Exhibit 10.33

 

EXECUTION VERSION

 

CREDIT AGREEMENT

 

Dated as of April 9, 2015 among

 

FRED'S, INC., AND

 

AND CERTAIN OF ITS SUBSIDIARIES,

 

JOINTLY AND SEVERALLY,

 

as the “Borrowers”

 

ANY OTHER LOAN PARTIES PARTY HERETO FROM TIME TO TIME

 

and

 

THE FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME

 

As the "Lenders"

 

and

 

REGIONS BANK

 

as the "Administrative Agent"

 

and

 

REGIONS BUSINESS CAPITAL, a division of Regions Bank,

 

as Sole Book Runner and Sole Lead Arranger

 

 

 

 

TABLE OF CONTENTS

 

    Page       Article 1 DEFINITIONS; CONSTRUCTION - 1 -       Section 1.1.
Definitions - 1 -       Section 1.2. Accounting Terms and Determination - 24 -  
    Section 1.3. Uniform Commercial Code - 24 -       Section 1.4. Terms
Generally - 24 -       Article 2 AMOUNT AND TERMS OF THE COMMITMENTS - 25 -    
  Section 2.1. General Description of Facility - 25 -       Section 2.2.
Revolving Loans - 25 -       Section 2.3. Procedure for Revolving Borrowings -
26 -       Section 2.4. Swingline Commitment. - 27 -       Section 2.5. Funding
of Borrowings - 27 -       Section 2.6. Interest Elections - 28 -       Section
2.7. Optional Reduction and Termination of Commitments - 29 -       Section 2.8.
Repayment of Loans - 29 -       Section 2.9. Evidence of Indebtedness - 30 -    
  Section 2.10. Optional Prepayments - 30 -       Section 2.11. Interest on
Loans - 30 -       Section 2.12. Fees - 31 -       Section 2.13. Computation of
Interest and Fees - 32 -       Section 2.14. Inability to Determine Interest
Rates - 32 -       Section 2.15. Illegality - 32 -       Section 2.16. Increased
Costs - 33 -       Section 2.17. Funding Indemnity - 34 -       Section 2.18.
Taxes - 34 -       Section 2.19. Payments Generally; Pro Rata Treatment; Sharing
of Set-offs - 37 -       Section 2.20. Mitigation of Obligations - 38 -      
Section 2.21. Borrower Agent - 38 -       Section 2.22. Letter of Credit
Facility - 39 -       Section 2.23. Defaulting Lender - 41 -       Section 2.24.
One Obligation - 43 -       Section 2.25. Effect of Termination - 43 -      
Section 2.26. Cash Collateral - 43 -

 

i

 

 

Section 2.27. Effectiveness of Addendum - 44 -       Article 3 CONDITIONS
PRECEDENT TO LOANS - 44 -       Section 3.1. Conditions to Effectiveness - 44 -
      Section 3.2. Conditions to Each Credit Event - 46 -       Section 3.3.
Delivery of Documents - 47 -       Article 4 REPRESENTATIONS AND WARRANTIES - 47
-       Section 4.1. Existence; Power - 47 -       Section 4.2. Organizational
Power; Authorization - 47 -       Section 4.3. Governmental Approvals; No
Conflicts - 47 -       Section 4.4. Financial Statements - 48 -       Section
4.5. Litigation and Environmental Matters - 48 -       Section 4.6. Compliance
with Laws and Agreements - 48 -       Section 4.7. Investment Company Act - 48 -
      Section 4.8. Taxes - 48 -       Section 4.9. Margin Regulations - 49 -    
  Section 4.10. ERISA - 49 -       Section 4.11. Ownership of Property;
Insurance - 49 -       Section 4.12. Disclosure - 50 -       Section 4.13. Labor
Relations - 50 -       Section 4.14. Subsidiaries - 50 -       Section 4.15.
Solvency - 50 -       Section 4.16. OFAC - 50 -       Section 4.17.
Anti-Terrorism Laws - 50 -       Section 4.18. Enforceability - 51 -      
Section 4.19. Deposit Accounts; Securities Accounts; Commodities Accounts - 51 -
      Section 4.20. Intellectual Property - 52 -       Section 4.21. Brokers -
52 -       Section 4.22. Accuracy and Completeness of Information - 52 -      
Section 4.23. No Defaults - 52 -       Article 5 AFFIRMATIVE COVENANTS - 53 -  
    Section 5.1. Financial Statements and Other Information - 53 -       Section
5.2. Notices of Material Events - 54 -       Section 5.3. Existence; Conduct of
Business - 55 -       Section 5.4. Compliance with Laws - 55 -

