders, the
aggregate of all Lenders’ Revolving Loan Commitments (including without
duplication the Swing Line Lender’s Swing Line Commitment as a subset of its
Revolving Loan Commitment) and Tranche B Commitments, which aggregate commitment
shall be Fifty-Seven Million Dollars ($57,000,000) on the Closing Date, as to
each of clauses (a) and (b), as such Commitments may be reduced or adjusted from
time to time in accordance with the Agreement.

 

“Compliance Certificate” has the meaning ascribed to it in Annex E.

 

“Concentration Accounts” has the meaning ascribed to it in Annex C.

 

“Contracts” means all “contracts,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.

 

“Control Letter” means a letter agreement between Agent and (i) the issuer of
uncertificated securities with respect to uncertificated securities in the name
of any Credit Party, (ii) a securities intermediary with respect to securities,
whether certificated or uncertificated, securities entitlements and other
financial assets held in a securities account in the name of any Credit Party,
(iii) a futures commission merchant or clearing house, as applicable, with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant limits any security interest in the applicable financial
assets in a manner reasonably satisfactory to Agent, acknowledges the Lien of
Agent, on behalf of itself and Lenders, on such financial assets, and agrees to
follow the instructions or entitlement orders of Agent without further consent
by the affected Credit Party.

 

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“Copyright License” means any and all rights now owned or hereafter acquired by
any Credit Party under any written agreement granting any right to use any
Copyright or Copyright registration.

 

“Copyright Security Agreements” means the Copyright Security Agreements made in
favor of Agent, on behalf of itself and Lenders, by each applicable Credit
Party.

 

“Copyrights” means all of the following now owned or hereafter adopted or
acquired by any Credit Party: (a) all copyrights and General Intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.

 

“Credit Parties” means each Borrower and each Guarantor.

 

“Customer Deposit Reserve” means, at any time of determination by Agent, from
time to time an amount equal to (a) 75% of customer deposits aged thirty
(30) days or less of Storehouse at any time that Borrowing Availability is
$10,000,000 or greater and (b) 100% of customer deposits aged thirty (30) days
or less of Storehouse (i) at any time that Borrowing Availability is less than
$10,000,000 or (ii) at any time after January 20, 2006, in the event that the
Borrowers have not received the Equity Commitment on or prior to such date.

 

“Default” means any event that, with the passage of time or notice or both,
would, unless cured or waived, become an Event of Default.

 

“Default Rate” has the meaning ascribed to it in Section 1.5(d).

 

“Deposit Accounts” means all “deposit accounts” as such term is defined in the
Code, now or hereafter held in the name of any Credit Party.

 

“Disbursement Accounts” has the meaning ascribed to it in Annex C.

 

“Disclosure Schedules” means the Schedules prepared by Borrowers and denominated
as Disclosure Schedules (1.4) through (6.7) in the Index to the Agreement.

 

“Documentary Letter of Credit Fee” has the meaning ascribed to it in Annex B.

 

“Documents” means all “documents,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located.

 

“Dollars” or “$” means lawful currency of the United States of America.

 

“E-Fax” means any system used to receive or transmit faxes electronically.

 

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“E-System” means any electronic system, including Intralinks® and any other
Internet or extranet-based site, whether such electronic system is owned,
operated or hosted by Agent, any of its Affiliates, or any of such Person’s
respective officers, directors, employees, attorneys, agents and representatives
or any other Person, providing for access to data protected by passcodes or
other security system.

 

“EBITDA” means, with respect to any Person for any fiscal period, without
duplication, an amount equal to (a) consolidated net income of such Person for
such period determined in accordance with GAAP, minus (b) the sum of (i) income
tax credits for such period, (ii) interest income for such period, (iii) gain
from extraordinary items for such period, (iv) any aggregate net gain (but not
any aggregate net loss) during such period arising from the sale, exchange or
other disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all Inventory sold in conjunction with the
disposition of fixed assets and all securities), and (v) any other non-cash
gains for such period, in each case to the extent included in the calculation of
consolidated net income of such Person for such period in accordance with GAAP,
but without duplication, plus (c) the sum of (i) any provision for income taxes
for such period, (ii) Interest Expense for such period, (iii) loss from
extraordinary items for such period, (iv) depreciation and amortization for such
period, (v) amortized debt discount for such period, and (vi) the amount of any
deduction to consolidated net income as the result of any grant to any members
of the management of such Person of any Stock during such period, in each case
to the extent included in the calculation of consolidated net income of such
Person for such period in accordance with GAAP, but without duplication. For
purposes of this definition, the following items shall be excluded in
determining consolidated net income of a Person: (1) the income (or deficit) of
any other Person accrued prior to the date it became a Subsidiary of, or was
merged or consolidated into, such Person or any of such Person’s Subsidiaries;
(2) the income (or deficit) of any other Person (other than a Subsidiary) in
which such Person has an ownership interest, except to the extent any such
income has actually been received by such Person in the form of cash dividends
or distributions; (3) the undistributed earnings of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation or requirement of law applicable to such Subsidiary;
(4) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of income accrued during such
period; (5) any write-up of any asset; (6) any net gain from the collection of
the proceeds of Life Insurance Policies; (7) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person; (8) in the case of a successor to such Person by
consolidation or merger or as a transferee of its assets, any earnings of such
successor prior to such consolidation, merger or transfer of assets; and (9) any
deferred credit representing the excess of equity in any Subsidiary of such
Person at the date of acquisition of such Subsidiary over the cost to such
Person of the investment in such Subsidiary.

 

“Eligible Accounts” has the meaning ascribed to it in Section 1.6.

 

“Eligible Inventory” has the meaning ascribed to it in Section 1.7.

 

“Eligible Life Insurance Policies” All Life Insurance Policies issued to the
Borrowers, listed on Schedule A hereto and reflected in the most recent
Borrowing Base Certificate delivered by each Borrower to Agent shall be
“Eligible Life Insurance Policies” for purposes of

 

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this Agreement, except any Life Insurance Policy to which any of the
exclusionary criteria set forth below applies. Agent shall have the right to
establish, modify or eliminate Reserves against Eligible Life Insurance Policies
from time to time in its reasonable credit judgment. In addition, Agent reserves
the right, at any time and from time to time after the Closing Date, to adjust
any of the criteria set forth below and to establish new criteria, and to adjust
advance rates with respect to Eligible Life Insurance Policies, in its
reasonable credit judgment, reflecting changes in the collectibility or
realization values of such Life Insurance Policies arising or discovered by
Agent after the Closing Date subject to the approval of all Revolving Lenders
and the Requisite Tranche B Lenders in the case of adjustments, new criteria or
changes in advance rates which have the effect of making more credit available
than available on the Closing Date; provided that, unless a Default or an Event
of Default shall have occurred and be continuing, no adjustments, new criteria
or changes in advance rates which have the effect of making less credit
available shall be made absent a Material Adverse Effect. Eligible Life
Insurance Policies shall not include any Life Insurance Policy:

 

(i) that is not at all times subject to the Agent’s duly perfected,
first-priority security interest and no other Lien; or

 

(ii) as to which the proceeds of such Life Insurance Policy have not been
assigned to the Agent pursuant to such documents and certificates as reasonably
required by the Agent and, from and after the date required pursuant to
Section 5.13, acknowledged by the applicable insurer pursuant to Section 5.13;
or

 

(iii) that is not in good standing and in full force in effect; or

 

(iv) as to which any premiums are past due.

 

“Eligible Real Estate” All Real Estate of the Borrowers listed on (a) Schedule
B-1 hereto and (b) to the extent that the Borrower has satisfied the covenants
contained in Section 5.12, Schedule B-2(ii) hereto and, in each case, to the
extent reflected in the most recent Borrowing Base Certificate delivered by each
Borrower to Agent, shall be “Eligible Real Estate” for purposes of this
Agreement, except any Real Estate to which any of the exclusionary criteria set
forth below applies. Agent shall have the right to establish, modify or
eliminate Reserves against Eligible Real Estate from time to time in its
reasonable credit judgment. In addition, Agent reserves the right, at any time
and from time to time after the Closing Date, to adjust any of the criteria set
forth below and to establish new criteria, and to adjust advance rates with
respect to Eligible Real Estate in its reasonable credit judgment, reflecting
changes in the salability or realization values of such Real Estate arising or
discovered by Agent after the Closing Date subject to the approval of all
Revolving Lenders and the Requisite Tranche B Lenders in the case of
adjustments, new criteria or changes in advance rates which have the effect of
making more credit available than on the Closing Date; provided that, unless a
Default or an Event of Default shall have occurred and be continuing, no
adjustments, new criteria or changes in advance rates which have the effect of
making less credit available shall be made absent a Material Adverse Effect (it
being understood that a change of the calculation of the fair market value (or
the component percentages thereof) of any Real Estate based on appraisals
obtained by the Agent pursuant to the terms hereof shall not constitute a change
in the advance rates). Eligible Real Estate shall not include any Real Estate:

 

(i) that is not located in the United States; or

 

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(ii) that is not at all times subject to the Agent’s duly perfected,
first-priority security interest and no other Lien except a Permitted Lien which
is subordinate to the Agent’s Lien; or

 

(iii) that has not been appraised by an appraiser reasonably acceptable to the
Agent; or

 

(iv) as to which (A) the Agent has not received an environmental site assessment
of such Real Estate reasonably acceptable to the Agent, including without
limitation, such assessments required pursuant to Section 5.12 or (B) any
environmental remediation required pursuant to Section 5.12 has not been
completed; or

 

(v) which is not improved by fully constructed buildings occupied by such
Borrower and utilized for the operation of such Borrower’s business; or

 

(vi) which is located in a special flood hazard area, but is not insured with
flood insurance acceptable to Agent.

 

“Environmental Laws” means all applicable federal, state, local and foreign
laws, statutes, ordinances, codes, rules, standards and regulations, now or
hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing liability or standards of
conduct for or relating to the regulation and protection of human health,
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§
9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation Authorization
Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42
U.S.C. §§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et
seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water
Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and
Health Act (29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42
U.S.C. §§ 300(f) et seq.), and any and all regulations promulgated thereunder,
and all analogous state, local and foreign counterparts or equivalents and any
transfer of ownership notification or approval statutes.

 

“Environmental Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.

 

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“Environmental Permits” means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.

 

“Equipment” means all “equipment,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located and, in any
event, including all such Credit Party’s machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.

 

“Equity Commitment” means an executed commitment letter or a fully executed
stock purchase agreement, in each case, reasonably satisfactory to the Agent,
with respect to the equity investment of $9,500,000 referred to in Section 5.14.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any regulations promulgated thereunder.

 

“ERISA Affiliate” means, with respect to any Credit Party, any trade or business
(whether or not incorporated) that, together with such Credit Party, are treated
as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of
the IRC.

 

“ERISA Event” means, with respect to any Credit Party or any ERISA Affiliate,
(a) with respect to a Title IV Plan, any event described in Section 4043(c) of
ERISA for which notice to the PBGC has not been waived; (b) the withdrawal of
any Credit Party or ERISA Affiliate from a Title IV Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer, as defined
in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any
Credit Party or any ERISA Affiliate from any Multiemployer Plan; (d) the filing
of a notice of intent to terminate a Title IV Plan in a distress termination
described in Section 4041(c) of ERISA or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) with respect to
a Title IV Plan, the existence of an “accumulated funding deficiency” (as
defined in Section 412 of the IRC or Section 302 of ERISA) whether or not
waived, or the failure to make by its due date a required installment under
Section 412(m) of the Code or the failure to make any required contribution to a
Multiemployer Plan; (g) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to a Title IV Plan; (h) the making of any amendment to any
Title IV Plan which could result in the imposition of a lien or the posting of a
bond or other

 

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security; (i) with respect to a Title IV Plan an event described in
Section 4062(e) of ERISA; (j) any other event or condition that would reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Title IV Plan
or Multiemployer Plan or for the imposition of liability under Section 4069 or
4212(c) of ERISA; (k) the termination of a Multiemployer Plan under
Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer
Plan under Section 4241 or 4245 of ERISA; (l) the loss of a Qualified Plan’s
qualification or tax exempt status; or (m) the termination of a Plan described
in Section 4064 of ERISA.

 

“Event of Default” has the meaning ascribed to it in Section 8.1.

 

“Fair Labor Standards Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et
seq.

 

“Federal Funds Rate” means, for any day, a floating rate equal to the weighted
average of the rates on overnight Federal funds transactions among members of
the Federal Reserve System, as determined by Agent in its sole discretion, which
determination shall be final, binding and conclusive (absent manifest error).

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System.

 

“Fee Letter” means that certain letter, dated the date hereof among GE Capital
and Borrowers with respect to certain Fees to be paid from time to time by
Borrowers to GE Capital.

 

“Fees” means any and all fees payable to Agent or any Lender pursuant to the
Agreement or any of the other Loan Documents.

 

“Financial Covenants” means the financial covenants set forth in Annex G.

 

“Financial Statements” means the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Borrowers delivered
in accordance with Section 3.4 and Annex E.

 

“Fiscal Month” means any of the monthly accounting periods of Borrowers.

 

“Fiscal Quarter” means any of the quarterly accounting periods of Borrowers,
ending on or about February 28, May 31, August 31 and November 30 of each year.

 

“Fiscal Year” means any of the annual accounting periods of Borrowers ending on
or about November 30 of each year.

 

“Fixed Charges” means, with respect to any Person for any fiscal period, (a) the
aggregate of all Interest Expense paid or accrued during such period (other than
amortized debt discounts for such period and amortized preferred financing fees
for such period), plus (b) payments of principal with respect to Indebtedness
made or scheduled to be made during such period, plus (c) Restricted Payments
paid or scheduled to be paid during such period (other than Restricted Payments
with respect to intercompany loans and advances).

 

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“Fixed Charge Coverage Ratio” means, with respect to any Person for any fiscal
period, the ratio of (a) (i) EBITDA for such fiscal period minus (ii) the
aggregate amount of Non-Financed Capital Expenditures made during such fiscal
period minus (iii) income taxes paid or payable in cash with respect to such
fiscal period to (b) Fixed Charges for such fiscal period.

 

“Fixtures” means all “fixtures” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party.

 

“Funded Debt” means, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness
consisting of guaranties of Funded Debt of other Persons.

 

“GAAP” means generally accepted accounting principles in the United States of
America consistently applied, as such term is further defined in Annex G to the
Agreement.

 

“GE Capital” means General Electric Capital Corporation, a Delaware corporation.

 

“General Intangibles” means all “general intangibles,” as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party, including all
right, title and interest that such Credit Party may now or hereafter have in or
under any Contract, all payment intangibles, customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License), all
rights and claims in or under insurance policies (including insurance for fire,
damage, loss and casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums, but not including the
insurance policies excluded under Section 5.4(c) of the Agreement),
uncertificated securities, choses in action, deposit, checking and other bank
accounts, rights to receive tax refunds and other payments, rights to receive
dividends, distributions, cash, Instruments and other property in respect of or
in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, 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
Credit Party or any computer bureau or service company from time to time acting
for such Credit Party.

 

“Goods” means all “goods” as defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located, including embedded software to
the extent included in “goods” as defined in the Code, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.

 

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“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

“Guaranteed Indebtedness” means as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease,
dividend, or other obligation (“primary obligation”) of any other Person (the
“primary obligor”) in any manner, including any obligation or arrangement of
such Person to (a) purchase or repurchase any such primary obligation,
(b) advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) 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, (d) protect the beneficiary of such arrangement from loss (other
than product warranties given in the ordinary course of business) or
(e) indemnify the owner of such primary obligation against loss in respect
thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed
to be an amount equal to the lesser at such time of (x) the stated or
determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is incurred and (y) the maximum amount for which such
Person may be liable pursuant to the terms of the instrument embodying such
Guaranteed Indebtedness, or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect thereof.

 

“Guaranties” means, collectively, each Subsidiary Guaranty and any other
guaranty executed by any Guarantor in favor of Agent and Lenders in respect of
the Obligations.

 

“Guarantors” means Rowe Properties and Rowe Diversified, and each other Person,
if any, that executes a guaranty or other similar agreement in favor of Agent,
for itself and the ratable benefit of Lenders, in connection with the
transactions contemplated by the Agreement and the other Loan Documents.

 

“Hazardous Material” means any substance, material or waste that is regulated
by, or forms the basis of liability now or hereafter under, any Environmental
Laws, including any material or substance that is (a) defined as a “solid
waste,” “hazardous waste,” “hazardous material,” “hazardous substance,”
“extremely hazardous waste,” “restricted hazardous waste,” “pollutant,”
“contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s),
or any radioactive substance.

 

“Indebtedness” means, with respect to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred 6 months or more, but excluding
obligations to trade creditors incurred in the ordinary course of business that
are unsecured and not overdue by more than 6 months unless being contested in
good faith, (b) all reimbursement and other obligations with

 

14

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respect to letters of credit, bankers’ acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement 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
or sale of such property), (e) all Capital Lease Obligations and the present
value (discounted at the Index Rate as in effect on the Closing Date) of future
rental payments under all synthetic leases, (f) all obligations of such Person
under commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all obligations of
such Person under any foreign exchange contract, currency swap agreement,
interest rate swap, cap or collar agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates, in each case whether contingent or
matured, (h) all Indebtedness referred to 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 or other assets (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, and (i) the
Obligations.

