Exhibit 10.3

EXECUTION COPY

AMENDED AND RESTATED

SECOND LIEN CREDIT AND GUARANTY AGREEMENT

dated as of May 20, 2008

among

MOVIE GALLERY, INC.,

CERTAIN SUBSIDIARIES OF

MOVIE GALLERY, INC.

as Guarantors,

VARIOUS LENDERS,

and

WELLS FARGO BANK, N.A.

as Administrative Agent and Collateral Agent

 

 

$117,141,030 Senior Secured Second Priority Credit Facilities

 

 

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TABLE OF CONTENTS

 

     Page

SECTION 1. DEFINITIONS AND INTERPRETATION

   2

1.1. Definitions

   2

1.2. Accounting Terms

   29

1.3. Interpretation, etc.

   30

SECTION 2. LOANS

   30

2.1. Loans

   30

2.2. [Reserved]

   30

2.3. [Reserved]

   30

2.4. Evidence of Debt; Register; Lenders’ Books and Records; Notes

   30

2.5. Interest on Loans

   31

2.6. Continuation

   32

2.7. Default Interest

   33

2.8. Fees

   33

2.9. Payments at Maturity

   33

2.10. Voluntary Prepayments/Call Protection

   33

2.11. Mandatory Prepayments

   34

2.12. Application of Prepayments

   37

2.13. General Provisions Regarding Payments

   37

2.14. Ratable Sharing

   38

2.15. Maintaining Eurodollar Rate Loans

   39

2.16. Increased Costs; Capital Adequacy

   41

2.17. Taxes; Withholding, etc.

   42

2.18. Obligation to Mitigate

   44

2.19. Removal or Replacement of a Lender

   44

SECTION 3. CONDITIONS PRECEDENT

   45

3.1. Effective Date

   45

3.2. Notices

   51

SECTION 4. REPRESENTATIONS AND WARRANTIES

   52

4.1. Organization; Requisite Power and Authority; Qualification

   52

4.2. Equity Interests and Ownership

   52

4.3. Due Authorization

   52

4.4. No Conflict

   52

4.5. Governmental Consents

   53

4.6. Binding Obligation

   53

4.7. Historical Financial Statements

   53

4.8. Projections

   53

4.9. No Material Adverse Change

   54

4.10. No Restricted Junior Payments

   54

4.11. Adverse Proceedings, etc.

   54

4.12. Payment of Taxes

   54

4.13. Properties

   54

4.14. Environmental Matters

   55

4.15. No Defaults

   56

4.16. Material Contracts

   56

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4.17. Governmental Regulation

   56

4.18. Margin Stock

   56

4.19. Employee Matters

   56

4.20. Employee Benefit Plans

   57

4.21. Certain Fees

   57

4.22. Solvency

   57

4.23. Compliance with Statutes, etc.

   58

4.24. Disclosure

   58

4.25. Patriot Act

   58

SECTION 5. AFFIRMATIVE COVENANTS

   59

5.1. Financial Statements and Other Reports

   59

5.2. Existence

   63

5.3. Payment of Taxes and Claims

   63

5.4. Maintenance of Properties

   63

5.5. Insurance

   63

5.6. Books and Records; Inspections

   64

5.7. Lenders Meetings

   64

5.8. Compliance with Laws

   65

5.9. Environmental

   65

5.10. Subsidiaries

   66

5.11. Additional Material Real Estate Assets

   67

5.12. Further Assurances

   67

5.13. Miscellaneous Covenants

   67

SECTION 6. NEGATIVE COVENANTS

   68

6.1. Indebtedness

   68

6.2. Liens

   70

6.3. No Further Negative Pledges

   73

6.4. Restricted Junior Payments

   73

6.5. Restrictions on Subsidiary Distributions

   74

6.6. Investments

   74

6.7. Fundamental Changes; Disposition of Assets; Acquisitions

   76

6.8. Disposal of Subsidiary Interests

   77

6.9. Sales and Lease-Backs

   77

6.10. Transactions with Shareholders and Affiliates

   78

6.11. Conduct of Business

   78

6.12. Amendments or Waivers of Organizational Documents

   78

6.13. [Reserved]

   79

6.14. Limitation on Amendments or Waivers of the First Lien Credit Agreement,
etc.

   79

6.15. Fiscal Year

   79

6.16. Real Estate Guarantors Covenants

   79

SECTION 7. GUARANTY

   80

7.1. Guaranty of the Obligations

   80

7.2. Contribution by Guarantors

   81

7.3. Payment by Guarantors

   81

7.4. Liability of Guarantors Absolute

   82

 

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7.5. Waivers by Guarantors

   84

7.6. Guarantors’ Rights of Subrogation, Contribution, etc.

   84

7.7. Subordination of Other Obligations

   85

7.8. Continuing Guaranty

   85

7.9. Authority of Guarantors or Borrower

   85

7.10. Financial Condition of Borrower

   85

7.11. Bankruptcy, etc.

   86

7.12. Discharge of Guaranty Upon Sale of Guarantor

   86

SECTION 8. EVENTS OF DEFAULT

   86

8.1. Events of Default

   86

SECTION 9. AGENTS

   89

9.1. Appointment of Agents

   89

9.2. Powers and Duties

   90

9.3. General Immunity

   90

9.4. Agents Entitled to Act as Lender

   92

9.5. Lenders’ Representations, Warranties and Acknowledgment

   92

9.6. Right to Indemnity

   92

9.7. Successor Administrative Agent and Collateral Agent

   93

9.8. Collateral Documents and Guaranty

   94

9.9. Intercreditor Agreement

   94

SECTION 10. MISCELLANEOUS

   94

10.1. Notices

   94

10.2. Expenses

   96

10.3. Indemnity

   96

10.4. Set-Off

   97

10.5. Amendments and Waivers

   98

10.6. Successors and Assigns; Participations

   99

10.7. Independence of Covenants

   104

10.8. Survival of Representations, Warranties and Agreements

   104

10.9. No Waiver; Remedies Cumulative

   104

10.10. Marshalling; Payments Set Aside

   104

10.11. Severability

   104

10.12. Obligations Several; Independent Nature of Lenders’ Rights

   105

10.13. Headings

   105

10.14. APPLICABLE LAW

   105

10.15. CONSENT TO JURISDICTION

   105

10.16. WAIVER OF JURY TRIAL

   105

10.17. Confidentiality

   106

10.18. Usury Savings Clause

   107

10.19. Counterparts

   107

10.20. Effectiveness

   107

10.21. Patriot Act

   107

10.22. Electronic Execution of Assignments

   107

10.23. Post-Closing Actions

   108

10.24. No Fiduciary Duty

   108

10.25. Effect of Restatement

   109

 

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APPENDICES:    A    Lender Exposure    B    Notice Addresses SCHEDULES:    1A   
Fiscal Years    1B    Seasonal Overadvance Facility Terms    3.1(g)(i)   
Effective Date Mortgaged Properties    4.1    Jurisdictions of Organization and
Qualification    4.2    Equity Interests and Ownership    4.7    Certain
Disclosures    4.13    Real Estate Assets    4.16    Material Contracts    6.1
   Certain Indebtedness    6.2    Certain Liens    6.5    Certain Restrictions
on Subsidiary Distributions    6.6    Certain Investments    6.10    Certain
Affiliate Transactions    10.23    Post-Closing Actions EXHIBITS:          A   
Continuation Notice    B    Note    C    Compliance Certificate    D    Opinions
of Counsel    E    Assignment Agreement    F    Certificate Re Non-bank Status
   G-1    Effective Date Certificate    G-2    Solvency Certificate    H   
Counterpart Agreement    I    Pledge and Security Agreement    J    Mortgage   
K    Landlord Waiver and Consent Agreement    L   

Intercompany Note

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AMENDED AND RESTATED

SECOND LIEN CREDIT AND GUARANTY AGREEMENT

This AMENDED AND RESTATED SECOND LIEN CREDIT AND GUARANTY AGREEMENT, dated as of
May 20, 2008, is entered into by and among MOVIE GALLERY, INC., a Delaware
corporation (“Borrower”), CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the
Lenders party hereto from time to time, and WELLS FARGO BANK, N.A. (“Wells
Fargo”), as Administrative Agent (together with its permitted successors in such
capacity, “Administrative Agent”) and as Collateral Agent (together with its
permitted successors in such capacity, “Collateral Agent”).

RECITALS:

WHEREAS, this Agreement amends and restates in its entirety the Second Lien
Credit and Guaranty Agreement (the “Original Agreement”), dated as of March 8,
2007, entered into by and among the Borrower, certain Subsidiaries of Borrower,
as Guarantors, the Lenders party thereto, Goldman Sachs Credit Partners L.P. as
Lead Arranger and Syndication Agent, and CapitalSource Finance LLC, as
Administrative Agent and as Collateral Agent;

WHEREAS, capitalized terms used in these Recitals shall have the respective
meanings set forth for such terms in Section 1.1 hereof;

WHEREAS, Lenders under the Original Agreement had agreed to extend a term loan
credit facility to Borrower, in an aggregate amount not to exceed $175,000,000
(plus the amount of any interest that is paid in the form of additional
principal thereto) to be used to, together with the proceeds of the First Lien
Term Loans advanced under the First Lien Credit Facilities, (i) to fund the
refinancing of the Existing Indebtedness and (ii) to pay certain other fees and
expenses relating to the credit facility established hereunder;

WHEREAS, on October 16, 2007 (the “Petition Date”), Credit Parties filed
voluntary petitions for relief commencing cases (collectively, the “Cases”)
under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court;

WHEREAS, the Credit Parties, as Debtors, had previously entered into a Secured
Super-Priority Debtor in Possession Credit and Guaranty Agreement, dated of
October 16, 2007 (as amended, the “DIP Credit Agreement”), with the lenders
party thereto, GSCP as syndication agent and as documentation agent, and The
Bank of New York as administrative agent and as collateral agent, pursuant to
which the lenders thereunder had extended certain credit facilities to the
Debtors in an aggregate amount not to exceed $150,000,000, consisting of
$100,000,000 aggregate principal amount of “Term Loans” (as defined in the DIP
Credit Agreement) and $50,000,000 aggregate principal amount of “Revolving
Commitments” (as defined in the DIP Credit Agreement), the proceeds of which
were used, among other things, to refinance the Obligations under the Existing
First Lien Credit Agreement in respect of Revolving Loans, swing line loans and
letters of credit;

WHEREAS, on April 10, 2008, the Bankruptcy Court confirmed the Debtors’ Second
Amended Joint Plan of Reorganization of Movie Gallery, Inc. and Its Debtor
Subsidiaries Under Chapter 11 of the Bankruptcy Code (as amended, supplemented
or modified from time to time, together with any “Plan Supplement” (as defined
in the Plan), the “Plan”);

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WHEREAS, as part of the implementation of the Plan, Borrower has requested
Lenders to amend and restate the Original Agreement on the terms and conditions
set forth herein, pursuant to which Lenders have agreed, or otherwise are
required pursuant to the Plan, to extend certain credit facilities to Credit
Parties in an aggregate amount not to exceed $117,141,030, consisting of Loans,
plus payment-in-kind interest and other principal increases as provided
hereunder, to be used (i) to fund the transactions contemplated by the Plan,
including the refinancing of the DIP Credit Facility Obligations, and the
payment of administrative fees and other fees and expenses relating to the
Debtors’ implementation of the Plan, (ii) to pay certain other fees and expenses
relating to the credit facilities established hereunder and (iii) for general
working capital and other corporate purposes of Borrower and its Subsidiaries;

WHEREAS, Borrower has agreed to secure all of its Obligations by granting to
Collateral Agent, for the benefit of Secured Parties, a Second Priority Lien on
substantially all of its assets, including a pledge of all of the Equity
Interests of each of its Domestic Subsidiaries and 65% of all the Equity
Interests of each of its Foreign Subsidiaries; and

WHEREAS, Guarantors have agreed to guarantee the obligations of Borrower
hereunder and to secure their respective Obligations by granting to Collateral
Agent, for the benefit of Secured Parties, a Second Priority Lien on
substantially all of their respective assets, including a pledge of all of the
Equity Interests of each of their respective Domestic Subsidiaries (including
Borrower) and 65% of all the Equity Interests of each of their respective
Foreign Subsidiaries.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, the parties hereto agree as follows:

SECTION 1. DEFINITIONS AND INTERPRETATION

1.1. Definitions. The following terms used herein, including in the preamble,
recitals, exhibits and schedules hereto, shall have the following meanings:

“Adjusted Eurodollar Rate” means, for any Interest Rate Determination Date with
respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum
obtained by dividing (and rounding upward to the next whole multiple of 1/16 of
1%) (i) (a) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the
rate determined by Administrative Agent to be the offered rate which appears on
the page of the Telerate Screen which displays an average British Bankers
Association Interest Settlement Rate (such page currently being page number 3740
or 3750, as applicable) for deposits (for delivery on the first day of such
period) with a term equivalent to such period in Dollars, determined as of
approximately 11:00 a.m. (London, England time) on such Interest Rate
Determination Date, or (b) in the event the rate referenced in the preceding
clause (a) does not appear on such page or service or if such page or service
shall cease to be available, the rate per annum (rounded to the nearest 1/100 of
1%) equal to the rate determined by Administrative Agent to be the offered rate
on such other page or other service which displays an average British Bankers
Association Interest Settlement Rate for

 

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deposits (for delivery on the first day of such period) with a term equivalent
to such period in Dollars, determined as of approximately 11:00 a.m. (London,
England time) on such Interest Rate Determination Date, or (c) in the event the
rates referenced in the preceding clauses (a) and (b) are not available, the
rate per annum (rounded to the nearest 1/100 of 1%) equal to the offered
quotation rate to first class banks in the London interbank market by JPMorgan
Chase Bank for deposits (for delivery on the first day of the relevant period)
in Dollars of amounts in same day funds comparable to the principal amount of
the applicable Loan for which the Adjusted Eurodollar Rate is then being
determined with maturities comparable to such period as of approximately 11:00
a.m. (London, England time) on such Interest Rate Determination Date, by (ii) an
amount equal to (a) one minus (b) the Applicable Reserve Requirement.

“Additional Letters of Credit” means any letters of credit issued on the
following terms: (A) the Indebtedness or other obligations in respect of such
letters of credit shall be unsecured, except for the Lien permitted to be
incurred pursuant to Section 6.2(r), (B) the provisions thereof shall be on
commercially reasonable reimbursement agreement terms for cash collateralized
letters of credit and, to the extent applicable in such reimbursement agreement,
the covenants, events of default, subordination and other provisions thereof
(including any guarantees thereof) shall be, in the aggregate, no less favorable
to the Borrower and to the Lenders than those contained in the First Lien Credit
Agreement and (C) no Default or Event of Default shall have occurred and be
continuing or result therefrom.

“Administrative Agent” as defined in the preamble hereto.

“Adverse Proceeding” means any action, suit, proceeding, hearing (whether
administrative, judicial or otherwise), governmental investigation or
arbitration (whether or not purportedly on behalf of Borrower or any of its
Subsidiaries) at law or in equity, or before or by any Governmental Authority,
domestic or foreign (including any Environmental Claims), whether pending or, to
the knowledge of Borrower or any of its Subsidiaries, threatened against or
adversely affecting Borrower or any of its Subsidiaries or any property of
Borrower or any of its Subsidiaries.

“Affected Lender” as defined in Section 2.15(b).

“Affected Loans” as defined in Section 2.15(b).

“Affiliate” means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”), as applied to any Person, means the possession, directly or
indirectly, of the power (i) to vote 5% or more of the Securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities or by contract or otherwise.

“Agent” means each of Administrative Agent and Collateral Agent.

“Agent Affiliates” as defined in Section 10.1(b).

 

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“Aggregate Amounts Due” as defined in Section 2.14.

“Aggregate Payments” as defined in Section 7.2.

“Agreement” means this Amended and Restated Second Lien Credit and Guaranty
Agreement, dated as of March 8, 2007, as amended and restated as of May 20,
2008, as it may be amended, restated, supplemented or otherwise modified from
time to time.

“Applicable Margin” means (1) until the first anniversary of the Effective Date,
12.75% per annum in the case of Eurodollar Rate Loans and 11.75% in the case of
Base Rate Loans and (2) from the first anniversary of the Effective Date,
13.00% per annum in the case of Eurodollar Rate Loans and 12.00% in the case of
Base Rate Loans, which shall increase by an additional 0.25% per annum each six
months thereafter; provided that, notwithstanding the foregoing, upon the
occurrence of an Interest Event, then, as of the next Interest Payment Date, the
Applicable Margin shall be 8.00% per annum in the case of Eurodollar Rate Loans
and 7.00% in the case of Base Rate Loans.

“Applicable Reserve Requirement” means, at any time, for any Eurodollar Rate
Loan, the maximum rate, expressed as a decimal, at which reserves (including any
basic marginal, special, supplemental, emergency or other reserves) are required
to be maintained with respect thereto against “Eurocurrency liabilities” (as
such term is defined in Regulation D) under regulations issued from time to time
by the Board of Governors or other applicable banking regulator. Without
limiting the effect of the foregoing, the Applicable Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by reference
to which the applicable Adjusted Eurodollar Rate or any other interest rate of a
Loan is to be determined, or (ii) any category of extensions of credit or other
assets which include Eurodollar Rate Loans. A Eurodollar Rate Loan shall be
deemed to constitute Eurocurrency liabilities and as such shall be deemed
subject to reserve requirements without benefits of credit for proration,
exceptions or offsets that may be available from time to time to the applicable
Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted
automatically on and as of the effective date of any change in the Applicable
Reserve Requirement.

“Approved Electronic Communications” means any notice, demand, communication,
information, document or other material that any Credit Party provides to
Administrative Agent pursuant to any Credit Document or the transactions
contemplated therein which is distributed to the Agents or to the lenders by
means of electronic communications pursuant to Section 10.1(b).

“Asset Sale” means a sale, lease or sub-lease (as lessor or sublessor), sale and
leaseback, assignment, conveyance, exclusive license (as licensor or
sublicensor), transfer or other disposition to, or any exchange of property
with, any Person (other than Borrower or any Guarantor Subsidiary), in one
transaction or a series of transactions, of all or any part of Borrower’s or any
of its Subsidiaries’ businesses, assets or properties of any kind, whether real,
personal, or mixed and whether tangible or intangible, whether now owned or
hereafter acquired, leased or licensed, including the Equity Interests of any of
Borrower’s Subsidiaries, other than (i) inventory (or other assets) sold, leased
or licensed out in the ordinary course of business

 

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(excluding any such sales, leases or licenses out by operations or divisions
discontinued or to be discontinued), and (ii) sales, leases or licenses out of
other assets for aggregate consideration of less than $2,000,000 in the
aggregate during any Fiscal Year.

“Assignment Agreement” means an Assignment and Assumption Agreement
substantially in the form of Exhibit E, with such amendments or modifications as
may be approved by Administrative Agent (provided, that the approval of the
Requisite Lenders shall be required to amend or modify any provision of Exhibit
E that relates to Restricted Sponsor Affiliates (such approval not to be
unreasonably withheld or delayed)).

“Assignment Effective Date” as defined in Section 10.6(b).

“Authorized Officer” means, as applied to any Person, any individual holding the
position of chairman of the board (if an officer), chief executive officer,
president or one of its vice presidents (or the equivalent thereof), and such
Person’s chief financial officer or treasurer.

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as now and hereafter in effect, or any successor statute.

“Bankruptcy Court” means the United States Bankruptcy Court for the Eastern
District of Virginia, Richmond Division, or any other court having competent
jurisdiction over the Cases.

“Base Rate” means, for any day, a rate per annum equal to the greater of (i) the
Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in
effect on such day plus  1/2 of 1%. Any change in the Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective day of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.

“Base Rate Loan” means a Loan bearing interest at a rate determined by reference
to the Base Rate.

“Beneficiary” means each Agent and Lender.

“Board of Governors” means the Board of Governors of the United States Federal
Reserve System, or any successor thereto.

“Borrower” as defined in the preamble hereto.

“Budget” has the meaning ascribed to that term in the First Lien Credit
Agreement, provided that after any Discharge of First Lien Obligations, “Budget”
means the business plan and projected operating budget by the Credit Parties,
dated March 31, 2008 (which includes income statements, balance sheets, cash
flow statements, and a line item for “total available liquidity”), on (i) a
monthly basis for the then-current Fiscal Year and (ii) on a quarterly basis for
the then-current Fiscal Year and through the next succeeding two Fiscal Years
(but in no event through a date that is later than the Maturity Date), and which
shall provide for the payment of the fees and expenses relating to ordinary
course administrative expenses, working capital and other general corporate
needs, in form satisfactory to Administrative Agent or the Requisite Lenders.

 

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“Business Day” means (i) any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of New York or Minnesota or is a day
on which banking institutions located in such state are authorized or required
by law or other governmental action to close and (ii) with respect to all
notices, determinations, fundings and payments in connection with the Adjusted
Eurodollar Rate or any Eurodollar Rate Loans, the term “Business Day” shall mean
any day which is a Business Day described in clause (i) and which is also a day
for trading by and between banks in Dollar deposits in the London interbank
market.

“Capital Lease” means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is or should be accounted for as a capital lease on the balance sheet
of that Person.

“Cases” as defined in the recitals hereto.

“Cash” means money, currency or a credit balance in any demand or Deposit
Account.

“Cash Equivalents” means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States Government or (b) issued by any agency of the
United States the obligations of which are backed by the full faith and credit
of the United States, in each case maturing within one year after such date;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after such date
and having, at the time of the acquisition thereof, a rating of at least A-1
from S&P or at least P-1 from Moody’s; (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody’s; (iv) certificates of deposit or bankers’ acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least “adequately
capitalized” (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; (v) shares of any money market mutual fund that (a) has
substantially all of its assets invested continuously in the types of
investments referred to in clauses (i) and (ii) above, (b) has net assets of not
less than $500,000,000, and (c) has the highest rating obtainable from either
S&P or Moody’s and (vi) solely in respect of the cash management activities of
Subsidiaries of the Borrower organized under the laws of Canada or any province
or territory thereof, equivalents to the investments described in clause
(i) above to the extent guaranteed by the full faith and credit of the
government of Canada and equivalents of investments described in clauses
(iii) and (iv) above issued, accepted or offered by the local office of any
commercial bank organized under the laws of Canada, or any province or territory
thereof of such Canadian Subsidiary, which bank has combined capital and surplus
of not less than $1,000,000,000.

 

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“Certificate re Non-Bank Status” means a certificate substantially in the form
of Exhibit F.

“Change of Control” means, at any time after the Effective Date and except as
contemplated by the Plan, (i) any Person or “group” (within the meaning of Rules
13d-3 and 13d-5 under the Exchange Act) other than a Sponsor Affiliate (a) shall
have acquired beneficial ownership of 35% or more on a fully diluted basis of
the voting and/or economic interest in the Equity Interests of Borrower
(provided, that if such percentage is exceeded as a result of an exchange of the
Borrower’s Equity Interests for Indebtedness, then this subclause (i)(a) shall
not be the basis of an Change of Control unless such Person or “group” (within
the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) other than a
Sponsor Affiliate shall have beneficial ownership of 50% or more on a fully
diluted basis of the voting and/or economic interest in the Equity Interests of
Borrower outstanding after giving effect to such exchange of the Borrower’s
Equity Interests for Indebtedness) or (b) shall have obtained the power (whether
or not exercised) to elect a majority of the members of the board of directors
(or similar governing body) of Borrower; (ii) the majority of the seats (other
than vacant seats) on the board of directors (or similar governing body) of
Borrower cease to be occupied by Persons who either (a) were members of the
board of directors of Borrower on the Effective Date or (b) were nominated for
election by the board of directors of Borrower, a majority of whom were
directors on the Effective Date or whose election or nomination for election was
previously approved by a majority of such directors; or (iii) Borrower and
Guarantors shall cease to be the direct or indirect holders or owners of one
hundred percent (100%) of the Equity Interests of Real Estate Guarantors,
subject to the lien of the Pledge and Security Agreement.

“Collateral” means, collectively, all of the real, personal and mixed property
(including Equity Interests (but limited to 65% of such interests in the case of
Foreign Subsidiaries as and to the extent set forth in the Pledge and Security
Agreement) and all monies and other property of any kind received on account
thereof) in which Liens are purported to be granted pursuant to the Collateral
Documents as security for the Obligations.

“Collateral Agent” as defined in the preamble hereto.

“Collateral Documents” means the Pledge and Security Agreement, the Mortgages,
the Intellectual Property Security Agreements, the Landlord Personal Property
Collateral Access Agreements, if any, and all other instruments, documents and
agreements delivered by any Credit Party pursuant to this Agreement or any of
the other Credit Documents, or constituting “Collateral Documents” under and as
defined in the Original Agreement, in each case in order to grant to Collateral
Agent for the benefit of Secured Parties, or perfect, a Lien on any real,
personal or mixed property of that Credit Party as security for the Obligations.

“Collateral Questionnaire” means a certificate in form satisfactory to
Collateral Agent that provides information with respect to the personal or mixed
property of each Credit Party.

“Compliance Certificate” means a Compliance Certificate substantially in the
form of Exhibit C.

 

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“Confirmation Order” means the order by the Bankruptcy Court entered on
April 10, 2008 confirming the Plan.

“Consolidated Adjusted EBITDA” means, for any period, an amount determined for
Borrower and its Subsidiaries on a consolidated basis equal to (x) Consolidated
Net Income, plus, to the extent reducing Consolidated Net Income, the sum,
without duplication, of amounts for (a) consolidated interest expense
(determined in accordance with GAAP), (b) provisions for taxes based on income,
(c) total depreciation expense, (d) total amortization expense (excluding Rental
Items amortization, except for one time and incremental charges resulting from
changes in estimates and accounting principles), (e) losses from Hedge
Agreements, (f) losses from discontinued operations, (g) losses from changes in
estimates and accounting principles (including subsequent changes related to a
change in the salvage value of rental inventory), (h) fees and costs associated
with the early extinguishment of debt, (i) fees and other expenses made or
incurred in connection with the transactions contemplated hereby that are paid
or accounted for (without duplication) within 180 days of the Effective Date,
(j) reasonable fees or expenses relating to any issuance of Equity Interests,
permitted Investments, Permitted Acquisitions or Indebtedness, whether or not
such transaction is consummated, to the extent deducted in computing
Consolidated Net Income, (k) with respect to any period (including any Fiscal
Quarter) during Fiscal Year 2008, costs and expenses resulting from
administrative expenses paid with respect to the Cases for professional fees and
expenses and costs and expenses actually incurred with respect to severance
obligations and/or employee retention plans adopted by the Borrower and approved
by the Bankruptcy Court prior to the Effective Date; (l) with respect to any
period (including any Fiscal Quarter) during Fiscal Year 2008, amounts paid as
cure payments or similar costs in connection with executory contracts assumed
during the Cases or as part of the Plan, (m) non-recurring costs, losses and
restructuring charges, in each case associated with general and administration
costs in connection with the implementation and management of Real Estate
Guarantors, (n) costs or losses resulting directly from store closures, lease
terminations and liquidations of associated inventory which, in each case,
commenced prior to the Plan Effective Date, (o) costs and expenses with respect
to severance obligations and/or employee retention plans not to exceed
$5,000,000 in the aggregate from and after the Effective Date and (p) other
non-Cash charges reducing Consolidated Net Income (excluding any such non-Cash
charge to the extent that it represents an accrual or reserve for potential Cash
charge in any future period or amortization of a prepaid Cash charge that was
paid in a prior period), (q) non-recurring losses not to exceed $10,000,000 in
the aggregate from and after the Effective Date or (r) non-recurring costs,
losses and restructuring charges, in each case associated with general and
administrative costs (but in no event including costs associated with store
openings, closings and relocation) in connection with consolidating the
operations of the Movie Gallery division and the Hollywood division not to
exceed $10,000,000 in the aggregate from and after the Effective Date, minus
(y) to the extent increasing Consolidated Net Income, the sum, without
duplication, of amounts for (a) gains from Hedge Agreements, (b) income from
discontinued operations, (c) income from changes in accounting principles
(including subsequent changes related to a change in the salvage value of rental
inventory), (d) gains resulting from liquidations of inventory commenced prior
to the Plan Effective Date, (e) other non-Cash gains increasing Consolidated Net
Income for such period (excluding any such non-Cash gain to the extent it
represents the reversal of an accrual or reserve for potential Cash gain in any
prior period) and (f) non-recurring gains not to exceed $10,000,000 in the
aggregate from and after the Effective Date. For all purposes of this Agreement,
Consolidated Adjusted EBITDA shall equal

 

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$2,385,193 for the second Fiscal Quarter of 2007; $18,038,950 for the third
Fiscal Quarter of 2007; $44,312,703 for the fourth Fiscal Quarter of 2007; and
$56,473,694 for the first Fiscal Quarter of 2008.

“Consolidated Capital Expenditures” means, for any period, the aggregate of all
expenditures of Borrower and its Subsidiaries during such period determined on a
consolidated basis that, in accordance with GAAP, are or should be included in
“purchase of property and equipment” or similar items reflected in the
consolidated statement of cash flows of Borrower and its Subsidiaries (but shall
in any event exclude the purchase or acquisition of assets pursuant to a
Permitted Acquisition).

“Consolidated Current Assets” means, as at any date of determination, the total
assets of Borrower and its Subsidiaries on a consolidated basis that may
properly be classified as current assets in conformity with GAAP, excluding Cash
and Cash Equivalents.

“Consolidated Current Liabilities” means, as at any date of determination, the
total liabilities of Borrower and its Subsidiaries on a consolidated basis that
may properly be classified as current liabilities in conformity with GAAP,
excluding the current portion of long term debt.

“Consolidated Excess Cash Flow” means, for any period, an amount (if positive)
equal to: (i) the sum, without duplication, of the amounts for such period of
(a) Consolidated Adjusted EBITDA, (b) the Consolidated Working Capital
Adjustment, (c) the amount by which amortization of Rental Items exceeds cash
purchases of Rental Items and (d) extraordinary and non-recurring gains of the
type described in clause (e)(A) and (e)(B) of the definition of “Consolidated
Net Income” (not to exceed the aggregate amounts referred to in such clauses) to
the extent such gains are received in cash during such period, minus (ii) the
sum, without duplication, of the amounts for such period paid in cash from
operating cash flow of (a) scheduled repayments of Indebtedness for borrowed
money (including Indebtedness under the Seasonal Overadvance Facility, and
excluding repayments of Revolving Loans except to the extent the Revolving
Commitments are permanently reduced in connection with such repayments, but
including the principal component of Capital Leases), (b) Consolidated Capital
Expenditures (net of any proceeds of (y) any related financings with respect to
such expenditures and (z) any sales of assets used to finance such
expenditures), (c) Consolidated Interest Expense, (d) provisions for current
taxes based on income of Borrower and its Subsidiaries and payable in cash with
respect to such period, (e) the amount by which cash purchases of Rental Items
exceeds amortization of Rental Items, (f) extraordinary and non-recurring costs,
losses and restructuring charges of the type described in clause (e)(B) of the
definition of “Consolidated Net Income”, in clauses (x)(q) and (x)(r) of the
definition of “Consolidated Adjusted EBITDA” (not to exceed the aggregate
amounts referred to in such clauses) or in clauses (x)(i) through and including
(x)(o) of the definition of “Consolidated Adjusted EBITDA” to the extent such
charges are actually paid in cash during such period; (g) with respect to Fiscal
Year 2008, to the extent added in clause (x)(k) of the definition of
“Consolidated Adjusted EBITDA”, costs and expenses actually incurred resulting
from administrative expenses with respect to the Cases which are for
professional fees and expenses and are paid in Cash; and (h) to the extent added
in clauses (x)(l) through and including (x)(o) of the definition of
“Consolidated Adjusted EBITDA”, amounts paid in Cash during such Fiscal Year as
cure payments or similar costs in connection with executory contracts assumed
during the Cases or as part of the Plan.

 

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“Consolidated Interest Expense” means, for any period, total interest expense
(including that portion attributable to Capital Leases in accordance with GAAP
and capitalized interest) of Borrower and its Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of Borrower and its
Subsidiaries, including all commissions, discounts and other fees and charges
owed with respect to letters of credit and net costs under Interest Rate
Agreements, but excluding, however, any amount not payable in Cash and any
amounts referred to in Section 2.8(c) payable on or before the Effective Date.

“Consolidated Net Income” means, for any period, (i) the net income (or loss) of
Borrower and its Subsidiaries on a consolidated basis for such period taken as a
single accounting period determined in conformity with GAAP, but excluding the
effects of any of the following, (ii) (a) the income (or loss) of any Person
(other than a Subsidiary of Borrower) in which any other Person (other than
Borrower or any of its Subsidiaries) has a joint interest, except to the extent
of the amount of dividends or other distributions actually paid to Borrower or
any of its Subsidiaries by such Person during such period, (b) the income (or
loss) of any Person accrued prior to the date it becomes a Subsidiary of
Borrower or is merged into or consolidated with Borrower or any of its
Subsidiaries or that Person’s assets are acquired by Borrower or any of its
Subsidiaries, (c) the income of any Subsidiary of Borrower to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, (d) any after-tax
gains or losses attributable to Asset Sales or returned surplus assets of any
Pension Plan, and (e) (to the extent not included in clauses (a) through
(d) above) any (A) net extraordinary gains or (B) net extraordinary losses.

“Consolidated Working Capital” means, as at any date of determination, the
excess of Consolidated Current Assets over Consolidated Current Liabilities
(which may be a negative number).

“Consolidated Working Capital Adjustment” means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.

“Continuation Date” means the effective date of a continuation as set forth in
the applicable Continuation Notice.

“Continuation Notice” means a Continuation Notice substantially in the form of
Exhibit A.

“Contractual Obligation” means, as applied to any Person, any provision of any
Security issued by that Person or of any indenture, mortgage, deed of trust,
contract, undertaking, agreement or other instrument to which that Person is a
party or by which it or any of its properties is bound or to which it or any of
its properties is subject.

 

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“Contributing Guarantors” as defined in Section 7.2.

“Counterpart Agreement” means a Counterpart Agreement substantially in the form
of Exhibit H delivered by a Credit Party pursuant to Section 5.10.

“Credit Document” means any of this Agreement, the Notes, if any, the Collateral
Documents, the Intercreditor Agreement and all other documents, instruments or
agreements executed and delivered by a Credit Party for the benefit of any Agent
or any Lender in connection herewith.

“Credit Extension” means the making of a Loan.

“Credit Party” means Borrower and each Guarantor.

“Currency Agreement” means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement, each of which is for the purpose of hedging the
foreign currency risk associated with Borrower’s and its Subsidiaries’
operations and not for speculative purposes.

“Debtors” means Borrower and each Guarantor that was a debtor in the Cases.

“Default” means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default.

“Deposit Account” means a demand, time, savings, passbook or like account with a
bank, savings and loan association, credit union or like organization, other
than an account evidenced by a negotiable certificate of deposit.

“DIP Credit Agreement” as defined in the recitals hereto.

“DIP Credit Facility Obligations” means the “Obligations” as defined in the DIP
Credit Agreement.

“Discharge of First Lien Obligations” has the meaning assigned to that term in
the Intercreditor Agreement.

“Disclosed Matter” means the existence or occurrence of any matter which has
been disclosed by Borrower in any filing made by Borrower with the Securities
and Exchange Commission prior to the Effective Date and after December 31, 2007
(including disclosures regarding financial performance or condition as set forth
in any Form 10-K or Form 10-Q during such period); provided, that no matter
shall constitute a “Disclosed Matter” to the extent it shall prove to be, or
shall become, materially more adverse to Borrower and its Subsidiaries taken as
a whole or to the Lenders than it would have reasonably appeared to be on the
basis of the disclosure contained in any of the documents referred to above in
this definition.