 

ii

 

 

Section 5.5. Payment of Obligations - 55 -       Section 5.6. Books and Records
- 56 -       Section 5.7. Visitation and Inspection - 56 -       Section 5.8.
Maintenance of Properties; Insurance - 56 -       Section 5.9. Use of Proceeds;
Margin Regulations - 56 -       Section 5.10. Casualty and Condemnation - 57 -  
    Section 5.11. Additional Subsidiaries - 57 -       Section 5.12. ERISA - 57
-       Section 5.13. Environmental - 58 -       Section 5.14. Margin Stock - 58
-       Section 5.15. Taxes; Claims - 58 -       Section 5.16. Cash Management;
Deposit Accounts - 58 -       Section 5.17. Further Assurances - 59 -      
Article 6 [RESERVED] - 59 -     Article 7 NEGATIVE COVENANTS - 59 -      
Section 7.1. Indebtedness - 59 -       Section 7.2. Liens - 60 -       Section
7.3. Fundamental Changes - 61 -       Section 7.4. Investments, Loans - 61 -    
  Section 7.5. Restricted Payments - 63 -       Section 7.6. Sale of Assets - 63
-       Section 7.7. Transactions with Affiliates - 64 -       Section 7.8.
Hedging Agreement - 64 -       Section 7.9. Amendment to Material Documents - 65
-       Section 7.10. Accounting Changes - 65 -       Section 7.11. Government
Regulation - 65 -       Section 7.12. Plans - 65 -       Section 7.13. Sales and
Leasebacks - 65 -       Section 7.14. Disqualified Capital Stock - 65 -      
Article 8 EVENTS OF DEFAULT - 66 -       Section 8.1. Events of Default - 66 -  
    Section 8.2. Remedies upon Default - 68 -       Section 8.3. License - 68 -
      Section 8.4. Receiver - 68 -

 

iii

 

 

Section 8.5. Deposits; Insurance - 68 -       Section 8.6. Remedies Cumulative -
69 -       Article 9 ADMINISTRATIVE AGENT - 69 -       Section 9.1. Appointment
of Administrative Agent - 69 -       Section 9.2. Nature of Duties of
Administrative Agent - 69 -       Section 9.3. Lack of Reliance on
Administrative Agent - 70 -       Section 9.4. Certain Rights of Administrative
Agent - 70 -       Section 9.5. Reliance by Administrative Agent - 70 -      
Section 9.6. Administrative Agent in its Individual Capacity - 70 -      
Section 9.7. Successor Administrative Agent - 70 -       Section 9.8.
Withholding Tax - 71 -       Section 9.9. Administrative Agent May File Proofs
of Claim - 71 -       Section 9.10. Authorization to Execute Other Loan
Documents - 72 -       Section 9.11. Administrative Agent Titles - 72 -      
Section 9.12. Bank Product Providers - 72 -       Section 9.13. No Third Party
Beneficiaries - 72 -       Section 9.14. Certifications From Lenders and
Participants; PATRIOT Act; No Reliance - 72 -       Article 10 MISCELLANEOUS -
73 -       Section 10.1. Notices - 73 -       Section 10.2. Waiver; Amendments -
74 -       Section 10.3. Expenses; Indemnification - 75 -       Section 10.4.
Successors and Assigns - 77 -       Section 10.5. Governing Law; Jurisdiction;
Consent to Service of Process - 81 -       Section 10.6. WAIVERS - 81 -      
Section 10.7. Right of Set-off - 82 -       Section 10.8. Counterparts;
Integration - 83 -       Section 10.9. Survival - 83 -       Section 10.10.
Severability - 83 -       Section 10.11. Confidentiality - 83 -       Section
10.12. Interest Rate Limitation - 84 -       Section 10.13. Patriot Act - 84 -  
    Section 10.14. No Advisory or Fiduciary Responsibility - 84 -       Section
10.15. Revival and Reinstatement of Obligations - 85 -       Section 10.16. Time
is of the Essence - 85 -

 

iv

 

 

Article 11 NATURE AND EXTENT OF EACH LOAN PARTY'S LIABILITY - 85 -       Section
11.1. Joint and Several Liability - 85 -       Section 11.2. Waivers - 85 -    
  Section 11.3. Extent of Liability; Contribution - 86 -       Section 11.4.
Joint Enterprise - 87 -       Section 11.5. Subordination - 87 -       Section
11.6. Keepwell - 87 -       Article 12 GUARANTEE - 87 -       Section 12.1.
Guaranty - 87 -       Section 12.2. Obligations Not Waived - 87 -       Section
12.3. Guarantee of Payment - 88 -       Section 12.4. No Discharge or
Diminishment of Guaranty - 88 -       Section 12.5. Defenses of Borrowers Waived
- 88 -       Section 12.6. Subordination - 88 -       Section 12.7. Information
- 88 -