 

“Indemnified Liabilities” has the meaning ascribed to it in Section 1.13.

 

“Indemnified Person” has the meaning ascribed to in Section 1.13.

 

“Index Rate” means, for any day, a floating rate equal to the higher of (i) the
rate publicly quoted from time to time by The Wall Street Journal as the “prime
rate” (or, if The Wall Street Journal ceases quoting a prime rate, the highest
per annum rate of interest published by the Federal Reserve Board in Federal
Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the
Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus 50
basis points per annum. Each change in any interest rate provided for in the
Agreement based upon the Index Rate shall take effect at the time of such change
in the Index Rate.

 

“Index Rate Loan” means a Loan or portion thereof bearing interest by reference
to the Index Rate.

 

“Instruments” means all “instruments,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located, and, in any
event, including all certificated securities, all certificates of deposit, and
all promissory notes and other evidences of indebtedness, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel
Paper.

 

“Intellectual Property” means any and all Licenses, Patents, Copyrights,
Trademarks, and the goodwill associated with such Trademarks.

 

“Interest Expense” means, with respect to any Person for any fiscal period,
interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including,
interest expense with respect to any Funded Debt of such Person and interest
expense for the relevant period that has been capitalized on the balance sheet
of such Person.

 

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“Interest Payment Date” means (a) as to any Index Rate Loan, the first Business
Day of each month to occur while such Loan is outstanding, and (b) as to any
LIBOR Loan, the last day of the applicable LIBOR Period; provided that, in
addition to the foregoing, each of (x) the date upon which all of the
Commitments have been terminated and the Loans have been paid in full and
(y) the Commitment Termination Date shall be deemed to be an “Interest Payment
Date” with respect to any interest that has then accrued under the Agreement.

 

“Inventory” means all “inventory,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located, and in any
event including inventory, merchandise, goods and other personal property that
are held by or on behalf of any Credit Party for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party’s business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
and embedded software.

 

“Investment Property” means all “investment property” as such term is defined in
the Code now owned or hereafter acquired by any Credit Party, wherever located,
including (i) all securities, whether certificated or uncertificated, including
stocks, bonds, interests in limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (ii) all securities
entitlements of any Credit Party, including the rights of any Credit Party to
any securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or other
money owing by any securities intermediary with respect to that account;
(iii) all securities accounts of any Credit Party; (iv) all commodity contracts
of any Credit Party; and (v) all commodity accounts held by any Credit Party.

 

“IRC” means the Internal Revenue Code of 1986 and all regulations promulgated
thereunder.

 

“IRS” means the Internal Revenue Service.

 

“L/C Issuer” has the meaning ascribed to it in Annex B.

 

“L/C Sublimit” has the meaning ascribed to it in Annex B.

 

“Lenders” means GE Capital, the other Lenders named on the signature pages of
the Agreement, and, if any such Lender shall decide to assign all or any portion
of the Obligations, such term shall include any assignee of such Lender.

 

“Letter of Credit Fee” collectively, the Documentary Letter of Credit Fee and
the Standby Letter of Credit Fee.

 

“Letter of Credit Obligations” means all outstanding obligations incurred by
Agent and Lenders at the request of Borrower Representative, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of Letters of Credit by Agent or another L/C Issuer or the purchase of
a participation as set forth in Annex B with respect to any Letter of Credit.
The amount of such Letter of Credit Obligations shall equal the maximum amount
that may be payable at such time or at any time thereafter by Agent or Lenders
thereupon or pursuant thereto.

 

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“Letters of Credit” means documentary or standby letters of credit issued for
the account of any Borrower by any L/C Issuer, and bankers’ acceptances issued
by any Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.

 

“Letter-of-Credit Rights” means “letter-of-credit rights” as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
including rights to payment or performance under a letter of credit, whether or
not such Credit Party, as beneficiary, has demanded or is entitled to demand
payment or performance.

 

“LIBOR Business Day” means a Business Day on which banks in the City of London
are generally open for interbank or foreign exchange transactions.

 

“LIBOR Loan” means a Loan or any portion thereof bearing interest by reference
to the LIBOR Rate.

 

“LIBOR Period” means, with respect to any LIBOR Loan, each period commencing on
a LIBOR Business Day selected by Borrower Representative pursuant to the
Agreement and ending one, two or three months thereafter, as selected by
Borrower Representative’s irrevocable notice to Agent as set forth in
Section 1.5(e); provided, that the foregoing provision relating to LIBOR Periods
is subject to the following:

 

(a) if any LIBOR Period would otherwise end on a day that is not a LIBOR
Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR
Business Day unless the result of such extension would be to carry such LIBOR
Period into another calendar month in which event such LIBOR Period shall end on
the immediately preceding LIBOR Business Day;

 

(b) any LIBOR Period that would otherwise extend beyond the Commitment
Termination Date shall end two (2) LIBOR Business Days prior to such date;

 

(c) any LIBOR Period that begins on the last LIBOR Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such LIBOR Period) shall end on the last LIBOR
Business Day of a calendar month;

 

(d) Borrower Representative shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and

 

(e) Borrower Representative shall select LIBOR Periods so that there shall be no
more than 3 separate LIBOR Loans in existence at any one time.

 

“LIBOR Rate” means for each LIBOR Period, a rate of interest determined by Agent
equal to:

 

(a) the offered rate for deposits in United States Dollars for the applicable
LIBOR Period that appears on Telerate Page 3750 as of 12 noon. (London time), on
the second full LIBOR Business Day next preceding the first day of such LIBOR
Period (unless such date is not a Business Day, in which event the next
succeeding Business Day will be used); divided by

 

17

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(b) a number equal to 1.0 minus the aggregate (but without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in effect on the
day that is two (2) LIBOR Business Days prior to the beginning of such LIBOR
Period (including basic, supplemental, marginal and emergency reserves under any
regulations of the Federal Reserve Board or other Governmental Authority having
jurisdiction with respect thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Federal Reserve Board that are required to be maintained by
a member bank of the Federal Reserve System.

 

If such interest rates shall cease to be available from Telerate News Service
(or its successor satisfactory to Agent), the LIBOR Rate shall be determined
from such financial reporting service or other information as shall be mutually
acceptable to Agent and Borrower Representative.

 

“License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Credit Party.

 

“Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, lien, charge, claim, security interest, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Code or comparable
law of any jurisdiction).

 

“Life Insurance Policies” means the policies of life insurance listed on
Schedule A hereto.

 

“Litigation” has the meaning ascribed to it in Section 3.13.

 

“Loan Account” has the meaning ascribed to it in Section 1.12.

 

“Loan Documents” means the Agreement, the Notes, the Collateral Documents, the
Master Standby Agreement, the Master Documentary Agreement, and all other
agreements, instruments, documents and certificates identified in the Closing
Checklist executed and delivered to, or in favor of, Agent or any Lenders and
including all other pledges, powers of attorney, consents, assignments,
contracts, notices, letter of credit agreements and all other written matter
whether heretofore, now or hereafter executed by or on behalf of any Credit
Party, or any employee of any Credit Party, and delivered to Agent or any Lender
in connection with the Agreement or the transactions contemplated thereby. Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to the
Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.

 

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“Loans” means the Revolving Loan, the Swing Line Loan and the Tranche B Loan.

 

“Lock Boxes” has the meaning ascribed to it in Annex C.

 

“Margin Stock” has the meaning ascribed to in Section 3.10.

 

“Master Documentary Agreement” means the Master Agreement for Documentary
Letters of Credit dated as of the Closing Date among Borrowers, as Applicant(s),
and GE Capital.

 

“Master Standby Agreement” means the Master Agreement for Standby Letters of
Credit dated as of the Closing Date among Borrowers, as Applicant(s), and GE
Capital, as issuer.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, prospects or financial or other condition of the Credit
Parties considered as a whole, (b) the Credit Parties’ ability as a whole to pay
any of the Loans or any of the other Obligations in accordance with the terms of
the Agreement, (c) the Collateral (including, without limitation, the value
thereof) or the Agent’s Liens, on behalf of itself and Lenders, on the
Collateral or the priority of such Liens, or (d) Agent’s or any Lender’s rights
and remedies under the Agreement and the other Loan Documents.

 

“Maximum Amount” means, as of any date of determination, an amount equal to the
Revolving Loan Commitment of all Lenders as of that date.

 

“Minimum Borrowing Availability Amount” has the meaning ascribed thereto in
Annex G.

 

“Mortgaged Properties” has the meaning assigned to it in Annex D.

 

“Mortgages” means each of the mortgages, deeds of trust, leasehold mortgages,
leasehold deeds of trust, collateral assignments of leases or other real estate
security documents delivered by any Credit Party to Agent on behalf of itself
and Lenders with respect to the Mortgaged Properties, all in form and substance
reasonably satisfactory to Agent.

 

“Multiemployer Plan” means a “multiemployer plan” as defined in Sections 3(37)
or 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated to make or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.

 

“Net Cash Surrender Value” at any time, the cash surrender value of Eligible
Life Insurance Policies, net of any Indebtedness or other claims against such
cash surrender value, determined by the Agent based on information provided by
the issuer(s) of such Life Insurance Policies.

 

“Non-Financed Capital Expenditures” means, with respect to any Person, Capital
Expenditures paid in cash and not financed with third party Capital Leases or
purchase money indebtedness incurred in connection with a Capital Expenditure.

 

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“Non-Funding Lender” has the meaning ascribed to it in Section 9.9(a)(ii).

 

“Notes” means, collectively, the Revolving Notes, the Swing Line Note and the
Tranche B Notes.

 

“Notice of Conversion/Continuation” has the meaning ascribed to it in
Section 1.5(e).

 

“Notice of Revolving Credit Advance” has the meaning ascribed to it in
Section 1.1(a).

 

“Obligations” means all loans, advances, debts, liabilities and obligations for
the performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such amounts
are liquidated or determinable) owing by any Credit Party to Agent or any
Lender, and all covenants and duties regarding such amounts, of any kind or
nature, present or future, whether or not evidenced by any note, agreement,
letter of credit agreement or other instrument, arising under the Agreement or
any of the other Loan Documents. This term includes all principal, interest
(including all interest that accrues after the commencement of any case or
proceeding by or against any Credit Party in bankruptcy, whether or not allowed
in such case or proceeding), Fees, hedging obligations under swaps, caps and
collar arrangements provided by the Agent, any Lender or any of their
Affiliates, obligations arising under any cash management services provided to
any Credit Party by the Agent, any Lender or any of their Affiliates, expenses,
attorneys’ fees and any other sum chargeable to any Credit Party under the
Agreement or any of the other Loan Documents.

 

“Overadvance” has the meaning ascribed to it in Section 1.1(a)(iii).

 

“Patent License” means rights under any written agreement now owned or hereafter
acquired by any Credit Party granting any right with respect to any invention on
which a Patent is in existence.

 

“Patent Security Agreements” means the Patent Security Agreements made in favor
of Agent, on behalf of itself and Lenders, by each applicable Credit Party.

 

“Patents” means all of the following in which any Credit Party now holds or
hereafter acquires any interest: (a) all letters patent of the United States or
of any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State, or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Plan” means a Plan described in Section 3(2) of ERISA.

 

“Permitted Encumbrances” means the following encumbrances: (a) Liens for taxes
or assessments or other governmental Charges not yet due and payable or which
are being contested in accordance with Section 5.2(b); (b) pledges or deposits
of money securing statutory obligations under workmen’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of

 

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money securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers’, mechanics’
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers’,
warehousemen’s, suppliers’ or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding aggregate
amount not in excess of $ 250,000 at any time, so long as such Liens attach only
to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which any Credit Party is a party; (g) any attachment or
judgment lien not constituting an Event of Default under Section 8.1(j);
(h) zoning restrictions, easements, licenses, or other restrictions on the use
of any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (i) presently existing or hereafter created
Liens in favor of Agent, on behalf of Lenders; (j) statutory landlord liens;
(k) Liens expressly permitted under clauses (b) and (c) of Section 6.7 of the
Agreement and (l) pledges of cash, certificates of deposit and other marketable
securities in favor of BB & T securing issued and outstanding letters of credit;
provided that (i) such pledges were made prior to the Closing Date and (ii) the
amount of obligations under such letters of credit do not exceed $2,000,000.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department thereof).

 

“Plan” means, at any time, an “employee benefit plan”, as defined in
Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to or has maintained,
contributed to or had an obligation to contribute to at any time within the past
7 years on behalf of participants who are or were employed by any Credit Party
or ERISA Affiliate.

 

“Post-Petition Interest” means interest or fees accruing on or after the
occurrence of, and during the continuance of, an Event of Default under
Section 8.1(h) or (i) of the Agreement at the rates set forth in the Agreement,
whether or not allowed or allowable in any case or proceeding under the
Bankruptcy Code.

 

“Prior Lenders” means collectively, the Bank of America Group party to the Loan
and Security Agreement component of the Prior Loan Agreements and the SunTrust
Group party to the Synthetic Lease component of the Prior Loan Agreements.

 

“Prior Lender Obligations” means all obligations of any Credit Party to the
Prior Lenders under the Prior Loan Agreements.

 

“Prior Loan Agreements” means that certain Loan and Security Agreement, dated as
of May 15, 2002, by and among certain Credit Parties and the Bank of America
Group and that certain Master Agreement and related agreements respecting the
Synthetic Lease financing dated August 27, 1999 by and among certain Credit
Parties and the SunTrust Group.

 

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“Private Label Credit Card Arrangements” means the Merchant Agreement, dated
April 29, 1991 among Storehouse, Inc. and HSBC Bank Nevada National Association
(f/k/a Household Bank (SB), N.A. (successor by assignment of Beneficial National
Bank USA, pursuant to which Storehouse assigns accounts receivable owing from
retail customers to HSBC in consideration of a payment from HSBC to Storehouse,
in each case, pursuant to such documents and agreements as have been approved by
the Agent.

 

“Proceeds” means “proceeds,” as such term is defined in the Code, including
(a) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to any Credit Party from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Credit Party against
third parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or dilution of
any Copyright, Copyright License, Trademark or Trademark License, or for injury
to the goodwill associated with any Trademark or Trademark License, (d) any
recoveries by any Credit Party against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to payment
or other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.

 

“Pro Forma” means the unaudited consolidated and consolidating balance sheet of
Rowe Companies and its Subsidiaries as of August 28, 2005 after giving pro forma
effect to the Related Transactions.

 

“Projections” means Rowe Companies forecasted consolidated and consolidating:
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, all prepared on a Subsidiary by Subsidiary or
division-by-division basis, if applicable, and otherwise consistent with the
historical Financial Statements of Rowe Companies, together with appropriate
supporting details and a statement of underlying assumptions.

 

“Pro Rata Share” means (a) with respect to matters relating to any Revolving
Lender in its capacity as such, (i) the percentage obtained by dividing (A) the
Revolving Loan Commitment of that Revolving Lender by (B) the aggregate
Revolving Loan Commitments of all Revolving Lenders or (ii) if the Revolving
Commitments have been terminated, the percentage obtained by dividing (A) the
aggregate outstanding principal balance of the Revolving Loans held by that
Revolving Lender; (b) with respect to matters relating to any Tranche B Lender
in its capacity as such, the percentage obtained by dividing (i) the Tranche B
Commitment of that Tranche B Lender by (ii) the aggregate Tranche B Loan
Commitments of all Tranche B Lenders; and (c) with respect to matters relating
to all Lenders, (i) the percentage obtained by dividing (A) the aggregate
Commitments of that Lender by (B) the aggregate Commitments of all Lenders or
(ii) if the Revolving Commitments have been terminated, the percentage obtained
by dividing (i) the aggregate outstanding principal balance of the Loans held by
that Lender, by (ii) the outstanding principal balance of the Loans held by all
Lenders.

 

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“Qualified Plan” means a Pension Plan that is intended to be tax-qualified under
Section 401(a) of the IRC.

 

“Qualified Assignee” means (a) any Lender, any Affiliate of any Lender and, with
respect to any Lender that is an investment fund that invests in commercial
loans, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, and (b) any commercial bank, savings and
loan association or savings bank or any other entity which is an “accredited
investor” (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a rating of BBB or higher from S&P and a
rating of Baa2 or higher from Moody’s at the date that it becomes a Lender and
which, through its applicable lending office, is capable of lending to Borrowers
without the imposition of any withholding or similar taxes; provided that no
Person proposed to become a Lender after the Closing Date and determined by
Agent to be acting in the capacity of a vulture fund or distressed debt
purchaser shall be a Qualified Assignee, and no Person or Affiliate of such
Person proposed to become a Lender after the Closing Date and that holds Stock
issued by any Credit Party shall be a Qualified Assignee.

 

“Real Estate” has the meaning ascribed to it in Section 3.6.

 

“Refinancing” means the repayment in full by Borrowers of the Prior Lender
Obligations on the Closing Date.

 

“Refunded Swing Line Loan” has the meaning ascribed to it in
Section 1.1(c)(iii).

 

“Related Transactions” means the initial borrowing under the Revolving Loan and
the Tranche B Loan on the Closing Date, the Refinancing, the payment of all
fees, costs and expenses associated with all of the foregoing and the execution
and delivery of all of the Related Transactions Documents.

 

“Related Transactions Documents” means the Loan Documents and all other
agreements or instruments executed in connection with the Related Transactions.