“Disqualified Equity Interests” means any Equity Interest which, by its terms
(or by the terms of any security or other Equity Interests into which it is
convertible or for which it is exchangeable), or upon the happening of any event
or condition (i) matures or is mandatorily

 

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redeemable (other than solely for Equity Interests which are not otherwise
Disqualified Equity Interests), pursuant to a sinking fund obligation or
otherwise, (ii) is redeemable at the option of the holder thereof (other than
solely for Equity Interests which are not otherwise Disqualified Equity
Interests), in whole or in part, (iii) provides for the scheduled payments or
dividends in cash, or (iv) is or becomes convertible into or exchangeable for
Indebtedness or any other Equity Interests that would constitute Disqualified
Equity Interests, in each case, prior to the date that is 91 days after the
Maturity Date.

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

“Domestic Subsidiary” means any Subsidiary organized under the laws of the
United States of America, any State thereof or the District of Columbia.

“Effective Date” means the date on which the conditions precedent in Section 3
shall be satisfied and the Administrative Agent shall have received the
Effective Date Certificate.

“Effective Date Certificate” means an Effective Date Certificate substantially
in the form of Exhibit G-1.

“Effective Date Mortgaged Property” as defined in Section 3.1(g).

“Eligible Assignee” means (i) any Lender, any Affiliate of any Lender and any
Related Fund (any two or more Related Funds being treated as a single Eligible
Assignee for all purposes hereof), and (ii) any commercial bank, insurance
company, investment or mutual fund or other entity that is an “accredited
investor” (as defined in Regulation D under the Securities Act) and which
extends credit or buys loans; provided, neither Borrower nor any of its
Subsidiaries shall be an Eligible Assignee.

“Employee Benefit Plan” means any “employee benefit plan” as defined in
Section 3(3) of ERISA which is or was sponsored, maintained or contributed to
by, or required to be contributed by, Borrower, any of its Subsidiaries or any
of their respective ERISA Affiliates.

“Environmental Claim” means any investigation, notice, notice of violation,
claim, action, suit, proceeding, demand, abatement order or other order or
directive (conditional or otherwise), by any Governmental Authority or any other
Person, arising (i) pursuant to or in connection with any actual or alleged
violation of any Environmental Law; (ii) in connection with any Hazardous
Material or any actual or alleged Hazardous Materials Activity; or (iii) in
connection with any actual or alleged damage, injury, threat or harm to health,
safety, natural resources or the environment.

“Environmental Laws” means any and all current or future foreign or domestic,
federal or state (or any subdivision of either of them), statutes, ordinances,
orders, rules, regulations, judgments, Governmental Authorizations, or any other
requirements of Governmental Authorities relating to (i) environmental matters,
including those relating to any Hazardous Materials Activity; (ii) the
generation, use, storage, transportation or disposal of Hazardous Materials; or
(iii) occupational safety and health, industrial hygiene, land use or the
protection of human, plant or animal health or welfare, in any manner applicable
to Borrower or any of its Subsidiaries or any Facility.

 

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“Equity Interests” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation), including
partnership interests and membership interests, and any and all warrants, rights
or options to purchase or other arrangements or rights to acquire any of the
foregoing.

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

“ERISA Affiliate” means, as applied to any Person, (i) any corporation which is
a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of
Section 414(c) of the Internal Revenue Code of which that Person is a member;
and (iii) any member of an affiliated service group within the meaning of
Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member. Any former ERISA Affiliate of Borrower or any of
its Subsidiaries shall continue to be considered an ERISA Affiliate of Borrower
or any such Subsidiary within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of Borrower or such Subsidiary and
with respect to liabilities arising after such period for which Borrower or such
Subsidiary could be liable under the Internal Revenue Code or ERISA.

“ERISA Event” means (i) a “reportable event” within the meaning of Section 4043
of ERISA and the regulations issued thereunder with respect to any Pension Plan
(excluding those for which the provision for 30-day notice to the PBGC has been
waived by regulation); (ii) the failure to meet the minimum funding standard of
Section 412 of the Internal Revenue Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(d) of the Internal Revenue
Code) or the failure to make by its due date a required installment under
Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or
the failure to make any required contribution to a Multiemployer Plan; (iii) the
provision by the administrator of any Pension Plan pursuant to
Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal
by Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates
from any Pension Plan with two or more contributing sponsors or the termination
of any such Pension Plan resulting in liability to Borrower, any of its
Subsidiaries or any of their respective Affiliates pursuant to Section 4063 or
4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any
Pension Plan, or the occurrence of any event or condition which might constitute
grounds under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (vi) the imposition of liability on Borrower, any
of its Subsidiaries or any of their respective ERISA Affiliates pursuant to
Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal of Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there

 

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is any potential liability therefore, or the receipt by Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated
under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or
omission which could give rise to the imposition on Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates of fines, penalties,
taxes or related charges under Chapter 43 of the Internal Revenue Code or under
Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of
any Employee Benefit Plan; (ix) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice
of the failure of any Pension Plan (or any other Employee Benefit Plan intended
to be qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any trust
forming part of any Pension Plan to qualify for exemption from taxation under
Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien
pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or
pursuant to ERISA with respect to any Pension Plan.

“Eurodollar Rate Loan” means a Loan bearing interest at a rate determined by
reference to the Adjusted Eurodollar Rate.

“Event of Default” means each of the conditions or events set forth in
Section 8.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and any successor statute.

“Excluded Property” means the properties located at 404 Third Avenue, NW,
Aliceville, Alabama and 1311 Woodmount, Tuscumbie, Alabama, collectively.

“Existing Indebtedness” means Indebtedness and other obligations outstanding
under that certain Credit Agreement, dated as of April 27, 2005 (as amended,
supplemented or otherwise modified), among the Borrower, Movie Gallery Canada,
Inc., the banks, financial institutions and other lenders named therein,
Wachovia Bank, National Association, as U.S. administrative agent, Congress
Financial Corporation (Canada), as Canadian administrative agent, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as syndication agent, and Bank of America,
N.A., Calyon New York Branch and Canadian Imperial Bank of Commerce, as
co-documentation agents.

“Facility” means any real property (including all buildings, fixtures or other
improvements located thereon) now, hereafter or heretofore owned, leased,
operated or used by Borrower or any of its Subsidiaries or any of their
respective predecessors or Affiliates.

“Fair Share” as defined in Section 7.2.

“Fair Share Contribution Amount” as defined in Section 7.2.

 

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“Federal Funds Effective Rate” means for any day, the rate per annum (expressed,
as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; provided, (i) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (ii) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate charged to Administrative Agent on such day on such transactions as
determined by Administrative Agent.

“Financial Officer Certification” means, with respect to the financial
statements for which such certification is required, the certification of the
chief financial officer or (if such officer has been duly appointed in
accordance with the Organizational Documents of Borrower) the chief accounting
officer of Borrower that such financial statements fairly present, in all
material respects, the financial condition of Borrower and its Subsidiaries as
at the dates indicated and the results of their operations and their cash flows
for the periods indicated, subject to changes resulting from audit and normal
year-end adjustments.

“First Lien Agent” means the “Administrative Agent” under and as defined in the
First Lien Credit Agreement.

“First Lien Credit Agreement” means (i) the Amended and Restated First Lien Term
Loan and Guaranty Agreement dated as of the Effective Date among Borrower,
certain Subsidiaries of Borrower and the other agents and lenders party thereto,
as such may be amended, supplemented or otherwise modified from time to time in
accordance with this Agreement and (ii) any other First Lien Credit Agreement
(as defined in the Intercreditor Agreement), in each instance under each of
clauses (i) and (ii), as it may be amended, restated, supplemented or otherwise
modified from time to time. In each instance where a defined term used herein is
defined as used in the First Lien Credit Agreement and the First Lien Credit
Agreement in effect at such time does not define such term, then such defined
term used in this Agreement shall have the meaning of the defined term in the
First Lien Credit Agreement then in effect that is substantially similar to the
defined term that is defined in the initial First Lien Credit Agreement.

“First Lien Credit Documents” shall mean the “Credit Documents” as defined in
the First Lien Credit Agreement.

“First Lien Credit Facilities” means the credit facilities in an aggregate
principal amount of $626,488,750 under the First Lien Credit Agreement described
in clause (i) of such defined term, and any Refinancing (as defined in the
Intercreditor Agreement) of such facilities in accordance with the Intercreditor
Agreement.

“First Lien Term Loans” means term loans in an aggregate principal amount of
$602,988,750 made pursuant to the First Lien Credit Agreement.

 

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“Fiscal Quarter” means each 13 week period after the end of the Fiscal Year
except the last period in Fiscal Year 2007 and in Fiscal Year 2012, which shall
be a 14 week period.

“Fiscal Year” means any 52 week period ending on the first Sunday following
December 30, except for 2007 and 2012, respectively, which shall be a 53 week
period ending January 6, 2008 and January 6, 2013, respectively (as set forth in
Schedule 1A hereto); references to a Fiscal Year with a number corresponding to
any calendar year (e.g., the “2012 Fiscal Year”) refer to the Fiscal Year ending
on the first Sunday following December 30 of such calendar year.

“Flood Hazard Property” means any Real Estate Asset subject to a mortgage in
favor of Collateral Agent, for the benefit of the Secured Parties, and located
in an area designated by the Federal Emergency Management Agency as having
special flood or mud slide hazards.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Funding Guarantors” as defined in Section 7.2.

“GAAP” means, subject to the limitations on the application thereof set forth in
Section 1.2, United States generally accepted accounting principles in effect as
of the date of determination thereof.

“Game Crazy” means the Borrower’s business, operations and locations, including
www.gamecrazy.com, which, taken together, constitutes the Borrower’s “Game
Crazy” business segment, and shall include all Equity Interests of any
Subsidiary owning Game Crazy assets and properties and the assets and properties
(tangible and intangible, real and personal) related to, or used in connection
with, such segment. The “Game Crazy” segment includes the business, operations
and locations within Hollywood Video stores as well as free-standing locations.

“Game Crazy IPO” means any underwritten public offering by Borrower of its and
any other Credit Party’s common Equity Interests in a Subsidiary formed to hold
all the Game Crazy assets and properties pursuant to a registration statement
filed with the Securities and Exchange Commission in accordance with the
Securities Act.

“Governmental Acts” means any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or Governmental Authority.

“Governmental Authority” means any federal, state, municipal, national or other
government, governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity, officer or
examiner exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case whether associated with a state of the United States, the United
States, or a foreign entity or government.

“Governmental Authorization” means any permit, license, authorization, plan,
directive, consent order or consent decree of or from any Governmental
Authority.

 

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“Grantor” as defined in the Pledge and Security Agreement.

“Guaranteed Obligations” as defined in Section 7.1.

“Guarantor” means each of Borrower and each Domestic Subsidiary of Borrower
(including the Real Estate Guarantors) and, at the election of Borrower and upon
compliance with Section 5.10, Movie Gallery Canada.

“Guarantor Subsidiary” means each Guarantor other than Borrower.

“Guaranty” means the guaranty of each Guarantor set forth in Section 7.

“Hazardous Materials” means any chemical, material or substance, exposure to
which is prohibited, limited or regulated by any Governmental Authority or which
may or could pose a hazard to the health and safety of the owners, occupants or
any Persons in the vicinity of any Facility or to the indoor or outdoor
environment.

“Hazardous Materials Activity” means any past, current, proposed or threatened
activity, event or occurrence involving any Hazardous Materials, including the
use, manufacture, possession, storage, holding, presence, existence, location,
Release, threatened Release, discharge, placement, generation, transportation,
processing, construction, treatment, abatement, removal, remediation, disposal,
disposition or handling of any Hazardous Materials, and any corrective action or
response action with respect to any of the foregoing.

“Hedge Agreement” has the meaning assigned to that term in the First Lien Credit
Agreement.

“Highest Lawful Rate” means the maximum lawful interest rate, if any, that at
any time or from time to time may be contracted for, charged, or received under
the laws applicable to any Lender which are presently in effect or, to the
extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.

“Historical Financial Statements” means as of the Effective Date, (i) the
audited financial statements of Borrower and its Subsidiaries, for the Fiscal
Years ended January 1, 2006 and December 31, 2006, consisting of balance sheets
and the related consolidated statements of operations, stockholders’ equity and
cash flows for such Fiscal Years, (ii) the unaudited financial statements of
Borrower and its Subsidiaries as at the most recent Fiscal Quarter ending 45
days or more prior to the Effective Date, consisting of a balance sheet and the
related consolidated statements of operations, stockholders’ equity and cash
flows for the three-, six-or nine- fiscal month period, as applicable, ending on
such date, and (iii) the unaudited financial statements of Borrower and its
Subsidiaries as of the most recent fiscal month ending 30 days or more prior to
the Effective Date, consisting of a balance sheet and related consolidated
statements of operations, stockholders’ equity and cash flows for such month;
and, in the case of clauses (i), (ii) and (iii), certified by the chief
financial officer of Borrower that they fairly present, in all material
respects, the financial condition of Borrower and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-end
adjustments.

 

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“Inactive Entities” means (a) the following entities in which Movie Gallery US,
LLC, a Guarantor, has an ownership interest as of the Effective Date:
DVDStation, Inc. and Echo, LLC; and (b) the following entity in which Borrower
and Movie Gallery US, LLC, a Guarantor, have an ownership interest as of the
Effective Date: Movie Gallery Mexico Inc., S. de R.L. de C.V.

“Increased Amount Date” as defined in Section 2.20.

“Increased-Cost Lenders” as defined in Section 2.19.

“Indebtedness”, as applied to any Person, means, without duplication, (i) all
indebtedness for borrowed money; (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP; (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money;
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months from the date of incurrence
of the obligation in respect thereof or (b) evidenced by a note or similar
written instrument; (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person; (vi) the face amount of any letter of credit issued for
the account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (vii) Disqualified Equity Interests, (viii) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another;
(ix) any obligation of such Person the primary purpose or intent of which is to
provide assurance to an obligee that the obligation of the obligor thereof will
be paid or discharged, or any agreement relating thereto will be complied with,
or the holders thereof will be protected (in whole or in part) against loss in
respect thereof; (x) any liability of such Person for an obligation of another
through any agreement (contingent or otherwise) (a) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (b) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(a) or (b) of this clause (x), the primary purpose or intent thereof is as
described in clause (ix) above; and (xi) all obligations of such Person in
respect of any exchange traded or over the counter derivative transaction,
including any Interest Rate Agreement and Currency Agreement, whether entered
into for hedging or speculative purposes; provided, in no event shall
(x) deferred compensation arrangements and (y) severance obligations payable
over time, be deemed to be “Indebtedness” hereunder.

“Indemnified Liabilities” means, collectively, any and all liabilities,
obligations, losses, damages (including natural resource damages), penalties,
claims (including Environmental Claims), actions, judgments, suits, costs
(including the costs of any investigation, study, sampling, testing, abatement,
cleanup, removal, remediation or other response action necessary to remove,
remediate, clean up or abate any Hazardous Materials Activity), expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and

 

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disbursements of counsel for Indemnitees in connection with any investigative,
administrative or judicial proceeding or hearing commenced or threatened by any
Person, whether or not any such Indemnitee shall be designated as a party or a
potential party thereto (it being agreed that, such counsel fees and expenses
shall be limited to one primary counsel, and any additional special and local
counsel in each appropriate jurisdiction, for the Indemnitees, except in the
case of actual or potential conflicts of interest between or among the
Indemnitees), and any fees or expenses incurred by Indemnitees in enforcing this
indemnity), whether direct, indirect or consequential and whether based on any
federal, state or foreign laws, statutes, rules or regulations (including
securities and commercial laws, statutes, rules or regulations and Environmental
Laws), on common law or equitable cause or on contract or otherwise, that may be
imposed on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of (i) this Agreement or the other Credit Documents
or the transactions contemplated hereby or thereby (including the Lenders’
agreement to make Credit Extensions, or the use or intended use of the proceeds
thereof, or any enforcement of any of the Credit Documents (including any sale
of, collection from, or other realization upon any of the Collateral or the
enforcement of the Guaranty)); (ii) the statements contained in the commitment
letter delivered by any Lender to Borrower with respect to the transactions
contemplated by this Agreement; or (iii) any Environmental Claim or any
Hazardous Materials Activity relating to or arising from, directly or
indirectly, any past or present activity, operation, land ownership, or practice
of Borrower or any of its Subsidiaries.

“Indemnitee” as defined in Section 10.3.

“Intellectual Property” as defined in the Pledge and Security Agreement.

“Intellectual Property Asset” means, at the time of determination, any interest
(fee, license or otherwise) then owned by any Credit Party in any Intellectual
Property.

“Intellectual Property Security Agreements” has the meaning assigned to that
term in the Pledge and Security Agreement.

“Intercompany Note” means a promissory note substantially in the form of Exhibit
L evidencing Indebtedness owed among the Credit Parties and their Subsidiaries.

“Intercreditor Agreement” means that certain Amended and Restated Intercreditor
Agreement, dated as of March 8, 2007, as amended and restated as of the
Effective Date, among the Joint First Lien Collateral Agent (as defined in the
First Lien Credit Agreement), Borrower and the Collateral Agent.

“Interest Event” shall be deemed to have occurred if, at any time after the date
that a Discharge of First Lien Obligations occurs, the ratio on the last day of
any Fiscal Quarter of (i) Consolidated Adjusted EBITDA for the four-Fiscal
Quarter period then ended to (ii) Consolidated Interest Expense (giving pro
forma effect for the conversion of any interest paid-in-kind under this
Agreement to interest payable in Cash) for such four Fiscal-Quarter period is
greater than 2.00:1.00.

“Interest Payment Date” means the last day of each Interest Period applicable to
such Loan; provided, in the case of each Interest Period of longer than three
months “Interest Payment Date” shall also include each date that is three
months, or an integral multiple thereof, after the commencement of such Interest
Period.

 

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“Interest Period” means, in connection with a Eurodollar Rate Loan, an interest
period of one-, two-, three- or six-months, as selected by Borrower in the
applicable Continuation Notice, (i) initially, commencing on the Effective Date
or Continuation Date thereof, as the case may be; and (ii) thereafter,
commencing on the day on which the immediately preceding Interest Period
expires; provided, (a) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day unless no further Business Day occurs in such month, in
which case such Interest Period shall expire on the immediately preceding
Business Day; (b) any Interest Period that begins on the last 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 Interest Period) shall, subject to
clause (c) of this definition, end on the last Business Day of the calendar
month that is closest to the applicable first, second, third or sixth month of
such Interest Period; and (c) no Interest Period with respect to any portion of
any of the Loans shall extend beyond the Maturity Date.

“Interest Rate Agreement” means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate hedging agreement
or other similar agreement or arrangement, each of which is for the purpose of
hedging the interest rate exposure associated with Borrower’s and its
Subsidiaries’ operations and not for speculative purposes.

“Interest Rate Determination Date” means, with respect to any Interest Period,
the date that is two Business Days prior to the first day of such Interest
Period.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to
the date hereof and from time to time hereafter, and any successor statute.

“Investment” means (i) any direct or indirect purchase or other acquisition by
Borrower or any of its Subsidiaries of, or of a beneficial interest in, any of
the Securities of any other Person (other than a Guarantor Subsidiary); (ii) any
direct or indirect redemption, retirement, purchase or other acquisition for
value, by any Subsidiary of Borrower from any Person (other than Borrower or any
Guarantor Subsidiary), of any Equity Interests of such Person; and (iii) any
direct or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contributions by Borrower or any of
its Subsidiaries to any other Person (other than Borrower or any Guarantor
Subsidiary), including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business. The amount of any Investment shall be
the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.

“Joint Venture” means a joint venture, partnership or other similar arrangement,
whether in corporate, partnership or other legal form; provided, in no event
shall any corporate Subsidiary of any Person be considered to be a Joint Venture
to which such Person is a party.

 

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“Kiosk Program” means the installation of movie rental kiosks in various retail
and other locations.

“Landlord Personal Property Collateral Access Agreement” means a Landlord Waiver
and Consent Agreement substantially in the form of Exhibit K with such
amendments, restatements or modifications as may be approved by Collateral
Agent.

“Leasehold Property” means any leasehold interest of any Credit Party as lessee
under any lease of real property.

“Lender” means each financial institution listed on the signature pages hereto
as a Lender, and any other Person that becomes a party hereto pursuant to an
Assignment Agreement.

“Lien” means (i) any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, and any
lease or license in the nature thereof) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing and
(ii) in the case of Securities, any purchase option, call or similar right of a
third party with respect to such Securities.

“Loan” means a Loan deemed to have been made by a Lender to Borrower pursuant to
Section 2.1(a).

“Loan Exposure” means, with respect to any Lender, as of any date of
determination, the outstanding principal amount of the Loans of such Lender.

“Margin Stock” as defined in Regulation U of the Board of Governors as in effect
from time to time.

“Material Adverse Effect” means a material adverse effect on and/or material
adverse developments with respect to (i) the business, operations, properties,
assets or condition (financial or otherwise) or prospects of Borrower and its
Subsidiaries taken as a whole; (ii) the ability of any Credit Party to fully and
timely perform its Obligations; (iii) the legality, validity, binding effect or
enforceability against a Credit Party of a Credit Document to which it is a
party; or (iv) the rights, remedies and benefits available to, or conferred
upon, any Agent and any Lender or any Secured Party under any Credit Document;
provided, that no Disclosed Matter shall constitute a Material Adverse Effect
and (B) the occurrence of any matters described on Schedule 4.7 hereto shall not
constitute a Material Adverse Effect.

“Material Contract” means any contract or other arrangement to which Borrower or
any of its Subsidiaries is a party (other than the Credit Documents) for which
breach, nonperformance, cancellation or failure to renew could reasonably be
expected to have a Material Adverse Effect.

“Material Real Estate Asset” means (i) (a) any fee-owned Real Estate Asset
having a fair market value in excess of $250,000 as of the date of the
acquisition thereof and (b) all Leasehold Properties other than those with
respect to which the aggregate payments under the

 

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remaining term of the lease are less than $750,000 or (ii) any Real Estate Asset
that the Requisite Lenders have determined is material to the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of Borrower or any Subsidiary of the Borrower.

“Maturity Date” means the earliest to occur of (i) November 20, 2012, and
(ii) the date that all such Loans become due and payable in full hereunder,
whether by acceleration or otherwise.

“Moody’s” means Moody’s Investor Services, Inc.

“Mortgage” means a Mortgage substantially in the form of Exhibit J, as it may be
amended, restated, supplemented or otherwise modified from time to time.

“Movie Gallery Canada” means Movie Gallery Canada, Inc., a wholly-owned
Subsidiary of Borrower organized under the laws of the Province of New
Brunswick.

“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer
plan” as defined in Section 3(37) of ERISA.

“NAIC” means The National Association of Insurance Commissioners, and any
successor thereto.

“Narrative Report” means (a) with respect to the financial statements delivered
pursuant to Section 5.1(b) and Section 5.1(c), a narrative report describing the
operations of Borrower and its Subsidiaries which report meets the requirements
of Item 303 of Regulation S-K promulgated under the Securities Act for the
applicable Fiscal Quarter or Fiscal Year and for the period from the beginning
of the then current Fiscal Year to the end of such period to which such
financial statements relate, and (b) with respect to the financial statements
delivered pursuant to Section 5.1(a), a narrative report prepared on a basis
consistent with, and setting forth the same types of information as set forth
in, the monthly financial statement reporting package delivered to
Administrative Agent prior to the Effective Date.

“Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal
to: (i) Cash payments (including any Cash received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received) received by Borrower or any of its Subsidiaries from such
Asset Sale, minus (ii) any bona fide direct costs incurred in connection with
such Asset Sale, including (a) income or gains taxes payable by the seller as a
result of any gain recognized in connection with such Asset Sale, (b) payment of
the outstanding principal amount of, premium or penalty, if any, and interest on
any Indebtedness (other than the Loans) that is secured by a Lien on the stock
or assets in question and that is required to be repaid under the terms thereof
as a result of such Asset Sale and (c) a reasonable reserve for any
indemnification payments (fixed or contingent) attributable to seller’s
indemnities and representations and warranties to purchaser in respect of such
Asset Sale undertaken by Borrower or any of its Subsidiaries in connection with
such Asset Sale.

“Net Insurance/Condemnation Proceeds” means an amount equal to: (i) any Cash
payments or proceeds received by Borrower or any of its Subsidiaries (a) under
any casualty insurance policy in respect of a covered loss thereunder or (b) as
a result of the taking of

 

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any assets of Borrower or any of its Subsidiaries by any Person pursuant to the
power of eminent domain, condemnation or otherwise, or pursuant to a sale of any
such assets to a purchaser with such power under threat of such a taking, minus
(ii) (a) any actual and reasonable costs incurred by Borrower or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
Borrower or such Subsidiary in respect thereof, and (b) any bona fide reasonable
direct costs incurred in connection with any sale of such assets as referred to
in clause (i)(b) of this definition, including income taxes payable as a result
of any gain recognized in connection therewith.

“Nonpublic Information” means information which has not been disseminated in a
manner making it available to investors generally, within the meaning of
Regulation FD.

“Non-Core Assets” means the following assets of the Borrower and its
Subsidiaries which are not essential or material to the conduct of the
businesses of the Borrower and its Subsidiaries: (i) aircraft of the Borrower
and its Subsidiaries, (ii) the “Reel.com” assets, (iii) the “Rack Division”
assets, (iv) the iBlast division assets, (v) the assets and/or Equity Interests
of MG Automation, Inc., (vi) the “Movie Beam” assets, (vii) owned real estate on
the Effective Date and (viii) other assets which are not essential or material
to the conduct of the businesses of the Borrower and its Subsidiaries to the
extent that the value of each such asset, individually, does not exceed
$100,000, and the value of all such assets, in the aggregate, does not exceed
$500,000 in any Fiscal Year.

“Non-US Lender” as defined in Section 2.17(c).

“Note” means a promissory note in the form of Exhibit B, as it may be amended,
supplemented or otherwise modified from time to time.

“Obligations” means all obligations of every nature of each Credit Party,
including obligations from time to time owed to the Agents (including former
Agents), the Lenders or any of them, under any Credit Document, whether for
principal, interest (including interest which, but for the filing of a petition
in bankruptcy with respect to such Credit Party, would have accrued on any
Obligation, whether or not a claim is allowed against such Credit Party for such
interest in the related bankruptcy proceeding), fees, expenses, indemnification
or otherwise.

“Obligee Guarantor” as defined in Section 7.7.

“Original Agreement” as defined in the recitals.

“Organizational Documents” means (i) with respect to any corporation, its
certificate or articles of incorporation or organization, as amended, and its
by-laws, as amended, (ii) with respect to any limited partnership, its
certificate of limited partnership, as amended, and its partnership agreement,
as amended, (iii) with respect to any general partnership, its partnership
agreement, as amended, and (iv) with respect to any limited liability company,
its articles of organization, as amended, and its operating agreement, as
amended. In the event any term or condition of this Agreement or any other
Credit Document requires any Organizational Document to be certified by a
secretary of state or similar governmental official, the reference to any such
“Organizational Document” shall only be to a document of a type customarily
certified by such governmental official.

 

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“Patriot Act” as defined in Section 3.1(s).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to Section 412 of the Internal Revenue Code or Section 302 of
ERISA.

“Permitted Acquisition” means any acquisition by Borrower or any of its
wholly-owned Subsidiaries, whether by purchase, merger or otherwise, of all or
substantially all of the assets of, all of the Equity Interests of, or a
business line or unit or a division of, any Person; provided,

 

  (i) immediately prior to, and after giving effect thereto, no Default or Event
of Default shall have occurred and be continuing or would result therefrom;

 

  (ii) all transactions in connection therewith shall be consummated, in all
material respects, in accordance with all applicable laws and in conformity with
all applicable Governmental Authorizations;

 

  (iii) in the case of the acquisition of Equity Interests, all of the Equity
Interests (except for any such Securities in the nature of directors’ qualifying
shares required pursuant to applicable law) acquired or otherwise issued by such
Person or any newly formed Subsidiary of Borrower in connection with such
acquisition shall be owned 100% by Borrower or a Guarantor Subsidiary thereof,
and Borrower shall have taken, or caused to be taken, as of the date such Person
becomes a Subsidiary of Borrower, each of the actions set forth in Sections 5.10
and/or 5.11, as applicable;

 

  (iv) Borrower shall have delivered to Administrative Agent (A) at least 10
Business Days prior to such proposed acquisition, all relevant financial
information with respect to such acquired assets, including the aggregate
consideration for such acquisition and (B) promptly upon request by
Administrative Agent, (i) a copy of the purchase agreement related to the
proposed Permitted Acquisition (and any related documents reasonably requested
by Administrative Agent) and (ii) quarterly and annual financial statements of
the Person whose Equity Interests or assets are being acquired for the twelve
month (12) month period immediately prior to such proposed Permitted
Acquisition, including any audited financial statements that are available;

 

  (v) any Person or assets or division as acquired in accordance herewith
(y) shall be in same business or lines of business in which Borrower and/or its
Subsidiaries are engaged as of the Effective Date or any business reasonably
related thereto or a reasonable extension thereof and (z) shall have generated
positive cash flow for the four quarter period most recently ended prior to the
date of such acquisition; and

 

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  (vi) prior to the Discharge of First Lien Obligations, the aggregate unused
portion of the Revolving Credit Commitments at such time (after giving effect to
the consummation of the respective Permitted Acquisition and any financing
thereof) shall equal or exceed $50,000,000.

“Permitted Liens” means each of the Liens permitted pursuant to Section 6.2.

“Person” means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, limited liability
partnerships, joint stock companies, Joint Ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and Governmental Authorities.

“PIK Interest” as defined in Section 2.5(e).

“Plan” as defined in the recitals hereto.

“Plan Effective Date” means the “Effective Date” as defined in the Plan.

“Platform” as defined in Section 5.1(p).

“Pledge and Security Agreement” means the Amended and Restated Pledge and
Security Agreement, dated as of March 8, 2007, as amended and restated as of the
Effective Date, to be executed by Borrower and each Guarantor substantially in
the form of Exhibit I, as it may be amended, restated, supplemented or otherwise
modified from time to time.

“Prime Rate” means the rate of interest quoted in The Wall Street Journal, Money
Rates Section as the Prime Rate (currently defined as the base rate on corporate
loans posted by at least 75% of the nation’s thirty (30) largest banks), as in
effect from time to time. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
Agent or any other Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.

“Principal Office” means Administrative Agent’s “Principal Office” as set forth
on Appendix B, or such other office or office of a third party or sub-agent, as
appropriate, as Administrative Agent may from time to time designate in writing
to Borrower and each Lender.

“Projections” as defined in Section 4.8.

“Pro Rata Share” means with respect to all payments, computations and other
matters relating to any Lender, the percentage obtained by dividing (a) the Loan
Exposure of that Lender by (b) the aggregate Loan Exposure of all Lenders.

 

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“Real Estate Asset” means, at any time of determination, any interest (fee,
leasehold or otherwise) then owned by any Credit Party in any real property.

“Real Estate Guarantors” means M.G.A. Realty I, LLC and MG Automation LLC, each
individually a Real Estate Guarantor, together with their successors and
assigns, including any trustee or other fiduciary hereafter appointed as legal
representative on behalf of such person or on behalf of any such successor or
assign.

“Register” as defined in Section 2.4(b).

“Regulation D” means Regulation D of the Board of Governors, as in effect from
time to time.

“Regulation FD” means Regulation FD as promulgated by the US Securities and
Exchange Commission under the Securities Act and Exchange Act as in effect from
time to time.

“Related Fund” means, with respect to any Lender that is an investment fund, 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.

“Release” means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of any Hazardous Material into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Material), including the movement of
any Hazardous Material through the air, soil, surface water or groundwater.

“Rental Items” means video cassette tapes, digital versatile disc (DVD) or video
discs (regardless of format), video games, audiotapes and related equipment to
the extent that such items were acquired by the Borrower or any of its
Subsidiaries for sale or rental to their customers or are held by the Borrower
or such Subsidiary for sale or rental to their customers.

“Replacement Lender” as defined in Section 2.19.

“Required Prepayment Date” as defined in Section 2.12(b).

“Requisite Lenders” means one or more Lenders having or holding Loan Exposure
representing more than 50% of the aggregate Loan Exposure of all Lenders,
provided that, if the Loan Exposure held or beneficially owned by Restricted
Sponsor Affiliates exceeds 15% of the aggregate Loan Exposure of all Lenders,
then, for purposes of this definition, the Loan Exposure of the Restricted
Sponsor Affiliates shall be ratably reduced so as to equal, in the aggregate,
15% and the Loan Exposure held or beneficially owned by all the other Lenders
shall be ratably increased so as to equal, in the aggregate, 85%.

“Restricted Junior Payment” means (i) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of Borrower now or
hereafter outstanding, except a dividend payable solely in shares of that class
of stock to the holders of that class; (ii) any redemption, retirement, sinking
fund or similar payment, purchase or other

 

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acquisition for value, direct or indirect, of any shares of any class of stock
of Borrower now or hereafter outstanding; (iii) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of Borrower now or hereafter outstanding;
and (iv) any payment or prepayment of principal of, premium, if any, or interest
on, or redemption, purchase, retirement, defeasance (including in-substance or
legal defeasance), sinking fund or similar payment, or any other payment (other
than principal or interest), with respect to any Indebtedness which is
subordinated in right of payment to the Obligations.

“Restricted Sponsor Affiliates” means the Sponsor Affiliates, but only at such
times that the Sponsor Affiliates (i) have, in the aggregate, ownership
(beneficial or otherwise) of 20% or more of the voting and/or economic interest
in the Equity Interests of Borrower, or (ii) have, individually or in the
aggregate, the power to direct or cause the direction of the management and
policies of Borrower or any of the Credit Parties, whether through the ownership
of voting securities or by contract or otherwise.

“Revolver Refinancing Indebtedness” has the meaning ascribed to that term in the
First Lien Credit Agreement.

“Revolving Agent” means the “Administrative Agent” under and as defined in the
Revolving Credit Facility.

“Revolving Credit Commitments” means the aggregate commitments of the lenders
under the Revolving Credit Facility to extend loans and other financial
accommodations thereunder.

“Revolving Credit Facility” means that certain Revolving Credit and Guarantee
Agreement, dated as of the Effective Date, by and among the Credit Parties, the
Revolving Agent, and the lenders from time to time party thereto.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw Hill
Corporation.

“Seasonal Overadvance Facility” means a letter of credit procurement facility
provided by a Sponsor Affiliate on the following terms: (A) the Indebtedness or
other obligations thereunder shall be unsecured, (B) the letters of credit
issued under the facility shall be used only for the purposes described on
Schedule 1B hereto, (C) the cash yield or cash interest on the Indebtedness
shall not exceed the rate applicable for Loans under this Agreement at such
time, (D) the covenants, events of default, subordination and other provisions
thereof (including any guarantees thereof) shall be as set forth on Schedule 1B
hereto and shall be, in the aggregate, no less favorable to the Borrower and to
the Lenders than those contained in the Credit Documents as currently in effect
and (E) no Default or Event of Default shall result therefrom.

“Second Priority” means, with respect to any Lien purported to be created in any
Collateral pursuant to any Collateral Document, that such Lien is (i) the only
Lien to which such Collateral is subject, other than any Permitted Lien and
(ii) junior in priority to the Liens created under or relating to the First Lien
Credit Documents in accordance with the Intercreditor Agreement.