 

v

 

 

Schedules       Schedule 1 Commitments Schedule 2 Existing Letters of Credit
Schedule 4.5 Litigation and Environmental Matters Schedule 4.14 Subsidiaries
Schedule 4.19 Deposit, Securities and Commodities Accounts Schedule 4.20
Intellectual Property Schedule 7.1 Indebtedness Schedule 7.2 Liens Schedule 7.4
Investments; Loans Schedule 7.7 Transactions with Affiliates     Exhibits      
Exhibit A Form of Revolving Note Exhibit B Form of Swingline Note Exhibit C Form
of Assignment and Acceptance Exhibit D Form of Compliance Certificate Exhibit E
Form of Joinder Agreement Exhibit F Form of Notice of Borrowing Exhibit G Form
of Notice of Conversion/Continuation Exhibit H Form of FIFO Inventory Amount
Calculation

 

vi

 

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this "Agreement") is made and entered into as of April 9,
2015, by and among (A) FRED'S, INC., a Tennessee corporation ("Parent"), (B) the
Subsidiaries of Parent identified on the signature pages hereto and any other
Subsidiaries of Parent which may become Borrowers hereunder pursuant to
Section 5.11 (each of such Subsidiaries, together with Parent, jointly and
severally, "Borrowers" and, each, a "Borrower"); (C) the Loan Parties identified
on the signature pages hereto and any other Subsidiaries of Parent which may
become Guarantors hereunder pursuant to Section 5.11 (each of such Subsidiaries,
jointly and severally, "Guarantors" and, each, a "Guarantor"); (D) the financial
institutions from time to time party hereto (each, a "Lender" and, collectively,
"Lenders"); (E) REGIONS BANK, an Alabama bank (as further defined below,
"Regions Bank"), in its capacity as Swingline Lender (as defined below) and LC
Issuer (as defined below); and (F) Regions Bank, in its capacity as
administrative agent and collateral agent for Lenders, LC Issuer and other
Secured Parties (in such capacity and as further defined below, "Administrative
Agent" or "Agent").

 

RECITALS:

 

Borrowers have requested that Administrative Agent and Lenders establish a
senior secured revolving credit facility and that LC Issuer establish a letter
of credit sub-facility, all for the purposes set forth herein.

 

Administrative Agent, Lenders, and LC Issuer are willing to provide such senior
secured credit facility and letter of credit sub-facility, subject to the terms
and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing premises, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
mutually acknowledged, each Borrower, each Guarantor, Administrative Agent, each
Lender, and LC Issuer, each intending to be legally bound, hereby covenant and
agree as follows:

 

Article 1

 

DEFINITIONS; CONSTRUCTION

 

Section 1.1.          Definitions. In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein specified
(to be applicable to both the singular and plural forms of the terms defined):

 

"Acquisition" shall mean (whether by purchase, exchange, issuance of stock, or
other equity or debt securities, merger, reorganization, amalgamation, or any
other method and whether by a single transaction or a series of transactions)
any acquisition by any Borrower or Subsidiary of (a) any Voting Capital Stock
issued by any other Person, but only if such acquisition results in such
Borrower or Subsidiary's owning more than fifty percent (50%) of such Voting
Capital Stock; (b) all or substantially all of the assets of any other Person;
or (c) the assets which constitute all or any substantial part of any division
or operating unit of the business of any other Person.

 

"Addendum" shall mean that certain Addendum to Credit Agreement dated on or
about the date by and among Administrative Agent, Lenders, LC Issuer, and Loan
Parties, as the same may be amended, restated, supplemented or otherwise
modified from time to time.

 

"Administrative Agent" shall mean Regions Bank, in its capacity as
administrative agent and collateral agent for each Secured Party, together with
its successors and assigns.

 

- 1 -

 

 

"Administrative Agent Indemnitees" shall mean Administrative Agent and its
officers, directors, employees, Affiliates, agents, consultants and attorneys,
including Administrative Agent Professionals.

 

"Administrative Agent Professionals" shall mean attorneys, accountants,
appraisers, auditors, business valuation experts, environmental engineers or
consultants, turnaround consultants, and other professionals and experts
retained by Administrative Agent.