 

“Release” means any release, threatened release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material in
the indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.

 

“Requisite Lenders” means Lenders having (a) more than 66 2/3% of the
Commitments of all Lenders, or (b) if the Commitments have been terminated, more
than 66 2/3% of the aggregate outstanding principal amount of all Loans;
provided, however, that, notwithstanding the foregoing, (i) if there are only
two (2) Lenders at any time, “Requisite Lenders” shall mean both Lenders, and
(ii) if there are only three (3) Lenders at any time, “Requisite Lenders” shall
mean at least two (2) Lenders having at least the percentage prescribed above.

 

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“Requisite Revolving Lenders” means Lenders having (a) more than 66 2/3% of the
Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan
Commitments have been terminated, more than 66 2/3% of the aggregate outstanding
principal amount of the Revolving Loan.

 

“Requisite Tranche B Lenders” means Lenders having more than 66 2/3% of the
Tranche B Loan Commitments of all Lenders.

 

“Reserves” means (a) reserves established by Agent from time to time against
Eligible Inventory pursuant to Section 5.9, (b) reserves established pursuant to
Section 5.4(c), (c) the Customer Deposit Reserve, (d) the Tranche B Availability
Reserve and (e) such other reserves against Eligible Accounts, Eligible
Inventory, Eligible Life Insurance Policies, Eligible Real Estate or Borrowing
Availability of the Borrowers that Agent may, in its reasonable credit judgment,
establish from time to time. Without limiting the generality of the foregoing,
(a) Reserves established to ensure the payment of accrued Interest Expenses or
Indebtedness shall be deemed to be a reasonable exercise of Agent’s credit
judgment and (b) Reserves may include (and shall be deemed to be a reasonable
exercise of Agent’s credit judgment), but are not limited to, the following:
rent, whether for personal or real property but only if a lessor’s or landlord’s
waiver, in a form acceptable to the Agent, has not been received by the Agent
from such lessor or landlord; up to 50% of the Borrower’s liability under gift
certificates; any customs, duty or freight charges; accrued advertising costs;
accrued rebates; and potential environmental remediation costs relating to the
owned Real Estate listed on Schedule B-2(i). Notwithstanding the foregoing, so
long as the Minimum Borrowing Availability Amount is $9,000,000, the Agent will
not establish reserves relating to (a) potential environmental remediation costs
relating to the owned Real Estate listed on Schedule B-2(i), so long as such
potential costs (as determined by the Agent in its sole discretion) do not
exceed $700,000 in the aggregate and (b) rent relating to Storehouse locations
so long as the liability of the Borrowers in respect of such rent (as determined
by the Agent in its sole discretion) does not exceed $500,000; provided that, in
the event that the Borrowers do not receive the Equity Commitment on or prior to
January 20, 2006, the Agent shall have the right to establish reserves in
respect of such rent.

 

“Restricted Payment” means, with respect to any Credit Party (a) the declaration
or payment of any dividend or the incurrence of any liability to make any other
payment or distribution of cash or other property or assets in respect of Stock;
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement of such Credit Party’s Stock or any other payment or
distribution made in respect thereof, either directly or indirectly; (c) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire Stock
of such Credit Party now or hereafter outstanding; (d) any payment of a claim
for the rescission of the purchase or sale of, or for material damages arising
from the purchase or sale of, any shares of such Credit Party’s Stock or of a
claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (e) any payment, loan,
contribution, or other transfer of funds or other property to any Stockholder of
such Credit Party other than payment of compensation in the ordinary course of
business to Stockholders who are employees, directors,

 

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vendors or independent contractors of such Person; and (f) any payment of
management fees (or other fees of a similar nature) by such Credit Party to any
Stockholder of such Credit Party or its Affiliates (other than an Affiliate that
is also a Credit Party).

 

“Retiree Welfare Plan” means, at any time, a welfare plan (within the meaning of
Section 3(1) of ERISA) that provides for continuing coverage or benefits for any
participant or any beneficiary of a participant after such participant’s
termination of employment, other than continuation coverage provided pursuant to
Section 4980B of the IRC or other similar state law and at the sole expense of
the participant or the beneficiary of the participant.

 

“Revolving Credit Advance” has the meaning ascribed to it in Section 1.1(a)(i).

 

“Revolving Lenders” means, as of any date of determination, Lenders having a
Revolving Loan Commitment.

 

“Revolving Loan” means, at any time, the sum of (i) the aggregate amount of
Revolving Credit Advances outstanding to Borrowers plus (ii) the aggregate
Letter of Credit Obligations incurred on behalf of Borrowers. Unless the context
otherwise requires, references to the outstanding principal balance of the
Revolving Loan shall include the outstanding balance of Letter of Credit
Obligations.

 

“Revolving Loan Commitment” means (a) as to any Lender, the aggregate commitment
of such Lender to make Revolving Credit Advances or incur Letter of Credit
Obligations as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Lender and (b) as to all Lenders, the
aggregate commitment of all Lenders to make Revolving Credit Advances or incur
Letter of Credit Obligations, which aggregate commitment shall be Fifty Million
Dollars ($50,000,000) on the Closing Date, as such amount may be adjusted, if at
all, from time to time in accordance with the Agreement.

 

“Revolving Note” has the meaning ascribed to it in Section 1.1(a)(ii).

 

“Rowe Companies” has the meaning ascribed thereto in the recitals to the
Agreement.

 

“Rowe Diversified” has the meaning ascribed thereto in the recitals to the
Agreement.

 

“Rowe Furniture” has the meaning ascribed thereto in the recitals to the
Agreement.

 

“Rowe Jessup” means Rowe Properties Jessup, Inc., a Maryland corporation.

 

“Rowe Properties” has the meaning ascribed thereto in the recitals to the
Agreement.

 

“Rowe Salem” means Rowe Properties Salem, Inc., a Virginia corporation.

 

“Rowe Sylmar” means Rowe Properties Sylmar, Inc., a California corporation.

 

“Rowe Wood Products” means Rowe Furniture Wood Products, Inc., a California
corporation.

 

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“Security Agreement” means the Security Agreement of even date herewith entered
into by and among Agent, on behalf of itself and Lenders, and each Credit Party
that is a signatory thereto.

 

“Software” means all “software” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, other than software embedded in any
category of Goods, including all computer programs and all supporting
information provided in connection with a transaction related to any program.

 

“Solvent” means, with respect to any Person on a particular date, that on such
date (a) the fair value of the property of such Person (including intercompany
accounts) is greater than the total amount of liabilities, including contingent
liabilities, of such Person; (b) the present fair salable value of the assets 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 or liabilities beyond such Person’s ability to pay as such debts and
liabilities mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person’s property would constitute an unreasonably small capital. The
amount of contingent liabilities (such as litigation, guaranties and pension
plan liabilities) at any time shall be computed as the amount that, in light of
all the facts and circumstances existing at the time, represents the amount that
can be reasonably be expected to become an actual or matured liability.

 

“Standby Letter of Credit Fee” has the meaning ascribed to it in Annex B.

 

“Standstill Termination Date” means any date, (a) on which an Event of Default
exists under Section 8.1(a) and has existed for at least a thirty-one
(31) consecutive day period commencing on the date that the Agent receives
written notice from the Tranche B Lenders of such Event of Default and (b) on
which any other Event of Default exists and has existed for at least a one
hundred and twenty (120) consecutive day period commencing on the date that the
Agent receives written notice from the Tranche B Lenders of such Event of
Default.

 

“Stock” means all shares, options, warrants, general or limited partnership
interests, membership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership, limited liability company or
equivalent entity whether voting or nonvoting, including common stock, preferred
stock or any other “equity security” (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934).

 

“Stockholder” means, with respect to any Person, each holder of Stock of such
Person.

 

“Storehouse” has the meaning ascribed thereto in the recitals to the Agreement.

 

“Subsidiary” means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or

 

26

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beneficially by such Person or one or more Subsidiaries of such Person, or with
respect to which any such Person has the right to vote or designate the vote of
50% or more of such Stock whether by proxy, agreement, operation of law or
otherwise, and (b) any partnership or limited liability company in which such
Person and/or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or may exercise the powers of a general partner. Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary of
a Borrower.

 

“Subsidiary Guaranty” means the Subsidiary Guaranty of even date herewith
executed by Rowe Properties and Rowe Diversified.

 

“SunTrust Group” means SunTrust Bank and Atlantic Financial Group, Ltd.

 

“Supporting Obligations” means all “supporting obligations” as such term is
defined in the Code, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.

 

“Swing Line Advance” has the meaning ascribed to it in Section 1.1(c)(i).

 

“Swing Line Availability” has the meaning ascribed to it in Section 1.1(c)(i).

 

“Swing Line Commitment” means, as to the Swing Line Lender, the commitment of
the Swing Line Lender to make Swing Line Advances as set forth on Annex J to the
Agreement, which commitment constitutes a subfacility of the Revolving Loan
Commitment of the Swing Line Lender.

 

“Swing Line Lender” means GE Capital.

 

“Swing Line Loan” means, as the context may require, at any time, the aggregate
amount of Swing Line Advances outstanding to any Borrower or to all Borrowers.

 

“Swing Line Note” has the meaning ascribed to it in Section 1.1(c)(ii).

 

“Taxes” means taxes, levies, imposts, deductions, Charges or withholdings, and
all liabilities with respect thereto, excluding taxes imposed on or measured by
the net income of Agent or a Lender by the jurisdictions under the laws of which
Agent and Lenders are organized or conduct business or any political subdivision
thereof.

 

“Termination Date” means the date on which (a) the Loans have been indefeasibly
repaid in full, (b) all other Obligations under the Agreement and the other Loan
Documents have been completely discharged (c) all Letter of Credit Obligations
have been cash collateralized, canceled or backed by standby letters of credit
in accordance with Annex B, and (d) none of Borrowers shall have any further
right to borrow any monies under the Agreement.

 

“Title IV Plan” means a Pension Plan (other than a Multiemployer Plan), that is
subject to Title IV of ERISA or Section 412 of the IRC, and that any Credit
Party or ERISA Affiliate maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of them.

 

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“Trademark Security Agreements” means the Trademark Security Agreements made in
favor of Agent, on behalf of Lenders, by each applicable Credit Party.

 

“Trademark License” means rights under any written agreement now owned or
hereafter acquired by any Credit Party granting any right to use any Trademark.

 

“Trademarks” means all of the following now owned or hereafter existing or
adopted or acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; and (c) all goodwill associated with or symbolized by any
of the foregoing.

 

“Tranche B Availability Reserve” means, at any time of determination by Agent,
from time to time an amount equal to the greater of (a) zero Dollars and (b) the
outstanding amount of the Tranche B Loans at such time minus (i) 5% of the book
value of Eligible Accounts Receivable at such time, minus (ii) 7.5% of the
appraised net orderly liquidation value of Eligible Inventory at such time,
minus (iii) 25% of the appraised fair market value of Eligible Real Estate at
such time.

 

“Tranche B Lenders” means those Lenders having Tranche B Loan Commitments.

 

“Tranche B Loan” has the meaning assigned to it in Section 1.1(b)(i).

 

“Tranche B Loan Commitment” means (a) as to any Lender with a Tranche B Loan
Commitment, the commitment of such Lender to make its Pro Rata Share of the
Tranche B Loan as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Lender, and (b) as to all Lenders with a
Tranche B Loan Commitment, the aggregate commitment of all Lenders to make the
Tranche B Loan, which aggregate commitment shall be Seven Million Dollars
($7,000,000) on the Closing Date. After advancing the Tranche B Loan, each
reference to a Lender’s Tranche B Loan Commitment shall refer to that Lender’s
Pro Rata Share of the outstanding Tranche B Loan.

 

“Tranche B Note” has the meaning assigned to it in Section 1.1(b)(i).

 

“Unfunded Pension Liability” means, at any time, the aggregate amount, if any,
of the sum of (a) the amount by which the present value of all accrued benefits
under each Title IV Plan exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
all determined as of the most recent valuation date for each such Title IV Plan
using the actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of five (5) years following a transaction which
might reasonably be expected to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by any Credit Party
or any ERISA Affiliate as a result of such transaction.

 

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Rules of construction with respect to accounting terms used in the Agreement or
the other Loan Documents shall be as set forth in Annex G. All other undefined
terms contained in any of the Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code to the extent the same are
used or defined therein; in the event that any term is defined differently in
different Articles or Divisions of the Code, the definition contained in Article
or Division 9 shall control. Unless otherwise specified, references in the
Agreement or any of the Appendices to a Section, subsection or clause refer to
such Section, subsection or clause as contained in the Agreement. The words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.

 

Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
feminine and neuter genders. The words “including”, “includes” and “include”
shall be deemed to be followed by the words “without limitation”; the word “or”
is not exclusive; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are intended
to signify that such Credit Party has actual knowledge or awareness of a
particular fact or circumstance or that such Credit Party, if it had exercised
reasonable diligence, would have known or been aware of such fact or
circumstance.

 

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ANNEX B (Section 1.2)

to

CREDIT AGREEMENT

 

LETTERS OF CREDIT

 

(a) Issuance. Subject to the terms and conditions of the Agreement, Agent and
Revolving Lenders agree to incur, from time to time prior to the Commitment
Termination Date, upon the request of Borrower Representative on behalf of the
applicable Borrower and for such Borrower’s account, Letter of Credit
Obligations by causing Letters of Credit to be issued by GE Capital or a
Subsidiary thereof or a bank or other legally authorized Person selected by or
acceptable to Agent in its sole discretion (each, an “L/C Issuer”) for such
Borrower’s account and guaranteed by Agent; provided, that if the L/C Issuer is
a Revolving Lender, then such Letters of Credit shall not be guaranteed by Agent
but rather each Revolving Lender shall, subject to the terms and conditions
hereinafter set forth, purchase (or be deemed to have purchased) risk
participations in all such Letters of Credit issued with the written consent of
Agent, as more fully described in paragraph (b)(ii) below. The aggregate amount
of all such Letter of Credit Obligations shall not at any time exceed the least
of (i) Five Million Dollars ($5,000,000) (the “L/C Sublimit”) and (ii) the
Maximum Amount less the aggregate outstanding principal balance of the Revolving
Credit Advances and the Swing Line Loan, and (iii) the Borrowing Base less the
aggregate outstanding principal balance of the Revolving Credit Advances and the
Swing Line Loan; provided that, prior to the Borrowers’ satisfaction of the
covenants contained in Section 5.14, the sum of the aggregate Revolving Loan and
Swing Line Loan then outstanding, after giving effect to the incurrence of such
Letter of Credit Obligations, shall not exceed $45,000,000. No such Letter of
Credit shall have an expiry date that is more than one year following the date
of issuance thereof, unless otherwise determined by the Agent, in its sole
discretion (including with respect to customary evergreen provisions), and
neither Agent nor Revolving Lenders shall be under any obligation to incur
Letter of Credit Obligations in respect of, or purchase risk participations in,
any Letter of Credit having an expiry date that is later than the Commitment
Termination Date.

 

(b) (i) Advances Automatic; Participations. In the event that Agent or any
Revolving Lender shall make any payment on or pursuant to any Letter of Credit
Obligation, such payment shall then be deemed automatically to constitute a
Revolving Credit Advance to the Borrowers under Section 1.1(a) of the Agreement
regardless of whether a Default or Event of Default has occurred and is
continuing and notwithstanding any Borrower’s failure to satisfy the conditions
precedent set forth in Section 2, and each Revolving Lender shall be obligated
to pay its Pro Rata Share thereof in accordance with the Agreement. The failure
of any Revolving Lender to make available to Agent for Agent’s own account its
Pro Rata Share of any such Revolving Credit Advance or payment by Agent under or
in respect of a Letter of Credit shall not relieve any other Revolving Lender of
its obligation hereunder to make available to Agent its Pro Rata Share thereof,
but no Revolving Lender shall be responsible for the failure of any other
Revolving Lender to make available such other Revolving Lender’s Pro Rata Share
of any such payment.

 

(ii) If it shall be illegal or unlawful for any Borrower to incur Revolving
Credit Advances as contemplated by paragraph (b)(i) above because of an Event of

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Default described in Sections 8.1(h) or (i) or otherwise or if it shall be
illegal or unlawful for any Revolving Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Revolving Lender, then (A) immediately and without further
action whatsoever, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an
undivided interest and participation equal to such Revolving Lender’s Pro Rata
Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and
(B) thereafter, immediately upon issuance of any Letter of Credit, each
Revolving Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation in such Revolving Lender’s Pro Rata Share (based on
the Revolving Loan Commitments) of the Letter of Credit Obligations with respect
to such Letter of Credit on the date of such issuance. Each Revolving Lender
shall fund its participation in all payments or disbursements made under the
Letters of Credit in the same manner as provided in the Agreement with respect
to Revolving Credit Advances.

 

(c) Cash Collateral.