 

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“Secured Leverage Ratio” means the ratio as of the last day of any Fiscal
Quarter of (i) Total Secured Debt as of such day to (ii) Consolidated Adjusted
EBITDA for the four-Fiscal Quarter period ending on such date.

“Secured Parties” has the meaning assigned to that term in the Pledge and
Security Agreement.

“Securities” means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as “securities” or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and any successor statute.

“Solvency Certificate” means a Solvency Certificate of the chief financial
officer of Borrower substantially in the form of Exhibit G-2.

“Solvent” means, with respect to any Credit Party, that as of the date of
determination, determined on a going concern basis, both (i) (a) the sum of such
Credit Party’s debt (including contingent liabilities) does not exceed the
present fair saleable value of such Credit Party’s present assets; (b) such
Credit Party’s capital is not unreasonably small in relation to its business as
contemplated on the Effective Date and reflected in the Projections or with
respect to any transaction contemplated or undertaken after the Effective Date;
and (c) such Person has not incurred and does not intend to incur, or believe
(nor should it reasonably believe) that it will incur, debts beyond its ability
to pay such debts as they become due (whether at maturity or otherwise); and
(ii) such Person is “solvent” within the meaning given that term and similar
terms under the Bankruptcy Code and applicable laws relating to fraudulent
transfers and conveyances. For purposes of this definition, the amount of any
contingent liability at any time shall be computed as the amount that, in light
of all of the facts and circumstances existing at such time, including such
Credit Party’s rights to contribution, indemnification and reimbursement,
represents the amount that can reasonably be expected to become an actual or
matured liability (irrespective of whether such contingent liabilities meet the
criteria for accrual under Statement of Financial Accounting Standard No. 5).

“Sponsor Affiliates” means Aspen Advisors, Condor Partners, Sopris Capital
Advisors LLC, Sopris Capital Management and Trendex Capital Management and their
respective Affiliates.

“Subsidiary” means, with respect to any Person, any corporation, partnership,
limited liability company, association, joint venture or other business entity
of which more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the

 

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power to direct or cause the direction of the management and policies thereof is
at the time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination thereof;
provided, in determining the percentage of ownership interests of any Person
controlled by another Person, no ownership interest in the nature of a
“qualifying share” of the former Person shall be deemed to be outstanding.

“Tax” means any present or future tax, levy, impost, duty, assessment, charge,
fee, deduction or withholding of any nature and whatever called, by whomsoever,
on whomsoever and wherever imposed, levied, collected, withheld or assessed;
provided, “Tax on the overall net income” of a Person shall be construed as a
reference to a tax imposed by the jurisdiction in which that Person is organized
or in which that Person’s applicable principal office (and/or, in the case of a
Lender, its lending office) is located or in which that Person (and/or, in the
case of a Lender, its lending office) is deemed to be doing business on all or
part of the net income, profits or gains (whether worldwide, or only insofar as
such income, profits or gains are considered to arise in or to relate to a
particular jurisdiction, or otherwise) of that Person (and/or, in the case of a
Lender, its applicable lending office).

“Term Loan Refinancing Indebtedness” has the meaning ascribed to that term in
the First Lien Credit Agreement.

“Terminated Lender” as defined in Section 2.19.

“Title Policy” as defined in Section 3.1(g)(iii).

“Total Secured Debt” means, as at any date of determination, Indebtedness with
respect to Loans plus Indebtedness outstanding under the Revolving Credit
Facility plus Indebtedness with respect to First Lien Term Loans plus “Synthetic
LC Usage” under (and as defined in) the First Lien Credit Agreement (only to the
extent drawn and not reimbursed) plus any other Indebtedness of the Borrower and
any of its Subsidiaries secured by a Lien.

“Type of Loan” means either a Base Rate Loan or a Eurodollar Rate Loan.

“UCC” means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.

“U.S. Lender” as defined in Section 2.17(c).

“Waivable Mandatory Prepayment” as defined in Section 2.12(b).

“Wells Fargo” as defined in the preamble.

1.2. Accounting Terms Except as otherwise expressly provided herein, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Borrower to Lenders pursuant to Section 5.1(b) and
5.1(c) shall be prepared in accordance with GAAP as in effect at the time of
such preparation (and delivered together with the reconciliation statements
provided for in Section 5.1(e), if applicable). Subject to the foregoing,
calculations in connection with the definitions, covenants and other provisions
hereof shall utilize accounting

 

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principles and policies in conformity with those used to prepare the Historical
Financial Statements. If at any time any change in GAAP (or a change in the
application of the policies thereof) would affect the computation of any
financial ratio or requirement set forth in any Credit Document, and Borrower or
Requisite Lenders shall so request, Administrative Agent, Requisite Lenders and
Borrower shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP (subject to
the approval of Requisite Lenders), provided that, until so amended, such ratio
or requirement shall continue to be computed in accordance with GAAP prior to
such change therein and Borrower shall provide to Administrative Agent and
Lenders reconciliation statements provided for in Section 5.1(e).

1.3. Interpretation, etc. Any of the terms defined herein may, unless the
context otherwise requires, be used in the singular or the plural, depending on
the reference. References herein to any Section, Appendix, Schedule or Exhibit
shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may
be, hereof unless otherwise specifically provided. The use herein of the word
“include” or “including”, when following any general statement, term or matter,
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not non-limiting language (such as “without limitation”
or “but not limited to” or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
fall within the broadest possible scope of such general statement, term or
matter. The terms lease and license shall include sub-lease and sub-license, as
applicable.

SECTION 2. LOANS

2.1. Loans.

(a) Loans. Each Lender shall be deemed to have made, on the Effective Date, a
Loan to Borrower in an amount equal to the amount set forth opposite such
Lender’s name on Appendix A hereto. Any amount repaid or prepaid may not be
reborrowed. Subject to Sections 2.10(a) and 2.11, all amounts owed hereunder
with respect to the Loans shall be paid in full no later than the Maturity Date.

2.2. [Reserved].

2.3. [Reserved].

2.4. Evidence of Debt; Register; Lenders’ Books and Records; Notes.

(a) Lenders’ Evidence of Debt. Each Lender shall maintain on its internal
records an account or accounts evidencing the Obligations of Borrower to such
Lender, including the amounts of the Loans made by it and each repayment and
prepayment in respect thereof. Any such recordation shall be conclusive and
binding on Borrower, absent manifest error; provided, that the failure to make
any such recordation, or any error in such recordation, shall not affect
Borrower’s Obligations in respect of any applicable Loans; and provided further,
in the event of any inconsistency between the Register and any Lender’s records,
the recordations in the Register shall govern.

 

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(b) Register. Administrative Agent (or its agent or sub-agent appointed by it)
shall maintain at the Principal Office a register for the recordation of the
names and addresses of Lenders and Loans of each Lender (the “Register”). The
Register shall be available for inspection by Borrower or any Lender (with
respect to any entry relating to such Lender’s Loans) at any reasonable time and
from time to time upon reasonable prior notice. Administrative Agent shall
record, or shall cause to be recorded, in the Register the Loans of each Lender
in accordance with the provisions of Section 10.6, and each repayment or
prepayment in respect of the principal amount of the Loans, and any such
recordation shall be conclusive and binding on Borrower and each Lender, absent
manifest error; provided, failure to make any such recordation, or any error in
such recordation, shall not affect Borrower’s Obligations in respect of any
Loan. Borrower hereby designates Wells Fargo to serve as Borrower’s agent solely
for purposes of maintaining the Register as provided in this Section 2.4, and
Borrower hereby agrees that, to the extent Wells Fargo serves in such capacity,
Wells Fargo and its officers, directors, employees, agents, sub-agents and
affiliates shall constitute “Indemnitees.”

(c) Notes. If so requested by any Lender by written notice to Borrower (with a
copy to Administrative Agent) at least two Business Days prior to the Effective
Date, or at any time thereafter, Borrower shall execute and deliver to such
Lender (and/or, if applicable and if so specified in such notice, to any Person
who is an assignee of such Lender pursuant to Section 10.6) on the Effective
Date (or, if such notice is delivered after the Effective Date, promptly after
Borrower’s receipt of such notice) a Note or Notes to evidence such Lender’s
Loan.

2.5. Interest on Loans.

(a) Except as otherwise set forth herein, Loans shall bear interest on the
unpaid principal amount thereof from the Effective Date through repayment
(whether by acceleration or otherwise) thereof as follows:

(1) if a Base Rate Loan, at the Base Rate plus the Applicable Margin; or

(2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus the
Applicable Margin.

(b) The basis for determining the rate of interest with respect to any Loan, and
the Interest Period with respect to any Eurodollar Rate Loan, shall be selected
by Borrower and notified to Administrative Agent and Lenders pursuant to the
applicable Continuation Notice. If on any day a Loan is outstanding with respect
to which a Continuation Notice has not been delivered to Administrative Agent in
accordance with the terms hereof specifying the applicable basis for determining
the rate of interest, then for that day such Loan shall be a Base Rate Loan.

(c) In connection with the Eurodollar Rate Loans there shall be no more than
five (5) Interest Periods outstanding at any time. In the event Borrower fails
to specify between

 

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a Base Rate Loan or a Eurodollar Rate Loan in the applicable Continuation
Notice, such Loan (if outstanding as a Eurodollar Rate Loan) will be
automatically continued as a Base Rate Loan on the last day of the then-current
Interest Period for such Loan (or if outstanding as a Base Rate Loan will remain
as a Base Rate Loan). In the event Borrower fails to specify an Interest Period
for any Eurodollar Rate Loan in the applicable Continuation Notice, Borrower
shall be deemed to have selected an Interest Period of one month. As soon as
practicable after 10:00 a.m. (New York City time) on each Interest Rate
Determination Date, Administrative Agent shall determine (which determination
shall, absent manifest error, be final, conclusive and binding upon all parties)
the interest rate that shall apply to the Eurodollar Rate Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to Borrower and each Lender.

(d) Interest payable pursuant to Section 2.5(a) shall be computed (i) in the
case of Base Rate Loans on the basis of a 365-day or 366-day year, as the case
may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day
year, in each case for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of the making of
such Loan or the first day of an Interest Period applicable to such Loan or the
last Interest Payment Date with respect to such Loan shall be included, and the
date of payment of such Loan or the expiration date of an Interest Period
applicable to such Loan shall be excluded; provided, if a Loan is repaid on the
same day on which it is made, one day’s interest shall be paid on that Loan.

(e) Except as otherwise set forth herein, interest on each Loan (i) shall accrue
on a daily basis and shall be payable in arrears on each Interest Payment Date
with respect to interest accrued on and to each such payment date; (ii) shall
accrue on a daily basis and shall be payable in arrears upon any prepayment of
that Loan, whether voluntary or mandatory, to the extent accrued on the amount
being prepaid; and (iii) shall accrue on a daily basis and shall be payable in
arrears at maturity of the Loans, including final maturity of the Loans.
Interest will be paid by adding such interest to the principal amount of the
outstanding Loans (“PIK Interest”), in each case, on each Interest Payment Date;
provided that, all interest shall be paid in cash on each Interest Payment Date
following an Interest Event. The obligation of Borrower to pay all such PIK
Interest so added shall be automatically evidenced by this Agreement or, if
applicable, all Notes. Upon request of Administrative Agent or any Lender,
Borrower shall confirm in writing the principal amount then outstanding on
Loans, including all PIK Interest so added.

2.6. Continuation. Subject to Section 2.15 and so long as no Default or Event of
Default shall have occurred and then be continuing, Borrower shall have the
option, upon the expiration of any Interest Period applicable to any Eurodollar
Rate Loan, to continue all or any portion of such Loan equal to $5,000,000 and
integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate
Loan.

Borrower shall deliver a Continuation Notice to Administrative Agent no later
than 10:00 a.m. (New York City time) at least three Business Days in advance of
the proposed continuation date. Except as otherwise provided herein, a
Continuation Notice for continuation of any Eurodollar Rate Loans (or telephonic
notice in lieu thereof) shall be irrevocable on and after the related Interest
Rate Determination Date, and Borrower shall be bound to effect a continuation in
accordance therewith.

 

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2.7. Default Interest. The principal amount of all Loans outstanding and not
paid when due and, to the extent permitted by applicable law, any interest
payments on the Loans or any fees or other amounts owed hereunder and not paid
when due, shall thereafter bear interest (including post-petition interest in
any proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable on demand at a rate that is 2% per annum in excess of the interest rate
otherwise payable hereunder with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable hereunder for Base Rate Loans);
provided, in the case of Eurodollar Rate Loans, upon the expiration of the
Interest Period in effect at the time any such increase in interest rate is
effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and
shall thereafter bear interest payable upon demand at a rate which is 2% per
annum in excess of the interest rate otherwise payable hereunder for Base Rate
Loans. Payment or acceptance of the increased rates of interest provided for in
this Section 2.7 is not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice or limit any
rights or remedies of Administrative Agent or any Lender.

2.8. Fees.

(a) On the date that is eighteen (18) months from the Effective Date, the
Borrower shall pay a fee to the Lenders in an amount equal to 0.50% of the then
unpaid principal amount of each Loan (including any accrued PIK Interest), which
amount shall be added to the outstanding principal amount of the Loans.

(b) On the second anniversary of the Effective Date, the Borrower shall pay a
fee to the Lenders in an amount equal to 0.50% of the then unpaid principal
amount of each Loan (including any accrued PIK Interest), which amount shall be
added to the outstanding principal amount of the Loans.

(c) Borrower agrees to pay to Lenders and to Agents such other fees in the
amounts and at the times separately agreed upon.

2.9. Payments at Maturity.

The Loans, together with all other amounts owed hereunder with respect thereto,
shall be paid in full no later than the Maturity Date.

2.10. Voluntary Prepayments/Call Protection.

(a) Voluntary Prepayments.

(i) Subject to the terms of Section 2.10(b) below and after or concurrently with
the Discharge of First Lien Obligations at any time and from time to time,
Borrower may prepay any such Loans on any Business Day in whole or in part in an
aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in
excess of that amount.

 

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(ii) All such prepayments shall be made:

(1) upon not less than three Business Day’s prior written or telephonic notice
in the case of Base Rate Loans; and

(2) upon not less than five Business Days’ prior written or telephonic notice in
the case of Eurodollar Rate Loans;

in each case given to Administrative Agent by 12:00 p.m. (New York City time) on
the date required and, if given by telephone, as soon as practicable confirmed
in writing to Administrative Agent (and Administrative Agent will promptly
transmit such telephonic or original notice by telefacsimile or telephone to
each Lender). Upon the giving of any such notice, the principal amount of the
Loans specified in such notice shall become due and payable on the prepayment
date specified therein. Any such voluntary prepayment shall be applied as
specified in Section 2.12(a), and shall be without penalty or premium of any
kind, except to the extent of breakage and other costs specifically provided for
under this Agreement.

(b) Call Protection. In the event all or any portion of the Loans are repaid for
any reason other than a prepayment required under Section 2.11(a), (b), (c) and
(e) prior to the second anniversary of the Effective Date, such repayments will
be made at (i) 102.0% of the amount repaid if such repayment occurs after the
Effective Date, but on or prior to the second anniversary of the Effective Date
and (ii) at 101.0% of the amount repaid if such repayment occurs after the
second anniversary of the Effective Date but on or prior to the third
anniversary of the Effective Date.

2.11. Mandatory Prepayments. Subject to the Intercreditor Agreement:

(a) Asset Sales. Subject to Section 2.12(b) and after the Discharge of First
Lien Obligations, no later than the first Business Day following the date of
receipt by Borrower or any of its Subsidiaries of any Net Asset Sale Proceeds,
Borrower shall prepay the Loans as set forth in Section 2.12(b) in an aggregate
amount equal to such Net Asset Sale Proceeds; provided, (i) so long as no
Default or Event of Default shall have occurred and be continuing and (ii) to
the extent that aggregate Net Asset Sale Proceeds from the Effective Date
through the applicable date of determination do not exceed $3,000,000, Borrower
shall have the option, directly or through one or more of its Subsidiaries, to
invest such Net Asset Sale Proceeds within three hundred sixty five days of
receipt thereof (A) in long-term productive assets (including the assets of
another Person (or the Equity Interests of a Person owning such assets) of the
general type used in the business of Borrower and its Subsidiaries and (B) to
the extent such Net Asset Sale Proceeds constitute proceeds of Non-Core Assets
in Rental Items or inventory held for sale at stores; provided, further, pending
any such investment, all such Net Asset Sale Proceeds may be applied to prepay
Revolving Loans under the Revolving Credit Facility to the extent outstanding
(without a reduction in Revolving Commitment thereunder).

 

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(b) Insurance/Condemnation Proceeds. Subject to Section 2.12(b) and after the
Discharge of First Lien Obligations, no later than the first Business Day
following the date of receipt by Borrower or any of its Subsidiaries, or
Administrative Agent as loss payee, of any Net Insurance/Condemnation Proceeds,
Borrower shall prepay the Loans as set forth in Section 2.12(b) in an aggregate
amount equal to such Net Insurance/Condemnation Proceeds; provided, (i) so long
as no Default or Event of Default shall have occurred and be continuing, and
(ii) to the extent that aggregate Net Insurance/Condemnation Proceeds from the
Effective Date through the applicable date of determination do not exceed
$10,000,000, Borrower shall have the option, directly or through one or more of
its Subsidiaries to invest such Net Insurance/Condemnation Proceeds within three
hundred sixty five days of receipt thereof in long term productive assets of the
general type used in the business of Borrower and its Subsidiaries, which
investment may include the repair, restoration or replacement of the applicable
assets thereof; provided, further, pending any such investment, all such Net
Insurance/Condemnation Proceeds as the case may be, may be applied to prepay
Revolving Loans under the Revolving Credit Facility to the extent outstanding
(without reduction in Revolving Commitments thereunder).

(c) Issuance of Equity Securities. Subject to Section 2.12(b) and after the
Discharge of First Lien Obligations, on the date of receipt by Borrower of any
Cash proceeds from a capital contribution to, or the issuance of any Equity
Interests of, Borrower or any of its Subsidiaries (other than (w) proceeds of
Equity Interests of the Borrower (that are not Disqualified Equity Interests)
issued to a Sponsor Affiliate that is not a Credit Party (provided no Default or
Event of Default shall have occurred and be then continuing), (x) proceeds of
the issuance of Equity Interests issued pursuant to the Plan, (y) pursuant to
any employee stock or stock option compensation plan, or (z) proceeds of the
issuance of Equity Interests (that are not Disqualified Equity Interests), to
finance the purchase of a Permitted Acquisition or Permitted Investment within
180 days of such issuance (provided no Default or Event of Default shall have
occurred and be then continuing), Borrower shall prepay the Loans as set forth
in Section 2.12(b) in an aggregate amount equal to 50% of such proceeds, net of
underwriting discounts and commissions and other reasonable costs and expenses
associated therewith, including reasonable legal fees and expenses; provided,
during any period in which the Secured Leverage Ratio (determined for any such
period by reference to the Compliance Certificate delivered pursuant to
Section 5.1(d) calculating the Secured Leverage Ratio as of the last day of the
most recently ended Fiscal Quarter) (i) shall be 2.50:1.00 or less, Borrower
shall only be required to make the prepayments and/or reductions otherwise
required hereby in an amount equal to 25% of such net proceeds and (ii) shall be
2.00:1.00 or less, Borrower shall not be required to make the prepayments and/or
reductions otherwise required hereby; provided further, that notwithstanding
anything to the contrary in this Section 2.11(c), 100% of the proceeds of the
Game Crazy IPO permitted by Section 6.7(j)(B), net of underwriting discounts and
commissions and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses, shall be applied to prepay the
Loans as set forth in Section 2.12(a).

(d) Issuance of Debt. Subject to Section 2.12(b) and after the Discharge of
First Lien Obligations, on the date of receipt by Borrower or any of its
Subsidiaries of any Cash proceeds from the incurrence of any Indebtedness of
Borrower or any of its Subsidiaries (other than with respect to any Indebtedness
permitted to be incurred pursuant to Section 6.1), Borrower shall prepay the
Loans as set forth in Section 2.12(b) in an aggregate amount equal to 100% of
such proceeds, net of underwriting discounts and commissions and other
reasonable costs and expenses associated therewith, including reasonable legal
fees and expenses.

 

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(e) Consolidated Excess Cash Flow. Subject to Section 2.12(b) and after the
Discharge of First Lien Obligations, in the event that there shall be
Consolidated Excess Cash Flow in any Fiscal Year (commencing with the Fiscal
Year ending 2008), Borrower shall, no later than ninety (90) days after the end
of each such Fiscal Year, prepay the Loans as set forth in Section 2.12(b) in an
aggregate amount equal to (i) 75% of such Consolidated Excess Cash Flow minus
(ii) voluntary repayments of the Loans, First Lien Term Loans and Revolving
Loans (excluding repayments of Revolving Loans except to the extent the
Revolving Commitments are permanently reduced in connection with such
repayments) during such Fiscal Year; provided, that if, as of the last day of
the most recently ended Fiscal Year, the Secured Leverage Ratio (determined for
any such period by reference to the Compliance Certificate delivered pursuant to
Section 5.1(d) calculating the Secured Leverage Ratio as of the last day of such
Fiscal Year) (i)(A) shall be 2.00:1.00 or less, Borrower shall only be required
to make the prepayments and/or reductions otherwise required hereby in an amount
equal to 50% of such Consolidated Excess Cash Flow or (B) shall be 1.50:1.00 or
less, Borrower shall only be required to make the prepayments and/or reductions
otherwise required hereby in an amount equal to 25% of such Consolidated Excess
Cash Flow, in each case minus (ii) voluntary repayments of the Loans, First Lien
Term Loans and Revolving Loans (excluding repayments of Revolving Loans except
to the extent the Revolving Commitments are permanently reduced in connection
with such repayments) during such Fiscal Year; provided, further, that
prepayments under this Section 2.11(e) shall not be required at the end of any
Fiscal Year following the Effective Date to the extent such prepayments would,
if given effect on the last day of such Fiscal Year, result in the aggregate
Cash and Cash Equivalents of Borrower and its Subsidiaries (minus the aggregate
amount of Revolving Loans then outstanding under the Revolving Credit Facility)
on such date being reduced to below the sum of $50,000,000 plus the cash
interest payments in respect of the Loans and in respect of Indebtedness under
the Revolving Credit Facility that would accrue during the Fiscal Quarter
immediately following the Fiscal Year to which such prepayment relates.

(f) Excess Cash. At the end of any of the first three Fiscal Quarters in any
Fiscal Year (commencing with the Fiscal Quarter ending April 6, 2008), Borrower
shall, no later than fifty (50) days after the end of each such Fiscal Quarter,
prepay the Loans as set forth in Section 2.12(b) in an aggregate amount equal to
(i) 100% of the Credit Parties’ Cash plus Cash Equivalents on hand at such date
minus (ii) voluntary repayments of the Loans and Revolving Loans (excluding
repayments of Revolving Loans except to the extent the Revolving Commitments are
permanently reduced in connection with such repayments) during such Fiscal
Quarter; provided, that prepayments under this Section 2.11(f) shall not be
required at the end of any of the first three Fiscal Quarters of any Fiscal Year
to the extent such prepayments would, if given effect on the last day of the
Fiscal Quarter, result in the aggregate Cash and Cash Equivalents of Borrower
and its Subsidiaries (minus the aggregate amount of Revolving Loans then
outstanding under the Revolving Credit Agreement) on such date being reduced to
below the sum of $50,000,000 plus the cash interest payments in respect of the
Loans and in respect of Indebtedness under the Revolving Credit Agreement that
would accrue during the Fiscal Quarter immediately following the Fiscal Quarter
to which such prepayment relates.

(g) Prepayment Certificate. Concurrently with any prepayment of the Loans
pursuant to Sections 2.11(a) through 2.11(f), Borrower shall deliver to
Administrative Agent a certificate of an Authorized Officer demonstrating in
reasonable detail the calculation of the

 

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amount of the applicable net proceeds or Consolidated Excess Cash Flow, as the
case may be. In the event that Borrower shall subsequently determine that the
actual amount received exceeded the amount set forth in such certificate,
Borrower shall promptly make an additional prepayment of the Loans in an amount
equal to such excess, and Borrower shall concurrently therewith deliver to
Administrative Agent a certificate of an Authorized Officer demonstrating the
derivation of such excess.

2.12. Application of Prepayments.

(a) Application of Prepayments of Loans. Prepayments of Loans shall be applied
first to Base Rate Loans to the full extent thereof before application to
Eurodollar Rate Loans, in each case in a manner which minimizes the amount of
any payments required to be made by Borrower pursuant to Section 2.15(c).

(b) Waivable Mandatory Prepayment. Anything contained herein to the contrary
notwithstanding except the limitations of the Intercreditor Agreement, in the
event Borrower is required to make any mandatory prepayment (a “Waivable
Mandatory Prepayment”) of the Loans, not less than three Business Days prior to
the date (the “Required Prepayment Date”) on which Borrower is required to make
such Waivable Mandatory Prepayment, Borrower shall notify Administrative Agent
of the amount of such prepayment, and Administrative Agent will promptly
thereafter notify each Lender of the amount of such Lender’s Pro Rata Share of
such Waivable Mandatory Prepayment and such Lender’s option to refuse such
amount. Each such Lender may exercise such option by giving written notice to
Borrower and Administrative Agent of its election to do so on or before the
first Business Day prior to the Required Prepayment Date (it being understood
that any Lender which does not notify Borrower and Administrative Agent of its
election to exercise such option on or before the first Business Day prior to
the Required Prepayment Date shall be deemed to have elected, as of such date,
not to exercise such option). On the Required Prepayment Date, Borrower shall
pay to Administrative Agent that portion of the Waivable Mandatory Prepayment
payable to those Lenders that have elected not to exercise such option, to
prepay the Loans of such Lenders (which prepayment shall be applied in
accordance with Section 2.12(a)).

2.13. General Provisions Regarding Payments.

(a) All payments by Borrower of principal, interest, fees and other Obligations
shall be made in Dollars in same day funds, without defense, setoff or
counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 12:00 p.m. (New York City time) on the date
due at the Principal Office designated by Administrative Agent for the account
of Lenders; for purposes of computing interest and fees, funds received by
Administrative Agent after that time on such due date shall be deemed to have
been paid by Borrower on the next succeeding Business Day.

(b) All payments in respect of the principal amount of any Loan shall be
accompanied by payment of accrued interest on the principal amount being repaid
or prepaid, and all such payments (and, in any event, any payments in respect of
any Loan on a date when interest is due and payable with respect to such Loan)
shall be applied to the payment of interest then due and payable before
application to principal.

 

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(c) Administrative Agent (or its agent or sub-agent appointed by it) shall
promptly distribute to each Lender at such address as such Lender shall indicate
in writing, such Lender’s applicable Pro Rata Share of all payments and
prepayments of principal and interest due hereunder, together with all other
amounts due thereto, including all fees payable with respect thereto, to the
extent received by Administrative Agent.

(d) Notwithstanding the foregoing provisions hereof, if any Continuation Notice
is withdrawn as to any Affected Lender or if any Affected Lender maintains Base
Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans,
Administrative Agent shall give effect thereto in apportioning payments received
thereafter.

(e) Whenever any payment to be made hereunder with respect to any Loan shall be
stated to be due on a day that is not a Business Day, such payment shall be made
on the next succeeding Business Day.

(f) Borrower hereby authorizes Administrative Agent to charge Borrower’s
accounts with Administrative Agent, if any, in order to cause timely payment to
be made to Administrative Agent of all principal, interest, fees and expenses
due hereunder (subject to sufficient funds being available in its accounts for
that purpose).

(g) Administrative Agent shall deem any payment by or on behalf of Borrower
hereunder that is not made in same day funds prior to 12:00 p.m. (New York City
time) to be a non-conforming payment. Any such payment shall not be deemed to
have been received by Administrative Agent until the later of (i) the time such
funds become available funds, and (ii) the applicable next Business Day.
Administrative Agent shall give prompt telephonic notice to Borrower and each
applicable Lender (confirmed in writing) if any payment is non-conforming. Any
non-conforming payment may constitute or become a Default or Event of Default in
accordance with the terms of Section 8.1(a). Interest shall continue to accrue
on any principal as to which a non-conforming payment is made until such funds
become available funds (but in no event less than the period from the date of
such payment to the next succeeding applicable Business Day) at the rate
determined pursuant to Section 2.7 from the date such amount was due and payable
until the date such amount is paid in full.

(h) Subject to the terms of the Intercreditor Agreement, if an Event of Default
shall have occurred and not otherwise been waived, and the maturity of the
Obligations shall have been accelerated pursuant to Section 8.1, or any Event of
Default under Section 8.1(f) or (g) shall have occurred, all payments or
proceeds received by Agents hereunder in respect of any of the Obligations,
shall be applied in accordance with the application arrangements described in
Section 7.2 of the Pledge and Security Agreement.

2.14. Ratable Sharing. Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment (other than a voluntary prepayment of Loans
made and applied in accordance with the terms hereof), through the exercise of
any right of set-off or banker’s lien, by counterclaim or cross action or by the
enforcement of any right under the Credit Documents or otherwise, or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal, interest, fees and other amounts then due and owing to such Lender
hereunder or under

 

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the other Credit Documents (collectively, the “Aggregate Amounts Due” to such
Lender) which is greater than the proportion received by any other Lender in
respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall (a) notify Administrative
Agent and each other Lender of the receipt of such payment and (b) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate Amounts
Due to the other Lenders so that all such recoveries of Aggregate Amounts Due
shall be shared by all Lenders in proportion to the Aggregate Amounts Due to
them; provided, if all or part of such proportionately greater payment received
by such purchasing Lender is thereafter recovered from such Lender upon the
bankruptcy or reorganization of Borrower or otherwise, those purchases shall be
rescinded and the purchase prices paid for such participations shall be returned
to such purchasing Lender ratably to the extent of such recovery, but without
interest. Borrower expressly consents to the foregoing arrangement and agrees
that any holder of a participation so purchased may exercise any and all rights
of banker’s lien, set-off or counterclaim with respect to any and all monies
owing by Borrower to that holder with respect thereto as fully as if that holder
were owed the amount of the participation held by that holder.

2.15. Maintaining Eurodollar Rate Loans.

(a) Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the London interbank market adequate and fair means do
not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone confirmed
in writing) to Borrower and each Lender of such determination, whereupon (i) no
Loans may continue as Eurodollar Rate Loans until such time as Administrative
Agent notifies Borrower and Lenders that the circumstances giving rise to such
notice no longer exist, and (ii) any Continuation Notice given by Borrower with
respect to the Loans in respect of which such determination was made shall be
deemed to be a Continuation Notice into Base Rate Loans.

(b) Illegality or Impracticability of Eurodollar Rate Loans. In the event that
on any date any Lender shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto but shall be made only after
consultation with Borrower and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful),
or (ii) has become impracticable, as a result of contingencies occurring after
the date hereof which materially and adversely affect the London interbank
market or the position of such Lender in that market, then, and in any such
event, such Lender shall be an “Affected Lender” and it shall on that day give
notice (by telefacsimile or by telephone confirmed in writing) to Borrower and
Administrative Agent of such determination (which notice Administrative Agent
shall promptly transmit to each other Lender). Thereafter (1) the Affected
Lender’s obligation to maintain its outstanding Eurodollar

 

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Rate Loans (the “Affected Loans”) shall be terminated at the earlier to occur of
the expiration of the Interest Period then in effect with respect to the
Affected Loans or when required by law, and (2) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being requested
by Borrower pursuant to a Continuation Notice, Borrower shall have the option,
subject to the provisions of Section 2.15(c), to rescind such Continuation
Notice as to all Lenders by giving notice (by telefacsimile or by telephone
confirmed in writing) to Administrative Agent of such rescission on the date on
which the Affected Lender gives notice of its determination as described above
(which notice of rescission Administrative Agent shall promptly transmit to each
other Lender). Except as provided in the immediately preceding sentence, nothing
in this Section 2.15(b) shall affect the obligation of any Lender other than an
Affected Lender to maintain Loans as Eurodollar Rate Loans in accordance with
the terms hereof.

(c) Compensation for Breakage or Non-Commencement of Interest Periods. Borrower
shall compensate each Lender, upon written request by such Lender (which request
shall set forth the basis for requesting such amounts), for all reasonable
losses, expenses and liabilities (including any interest paid by such Lender to
Lenders of funds borrowed by it to carry its Eurodollar Rate Loans and any loss,
expense or liability sustained by such Lender in connection with the liquidation
or re-employment of such funds but excluding loss of anticipated profits) which
such Lender may sustain: (i) if for any reason (other than a default by such
Lender or a rescission pursuant to Section 2.15(b)) a borrowing of any
Eurodollar Rate Loan does not occur on a date specified therefor in a
continuation of any Eurodollar Rate Loan does not occur on a date specified
therefor in a Continuation Notice or a telephonic request for continuation;
(ii) if any prepayment or other principal payment of any of its Eurodollar Rate
Loans occurs on a date prior to the last day of an Interest Period applicable to
that Loan; or (iii) if any prepayment of any of its Eurodollar Rate Loans is not
made on any date specified in a notice of prepayment given by Borrower.

(d) Booking of Eurodollar Rate Loans. Any Lender may carry or transfer
Eurodollar Rate Loans at, to, or for the account of any of its branch offices or
the office of an Affiliate of such Lender.

(e) Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all
amounts payable to a Lender under this Section 2.15 and under Section 2.16 shall
be made as though such Lender had actually funded each of its relevant
Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing
interest at the rate obtained pursuant to clause (i) of the definition of
Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of such
Lender to a domestic office of such Lender in the United States of America;
provided, however, each Lender may fund each of its Eurodollar Rate Loans in any
manner it sees fit and the foregoing assumptions shall be utilized only for the
purposes of calculating amounts payable under this Section 2.15 and under
Section 2.16.

 

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2.16. Increased Costs; Capital Adequacy.

(a) Compensation For Increased Costs and Taxes. Subject to the provisions of
Section 2.17 (which shall be controlling with respect to the matters covered
thereby), in the event that any Lender shall determine (which determination
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto) that any law, treaty or governmental rule, regulation or order,
or any change therein or in the interpretation, administration or application
thereof (including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or Governmental Authority,
in each case that becomes effective after the date hereof, or compliance by such
Lender with any guideline, request or directive issued or made after the date
hereof by any central bank or other governmental or quasi-governmental authority
(whether or not having the force of law): (i) subjects such Lender (or its
applicable lending office) to any additional Tax (other than any Tax on the
overall net income of such Lender) with respect to this Agreement or any of the
other Credit Documents or any of its obligations hereunder or thereunder or any
payments to such Lender (or its applicable lending office) of principal,
interest, fees or any other amount payable hereunder; (ii) imposes, modifies or
holds applicable any reserve (including any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement against assets held by, or deposits or other liabilities in
or for the account of, or advances or loans by, or other credit extended by, or
any other acquisition of funds by, any office of such Lender (other than any
such reserve or other requirements with respect to Eurodollar Rate Loans that
are reflected in the definition of Adjusted Eurodollar Rate); or (iii) imposes
any other condition (other than with respect to a Tax matter) on or affecting
such Lender (or its applicable lending office) or its obligations hereunder or
the London interbank market; and the result of any of the foregoing is to
increase the cost to such Lender of agreeing to maintain Loans hereunder or to
reduce any amount received or receivable by such Lender (or its applicable
lending office) with respect thereto; then, in any such case, Borrower shall
promptly pay to such Lender, upon receipt of the statement referred to in the
next sentence, such additional amount or amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender in its sole discretion shall determine) as may be necessary to compensate
such Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Borrower (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
Section 2.16(a), which statement shall be conclusive and binding upon all
parties hereto absent manifest error.