 

"Administrative Questionnaire" shall mean, with respect to each Lender, an
administrative questionnaire in the form provided by Administrative Agent and
submitted to Administrative Agent duly completed by such Lender.

 

"Affiliate" shall mean, as to any Person, any other Person that directly, or
indirectly through one or more intermediaries, Controls, is Controlled by, or is
under common Control with, such Person. For the purposes of this definition,
"Control" shall mean the power, directly or indirectly, either to (i) vote
twenty-five percent (25%) or more of the securities having ordinary voting power
for the election of directors (or persons performing similar functions) of a
Person or (ii) direct or cause the direction of the management and policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. The terms "Controlled by" and "under common Control with" have the
meanings correlative thereto.

 

"Aggregate Revolving Commitments" shall mean, collectively, the Revolving
Commitments of all Lenders.

 

"Aggregate Revolving Obligations" shall mean, at any time of determination, the
sum (without duplication) of (a) the outstanding principal amount of all
Revolving Loans plus (b) the outstanding amount of all LC Obligations.

 

"Allocable Amount" has the meaning given such term in Section 11.3(b).

 

"Anti-Terrorism Law" shall mean any laws relating to the prevention of terrorism
or money laundering, including the PATRIOT Act.

 

"Applicable Law" shall mean all laws, rules, regulations, and governmental
guidelines applicable to a Person, conduct, transaction, agreement, or matter in
question, including all applicable statutory law, common law, and equitable
principles, and all provisions of constitutions, treaties, statutes, rules,
regulations, orders, and decrees of Governmental Authorities.

 

"Applicable Lending Office" shall mean, for each Lender, the "Lending Office" of
such Lender (or an Affiliate of such Lender) designated in the Administrative
Questionnaire submitted by such Lender, as such Lender may from time to time
specify to Administrative Agent and Borrower Agent as the office pursuant to
which its Loans are to be made and maintained.

 

"Applicable Margin" shall mean, subject to the terms of this definition and
prior to the occurrence of the Borrowing Base Trigger Event, with respect to any
Type of Loan and at any time of determination, the percentage rate per annum set
forth in the following table, as determined by reference to Borrowers' FIFO
Inventory Amount for the calendar quarter preceding each Determination Date (as
defined below), as further described below:

 

- 2 -

 

 

      Revolving Loans  Level  FIFO
Inventory Amount  Base
Rate   LIR   LIBOR  I  Greater than $325,000,000   0.25%   1.25%   1.25% III 
Less than or equal to $325,000,000   0.50%   1.50%   1.50%

 

The Applicable Margin shall be subject to reduction or increase, as applicable
and as set forth in the table above, on a quarterly basis on each Determination
Date, and any such reduction or increase shall be automatic and without notice
to any Person. Without limiting Administrative Agent's or Required Lenders'
rights to charge Default Interest, if (a) the Compliance Certificate setting
forth the FIFO Inventory Amount is not received by Administrative Agent on or
before the applicable dates required pursuant to Section 5.1(c), or (b) an Event
of Default occurs and, in either case, Administrative Agent or Required Lenders
so elect, then, in each case, from the date such Compliance Certificate is
required to be delivered or the date such Event of Default occurred, as
applicable, the Applicable Margin shall, at the option of Administrative Agent
or the Required Lenders, be at the Level with the highest rates of interest
until such time as such Compliance Certificate is received by Administrative
Agent and any Event of Default (whether resulting from a failure to timely
deliver such Compliance Certificate or otherwise) is waived in accordance with
the terms of this Agreement; provided, that, if the Applicable Margin is
increased due to Loan Parties' failure to deliver the Compliance Certificate
setting forth the FIFO Inventory Amount to Administrative Agent on or before the
applicable date required pursuant to Section 5.1(c), such Applicable Margin
shall be reduced to the level otherwise applicable hereunder if Loan Parties
deliver such Compliance Certificate on or before the date that is fifteen (15)
days after the applicable date required pursuant to Section 5.1(c) as of the
date immediately following such delivery.

 

Any of the foregoing to the contrary notwithstanding, on and after the Closing
Date to, but not including, the first Determination Date, the Applicable Margin
shall be equal to the rates set forth in Level I. As used herein, "Determination
Date" shall mean the first day of Parent's Fiscal Quarters beginning on or about
the first day of each February, May, August and November.