 

(i) If Borrowers are required to provide cash collateral for any Letter of
Credit Obligations pursuant to the Agreement, including Section 8.2 of the
Agreement, prior to the Commitment Termination Date, Borrowers will pay to Agent
for the ratable benefit of itself and Revolving Lenders cash or cash equivalents
acceptable to Agent (“Cash Equivalents”) in an amount equal to 105% of the
maximum amount then available to be drawn under each applicable Letter of Credit
outstanding for the benefit of Borrowers. Such funds or Cash Equivalents shall
be held by Agent in a cash collateral account (the “Cash Collateral Account”)
maintained at a bank or financial institution acceptable to Agent. The Cash
Collateral Account shall be in the name of the Borrowers and shall be pledged
to, and subject to the control of, Agent, for the benefit of Agent and Lenders,
in a manner satisfactory to Agent. Each Borrower hereby pledges and grants to
Agent, on behalf of itself and Lenders, a security interest in all such funds
and Cash Equivalents held in the Cash Collateral Account from time to time and
all proceeds thereof, as security for the payment of all amounts due in respect
of the Letter of Credit Obligations and other Obligations, whether or not then
due. The Agreement, including this Annex B, shall constitute a security
agreement under applicable law.

 

(ii) If any Letter of Credit Obligations, whether or not then due and payable,
shall for any reason be outstanding on the Commitment Termination Date,
Borrowers shall either (A) provide cash collateral therefor in the manner
described above, or (B) cause all such Letters of Credit and guaranties thereof,
if any, to be canceled and returned, or (C) deliver a stand-by letter (or
letters) of credit in guaranty of such Letter of Credit Obligations, which
stand-by letter (or letters) of credit shall be of like tenor and duration (plus
thirty (30) additional days) as, and in an amount equal to 105% of, the
aggregate maximum amount then available to be drawn under, the Letters of Credit
to which such outstanding Letter of Credit Obligations relate and shall be
issued by a Person, and shall be subject to such terms and conditions, as are be
satisfactory to Agent in its sole discretion.

 

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(iii) From time to time after funds are deposited in the Cash Collateral Account
by any Borrower, whether before or after the Commitment Termination Date, Agent
may apply such funds or Cash Equivalents then held in the Cash Collateral
Account to the payment of any amounts, and in such order as Agent may elect, as
shall be or shall become due and payable by the Borrowers to Agent and Lenders
with respect to such Letter of Credit Obligations of the Borrowers and, upon the
satisfaction in full of all Letter of Credit Obligations of the Borrowers, to
any other Obligations of the Borrowers then due and payable.

 

(iv) No Borrower nor any Person claiming on behalf of or through any Borrower
shall have any right to withdraw any of the funds or Cash Equivalents held in
the Cash Collateral Account, except that upon the termination of all Letter of
Credit Obligations and the payment of all amounts payable by Borrowers to Agent
and Lenders in respect thereof, any funds remaining in the Cash Collateral
Account shall be applied to other Obligations then due and owing and upon
payment in full of such Obligations, any remaining amount shall be paid to
Borrowers or as otherwise required by law. Interest earned on deposits in the
Cash Collateral Account shall be held as additional collateral.

 

(d) Fees and Expenses. Borrowers agree to pay to Agent for the benefit of
Revolving Lenders, as compensation to such Lenders for Letter of Credit
Obligations incurred hereunder, (i) all costs and expenses incurred by Agent or
any Lender on account of such Letter of Credit Obligations, and (ii) for each
month during which (A) any Letter of Credit Obligation incurred in connection
with standby Letters of Credit shall remain outstanding, a fee (the “Standby
Letter of Credit Fee”) in an amount equal to the Applicable Standby L/C Margin
from time to time in effect multiplied by the maximum amount available from time
to time to be drawn under the applicable standby Letter of Credit and (B) any
Letter of Credit Obligation incurred in connection with documentary Letters of
Credit shall remain outstanding, a fee (the “Documentary Letter of Credit Fee”)
in an amount equal to the Applicable Documentary L/C Margin from time to time in
effect multiplied by the maximum amount available from time to time to be drawn
under the applicable documentary Letter of Credit. Such fees shall be paid to
Agent for the benefit of the Revolving Lenders in arrears, on the first day of
each month and on the Commitment Termination Date. In addition, Borrowers shall
pay to any L/C Issuer, on demand, such fees (including all per annum fees),
charges and expenses of such L/C Issuer in respect of the issuance, negotiation,
acceptance, amendment, transfer and payment of such Letter of Credit or
otherwise payable pursuant to the application and related documentation under
which such Letter of Credit is issued.

 

(e) Request for Incurrence of Letter of Credit Obligations. Borrower
Representative shall give Agent at least two (2) Business Days’ prior written
notice requesting the incurrence of any Letter of Credit Obligation. The notice
shall be accompanied by the form of the Letter of Credit (which shall be
acceptable to the L/C Issuer) and a completed application in the form of Exhibit
B-1 or B-2 attached hereto (as applicable) . Notwithstanding anything contained
herein to the contrary, Letter of Credit applications by Borrower Representative
and approvals by Agent and the L/C Issuer may be made and transmitted pursuant
to electronic codes and security measures mutually agreed upon and established
by and among Borrower Representative, Agent and the L/C Issuer.

 

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(f) Obligation Absolute. The joint and several obligation of Borrowers to
reimburse Agent and Revolving Lenders for payments made with respect to any
Letter of Credit Obligation shall be absolute, unconditional and irrevocable,
without necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable. Such obligations of
Borrowers and Revolving Lenders shall be paid strictly in accordance with the
terms hereof under all circumstances including the following:

 

(i) any lack of validity or enforceability of any Letter of Credit or the
Agreement or the other Loan Documents or any other agreement;

 

(ii) the existence of any claim, setoff, defense or other right that any
Borrower or any of their respective Affiliates or any Lender may at any time
have against a beneficiary or any transferee of any Letter of Credit (or any
Persons or entities for whom any such transferee may be acting), Agent, any
Lender, or any other Person, whether in connection with the Agreement, the
Letter of Credit, the transactions contemplated herein or therein or any
unrelated transaction (including any underlying transaction between any Borrower
or any of their respective Affiliates and the beneficiary for which the Letter
of Credit was procured);

 

(iii) any draft, demand, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;

 

(iv) payment by Agent (except as otherwise expressly provided in paragraph
(g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or guaranty
thereof against presentation of a demand, draft or certificate or other document
that does not comply with the terms of such Letter of Credit or such guaranty;

 

(v) any other circumstance or event whatsoever, that is similar to any of the
foregoing; or

 

(vi) the fact that a Default or an Event of Default has occurred and is
continuing.

 

(g) Indemnification; Nature of Lenders’ Duties.

 

(i) In addition to amounts payable as elsewhere provided in the Agreement,
Borrowers hereby agree to pay and to protect, indemnify, and save harmless Agent
and each Lender from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys’
fees and allocated costs of internal counsel) that Agent or any Lender may incur
or be subject to as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or guaranty thereof, or (B) the failure of Agent or any
Lender seeking indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guaranty thereof as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, in each case other than to the
extent solely as a result of the gross negligence or willful misconduct of Agent
or such Lender (as finally determined by a court of competent jurisdiction).

 

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(ii) As between Agent and any Lender and Borrowers, Borrowers assume all risks
of the acts and omissions of, or misuse of any Letter of Credit by
beneficiaries, of any Letter of Credit. In furtherance and not in limitation of
the foregoing, to the fullest extent permitted by law, neither Agent nor any
Lender shall be responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (C) failure of
the beneficiary of any Letter of Credit to comply fully with conditions required
in order to demand payment under such Letter of Credit; provided, that in the
case of any payment by Agent under any Letter of Credit or guaranty thereof,
Agent shall be liable to the extent such payment was made solely as a result of
its gross negligence or willful misconduct (as finally determined by a court of
competent jurisdiction) in determining that the demand for payment under such
Letter of Credit or guaranty thereof complies on its face with any applicable
requirements for a demand for payment under such Letter of Credit or guaranty
thereof; (D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they may be in cipher; (E) errors in interpretation of technical terms;
(F) any loss or delay in the transmission or otherwise of any document required
in order to make a payment under any Letter of Credit or guaranty thereof or of
the proceeds thereof; (G) the credit of the proceeds of any drawing under any
Letter of Credit or guaranty thereof; and (H) any consequences arising from
causes beyond the control of Agent or any Lender. None of the above shall
affect, impair, or prevent the vesting of any of Agent’s or any Lender’s rights
or powers hereunder or under the Agreement.

 

(iii) Nothing contained herein shall be deemed to limit or to expand any
waivers, covenants or indemnities made by Borrowers in favor of any L/C Issuer
in any letter of credit application, reimbursement agreement or similar
document, instrument or agreement between or among Borrowers and such L/C
Issuer, including an application or agreement for a Letter of Credit, entered
into with Agent.

 

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ANNEX C (Section 1.8)

to

CREDIT AGREEMENT

 

CASH MANAGEMENT SYSTEM

 

Each Credit Party shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:

 

(a) On or before the Closing Date and until the Termination Date, each Credit
Party shall (i) establish lock boxes (“Lock Boxes”) or at Agent’s discretion,
blocked accounts (“Blocked Accounts”) at one or more of the banks set forth in
Disclosure Schedule (3.19), and shall request in writing and otherwise take such
reasonable steps to ensure that all Account Debtors forward payment directly to
such Lock Boxes, and (ii) deposit and cause its Subsidiaries to deposit or cause
to be deposited promptly, and in any event no later than the first Business Day
after the date of receipt thereof, all cash, checks, drafts or other similar
items of payment relating to or constituting payments made in respect of any and
all Collateral (whether or not otherwise delivered to a Lock Box) into one or
more Blocked Accounts in such Credit Party’s name or any such Subsidiary’s name
and at a bank identified in Disclosure Schedule (3.19) (each, a “Relationship
Bank”). Subject to clause (f) of this Annex C, each Credit Party shall maintain
a concentration account in its name (each a “Concentration Account” and
collectively, the “Concentration Accounts”) at the bank or banks that shall be
designated as the Concentration Account bank for each such Credit Party in
Disclosure Schedule (3.19) (each a “Concentration Account Bank” and
collectively, the “Concentration Account Banks”), which banks shall be
reasonably satisfactory to Agent.

 

(b) Borrowers may maintain, in its name, an account (each a “Disbursement
Account” and collectively, the “Disbursement Accounts”) at a bank reasonably
acceptable to Agent into which Agent shall, from time to time, deposit proceeds
of Revolving Credit Advances and Swing Line Advances made to Borrowers pursuant
to Section 1.1 for use by Borrowers solely in accordance with the provisions of
Section 1.4.

 

(c) On or before the Closing Date (or such later date as Agent shall consent to
in writing), each Concentration Account Bank, each bank where a Disbursement
Account is maintained and all other Relationship Banks, shall have entered into
tri-party blocked account agreements with Agent, for the benefit of itself and
Lenders, and the applicable Credit Party and Subsidiaries thereof, as
applicable, in form and substance reasonably acceptable to Agent, which shall
become operative on or prior to the Closing Date; provided that Storehouse may
maintain accounts not subject to such blocked account agreements so long as the
aggregate balance maintained in all such accounts does not exceed $50,000 at any
time. Each such blocked account agreement shall provide, among other things,
that (i) all items of payment deposited in such account and proceeds thereof
deposited in the applicable Concentration Account are held by such bank as agent
or bailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the
bank executing such agreement has no rights of setoff or recoupment or any other
claim against such account, as the case may be, other than for payment of its
service fees and other charges directly related to the administration of such
account and for returned checks or other items of payment, and (iii) from and
after the Closing Date (A) with respect to banks at which a Blocked Account is

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maintained, such bank agrees, to forward immediately all amounts in each Blocked
Account to such Borrower’s Concentration Account Bank and to commence the
process of daily sweeps from such Blocked Account into the applicable
Concentration Account and (B) with respect to each Concentration Account Bank,
such bank agrees to immediately forward all amounts received in the applicable
Concentration Account to the Collection Account through daily sweeps from such
Concentration Account into the Collection Account. No Borrower shall, or shall
cause or permit any Subsidiary thereof to, accumulate or maintain cash in
Disbursement Accounts or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and amounts
necessary to meet minimum balance requirements.

 

(d) So long as no Default or Event of Default has occurred and is continuing,
Borrowers may amend Disclosure Schedule (3.19) to add or replace a Relationship
Bank, Lock Box or Blocked Account or to replace any Concentration Account or any
Disbursement Account; provided, that (i) Agent shall have consented in writing
in advance to the opening of such account or Lock Box with the relevant bank and
(ii) prior to the time of the opening of such account or Lock Box, the
applicable Credit Party or its Subsidiaries, as applicable, and such bank shall
have executed and delivered to Agent a tri-party blocked account agreement, in
form and substance reasonably satisfactory to Agent. Credit Parties shall close
any of their accounts (and establish replacement accounts in accordance with the
foregoing sentence) promptly and in any event within thirty (30) days following
notice from Agent that the creditworthiness of any bank holding an account is no
longer acceptable in Agent’s reasonable judgment, or as promptly as practicable
and in any event within sixty (60) days following notice from Agent that the
operating performance, funds transfer or availability procedures or performance
with respect to accounts or Lock Boxes of the bank holding such accounts or
Agent’s liability under any tri-party blocked account agreement with such bank
is no longer acceptable in Agent’s reasonable judgment.

 

(e) The Lock Boxes, Blocked Accounts, Disbursement Accounts and the
Concentration Accounts shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of the
Loans and all other Obligations, and in which each Credit Party and each
Subsidiary thereof shall have granted a Lien to Agent, on behalf of itself and
Lenders, pursuant to the Security Agreement.

 

(f) All amounts deposited in the Collection Account shall be deemed received by
Agent in accordance with Section 1.10 and shall be applied (and allocated) by
Agent in accordance with Section 1.11. In no event shall any amount be so
applied unless and until such amount shall have been credited in immediately
available funds to the Collection Account.

 

(g) Each Credit Party shall and shall cause its Affiliates, officers, employees,
agents, directors or other Persons acting for or in concert with such Credit
Party (each a “Related Person”) to (i) hold in trust for Agent, for the benefit
of itself and Lenders, all checks, cash and other items of payment received by
such Credit Party or any such Related Person, and (ii) within one (1) Business
Day after receipt by such Credit Party or any such Related Person of any checks,
cash or other items of payment, deposit the same into a Blocked Account of such
Credit Party. Each Credit Party on behalf of itself and each Related Person
thereof acknowledges and agrees that all cash, checks or other items of payment
constituting proceeds of Collateral are part of the Collateral. All proceeds of
the sale or other disposition of any Collateral, shall be deposited directly
into the applicable Blocked Accounts.

 

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(h) (i) Within seven (7) days following the Closing Date, each Credit Party
shall (A) open a segregated Lock Box at Wachovia Bank, National Association,
under the dominion and control of the Agent and (B) open a Concentration Account
for all accounts maintained at Wachovia Bank, National Association, under the
dominion and control of the Agent and (ii) at all times thereafter, (A) maintain
such Lock Box and Concentration Account and (b) cause all credit card
receivables (including payments received in respect of the Private Label Credit
Card Arrangements) to be made into such Lock Box.

 

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ANNEX D (Section 2.1(a))

to

CREDIT AGREEMENT

 

CLOSING CHECKLIST

 

In addition to, and not in limitation of, the conditions described in
Section 2.1 of the Agreement, pursuant to Section 2.1(a), the following items
must be received by Agent in form and substance satisfactory to Agent on or
prior to the Closing Date (each capitalized term used but not otherwise defined
herein shall have the meaning ascribed thereto in Annex A to the Agreement):

 

A. Appendices. All Appendices to the Agreement, in form and substance
satisfactory to Agent.

 

B. Revolving Notes, Swing Line Note and Tranche B Notes. Duly executed originals
of the Revolving Notes, Swing Line Note and Tranche B Notes for each applicable
Lender, dated the Closing Date.

 

C. Security Agreement. Duly executed originals of the Security Agreement, dated
the Closing Date, and all instruments, documents and agreements executed
pursuant thereto.

 

D. Insurance. (a) Satisfactory evidence that the insurance policies required by
Section 5.4 are in full force and effect, together with appropriate evidence
showing loss payable and/or additional insured clauses or endorsements, as
reasonably requested by Agent, in favor of Agent, on behalf of Lenders and
(b) with respect to each Life Insurance Policy, (i) appropriate evidence showing
additional insured clauses or endorsements, as reasonably requested by Agent, in
favor of Agent, on behalf Lenders, together with provisions pursuant to which
the insurer agrees to provide thirty (30) days prior written notice to Agent in
the event of any non-renewal, cancellation or amendment of any such Life
Insurance Policy and (ii) documentation and certificates reasonably required by
the Agent to evidence the assignment of the proceeds of such Life Insurance
Polices to the Agent.

 

E. Security Interests and Code Filings.

 

(a) Evidence satisfactory to Agent that Agent (for the benefit of itself and
Lenders) has a valid and perfected first priority security interest in the
Collateral, including (i) such documents duly executed by each Credit Party
(including financing statements under the Code and other applicable documents
under the laws of any jurisdiction with respect to the perfection of Liens) as
Agent may request in order to perfect its security interests in the Collateral
and (ii) copies of Code search reports listing all effective financing
statements that name any Credit Party as debtor, together with copies of such
financing statements, none of which shall cover the Collateral, except for those
relating to the Prior Lender Obligations (all of which shall be terminated on
the Closing Date) and Permitted Encumbrances.

 

(b) Evidence reasonably satisfactory to Agent, including copies, of all UCC-1
and other financing statements filed in favor of any Credit Party with respect
to each location, if any, at which Inventory may be consigned.