(b) Capital Adequacy Adjustment. In the event that any Lender shall have
determined that the adoption, effectiveness, phase-in or applicability after the
Effective Date of any law, rule or regulation (or any provision thereof)
regarding capital adequacy, or any change therein or in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender’s Loans or participations therein or other obligations hereunder
with respect to the Loans to a level below that which such Lender or such
controlling corporation could have achieved but for such adoption,
effectiveness, phase-in, applicability, change or compliance (taking into
consideration the policies of such

 

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Lender or such controlling corporation with regard to capital adequacy), then
from time to time, within five Business Days after receipt by Borrower from such
Lender of the statement referred to in the next sentence, Borrower shall pay to
such Lender such additional amount or amounts as will compensate such Lender or
such controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to Borrower (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to Lender under this Section 2.16(b), which statement
shall be conclusive and binding upon all parties hereto absent manifest error.

(c) Notice. Failure or delay on the part of any Lender to demand compensation
for any increased costs or reduction in amounts received or receivable or
reduction in return on capital shall not constitute a waiver of such Lender’s
right to demand such compensation; provided that Borrower shall not be under any
obligation to compensate any Lender under paragraph (a) or (b) of this
Section 2.16 with respect to increased costs or reductions with respect to any
period prior to the date that is 180 days prior to the date of the delivery of
the statement required pursuant to paragraph (a) or (b); provided further that
the foregoing limitation shall not apply to any increased costs or reductions
arising out of the retroactive application of any change in any law, treaty,
governmental rule, regulation or order within such 180-day period.

2.17. Taxes; Withholding, etc.

(a) Payments to Be Free and Clear. All sums payable by any Credit Party
hereunder and under the other Credit Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net income
of any Lender) imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United States
of America or any other jurisdiction from or to which a payment is made by or on
behalf of any Credit Party or by any federation or organization of which the
United States of America or any such jurisdiction is a member at the time of
payment.

(b) Withholding of Taxes. If any Credit Party or any other Person is required by
law to make any deduction or withholding on account of any such Tax from any sum
paid or payable by any Credit Party to Administrative Agent or any Lender under
any of the Credit Documents: (i) Borrower shall notify Administrative Agent of
any such requirement or any change in any such requirement as soon as Borrower
becomes aware of it; (ii) Borrower shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if the liability to pay
is imposed on any Credit Party) for its own account or (if that liability is
imposed on Administrative Agent or such Lender, as the case may be) on behalf of
and in the name of Administrative Agent or such Lender; (iii) the sum payable by
such Credit Party in respect of which the relevant deduction, withholding or
payment is required shall be increased to the extent necessary to ensure that,
after the making of that deduction, withholding or payment, Administrative Agent
or such Lender, as the case may be, receives on the due date a net sum equal to
what it would have received had no such deduction, withholding or payment been
required or made; and (iv) within thirty days after paying any sum from which it
is required by law to make any deduction or withholding, and within thirty days
after the due date of payment of any Tax which it is required by clause
(ii) above to pay, Borrower shall deliver to

 

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Administrative Agent evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to the relevant
taxing or other authority; provided, no such additional amount shall be required
to be paid to any Lender under clause (iii) above except to the extent that any
change after the date hereof (in the case of each Lender listed on the signature
pages hereof on the Effective Date) or after the effective date of the
Assignment Agreement pursuant to which such Lender became a Lender (in the case
of each other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the rate of such
deduction, withholding or payment from that in effect at the date hereof or at
the date of such Assignment Agreement, as the case may be, in respect of
payments to such Lender.

(c) Evidence of Exemption From U.S. Withholding Tax. Each Lender that is not a
United States Person (as such term is defined in Section 7701(a)(30) of the
Internal Revenue Code) for U.S. federal income tax purposes (a “Non-US Lender”)
shall deliver to Administrative Agent for transmission to Borrower, on or prior
to the Effective Date (in the case of each Lender listed on the signature pages
hereof on the Effective Date) or on or prior to the date of the Assignment
Agreement pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the determination of
Borrower or Administrative Agent (each in the reasonable exercise of its
discretion), (i) two original copies of Internal Revenue Service Form W-8BEN or
W-8ECI (or any successor forms), properly completed and duly executed by such
Lender, and such other documentation required under the Internal Revenue Code
and reasonably requested by Borrower to establish that such Lender is not
subject to deduction or withholding of United States federal income tax with
respect to any payments to such Lender of principal, interest, fees or other
amounts payable under any of the Credit Documents, or (ii) if such Lender is not
a “bank” or other Person described in Section 881(c)(3) of the Internal Revenue
Code and cannot deliver either Internal Revenue Service Form W-8ECI pursuant to
clause (i) above, a Certificate re Non-Bank Status together with two original
copies of Internal Revenue Service Form W-8BEN (or any successor form), properly
completed and duly executed by such Lender, and such other documentation
required under the Internal Revenue Code and reasonably requested by Borrower to
establish that such Lender is not subject to deduction or withholding of United
States federal income tax with respect to any payments to such Lender of
interest payable under any of the Credit Documents. Each Lender that is a United
States person (as such term is defined in Section 7701(a)(30) of the Internal
Revenue Code) for United States federal income tax purposes (a “U.S. Lender”)
shall deliver to Administrative Agent and Borrower on or prior to the Effective
Date (or, if later, on or prior to the date on which such Lender becomes a party
to this Agreement) two original copies of Internal Revenue Service Form W-9 (or
any successor form), properly completed and duly executed by such Lender,
certifying that such U.S. Lender is entitled to an exemption from United States
backup withholding tax, or otherwise prove that it is entitled to such an
exemption. Each Lender required to deliver any forms, certificates or other
evidence with respect to United States federal income tax withholding matters
pursuant to this Section 2.17(c) hereby agrees, from time to time after the
initial delivery by such Lender of such forms, certificates or other evidence,
whenever a lapse in time or change in circumstances renders such forms,
certificates or other evidence obsolete or inaccurate in any material respect,
that such Lender shall promptly deliver to Administrative Agent for transmission
to Borrower two new original copies of Internal Revenue Service Form W-8BEN or
W-8ECI, or a Certificate re Non-Bank Status and two original copies of Internal
Revenue Service Form W-8BEN (or any successor form), as the case

 

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may be, properly completed and duly executed by such Lender, and such other
documentation required under the Internal Revenue Code and reasonably requested
by Borrower to confirm or establish that such Lender is not subject to deduction
or withholding of United States federal income tax with respect to payments to
such Lender under the Credit Documents, or notify Administrative Agent and
Borrower of its inability to deliver any such forms, certificates or other
evidence. Borrower shall not be required to pay any additional amount to any
Non-US Lender under Section 2.17(b)(iii) if such Lender shall have failed (1) to
deliver the forms, certificates or other evidence referred to in the second
sentence of this Section 2.17(c), or (2) to notify Administrative Agent and
Borrower of its inability to deliver any such forms, certificates or other
evidence, as the case may be; provided, if such Lender shall have satisfied the
requirements of the first sentence of this Section 2.17(c) on the Effective Date
or on the date of the Assignment Agreement pursuant to which it became a Lender,
as applicable, nothing in this last sentence of Section 2.17(c) shall relieve
Borrower of its obligation to pay any additional amounts pursuant this
Section 2.17 in the event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is no longer
properly entitled to deliver forms, certificates or other evidence at a
subsequent date establishing the fact that such Lender is not subject to
withholding as described herein.

2.18. Obligation to Mitigate. Each Lender agrees that, as promptly as
practicable after the officer of such Lender responsible for administering its
Loans becomes aware of the occurrence of an event or the existence of a
condition that would cause such Lender to become an Affected Lender or that
would entitle such Lender to receive payments under Section 2.15, 2.16 or 2.17,
it will, to the extent not inconsistent with the internal policies of such
Lender and any applicable legal or regulatory restrictions, use reasonable
efforts to (a) maintain its Credit Extensions, including any Affected Loans,
through another office of such Lender, or (b) take such other measures as such
Lender may deem reasonable, if as a result thereof the circumstances which would
cause such Lender to be an Affected Lender would cease to exist or the
additional amounts which would otherwise be required to be paid to such Lender
pursuant to Section 2.15, 2.16 or 2.17 would be materially reduced and if, as
determined by such Lender in its sole discretion, the making, issuing, funding
or maintaining of such Loans through such other office or in accordance with
such other measures, as the case may be, would not otherwise adversely affect
such Loans or the interests of such Lender; provided, such Lender will not be
obligated to utilize such other office pursuant to this Section 2.18 unless
Borrower agrees to pay all incremental expenses incurred by such Lender as a
result of utilizing such other office as described above. A certificate as to
the amount of any such expenses payable by Borrower pursuant to this
Section 2.18 (setting forth in reasonable detail the basis for requesting such
amount) submitted by such Lender to Borrower (with a copy to Administrative
Agent) shall be conclusive absent manifest error.

2.19. Removal or Replacement of a Lender. Anything contained herein to the
contrary notwithstanding, in the event that: (a) (i) any Lender (an
“Increased-Cost Lender”) shall give notice to Borrower that such Lender is an
Affected Lender or that such Lender is entitled to receive payments under
Section 2.15, 2.16 or 2.17, (ii) the circumstances which have caused such Lender
to be an Affected Lender or which entitle such Lender to receive such payments
shall remain in effect, and (iii) such Lender shall fail to withdraw such notice
within five Business Days after Borrower’s request for such withdrawal; or
(b) in connection with any

 

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proposed amendment, modification, termination, waiver or consent with respect to
any of the provisions hereof as contemplated by Section 10.5(b), the consent of
Requisite Lenders shall have been obtained but the consent of one or more of
such other Lenders (each a “Non-Consenting Lender”) whose consent is required
shall not have been obtained; then, with respect to each such Increased-Cost
Lender or Non-Consenting Lender (the “Terminated Lender”), Borrower may, by
giving written notice to Administrative Agent and any Terminated Lender of its
election to do so, elect to cause such Terminated Lender (and such Terminated
Lender hereby irrevocably agrees) to assign its outstanding Loans in full to one
or more Eligible Assignees (each a “Replacement Lender”) in accordance with the
provisions of Section 10.6 and Borrower shall pay or cause to be paid the fees,
if any, payable thereunder in connection with any such assignment from an
Increased Cost Lender or a Non-Consenting Lender; provided, (1) on the date of
such assignment, the Replacement Lender shall pay to Terminated Lender an amount
equal to the sum of (A) an amount equal to the principal of, and all accrued
interest on, all outstanding Loans of the Terminated Lender and (B) an amount
equal to all accrued, but theretofore unpaid fees owing to such Terminated
Lender pursuant to Section 2.8 and all other amounts owing to such Terminated
Lender pursuant to any other provision of any Credit Document; (2) on the date
of such assignment, Borrower shall pay any amounts payable to such Terminated
Lender pursuant to Section 2.15(c), 2.16 or 2.17; or otherwise as if it were a
prepayment and (3) in the event such Terminated Lender is a Non-Consenting
Lender, each Replacement Lender shall consent, at the time of such assignment,
to each matter in respect of which such Terminated Lender was a Non-Consenting
Lender. Upon the prepayment of all amounts owing to any Terminated Lender such
Terminated Lender shall no longer constitute a “Lender” for purposes hereof;
provided, any rights of such Terminated Lender to indemnification hereunder
shall survive as to such Terminated Lender.

SECTION 3. CONDITIONS PRECEDENT

3.1. Effective Date. The effectiveness of this Agreement on the Effective Date
is subject to the satisfaction, or waiver in accordance with Section 10.5, of
the following conditions on or before the Effective Date:

(a) Credit Documents. Administrative Agent shall have received copies of each
Credit Document originally executed and delivered by each applicable Credit
Party, and each schedule to such Credit Documents (such schedules to be in form
and substance reasonably satisfactory to the Requisite Lenders).

 

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(b) Additional Loan Documents. On or before the Effective Date, all conditions
precedent to the effectiveness of the First Lien Credit Agreement and the
Revolving Credit Facility shall have been satisfied (or waived), and Borrower
shall have delivered to Administrative Agent complete, correct and conformed
copies of the (i) the First Lien Credit Facilities and the other First Lien
Credit Documents, in each case in form and substance reasonably satisfactory to
the Requisite Lenders and (ii) the Revolving Credit Facility and the other
Revolving Credit Documents, in each case in form and substance reasonably
satisfactory to the Requisite Lenders.

(c) Organizational Documents; Incumbency. Administrative Agent shall have
received (i) copies of each Organizational Document executed and delivered by
each Credit Party, as applicable, and, to the extent applicable, certified as of
a recent date by the appropriate governmental official, each dated the Effective
Date or a recent date prior thereto; (ii) signature and incumbency certificates
of the officers of such Person executing the Credit Documents to which it is a
party; (iii) resolutions of the Board of Directors or similar governing body of
each Credit Party approving and authorizing the execution, delivery and
performance of this Agreement and the other Credit Documents to which it is a
party or by which it or its assets may be bound as of the Effective Date,
certified as of the Effective Date by its secretary or an assistant secretary as
being in full force and effect without modification or amendment; (iv) a good
standing certificate from the applicable Governmental Authority of each Credit
Party’s jurisdiction of incorporation, organization or formation and in each
jurisdiction in which it is qualified as a foreign corporation or other entity
to do business (other than, in the case of jurisdictions other than such Credit
Party’s jurisdiction of incorporation, organization or formation, where the
failure to be in good standing or so qualified could not be reasonably expected
to have a Material Adverse Effect), each dated a recent date prior to the
Effective Date and (v) such other documents as Administrative Agent may
reasonably request.

(d) Organizational and Capital Structure. The organizational structure and
capital structure of Borrower and its Subsidiaries shall be as set forth on
Schedule 4.1.

(e) Repayment of DIP Financing Obligations. On the Effective Date, Borrower and
its Subsidiaries shall have (i) repaid in full in cash the DIP Credit Facility
Obligations and any and all fees then owing to the lenders under the DIP Credit
Agreement or pursuant to any “DIP Order” (as defined in the DIP Credit
Agreement), (ii) terminated any commitments to lend or make other extensions of
credit under the DIP Credit Agreement and (iii) delivered to Administrative
Agent all documents or instruments necessary to release all Liens securing the
DIP Credit Facility Obligations or other obligations of Borrower and its
Subsidiaries thereunder being repaid on the Effective Date.

(f) Governmental Authorizations and Consents. Each Credit Party shall have
obtained all Governmental Authorizations and all consents of other Persons, in
each case that are necessary or advisable in connection with the Plan and the
transactions contemplated by the Credit Documents and each of the foregoing
shall be in full force and effect and in form and substance reasonably
satisfactory to Administrative Agent. All applicable waiting periods shall have
expired without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the
transactions contemplated by the Credit Documents or the financing thereof and
no action, request for stay, petition for

 

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review or rehearing, reconsideration, or appeal with respect to any of the
foregoing shall be pending, and the time for any applicable agency to take
action to set aside its consent on its own motion shall have expired.

(g) Real Estate Assets. In order to create or continue, in favor of Collateral
Agent, for the benefit of Secured Parties, a valid and, subject to any filing
and/or recording referred to herein, perfected Second Priority security interest
in certain Real Estate Assets, Collateral Agent shall have received from
Borrower and each applicable Guarantor:

(i) fully executed and notarized Mortgages, in proper form for recording in all
appropriate places in all applicable jurisdictions, encumbering each Real Estate
Asset listed in Schedule 3.1(g)(i) (each, an “Effective Date Mortgaged
Property”);

(ii) an opinion of counsel (which counsel shall be reasonably satisfactory) in
each state in which an Effective Date Mortgaged Property is located with respect
to the enforceability of the form(s) of Mortgages to be recorded in such state
and such other matters as Collateral Agent may reasonably request, in each case
in form and substance reasonably satisfactory;

(iii) (a) except as determined by the Requisite Lenders in the exercise of their
sole discretion, ALTA mortgagee title insurance policies or unconditional
commitments therefor issued by one or more title companies reasonably
satisfactory with respect to each Effective Date Mortgaged Property (each, a
“Title Policy”), in amounts not less than the fair market value of each
Effective Date Mortgaged Property, together with a title report issued by a
title company with respect thereto, dated not more than thirty days prior to the
Effective Date and copies of all recorded documents listed as exceptions to
title or otherwise referred to therein, each in form and substance reasonably
satisfactory and (B) satisfactory evidence that such Credit Party has paid to
the title company or to the appropriate governmental authorities all expenses
and premiums of the title company and all other sums required in connection with
the issuance of each Title Policy and all recording and stamp taxes (including
mortgage recording and intangible taxes) payable in connection with recording
the Mortgages for each Effective Date Mortgaged Property in the appropriate real
estate records;

(iv) flood certifications with respect to all Effective Date Mortgaged
Properties and evidence of flood insurance with respect to each Flood Hazard
Property that is located in a community that participates in the National Flood
Insurance Program, in each case in compliance with any applicable regulations of
the Board of Governors, in form and substance reasonably satisfactory; and

(v) except as determined by the Requisite Lenders in the exercise of their sole
discretion, either (i) new ALTA surveys of all Effective Date Mortgaged
Properties, certified to Collateral Agent and dated not more than thirty days
prior to the Effective Date or (ii) existing ALTA surveys of all Effective Date
Mortgaged Properties, certified to the Collateral Agent, along with an affidavit
of no change from the surveyor issued not more than thirty days prior to the
Effective Date.

 

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(h) Personal Property Collateral. In order to create or continue, in favor of
Collateral Agent, for the benefit of Secured Parties, a valid, perfected Second
Priority security interest in the personal property Collateral, the Credit
Parties shall have delivered to Collateral Agent:

(i) Satisfactory evidence of the compliance by each Credit Party of their
obligations under the Pledge and Security Agreement and the other Collateral
Documents (including their obligations to execute and deliver UCC financing
statements, originals of securities, instruments, chattel paper and certificates
of title and any agreements governing deposit and/or securities accounts as
provided therein);

(ii) A completed Collateral Questionnaire dated the Effective Date and executed
by an Authorized Officer of each Credit Party, together with all attachments
contemplated thereby together with (A) the results of a recent search, by a
Person reasonably satisfactory, of all effective UCC financing statements made
with respect to any personal or mixed property of any Credit Party in the
jurisdictions specified in the Collateral Questionnaire, together with copies of
all such filings disclosed by such search, and (B) UCC termination statements
(or similar documents) duly authorized and, if applicable, executed by all
applicable Persons for filing in all applicable jurisdictions as may be
necessary to terminate any effective UCC financing statements disclosed in such
search (other than any such financing statements in respect of Permitted Liens);

(iii) fully executed and notarized Intellectual Property Security Agreements, in
proper form for filing or recording in all appropriate places in all applicable
jurisdictions, memorializing and recording the encumbrance of the Intellectual
Property Assets listed in Schedule 4.7 to the Pledge and Security Agreement;

(iv) opinions of counsel (which counsel shall be reasonably satisfactory) with
respect to the creation and perfection of the security interests in favor of
Collateral Agent in such Collateral and such other matters governed by the laws
of each jurisdiction in which any Credit Party or any personal property
Collateral is located as Collateral Agent may reasonably request, in each case
in reasonably satisfactory form and substance;

(v) evidence that each Credit Party shall have taken or caused to be taken any
other action, executed and delivered or caused to be executed and delivered any
other agreement, document and instrument (including (i) a Landlord Personal
Property Collateral Access Agreement executed by the landlord of any Leasehold
Property which is a warehouse, distribution center or other location at which a
material amount of Collateral is located, and by the applicable Credit Party and
(ii) any intercompany notes evidencing Indebtedness permitted to be incurred
pursuant to Section 6.1(b)) and made or caused to be made any other filing and
recording (other than as set forth herein) reasonably required by Collateral
Agent; and

 

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(vi) satisfactory evidence that Borrower has retained, at its sole cost and
expense, a service provider for the tracking of all of UCC financing statements
of Borrower and the Guarantors and that will provide notification to Collateral
Agent of, among other things, the upcoming lapse or expiration thereof.

(i) Financial Statements; Projections. Lenders shall have received from Borrower
(i) the Historical Financial Statements (it being understood and agreed that
such Historical Financial Statements submitted to Lenders prior to the Effective
Date are satisfactory to Lenders), (ii) pro forma consolidated balance sheets of
Borrower and its Subsidiaries as at the Effective Date, and reflecting
consummation of the Plan and the other the transactions contemplated by the
Credit Documents to occur on or prior to the Effective Date, which pro forma
balance sheet shall be in form and substance reasonably satisfactory to
Administrative Agent and (iii) the Projections.

(j) Budget. Administrative Agent shall have received the Budget.

(k) Evidence of Insurance. Collateral Agent shall have received a certificate
from Borrower’s insurance broker or other evidence reasonably satisfactory to it
that all insurance required to be maintained pursuant to Section 5.5 is in full
force and effect, together with endorsements naming the Collateral Agent, for
the benefit of Secured Parties, as additional insured and loss payee thereunder
to the extent required under Section 5.5.

(l) Opinions of Counsel to Credit Parties. Lenders and Agents and their
respective counsel shall have received originally executed copies of the
favorable written opinions of Kirkland & Ellis LLP, counsel for Credit Parties
and as to such other matters as Administrative Agent may reasonably request,
dated as of the Effective Date and otherwise in form and substance reasonably
satisfactory to Administrative Agent and Lenders (and each Credit Party hereby
instructs such counsel to deliver such opinions to the Agents and Lenders).

(m) Fees. Borrower shall have paid to Agents the fees payable on the Effective
Date referred to in Section 2.8.

(n) Solvency Certificate. On the Effective Date Administrative Agent shall have
received a Solvency Certificate from Borrower and in form, scope and substance
satisfactory to Administrative Agent and demonstrating that after giving effect
to the consummation of the transactions contemplated by the initial borrowings
hereunder, under the First Lien Credit Agreement and under the Revolving Credit
Facility and any rights of contribution, each of Borrower and its Subsidiaries
is and will be Solvent.

(o) Effective Date Certificate. Borrower shall have delivered to Administrative
Agent an originally executed Effective Date Certificate, together with all
attachments thereto.

(p) No Litigation. There shall not exist any action, suit, investigation,
litigation, proceeding, hearing or other legal or regulatory developments,
pending or threatened

 

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in any court or before any arbitrator or Governmental Authority that, in the
reasonable opinion of Administrative Agent, singly or in the aggregate,
materially impairs the Plan or any of the other transactions contemplated by the
Credit Documents, or that could have a Material Adverse Effect.

(q) Completion of Proceedings. All partnership, corporate and other proceedings
taken or to be taken in connection with the Plan and the other transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent and its counsel shall be satisfactory in form
and substance to Administrative Agent and such counsel, and Administrative Agent
and such counsel shall have received all such counterpart originals or certified
copies of such documents as Administrative Agent may reasonably request.

(r) Patriot Act. Prior to the Effective Date, the Administrative Agent and the
Collateral Agent shall have received all documentation and other information
required by bank regulatory authorities under applicable “know-your-customer”
and anti-money laundering rules and regulations, including the U.S.A. Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
“Patriot Act”).

(s) Consummation of Plan; etc. The following events or transactions shall have
occurred, in each case on terms and conditions reasonably satisfactory to
Administrative Agent:

(i) All documents executed in connection with the implementation of the Plan
shall be in accordance with the Plan and shall be reasonably satisfactory in
form and substance to Administrative Agent;

(ii) The capitalization of Borrower and its Subsidiaries and the sources and
uses of the funds of Borrower and its Subsidiaries on the Effective Date and in
connection with the implementation of the Plan shall be consistent in all
material respects with the pro forma financial statements and other information
delivered to Lenders prior to the date of the Effective Date;

(iii) All conditions precedent to the effectiveness of the Plan shall have been
met (or shall be met upon funding of the Loans to be made on the Effective Date)
or waived in accordance with the Plan, the Plan Effective Date and substantial
consummation of the Plan shall have occurred (or shall be scheduled to occur
upon funding of the Loans to be made on the Effective Date), and the Plan shall
be in full force and effect;

(iv) the Confirmation Order shall be final, valid, subsisting and continuing and
shall not have been reversed, stayed or otherwise amended or modified, and shall
not be subject to a pending motion to modify or to stay and shall be in full
force and effect;

(v) there shall be no motion to revoke confirmation of the Plan; and

 

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(vi) all appeal periods relating to the Confirmation Order shall have expired,
and there shall be no petition for rehearing or certiorari pending in respect of
the Confirmation Order which could reasonably be expected, in the reasonable
judgment of Administrative Agent, to adversely affect the Plan.

(t) Representations and Warranties. The representations and warranties contained
herein and in the other Credit Documents shall be true and correct in all
material respects on and as of the Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date.

(u) No Default. No event shall have occurred and be continuing or would result
from the making of the Loans that would constitute an Event of Default or a
Default.

(v) Evidence of Transfer of Leasehold Property to Real Estate Guarantors.
Collateral Agent shall have received, in form and substance satisfactory to the
Administrative Agent, (a) such agreements, documents, instruments and orders of
the Bankruptcy Court required (i) to convey all of the Leasehold Property to the
Real Estate Guarantors (other than Leasehold Property determined by the
Administrative Agent or Requisite Lenders, in its or their sole discretion, as
not having to be conveyed) and (ii) to evidence the assignment to and assumption
by the Real Estate Guarantors of all of the Leasehold Property and (b) the
sublease agreements between Real Estate Guarantors, on the one hand, and each
other Credit Party that operates a retail store, warehouse, distribution center
or other business on any Leasehold Property, on the other hand, duly authorized,
executed and delivered by the parties thereto.

Any Agent or Requisite Lenders shall be entitled, but not obligated to, request
and receive, prior to the Effective Date, additional information reasonably
satisfactory to the requesting party confirming the satisfaction of any of the
foregoing if, in the good faith judgment of such Agent or Requisite Lender such
request is warranted under the circumstances.

3.2. Notices. Any Continuation Notice shall be executed by an Authorized Officer
in a writing delivered to Administrative Agent, which may be by electronic mail.
In lieu of delivering a Continuation Notice, Borrower may give Administrative
Agent telephonic notice by the required time of any proposed continuation;
provided each such notice shall be promptly confirmed in writing by delivery of
the applicable Continuation Notice to Administrative Agent on or before the
applicable date of continuation. Neither Administrative Agent nor any Lender
shall incur any liability to Borrower in acting upon any telephonic notice
referred to above that Administrative Agent believes in good faith to have been
given by a duly authorized officer or other person authorized on behalf of
Borrower or for otherwise acting in good faith.

 

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SECTION 4. REPRESENTATIONS AND WARRANTIES

In order to induce Lenders to enter into this Agreement, each Credit Party
represents and warrants to each Lender and Agents that the following statements
are true and correct as of the Effective Date (it being understood and agreed
that the representations and warranties made on the Effective Date are deemed to
be made concurrently with the Plan Effective Date and the other transactions
contemplated hereby):

4.1. Organization; Requisite Power and Authority; Qualification. Each of
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization as identified
in Schedule 4.1, (b) has all requisite power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Credit Documents to which it is a party and to
carry out the transactions contemplated thereby, and (c) is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions where the failure to be so qualified or in good standing has not
had, and could not be reasonably expected to have, a Material Adverse Effect.

4.2. Equity Interests and Ownership. The Equity Interests of Subsidiaries of
Borrower has been duly authorized and validly issued and is fully paid and
non-assessable. Except as set forth on Schedule 4.2, as of the date hereof,
there is no existing option, warrant, call, right, commitment or other agreement
to which any Subsidiary of Borrower is a party requiring, and there is no
membership interest or other Equity Interests of any Subsidiary of Borrower
outstanding which upon conversion or exchange would require, the issuance by any
Subsidiary of Borrower of any additional membership interests or other Equity
Interests of any Subsidiary of Borrower or other Securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase, a
membership interest or other Equity Interests of any Subsidiary of Borrower.
Schedule 4.2 correctly sets forth the ownership interest of Borrower and each of
its Subsidiaries in their respective Subsidiaries as of the Effective Date after
giving effect to the consummation of the Plan.

4.3. Due Authorization. The execution, delivery and performance of the Credit
Documents have been duly authorized by all necessary action on the part of each
Credit Party that is a party thereto.

4.4. No Conflict. The execution, delivery and performance by Credit Parties of
the Credit Documents to which they are parties, the consummation of the Plan and
the consummation of the transactions contemplated by the Credit Documents do not
and will not (a) violate (i) any provision of any law or any governmental rule
or regulation applicable to Borrower or any of its Subsidiaries, (ii) any of the
Organizational Documents of Borrower or any of its Subsidiaries, or (iii) any
order, judgment or decree of any court or other agency of government binding on
Borrower or any of its Subsidiaries; (b) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Borrower or any of its Subsidiaries except to the
extent such conflict, breach or default could not reasonably be expected to have
a Material Adverse Effect; (c) result in or require the creation or imposition
of any Lien upon any of the properties or assets of Borrower or any of its
Subsidiaries (other than any Liens created under any of the Credit Documents in
favor of Collateral Agent, on behalf of Secured Parties, and Liens securing the
obligations under the Revolving Credit Facility and Liens securing the
obligations under the First Lien Credit Agreement); or (d) require any approval
of stockholders, members or partners or any approval or consent of any Person
under any Contractual Obligation of Borrower or any of its Subsidiaries,

 

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except for such approvals or consents which will be obtained on or before the
Effective Date and disclosed in writing to Lenders and except for any such
approvals or consents the failure of which to obtain will not have a Material
Adverse Effect.

4.5. Governmental Consents. The execution, delivery and performance by Credit
Parties of the Credit Documents to which they are parties and the consummation
of the Plan and the transactions contemplated by the Credit Documents do not and
will not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any Governmental Authority except (i) as otherwise
set forth in the Plan, (ii) for filings and recordings with respect to the
Collateral to be made, or otherwise delivered to Collateral Agent for filing
and/or recordation, as of the Effective Date and (iii) any registration,
consent, approval, notice or action to the extent that the failure to undertake
or obtain such registration, consent, approval, notice or action could not
reasonably be expected to have a Material Adverse Effect.

4.6. Binding Obligation. Each Credit Document has been duly executed and
delivered by each Credit Party that is a party thereto and is the legally valid
and binding obligation of such Credit Party, enforceable against such Credit
Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors’ rights generally or by equitable principles relating to
enforceability.

4.7. Historical Financial Statements. Other than in respect of matters disclosed
on Schedule 4.7 hereto, the Historical Financial Statements were prepared in
conformity with GAAP and fairly present, in all material respects, the financial
position, on a consolidated basis, of the Persons described in such financial
statements as at the respective dates thereof and the results of operations and
cash flows, on a consolidated basis, of the entities described therein for each
of the periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from (i) audit and normal year-end adjustments
and (ii) changes resulting from the matters described on Schedule 4.7 hereto. As
of the Effective Date, except in respect of matters disclosed on Schedule 4.7
hereto, neither Borrower nor any of its Subsidiaries has any contingent
liability or liability for taxes, long-term lease (other than store leases
entered into in the ordinary course of business) or unusual forward or long-term
commitment that is not reflected in the Historical Financial Statements or the
notes thereto and which in any such case is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Borrower and any of its Subsidiaries taken as a whole.

4.8. Projections. On and as of the Effective Date, the projections of Borrower
and its Subsidiaries for the period of Fiscal Year 2008 through and including
Fiscal Year 2011 (the “Projections”) are based on good faith estimates and
assumptions made as of the Effective Date by the management of Borrower;
provided, the Projections are not to be viewed as facts and that actual results
during the period or periods covered by the Projections may differ from such
Projections and that the differences may be material; provided further, as of
the Effective Date, management of Borrower believed that the Projections were
reasonable and attainable.

 

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4.9. No Material Adverse Change. Since the Effective Date (after giving effect
to the transactions contemplated by this Agreement and the Plan), no event,
circumstance or change has occurred that has caused or evidences, either in any
case or in the aggregate, a Material Adverse Effect, other than such changes and
developments that are contemplated by the Plan.

4.10. No Restricted Junior Payments. Since the Effective Date, neither Borrower
nor any of its Subsidiaries has directly or indirectly declared, ordered, paid
or made, or set apart any sum or property for, any Restricted Junior Payment or
agreed to do so except as permitted pursuant to Section 6.4 and the Plan.

4.11. Adverse Proceedings, etc. There are no Adverse Proceedings, individually
or in the aggregate, that could reasonably be expected to have a Material
Adverse Effect. Neither Borrower nor any of its Subsidiaries (a) is in violation
of any applicable laws (including Environmental Laws) that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
or (b) is subject to or in default with respect to any final judgments, orders,
writs, injunctions, decrees, rules or regulations of any court or any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. Other
than as expressly contemplated by the Plan to be paid in connection with the
consummation of the Plan or contemplated pursuant to the Plan to survive the
Plan Effective Date, there are no pre-petition or administrative claims or
pre-petition Liens other than such claims and Liens identified on Schedules 6.1
and 6.2 that are not material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Borrower
and any of its Subsidiaries taken as a whole.

4.12. Payment of Taxes. Except as otherwise permitted under Section 5.3 or
pursuant to the Plan, all federal, material state, material provincial and other
material tax returns and reports of Borrower and its Subsidiaries required to be
filed by any of them have been timely filed, and all taxes reflected therein
which are due and payable and all assessments, fees and other governmental
charges upon Borrower and its Subsidiaries and upon their respective properties,
assets, income, businesses and franchises which are due and payable have been
paid when due and payable. Borrower knows of no proposed tax assessment against
Borrower or any of its Subsidiaries which is not being actively contested by
Borrower or such Subsidiary in good faith and by appropriate proceedings;
provided, such reserves or other appropriate provisions, if any, as shall be
required in conformity with GAAP shall have been made or provided therefor.

4.13. Properties.

(a) Title. Each of Borrower and its Subsidiaries has (i) good, sufficient and
legal title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or personal
property, and subject to Section 3.1(v) in the case of leasehold interests in
real property), (iii) valid licensed rights in (in the case of licensed
interests in Intellectual Property) and (iv) good title to (in the case of all
other personal property), all of their respective properties and assets
reflected in their respective Historical Financial Statements referred to in
Section 4.7 and in the most recent financial statements delivered

 

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pursuant to Section 5.1, in each case except for assets disposed of (x) during
the Cases in accordance with applicable requirements of the Bankruptcy Code or
pursuant to an order of the Bankruptcy Court, (y) since the date of such
financial statements in the ordinary course of business or as otherwise
permitted under Section 6.7 and, with respect to the foregoing clause (ii),
except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Except as permitted by this Agreement, all
such properties and assets are free and clear of Liens.

(b) Real Estate. As of the Effective Date, Schedule 4.13 contains a true,
accurate and complete list of (i) all Real Estate Assets, and (ii) all leases,
subleases or assignments of leases (together with all amendments, modifications,
supplements, renewals or extensions of any thereof) affecting each Real Estate
Asset of any Credit Party, regardless of whether such Credit Party is the
landlord or tenant (whether directly or as an assignee or successor in interest)
under such lease, sublease or assignment. Except as could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
each agreement listed in clause (ii) of the immediately preceding sentence is in
full force and effect and Borrower does not have knowledge of any default that
has occurred and is continuing thereunder, and each such agreement constitutes
the legally valid and binding obligation of each applicable Credit Party,
enforceable against such Credit Party in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors’ rights generally or by
equitable principles. As of the Effective Date, the Excluded Properties have an
estimated fair market value of not more than $60,000 each.

4.14. Environmental Matters. Neither Borrower nor any of its Subsidiaries nor
any of their respective Facilities or operations are subject to any outstanding
written order, consent decree or settlement agreement with any Person relating
to any Environmental Law, any Environmental Claim, or any Hazardous Materials
Activity that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect. Neither Borrower nor any of its Subsidiaries has
received any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
§ 9604) or any comparable state law. There are and, to each of Borrower’s and
its Subsidiaries’ knowledge, have been, no conditions, occurrences, or Hazardous
Materials Activities which could reasonably be expected to form the basis of an
Environmental Claim against Borrower or any of its Subsidiaries that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Neither Borrower nor any of its Subsidiaries nor, to
any Credit Party’s knowledge, any predecessor of Borrower or any of its
Subsidiaries has filed any notice under any Environmental Law indicating past or
present treatment of Hazardous Materials at any Facility, and none of Borrower’s
or any of its Subsidiaries’ operations involves the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R.
Parts 260-270 or any state equivalent. Compliance with all current or reasonably
foreseeable future requirements pursuant to or under Environmental Laws could
not be reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. No event or condition has occurred or is occurring with respect
to Borrower or any of its Subsidiaries relating to any Environmental Law, any
Release of Hazardous Materials, or any Hazardous Materials Activity which
individually or in the aggregate has had, or could reasonably be expected to
have, a Material Adverse Effect.

 

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4.15. No Defaults. Neither Borrower nor any of its Subsidiaries is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any of its Contractual Obligations, and no condition
exists which, with the giving of notice or the lapse of time or both, could
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, could not reasonably be expected to have a
Material Adverse Effect.

4.16. Material Contracts. Schedule 4.16 contains a true, correct and complete
list of all the Material Contracts in effect on the Effective Date, and, after
giving effect to the consummation of the transactions contemplated by this
Agreement, except as described thereon, all such Material Contracts are in full
force and effect and no defaults currently exist thereunder.

4.17. Governmental Regulation. Neither Borrower nor any of its Subsidiaries is
subject to regulation under the Federal Power Act or the Investment Company Act
of 1940 or under any other federal or state statute or regulation which may
limit its ability to incur Indebtedness or which may otherwise render all or any
portion of the Obligations unenforceable. Neither Borrower nor any of its
Subsidiaries is a “registered investment company” or a company “controlled” by a
“registered investment company” or a “principal underwriter” of a “registered
investment company” as such terms are defined in the Investment Company Act of
1940.

4.18. Margin Stock. Neither Borrower nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the Loans made to such Credit Party will be used to purchase or
carry any such Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any purpose that violates,
or is inconsistent with, the provisions of Regulation T, U or X of the Board of
Governors.

4.19. Employee Matters. Neither Borrower nor any of its Subsidiaries is engaged
in any unfair labor practice that could reasonably be expected to have a
Material Adverse Effect. There is (a) no unfair labor practice complaint pending
against Borrower or any of its Subsidiaries, or to the best knowledge of
Borrower and Borrower, threatened against any of them before the National Labor
Relations Board and no grievance or arbitration proceeding arising out of or
under any collective bargaining agreement that is so pending against Borrower or
any of its Subsidiaries or to the best knowledge of Borrower and Borrower,
threatened against any of them, (b) no strike or work stoppage in existence or
threatened involving Borrower or any of its Subsidiaries, and (c) to the best
knowledge of Borrower and Borrower, no union representation question existing
with respect to the employees of Borrower or any of its Subsidiaries and, to the
best knowledge of Borrower and Borrower, no union organization activity that is
taking place, except (with respect to any matter specified in clause (a), (b) or
(c) above, either individually or in the aggregate) such as is not reasonably
likely to have a Material Adverse Effect. The consummation of the Plan will not
give rise to any right of termination, right of renegotiation or any other right
under any collective bargaining agreement or Multiemployer Plan to which
Borrower or any of its Subsidiaries is bound.

 

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4.20. Employee Benefit Plans. Borrower, each of its Subsidiaries and each of
their respective ERISA Affiliates are in compliance with all applicable
provisions and requirements of ERISA and the Internal Revenue Code and the
regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed all their obligations under each
Employee Benefit Plan, except, in each case, where the failure to comply or
perform would not reasonably be expected to result in liabilities of Borrower
and its Subsidiaries in excess of $15,000,000 in the aggregate or have Material
Adverse Effect. Each Employee Benefit Plan which is intended to qualify under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service indicating that such
Employee Benefit Plan is so qualified and nothing has occurred subsequent to the
issuance of such determination letter which would cause such Employee Benefit
Plan to lose its qualified status. No liability to the PBGC (other than required
premium payments), the Internal Revenue Service, any Employee Benefit Plan
(other than routine contributions) or any trust established under Title IV of
ERISA (other than routine contributions)has been or is expected to be incurred
by Borrower, any of its Subsidiaries or any of their ERISA Affiliates, which
would, when taken together with all such liabilities, exceed $15,000,000 in the
aggregate for Borrower and its Subsidiaries or which would reasonably be
expected to have Material Adverse Effect. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all such ERISA
Events, would exceed $15,000,000 in the aggregate for Borrower and its
Subsidiaries or would reasonably be expected to have Material Adverse Effect.
Except to the extent required under Section 4980B of the Internal Revenue Code
or similar state laws and to the extent an employee became entitled to benefits
prior to his or her termination of employment (e.g., severance, long term
disability benefits, etc.), no Employee Benefit Plan provides health or welfare
benefits (through the purchase of insurance or otherwise) for any retired or
former employee of Borrower, any of its Subsidiaries or any of their respective
ERISA Affiliates. The present value of the aggregate benefit liabilities under
each Pension Plan sponsored, maintained or contributed to by Borrower, any of
its Subsidiaries or any of their ERISA Affiliates (determined as of the end of
the most recent plan year on the basis of the actuarial assumptions specified
for funding purposes in the most recent actuarial valuation for such Pension
Plan), did not exceed the aggregate current value of the assets of such Pension
Plan. As of the most recent valuation date for each Multiemployer Plan for which
the actuarial report is available, the potential liability of Borrower, its
Subsidiaries and their respective ERISA Affiliates for a complete withdrawal
from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
aggregated with such potential liability for a complete withdrawal from all
Multiemployer Plans, based on information available pursuant to Section 4221(e)
of ERISA is zero. Borrower, each of its Subsidiaries and each of their ERISA
Affiliates have complied with the requirements of Section 515 of ERISA with
respect to each Multiemployer Plan and are not in material “default” (as defined
in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer
Plan.

4.21. Certain Fees. No broker’s or finder’s fee or commission will be payable
with respect to the transactions contemplated by the Plan or the Credit
Documents, except as payable to the Agents and the Lenders or as otherwise
contemplated by the Plan.

4.22. Solvency. The Credit Parties are and, upon the incurrence of any
Obligation by any Credit Party on any date on which this representation and
warranty is made, will be, Solvent.

 

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4.23. Compliance with Statutes, etc. Each of Borrower and its Subsidiaries is in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all Governmental Authorities, in respect of
the conduct of its business and the ownership of its property (including
compliance with all applicable Environmental Laws with respect to any Real
Estate Asset or governing its business and the requirements of any permits
issued under such Environmental Laws with respect to any such Real Estate Asset
or the operations of Borrower or any of its Subsidiaries), except such
non-compliance that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

4.24. Disclosure. No representation or warranty of any Credit Party contained in
any Credit Document or in any other documents, certificates or written
statements furnished to any Agent or Lender by or on behalf of Borrower or any
of its Subsidiaries for use in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact (known to Borrower, in the case of any document not furnished by
it) necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made, except for
the possible adjustment to the Historical Financial Statements resulting from
the matters described on Schedule 4.7 hereto. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made, it being recognized by the Administrative Agent and the Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
materially and adversely from the projected results (it being understood that
such projections and financial information do not give effect to the matters
described on Schedule 4.7 hereto). There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Borrower (other than
matters of a general economic nature) that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect and that
have not been disclosed herein or in such other documents, certificates and
statements furnished to Lenders for use in connection with the transactions
contemplated hereby.

4.25. Patriot Act. To the extent applicable, each Credit Party is in compliance,
in all material respects, with the (i) Trading with the Enemy Act, as amended,
and each of the foreign assets control regulations of the Untied States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA Patriot Act of 2001). No part of the proceeds of the
Loans will be used, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

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SECTION 5. AFFIRMATIVE COVENANTS

Each Credit Party covenants and agrees that, so long as any Lender Exposure
exists and until payment in full of all Obligations, each Credit Party shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 5.

5.1. Financial Statements and Other Reports. Borrower will deliver to
Administrative Agent and Lenders:

(a) Monthly Reports. As soon as available, and in any event within 30 days after
the end of each fiscal month ending after the Effective Date, commencing with
the fiscal month prior to the fiscal month in which the Effective Date occurs,
the consolidated balance sheets of Borrower and its Subsidiaries as at the end
of such fiscal month and the related consolidated statements of operations,
stockholders’ equity and cash flows of Borrower and its Subsidiaries for such
fiscal month and for the period from the beginning of the then current Fiscal
Year to the end of such fiscal month, setting forth in each case in comparative
form the corresponding figures for the corresponding periods of the previous
Fiscal Year, all in reasonable detail, together with a Financial Officer
Certification and a Narrative Report with respect thereto;

(b) Quarterly Financial Statements. As soon as available, and in any event
within 50 days after the end of each of the first three Fiscal Quarters of each
Fiscal Year, commencing with the Fiscal Quarter in which the Effective Date
occurs, the consolidated balance sheets of Borrower and its Subsidiaries as at
the end of such Fiscal Quarter and the related consolidated statements of
operations, stockholders’ equity and cash flows of Borrower and its Subsidiaries
for such Fiscal Quarter and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, setting forth in each
case in comparative form the corresponding figures for the corresponding periods
of the previous Fiscal Year, all in reasonable detail, together with a Financial
Officer Certification and a Narrative Report with respect thereto;

(c) Annual Financial Statements. As soon as available, and in any event within
105 days after the end of each Fiscal Year, commencing with the Fiscal Year in
which the Effective Date occurs, (i) the consolidated balance sheets of Borrower
and its Subsidiaries as at the end of such Fiscal Year and the related
consolidated statements of operations, stockholders’ equity and cash flows of
Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case
in comparative form the corresponding figures for the previous Fiscal Year
covered by such financial statements, in reasonable detail, together with a
Financial Officer Certification and a Narrative Report with respect thereto, and
(ii) with respect to such consolidated financial statements a report thereon of
Ernst & Young LLP or other independent certified public accountants of
recognized national standing selected by Borrower, and reasonably satisfactory
to Administrative Agent (which report shall be unqualified as to going concern
and scope of audit, and shall state that such consolidated financial statements
fairly present, in all material respects, the consolidated financial position of
Borrower and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements has been
made in accordance with generally accepted auditing

 

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standards) together with a written statement by such independent certified
public accountants stating if provided by such independent certified public
accountants, that nothing has come to their attention that causes them to
believe that the information contained in any Compliance Certificate is not
correct or that the matters set forth in such Compliance Certificate are not
stated in accordance with the terms hereof;

(d) Compliance Certificate. Together with each delivery of financial statements
of Borrower and its Subsidiaries pursuant to 5.1(b) and 5.1(c), a duly executed
and completed Compliance Certificate;

(e) Statements of Reconciliation after Change in Accounting Principles. If, as a
result of any change in accounting principles and policies from those used in
the preparation of the Historical Financial Statements, the consolidated
financial statements of Borrower and its Subsidiaries delivered pursuant to
Section 5.1(b) or 5.1(c) will differ in any material respect from the
consolidated financial statements that would have been delivered pursuant to
such subdivisions had no such change in accounting principles and policies been
made, then, together with the first delivery of such financial statements after
such change, one or more statements of reconciliation for all such prior
financial statements in form and substance satisfactory to Administrative Agent
provided, that this Section 5.1(e) shall not apply in the event Borrower or
Requisite Lenders do not make the request referred to in, and the Credit
Documents are not amended in the manner described in, Section 1.2;

(f) Notice of Default. Promptly upon any officer of Borrower obtaining knowledge
(i) of any condition or event that constitutes a Default or an Event of Default
or that notice has been given to Borrower with respect thereto; (ii) that any
Person has given any notice to Borrower or any of its Subsidiaries or taken any
other action with respect to any event or condition set forth in Section 8.1(b);
or (iii) of the occurrence of any event or change that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect, a certificate
of its Authorized Officer specifying the nature and period of existence of such
condition, event or change, or specifying the notice given and action taken by
any such Person and the nature of such claimed Event of Default, Default,
default, event or condition, and what action Borrower has taken, is taking and
proposes to take with respect thereto;

(g) Notice of Litigation. Promptly upon any officer of Borrower obtaining
knowledge of (i) the institution of, or non-frivolous threat of, any Adverse
Proceeding not previously disclosed in writing by Borrower to Lenders, or
(ii) any material development in any Adverse Proceeding that, in the case of
either clause (i) or (ii), if adversely determined could be reasonably expected
to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby, written notice thereof together with such
other information as may be reasonably available to Borrower to enable Lenders
and their counsel to evaluate such matters;

(h) ERISA. (i) Promptly upon any officer of Borrower becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a written notice
specifying the nature thereof, what action Borrower, any of its Subsidiaries or
any of their respective ERISA Affiliates has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the

 

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PBGC with respect thereto; and (ii) with reasonable promptness, copies of
(1) each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by Borrower, any of its Subsidiaries or any of their respective
ERISA Affiliates with the Internal Revenue Service with respect to each Pension
Plan; (2) all notices received by Borrower, any of its Subsidiaries or any of
their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning
an ERISA Event; and (3) copies of such other documents or governmental reports
or filings relating to any Employee Benefit Plan as Administrative Agent shall
reasonably request which, in each of (i) and (ii) relate to matters or
liabilities that, when taken together with all such matters and liabilities,
exceed $15,000,000 in the aggregate for the Borrower and its Subsidiaries or
which would reasonably be expected to have Material Adverse Effect;

(i) Updated Budget. As soon as practicable and in any event no later than forty
five days after the end of each Fiscal Year, an updated Budget;

(j) Insurance Report. As soon as practicable and in any event by the last day of
each Fiscal Year, a certificate from Borrower’s insurance broker(s) in form and
substance satisfactory to Administrative Agent outlining all material insurance
coverage maintained as of the date of such certificate by Borrower and its
Subsidiaries;

(k) Notice of Change in Board of Directors. With reasonable promptness, written
notice of any change in the board of directors (or similar governing body) of
Borrower;

(l) Notice Regarding Material Contracts. Promptly, and in any event within ten
Business Days (i) after any Material Contract of Borrower or any of its
Subsidiaries is terminated or amended in a manner that is materially adverse to
Borrower or such Subsidiary, as the case may be, or (ii) after any new Material
Contract is entered into, a written statement describing such event, with copies
of such material amendments or new contracts, delivered to Administrative Agent
(to the extent such delivery is permitted by the terms of any such Material
Contract, provided, no such prohibition on delivery shall be effective if it
were bargained for by Borrower or its applicable Subsidiary with the intent of
avoiding compliance with this Section 5.1(l)), and an explanation of any actions
being taken with respect thereto;

(m) Information Regarding Collateral. (a) Borrower will furnish to Collateral
Agent prompt written notice of any change (i) in any Credit Party’s corporate
name, (ii) in any Credit Party’s identity or corporate structure, (iii) in any
Credit Party’s jurisdiction of organization or (iv) in any Credit Party’s
Federal Taxpayer Identification Number or state organizational identification
number. Borrower agrees not to effect or permit any change referred to in the
preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are reasonably required in order for
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected security interest in all the Collateral as contemplated in
the Collateral Documents. Borrower also agrees promptly to notify Collateral
Agent if any material portion of the Collateral is damaged or destroyed;

(n) Annual Collateral Verification. Each year, at the time of delivery of annual
financial statements with respect to the preceding Fiscal Year pursuant to
Section 5.1(b), Borrower shall deliver to Collateral Agent a certificate of its
Authorized Officer (i) either

 

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confirming that there has been no change in such information since the date of
the Collateral Questionnaire delivered on the Effective Date or the date of the
most recent certificate delivered pursuant to this Section and/or identifying
such changes and (ii) certifying that all Uniform Commercial Code financing
statements (including fixtures filings, as applicable) and all supplemental
intellectual property security agreements or other appropriate filings,
recordings or registrations, have been filed of record in each governmental,
municipal or other appropriate office in each jurisdiction identified pursuant
to clause (i) above (or in such Collateral Questionnaire) to the extent
necessary to effect, protect and perfect the security interests under the
Collateral Documents for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period);

(o) Other Information. (A) Promptly upon their becoming available, copies of
(i) all financial statements, reports, notices and proxy statements sent or made
available generally by Borrower to its security holders acting in such capacity
or by any Subsidiary of Borrower to its security holders other than Borrower or
another Subsidiary of Borrower, (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by Borrower or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority,
(iii) all press releases and other statements made available generally by
Borrower or any of its Subsidiaries to the public concerning material
developments in the business of Borrower or any of its Subsidiaries, and
(B) such other information and data with respect to Borrower or any of its
Subsidiaries as from time to time may be reasonably requested by Administrative
Agent (for itself or any Lender); and

(p) Communications Platform. The Borrower and the Lenders agree that the Agents
may distribute documents, notices, and communications (“Communications”) to the
Lenders, including without limitation the financial statements and other
information delivered to the Agents pursuant to this Section 5.1 by posting such
Communications on Intralinks or a substantially similar electronic transmission
system selected by the Administrative Agent (the “Platform”).

ANY PLATFORM, IF PROVIDED, IS PROVIDED “AS IS” AND “AS AVAILABLE”. NEITHER AGENT
WARRANTS THE ACCURACY OR COMPLETENESS OF ANY COMMUNICATION OR THE ADEQUACY OF
THE PLATFORM, AND THE AGENTS EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR
OMISSIONS IN ANY COMMUNICATION. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NONINFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER
CODE DEFECTS, IS MADE BY THE AGENTS IN CONNECTION WITH ANY COMMUNICATION OR THE
PLATFORM. IN NO EVENT SHALL THE AGENTS OR THE BORROWER HAVE ANY LIABILITY TO THE
BORROWER, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES, LOSSES OR EXPENSES
(WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S, OR ANY
AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE
EXTENT SUCH DAMAGES ARE FOUND IN A FINAL JUDGMENT BY A COURT OF COMPETENT
JURISDICTION NO LONGER

 

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SUBJECT TO APPEAL TO HAVE RESULTED FROM SUCH PERSON’S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. WITHOUT LIMITING THE FOREGOING, NEITHER THE AGENTS NOR THE
BORROWER SHALL, UNDER ANY CIRCUMSTANCE, BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OF THE PLATFORM OR,
ANY AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET.

Each Lender agrees that notice to it (as provided in the next sentence)
specifying that a Communication has been posted to the Platform shall constitute
effective delivery of such Communication to such Lender for purposes of the
Credit Documents. Each Lender agrees (i) to notify the Agents from time to time
of the e-mail address to which the foregoing notice may be sent and (ii) that
such notice may be sent to such e-mail address.

5.2. Existence. Except as otherwise permitted under Section 6.7, each Credit
Party will, and will cause each of its Subsidiaries to, at all times preserve
and keep in full force and effect its existence and all rights and franchises,
licenses and permits material to its business; provided, no Credit Party (other
than Borrower with respect to existence) or any of its Subsidiaries shall be
required to preserve any such existence, right or franchise, licenses and
permits if the failure to do so, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.

5.3. Payment of Taxes and Claims. Each Credit Party will, and will cause each of
its Subsidiaries to, pay all Taxes imposed upon it or any of its properties or
assets or in respect of any of its income, businesses or franchises before any
penalty or fine accrues thereon, and all claims (including claims for labor,
services, materials and supplies) for sums that have become due and payable and
that by law have or may become a Lien upon any of its properties or assets,
prior to the time when any penalty or fine shall be incurred with respect
thereto; provided, no such Tax or claim need be paid if (i) such Tax or claim
does not, together with all other Taxes then remaining unpaid, exceed $250,000
in the aggregate or (ii) it is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, so long as
(a) adequate reserve or other appropriate provision, as shall be required in
conformity with GAAP shall have been made therefor, and (b) in the case of a Tax
or claim which has or may become a Lien against any of the Collateral, such
contest proceedings conclusively operate to stay the sale of any portion of the
Collateral to satisfy such Tax or claim. No Credit Party will, nor will it
permit any of its Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any Person (other than Borrower or any of
its Subsidiaries).

5.4. Maintenance of Properties. Each Credit Party will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear, casualty and condemnation excepted,
all material tangible properties used or useful in the business of Borrower and
its Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof.

5.5. Insurance. Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Borrower and

 

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its Subsidiaries as may customarily be carried or maintained under similar
circumstances by Persons of established reputation engaged in similar
businesses, in each case in such amounts (giving effect to self-insurance), with
such deductibles, covering such risks and otherwise on such terms and conditions
as shall be customary for such Persons. Without limiting the generality of the
foregoing, Borrower will maintain or cause to be maintained (a) flood insurance
with respect to each Flood Hazard Property that is located in a community that
participates in the National Flood Insurance Program, in each case in compliance
with any applicable regulations of the Board of Governors of the Federal Reserve
System, and (b) replacement value casualty insurance on the Collateral under
such policies of insurance, with such insurance companies, in such amounts, with
such deductibles, and covering such risks as are at all times carried or
maintained under similar circumstances by Persons of established reputation
engaged in similar business (it being understood and agreed that Borrower’s
hazard self-insurance program of $250,000 per store consistent with past prudent
business practice and currently in effect as of the Effective Date is
acceptable). Each such policy of insurance shall (i) name Collateral Agent, on
behalf of Secured Parties, as an additional insured thereunder as its interests
may appear, (ii) in the case of each casualty insurance policy, contain a loss
payable clause or endorsement, satisfactory in form and substance to Collateral
Agent, that names Collateral Agent, on behalf of the Secured Parties, as the
loss payee thereunder and provide for at least thirty days’ prior written notice
to Collateral Agent of any modification or cancellation of such policy.

5.6. Books and Records; Inspections. Each Credit Party will, and will cause each
of its Subsidiaries to, keep proper books of record and accounts in which full,
true and correct entries in conformity in all material respects with GAAP
(except as related to matters described on Schedule 4.7 hereto) shall be made of
all dealings and transactions in relation to its business and activities. Each
Credit Party will, and will cause each of its Subsidiaries to, permit any
authorized representatives designated by Administrative Agent or any Lender to
visit and inspect any of the properties of any Credit Party and any of its
respective Subsidiaries, to inspect, copy and take extracts from its and their
financial and accounting records, and to discuss its and their affairs, finances
and accounts with its and their officers and independent public accountants, all
upon reasonable notice and at such reasonable times during normal business hours
and as often as may reasonably be requested; provided, however, that so long as
no Event of Default has occurred and is continuing, the Administrative Agent may
visit and inspect Borrower only once during any Fiscal Year at Borrower’s
expense.

5.7. Lenders Meetings.

(a) Borrower will, upon the request of Administrative Agent or Requisite
Lenders, participate in a meeting of Administrative Agent and Lenders once
during each Fiscal Year to be held at Borrower’s corporate offices (or at such
other location as may be agreed to by Borrower and Administrative Agent) at such
time as may be agreed to by Borrower and Administrative Agent.

(b) Borrower will, at such dates and times agreed to by Administrative Agent,
participate in conference calls or meetings with the Administrative Agent and
the “restricted” Lenders once during each Fiscal Quarter, with the first such
conference call or meeting to occur no later than the date that is sixty
(60) days after the Effective Date; provided, that Borrower will also
participate in such calls or meetings at such other reasonable dates and times
indicated by Administrative Agent or the Requisite Lenders upon no less than 10
days prior notice to Borrower.

 

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5.8. Compliance with Laws. Each Credit Party will comply, and shall cause each
of its Subsidiaries and all other Persons, if any, on or occupying any
Facilities to comply, with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority (including all
Environmental Laws), noncompliance with which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, and each
Credit Party will comply with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority in respect of the
disclosure (if any) of the matters described on Schedule 4.7.

5.9. Environmental.

(a) Environmental Disclosure. Borrower will deliver to Administrative Agent,
Collateral Agent and Lenders:

(i) as soon as practicable following receipt thereof, copies of all
environmental audits, investigations, analyses and reports of any kind or
character, whether prepared by personnel of Borrower or any of its Subsidiaries
or by independent consultants, governmental authorities or any other Persons,
with respect to significant environmental matters at any Facility or with
respect to any material Environmental Claims;

(ii) promptly upon an officer of Borrower obtaining knowledge of the occurrence
thereof, written notice describing in reasonable detail (1) any Release required
to be reported to any federal, state or local governmental or regulatory agency
under any applicable Environmental Laws, (2) any remedial action taken by
Borrower or any other Person in response to (A) any Hazardous Materials
Activities the existence of which has a reasonable possibility of resulting in
one or more Environmental Claims having, individually or in the aggregate, a
Material Adverse Effect, or (B) any Environmental Claims that, individually or
in the aggregate, have a reasonable possibility of resulting in a Material
Adverse Effect, and (3) Borrower’s discovery of any occurrence or condition on
any real property adjoining or in the vicinity of any Facility that could cause
such Facility or any part thereof to be subject to any material restrictions on
the ownership, occupancy, transferability or use thereof under any Environmental
Laws;

(iii) as soon as practicable following the sending or receipt thereof by
Borrower or any of its Subsidiaries, a copy of any and all written
communications with respect to (1) any Environmental Claims that, individually
or in the aggregate, have a reasonable possibility of giving rise to a Material
Adverse Effect, (2) any Release required to be reported to any federal, state or
local governmental or regulatory agency, and (3) any request for information
from any governmental agency that suggests such agency is investigating whether
Borrower or any of its Subsidiaries may be potentially responsible for any
Hazardous Materials Activity that, individually or in the aggregate, has a
reasonable possibility of resulting in a Material Adverse Effect;

 

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(iv) prompt written notice describing in reasonable detail (1) any proposed
acquisition of stock, assets, or property by Borrower or any of its Subsidiaries
that could reasonably be expected to (A) expose Borrower or any of its
Subsidiaries to, or result in, Environmental Claims that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
(B) affect the ability of Borrower or any of its Subsidiaries to maintain in
full force and effect all material Governmental Authorizations required under
any Environmental Laws for their respective operations and (2) any proposed
action to be taken by Borrower or any of its Subsidiaries to modify current
operations in a manner that could reasonably be expected to subject Borrower or
any of its Subsidiaries to any additional material obligations or requirements
under any Environmental Laws; and

(v) with reasonable promptness, such other documents and information as from
time to time may be reasonably requested by Administrative Agent in relation to
any matters disclosed pursuant to this Section 5.9(a).

(b) Hazardous Materials Activities, Etc. Each Credit Party shall promptly take,
and shall cause each of its Subsidiaries promptly to take, any and all actions
necessary to (i) cure any violation of applicable Environmental Laws by such
Credit Party or its Subsidiaries that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, and (ii) make an
appropriate response to any Environmental Claim against such Credit Party or any
of its Subsidiaries and discharge any obligations it may have to any Person
thereunder where failure to do so could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

5.10. Subsidiaries. In the event that any Person becomes a Domestic Subsidiary
of Borrower (or Borrower elects to have Movie Gallery Canada become a
Guarantor), Borrower shall (a) promptly cause such Domestic Subsidiary (or Movie
Gallery Canada, as the case may be) to become a Guarantor hereunder and a
Grantor under the Pledge and Security Agreement by executing and delivering to
Administrative Agent and Collateral Agent a Counterpart Agreement, and (b) take
all such actions and execute and deliver, or cause to be executed and delivered,
all such documents, instruments, agreements, and certificates as are similar to
those described in Sections 3.1(c), 3.1(g), 3.1(h), 3.1(i), 3.1(l) and 3.1(o).
In the event that any Person becomes a Foreign Subsidiary of Borrower, and the
ownership interests of such Foreign Subsidiary are owned by Borrower or by any
Domestic Subsidiary thereof, Borrower shall, or shall cause such Domestic
Subsidiary to, deliver, all such documents, instruments, agreements, and
certificates as are similar to those described in Sections 3.1(c), and Borrower
shall take, or shall cause such Domestic Subsidiary to take, all of the actions
referred to in Section 3.1(h)(i) necessary to grant and to perfect a Second
Priority Lien in favor of Collateral Agent, for the benefit of Secured Parties,
under the Pledge and Security Agreement in 65% of such Equity Interests. In the
event that any Inactive Entity shall have total revenues exceeding $1,000,000
for any four consecutive Fiscal Quarters after the Effective Date or at any time
after the Effective Date shall have total assets exceeding $1,000,000, Borrower
shall, or shall cause any Domestic Subsidiary holding the Equity Interests in
such Inactive Entity to, take, all of the

 

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actions referred to in Section 3.1(h)(i) necessary to grant and to perfect a
First Priority Lien in favor of Collateral Agent, for the benefit of Secured
Parties, under the Pledge and Security Agreement in such Equity Interests (to
the extent required pursuant to the terms of the Pledge and Security Agreement).
With respect to each such Subsidiary, Borrower shall promptly send to
Administrative Agent written notice setting forth with respect to such Person
(i) the date on which such Person became a Subsidiary of Borrower, and (ii) all
of the data required to be set forth in Schedules 4.1 and 4.2 with respect to
all Subsidiaries of Borrower; and such written notice shall be deemed to
supplement Schedule 4.1 and 4.2 for all purposes hereof.

5.11. Additional Material Real Estate Assets. In the event that (i) any Credit
Party acquires a Material Real Estate Asset or (ii) a Real Estate Asset owned or
leased on the Effective Date becomes a Material Real Estate Asset and, in each
case, such interest has not otherwise been made subject to the Lien of the
Collateral Documents in favor of Collateral Agent, for the benefit of Secured
Parties, then such Credit Party shall promptly take all such actions and execute
and deliver, or cause to be executed and delivered, all such mortgages,
documents, instruments, agreements, opinions and certificates similar to those
described in Sections 3.1(g) and 3.1(h) with respect to each such Material Real
Estate Asset required by applicable law or that Collateral Agent shall
reasonably request to create in favor of Collateral Agent, for the benefit of
Secured Parties, a valid and, subject to any filing and/or recording referred to
herein, perfected Second Priority security interest in such Material Real Estate
Assets. In addition to the foregoing, Borrower shall, at the request of
Collateral Agent, deliver, from time to time, to Collateral Agent such
appraisals as are required by law or regulation of Real Estate Assets with
respect to which Collateral Agent has been granted a Lien.

5.12. Further Assurances. At any time or from time to time upon the request of
Administrative Agent, each Credit Party will, at its expense, promptly execute,
acknowledge and deliver such further documents and do such other acts and things
as Administrative Agent or Collateral Agent may reasonably request in order to
effect fully the purposes of the Credit Documents. In furtherance and not in
limitation of the foregoing, each Credit Party shall take such actions as
Administrative Agent or Collateral Agent may reasonably request from time to
time to ensure that the Obligations are guarantied by the Guarantors and are
secured by substantially all of the assets of Borrower, and its Subsidiaries and
all of the outstanding Equity Interests of Borrower and its Subsidiaries
(subject to limitations contained in the Credit Documents with respect to
Foreign Subsidiaries).

5.13. Miscellaneous Covenants. Unless otherwise consented to by Agents or
Requisite Lenders:

(a) Cash Management Systems. Borrower and its Subsidiaries shall establish and
maintain cash management systems in accordance with the terms of the Collateral
Documents.

(b) [RESERVED].

 

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SECTION 6. NEGATIVE COVENANTS

Each Credit Party covenants and agrees that, so long as any Lender Exposure
exists and until payment in full of all Obligations, such Credit Party shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 6.