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(c) Control Letters from (i) all issuers of uncertificated securities and
financial assets held by each Credit Party, (ii) all securities intermediaries
with respect to all securities accounts and securities entitlements of each
Credit Party, and (iii) all futures commission agents and clearing houses with
respect to all commodities contracts and commodities accounts held by any Credit
Party.

 

F. Payoff Letter; Termination Statements. Copies of a duly executed payoff
letters, in form and substance reasonably satisfactory to Agent, by and between
all parties to the any Prior Lender’s loan documents evidencing repayment in
full of all Prior Lender Obligations, together with (a) UCC-3 or other
appropriate termination statements, in form and substance satisfactory to Agent,
manually signed by the applicable Prior Lender releasing all liens of such Prior
Lender upon any of the personal property of each Credit Party, and
(b) termination of all blocked account agreements, bank agency agreements or
other similar agreements or arrangements or arrangements in favor such Prior
Lender or relating to the Prior Lender Obligations.

 

G. Intellectual Property Security Agreements. Duly executed originals of
Trademark Security Agreements, Copyright Security Agreements and Patent Security
Agreements, each dated the Closing Date and signed by each Credit Party which
owns Trademarks, Copyrights and/or Patents, as applicable, all in form and
substance reasonably satisfactory to Agent, together with all instruments,
documents and agreements executed pursuant thereto.

 

H. Subsidiary Guaranties. Duly executed originals of the Subsidiary Guaranty,
dated the Closing Date, in form and substance reasonably satisfactory to Agent.

 

I. Initial Borrowing Base Certificate. Duly executed originals of an initial
Borrowing Base Certificate from the Borrowers, dated the Closing Date,
reflecting information concerning Eligible Accounts, Eligible Inventory Eligible
Life Insurance Policies and Eligible Real Estate of the Borrowers as of the
Closing Date.

 

J. Initial Notice of Revolving Credit Advance. Duly executed originals of a
Notice of Revolving Credit Advance, dated the Closing Date, with respect to the
initial Revolving Credit Advance to be requested by Borrower Representative on
the Closing Date.

 

K. Letter of Direction. Duly executed originals of a letter of direction from
Borrower Representative addressed to Agent, on behalf of itself and Lenders,
with respect to the disbursement on the Closing Date of the proceeds of the
Tranche B Loan and the initial Revolving Credit Advance.

 

L. Cash Management System; Blocked Account Agreements. Evidence satisfactory to
Agent that, as of the Closing Date, Cash Management Systems complying with Annex
C to the Agreement have been established and are currently being maintained in
the manner set forth in such Annex C, together with copies of duly executed
tri-party blocked account and lock box agreements, reasonably satisfactory to
Agent, with the banks as required by Annex C.

 

M. Charter and Good Standing. For each Credit Party, such Person’s (a) charter
and all amendments thereto, (b) good standing certificates (including
verification of tax status) in its state of incorporation and (c) good standing
certificates (including verification of tax status) and

 

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certificates of qualification to conduct business in each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, each dated a recent date prior to the Closing Date and certified
by the applicable Secretary of State or other authorized Governmental Authority.

 

N. Bylaws and Resolutions. For each Credit Party, (a) such Person’s bylaws,
together with all amendments thereto and (b) resolutions of such Person’s Board
of Directors approving and authorizing the execution, delivery and performance
of the Loan Documents to which such Person is a party and the transactions to be
consummated in connection therewith, each certified as of the Closing Date by
such Person’s corporate secretary or an assistant secretary as being in full
force and effect without any modification or amendment.

 

O. Incumbency Certificates. For each Credit Party, signature and incumbency
certificates of the officers of each such Person executing any of the Loan
Documents, certified as of the Closing Date by such Person’s corporate secretary
or an assistant secretary as being true, accurate, correct and complete.

 

P. Opinions of Counsel. Duly executed originals of opinions of Silver Freedmon &
Taff, L.L.P., Kummer Kaempfer Bonner Renshaw & Ferrario, Sutherland Asbill &
Brennan LLP and Blanton, Rice, Sidwell, Nickell, Cozean, & Collins, L.L.C., each
counsel for the Credit Parties, together with any additional local counsel
opinions reasonably requested by Agent, each in form and substance reasonably
satisfactory to Agent and its counsel, dated the Closing Date, and each
accompanied by a letter addressed to such counsel from the Credit Parties,
authorizing and directing such counsel to address its opinion to Agent, on
behalf of Lenders, and to include in such opinion an express statement to the
effect that Agent and Lenders are authorized to rely on such opinion.

 

Q. Accountants’ Letters. A letter from the Credit Parties to their independent
auditors authorizing the independent certified public accountants of the Credit
Parties to communicate with Agent and Lenders in accordance with Section 4.2.

 

R. Appointment of Agent for Service. An appointment of CT Corporation as each
Credit Party’s agent for service of process.

 

S. Fee Letter. Duly executed originals of the Fee Letter.

 

T. Officer’s Certificate. Agent shall have received duly executed originals of a
certificate of an authorized officer of each Borrower, dated the Closing Date,
stating that, since August 28, 2005 (a) no event or condition has occurred or is
existing which could reasonably be expected to have a Material Adverse Effect;
(b) there has been no material adverse change in the industry in which any
Borrower operates; (c) no Litigation has been commenced which, if successful,
would have a Material Adverse Effect or could challenge any of the transactions
contemplated by the Agreement and the other Loan Documents; (d) there have been
no Restricted Payments made by any Credit Party; (e) before and after giving
effect to the transactions contemplated by the Credit Agreement, each Credit
Party will be Solvent, and (f) there has been no material increase in
liabilities, liquidated or contingent, and no material decrease in assets of any
Borrower or any of its Subsidiaries.

 

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U. Waivers. Agent, on behalf of Lenders, shall have received landlord waivers
and consents, bailee letters and mortgagee agreements in form and substance
reasonably satisfactory to Agent, in each case as required pursuant to
Section 5.9.

 

V. Mortgages. Mortgages covering all of the owned Real Estate listed on
Schedules B-1 and Schedule B-2 hereto (the “Mortgaged Properties”), together
with: (a) title insurance policies, current as-built surveys, zoning letters and
certificates of occupancy, in each case reasonably satisfactory in form and
substance to Agent, in its sole discretion; (b) evidence that counterparts of
the Mortgages have been recorded in all places to the extent necessary or
desirable, in the judgment of Agent, to create a valid and enforceable first
priority lien (subject to Permitted Encumbrances) on each Mortgaged Property in
favor of Agent for the benefit of itself and Lenders (or in favor of such other
trustee as may be required or desired under local law); and (c) an opinion of
counsel in each state in which any Mortgaged Property is located in form and
substance and from counsel reasonably satisfactory to Agent.

 

W. Environmental Reports. Agent shall have received Phase I Environmental Site
Assessment Reports, consistent with American Society for Testing and Materials
(ASTM) Standard E 1527-00 (or the current ASTM standard for Phase I
environmental site assessment reports), and applicable state requirements, on
all of the Real Estate, dated no more than 6 months prior to the Closing Date,
prepared by environmental engineers reasonably satisfactory to Agent, all in
form and substance reasonably satisfactory to Agent, in its sole discretion; and
Agent shall have further received such environmental review and audit reports,
including Phase II reports (other than the Phase II reports referred to in
Section 5.12), with respect to the Real Estate of any Credit Party as Agent
shall have requested, and Agent shall be satisfied, in its sole discretion, with
the contents of all such environmental reports. Agent shall have received
letters executed by the environmental firms preparing such environmental
reports, in form and substance reasonably satisfactory to Agent, authorizing
Agent and Lenders to rely on such reports.

 

X. Appraisal; Audit. Agent shall have received appraisals as to all Equipment,
all Inventory and as to each of the Mortgaged Properties and collateral audits
as to all Inventory and Accounts, each of which shall be in form and substance
reasonably satisfactory to Agent.

 

Y. Audited Financials; Financial Condition. Agent shall have received the
Financial Statements, Projections and other materials set forth in Section 3.4,
certified by Borrower Representative’s Chief Financial Officer, in each case in
form and substance reasonably satisfactory to Agent, and Agent shall be
satisfied, in its sole discretion, with all of the foregoing. Agent shall have
further received a certificate of the Chief Executive Officer and/or the Chief
Financial Officer of each Borrower, based on such Pro Forma and Projections, to
the effect that (a) such Borrower will be Solvent upon the consummation of the
transactions contemplated herein; (b) the Pro Forma fairly presents the
financial condition of such Borrower as of the date thereof after giving effect
to the transactions contemplated by the Loan Documents; (c) the Projections are
based upon estimates and assumptions stated therein, all of which such Borrower
believes to be reasonable and fair in light of current conditions and current
facts known to such Borrower and, as of the Closing Date, reflect such
Borrower’s good faith and reasonable estimates of its future financial
performance and of the other information projected therein for the period set
forth therein; and (d) containing such other statements with respect to the
solvency of such Borrower and matters related thereto as Agent shall request.

 

4

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Z. Master Standby Agreement. A Master Agreement for Standby Letters of Credit
among Borrowers and GE Capital.

 

AA. Master Documentary Agreement. A Master Agreement for Documentary Letters of
Credit among Borrowers and GE Capital.

 

BB. Other Documents. Such other certificates, documents and agreements
respecting any Credit Party as Agent may reasonably request.

 

5

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ANNEX E (Section 4.1(a))

to

CREDIT AGREEMENT

 

FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING

 

Borrowers shall deliver or cause to be delivered to Agent or to Agent and
Lenders, as indicated, the following:

 

(a) Monthly Financials. To Agent and Lenders, within thirty (30) days after the
end of each Fiscal Month, financial information regarding Borrowers and their
Subsidiaries, certified by the Chief Financial Officer of Borrower
Representative, consisting of consolidated and consolidating (i) unaudited
balance sheets as of the close of such Fiscal Month and the related statements
of income and cash flows for that portion of the Fiscal Year ending as of the
close of such Fiscal Month; (ii) unaudited statements of income and cash flows
for such Fiscal Month, setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to the absence of notes and normal year-end adjustments); and (iii) a summary of
the outstanding balance of all intercompany loans and advances as of the last
day of that Fiscal Month. Such financial information shall be accompanied by the
signature of the Chief Financial Officer of Borrower Representative that
(i) such financial information presents fairly in accordance with GAAP (subject
to normal year-end adjustments) the financial position and results of operations
of Borrowers and their Subsidiaries, on a consolidated and consolidating basis,
in each case as at the end of such Fiscal Month and for that portion of the
Fiscal Year then ended and (ii) any other information presented is true, correct
and complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default has
occurred and is continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.

 

(b) Quarterly Financials. To Agent and Lenders, within forty-five (45) days
after the end of each Fiscal Quarter, consolidated and consolidating financial
information regarding Borrowers and their Subsidiaries, certified by the Chief
Financial Officer of Borrower Representative, including (i) unaudited balance
sheets as of the close of such Fiscal Quarter and the related statements of
income and cash flow for that portion of the Fiscal Year ending as of the close
of such Fiscal Quarter and (ii) unaudited statements of income and cash flows
for such Fiscal Quarter, in each case setting forth in comparative form the
figures for the corresponding period in the prior year and the figures contained
in the Projections for such Fiscal Year, all prepared in accordance with GAAP
(subject to the absence of notes and normal year-end adjustments). Such
financial information shall be accompanied by (A) a statement in reasonable
detail (each, a “Compliance Certificate” showing the calculations used in
determining compliance with each of the Financial Covenants and (B) the
certification of the Chief Financial Officer of Borrower Representative that
(i) such financial information presents fairly in accordance with GAAP (subject
to normal year-end adjustments) the financial position, results of operations
and statements of cash flows of Borrowers and their Subsidiaries, on both a
consolidated and consolidating basis, as at the end of such Fiscal Quarter and
for that portion of the Fiscal Year then ended, (ii) any other information
presented is true, correct and complete in all material respects and that there
was no Default or Event of Default in existence as of such

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

time or, if a Default or Event of Default has occurred and is continuing,
describing the nature thereof and all efforts undertaken to cure such Default or
Event of Default. In addition, Borrowers shall deliver to Agent and Lenders,
within forty-five (45) days after the end of each Fiscal Quarter, a management
discussion and analysis that includes a comparison to budget for that Fiscal
Quarter and a comparison of performance for that Fiscal Quarter to the
corresponding period in the prior year.

 

(c) Operating Plan. To Agent and Lenders, as soon as available, but not later
than thirty (30) days after the end of each Fiscal Year, an annual operating
plan for Borrowers, on a consolidated and consolidating basis, approved by the
Board of Directors of Borrowers, for the following Fiscal Year, which
(i) includes a statement of all of the material assumptions on which such plan
is based, (ii) includes monthly balance sheets, income statements and statements
of cash flows for the following year and (iii) integrates sales, gross profits,
operating expenses, operating profit, cash flow projections and Borrowing
Availability projections, all prepared on the same basis and in similar detail
as that on which operating results are reported (and in the case of cash flow
projections, representing management’s good faith estimates of future financial
performance based on historical performance), and including plans for personnel,
Capital Expenditures and facilities.

 

(d) Annual Audited Financials. To Agent and Lenders, within ninety (90) days
after the end of each Fiscal Year, audited Financial Statements for Borrowers
and their Subsidiaries on a consolidated and (unaudited) consolidating basis,
consisting of balance sheets and statements of income and retained earnings and
cash flows, setting forth in comparative form in each case the figures for the
previous Fiscal Year, which Financial Statements shall be prepared in accordance
with GAAP and certified without qualification, by an independent certified
public accounting firm of national standing or otherwise acceptable to Agent.
Such Financial Statements shall be accompanied by (i) a statement prepared in
reasonable detail showing the calculations used in determining compliance with
each of the Financial Covenants, (ii) a report from such accounting firm to the
effect that, in connection with their audit examination, nothing has come to
their attention to cause them to believe that a Default or Event of Default has
occurred with respect to the Financial Covenants (or specifying those Defaults
and Events of Default that they became aware of), it being understood that such
audit examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) the annual letters to such accountants in connection with their
audit examination detailing contingent liabilities and material litigation
matters, and (iv) the certification of the Chief Executive Officer or Chief
Financial Officer of Borrowers that all such Financial Statements present fairly
in accordance with GAAP the financial position, results of operations and
statements of cash flows of Borrowers and their Subsidiaries on a consolidated
and consolidating basis, as at the end of such Fiscal Year and for the period
then ended, and that there was no Default or Event of Default in existence as of
such time or, if a Default or Event of Default has occurred and is continuing,
describing the nature thereof and all efforts undertaken to cure such Default or
Event of Default.

 

(e) Management Letters. To Agent and Lenders, within five (5) Business Days
after receipt thereof by any Credit Party, copies of all management letters,
exception reports or similar letters or reports received by such Credit Party
from its independent certified public accountants.

 

2

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

(f) Default Notices. To Agent and Lenders, as soon as practicable, and in any
event within five (5) Business Days after an executive officer of any Borrower
has actual knowledge of the existence of any Default, Event of Default or other
event that has had a Material Adverse Effect, telephonic or telecopied notice
specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day.

 

(g) SEC Filings and Press Releases. To Agent and Lenders, promptly upon their
becoming available, copies of: (i) all Financial Statements, reports, notices
and proxy statements made publicly available by any Credit Party to its security
holders; (ii) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by any Credit Party with any securities exchange
or with the Securities and Exchange Commission or any governmental or private
regulatory authority; and (iii) all press releases and other statements made
available by any Credit Party to the public concerning material changes or
developments in the business of any such Person.

 

(h) Supplemental Schedules. To Agent, supplemental disclosures, if any, required
by Section 5.6.

 

(i) Litigation. To Agent in writing, promptly upon learning thereof, notice of
any Litigation commenced or threatened against any Credit Party that (i) seeks
damages in excess of $250,000, (ii) seeks injunctive relief, (iii) is asserted
or instituted against any Plan, its fiduciaries or its assets or against any
Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges
criminal misconduct by any Credit Party, (v) alleges the violation of any law
regarding, or seeks remedies in connection with, any Environmental Liabilities
or (vi) involves any product recall.

 

(j) Insurance Notices. To Agent, disclosure of losses or casualties required by
Section 5.4.

 

(k) Lease Default Notices. To Agent, (i) within two (2) Business Days after
receipt thereof, copies of any and all default notices received under or with
respect to any leased location or public warehouse where Collateral is located,
(ii) monthly within three (3) Business Days after payment thereof, evidence of
payment of lease or rental payments as to each leased or rented location for
which a landlord or bailee waiver has not been obtained (other than Storehouse
retail locations) and (iii) such other notices or documents as Agent may
reasonably request.

 

(l) Lease Amendments. To Agent, within two (2) Business Days after receipt
thereof, copies of all material amendments to real estate leases.

 

(m) Hedging Agreements. To Agent within two (2) Business Days after entering
into such agreement or amendment, copies of all interest rate, commodity or
currency hedging agreements or amendments thereto.

 

(n) Other Documents. To Agent and Lenders, such other financial and other
information respecting any Credit Party’s business or financial condition as
Agent or any Lender shall from time to time reasonably request.