6.1. Indebtedness. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to any
Indebtedness, except:

(a) the Obligations;

(b) Indebtedness of any Guarantor Subsidiary to Borrower or to any other
Guarantor Subsidiary, or of Borrower to any Guarantor Subsidiary; provided,
(i) all such Indebtedness shall be evidenced by the Intercompany Note, which
shall be subject to a Second Priority Lien pursuant to the Pledge and Security
Agreement, (ii) all such Indebtedness shall be unsecured and subordinated in
right of payment to the payment in full of the Obligations pursuant to the terms
of the Intercompany Note, (iii) any payment by any such Guarantor Subsidiary
under any guaranty of the Obligations shall result in a pro tanto reduction of
the amount of any Indebtedness owed by such Subsidiary to Borrower or to any of
its Subsidiaries for whose benefit such payment is made and (iv) to the extent
owed by Real Estate Guarantors, only to the extent such Indebtedness was
incurred by Real Estate Guarantors to fund overhead costs and reasonable
operating expenses;

(c) Indebtedness (i)(x) and other “Obligations” under (and as defined in) the
First Lien Credit Agreement and any Term Loan Refinancing Indebtedness, in an
aggregate principal amount at any time outstanding not to exceed $626,488,750
plus any amounts added to the principal thereof in accordance with the terms of
the First Lien Credit Agreement as in effect on the Effective Date, (y) under
the Revolving Credit Facility in an aggregate principal amount at any time
outstanding (together with the face amount of issued and outstanding Additional
Letters of Credit described in the following subclause (c)(i)(z)) not to exceed
$100,000,000 (plus the amount of proceeds of Revolving Loans used to secure
issued and outstanding Additional Letters of Credit pursuant to Section 6.2(t)),
but not any extensions, renewals or replacements of such Indebtedness except
pursuant to Revolver Refinancing Indebtedness and (z) under Additional Letters
of Credit the aggregate face amount of which at any time does not exceed
$15,000,000 and (ii) subject to the terms of the Intercreditor Agreement,
Indebtedness incurred to refinance, renew or replace the Indebtedness referred
to in the foregoing clause (i) in whole or in part;

(d) Indebtedness incurred by Borrower or any of its Subsidiaries (other than the
Real Estate Guarantors) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from guaranties or
letters of credit, surety bonds or performance bonds securing the performance of
Borrower or any such Subsidiary pursuant to such agreements, in connection with
Permitted Acquisitions or dispositions permitted pursuant to Section 6.7 of any
business, assets or Subsidiary of Borrower or any of its Subsidiaries;

 

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(e) Indebtedness which may be deemed to exist pursuant to any guaranties,
performance, surety, statutory, appeal or similar obligations incurred in the
ordinary course of business;

(f) Indebtedness in respect of (i) netting services, overdraft protections, cash
management arrangements and otherwise in connection with deposit accounts and
(ii) Indebtedness arising from the honoring by a bank or other financial
institution of a check draft or similar instrument drawn against insufficient
funds in the ordinary course of business (provided such Indebtedness is
extinguished within five Business Days of its incurrence);

(g) guaranties in the ordinary course of business of the obligations of
suppliers, customers, franchisees and licensees of Borrower and its
Subsidiaries;

(h) guaranties by Borrower of Indebtedness of a Guarantor Subsidiary or
guaranties by a Guarantor Subsidiary (other than Real Estate Guarantors) of
Indebtedness of Borrower or another Guarantor Subsidiary with respect, in each
case, to Indebtedness otherwise permitted to be incurred pursuant to this
Section 6.1; provided, that if the Indebtedness that is being guarantied is
unsecured and/or subordinated to the Obligations, the guaranty shall also be
unsecured and/or subordinated to the Obligations;

(i) Indebtedness existing on the Effective Date and described in Schedule 6.1,
but not any extensions, renewals or replacements of such Indebtedness except
(i) renewals, replacements and extensions expressly provided for in the
agreements evidencing any such Indebtedness as the same are in effect on the
date of this Agreement and (ii) refinancing, renewals and extensions of any such
Indebtedness if the terms and conditions thereof are not less favorable to the
obligor thereon or to the Lenders than the Indebtedness being refinanced,
renewed or extended, and the average life to maturity thereof is greater than or
equal to that of the Indebtedness being refinanced, renewed or extended;
provided, such Indebtedness permitted under the immediately preceding clause
(i) or (ii) above shall not (A) include Indebtedness of an obligor that was not
an obligor with respect to the Indebtedness being extended, renewed or
refinanced, (B) exceed the principal amount of the Indebtedness being renewed,
extended or refinanced plus the amount of any interest, premium, or penalties
required to be paid thereon plus fees and expenses associated therewith or
(C) be incurred, created or assumed if any Default or Event of Default has
occurred and is continuing or would result therefrom;

(j) Indebtedness in respect of Interest Rate Agreements entered into pursuant to
Section 5.12 of the First Lien Credit Agreement and in respect of Hedge
Agreements, in each case entered into in the ordinary course of business and not
for speculative purposes;

(k) Indebtedness with respect to Capital Leases (i) in an aggregate amount
(together with the aggregate amount of Indebtedness incurred pursuant to
Section 6.1(l)(i)) not to exceed at any time $10,000,000 outstanding and (ii) in
connection with the Kiosk Program in an aggregate amount not to exceed at any
time $15,000,000 outstanding;

(l) purchase money Indebtedness (i) in an aggregate amount (together with the
aggregate amount of Indebtedness incurred pursuant to Section 6.1(k)(i)) not to
exceed at any time $10,000,000 outstanding and (ii) in connection with store
shell construction in the ordinary

 

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course of business in an aggregate amount not to exceed at any time $10,000,000
outstanding; provided, any such Indebtedness (A) shall be secured only by the
asset acquired, constructed or improved in connection with the incurrence of
such Indebtedness, and (B) shall constitute not less than 90% of the aggregate
consideration paid with respect to such asset;

(m) (i) Indebtedness of a Person or Indebtedness attaching to assets of a Person
that, in either case, becomes a Subsidiary or Indebtedness attaching to assets
that are acquired by Borrower or any of its Subsidiaries, in each case after the
Effective Date as the result of a Permitted Acquisition, in an aggregate amount
not to exceed $10,000,000 at any one time outstanding, provided that (x) such
Indebtedness existed at the time such Person became a Subsidiary or at the time
such assets were acquired and, in each case, was not created in anticipation
thereof and (y) such Indebtedness is not guaranteed in any respect by Borrower
or any Subsidiary (other than by any such Person that so becomes a Subsidiary),
and (ii) any refinancing, refunding, renewal or extension of any Indebtedness
specified in subclause (i) above, provided, that (1) the principal amount of any
such Indebtedness is not increased above the principal amount thereof
outstanding immediately prior to such refinancing, refunding, renewal or
extension plus the amount of any interest, premium or penalties required to be
paid thereon plus fees and expenses associated therewith, (2) the direct and
contingent obligors with respect to such Indebtedness are not changed and
(3) such Indebtedness shall not be secured by any assets other than the assets
securing the Indebtedness being renewed, extended or refinanced;

(n) Indebtedness of any Foreign Subsidiary (i) to any other wholly owned Foreign
Subsidiary, (ii) to Borrower or any other Subsidiary to extent permitted as an
Investment pursuant to Section 6.6(i) or (iii) in an aggregate amount not to
exceed at any time $15,000,000;

(o) other Indebtedness of Borrower and its Subsidiaries (other than Real Estate
Guarantors), provided that (i) such Indebtedness is unsecured (except to the
extent permitted to be secured under Section 6.2(r)), (ii) no more than
$5,000,000 in principal amount of such Indebtedness shall be payable prior to
the earlier of the Maturity Date and the payment in full of the Obligations and
(iii) no such Indebtedness may be incurred and owing by a Foreign Subsidiary or
an Inactive Entity;

(p) Indebtedness incurred solely during the period from September 15, 2008
through and including January 31, 2009, under the Seasonal Overadvance Facility
not to exceed an aggregate principal amount of $25,000,000 at any one time
outstanding; and

(q) Indebtedness owed to any Person providing property, casualty, business
interruption or liability insurance to the Borrower or any Subsidiary of the
Borrower, so long as (i) such Indebtedness shall not be in excess of the amount
of the unpaid cost of, and shall be incurred only to defer the cost of, such
insurance for the annual period in which such Indebtedness is incurred and such
Indebtedness shall be outstanding only during such year and (ii) the aggregate
amount of such Indebtedness does not exceed $1,000,000 at any one time
outstanding.

6.2. Liens. No Credit Party shall, nor shall it permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or permit to exist any Lien on
or with respect to any property or asset of any kind (including any document or
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accounts receivable) of Borrower or any of its Subsidiaries, whether now owned
or hereafter acquired or licensed, or any income, profits or royalties
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income, profits or royalties under the UCC of any State or
under any similar recording or notice statute or under the intellectual property
laws, rules or procedures, except:

(a) Liens in favor of Collateral Agent for the benefit of Secured Parties
granted pursuant to any Credit Document;

(b) Liens for Taxes not yet delinquent or that are being contested, in each case
in accordance with Section 5.3;

(c) statutory Liens of landlords, banks (and rights of set-off), of carriers,
warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens
imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29)
or 412(n) of the Internal Revenue Code or by ERISA), in each case incurred in
the ordinary course of business (i) for amounts not yet overdue or (ii) for
amounts that are overdue and that (in the case of any such amounts overdue for a
period in excess of five days) are being contested in good faith by appropriate
proceedings, so long as such reserves or other appropriate provisions, if any,
as shall be required by GAAP shall have been made for any such contested
amounts;

(d) Liens incurred in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money or other Indebtedness), so long
as no foreclosure, sale or similar proceedings have been commenced with respect
to any portion of the Collateral on account thereof;

(e) easements, rights-of-way, restrictions, encroachments, and other minor
defects or irregularities in title, in each case which do not and will not
interfere in any material respect with the ordinary conduct of the business of
Borrower or any of its Subsidiaries;

(f) any interest or title of a lessor or sublessor under any lease of real
estate permitted hereunder;

(g) Liens solely on any cash earnest money deposits made by Borrower or any of
its Subsidiaries in connection with any letter of intent, lease, purchase
agreement or deposit as security for contested taxes, import duties or the
payment of rent, in each case to the extent not prohibited hereunder;

(h) purported Liens evidenced by the filing of precautionary UCC financing
statements relating solely to operating leases of personal property entered into
in the ordinary course of business;

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

 

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(j) any zoning or similar law or right reserved to or vested in any governmental
office or agency to control or regulate the use of any real property;

(k) non-exclusive outbound licenses of patents, copyrights, trademarks and other
intellectual property rights granted by Borrower or any of its Subsidiaries in
the ordinary course of business and not interfering in any respect with the
ordinary conduct of or materially detracting from the value of the business of
Borrower or such Subsidiary;

(l) Liens on the collateral securing obligations under the Revolving Credit
Facility and the First Lien Credit Agreement; provided, that the lenders party
to the agreements evidencing such Indebtedness are bound by the terms of the
Intercreditor Agreement;

(m) Liens described in Schedule 6.2 or on a title report delivered pursuant to
Section 3.1(g)(iii);

(n) Liens securing Indebtedness (i) permitted pursuant to Section 6.1(k) or
6.1(l), provided any such Lien shall encumber only the asset acquired,
constructed or improved with the proceeds of such Indebtedness and
(ii) permitted pursuant to Section 6.1(m), to the extent described in
Section 6.1(m);

(o) Liens on the assets of Foreign Subsidiaries (other than the Collateral)
securing Indebtedness permitted to be incurred pursuant to Section 6.1(n);

(p) Liens on insurance policies and the proceeds thereof securing the financing
of the premiums with respect thereto permitted under Section 6.1 and rights
which may arise under state insurance guarantee funds relating to any such
insurance policy;

(q) Liens arising out of judgments, attachment, appeal bonds or awards in
connection with court proceedings which do not constitute an Event of Default;

(r) Liens securing other Indebtedness and obligations in an aggregate amount not
to exceed at any time $5,000,000;

(s) Liens on deposits or other accounts (and the Cash and Cash Equivalents or
investments from time to time credited thereto) securing obligations under
Interest Rate Agreements not entered into with Lender Counterparties and
required to be obtained pursuant to Section 5.12 of the First Lien Credit
Agreement, provided that such deposits or accounts, and the Indebtedness and
obligations secured thereby, do not in the aggregate exceed $10,000,000 at any
time; and

(t) Liens on deposits or other accounts (and the Cash and Cash Equivalents or
investments from time to time credited thereto) securing up to 105% of the face
amount of the issued and outstanding Additional Letters of Credit described in
Section 6.1(c)(i)(z); provided, that only the proceeds of Revolving Loans (as
defined in the First Lien Credit Agreement) may be deposited into such accounts
or otherwise used for such deposits.

 

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6.3. No Further Negative Pledges.

(a) Except with respect to (a) specific property encumbered to secure payment of
particular Indebtedness or to be sold pursuant to an executed agreement with
respect to a permitted Asset Sale, (b) restrictions by reason of customary
provisions restricting assignments, subletting or other transfers contained in
leases, licenses and similar agreements entered into in the ordinary course of
business (provided that such restrictions are limited to the property or assets
secured by such Liens or the property or assets subject to such leases, licenses
or similar agreements, as the case may be), (c) the Revolving Credit Facility
(or any Revolver Refinancing Indebtedness) and (d) the First Lien Credit
Documents, no Credit Party nor any of its Subsidiaries shall enter into any
agreement prohibiting the creation or assumption of any Lien upon any of its
properties or assets, whether now owned or hereafter acquired, to secure the
Obligations.

(b) No Credit Party will sell, assign, transfer, exchange or otherwise dispose
of any Equity Interests issued by any Foreign Subsidiary which are owned or
otherwise held by such Credit Party, except for sales, assignments, transfers,
exchanges or other dispositions to another Credit Party. No Credit Party will
create, incur, assume or, other than in connection with the Revolving Credit
Facility (or any Revolver Refinancing Indebtedness) and the First Lien Credit
Documents, suffer to exist, any Lien on the Equity Interests issued by any
Foreign Subsidiary which are owned or otherwise held by such Credit Party,
except for any Lien or claim in favor of Collateral Agent for the benefit of the
Secured Parties.

6.4. Restricted Junior Payments. No Credit Party shall, nor shall it permit any
of its Subsidiaries or Affiliates through any manner or means or through any
other Person to, directly or indirectly, declare, order, pay, make or set apart,
or agree to declare, order, pay, make or set apart, any sum for any Restricted
Junior Payment except that:

(a) [Reserved];

(b) Restricted Junior Payments may be made as permitted pursuant to the Plan;

(c) Borrower may pay dividends in the form of its common Equity Interests;

(d) any Subsidiary may make Restricted Junior Payments to a Credit Party (other
than dividends to Movie Gallery Canada);

(e) any Credit Party may make Restricted Junior Payments as repayment of amounts
outstanding under the Seasonal Overadvance Facility;

(f) any Credit Party may make Restricted Junior Payments of the type described
in clauses (i), (ii) and (iii) of the definition thereof in an amount equal to
the proceeds of Equity Interests not required to prepay the Loans pursuant to
Section 2.11(c); and

(g) the Credit Parties may make Restricted Junior Payments of the type described
in clauses (i), (ii) and (iii) of the definition thereof in an amount not to
exceed (A) $1,000,000 in the aggregate in any Fiscal Year and (B) $3,000,000 in
the aggregate from the Effective Date to the date of determination.

 

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Notwithstanding anything to the contrary, including, without limitation, in this
Section 6.4, no Credit Party shall, nor shall it permit any of its Subsidiaries
or Affiliates through any manner or means or through any other Person to,
directly or indirectly, declare, order, pay, make or set apart, or agree to
declare, order, pay, make or set apart, any sum for any dividend or other
distribution, in each case in Cash, except as provided in clause (d) above,
until the full and final payment of all Obligations.

6.5. Restrictions on Subsidiary Distributions. Except as provided herein, no
Credit Party shall, nor shall it permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary of
Borrower to (a) pay dividends or make any other distributions on any of such
Subsidiary’s Equity Interests owned by Borrower or any other Subsidiary of
Borrower, (b) repay or prepay any Indebtedness owed by such Subsidiary to
Borrower or any other Subsidiary of Borrower, (c) make loans or advances to
Borrower or any other Subsidiary of Borrower, or (d) transfer, lease or license
any of its property or assets to Borrower or any other Subsidiary of Borrower
other than restrictions (i) in agreements evidencing Indebtedness permitted by
Section 6.1(k), 6.1(l) or 6.1(m) that impose restrictions on the property so
acquired, constructed or improved, (ii) by reason of customary provisions
restricting assignments, subletting or other transfers contained in leases,
licenses, joint venture agreements and similar agreements entered into in the
ordinary course of business, (iii) that are or were created by virtue of any
transfer of, agreement to transfer or option or right with respect to any
property, assets or Equity Interests not otherwise prohibited under this
Agreement (including an agreement which has been entered into in connection with
the sale or transfer of assets or Equity Interests of a Subsidiary permitted
hereunder, including in connection with the Game Crazy IPO) that impose
restrictions on such Equity Interests or assets, (iv) any agreement of a Foreign
Subsidiary governing the Indebtedness permitted by Section 6.1(n)(iii) (provided
that such restrictions are no more onerous or restrictive than those set forth
in the First Lien Credit Agreement or, after the Discharge of First Lien
Obligations, than those set forth herein, and do not prevent the Obligations
being secured as provided herein and in the other Credit Documents),
(v) described on Schedule 6.5, (v) existing under the Revolving Credit Facility
(or any Revolver Refinancing Indebtedness), the First Lien Credit Agreement, any
Term Loan Refinancing Indebtedness and/or any Seasonal Overadvance Facility, or
(vi) that exist under or by reason of applicable law.

6.6. Investments. No Credit Party shall, nor shall it permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:

(a) Investments in Cash and Cash Equivalents;

(b) equity Investments owned as of the Effective Date in any Subsidiary and
Investments made after the Effective Date in Borrower and any wholly-owned
Guarantor Subsidiary of Borrower in the ordinary course of business (including
Investments of the Game Crazy assets and properties to a Subsidiary formed in
connection with the Game Crazy IPO);

(c) Investments (i) in any Securities received in satisfaction or partial
satisfaction thereof from financially troubled account debtors and (ii) in the
form of deposits, prepayments and other credits to suppliers made in the
ordinary course of business consistent with the past practices of Borrower and
its Subsidiaries;

 

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(d) intercompany loans to the extent permitted under Section 6.1(b) and
Section 6.1(n)(i);

(e) Consolidated Capital Expenditures with respect to Borrower and the
Guarantors;

(f) loans and advances to employees of Borrower and its Subsidiaries made in the
ordinary course of business in an aggregate principal amount not to exceed
$1,000,000 in the aggregate;

(g) Permitted Acquisitions permitted pursuant to Section 6.7;

(h) Investments described in Schedule 6.6;

(i) other Investments in Subsidiaries other than wholly-owned Guarantor
Subsidiaries of Borrower in an aggregate amount not to exceed at any time
$20,000,000; provided, that (i) no such Investments may be made in Inactive
Entities unless the Equity Interests therein are then pledged to Collateral
Agent in accordance with Section 5.10 and pursuant to the terms of the Pledge
and Security Agreement and (ii) no such Investment may be made in Movie Gallery
Canada unless and until such Investment is evidenced by a promissory note and
the obligations thereunder secured (under the applicable laws of Canada) by
substantially all the assets of Movie Gallery Canada, in each case pursuant to
documentation reasonably satisfactory to Administrative Agent (it being
understood that no legal opinions will be required in connection with such
documentation, and the perfection of Liens created thereunder will be limited to
necessary and customary filings under the Personal Property Security Act or
other similar legislation as in effect from time to time in the relevant
province of Canada or other applicable Governmental Authority), and such
promissory note and rights under such security interest (and under related
documentation) are pledged to Collateral Agent in accordance with Section 5.10
and pursuant to the terms of the Pledge and Security Agreement;

(j) Investments received in connection with the bankruptcy or reorganization of,
or settlement of delinquent accounts and disputes with, customers and suppliers,
in each case in the ordinary course of business;

(k) non-Cash consideration issued by the purchaser of assets in connection with
a sale of such assets to the extent permitted by Section 6.7; and

(l) additional Investments (other than in Foreign Subsidiaries) so long as the
aggregate amount invested, loaned or advanced pursuant to this clause
(determined without regard to any write-downs or write-offs of such investments,
loans and advances) does not exceed $10,000,000 in the aggregate at any time
outstanding.

Notwithstanding the foregoing, in no event shall any Credit Party make any
Investment which results in or facilitates in any manner any Restricted Junior
Payment not otherwise permitted under the terms of Section 6.4.

 

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6.7. Fundamental Changes; Disposition of Assets; Acquisitions. No Credit Party
shall, nor shall it permit any of its Subsidiaries to, enter into any
transaction of merger or consolidation, or liquidate, wind-up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease or license,
exchange, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, assets or property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible,
whether now owned or hereafter acquired, leased or licensed, or acquire by
purchase or otherwise (other than purchases or other acquisitions of inventory,
materials and equipment and Capital Expenditures in the ordinary course of
business) the business, property or fixed assets of, or stock or other evidence
of beneficial ownership of, any Person or any division or line of business or
other business unit of any Person, except:

(a) any Subsidiary of Borrower (other than Real Estate Guarantors) may be merged
with or into Borrower or any Guarantor Subsidiary (other than Real Estate
Guarantors), or be liquidated, wound up or dissolved, or all or any part of its
business, property or assets may be conveyed, sold, leased, transferred or
otherwise disposed of, in one transaction or a series of transactions, to
Borrower or any Guarantor Subsidiary (other than Real Estate Guarantors);
provided, in the case of such a merger, Borrower or such Guarantor Subsidiary,
as applicable shall be the continuing or surviving Person;

(b) sales or other dispositions of assets that do not constitute Asset Sales;

(c) Asset Sales (i) the proceeds of which (valued at the principal amount
thereof in the case of non-Cash proceeds consisting of notes or other debt
Securities and valued at fair market value in the case of other non-Cash
proceeds) when aggregated with the proceeds of all other Asset Sales made from
the Effective Date to the date of determination, are less than $50,000,000 in
the aggregate and (ii) by Foreign Subsidiaries of Borrower organized under any
of the laws of Canada and/or Province or Territory thereof, or by Borrower of
the Equity Interests in such Foreign Subsidiaries; provided, in each case
(1) the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof (determined in good faith by the board of
directors of Borrower (or similar governing body)), (2) no less than 75% thereof
shall be paid in Cash, and (3) the Net Asset Sale Proceeds thereof shall be
applied as required by Section 2.11(a);

(d) disposals of obsolete, worn out or surplus property;

(e) Permitted Acquisitions, for which the aggregate amount of Cash consideration
for all such Permitted Acquisitions from the Effective Date to the date of
determination does not exceed the sum of (i) $50,000,000 plus (ii) the aggregate
amount of the proceeds of Equity Interests issued to finance such Permitted
Acquisition within 180 days of such issuance and received by the Borrower since
the Effective Date (and not otherwise required to be used to prepay Loans
pursuant to Section 2.11(c));

(f) sale-leaseback transactions permitted by Section 6.9;

 

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(g) sales and other dispositions of Non-Core Assets, the proceeds of which
(valued at the principal amount thereof in the case of non-Cash proceeds
consisting of notes or other debt Securities and valued at fair market value in
the case of other non-Cash proceeds) when aggregated with the proceeds of all
other such sales or dispositions of Non-Core Assets made from the Effective Date
to the date of determination, are less than $40,000,000 in the aggregate (when
aggregated with sale-leaseback transactions pursuant to Section 6.9(i) and
(ii)); provided (1) the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof (determined in good faith
by the board of directors of Borrower (or similar governing body)), (2) no less
than 75% thereof shall be paid in Cash, and (3) the Net Asset Sale Proceeds
thereof shall be applied as required by Section 2.11(a);

(h) Investments made in accordance with Section 6.6;

(i) any Foreign Subsidiary of Borrower may be merged with or into a wholly-owned
Foreign Subsidiary of Borrower, or be liquidated, wound up or dissolve, or all
or any part of its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of, in one transaction or a series of
transactions, to a wholly owned Foreign Subsidiary of Borrower;

(j) (A) the sale or divestiture of Game Crazy (including all Equity Interests of
any Subsidiary owning Game Crazy assets and properties); provided (1) the
consideration received therefor shall be in an amount at least equal to the fair
market value thereof (determined in good faith by the board of directors of
Borrower (or similar governing body)), (2) no less than 75% thereof shall be
paid in Cash, and (3) the Net Asset Sale Proceeds thereof shall be applied as
required by Section 2.11(a); or (B) the Game Crazy IPO, provided (1) the
proceeds thereof shall be in an amount at least equal to the fair market value
of the Game Crazy assets and properties (determined in good faith by the board
of directors of Borrower (or similar governing body)) and (2) the net proceeds
thereof shall be applied as required by Section 2.11(a) or 2.11(c), as
applicable; and

(k) the conveyance of any Leasehold Property to the Real Estate Guarantors.

6.8. Disposal of Subsidiary Interests. Except for any sale of all of its
interests in the Equity Interests of any of its Subsidiaries in compliance with
the provisions of Section 6.7 (including pursuant to the Game Crazy IPO) and
Liens permitted under Sections 6.2(a), and 6.2(l), no Credit Party shall, nor
shall it permit any of its Subsidiaries to, (a) directly or indirectly sell,
assign, pledge or otherwise encumber or dispose of any Equity Interests of any
of its Subsidiaries, except to qualify directors if required by applicable law;
or (b) permit any of its Subsidiaries directly or indirectly to sell, assign,
pledge or otherwise encumber or dispose of any Equity Interests of any of its
Subsidiaries (other than Real Estate Guarantors), except to another Credit Party
(subject to the restrictions on such disposition otherwise imposed hereunder),
or to qualify directors if required by applicable law.

6.9. Sales and Lease-Backs. No Credit Party shall, nor shall it permit any of
its Subsidiaries to, directly or indirectly, become or remain liable as lessee
or as a guarantor or other surety with respect to any lease of any property
(whether real, personal or mixed), whether now owned or hereafter acquired,
which such Credit Party (a) has sold or transferred or is to sell or to transfer
to any other Person (other than Borrower or any of its Subsidiaries), or
(b) intends to use for substantially the same purpose as any other property
which has been or is to be sold or

 

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transferred by such Credit Party to any Person (other than Borrower or any of
its Subsidiaries) in connection with such lease, except (i) sale-leasebacks of
Non-Core Assets not to exceed $20,000,000 in the aggregate on fair and
reasonable terms no less favorable to such Credit Party than it could obtain in
an arm’s-length transaction with a Person that is not an Affiliate and pursuant
to documentation reasonably acceptable to the Administrative Agent and (ii) any
Capital Lease and Liens in connection therewith permitted by Section 6.1(k) and
6.2(m), provided that the aggregate amount permitted under Section 6.7(g) for
dispositions of Non-Core Assets is not exceeded after giving effect to the
sale-leaseback transactions described in the foregoing clause (i).

6.10. Transactions with Shareholders and Affiliates. No Credit Party shall, nor
shall it permit any of its Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
Borrower on terms that are less favorable to Borrower or that Subsidiary, as the
case may be, than those that might be obtained at the time from a Person who is
not such a holder or Affiliate as determined in good faith by the disinterested
members of the Board of Directors of the Borrower; provided, the foregoing
restriction shall not apply to (a) any transaction between Borrower and any
Guarantor Subsidiary (other than Real Estate Guarantors); (b) reasonable and
customary fees paid to members of the board of directors (or similar governing
body) of Borrower and its Subsidiaries; (c) compensation arrangements for
officers and other employees of Borrower and its Subsidiaries entered into in
the ordinary course of business; (d) the provision of officers’ and directors’
indemnification and insurance in the ordinary course of business to the extent
permitted by applicable law; (e) transactions described in Schedule 6.10;
(f) Indebtedness may be incurred to the extent permitted by Section 6.1(c)(i),
Section 6.1(n)(i), Section 6.1(n)(ii) and Section 6.1(p) ; (g) Investments may
be made to the extent permitted by Section 6.6(i); (h) sublease agreements
between Real Estate Guarantors and any of the Credit Parties that operate a
retail store, warehouse, distribution center or other business on any Leasehold
Property; (i) any Investment by a Restricted Sponsor Affiliates in (A) the
Equity Interests of the Borrower (that are not Disqualified Equity Interests)
and (B) debt Securities (that are not Disqualified Equity Interests) that are
otherwise permitted to be issued by Borrower in connection with Indebtedness
permitted to be incurred under Section 6.1(o) and (j) Indebtedness owed to
Restricted Sponsor Affiliate pursuant to this Agreement and/or the First Lien
Credit Agreement.

6.11. Conduct of Business. From and after the Effective Date, no Credit Party
shall, nor shall it permit any of its Subsidiaries to, engage in any business
other than (i) the businesses engaged in by such Credit Party on the Effective
Date and similar or related businesses and (ii) such other lines of business as
may be consented to by Requisite Lenders.

6.12. Amendments or Waivers of Organizational Documents. No Credit Party shall
nor shall it permit any of its Subsidiaries to, agree to any amendment,
restatement, supplement or other modification to, or waiver of, any of its
Organizational Documents after the Effective Date in a manner that would
adversely affect the ability of such Credit Party to perform its obligations
under the Credit Documents or adversely affect the rights, remedies and benefits
available to, or conferred upon, any Agent and any Lender or any Secured Party
under any Credit Document.

 

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6.13. [Reserved].

6.14. Limitation on Amendments or Waivers of the First Lien Credit Agreement,
etc. No Credit Party shall, nor shall it permit any of its Subsidiaries to,
agree to any amendment, restatement, supplement or other modification to, or
waiver of, any of its material rights after the Effective Date under the First
Lien Credit Agreement, the other First Lien Credit Documents or the Revolving
Credit Facility that is prohibited under Section 5.3 of the Intercreditor
Agreement, without in each case obtaining the prior written consent of Requisite
Lenders to such amendment, restatement, supplement or other modification or
waiver.

6.15. Fiscal Year. No Credit Party shall, nor shall it permit any of its
Subsidiaries to change its Fiscal Year.

6.16. Real Estate Guarantors Covenants. Real Estate Guarantors covenant and
agree as follows:

(a) notwithstanding the provisions of Section 6.12 hereof, Real Estate
Guarantors shall not, and shall not permit any member thereof to, terminate,
amend, modify or otherwise change any of its Organizational Documents in any
manner that in the good faith determination of Administrative Agent would
materially adversely affect the ability of Real Estate Guarantors to perform
their Obligations under this Agreement (including without limitation the
provisions of this Section 6.17) or any other Credit Document or the ability of
Administrative Agent and Lenders to enforce the Obligations or the ability of
any Secured Party to enforce its rights and remedies under this Agreement, any
Credit Document, or any other Collateral Document;

(b) notwithstanding the provisions of Section 6.7 hereof, Real Estate Guarantors
shall not liquidate or dissolve, consolidate with, or merge into or with, any
other Person, or purchase or otherwise acquire all or substantially all of the
assets or capital securities of any Person or any division thereof; provided,
with respect to the Game Crazy IPO, the foregoing shall not apply to the Real
Estate Guarantor owning the Game Crazy leases;

(c) Real Estate Guarantors do not own or shall not own any asset other than the
Real Estate Assets, Leasehold Property and incidental personal property
necessary for the management and operation of the Leasehold Property or Real
Estate Assets;

(d) notwithstanding the provisions of Section 6.11 hereof, Real Estate
Guarantors are not engaged and shall not engage, either directly or indirectly,
in any business other than the ownership, management and operation of the Real
Estate Assets, Leasehold Property and ownership of any incidental personal
property necessary for the operation of the Leasehold Property or Real Estate
Assets;

(e) notwithstanding the provisions of Section 6.1 hereof, Real Estate Guarantors
have not incurred, created or assumed and shall not incur, create or assume any
Indebtedness, secured or unsecured, direct or contingent, including guaranteeing
any obligation of or otherwise becoming liable on or in connection with any
obligation of any Person (including any Affiliate), other than (i) the
Obligations, (ii) Indebtedness to the owners or lessors of the Leasehold
Property or other Persons that are not Affiliates of such Real Estate Guarantors

 

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representing the rent, common area maintenance charges, real estate taxes and
other amounts and obligations due under the leases with respect to the Leasehold
Property and trade payables or expenses incurred in the ordinary course of
business of operating the Leasehold Property and (iii) Indebtedness permitted
pursuant to Sections 6.1(b) and 6.1(i);

(f) notwithstanding the provisions of Section 6.2 hereof, no Indebtedness of
Real Estate Guarantors other than the Obligations shall be secured (senior,
subordinate or pari passu) by the Leasehold Property or any other assets of Real
Estate Guarantors;

(g) notwithstanding the provisions of Section 6.6 hereof, Real Estate Guarantors
have not made or shall not make any loans or advances to any Person (including
any Affiliate);

(h) Real Estate Guarantors shall maintain Records and bank accounts separate
from those of Borrower and its other Subsidiaries, including, without
limitation, the member of Real Estate Guarantors;

(i) Real Estate Guarantors shall keep correct and complete limited liability
company records and minutes of the meetings and other proceedings of its members
and managers, as applicable, and the resolutions, agreements and other
instruments of Real Estate Guarantors will be continuously maintained as
official records by Real Estate Guarantors;

(j) Real Estate Guarantors shall conduct their business separate and apart from
those of their Affiliates, except as set forth in the sublease agreements
between Real Estate Guarantors, on the one hand, and each other Credit Party
that operates a retail store, warehouse, distribution center or other business
on any Leasehold Property, on the other hand;

(k) Real Estate Guarantors shall maintain their funds and other assets in a
manner that facilitates their identification and segregation from those of their
Affiliates and shall not commingle their funds or other assets with those of any
member or any other Person (including any Affiliate), except as set forth in the
sublease agreements between Real Estate Guarantors, on the one hand, and each
other Credit Party that operates a retail store, warehouse, distribution center
or other business on any Leasehold Property, on the other hand; and

(l) Real Estate Guarantors shall pay any operating expenses and other
liabilities, including compensation of their employees, consultants, agents,
attorneys, auditors and other professionals out of its own funds and not out of
funds of any Affiliate, except as set forth in the sublease agreements between
Real Estate Guarantors, on the one hand, and each other Credit Party that
operates a retail store, warehouse, distribution center or other business on any
Leasehold Property, on the other hand.

SECTION 7. GUARANTY

7.1. Guaranty of the Obligations. Subject to the provisions of Section 7.2,
Guarantors jointly and severally hereby irrevocably and unconditionally guaranty
to Administrative Agent for the ratable benefit of the Beneficiaries the due and
punctual payment in

 

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full of all Obligations when the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a))
(collectively, the “Guaranteed Obligations”).

7.2. Contribution by Guarantors. All Guarantors desire to allocate among
themselves (collectively, the “Contributing Guarantors”), in a fair and
equitable manner, their obligations arising under this Guaranty. Accordingly, in
the event any payment or distribution is made on any date by a Guarantor (a
“Funding Guarantor”) under this Guaranty such that its Aggregate Payments
exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled
to a contribution from each of the other Contributing Guarantors in an amount
sufficient to cause each Contributing Guarantor’s Aggregate Payments to equal
its Fair Share as of such date. “Fair Share” means, with respect to a
Contributing Guarantor as of any date of determination, an amount equal to
(a) the ratio of (i) the Fair Share Contribution Amount with respect to such
Contributing Guarantor to (ii) the aggregate of the Fair Share Contribution
Amounts with respect to all Contributing Guarantors multiplied by (b) the
aggregate amount paid or distributed on or before such date by all Funding
Guarantors under this Guaranty in respect of the obligations Guaranteed. “Fair
Share Contribution Amount” means, with respect to a Contributing Guarantor as of
any date of determination, the maximum aggregate amount of the obligations of
such Contributing Guarantor under this Guaranty that would not render its
obligations hereunder or thereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any comparable applicable provisions of state law; provided, solely for
purposes of calculating the “Fair Share Contribution Amount” with respect to any
Contributing Guarantor for purposes of this Section 7.2, any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder shall not be considered as assets or liabilities of such
Contributing Guarantor. “Aggregate Payments” means, with respect to a
Contributing Guarantor as of any date of determination, an amount equal to
(1) the aggregate amount of all payments and distributions made on or before
such date by such Contributing Guarantor in respect of this Guaranty (including
in respect of this Section 7.2), minus (2) the aggregate amount of all payments
received on or before such date by such Contributing Guarantor from the other
Contributing Guarantors as contributions under this Section 7.2. The amounts
payable as contributions hereunder shall be determined as of the date on which
the related payment or distribution is made by the applicable Funding Guarantor.
The allocation among Contributing Guarantors of their obligations as set forth
in this Section 7.2 shall not be construed in any way to limit the liability of
any Contributing Guarantor hereunder. Each Guarantor is a third party
beneficiary to the contribution agreement set forth in this Section 7.2.

7.3. Payment by Guarantors. Subject to Section 7.2, Guarantors hereby jointly
and severally agree, in furtherance of the foregoing and not in limitation of
any other right which any Beneficiary may have at law or in equity against any
Guarantor by virtue hereof, that upon the failure of Borrower to pay any of the
Guaranteed Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)),
Guarantors will upon demand pay, or cause to be paid, in Cash, to Administrative
Agent for the ratable

 

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benefit of Beneficiaries, an amount equal to the sum of the unpaid principal
amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid
interest on such Guaranteed Obligations (including interest which, but for
Borrower’s becoming the subject of a case under the Bankruptcy Code, would have
accrued on such Guaranteed Obligations, whether or not a claim is allowed
against Borrower for such interest in the related bankruptcy case) and all other
Guaranteed Obligations then owed to Beneficiaries as aforesaid.

7.4. Liability of Guarantors Absolute. Each Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guaranteed Obligations. In furtherance of the foregoing and without limiting the
generality thereof, each Guarantor agrees as follows:

(a) this Guaranty is a guaranty of payment when due and not of collectability.
This Guaranty is a primary obligation of each Guarantor and not merely a
contract of surety;

(b) Administrative Agent may enforce this Guaranty upon the occurrence of an
Event of Default notwithstanding the existence of any dispute between Borrower
and any Beneficiary with respect to the existence of such Event of Default;

(c) the obligations of each Guarantor hereunder are independent of the
obligations of Borrower and the obligations of any other guarantor (including
any other Guarantor) of the obligations of Borrower, and a separate action or
actions may be brought and prosecuted against such Guarantor whether or not any
action is brought against Borrower or any of such other guarantors and whether
or not Borrower is joined in any such action or actions;

(d) payment by any Guarantor of a portion, but not all, of the Guaranteed
Obligations shall in no way limit, affect, modify or abridge any Guarantor’s
liability for any portion of the Guaranteed Obligations which has not been paid.
Without limiting the generality of the foregoing, if Administrative Agent is
awarded a judgment in any suit brought to enforce any Guarantor’s covenant to
pay a portion of the Guaranteed Obligations, such judgment shall not be deemed
to release such Guarantor from its covenant to pay the portion of the Guaranteed
Obligations that is not the subject of such suit, and such judgment shall not,
except to the extent satisfied by such Guarantor, limit, affect, modify or
abridge any other Guarantor’s liability hereunder in respect of the Guaranteed
Obligations;

(e) any Beneficiary, upon such terms as it deems appropriate, without notice or
demand and without affecting the validity or enforceability hereof or giving
rise to any reduction, limitation, impairment, discharge or termination of any
Guarantor’s liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Guaranteed Obligations; (ii) settle,
compromise, release or discharge, or accept or refuse any offer of performance
with respect to, or substitutions for, the Guaranteed Obligations or any
agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations; (iii) request and accept other guaranties of
the Guaranteed Obligations and take and hold security for the payment hereof or
the Guaranteed Obligations; (iv) release, surrender, exchange, substitute,

 

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compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Guaranteed Obligations,
any other guaranties of the Guaranteed Obligations, or any other obligation of
any Person (including any other Guarantor) with respect to the Guaranteed
Obligations; (v) enforce and apply any security now or hereafter held by or for
the benefit of such Beneficiary in respect hereof or the Guaranteed Obligations
and direct the order or manner of sale thereof, or exercise any other right or
remedy that such Beneficiary may have against any such security, in each case as
such Beneficiary in its discretion may determine consistent herewith and with
any applicable security agreement, including foreclosure on any such security
pursuant to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and even though such action
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of any Guarantor against Borrower or any security for the
Guaranteed Obligations; and (vi) exercise any other rights available to it under
the Credit Documents; and

(f) this Guaranty and the obligations of Guarantors hereunder shall be valid and
enforceable and shall not be subject to any reduction, limitation, impairment,
discharge or termination for any reason (other than payment in full of the
Guaranteed Obligations), including the occurrence of any of the following,
whether or not any Guarantor shall have had notice or knowledge of any of them:
(i) any failure or omission to assert or enforce or agreement or election not to
assert or enforce, or the stay or enjoining, by order of court, by operation of
law or otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy (whether arising under the Credit Documents, at law, in
equity or otherwise) with respect to the Guaranteed Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for the
payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including provisions relating to events of default) hereof, any of
the other Credit Documents or any agreement or instrument executed pursuant
thereto, or of any other guaranty or security for the Guaranteed Obligations, in
each case whether or not in accordance with the terms hereof or such Credit
Document or any agreement relating to such other guaranty or security; (iii) the
Guaranteed Obligations, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received from any source (other than payments received
pursuant to the other Credit Documents or from the proceeds of any security for
the Guaranteed Obligations, except to the extent such security also serves as
collateral for indebtedness other than the Guaranteed Obligations) to the
payment of indebtedness other than the Guaranteed Obligations, even though any
Beneficiary might have elected to apply such payment to any part or all of the
Guaranteed Obligations; (v) any Beneficiary’s consent to the change,
reorganization or termination of the corporate structure or existence of
Borrower or any of its Subsidiaries and to any corresponding restructuring of
the Guaranteed Obligations; (vi) any failure to perfect or continue perfection
of a Lien in any collateral which secures any of the Guaranteed Obligations;
(vii) any defenses, set-offs or counterclaims which Borrower may allege or
assert against any Beneficiary in respect of the Guaranteed Obligations,
including failure of consideration, breach of warranty, payment, statute of
frauds, statute of limitations, accord and satisfaction and usury; and
(viii) any other act or thing or omission, or delay to do any other act or
thing, which may or might in any manner or to any extent vary the risk of any
Guarantor as an obligor in respect of the Guaranteed Obligations.

 

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7.5. Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of
Beneficiaries: (a) any right to require any Beneficiary, as a condition of
payment or performance by such Guarantor, to (i) proceed against Borrower, any
other guarantor (including any other Guarantor) of the Guaranteed Obligations or
any other Person, (ii) proceed against or exhaust any security held from
Borrower, any such other guarantor or any other Person, (iii) proceed against or
have resort to any balance of any Deposit Account or credit on the books of any
Beneficiary in favor of Borrower or any other Person, or (iv) pursue any other
remedy in the power of any Beneficiary whatsoever; (b) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of Borrower or any other Guarantor including any defense based on or arising out
of the lack of validity or the unenforceability of the Guaranteed Obligations or
any agreement or instrument relating thereto or by reason of the cessation of
the liability of Borrower or any other Guarantor from any cause other than
payment in full of the Guaranteed Obligations; (c) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (d) any defense based upon any Beneficiary’s errors or omissions in
the administration of the Guaranteed Obligations, except behavior which amounts
to bad faith; (e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms hereof and any legal
or equitable discharge of such Guarantor’s obligations hereunder, (ii) the
benefit of any statute of limitations affecting such Guarantor’s liability
hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments
and counterclaims, and (iv) promptness, diligence and any requirement that any
Beneficiary protect, secure, perfect or insure any Lien or any property subject
thereto; (f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
hereof, notices of default hereunder or under any agreement or instrument
related thereto, notices of any renewal, extension or modification of the
Guaranteed Obligations or any agreement related thereto, notices of any
extension of credit to Borrower and notices of any of the matters referred to in
Section 7.4 and any right to consent to any thereof; and (g) any defenses or
benefits that may be derived from or afforded by law which limit the liability
of or exonerate guarantors or sureties, or which may conflict with the terms
hereof.

7.6. Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed
Obligations shall have been indefeasibly paid in full, each Guarantor hereby
waives any claim, right or remedy, direct or indirect, that such Guarantor now
has or may hereafter have against Borrower or any other Guarantor or any of its
assets in connection with this Guaranty or the performance by such Guarantor of
its obligations hereunder, in each case whether such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise and
including (a) any right of subrogation, reimbursement or indemnification that
such Guarantor now has or may hereafter have against Borrower with respect to
the Guaranteed Obligations, (b) any right to enforce, or to participate in, any
claim, right or remedy that any Beneficiary now has or may hereafter have
against Borrower, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guaranteed Obligations shall have been indefeasibly paid in full, each
Guarantor shall withhold exercise of any right of contribution such Guarantor
may have against any other guarantor (including any other Guarantor) of the
Guaranteed Obligations, including any such right of contribution as contemplated
by Section 7.2. Each Guarantor further agrees that, to the extent the waiver or
agreement to withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction

 

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to be void or voidable for any reason, any rights of subrogation, reimbursement
or indemnification such Guarantor may have against Borrower or against any
collateral or security, and any rights of contribution such Guarantor may have
against any such other guarantor, shall be junior and subordinate to any rights
any Beneficiary may have against Borrower, to all right, title and interest any
Beneficiary may have in any such collateral or security, and to any right any
Beneficiary may have against such other guarantor. If any amount shall be paid
to any Guarantor on account of any such subrogation, reimbursement,
indemnification or contribution rights at any time when all Guaranteed
Obligations shall not have been finally and indefeasibly paid in full, such
amount shall be held in trust for Administrative Agent on behalf of
Beneficiaries and shall forthwith be paid over to Administrative Agent for the
benefit of Beneficiaries to be credited and applied against the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms hereof.

7.7. Subordination of Other Obligations. Any Indebtedness of Borrower or any
Guarantor now or hereafter held by any Guarantor (the “Obligee Guarantor”) is
hereby subordinated in right of payment to the Guaranteed Obligations, and any
such Indebtedness collected or received by the Obligee Guarantor after an Event
of Default has occurred and is continuing shall be held in trust for
Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over
to Administrative Agent for the benefit of Beneficiaries to be credited and
applied against the Guaranteed Obligations but without affecting, impairing or
limiting in any manner the liability of the Obligee Guarantor under any other
provision hereof.

7.8. Continuing Guaranty. This Guaranty is a continuing guaranty and shall
remain in effect until all of the Guaranteed Obligations shall have been paid in
full. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty
as to future transactions giving rise to any Guaranteed Obligations.

7.9. Authority of Guarantors or Borrower. It is not necessary for any
Beneficiary to inquire into the capacity or powers of any Guarantor or Borrower
or the officers, directors or any agents acting or purporting to act on behalf
of any of them.

7.10. Financial Condition of Borrower. Any Credit Extension may be made to
Borrower or continued from time to time without notice to or authorization from
any Guarantor regardless of the financial or other condition of Borrower at the
time of any such grant or continuation, as the case may be. No Beneficiary shall
have any obligation to disclose or discuss with any Guarantor its assessment, or
any Guarantor’s assessment, of the financial condition of Borrower. Each
Guarantor has adequate means to obtain information from Borrower on a continuing
basis concerning the financial condition of Borrower and its ability to perform
its obligations under the Credit Documents, and each Guarantor assumes the
responsibility for being and keeping informed of the financial condition of
Borrower and of all circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty
on the part of any Beneficiary to disclose any matter, fact or thing relating to
the business, operations or conditions of Borrower now known or hereafter known
by any Beneficiary.

 

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7.11. Bankruptcy, etc. (a) So long as any Guaranteed Obligations remain
outstanding, no Guarantor shall, without the prior written consent of
Administrative Agent acting pursuant to the instructions of Requisite Lenders,
commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency case or proceeding of or against Borrower or any
other Guarantor. The obligations of Guarantors hereunder shall not be reduced,
limited, impaired, discharged, deferred, suspended or terminated by any case or
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency,
receivership, reorganization, liquidation or arrangement of Borrower or any
other Guarantor or by any defense which Borrower or any other Guarantor may have
by reason of the order, decree or decision of any court or administrative body
resulting from any such proceeding.

(b) Each Guarantor acknowledges and agrees that any interest on any portion of
the Guaranteed Obligations which accrues after the commencement of any case or
proceeding referred to in clause (a) above (or, if interest on any portion of
the Guaranteed Obligations ceases to accrue by operation of law by reason of the
commencement of such case or proceeding, such interest as would have accrued on
such portion of the Guaranteed Obligations if such case or proceeding had not
been commenced) shall be included in the Guaranteed Obligations because it is
the intention of Guarantors and Beneficiaries that the Guaranteed Obligations
which are guaranteed by Guarantors pursuant hereto should be determined without
regard to any rule of law or order which may relieve Borrower of any portion of
such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy,
receiver, debtor in possession, assignee for the benefit of creditors or similar
Person to pay Administrative Agent, or allow the claim of Administrative Agent
in respect of, any such interest accruing after the date on which such case or
proceeding is commenced.

(c) In the event that all or any portion of the Guaranteed Obligations are paid
by Borrower, the obligations of Guarantors hereunder shall continue and remain
in full force and effect or be reinstated, as the case may be, in the event that
all or any part of such payment(s) are rescinded or recovered directly or
indirectly from any Beneficiary as a preference, fraudulent transfer or
otherwise, and any such payments which are so rescinded or recovered shall
constitute Guaranteed Obligations for all purposes hereunder.

7.12. Discharge of Guaranty Upon Sale of Guarantor. If all of the Equity
Interests of any Guarantor or any of its successors in interest hereunder shall
be sold or otherwise disposed of (including by merger or consolidation) in
accordance with the terms and conditions hereof, the Guaranty of such Guarantor
or such successor in interest, as the case may be, hereunder shall automatically
be discharged and released without any further action by any Beneficiary or any
other Person effective as of the time of such Asset Sale.

SECTION 8. EVENTS OF DEFAULT

8.1. Events of Default. If any one or more of the following conditions or events
shall occur:

(a) Failure to Make Payments When Due. Failure by Borrower to pay (i) when due
any principal of any Loan, whether at stated maturity, by acceleration, by
notice of voluntary prepayment, by mandatory prepayment or otherwise or (ii) any
interest on any Loan or any fee or any other amount due hereunder within five
days after the date due; or

 

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(b) Default in Other Agreements. (i) Failure of any Credit Party or any of their
respective Subsidiaries to pay when due any principal of or interest on or any
other amount payable in respect of one or more items of Indebtedness (other than
Indebtedness referred to in Section 8.1(a)) in an individual principal amount of
$5,000,000 or more or with an aggregate principal amount of $15,000,000 or more,
in each case beyond the grace period, if any, provided therefor; or (ii) breach
or default by any Credit Party with respect to any other material term of
(1) one or more items of Indebtedness in the individual or aggregate principal
amounts referred to in clause (i) above or (2) any loan agreement, mortgage,
indenture or other agreement relating to such item(s) of Indebtedness, in each
case beyond the grace period, if any, provided therefor, if the effect of such
breach or default is to cause, or to permit the holder or holders of that
Indebtedness (or a trustee on behalf of such holder or holders), to cause, that
Indebtedness to become or be declared due and payable (or redeemable) prior to
its stated maturity or the stated maturity of any underlying obligation, as the
case may be; provided, that with respect to any failure to pay or breach or
default under the First Lien Credit Agreement, such event shall only constitute
an Event of Default hereunder if there is an Event of Default (as defined in the
First Lien Credit Agreement) under subsection 8.1(a) of the First Lien Credit
Agreement, if the First Lien Credit Facilities shall have been accelerated or if
60 days have passed since the date of any other Event of Default under the First
Lien Credit Agreement and such Event of Default has not been cured or waived
during such period; or

(c) Breach of Certain Covenants. Failure of any Credit Party to perform or
comply with any term or condition contained in Section 2.3, Sections 5.1(f) and
5.1(g), Section 5.2 or Section 6; or

(d) Breach of Representations, etc. Any representation, warranty, certification
or other statement made or deemed made by any Credit Party in any Credit
Document or in any statement or certificate at any time given by any Credit
Party or any of its Subsidiaries in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false in any material respect as of
the date made or deemed made; or

(e) Other Defaults Under Credit Documents. Any Credit Party shall default in the
performance of or compliance with any term contained herein or any of the other
Credit Documents, other than any such term referred to in any other Section of
this Section 8.1, and such default shall not have been remedied or waived within
thirty days after the earlier of (i) an officer of such Credit Party becoming
aware of such default or (ii) receipt by Borrower of notice from Administrative
Agent or any Lender of such default; or

(f) Involuntary Bankruptcy; Appointment of Receiver, etc. After the Effective
Date, (i) A court of competent jurisdiction shall enter a decree or order for
relief in respect of Borrower or any of its Subsidiaries in an involuntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, which decree or order is not stayed;
or any other similar relief shall be granted under any applicable federal or
state law; or (ii) an involuntary case shall be commenced against Borrower or
any of its Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or
order of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Borrower or any of its Subsidiaries, or over

 

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all or a substantial part of its property, shall have been entered; or there
shall have occurred the involuntary appointment of an interim receiver, trustee
or other custodian of Borrower or any of its Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Borrower or any of its Subsidiaries, and any such event described in
this clause (ii) shall continue for sixty days without having been dismissed,
bonded or discharged; or

(g) Voluntary Bankruptcy; Appointment of Receiver, etc. After the Effective
Date, (i) Borrower or any of its Subsidiaries shall have an order for relief
entered with respect to it or shall commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Borrower or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or (ii) Borrower or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in writing
its inability, to pay its debts as such debts become due; or the board of
directors (or similar governing body) of Borrower or any of its Subsidiaries (or
any committee thereof) shall adopt any resolution or otherwise authorize any
action to approve any of the actions referred to herein or in Section 8.1(f); or

(h) Judgments and Attachments. Any money judgment, writ or warrant of attachment
or similar process involving (i) in any individual case an amount in excess of
$10,000,000 or (ii) in the aggregate at any time an amount in excess of
$20,000,000 (in either case to the extent not adequately covered by insurance as
to which a solvent and unaffiliated insurance company has acknowleged coverage)
shall be entered or filed against Borrower or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of sixty days (or in any event later than five days prior
to the date of any proposed sale thereunder); or

(i) Dissolution. Any order, judgment or decree shall be entered against any
Credit Party decreeing the dissolution or split up of such Credit Party and such
order shall remain undischarged or unstayed for a period in excess of thirty
days; or

(j) Employee Benefit Plans. (i) There shall occur an ERISA Event which
individually results in or might reasonably be expected to result in liability
of Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates
in excess of $10,000,000 during the term hereof; (ii) there shall occur one or
more ERISA Events which individually or in the aggregate results in or might
reasonably be expected to result in liability of Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates in excess of
$15,000,000 during the term hereof; or (iii) there exists any fact or
circumstance that reasonably could be expected to result in the imposition of a
Lien or security interest under Section 412(n) of the Internal Revenue Code or
under ERISA which (A) individually results in or might reasonably be expected to
result in liability or obligations of Borrower, any of its Subsidiaries or any
of their respective ERISA Affiliates in excess of $10,000,000 during the term
hereof or (B) in the aggregate results in or might reasonably be expected to
result in liability or obligations of Borrower, any of its Subsidiaries or any
of their respective ERISA Affiliates in excess of $15,000,000 during the term
hereof; or

 

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(k) Change of Control. A Change of Control shall occur; or

(l) Guaranties, Collateral Documents and other Credit Documents. At any time
after the execution and delivery thereof, (i) the Guaranty for any reason, other
than the satisfaction in full of all Obligations, shall cease to be in full
force and effect (other than in accordance with its terms) or shall be declared
to be null and void or any Guarantor shall repudiate its obligations thereunder,
(ii) this Agreement, the Intercreditor Agreement or any Collateral Document
ceases to be in full force and effect (other than by reason of a release of
Collateral in accordance with the terms hereof or thereof or the satisfaction in
full of the Obligations in accordance with the terms hereof) or shall be
declared null and void, or Collateral Agent shall not have or shall cease to
have a valid and perfected Lien in any Collateral purported to be covered by the
Collateral Documents with the priority required by the relevant Collateral
Document, in each case for any reason other than the failure of Collateral Agent
or any Secured Party to take any action within its control, or (iii) any Credit
Party shall contest the validity or enforceability of any Credit Document in
writing or deny in writing that it has any further liability, including with
respect to future advances by Lenders, under any Credit Document to which it is
a party or shall contest the validity or perfection of any Lien in any
Collateral purported to be covered by the Collateral Documents; or

(m) First Lien Obligation Reduction. At any time that the Obligations under and
as defined in the First Lien Credit Agreement are less than $20,000,000 and such
Obligations remain outstanding for at least ninety (90) days;

THEN, subject to the Intercreditor Agreement, (1) upon the occurrence of any
Event of Default described in Section 8.1(f) or 8.1(g), automatically, and
(2) upon the occurrence of any other Event of Default and at any time during the
continuance thereof, at the request of (or with the consent of) Requisite
Lenders, upon notice to Borrower by Administrative Agent, (A) each of the
following shall immediately become due and payable, in each case without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by each Credit Party: (I) the unpaid principal amount of
and accrued interest on the Loans and (II) all other Obligations; and
(B) Administrative Agent may cause Collateral Agent to enforce any and all Liens
and security interests created pursuant to Collateral Documents.

SECTION 9. AGENTS

9.1. Appointment of Agents. Wells Fargo is hereby appointed Administrative Agent
hereunder and under the other Credit Documents and each Lender hereby authorizes
Wells Fargo to act as Administrative Agent in accordance with the terms hereof
and the other Credit Documents. Wells Fargo is hereby appointed Collateral Agent
hereunder and under the other Credit Documents and each Lender hereby authorizes
Wells Fargo to act as Collateral Agent in accordance with the terms hereof and
the other Credit Documents. Each Agent hereby agrees to act in its capacity as
such upon the express conditions contained herein

 

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and the other Credit Documents, as applicable. The provisions of this Section 9
are solely for the benefit of Agents and Lenders and no Credit Party shall have
any rights as a third party beneficiary of any of the provisions thereof. In
performing its functions and duties hereunder, each Agent shall act solely as an
agent of Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Borrower or
any of its Subsidiaries.

9.2. Powers and Duties. Each Lender irrevocably authorizes each Agent to take
such action on such Lender’s behalf and to exercise such powers, rights and
remedies hereunder and under the other Credit Documents as are specifically
delegated or granted to such Agent by the terms hereof and thereof, together
with such powers, rights and remedies as are reasonably incidental thereto. Each
Agent shall have only those duties and responsibilities that are expressly
specified herein and the other Credit Documents and no implied duties or
responsibilities shall be read into this Agreement against any Agent. Each Agent
may exercise such powers, rights and remedies and perform such duties by or
through its agents or employees. No Agent shall have, by reason hereof or any of
the other Credit Documents, a fiduciary relationship in respect of any Lender;
and nothing herein or any of the other Credit Documents, expressed or implied,
is intended to or shall be so construed as to impose upon any Agent any
obligations in respect hereof or any of the other Credit Documents except as
expressly set forth herein or therein.

9.3. General Immunity.

(a) No Responsibility for Certain Matters. No Agent shall be responsible to any
Lender for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency hereof or any other Credit Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made by
any Agent to Lenders or by or on behalf of any Credit Party or any Lender in
connection with the Credit Documents and the transactions contemplated thereby
or for the financial condition or business affairs of any Credit Party or any
other Person liable for the payment of any Obligations, nor shall any Agent be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained in any of
the Credit Documents or as to the use of the proceeds of the Loans or as to the
existence or possible existence of any Event of Default or Default or to make
any disclosures with respect to the foregoing. Anything contained herein to the
contrary notwithstanding, Administrative Agent shall not have any liability
arising from confirmations of the amount of outstanding Loans.

(b) Exculpatory Provisions. No Agent nor any of its officers, partners,
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by any Agent under or in connection with any of the Credit Documents
except to the extent caused by such Agent’s gross negligence or willful
misconduct. Each Agent shall be entitled to refrain from any act or the taking
of any action (including the failure to take an action) in connection herewith
or any of the other Credit Documents or from the exercise of any power,
discretion or authority vested in it hereunder or thereunder unless and until
such Agent shall have received instructions in respect thereof from Requisite
Lenders (or such other Lenders as may be required

 

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to give such instructions under Section 10.5) and, upon receipt of such
instructions from Requisite Lenders (or such other Lenders, as the case may be),
such Agent shall be entitled to act or (where so instructed) refrain from
acting, or to exercise such power, discretion or authority, in accordance with
such instructions. Without prejudice to the generality of the foregoing,
(i) each Agent shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper Person or
Persons and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Borrower and its
Subsidiaries), accountants, experts and other professional advisors selected by
it; and (ii) no Lender shall have any right of action whatsoever against any
Agent as a result of such Agent acting or (where so instructed) refraining from
acting hereunder or any of the other Credit Documents in accordance with the
instructions of Requisite Lenders (or such other Lenders as may be required to
give such instructions under Section 10.5).

(c) Delegation of Duties. Each Agent may perform any and all of its duties and
exercise its rights and powers under this Agreement or under any other Credit
Document by or through any one or more sub-agents appointed by such Agent. Each
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Affiliates. The
exculpatory, indemnification and other provisions of this Section 9.3 and of
Section 9.6 shall apply to any the Affiliates of the Agents and shall apply to
the Administration Agent’s activities in connection with the syndication of the
credit facility provided for herein as well as activities as Administrative
Agent. All of the rights, benefits, and privileges (including the exculpatory
and indemnification provisions) of this Section 9.3 and of Section 9.6 shall
apply to any such sub-agent and to the Affiliates of any such sub-agent, and
shall apply to their respective activities as sub-agent as if such sub-agent and
Affiliates were named herein. Notwithstanding anything herein to the contrary,
with respect to each sub-agent appointed by an Agent, (i) such sub-agent shall
be a third party beneficiary under this Agreement with respect to all such
rights, benefits and privileges (including exculpatory rights and rights to
indemnification) and shall have all of the rights and benefits of a third party
beneficiary, including an independent right of action to enforce such rights,
benefits and privileges (including exculpatory rights and rights to
indemnification) directly, without the consent or joinder of any other Person,
against any or all of the Credit Parties and the Lenders, (ii) such rights,
benefits and privileges (including exculpatory rights and rights to
indemnification) shall not be modified or amended without the consent of such
sub-agent, and (iii) such sub-agent shall only have obligations to such Agent
and not to any Credit Party, Lender or any other Person and no Credit Party,
Lender or any other Person shall have any rights, directly or indirectly, as a
third party beneficiary or otherwise, against such sub-agent.

(d) Restricted Sponsor Affiliates. Notwithstanding anything to the contrary
contained herein, the Administrative Agent may and, upon the direction of the
Requisite Lenders, shall (i) exclude the Restricted Sponsor Affiliates from
receiving any document, instrument (other than a Note) or other communication
that the Restricted Sponsor Affiliates would otherwise have been entitled to
receive under the terms of this Agreement in their capacity as Lenders and
(ii) preclude the Restricted Sponsor Affiliates from participating in conference
calls with, and attending meetings of, the Lenders (including with respect to
the exercise of rights and remedies under any Credit Document); provided, that,
notwithstanding the foregoing, Lenders that are Restricted Sponsor Affiliates
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to ordinary course administration of the Loans and non-privileged information
determined in good faith by the Administrative Agent and/or the Requisite
Lenders to be reasonably necessary in order for Restricted Sponsor Affiliates to
consider amendments, waivers or modifications to the provisions of the Credit
Documents set forth in Section 10.5(b) and in Section 10.5(c)(ii). Lenders,
Agents and any of their respective officers, partners, directors, employees or
agents shall not be liable to any Restricted Sponsor Affiliate (in its capacity
as a Lender or otherwise) for any such action taken under this Section 9.3(d).

9.4. Agents Entitled to Act as Lender. The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans, each Agent shall have the same
rights and powers hereunder as any other Lender and may exercise the same as if
it were not performing the duties and functions delegated to it hereunder, and
the term “Lender” shall, unless the context clearly otherwise indicates, include
each Agent in its individual capacity. Any Agent and its Affiliates may accept
deposits from, lend money to, own securities of, and generally engage in any
kind of banking, trust, financial advisory or other business with Borrower or
any of its Affiliates as if it were not performing the duties specified herein,
and may accept fees and other consideration from Borrower for services in
connection herewith and otherwise without having to account for the same to
Lenders.

9.5. Lenders’ Representations, Warranties and Acknowledgment.

(a) Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Borrower and its
Subsidiaries in connection with Credit Extensions hereunder and that it has made
and shall continue to make its own appraisal of the creditworthiness of Borrower
and its Subsidiaries. No Agent shall have any duty or responsibility, either
initially or on a continuing basis, to make any such investigation or any such
appraisal on behalf of Lenders or to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter, and no Agent shall have
any responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.

(b) Each Lender, by delivering its signature page to this Agreement, an
Assignment Agreement, as the case may be, shall be deemed to have acknowledged
receipt of, and consented to and approved, each Credit Document and each other
document (including those delivered pursuant to Section 3 hereof) required to be
approved by any Agent, Requisite Lenders or Lenders, as applicable on the
Effective Date.

9.6. Right to Indemnity. Each Lender, in proportion to its Pro Rata Share,
severally agrees to indemnify each Agent, to the extent that such Agent shall
not have been reimbursed by any Credit Party, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Credit Documents or otherwise in its
capacity as such Agent in any way relating to or arising out of this Agreement
or the other Credit

 

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Documents; provided, no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent’s gross negligence or
willful misconduct. If any indemnity furnished to any Agent for any purpose
shall, in the opinion of such Agent, be insufficient or become impaired, such
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished; provided,
in no event shall this sentence require any Lender to indemnify any Agent
against any liability, obligation, loss, damage, penalty, action, judgment,
suit, cost, expense or disbursement in excess of such Lender’s Pro Rata Share
thereof; and provided further, this sentence shall not be deemed to require any
Lender to indemnify any Agent against any liability, obligation, loss, damage,
penalty, action, judgment, suit, cost, expense or disbursement described in the
proviso in the immediately preceding sentence.

9.7. Successor Administrative Agent and Collateral Agent. Administrative Agent
may resign at any time by giving thirty days’ prior written notice thereof to
Lenders and Borrower, and Administrative Agent may be removed at any time with
or without cause by an instrument or concurrent instruments in writing delivered
to Administrative Agent and signed by Requisite Lenders and Borrower; in each
case, upon delivery of such written notice (and the passage of 30 days, in the
case of notice of resignation) such retiring or removed Administrative Agent
shall be discharged from its duties and obligations hereunder (except with
respect to transfer of records and other documents to a successor Administrative
Agent or the Lenders as applicable). Upon any such notice of resignation or any
such removal, Requisite Lenders shall have the right, upon five Business Days’
notice to Borrower, to appoint a successor Administrative Agent who shall be
reasonably acceptable to Borrower. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, that
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed
Administrative Agent and the retiring or removed Administrative Agent shall
promptly transfer to such successor Administrative Agent all records and other
documents necessary or appropriate in connection with the performance of the
duties of the successor Administrative Agent under the Credit Documents. If the
Requisite Lenders have not appointed a successor Administrative Agent (upon the
passage of 30 days, in the case of resignation or upon delivery of notice, in
the case of removal), Administrative Agent shall have the right to appoint a
financial institution to act as Administrative Agent hereunder and in any case,
Administrative Agent’s resignation shall become effective on the thirtieth day
after such notice of resignation. If neither the Requisite Lenders nor
Administrative Agent have appointed a successor Administrative Agent, the
Requisite Lenders shall be deemed to succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent.
After any retiring or removed Administrative Agent’s resignation or removal
hereunder as Administrative Agent, 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
Administrative Agent hereunder. The Collateral Agent may resign in accordance
with the terms of the Intercreditor Agreement.

For the avoidance of doubt, neither the Administrative Agent nor Collateral
Agent shall be required to be a Lender hereunder.

 

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9.8. Collateral Documents and Guaranty.

(a) Agents under Collateral Documents and Guaranty. Each Secured Party hereby
further authorizes Administrative Agent or Collateral Agent, as applicable, on
behalf of and for the benefit of Secured Parties, to be the agent for and
representative of the Secured Parties with respect to the Guaranty, the
Collateral and the Collateral Documents. Subject to Section 10.5, without
further written consent or authorization from any Secured Party, Administrative
Agent or Collateral Agent, as applicable shall, at the request and expense of
Borrower, execute any documents or instruments necessary to (i) in connection
with a sale or disposition of assets permitted by this Agreement, release any
Lien encumbering any item of Collateral that is the subject of such sale or
other disposition of assets or to which Requisite Lenders (or such other Lenders
as may be required to give such consent under Section 10.5) have otherwise
consented or (ii) release any Guarantor from the Guaranty pursuant to
Section 7.12 or with respect to which Requisite Lenders (or such other Lenders
as may be required to give such consent under Section 10.5) have otherwise
consented.

(b) Right to Realize on Collateral and Enforce Guaranty. Anything contained in
any of the Credit Documents to the contrary notwithstanding, Borrower,
Administrative Agent, Collateral Agent and each Secured Party hereby agree that
(i) no Secured Party shall have any right individually to realize upon any of
the Collateral or to enforce the Guaranty, it being understood and agreed that
all powers, rights and remedies hereunder may be exercised solely by
Administrative Agent, on behalf of the Secured Parties in accordance with the
terms hereof and all powers, rights and remedies under the Collateral Documents
may be exercised solely by Collateral Agent, and (ii) in the event of a
foreclosure by Collateral Agent on any of the Collateral pursuant to a public or
private sale or other disposition, Collateral Agent or any Lender may be the
purchaser or licensor of any or all of such Collateral at any such sale or other
disposition and Collateral Agent, as agent for and representative of Secured
Parties (but not any Lender or Lenders in its or their respective individual
capacities unless Requisite Lenders shall otherwise agree in writing) shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Obligations as a credit on account of the
purchase price for any collateral payable by Collateral Agent at such sale or
other disposition.

9.9. Intercreditor Agreement. Each Lender hereby consents to and approves each
and all of the provisions of the Intercreditor Agreement, and irrevocably
authorizes and directs the Collateral Agent to execute and deliver the
Intercreditor Agreement and to exercise and enforce its rights and remedies and
perform its obligations thereunder.

SECTION 10. MISCELLANEOUS

10.1. Notices.

(a) Notices Generally. Any notice or other communication herein required or
permitted to be given to a Credit Party, Collateral Agent or Administrative
Agent, shall be sent to such Person’s address as set forth on Appendix B or in
the other relevant Credit Document, and in the case of any Lender, the address
as indicated on Appendix B or otherwise

 

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indicated to Administrative Agent in writing. Except as otherwise set forth in
paragraph (b) below, each notice hereunder shall be in writing and may be
personally served, telexed or sent by telefacsimile or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service and signed for against receipt thereof, upon receipt of
telefacsimile, or three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed; provided, no notice to any
Agent shall be effective until received by such Agent; provided further, any
such notice or other communication shall at the request of Administrative Agent
be provided to any sub-agent appointed pursuant to Section 9.3(c) hereto as
designated by Administrative Agent from time to time.

(b) Electronic Communications.

(i) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communication (including e-mail and Internet or
intranet websites, including the Platform) pursuant to procedures approved by
Administrative Agent, provided that the foregoing shall not apply to notices to
any Lender pursuant to Section 2 if such Lender has notified Administrative
Agent that it is incapable of receiving notices under such Section by electronic
communication. Administrative Agent or Borrower may, in its discretion, agree to
accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it, provided that approval of
such procedures may be limited to particular notices or communications. Unless
Administrative Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender’s receipt of
an acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

(ii) Each of the Credit Parties understands that the distribution of material
through an electronic medium is not necessarily secure and that there are
confidentiality and other risks associated with such distribution and agrees and
assumes the risks associated with such electronic distribution, except to the
extent caused by the willful misconduct or gross negligence of Administrative
Agent.

(iii) The Platform and any Approved Electronic Communications are provided “as
is” and “as available”. None of the Agents or any of their respective officers,
directors, employees, agents, advisors or representatives (the “Agent
Affiliates”) warrant the accuracy, adequacy, or completeness of the Approved
Electronic Communications or the Platform and each expressly disclaims liability
for errors or omissions in the Platform and the Approved Electronic
Communications. No warranty of any kind, express, implied or statutory,
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merchantability, fitness for a particular purpose, non-infringement of third
party rights or freedom from viruses or other code defects is made by the Agent
Affiliates in connection with the Platform or the Approved Electronic
Communications.

(iv) Each of the Credit Parties, the Lenders and the Agents agree that
Administrative Agent may, but shall not be obligated to, store any Approved
Electronic Communications on the Platform in accordance with Administrative
Agent’s customary document retention procedures and policies.

10.2. Expenses. Whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to pay promptly (a) all the actual and reasonable
costs and expenses of the Agents, in connection with the negotiation,
preparation, execution and administration of the Credit Documents and any
consents, amendments, waivers or other modifications thereto and any other
documents or matters requested by Borrower, including, without limitation, the
reasonable fees, expenses and disbursements of counsel (in each case including
allocated costs of internal counsel); (b) all the costs of furnishing all
opinions by counsel for Borrower and the other Credit Parties; (c) all the
actual costs and reasonable expenses of creating, perfecting and recording Liens
in favor of Collateral Agent, for the benefit of the Secured Parties, including
filing and recording fees, expenses and taxes, stamp or documentary taxes,
search fees, title insurance premiums and reasonable fees, expenses and
disbursements of counsel to each Agent and of counsel providing any opinions
that any Agent or Requisite Lenders may request in respect of the Collateral or
the Liens created pursuant to the Collateral Documents; (d) all the actual costs
and reasonable fees, expenses and disbursements of any auditors, accountants,
consultants or appraisers (provided, that, so long as no Event of Default has
occurred and is continuing, no more than one such third party appraiser,
consultant or advisor shall be retained on behalf the Agents and Lenders without
the prior written consent of the Borrower); (e) all the actual costs and
reasonable expenses (including the reasonable fees, expenses and disbursements
of any appraisers, consultants, advisors and agents employed or retained by
Collateral Agent and its counsel) in connection with the custody or preservation
of any of the Collateral; (f) all other actual and reasonable costs and expenses
incurred by each Agent in connection with the negotiation, preparation and
execution of the Credit Documents and any consents, amendments, waivers or other
modifications thereto and the transactions contemplated thereby; and (g) after
the occurrence and during the continuation of a Default or an Event of Default,
all costs and expenses, including reasonable attorneys’ fees (including
allocated costs of internal counsel) and costs of settlement, incurred by any
Agent and Lenders in enforcing any Obligations of or in collecting any payments
due from any Credit Party hereunder or under the other Credit Documents by
reason of such Default or Event of Default (including in connection with the
sale, lease or license of, collection from, or other realization upon any of the
Collateral or the enforcement of the Guaranty) or in connection with any
refinancing or restructuring of the credit arrangements provided hereunder in
the nature of a “work-out” or pursuant to any insolvency or bankruptcy cases or
proceedings.