 

3

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

ANNEX F (Section 4.1(b))

to

CREDIT AGREEMENT

 

COLLATERAL REPORTS

 

Borrowers shall deliver or cause to be delivered the following:

 

(a) To Agent, upon its request, and in any event no less frequently than (i) at
any time that the daily average Adjusted Borrowing Availability is at least
$2,500,000 during the immediately three prior Business Days, 12:00 p.m. (New
York time) on Wednesday of each week (prepared as of the prior Friday) and
(ii) at any time that the daily average Borrowing Availability is less than
$2,500,000 during the immediately prior three Business Days, 12:00 p.m. (New
York time) on each Business Day (prepared as of the prior Business Day), in each
case, together with a copy of all or any part of the following reports requested
by any Lender in writing after the Closing Date, each of the following reports:

 

(i) a Borrowing Base Certificate with respect to Borrowers, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;

 

(ii) with respect to Borrowers, a summary of Inventory by location and type with
a supporting perpetual Inventory report, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion; and

 

(iii) with respect to Borrowers, a monthly trial balance showing Accounts
outstanding aged from invoice date as follows: 1 to 30 days, 31 to 60 days, 61
to 90 days and 91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion.

 

Notwithstanding the foregoing, during the first three Business Days immediately
following the Closing Date, each of the above reports shall be delivered to
Agent upon its request, and in any event no less frequently than weekly or
daily, as the case may be, based upon the Adjusted Borrowing Availability as of
the prior Business Day;

 

(b) To Agent, on a weekly basis or at such more frequent intervals as Agent may
request from time to time (together with a copy of all or any part of such
delivery requested by any Lender in writing after the Closing Date), collateral
reports with respect to Borrowers, relating to all additions and reductions
(cash and non-cash) with respect to Accounts of such Borrower, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion each of which shall be prepared by the
Borrowers as of the last day of the immediately preceding week;

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

(c) To Agent, at the time of delivery of each of the monthly Financial
Statements delivered pursuant to Annex E:

 

(i) a reconciliation of the Accounts trial balance of Borrowers to such
Borrower’s most recent Borrowing Base Certificate, general ledger and monthly
Financial Statements delivered pursuant to Annex E, in each case accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;

 

(ii) a reconciliation of the perpetual Inventory by location of Borrowers to
such Borrower’s most recent Borrowing Base Certificate, general ledger and
monthly Financial Statements delivered pursuant to Annex E, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;

 

(iii) an aging of accounts payable and a reconciliation of that accounts payable
aging to Borrowers’ general ledger and monthly Financial Statements delivered
pursuant to Annex E, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion;

 

(iv) a reconciliation of the outstanding Loans as set forth in the monthly Loan
Account statement provided by Agent to Borrowers’ general ledger and monthly
Financial Statements delivered pursuant to Annex E, in each case accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;

 

(d) To Agent, at the time of delivery of each of the quarterly Financial
Statements delivered pursuant to Annex E, (i) a listing of government contracts
of Borrowers subject to the Federal Assignment of Claims Act of 1940; and (ii) a
list of any applications for the registration of any Patent, Trademark or
Copyright filed by any Credit Party with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
the prior Fiscal Quarter;

 

(e) Borrowers, at their own expense, shall deliver to Agent the results of each
physical verification, if any, that any Borrower or any Subsidiary of a Borrower
may in their discretion have made, or caused any other Person to have made on
their behalf, of all or any portion of their Inventory (and, if an Event of
Default has occurred and is continuing, Borrowers shall, upon the request of
Agent, conduct, and deliver the results of, such physical verifications as Agent
may require);

 

(f) Borrowers, at their own expense, shall deliver to Agent such appraisals of
its assets (including, without limitation, Inventory and Real Estate) as Agent
may request at any time (including, without limitation, appraisals of Inventory
on a quarterly basis and appraisals of Real Estate on a semi-annual basis, or,
in each case, on a more frequent basis, as requested by the Agent in its sole
discretion, at any time that Adjusted Borrowing Availability is less than
$2,500,000), such appraisals to be conducted by an appraiser, and in form and
substance reasonably satisfactory to Agent;

 

(g) Until the Borrowers’ receipt of net cash proceeds from an equity investment
of not less than $10,000,000 pursuant Section 5.14, to the Agent, on Wednesday
of each week, (i)

 

2

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

projections of the cash flows of Rowe Companies and its Subsidiaries and
(ii) projections of Borrowing Availability, in each case, for the immediately
succeeding eight weeks and consistent with the Pro Forma delivered on the
Closing Date; and

 

(h) Such other reports, statements and reconciliations with respect to the
Borrowing Base, Collateral or Obligations of any or all Credit Parties as Agent
shall from time to time request in its reasonable discretion.

 

3

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

ANNEX G (Section 6.10)

to

CREDIT AGREEMENT

 

FINANCIAL COVENANTS

 

Borrowers shall not breach or fail to comply with any of the following financial
covenants, each of which shall be calculated in accordance with GAAP
consistently applied:

 

(a) Maximum Capital Expenditures. Borrowers and their Subsidiaries on a
consolidated basis shall not make Capital Expenditures during the following
periods that exceed in the aggregate the amounts set forth opposite each of such
periods:

 

Period

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

  

Maximum Capital

Expenditures

per Period

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

Fiscal Year 2006

   $ 7,900,000

Fiscal Year 2007

   $ 12,900,000

Fiscal Year 2008

   $ 15,000,000

 

;provided, however, that the amount of permitted Capital Expenditures referenced
above will be increased in any period by the positive amount equal to the lesser
of (i) 50% of the amount of permitted Capital Expenditures for the immediately
prior period, and (ii) the amount (if any), equal to the difference obtained by
taking the Capital Expenditures limit specified above for the immediately prior
period minus the actual amount of any Capital Expenditures expended during such
prior period (the “Carry Over Amount”), and for purposes of measuring compliance
herewith, the Carry Over Amount shall be deemed to be the last amount spent on
Capital Expenditures in that succeeding year.

 

(b) Minimum Fixed Charge Coverage Ratio. At any time during any Fiscal Quarter
during which the Minimum Borrowing Availability Amount is less than $9,000,000,
Borrowers and their Subsidiaries shall have on a consolidated basis, determined
as of the end of the most recently ended Fiscal Quarter, a Fixed Charge Coverage
Ratio for the 12-month period then ended of not less than 1.1:1.0:

 

(c) Minimum Borrowing Availability. Borrowers shall maintain Borrowing
Availability of not less than $9,000,000 (the “Minimum Borrowing Availability
Amount’) at all times; provided that, (i) the Minimum Borrowing Availability
Amount shall be reduced to $8,000,000 upon the Borrowers’ receipt of net cash
proceeds from an equity investment of not less than $10,000,000 pursuant
Section 5.14; and provided further that, from and after September 30, 2006,
(i) the Borrowers may reduce the Minimum Borrowing Availability Amount to
$3,000,000 so long as (A) the Agent consents to such reduction in its sole
discretion and (B) the Borrowers comply with the minimum Fixed Charge Coverage
Ratio set forth in paragraph (b) above at all times and (ii) the Borrower may
reduce the Minimum Borrowing Availability

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

Amount to $0 so long as (A) the Agent consents to such reduction in its sole
discretion and (B) the Borrowers and their Subsidiaries shall have on a
consolidated basis, a Fixed Charge Coverage Ratio of not less than 1.2:1.0,
determined as at the end of the most recently ended two (2) consecutive Fiscal
Quarters (measured for the 12-month period ending on each such Fiscal Quarter
end date); provided that, in the event that the Borrowers reduce the Minimum
Borrowing Availability Amount to $0 pursuant to this clause (ii), (A) the
Borrowers shall comply with the minimum Fixed Charge Coverage Ratio set forth in
this clause (ii) at all times and (B) the advance rate of net orderly
liquidation value of Eligible Inventory consisting of finished goods contained
in the definition of Borrowing Base shall be automatically and permanently
reduced to 85% without further consent or other action by any party to the
Agreement; and provided further that the Borrowers may not elect to change the
Minimum Borrowing Availability Amount more than once in any 365 day period.

 

Unless otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied. That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing. If any “Accounting Changes” (as defined below)
occur and such changes result in a change in the calculation of the financial
covenants, standards or terms used in the Agreement or any other Loan Document,
then Borrowers, Agent and Lenders agree to enter into negotiations in order to
amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrowers’ and their Subsidiaries’ financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
“Accounting Changes” means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions),
(ii) changes in accounting principles concurred in by any Borrower’s certified
public accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17
and EITF 88-16, and the application of the accounting principles set forth in
FASB 109, including the establishment of reserves pursuant thereto and any
subsequent reversal (in whole or in part) of such reserves; and (iv) the
reversal of any reserves established as a result of purchase accounting
adjustments. All such adjustments resulting from expenditures made subsequent to
the Closing Date (including capitalization of costs and expenses or payment of
pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made and deducted as part of the calculation of EBITDA in such
period. If Agent, Borrowers and Requisite Lenders agree upon the required
amendments, then after appropriate amendments have been executed and the
underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in the Agreement or in any other Loan Document
shall, only to the extent of such Accounting Change, refer to GAAP, consistently
applied after giving effect to the implementation of such Accounting Change. If
Agent, Borrowers and Requisite Lenders cannot agree upon the required amendments
within thirty (30) days following the date of implementation of any Accounting
Change, then all Financial Statements delivered and all calculations of
financial covenants and other standards and terms in accordance with the
Agreement and the other Loan Documents shall be prepared, delivered and made
without regard to the underlying Accounting Change. For purposes of

 

2

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

Section 8.1, a breach of a Financial Covenant contained in this Annex G shall be
deemed to have occurred as of any date of determination by Agent or as of the
last day of any specified measurement period, regardless of when the Financial
Statements reflecting such breach are delivered to Agent.

 

3

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

ANNEX H (Section 9.9(a))

to

CREDIT AGREEMENT

 

WIRE TRANSFER INFORMATION

 

Name:   General Electric Capital Corporation Bank:   Deutsche Bank Trust Company
Americas     New York, New York ABA #:     Account #:     Account Name:    
Reference:    

 

ANNEX I (Section 11.10)

to

CREDIT AGREEMENT

 

NOTICE ADDRESSES

 

(A) If to Agent or GE Capital, at

General Electric Capital Corporation

201 Merritt 7, 3rd Floor

Norwalk, CT 06851

Attention: James Bravyak, Account Manager

Telecopier No.: (203) 956-4002

Telephone No.: (203) 956-4413

 

with copies to:

 

Bingham McCutchen LLP

150 Federal Street

Boston, MA 02110

Attention: Matthew F. Furlong, Esq.

Telecopier No.: (617) 951-8736

Telephone No.: (617) 951-8904

 

and

 

General Electric Capital Corporation

201 Merritt 7, 3rd Floor

Norwalk, CT 06851

Attention: Corporate Counsel - Corporate Lending

Telecopier No.: (203) 956-4001

Telephone No.: (203) 956-4383

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

(B) If to any Borrower or any other Credit Party, to Borrower Representative, at

 

The Rowe Companies

2121 Gardner Street

Elliston, VA 24087

Attention: Garry W. Angle

Telecopier No.: (540) 444-5077

Telephone No.: (540) 444-5075

 

with copies to:

 

Silver, Freedman & Taff, L.L.P.

1700 Wisconsin Avenue, NW

Washington, D.C. 20007

Attention: Steven M. Abramson

Telecopier No.: (202) 295-4510

Telephone No.: (202) 337-5502

 

(C) If to Tranche B Lender, at

 

General Electric Capital Corporation

201 Merritt 7, 3rd Floor

Norwalk, CT 06851

Attention: James Bravyak, Account Manager

Telecopier No.: (203) 956-4002

Telephone No.: (203) 956-4413

 

with copies to:

 

Bingham McCutchen LLP

150 Federal Street

Boston, MA 02110

Attention: Matthew F. Furlong, Esq.

Telecopier No.: (617) 951-8736

Telephone No.: (617) 951-8904

 

2

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

ANNEX J (from Annex A - Commitments definition)

to

CREDIT AGREEMENT

 

      

Lender(s)

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

Revolving Loan Commitment

     General Electric Capital Corporation

(including a Swing Line Commitment of $5,000,000)

      

$50,000,000

      

Tranche B Loan Commitment:

     General Electric Capital Corporation

$7,000,000

      

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

Exhibit 1.1(a)(i)

 

The Rowe Companies

 

Rowe Furniture, Inc.

 

Storehouse, Inc.

 

Combined Notice of Revolving Credit Advance and Collateral Activity Report -
(A/R Only Rollforward)

 

Capitalized terms used herein which are defined in the Credit Agreement dated as
of December     , 2005 (the "Credit Agreement") among the undersigned Borrower
Representative, the other Borrowers named therein, the other Credit Parties
named therein, General Electric Capital Corporation for itself and as Agent for
the other Lenders party thereto from time to time and the other Lenders shall
have the meanings therein defined. The undersigned Borrower Representative
hereby certifies that on the date hereof and on the borrowing date set forth
below, and after giving effect to the Loans requested hereby: (i) there exists
and there shall exist no Default or Event of Default under the Credit Agreement;
(ii) the proceeds of the Revolving Credit Advances will be used in accordance
with Section 1.4 of the Credit Agreement; and (iii) each of the representations
and warranties contained in the Credit Agreement and the other Loan Documents
shall be true an correct.

 

Client and Address    The Rowe Companies    Name of Contact    Garry Angle   
Phone   (540) 444-7693     

1650 Tyson Blvd.,

Suite 710 McLean, VA 22102

             Fax   (540) 444-5075 Bank    Bank of America    Wire Information   
     ABA#     Address    New York, NY              Acct#     Bank Contact     
                  

 

Request Date                         Index Rate Loan Amount $
                LIBOR Loan Amount $                 LIBOR Period:         
months

 

Collateral Availability Information

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

                   

Gross A/R Balance (from previous request dated MM/DD/YY)

        $                  —                        

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

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

           

Plus: Sales (from MM/DD/YY to MM/DD/YY)

   +    $ —                        

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

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

           

Minus: Cash Receipts Applied (MM/DD/YY)

   -    $ —                        

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

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

           

Minus: Credit Memos (from MM/DD/YY to MM/DD/YY)

   -    $ —                        

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

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

           

Minus: Discounts (from MM/DD/YY to MM/DD/YY)

   -    $ —                        

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

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

           

Plus/Minus: Other Debits/Credits (from MM/DD/YY to MM/DD/YY)

   +/-    $ —                        

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

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

           

Explanation                                         
                                             

                       

A/R Balance (as of MM/DD/YY)

        $ —                        

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

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

           

Less: Ineligibles (Borrowing Base Certificate dated MM/DD/YY)

   -    $ —                        

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

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

           

Eligible A/R

        $ —                        

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

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

            Available A/R Advance rate 85%                D    $
                —                        

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

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

Inventory Availability (B from Borrowing Base Certificate)

               E    $ —                        

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

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

Other Availability (C from Borrowing Base Certificate)

               F    $ —                        

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

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

D + E + F                G    $ —                        

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

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

Less: Collateral Reserves                H    $ —                        

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

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

G-H                I    $ —                        

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

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

Total Available: Lesser of: Line I or Total Credit Line                     $
—                        

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

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

Less: Revolver (J)

               -    $ —                        

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

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

Less: Outstanding Letters of Credit

               -    $ —                        

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

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

Less: Reserves (                            )

               -    $ —                        

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

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

(                            )

               -    $ —                        

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

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

Excess Availability                     $ —                        

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

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

Loan Balance

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

                   

Revolver Balance (Line H From Last Request Dated MM/DD/YY)

        $ —                        

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

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

           

Minus: Deposit Sweep From Last to Current Request

   -    $ —                        

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

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

           

Plus: Current Amount Requested (From Above)

   +    $ —                        

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

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

           

Plus: Interest/Other (From MM/DD/YY to MM/DD/YY)

   +    $ —                        

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

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

           

Minus: Other (From MM/DD/YY to MM/DD/YY)

   -    $ —                        

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

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

           

Revolver Balance After Advance

               J    $ —                        

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

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

 

Borrower Representative has caused this Request to be executed by its duly
authorized officer as of the date and year first written above.

 

Borrower Representative certifies that the Advance herein requested is for the
separate accounts of the following Borrowers in the following respective
amounts: Rowe Companies $            , Rowe Furniture $            , Storehouse
$            .

 

Authorizations        Phone   Fax Requested by:   

 

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

 

    (###) ###-####    

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

 

    (###) ###-####    

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

     Duly Authorized Signatory                        Fax to: Vicki
Holmes-Sells, GE Capital (203) 229-5789; Phone: (203) 229-5811

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

EXHIBIT 1.1(a)(ii)

to

CREDIT AGREEMENT

 

FORM OF REVOLVING NOTE

 

New York, New York

 

$         ,        ,                                    , 200  

 

FOR VALUE RECEIVED, the undersigned, THE ROWE COMPANIES, a Nevada corporation,
ROWE FURNITURE, INC., a Virginia corporation, and STOREHOUSE, INC., a Georgia
corporation (collectively, the “Borrowers”), HEREBY JOINTLY AND SEVERALLY
PROMISE TO PAY to the order of                                         
            (“Lender”), at the offices of GENERAL ELECTRIC CAPITAL CORPORATION,
a Delaware corporation, as Agent for Lenders (“Agent”), at its address at 201
Merritt 7, Norwalk, CT 06851, or at such other place as Agent may designate from
time to time in writing, in lawful money of the United States of America and in
immediately available funds, the amount of
                                                      DOLLARS AND
                     CENTS ($        ,        ,        ) or, if less, the
aggregate unpaid amount of all Revolving Credit Advances made to the undersigned
under the Credit Agreement (as hereinafter defined). All capitalized terms used
but not otherwise defined herein have the meanings given to them in the Credit
Agreement or in Annex A thereto.