10.3. Indemnity.

(a) In addition to the payment of expenses pursuant to Section 10.2, whether or
not the transactions contemplated hereby shall be consummated, each Credit Party
agrees to defend (subject to Indemnitees’ selection of counsel), indemnify, pay
and hold harmless, each

 

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Agent and Lender and the officers, partners, members, directors, trustees,
advisors, employees, agents, sub-agents and Affiliates of each Agent and each
Lender (each, an “Indemnitee”), from and against any and all Indemnified
Liabilities; provided, (i) no Credit Party shall have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise from the gross negligence or willful
misconduct of that Indemnitee and (ii) no Credit Party shall be liable for any
settlement of any claim or proceeding effected by any Indemnitee without the
prior written consent of Borrower (which consent shall not be unreasonably
withheld or delayed), but if settled with such consent or if there shall be a
final judgment against an Indemnitee, each of the Credit Parties shall indemnify
and hold harmless such Indemnitees from and against any loss or liability by
reason of such settlement or judgment in the manner set forth in this Agreement.
To the extent that the undertakings to defend, indemnify, pay and hold harmless
set forth in this Section 10.3 may be unenforceable in whole or in part because
they are violative of any law or public policy, the applicable Credit Party
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by Indemnitees or any of them.

(b) To the extent permitted by applicable law, no Credit Party shall assert, and
each Credit Party hereby waives, any claim against each Lender, each Agent and
their respective Affiliates, directors, employees, attorneys, agents or
sub-agents, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) (whether or not the
claim therefor is based on contract, tort or duty imposed by any applicable
legal requirement) arising out of, in connection with, arising out of, as a
result of, or in any way related to, this Agreement or any Credit Document or
any agreement or instrument contemplated hereby or thereby or referred to herein
or therein, the transactions contemplated hereby or thereby, any Loan or the use
of the proceeds thereof or any act or omission or event occurring in connection
therewith, and Borrower hereby waives, releases and agrees not to sue upon any
such claim or any such damages, whether or not accrued and whether or not known
or suspected to exist in its favor.

10.4. Set-Off. Subject to the terms of the Intercreditor Agreement, 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 of any Event of Default each
Lender is hereby authorized by each Credit Party at any time or from time to
time subject to the consent of Administrative Agent (such consent not to be
unreasonably withheld or delayed), without notice to any Credit Party or to any
other Person (other than Administrative Agent), any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including Indebtedness evidenced by certificates
of deposit, whether matured or unmatured, but not including trust accounts) and
any other Indebtedness at any time held or owing by such Lender to or for the
credit or the account of any Credit Party against and on account of the
obligations and liabilities of any Credit Party to such Lender hereunder and
under the other Credit Documents, including all claims of any nature or
description arising out of or connected hereto or with any other Credit
Document, irrespective of whether or not (a) such Lender shall have made any
demand hereunder or (b) the principal of or the interest on the Loans or any
other amounts due hereunder shall have become due and payable pursuant to
Section 2 and although such obligations and liabilities, or any of them, may be
contingent or unmatured.

 

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10.5. Amendments and Waivers.

(a) Requisite Lenders’ Consent. Subject to the additional requirements of
Sections 10.5(b) and 10.5(c), no amendment, modification, termination or waiver
of any provision of the Credit Documents, or consent to any departure by any
Credit Party therefrom, shall in any event be effective without the written
concurrence of the Requisite Lenders and the Borrower; provided that
Administrative Agent may, with the consent of Borrower only, amend, modify or
supplement this Agreement to cure any ambiguity, omission, defect or
inconsistency, so long as such amendment, modification or supplement does not
adversely affect the rights of any Lender.

(b) Affected Lenders’ Consent. Without the written consent of each Lender that
would be affected thereby and the Borrower, no amendment, modification,
termination, or consent shall be effective if the effect thereof would:

(i) extend the scheduled final maturity of any Loan or Note;

(ii) waive, reduce or postpone any scheduled repayment (but not prepayment).

(iii) reduce the rate of interest on any Loan (other than any waiver of any
increase in the interest rate applicable to any Loan pursuant to Section 2.7) or
any fee or any premium payable hereunder;

(iv) extend the time for payment of any such interest or fees;

(v) reduce the principal amount of any Loan;

(vi) amend, modify, terminate or waive any provision of this Section 10.5(b),
Section 10.5(c) or any other provision of this Agreement that expressly provides
that the consent of all Lenders is required;

(vii) amend the definition of “Requisite Lenders” or “Pro Rata Share”;

(viii) release all or substantially all of the Collateral or all or
substantially all of the Guarantors from the Guaranty except as expressly
provided in the Credit Documents;

(ix) consent to the assignment or transfer by any Credit Party of any of its
rights and obligations under any Credit Document; or

(x) amend, modify, terminate or waive any provision of Section 8.1 of the Pledge
and Security Agreement, as the same applies to the Collateral Agent, or any
other provision thereof as the same applies to the rights or obligations of the
Collateral Agent, in each case without the consent of the Collateral Agent.

 

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(c) Other Consents. No amendment, modification, termination or waiver of any
provision of the Credit Documents, or consent to any departure by any Credit
Party therefrom, shall (i) amend, modify, terminate or waive any provision of
Section 9 as the same applies to any Agent, or any other provision hereof as the
same applies to the rights or obligations of any Agent, in each case without the
written consent of such Agent or (ii) at any time that the Sponsor Affiliates
are Restricted Sponsor Affiliates, amend, modify, terminate or waive any
provision of Section 2.14, Section 9.3(d), Section 9.9, Section 10.5(b)(viii),
this Section 10.5(c)(ii), Section 10.6(g)(i), Section 10.6(i), the definition of
“Assignment Agreement” or the form of Exhibit E (in each case to the extent
related to Restricted Sponsor Affiliates), the definition of “Requisite
Lenders”, the definition of “Restricted Sponsor Affiliate”, the definition of
“Sponsor Affiliates” or the definition of “Eligible Assignee”, in each case
without the written consent of Lenders holding (A) more than 50% of the sum of
the aggregate Loan Exposure of all Lenders (without regard to Lenders that are
Restricted Sponsor Affiliates) and (B) more than 50% of the sum of the aggregate
Loan Exposure of all Lenders that are Restricted Sponsor Affiliates.

(d) Execution of Amendments, etc. Administrative Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of such Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on any Credit Party in
any case shall entitle any 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 10.5 shall be binding
upon each Lender at the time outstanding, each future Lender and, if signed by a
Credit Party, on such Credit Party.

10.6. Successors and Assigns; Participations.

(a) Generally. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders. No Credit Party’s rights or
obligations hereunder nor any interest therein may be assigned or delegated by
any Credit Party without the prior written consent of all Lenders. Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, Affiliates of
each of the Agents and Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.

(b) Register. Borrower, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of the
corresponding Loans listed therein for all purposes hereof, and no assignment or
transfer of any such Loan shall be effective, in each case, unless and until
recorded in the Register following receipt of an Assignment Agreement effecting
the assignment or transfer thereof, in each case, as provided in
Section 10.6(d). Each assignment shall be recorded in the Register on the
Business Day the Assignment Agreement is received by Administrative Agent, if
received by 12:00 noon (New York City time), and on the following Business Day
if received after such time, prompt notice thereof shall be provided to Borrower
and a copy of such Assignment Agreement shall be maintained, as applicable. The
date of such recordation of a transfer shall be referred to herein

 

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as the “Assignment Effective Date.” Any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and binding
on any subsequent holder, assignee or transferee of the corresponding Loans.

(c) Right to Assign. Each Lender shall have the right at any time to sell,
assign or transfer all or a portion of its rights and obligations under this
Agreement, including all or a portion of its Loans owing to it or other
Obligations (provided, however, that pro rata assignments shall not be required
and each assignment shall be of a uniform, and not varying, percentage of all
rights and obligations under and in respect of any applicable Loan):

(i) to any Person meeting the criteria of clause (i) of the definition of the
term of “Eligible Assignee” upon the giving of notice to Borrower and
Administrative Agent; and

(ii) to any Person meeting the criteria of clause (ii) of the definition of the
term of “Eligible Assignee” upon giving of notice to Borrower and Administrative
Agent; provided, further each such assignment pursuant to this
Section 10.6(c)(ii) shall be in an aggregate amount of not less than $1,000,000
(or such lesser amount as may be agreed to by Borrower and Administrative Agent
or as shall constitute the aggregate amount of the Loans of the assigning
Lender).

(d) Mechanics. Assignments and assumptions of Loans shall only be effected by
manual execution and delivery to Administrative Agent of an Assignment
Agreement, for its acceptance and recording in the Register, along with an
assignment fee of $3,500 for each such Assignment Agreement, for the processing
and recordation thereof. Assignments shall be effective as of the Assignment
Effective Date. In connection with all assignments there shall be delivered to
Administrative Agent such forms, certificates or other evidence, if any, with
respect to United States federal income tax withholding matters as the assignee
under such Assignment Agreement may be required to deliver pursuant to
Section 2.17(c).

(e) Representations and Warranties of Assignee. Each Lender, upon execution and
delivery hereof or upon succeeding to an interest in the Loans, as the case may
be, represents and warrants as of the Effective Date or as of the Assignment
Effective Date that (i) it is an Eligible Assignee; (ii) it has experience and
expertise in the making of or investing in commitments or loans such as the
Loans; and (iii) it will make or invest in its Loans for its own account in the
ordinary course and without a view to distribution of such Loans within the
meaning of the Securities Act or the Exchange Act or other federal securities
laws (it being understood that, subject to the provisions of this Section 10.6,
the disposition of such Loans or any interests therein shall at all times remain
within its exclusive control).

(f) Effect of Assignment. Subject to the terms and conditions of this
Section 10.6, as of the Assignment Effective Date with respect to any Assignment
Agreement (i) the assignee thereunder shall have the rights and obligations of a
“Lender” hereunder to the extent of its interest in the Loans as reflected in
the Register and shall thereafter be a party hereto and a

 

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“Lender” for all purposes hereof; (ii) the assigning Lender thereunder shall, to
the extent that rights and obligations hereunder have been assigned to the
assignee, relinquish its rights (other than any rights which survive the
termination hereof under Section 10.8) and be released from its obligations
hereunder (and, in the case of an assignment covering all or the remaining
portion of an assigning Lender’s rights and obligations hereunder, such Lender
shall cease to be a party hereto on the Assignment Effective Date; provided,
anything contained in any of the Credit Documents to the contrary
notwithstanding, such assigning Lender shall continue to be entitled to the
benefit of all indemnities hereunder as specified herein with respect to matters
arising out of the prior involvement of such assigning Lender as a Lender
hereunder); and (iii) if any such assignment occurs after the issuance of any
Note hereunder, the assigning Lender shall, upon the effectiveness of such
assignment or as promptly thereafter as practicable, surrender its applicable
Notes to Administrative Agent for cancellation, and thereupon Borrower shall
issue and deliver new Notes, if so requested by the assignee and/or assigning
Lender, to such assignee and/or to such assigning Lender, with appropriate
insertions, to reflect the new outstanding Loans of the assignee and/or the
assigning Lender.

(g) Participations.

(i) Each Lender shall have the right at any time to sell one or more
participations to any Person (other than Borrower, any of its Subsidiaries or
any of its Affiliates (including, without limitation, Restricted Sponsor
Affiliates)) in all or any part of its Loans or in any other Obligation.

(ii) The holder of any such participation, other than an Affiliate of the Lender
granting such participation, shall not be entitled to require such Lender to
take or omit to take any action hereunder except with respect to any amendment,
modification or waiver that would (A) extend the final scheduled maturity of any
Loan or Note in which such participant is participating, or reduce the rate or
extend the time of payment of interest or fees thereon (except in connection
with a waiver of applicability of any post-default increase in interest rates)
or reduce the principal amount thereof, or increase the amount of the
participant’s participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default shall not constitute
a change in the terms of such participation, and that an increase in any Loan
shall be permitted without the consent of any participant if the participant’s
participation is not increased as a result thereof), (B) consent to the
assignment or transfer by any Credit Party of any of its rights and obligations
under this Agreement or (C) release all or substantially all of the Collateral
under the Collateral Documents (except as expressly provided in the Credit
Documents) supporting the Loans hereunder in which such participant is
participating.

(iii) Borrower agrees that each participant shall be entitled to the benefits of
Sections 2.15(c), 2.16 and 2.17 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to paragraph (c) of this
Section; provided, (x) a participant shall not be entitled to receive any
greater payment under Section 2.16 or 2.17 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
participant, unless the sale of the participation to such participant is made
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(y) a participant that would be a Non-US Lender if it were a Lender shall not be
entitled to the benefits of Section 2.17 unless Borrower is notified of the
participation sold to such participant and such participant agrees, for the
benefit of Borrower, to comply with Section 2.17 as though it were a Lender;
provided further that, except as specifically set forth in clauses (x) and
(y) of this sentence, nothing herein shall require any notice to Borrower or any
other Person in connection with the sale of any participation. To the extent
permitted by law, each participant also shall be entitled to the benefits of
Section 10.4 as though it were a Lender, provided such Participant agrees to be
subject to Section 2.14 as though it were a Lender.

(h) Certain Other Assignments and Participations. In addition to any other
assignment or participation permitted pursuant to this Section 10.6:

(i) any Lender may assign and/or pledge all or any portion of its Loans, the
other Obligations owed by or to such Lender, and its Notes, if any, to secure
obligations of such Lender including any Federal Reserve Bank as collateral
security pursuant to Regulation A of the Board of Governors and any operating
circular issued by such Federal Reserve Bank; and

(ii) notwithstanding anything to the contrary in this Section 10.6, any Lender
may sell participations (or otherwise transfer its rights) in or to all or a
portion of its rights and obligations under the Credit Documents (including all
its rights and obligations with respect to the Loans) to one or more lenders or
other Persons that provide financing to such Lender;

provided, that no Lender, as between Borrower and such Lender, shall be relieved
of any of its obligations hereunder as a result of any such assignment, pledge,
participation or other transfer and provided further, that in no event shall the
applicable Federal Reserve Bank, pledge, trustee, lender or other financing
source described in the preceding clauses (i) or (ii) be considered to be a
“Lender” or be entitled to require the assigning, selling or transferring Lender
to take or omit to take any action hereunder.

(i) Restricted Sponsor Affiliates. Each Agent and Lender hereby acknowledges
that a Restricted Sponsor Affiliate (i) may be a Lender (provided such
Restricted Sponsor Affiliate otherwise satisfies the criteria of the definition
of the term of “Eligible Assignee”) and (ii) may sell, assign or transfer all or
a portion of its rights and obligations as a Lender under this Agreement to
Eligible Assignees. Each Lender that is a Restricted Sponsor Affiliate, upon
execution and delivery hereof or upon succeeding to an interest in the Loans:

(i) represents and warrants as of any Assignment Effective Date and as of any
subsequent date upon which a Restricted Sponsor Affiliate becomes legally
obligated to purchase, sell, assign or transfer all of or a portion of the
rights and obligations as a Lender under this Agreement that (x) it is not in
possession of any information with respect to the Borrower, its Affiliates or
the Obligations that (A) has not been disclosed by or on behalf of the Borrower
to the Lenders generally or otherwise been posted to that portion of the
Platform designated for “public-side” Lenders and (B) could have a Material
Adverse Effect or otherwise be material to a

 

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decision by a Person to sell the Loans or a participation interest therein, and
(y) it will make or invest in, as the case may be, Loans for its own account in
the ordinary course of business and without a view to distribution of such Loans
within the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of this
Section 10.6, the disposition of such Loans or any interests therein shall at
all times remain within such restricted Sponsor Affiliate’s exclusive control)
to the Borrower or any Subsidiary of the Borrower;

(ii) agrees that (w) notwithstanding anything in this Agreement to the contrary,
it shall not sell, assign, contribute, transfer or otherwise convey all or a
portion of its rights and obligations as a Lender to Borrower or its
Subsidiaries, (x) notwithstanding anything in this Agreement to the contrary
(including, without limitation, Section 5.7), except as otherwise provided in
Section 9.3(d), it shall not attend or otherwise participate in any conference
calls or meetings between the Agents and/or the Lenders, on the one hand, and
the Borrower or any Affiliate of the Borrower, on the other hand, unless
consented to by the Requisite Lenders, (y) it shall not disclose any information
it receives in its capacity as a Lender with the Borrower or with any Affiliate
of the Borrower, and (z) Lenders, Agents and any of their respective officers,
partners, directors, employees or agents shall not be liable to such Restricted
Sponsor Affiliate (in its capacity as a Lender, but, for the avoidance of doubt,
excluding the Borrower and the other Credit Parties) for any action taken or
omitted by any Lender or Agent under or in connection with any of the Credit
Documents; and

(j) to the extent permitted by applicable law, no Restricted Sponsor Affiliate
(in its capacity as a Lender, but, for the avoidance of doubt, excluding the
Borrower and the other Credit Parties) shall assert, and each Restricted Sponsor
Affiliate (in its capacity as a Lender, but, for the avoidance of doubt,
excluding the Borrower and the other Credit Parties) hereby waives, any claim or
cause of action against each Lender, each Agent and their respective Affiliates,
directors, employees, attorneys, agents or sub-agents (whether or not the claim
therefor is based on contract, tort or duty imposed by any applicable legal
requirement) arising on or prior to the Effective Date (but not thereafter) out
of, in connection with, as a result of, or in any way related to, the Plan, this
Agreement or any Credit Document or any agreement or instrument contemplated
hereby or thereby or referred to herein or therein, the transactions
contemplated hereby or thereby, any Loan or the use of the proceeds thereof or
any act or omission or event occurring in connection therewith, and each
Restricted Sponsor Affiliate (in its capacity as a Lender, but, for the
avoidance of doubt, excluding the Borrower and the other Credit Parties) hereby
waives, releases and agrees not to sue upon any such claim or any such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor. The foregoing shall not serve to limit or impair the ability of
Restricted Sponsor Affiliates to (x) assert claims or causes of action arising
from breaches that result in a failure of consideration or to otherwise enforce
a valid assignment and (y) enforce the provisions of Section 2.14 to the extent
payments on the Loans are made to Lenders generally from the Administrative
Agent or Collateral Agent

 

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10.7. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such action is taken
or condition exists.

10.8. Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made herein shall survive the
execution and delivery hereof and the making of any Credit Extension.
Notwithstanding anything herein or implied by law to the contrary, the
agreements of each Credit Party set forth in Sections 2.15(c), 2.16, 2.17, 10.2,
10.3 and 10.4 and the agreements of Lenders set forth in Sections 2.14, 9.3(b)
and 9.6 shall survive the payment of the Loans.

10.9. No Waiver; Remedies Cumulative. No failure or delay on the part of any
Agent or any Lender in the exercise of any power, right or privilege hereunder
or under any other Credit Document shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other power, right or privilege. The
rights, powers and remedies given to each Agent and each Lender hereby are
cumulative and shall be in addition to and independent of all rights, powers and
remedies existing by virtue of any statute or rule of law or in any of the other
Credit Documents. Any forbearance or failure to exercise, and any delay in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.

10.10. Marshalling; Payments Set Aside. Neither any Agent nor any Lender shall
be under any obligation to marshal any assets in favor of any Credit Party or
any other Person or against or in payment of any or all of the Obligations. To
the extent that any Credit Party makes a payment or payments to Administrative
Agent or Lenders (or to Administrative Agent, on behalf of Lenders), or any
Agent or Lenders enforce any Liens or exercise their rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, any other state or federal law, common law or any
equitable cause, then, to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor or related thereto, shall be revived and continued in full force and
effect as if such payment or payments had not been made or such enforcement or
setoff had not occurred.

10.11. Severability. In case any provision in or obligation hereunder or under
any other Credit Document shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

 

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10.12. Obligations Several; Independent Nature of Lenders’ Rights. The
obligations of Lenders hereunder are several and no Lender shall be responsible
for the obligations of any other Lender hereunder. Nothing contained herein or
in any other Credit Document, and no action taken by Lenders pursuant hereto or
thereto, shall be deemed to constitute Lenders as a partnership, an association,
a joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Lender shall be a separate and independent debt, and each
Lender shall be entitled to protect and enforce its rights arising out hereof
and it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.

10.13. Headings. Section headings herein are included herein for convenience of
reference only and shall not constitute a part hereof for any other purpose or
be given any substantive effect.

10.14. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES THEREOF.

10.15. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY
CREDIT PARTY ARISING OUT OF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR
ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY (A) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (B) WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS; (C) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SECTION 10.1; (D) AGREES THAT SERVICE AS PROVIDED IN CLAUSE
(C) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE
CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (E) AGREES THAT AGENTS AND
LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO BRING PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE COURTS OF ANY OTHER
JURISDICTION.

10.16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER
IS INTENDED TO BE

 

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ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT
TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS
WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON
THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS
AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT
IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER
SPECIFICALLY REFERRING TO THIS SECTION 10.16 AND EXECUTED BY EACH OF THE PARTIES
HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.

10.17. Confidentiality. Each Agent, and each Lender shall hold all non-public
information regarding Borrower and its Subsidiaries and their businesses
identified as such by Borrower and obtained by such Lender pursuant to the
requirements hereof in accordance with such Lender’s customary procedures for
handling confidential information of such nature, it being understood and agreed
by Borrower that, in any event, each Agent and each Lender may make
(i) disclosures of such information to Affiliates of such Lender or Agent and to
their respective agents and advisors (and to other Persons authorized by a
Lender or Agent to organize, present or disseminate such information in
connection with disclosures otherwise made in accordance with this
Section 10.17), (ii) disclosures of such information reasonably required by any
bona fide or potential assignee, pledgee, transferee or participant in
connection with the contemplated assignment, pledge, transfer or participation
of any Loans or any participations therein or by any direct or indirect
contractual counterparties (or the professional advisors thereto) to any swap or
derivative transaction relating to Borrower and its obligations (provided, such
assignees, pledgees, transferees, participants, counterparties and advisors are
advised of and agree to be bound by either the provisions of this Section 10.17
or other provisions at least as restrictive as this Section 10.17),
(iii) disclosure to any rating agency when required by it, provided that, prior
to any disclosure, such rating agency shall undertake in writing to preserve the
confidentiality of any confidential information relating to the Credit Parties
received by it from any of the Agents or any Lender, and (iv) disclosures
required or requested by any governmental agency or representative thereof or by
the NAIC or pursuant to legal or judicial process; provided, unless specifically
prohibited by applicable law or court order, each Lender and each Agent shall
make reasonable efforts to notify Borrower of any request by any governmental
agency or representative thereof (other than any such request in connection with
any examination of the financial condition or other routine examination of such
Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of

 

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such information. In addition, each Agent and each Lender may disclose the
existence of this Agreement and the information about this Agreement to market
data collectors, similar services providers to the lending industry, and service
providers to the Agents and the Lenders in connection with the administration
and management of this Agreement and the other Credit Documents.

10.18. Usury Savings Clause. Notwithstanding any other provision herein, the
aggregate interest rate charged with respect to any of the Obligations,
including all charges or fees in connection therewith deemed in the nature of
interest under applicable law shall not exceed the Highest Lawful Rate. If the
rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest Lawful Rate, the outstanding
amount of the Loans made hereunder shall bear interest at the Highest Lawful
Rate until the total amount of interest due hereunder equals the amount of
interest which would have been due hereunder if the stated rates of interest set
forth in this Agreement had at all times been in effect. In addition, if when
the Loans made hereunder are repaid in full the total interest due hereunder
(taking into account the increase provided for above) is less than the total
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect, then to
the extent permitted by law, Borrower shall pay to Administrative Agent an
amount equal to the difference between the amount of interest paid and the
amount of interest which would have been paid if the Highest Lawful Rate had at
all times been in effect. Notwithstanding the foregoing, it is the intention of
Lenders and Borrower to conform strictly to any applicable usury laws.
Accordingly, if any Lender contracts for, charges, or receives any consideration
which constitutes interest in excess of the Highest Lawful Rate, then any such
excess shall be cancelled automatically and, if previously paid, shall at such
Lender’s option be applied to the outstanding amount of the Loans made hereunder
or be refunded to Borrower.

10.19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.

10.20. Effectiveness. This Agreement shall become effective upon the execution
of a counterpart hereof by each of the parties hereto and receipt by Borrower
and Administrative Agent of written or telephonic notification of such execution
and authorization of delivery thereof.

10.21. Patriot Act. Each Lender and each Agent (for itself and not on behalf of
any Lender) hereby notifies Borrower that pursuant to the requirements of the
Patriot Act, it is required to obtain, verify and record information that
identifies Borrower, which information includes the name and address of Borrower
and other information that will allow such Lender or Administrative Agent, as
applicable, to identify Borrower in accordance with the Patriot Act.

10.22. Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment Agreement shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use

 

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of a paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.

10.23. Post-Closing Actions. Notwithstanding anything to the contrary contained
in this Agreement or the other Loan Documents, the parties hereto acknowledge
and agree that Borrower and its Subsidiaries shall be required to take the
actions specified in Schedule 10.23 as promptly as practicable, and in any event
within the time periods set forth in Schedule 10.23 or such other time periods
as Administrative Agent or the Requisite Lenders may agree. The provisions of
Schedule 10.23 shall be deemed incorporated by reference herein as fully as if
set forth herein in their entirety. All provisions of this Agreement and the
other Credit Documents (including, without limitation, all conditions precedent,
representations, warranties, certificates, borrowing notices, covenants, events
of default and other agreements herein and therein) shall be deemed modified to
the extent necessary to effect the foregoing (and to permit the taking of the
actions described above within the time periods required above, rather than as
otherwise provided in the Credit Documents); provided that (a) to the extent any
representation and warranty would not be true because the foregoing actions were
not taken on the Effective Date, the respective representation and warranty
shall be required to be true and correct in all material respects at the time
the respective action is taken (or was required to be taken) in accordance with
the foregoing provisions of this Section 10.23 and (b) all representations and
warranties relating to the Collateral Documents shall be required to be true
immediately after the actions required to be taken by this Section 10.23 have
been taken (or were required to be taken). The parties hereto acknowledge and
agree that the failure to take any of the actions required above within the
relevant time periods required above shall give rise to an immediate Event of
Default pursuant to this Agreement.

10.24. No Fiduciary Duty. Each Agent, each Lender and their respective
Affiliates (collectively, solely for purposes of this paragraph, the “Lenders”),
may have economic interests that conflict with those of the Borrower. The
Borrower, its Subsidiaries and their respective affiliates each agrees that
nothing in the Credit Documents or otherwise will be deemed to create an
advisory, fiduciary or agency relationship or fiduciary or other implied duty
between the Lenders, on the one hand, and the Borrower, its Subsidiaries, and
any of their respective stockholders or affiliates, on the other hand. Borrower,
its Subsidiaries and their respective affiliates each acknowledge and agree that
(i) the transactions contemplated by the Credit Documents are arm’s-length
commercial transactions between the Lenders, on the one hand, and the Borrower,
its Subsidiaries and their respective affiliates, on the other, (ii) in
connection therewith and with the process leading to such transaction each of
the Lenders is acting solely as a principal and not the agent or fiduciary of
the Borrower, its Subsidiaries or their respective affiliates, management,
stockholders, creditors or any other person, (iii) no Lender has assumed an
advisory or fiduciary responsibility in favor of the Borrower, its Subsidiaries
or their respective affiliates with respect to the transactions contemplated
hereby or the process leading thereto (irrespective of whether any Lender or any
of its affiliates has advised or is currently advising the Borrower, its
Subsidiaries or their respective affiliates on other matters) or any other
obligation to the Borrower, its Subsidiaries or their respective affiliates
except the obligations expressly set forth in the Credit Documents and (iv) the
Borrower, its Subsidiaries and their respective affiliates have consulted their
own legal and financial advisors

 

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to the extent each deemed appropriate. The Borrower, each of its Subsidiaries
and each of their respective affiliates each further acknowledges and agrees
that it is responsible for making its own independent judgment with respect to
such transactions and the process leading thereto. The Borrower, each of its
Subsidiaries and each of their respective affiliates each agrees that it will
not claim that any Lender has rendered advisory services of any nature or
respect, or owes a fiduciary or similar duty to the Borrower, its Subsidiaries
or their respective affiliates in connection with such transaction or the
process leading thereto.

10.25. Effect of Restatement. This Agreement shall, except as otherwise
expressly set forth herein, supersede the Original Agreement from and after the
Effective Date with respect to the Loans outstanding under the Original
Agreement as of the Effective Date. The parties hereto acknowledge and agree,
however, that (a) this Agreement and all other Credit Documents executed and
delivered herewith do not constitute a novation, payment and reborrowing or
termination of the Obligations under the Original Agreement and the other Credit
Documents as in effect prior to the Effective Date, (b) such Obligations are in
all respects continuing with only the terms being modified as provided in this
Agreement and the other Credit Documents, (c) the liens and security interests
in favor of the Collateral Agent for the benefit of the Secured Parties securing
payment of such Obligations are in all respects continuing and in full force and
effect with respect to all Obligations and (d) all references in the other
Credit Documents to the Credit Agreement shall be deemed to refer without
further amendment to this Agreement. The parties agree that as of the Effective
Date all “Defaults” and “Events of Defaults” (as each term is defined in the
Original Agreement) occurred, continuing or otherwise arising under the Original
Agreement shall be permanently waived; provided that such prior or permanent
waiver shall not constitute a waiver of any Default or Event of Default first
arising under this Agreement upon or after the effectiveness of this Agreement.
The parties understand and agree that the terms, provisions, conditions and
limitations set forth in any “Credit Document” (as such term is defined in the
Original Agreement), including any forbearance agreement, shall be as of the
Effective Date of no further force and effect except to the extent they are
amended and restated in the form of a Credit Document entered into in connection
with this Agreement, and then only with such terms, provisions, conditions and
limitations as set forth in such Credit Documents.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.

 

MOVIE GALLERY, INC. By:   /s/ S. Page Todd Name:   S. Page Todd Title:  
Executive Vice President, Secretary, and General Counsel

 

MOVIE GALLERY US, LLC By:   Movie Gallery, Inc., its Manager and Sole Member By:
  /s/ S. Page Todd Name:   S. Page Todd Title:   Executive Vice President,
Secretary, and General Counsel

[Signatures Continued on the Next Page]

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M.G.A REALTY I, LLC By:   Movie Gallery US, LLC, its Manager and Sole Member

  By:   Movie Gallery, Inc., its Manager and Sole Member   By:   /s/ S. Page
Todd   Name:   S. Page Todd   Title:   Executive Vice President, Secretary, and
General Counsel

 

HOLLYWOOD ENTERTAINMENT CORPORATION By:   /s/ S. Page Todd Name:   S. Page Todd
Title:   Executive Vice President, Secretary, and General Counsel

 

MG AUTOMATION LLC By:   Hollywood Entertainment Corporation, its Manager and
Sole Member By:   /s/ S. Page Todd Name:   S. Page Todd Title:   Executive Vice
President, Secretary, and General Counsel

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

WELLS FARGO BANK, N.A., as Administrative Agent, Collateral Agent By:   /s/
Jeffrey Rose   Name: Jeffrey Rose   Title:  Vice President

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

L.A. CAPITAL MANAGEMENT LTD. By:   /s/ Kirk Wallace   Name: Kirk Wallace  
Title:  Senior Vice President

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

PAR INVESTMENT PARTNERS, L.P. By: PAR Group, L.P., as general partner By: PAR
Capital Management, Inc. as general partner By:   /s/ Gina DiMento   Name: Gina
DiMento   Title:  General Counsel & Vice President

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

THE RESOLUTION MASTER FUND, LP By:   /s/ Samuel Periman   Name: Samuel Periman  
Title:  Managing Director

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

CITIGROUP FINANCIAL PRODUCT, INC. By:   /s/ Brian Blessing   Name: Brian
Blessing   Title:  Authorized Signatory

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

ANSONVILLE LP By:   /s/ Michael Duren   Name: Michael Duran   Title: Managing
Director

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

CONTEXT/TQA SPECIAL OPPORTUNITIES MASTER FUND, LTD. (formerly named TQA SPECIAL
OPPORTUNITIES MASTER FUND, LTD) By:   /s/ Michael S. Rosen   Name: Michael S.
Rosen   Title:  Managing Member, Context Capital Management, LLC, investment
manager

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

DISTRESSED/HIGH YIELD TRADING OPPORTUNITIES FUND LTD. By:   /s/ Scott A. Stagg  
Name: Scott A. Stagg   Title: Portfolio Manager

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

PIERCE DIVERSIFIED STRATEGY MASTER FUND, LLC By:   /s/ Scott A. Stagg   Name:
Scott A. Stagg   Title: Trading Advisor

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

HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD. By:   /s/ Philip A. Falcone  
Name: Philip A. Falcone   Title: Vice President

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

HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P. By:   /s/ Philip A.
Falcone   Name: Philip A. Falcone   Title: Vice President

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

APPENDIX A

TO CREDIT AND GUARANTY AGREEMENT

Lender Exposure

[Attached]

 

APPENDIX A-1

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

APPENDIX B

TO CREDIT AND GUARANTY AGREEMENT

Notice Addresses

MOVIE GALLERY, INC.

900 West Main Street

Dothan, Alabama 36301

Attention: S. Page Todd,

Executive Vice President, Secretary and General Counsel

Facsimile: (334) 836-3635

MOVIE GALLERY US, LLC

900 West Main Street

Dothan, Alabama 36301

Attention: S. Page Todd,

Executive Vice President, Secretary and General Counsel

Facsimile: (334) 836-3635

M.G.A. REALTY I, LLC

900 West Main Street

Dothan, Alabama 36301

Attention: S. Page Todd,

Executive Vice President, Secretary and General Counsel

Facsimile: (334) 836-3635

HOLLYWOOD ENTERTAINMENT CORPORATION

900 West Main Street

Dothan, Alabama 36301

Attention: S. Page Todd,

Executive Vice President, Secretary and General Counsel

Facsimile: (334) 836-3635

MG AUTOMATION LLC

900 West Main Street

Dothan, Alabama 36301

Attention: S. Page Todd,

Executive Vice President, Secretary and General Counsel

Facsimile: (334) 836-3635

 

APPENDIX B-1

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

in each case, with a copy to:

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, Illinois 60601-6636

Attention: Anup Sathy, P.C.

Facsimile: (312) 861-2200

and

Kirkland & Ellis LLP

Citigroup Center

153 East 53rd Street

New York, New York 10022-4611

Attention: Leonard Klingbaum, Esq.

Facsimile: (212) 446-6460

 

APPENDIX B-2

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

WELLS FARGO BANK, N.A.,

as Administrative Agent and Collateral Agent

Administrative Agent’s and Collateral Agent’s Principal Office:

Wells Fargo Bank, N.A.

Corporate Trust Services

625 Marquette Avenue, N9311-110

Minneapolis, MN 55479

Attention: Jeffrey Rose

in each case, with a copy to:

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, NY 10005

Attention: Matthew S. Barr

 

APPENDIX B-3