 

This Revolving Note is one of the Revolving Notes issued pursuant to that
certain Credit Agreement dated as of January 6, 2006 by and among Borrowers, the
other Persons named therein as Credit Parties, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including all annexes,
exhibits and schedules thereto, and as from time to time amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), and is entitled to
the benefit and security of the Credit Agreement, the Security Agreement and all
of the other Loan Documents referred to therein. Reference is hereby made to the
Credit Agreement for a statement of all of the terms and conditions under which
the Loans evidenced hereby are made and are to be repaid. The date and amount of
each Revolving Credit Advance made by Lenders to Borrowers, the rates of
interest applicable thereto and each payment made on account of the principal
thereof, shall be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the obligations of Borrowers
to make a payment when due of any amount owing under the Credit Agreement or
this Revolving Note in respect of the Revolving Credit Advances made by Lender
to Borrowers.

 

The principal amount of the indebtedness evidenced hereby shall be payable in
the amounts and on the dates specified in the Credit Agreement, the terms of
which are hereby incorporated herein by reference. Interest thereon shall be
paid until such principal amount is paid in full at such interest rates and at
such times, and pursuant to such calculations, as are specified in the Credit
Agreement.

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

If any payment on this Revolving Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.

 

Upon and after the occurrence of any Event of Default, this Revolving Note may,
as provided in the Credit Agreement, and without demand, notice or legal process
of any kind, be declared, and immediately shall become, due and payable.

 

Time is of the essence of this Revolving Note. Demand, presentment, protest and
notice of nonpayment and protest are hereby waived by Borrowers.

 

Except as provided in the Credit Agreement, this Revolving Note may not be
assigned by Lender to any Person.

 

THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE.

 

2

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

THE ROWE COMPANIES By:  

 

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

Name:  

 

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

Title:  

 

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

ROWE FURNITURE, INC. By:  

 

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

Name:  

 

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

Title:  

 

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

STOREHOUSE, INC. By:  

 

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

Name:  

 

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

Title:  

 

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

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

EXHIBIT 1.1(b)

to

CREDIT AGREEMENT

 

FORM OF TRANCHE B NOTE

 

New York, New York

 

$        ,        ,                                    , 200  

 

FOR VALUE RECEIVED, the undersigned, THE ROWE COMPANIES, a Nevada corporation,
ROWE FURNITURE, INC., a Virginia corporation, and STOREHOUSE, INC., a Georgia
corporation (collectively, the “Borrowers”), HEREBY JOINTLY AND SEVERALLY
PROMISE TO PAY to the order of                                         
             (“Lender”) at the offices of GENERAL ELECTRIC CAPITAL CORPORATION,
a Delaware corporation, as Agent for Lenders (“Agent”), at its address at 201
Merritt 7, Norwalk, CT 06851, or at such other place as Agent may designate from
time to time in writing, in lawful money of the United States of America and in
immediately available funds, the amount of
                                                      DOLLARS AND
                     CENTS ($        ,        ,        ). All capitalized terms
used but not otherwise defined herein have the meanings given to them in the
Credit Agreement (as hereinafter defined) or in Annex A thereto.

 

This Tranche B Note is one of the Tranche B Notes issued pursuant to that
certain Credit Agreement dated as of January 6, 2006 by and among Borrowers, the
other Persons named therein as Credit Parties, Agent, Lender and the other
Persons signatory thereto from time to time as Lenders (including all annexes,
exhibits and schedules thereto and as from time to time amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), and is entitled to
the benefit and security of the Credit Agreement, the Security Agreement and all
of the other Loan Documents referred to therein. Reference is hereby made to the
Credit Agreement for a statement of all of the terms and conditions under which
the Loans evidenced hereby are made and are to be repaid. The principal balance
of the Tranche B Loan, the rates of interest applicable thereto and the date and
amount of each payment made on account of the principal thereof, shall be
recorded by Agent on its books; provided that the failure of Agent to make any
such recordation shall not affect the obligations of Borrowers to make a payment
when due of any amount owing under the Credit Agreement or this Tranche B Note.

 

The principal amount of the indebtedness evidenced hereby shall be payable in
the amounts and on the dates specified in the Credit Agreement. Interest thereon
shall be paid until such principal amount is paid in full at such interest rates
and at such times, and pursuant to such calculations, as are specified in the
Credit Agreement. The terms of the Credit Agreement are hereby incorporated
herein by reference.

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

If any payment on this Tranche B Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.

 

Upon and after the occurrence of any Event of Default, this Tranche B Note may,
as provided in the Credit Agreement, and without demand, notice or legal process
of any kind, be declared, and immediately shall become, due and payable.

 

Time is of the essence of this Tranche B Note. Demand, presentment, protest and
notice of nonpayment and protest are hereby waived by Borrowers.

 

Except as provided in the Credit Agreement, this Tranche B Note may not be
assigned by Lender to any Person.

 

THIS TRANCHE B NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE.

 

2

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

THE ROWE COMPANIES By:  

 

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

Name:  

 

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

Title:  

 

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

ROWE FURNITURE, INC. By:  

 

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

Name:  

 

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

Title:  

 

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

STOREHOUSE, INC. By:  

 

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

Name:  

 

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

Title:  

 

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

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

EXHIBIT 1.1(c)(ii)

to

CREDIT AGREEMENT

 

FORM OF SWING LINE NOTE

 

New York, New York

 

$         ,        ,                                    , 200  

 

FOR VALUE RECEIVED, the undersigned, THE ROWE COMPANIES, a Nevada corporation,
ROWE FURNITURE, INC., a Virginia corporation, and STOREHOUSE, INC., a Georgia
corporation (collectively, the “Borrowers”), HEREBY JOINTLY AND SEVERALLY
PROMISE TO PAY to the order of                                         
             (“Swing Line Lender”), at the offices of GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation, as Agent for Lenders (“Agent”), at its
address at 201 Merritt 7, Norwalk, CT 06851, or at such other place as Agent may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the amount of
                                                      DOLLARS AND
                     CENTS ($        ,        ,        ) or, if less, the
aggregate unpaid amount of all Swing Line Advances made to the undersigned under
the Credit Agreement (as hereinafter defined). All capitalized terms used but
not otherwise defined herein have the meanings given to them in the Credit
Agreement or in Annex A thereto.

 

This Swing Line Note is issued pursuant to that certain Credit Agreement dated
as of January 6, 2006 by and among Borrowers, the other Persons named therein as
Credit Parties, Agent, Swing Line Lender and the other Persons signatory thereto
from time to time as Lenders (including all annexes, exhibits and schedules
thereto, and as from time to time amended, restated, supplemented or otherwise
modified, the “Credit Agreement”), and is entitled to the benefit and security
of the Credit Agreement, the Security Agreement and all of the other Loan
Documents referred to therein. Reference is hereby made to the Credit Agreement
for a statement of all of the terms and conditions under which the Loans
evidenced hereby are made and are to be repaid. The date and amount of each
Swing Line Advance made by Swing Line Lender to Borrowers, the rates of interest
applicable thereto and each payment made on account of the principal thereof,
shall be recorded by Agent on its books; provided that the failure of Agent to
make any such recordation shall not affect the obligations of Borrowers to make
a payment when due of any amount owing under the Credit Agreement or this Swing
Line Note in respect of the Swing Line Advances made by Swing Line Lender to
Borrowers.

 

The principal amount of the indebtedness evidenced hereby shall be payable in
the amounts and on the dates specified in the Credit Agreement, the terms of
which are hereby incorporated herein by reference. Interest thereon shall be
paid until such principal amount is paid in full at such interest rates and at
such times, and pursuant to such calculations, as are specified in the Credit
Agreement.

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

If any payment on this Swing Line Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.

 

Upon and after the occurrence of any Event of Default, this Swing Line Note may,
as provided in the Credit Agreement, and without demand, notice or legal process
of any kind, be declared, and immediately shall become, due and payable.

 

Time is of the essence of this Swing Line Note. Demand, presentment, protest and
notice of nonpayment and protest are hereby waived by Borrowers.

 

Except as provided in the Credit Agreement, this Swing Line Note may not be
assigned by Swing Line Lender to any Person.

 

THIS SWING LINE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE.

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

THE ROWE COMPANIES By:  

 

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

Name:  

 

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

Title:  

 

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

ROWE FURNITURE, INC. By:  

 

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

Name:  

 

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

Title:  

 

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

STOREHOUSE, INC. By:  

 

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

Name:  

 

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

Title:  

 

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

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

EXHIBIT 1.5(e)

to

CREDIT AGREEMENT

 

FORM OF NOTICE OF CONVERSION/CONTINUATION

 

Reference is made to that certain Credit Agreement, dated as of January 6, 2006,
(including all annexes, exhibits or schedules thereto, and as from time to time
amended, restated, supplemented or otherwise modified, the “Credit Agreement”),
by and among the undersigned (the “Borrower Representative”), the other
Borrowers signatory thereto, the other Credit Parties signatory thereto, General
Electric Capital Corporation (the “Agent”) and the Lenders from time to time
signatory thereto. Capitalized terms used herein without definition shall have
the meanings set forth in the Credit Agreement or in Annex A thereto.

 

Borrower Representative hereby gives irrevocable notice, pursuant to
Section 1.5(e) of the Credit Agreement, of its request to:

 

[(a) on [            ] convert $[            ] of the aggregate outstanding
principal amount of the [Revolving Loans] [Tranche B Loan] bearing interest at
the [LIBOR] [Index] Rate, into a(n) [            ] Loan [and, in the case of a
LIBOR Loan, having a LIBOR Period of [1][2][3] month(s)];]

 

[(b) on [            ] continue $[            ] of the aggregate outstanding
principal amount of the [Revolving Loans] [Tranche B Loan] bearing interest at
the LIBOR Rate, as a LIBOR Loan having a LIBOR Period of [1][2][3] month(s)].

 

Borrower Representative certifies that the conversion and/or continuation of the
Loans requested above is for the separate account(s) of the following Borrowers
in the following [respective] amount[s]: The Rowe Companies:
[$                    ], Rowe Furniture, Inc. [$                    ] and
Storehouse, Inc. [$                    ].

 

Borrower Representative hereby represents and warrants that all of the
conditions contained in Section 2.2 of the Credit Agreement have been satisfied
on and as of the date hereof, and will continue to be satisfied on and as of the
date of the conversion/continuation requested hereby, before and after giving
effect thereto; and (ii) reaffirms the cross-guaranty provisions set forth in
Section 12 of the Credit Agreement and the guaranty and continuance of Agent’s
Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.

 

[Signature Page Follows]

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

IN WITNESS WHEREOF, Borrower Representative has caused this Notice of
Conversion/Continuation to be executed and delivered on behalf of the Borrowers
specified above by Borrower Representative’s duly authorized officer as of the
date first set forth above.

 

THE ROWE COMPANIES as Borrower Representative By:  

 

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

Title  

 

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

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

Exhibit 4.1(b)

Form of Borrowing Base Certificate

 

THE ROWE COMPANIES

REVOLVING LINE OF CREDIT AVAILABILITY CALCULATION AT COST

01/00/00

 

     Consolidated

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

Eligible Accounts (Worksheet 1)

   $ 0                  

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

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

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

     

Advance Rate

                   85 %                

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

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

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

     

Available Accounts

           $ 0                  

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

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

Eligible Raw Material Inventory at Cost (Worksheet 2)

   $ 0                  

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

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

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

     

Net Orderly Liquidation Value (Appraisal Report As Of 12/15/2005)

     23.1 %                

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

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

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

     

Advance Rate

     20 %                

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

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

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

     

Available Inventory

           $ 0                  

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

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

Eligible Work In Process Inventory at Cost (Worksheet 2)

   $ 0                  

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

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

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

     

Net Orderly Liquidation Value (Appraisal Report As Of 12/15/2005)

     56.0 %                

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

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

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

     

Advance Rate

     48 %                

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

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

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

     

Available Inventory

           $ 0                  

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

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

Eligible Manufacturing Finished Goods Inventory at Cost (Worksheet 2)

   $ 0                  

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

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

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

     

Net Orderly Liquidation Value (Appraisal Report As Of 12/15/2005)

     74.5 %                

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

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

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

     

Advance Rate

     69 %                

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

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

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

     

Available Inventory

           $ 0                  

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

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

Eligible Retail Finished Goods Inventory at Cost (Worksheet 3)

   $ 0                  

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

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

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

     

Net Orderly Liquidation Value (Appraisal Report As Of 12/15/2005)

     78.3 %                

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

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

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

     

Advance Rate

     72 %                

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

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

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

     

Available Inventory

           $ 0                  

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

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

Eligible Life Insurance Policies Net Cash Surrender Value (Exhibit 1)

   $ 0                  

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

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

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

     

Advance Rate

     90 %                

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

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

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

     

Available Life Insurance (Capped at $2MM)

           $ 0                  

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

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

Eligible Owned Real Estate (Exhibit 2) (Appraisal Report As Of 12/02/2005)

   $ 0                  

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

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

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

     

Advance Rate

     50 %                

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

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

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

     

Available Owner Real Estate

           $ 0                  

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

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

Borrowing Base Before Reserves

           $ 0                  

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

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

Reserves

              

Less: Loan To Value Reserve (Exhibit 3)

   $ 0                  

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

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

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

     

Customer Deposit Reserve (Exhibit 4)

   $ 0                  

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

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

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

     

Rent (Exhibit 5)

   $ 0                  

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

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

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

     

Gift Certificates (50%)

   $ 0                  

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

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

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

     

Freight & Duty Reserve

   $ 0                  

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

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

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

     

Other

   $ 0                  

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

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

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

     

Total Reserves

           $ 0                  

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

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

BORROWING BASE BEFORE CAP

           $ 0                  

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

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

BORROWING BASE CAP

           $ 50,000,000                  

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

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

BORROWING BASE

           $ 0                  

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

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

Less: Standby Letters Of Credit @ 100% Face

   $ 0                  

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

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

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

     

Documentary Letters Of Credit @ 100% Face

   $ 0                  

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

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

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

     

Total Letters Of Credit

           $ 0                  

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

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

Borrowing Base After Loan Payoffs

           $ 0

Revolver Loan (Excluding Letters Of Credit) And Swingline Loan Balance As Of
1/0/1900

           $ 0                  

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

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

EXCESS REVOLVER AVAILABILITY

           $ 0                  

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

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

Tranche B Facility Availability

   $ 0                  

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

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

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

     

Tranche B Facility Outstandings

           $ 0                  

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

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

Net Available Tranche B Facility As Of 1/0/1900

           $ 0                  

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

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

EXCESS AVAILABILITY

           $ 0                  

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

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

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

EXHIBIT 9.1(a)

to

CREDIT AGREEMENT

 

FORM OF ASSIGNMENT AGREEMENT

 

This Assignment Agreement (this “Agreement”) is made as of                     
    ,          by and between                                         
             (“Assignor Lender”) and                                         
             (“Assignee Lender”) and acknowledged and consented to by GENERAL
ELECTRIC CAPITAL CORPORATION, as agent (“Agent”). All capitalized terms used in
this Agreement and not otherwise defined herein will have the respective
meanings set forth in the Credit Agreement as hereinafter defined or in Annex A
thereto.

 

RECITALS:

 

WHEREAS, The Rowe Companies, a Nevada corporation, Rowe Furniture, Inc. a
Virginia corporation, and Storehouse, Inc., a Georgia corporation, the other
Persons named therein as Credit Parties, Agent, Assignor Lender and other
Persons signatory thereto as Lenders have entered into that certain Credit
Agreement dated as of January 6, 2006 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”) pursuant to which
Assignor Lender has [agreed to make] [made] certain Loans to[, and incur certain
Letter of Credit Obligations for,] Borrowers;

 

WHEREAS, Assignor Lender desires to assign to Assignee Lender [all/a portion] of
its interest in the Loans (as described below)[, the Letter of Credit
Obligations] and the Collateral and to delegate to Assignee Lender [all/a
portion] of its Commitments and other duties with respect to such Loans[, Letter
of Credit Obligations] and Collateral;

 

WHEREAS, Assignee Lender desires to become a Lender under the Credit Agreement
and to accept such assignment and delegation from Assignor Lender; and

 

WHEREAS, Assignee Lender desires to appoint Agent to serve as agent for Assignee
Lender under the Credit Agreement.

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions,
and covenants herein contained, Assignor Lender and Assignee Lender agree as
follows:

 

1. ASSIGNMENT, DELEGATION, AND ACCEPTANCE.

 

1.1 Assignment. Assignor Lender hereby transfers and assigns to Assignee Lender,
without recourse and without representations or warranties of any kind (except
as set forth in Section 3.2), [all/such percentage] of Assignor Lender’s right,
title, and interest in [the Revolving Loan], [the Tranche B Loan], [the Swing
Line Loan], [Letter of Credit Obligations], Loan Documents and Collateral as
will result in Assignee Lender having as of the Effective Date (as hereinafter
defined) a Pro Rata Share thereof, as follows:

 

Assignee Lender’s Loans

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

   Principal Amount

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

   Pro Rata Share

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

 

[Revolving Loan]

   $                                      %

[Tranche B Loan]

   $                                      %

[Swing Line Loan]

   $                                      %

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

1.2 Delegation. Assignor Lender hereby irrevocably assigns and delegates to
Assignee Lender [all/a portion] of its Commitments and its other duties and
obligations as a Lender under the Loan Documents [equivalent to [100%/        %]
of Assignor Lender’s Revolving Loan Commitment (such percentage representing a
commitment of $                     ),] [[100%/        %] of Assignor Lender’s
Tranche B Loan Commitment (such percentage representing a commitment of $
                    ),] and [[100%/        %] of Assignor Lender’s Swing Line
Commitment (such percentage representing a commitment of $
                    )].

 

1.3 Acceptance by Assignee Lender. By its execution of this Agreement, Assignee
Lender irrevocably purchases, assumes and accepts such assignment and delegation
and agrees to be a Lender with respect to the delegated interest under the Loan
Documents and to be bound by the terms and conditions thereof. By its execution
of this Agreement, Assignor Lender agrees, to the extent provided herein, to
relinquish its rights and be released from its obligations and duties under the
Credit Agreement.

 

1.4 Effective Date. Such assignment and delegation by Assignor Lender and
acceptance by Assignee Lender will be effective and Assignee Lender will become
a Lender under the Loan Documents as of                          ,         
(“Effective Date”) and upon consent of the Agent and, if required pursuant to
the terms of the Credit Agreement, Borrower Representative and payment of the
Assigned Amount and the Assignment Fee (as each term is defined below).
[Interest and Fees accrued prior to the Effective Date are for the account of
Assignor Lender, and Interest and Fees accrued from and after the Effective Date
are for the account of Assignee Lender.]

 

2. INITIAL PAYMENT AND DELIVERY OF NOTES

 

2.1 Payment of the Assigned Amount. Assignee Lender will pay to Assignor Lender,
in immediately available funds, not later than 12:00 noon (New York time) on the
Effective Date, an amount equal to its Pro Rata Share of the then outstanding
principal amount of the Loans as set forth above in Section 1.1 [together with
accrued interest, fees and other amounts as set forth on Schedule 2.1] (the
“Assigned Amount”).

 

2.2 Payment of Assignment Fee. [Assignor Lender and/or Assignee Lender] will pay
to Agent, for its own account in immediately available funds, not later than
12:00 noon (New York time) on the Effective Date, the assignment fee in the
amount of $3,500 (the “Assignment Fee”) as required pursuant to Section 9.1(a)
of the Credit Agreement.

 

2.3 Execution and Delivery of Notes. Following payment of the Assigned Amount
and the Assignment Fee, Assignor Lender will deliver to Agent the Notes
previously delivered to Assignor Lender for redelivery to Borrowers and Agent
will obtain from Borrowers for delivery

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

to [Assignor Lender and] Assignee Lender, new executed Notes evidencing Assignee
Lender’s [and Assignor Lender’s respective] Pro Rata Share[s] in the Loans after
giving effect to the assignment described in Section 1. Each new Note will be
issued in the aggregate maximum principal amount of the [applicable] Commitment
[of the Lender to whom such Note is issued] OR [the Assignee Lender].

 

3. REPRESENTATIONS, WARRANTIES AND COVENANTS

 

3.1 Assignee Lender’s Representations, Warranties and Covenants. Assignee Lender
hereby represents, warrants, and covenants the following to Assignor Lender and
Agent:

 

(a) This Agreement is a legal, valid, and binding agreement of Assignee Lender,
enforceable according to its terms;

 

(b) The execution and performance by Assignee Lender of its duties and
obligations under this Agreement and the Loan Documents will not require any
registration with, notice to, or consent or approval by any Governmental
Authority;

 

(c) Assignee Lender is familiar with transactions of the kind and scope
reflected in the Loan Documents and in this Agreement;

 

(d) Assignee Lender has made its own independent investigation and appraisal of
the financial condition and affairs of each Credit Party, has conducted its own
evaluation of the Loans and Letter of Credit Obligations, the Loan Documents and
each Credit Party’s creditworthiness, has made its decision to become a Lender
to Borrowers under the Credit Agreement independently and without reliance upon
Assignor Lender or Agent, and will continue to do so;

 

(e) Assignee Lender is entering into this Agreement in the ordinary course of
its business, and is acquiring its interest in the Loans and [Letter of Credit
Obligations] for its own account and not with a view to or for sale in
connection with any subsequent distribution; provided, however, that at all
times the distribution of Assignee Lender’s property shall, subject to the terms
of the Credit Agreement, be and remain within its control;

 

(f) No future assignment or participation granted by Assignee Lender pursuant to
Section 9.1 of the Credit Agreement will require Assignor Lender, Agent, or
Borrower to file any registration statement with the Securities and Exchange
Commission or to apply to qualify under the blue sky laws of any state;

 

(g) Assignee Lender has no loans to, written or oral agreements with, or equity
or other ownership interest in any Credit Party;

 

(h) Assignee Lender will not enter into any written or oral agreement with, or
acquire any equity or other ownership interest in, any Credit Party without the
prior written consent of Agent; and

 

(i) As of the Effective Date, Assignee Lender (i) is entitled to receive
payments of principal and interest in respect of the Obligations without
deduction for or on

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account of any taxes imposed by the United States of America or any political
subdivision thereof, (ii) is not subject to capital adequacy or similar
requirements under Section 1.16(a) of the Credit Agreement, (iii) does not
require the payment of any increased costs under Section 1.16(b) of the Credit
Agreement, and (iv) is not unable to fund LIBOR Loans under Section 1.16(c) of
the Credit Agreement, and Assignee Lender will indemnify Agent from and against
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, or expenses that result from Assignee Lender’s failure to fulfill
its obligations under the terms of Section 1.15(c) of the Credit Agreement or
from any other inaccuracy in the foregoing.

 

3.2 Assignor Lender’s Representations, Warranties and Covenants. Assignor Lender
hereby represents, warrants and covenants the following to Assignee Lender:

 

(a) Assignor Lender is the legal and beneficial owner of the Assigned Amount;

 

(b) This Agreement is a legal, valid and binding agreement of Assignor Lender,
enforceable according to its terms;

 

(c) The execution and performance by Assignor Lender of its duties and
obligations under this Agreement and the Loan Documents will not require any
registration with, notice to or consent or approval by any Governmental
Authority;

 

(d) Assignor Lender has full power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill the obligations
hereunder and to consummate the transactions contemplated hereby;

 

(e) Assignor Lender is the legal and beneficial owner of the interests being
assigned hereby, free and clear of any adverse claim, lien, encumbrance,
security interest, restriction on transfer, purchase option, call or similar
right of a third party; and

 

(f) This Assignment by Assignor Lender to Assignee Lender complies, in all
material respects, with the terms of the Loan Documents.

 

4. LIMITATIONS OF LIABILITY

 

Neither Assignor Lender (except as provided in Section 3.2) nor Agent makes any
representations or warranties of any kind, nor assumes any responsibility or
liability whatsoever, with regard to (a) the Loan Documents or any other
document or instrument furnished pursuant thereto or the Loans, Letter of Credit
Obligations or other Obligations, (b) the creation, validity, genuineness,
enforceability, sufficiency, value or collectibility of any of them, (c) the
amount, value or existence of the Collateral, (d) the perfection or priority of
any Lien upon the Collateral, or (e) the financial condition of any Credit Party
or other obligor or the performance or observance by any Credit Party of its
obligations under any of the Loan Documents. Neither Assignor Lender nor Agent
has or will have any duty, either initially or on a continuing basis, to make
any investigation, evaluation, appraisal of, or any responsibility or liability
with respect to the accuracy or completeness of, any information provided to
Assignee Lender which has been provided to Assignor Lender or Agent by any
Credit Party. Nothing in this Agreement or in the Loan Documents shall impose
upon the Assignor Lender or Agent any fiduciary relationship in respect of the
Assignee Lender.

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

5. FAILURE TO ENFORCE.

 

No failure or delay on the part of Agent or Assignor Lender in the exercise of
any power, right, or privilege hereunder or under any Loan Document will impair
such power, right, or privilege or be construed to be a waiver of any default or
acquiescence therein. No single or partial exercise of any such power, right, or
privilege will preclude further exercise thereof or of any other right, power,
or privilege. All rights and remedies existing under this Agreement are
cumulative with, and not exclusive of, any rights or remedies otherwise
available.

 

6. NOTICES

 

Unless otherwise specifically provided herein, any notice or other communication
required or permitted to be given will be in writing and addressed to the
respective party as set forth below its signature hereunder, or to such other
address as the party may designate in writing to the other.

 

7. AMENDMENTS AND WAIVERS

 

No amendment, modification, termination, or waiver of any provision of this
Agreement will be effective without the written concurrence of Assignor Lender,
Agent and Assignee Lender.

 

8. SEVERABILITY

 

Whenever possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law. In the event any
provision of this Agreement is or is held to be invalid, illegal, or
unenforceable under applicable law, such provision will be ineffective only to
the extent of such invalidity, illegality, or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of the
Agreement. In addition, in the event any provision of or obligation under this
Agreement is or is held to be invalid, illegal, or unenforceable in any
jurisdiction, the validity, legality, and enforceability of the remaining
provisions or obligations in any other jurisdictions will not in any way be
affected or impaired thereby.

 

9. SECTION TITLES

 

Section and Subsection titles in this Agreement are included for convenience of
reference only, do not constitute a part of this Agreement for any other
purpose, and have no substantive effect.

 

10. SUCCESSORS AND ASSIGNS

 

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

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

11. APPLICABLE LAW

 

THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

 

12. COUNTERPARTS

 

This Agreement and any amendments, waivers, consents, or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which, when so executed and delivered, will be
deemed an original and all of which shall together constitute one and the same
instrument.

 

[signature page follows]

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

IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.

 

ASSIGNEE LENDER:   ASSIGNOR LENDER: By:  

 

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

  By:  

 

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

Name:       Name:     Title:       Title:     Notice Address:   Notice Address:

 

ACKNOWLEDGED AND CONSENTED TO:

 

GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By:  

 

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

Name:     Title:   Duly Authorized Signatory

[THE ROWE COMPANIES,

as Borrower Representative]*/

By:  

 

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

Name:     Title:    

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

*/ Include if required pursuant to the terms of the Credit Agreement.

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

SCHEDULE 2.1

 

Assignor Lender’s Loans

 

Principal Amount

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

    

[Revolving Loan]

   $                     

[Tranche B Loan]

   $  

[Swing Line Loan]

   $  

Subtotal

   $  

Accrued Interest

   $  

[Unused Line Fee]

   $  

Other + or -$

   $  

Total

   $  

 

All determined as of the Effective Date.

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

EXHIBIT B-1

 

Application For Irrevocable Standby Letter of Credit

TO: General Electric Capital Corporation

 

Date

 

L/C No.

 

                    (Bank Use Only)

 

The undersigned Applicant hereby requests General Electric Capital Corporation
(“GE Capital”) to issue and transmit by:

 

¨  Teletransmission         ¨  Mail         ¨  Overnight Courier
        ¨  Other, Explain

 

the Standby Letter of Credit (the “Credit”) substantially as set forth below. In
issuing the Credit, GE Capital is expressly authorized to make such changes from
the terms herein below set forth as GE Capital, in its sole discretion, may deem
advisable.

 

Applicant (Full Name and Address)   Advising Bank:  

Wachovia Bank National Association

401 Linden Street

Winston-Salem, NC 27101

Attention: Standby Letters of Credit

Beneficiary (Full Name and Address)   Currency and Amount in Figures:    
Currency and Amount in Words:     Expiration Date     * Special Instructions    
Is EVERGREEN language required?         ¨  Yes        ¨   No     If yes, what is
the number of days notification required for customary non-
renewal notice?     ¨  Thirty days         ¨  Sixty Days        ¨  Ninety
days        ¨  Other

 

Charges: GE Capital’s charges are for our account, all other charges are to be
paid by beneficiary.

 

Credit to be available to payment against Beneficiary’s draft(s) at sight drawn
on GE Capital or its correspondent at GE Capital’s option accompanied by the
following documents:

 

¨  Statement, purportedly signed by the Beneficiary, reading as follows (please
state below exact wording to appear on the statement):

 

¨  Other Documents

 

¨  Special Conditions

 

¨  Issue substantially in form of attached specimen. (Specimen must also be
signed by applicant)

 

Complete only when the Beneficiary (Foreign Bank, or other Financial
Institution) is to issue its undertaking based on this Credit.

 

¨ Request Beneficiary to issue and deliver their (specify the type of
undertaking)

     in favor of

     for an amount not exceeding the amount specified above, effective
immediately relative to (specify contract number or other pertinent reference)

 

     to expire on                     . (This date must be at least 15 days
prior to the expiry date indicated above). It is understood that if the Credit
is issued in favor of any bank or other financial or commercial entity which has
issued or is to issue an undertaking

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

     on behalf of Applicant of the Credit in connection with the Credit,
Applicant hereby agrees to remain liable under the Master Agreement and this
Application in respect of the Credit (even after its expiry date) until GE
Capital is released by such bank or entity.

 

Each Applicant signing below affirms that it has fully read and agrees to this
Application. In consideration of GE Capital’s issuance of the Credit, Applicant
agrees to be bound by the Master Agreement for Standby Letters of Credit between
Applicant and GE Capital (the “Master Agreement”), the terms of which are
incorporated by reference. All actions to be taken by GE Capital hereunder or in
connection with any Credit may be taken by First Union National Bank or another
bank designated by GE Capital as GE Capital’s agent.

 

(Note: If a bank, trust company, or other financial institution signs as
Applicant for its customer, or if two Applicants jointly apply, both parties
should sign below). Documents may be forwarded to you by the Beneficiary, or the
negotiating bank, in one mail. You may forward documents to us or our
customhouse broker, if specified below, in one mail. We understand and agree
that this Credit will be subject to the International Standby Practices,
International Chamber of Commerce Publication No. 590 (“ISP98”).

 

(Print or type name of Applicant)   (Print or type name of Applicant) (Address)
  (Address)

 

Authorized Signature (Title)

 

 

Authorized Signature (Title)

Authorized Signature (Title)   Authorized Signature (Title)

 

Customer Contact

 

GE CAPITAL USE ONLY

(NOTE: Application will NOT be processed if this section is not complete.)

 

Approved:   City:   Date:     Telephone:                         (Print name and
title)        

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LOGO [g88020img001.jpg]

  GE Capital

 

EXHIBIT B-2

 

APPLICATION FOR DOCUMENTARY LETTER OF CREDIT

 

THIS DOCUMENT MAY ONLY BE USED BY APPLICANTS WHO HAVE ENTERED

INTO A MASTER AGREEMENT FOR DOCUMENTARY LETTERS OF CREDIT

 

Dear Sir/Madam:

 

The undersigned hereby requests General Electric Capital Corporation (“GE
Capital”) to arrange for GE Capital Trade Services, Ltd. (the “Issuer”), to open
(as the undersigned’s agent) the irrevocable Letter of Credit.

 

Applicant: (Full Name, Address and Tele #):

 

 

 

 

 

Beneficiary: (Full Name and Address)

 

 

 

 

Up to an aggregate currency amount of:  

Available by drafts at                      drawn at the issuer’s option, on the
Issuer or it’s correspondent for                         % of invoice value

 

Currency:  

Presented no later than                                                  

                                (Letter of Credit Expiration date)

 

Evidencing shipment of   

 

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

(PLEASE MENTION COMMODITY ONLY, OMITTING DETAILS ON PRICE,

GRADE, QUALITY, ETC.)

 

DOCUMENTS REQUIRED (indicate # originals and copies)

 

Commercial Invoice:

 

 

US Special Customs Form #5515:

 

Insurance Policy/Certificate/Address (Insurance to be effected by the
undersigned if “Insurance Policy/Certificate” is not completed:  

Packing List:

 

 

Certificate Of Origin:

 

 

Other Documents (use a separate page (“3”) if needed noting here “see
attached”):

 

 

SHIPPING DOCUMENTS/TERMS:

 

    Air Way Bill consigned to First Union National Bank                 

 

_______________________________________________________________

 

Full set clean on board ocean Bills of Lading issued or endorsed to the order of
First Union National Bank marked “Freight              Collect             
Prepaid Latest Shipping Date                                         
                                                                         

 

Notify Party:                                         
                                        
                                        
                                                           

 

Shipment From                                         
                                                      To                     

 

__________________________________________________

 

Partial shipments              are              are not permitted. Transhipments
             are              are not permitted.

 

Indicate shipping terms: (FOB, C&F, CIF)                      Container
shipments              are              are not permitted

 

- Documents must be presented for payment, acceptance or negotiation within
         days after the date of issuance of the Bill of Lading or other shipping
documents (latest date of presentation, 21 days if silent).

 

- Unless otherwise stated, all banking charges outside USA are for account of
the Beneficiary

 

- The negotiating bank, if any, is to be authorized to forward all documents in
one registered airmail.

 

- The Master Agreement for Documentary Letters of Credit dated as of
                    , 20         between Applicant and GE Capital is
incorporated herein by reference.

 

Name of Applicant:  

Applicant Authorized Signature and Title:

 

Date:

GE Capital Unit and Region:  

GE Official Signature and Title:

Date:

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Other Documents:

 

 

INITIAL GE CAPITAL        INITIAL APPLICANT AUTHORIZED SIGNATURE