 

If any Compliance Certificate or any other report on which the FIFO Inventory
Amount is reported to Administrative Agent is shown to be inaccurate (regardless
of whether this Agreement or any Commitments are or remain in effect when such
inaccuracy is discovered), and such inaccuracy, if corrected, would have led to
the application of a higher Applicable Margin for any period (an "Applicable
Period") than the Applicable Margin actually applied for such Applicable Period,
then (A) Borrowers shall immediately deliver to Administrative Agent a correct
Compliance Certificate or related report for the Applicable Period; (B) the
Applicable Margin for such Applicable Period shall be determined by reference to
such Compliance Certificate or related report; and (C) Borrowers shall promptly
pay Administrative Agent, on demand, the accrued additional interest owing as a
result of such increased Applicable Margin for such Applicable Period and any
other additional fee or charge which was based, in whole or in part, on the
Applicable Margin, which payment shall be promptly applied by Administrative
Agent for its own account and the account of Lenders and LC Issuer, as
applicable, in accordance with the terms hereof. If any inaccurate Compliance
Certificate or other report on which the FIFO Inventory Amount is reported
would, if corrected, have led to the application of a lower Applicable Margin
for any period for which interest has already been paid, none of the Secured
Parties shall be required to refund or return any portion of such interest.

 

- 3 -

 

 

"Applicable Reserve Requirement" shall mean, at any time, for any LIBOR Loan or
LIR 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 (a) any category of liabilities which includes
deposits by reference to which LIBOR or the LIBOR Index Rate is to be
determined, or (b) any category of extensions of credit or other assets which
include LIBOR Loans or LIR Loans. LIBOR Loans and LIR Loans shall be deemed to
constitute Eurocurrency liabilities and as such shall be deemed subject to
reserve requirements without benefit of credit for pro ration, exception or
offsets that may be available from time to time to the applicable Lender. The
rate of interest on LIBOR Loans and LIR Loans shall be adjusted automatically on
and as of the effective date of any change in the Applicable Reserve
Requirement.

 

"Approved Fund" shall mean any Person (other than a natural Person) that is (or
will be) engaged in making, purchasing, holding or otherwise investing in
commercial loans and similar extensions of credit in the Ordinary Course of
Business and that is administered or managed by (i) a Lender, (ii) an Affiliate
of a Lender or (iii) an entity or an Affiliate of an entity that administers or
manages a Lender.

 

"Asset Disposition" shall mean, with respect to any Person, a sale, issuance,
assignment, lease, license, Consignment, transfer, abandonment, or other
disposition of such Person's Property, including a disposition of Property in
connection with a sale-leaseback transaction, synthetic lease, or similar
arrangement.

 

"Assignment and Acceptance" shall mean an assignment and acceptance entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 10.4(b)) and accepted by Administrative Agent, in the form
of Exhibit C attached hereto or any other form approved by Administrative Agent.

 

"Bank Products" shall mean all bank, banking, financial, and other similar or
related products, services, and facilities offered or provided by any Lender or
any Affiliate of a Lender to any Loan Party or any of its Subsidiaries,
including (a) merchant card services, credit or stored value cards and corporate
purchasing cards; (b) cash management, treasury, and related products and
services, including depository and checking services, Deposit Accounts (whether
operating, money market, investment, collections, payroll, trust, disbursement,
or other Deposit Accounts), automated clearinghouse ("ACH") transfers of funds
and any other ACH services, remote deposit capture, lockboxes, account
reconciliation and information reporting, controlled disbursements, wire and
other electronic funds transfers, e-payable, overdraft protection, stop payment
services and fraud protection services (all of the products and services
described in this clause (b), collectively, "Treasury Services"); and (c)
bankers' acceptances, drafts, documentary services, foreign currency exchange
services; (d) Hedging Agreements; (e) supply chain finance arrangements; (f) the
discretionary letter of credit program provided to one or more Borrowers by Bank
of America, N.A.; and (g) other similar banking products or services, other than
Letters of Credit.

 

"Bankruptcy Code" shall mean Title 11 of the United States Code.

 

"Base Rate" shall mean, for any day, a rate per annum equal to the greatest of
(i) the Prime Rate of Administrative Agent in effect on such day, (ii) the
Federal Funds Rate in effect on such day plus ½ of one percent (0.5%) or (iii)
one month LIBOR in effect on such day plus one percent (1.0%). If for any reason
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable, after due inquiry, to
ascertain the Federal Funds Rate for any reason, including the inability or
failure of Administrative Agent to obtain sufficient quotations in accordance
with the terms hereof, the Base Rate shall be determined without regard to
clause (ii) of the first sentence of this definition until the circumstances
giving rise to such inability no longer exist. Any change in the Base Rate due
to a change in the Prime Rate, the Federal Funds Rate or LIBOR shall be
effective on the effective day of such change in the Prime Rate, the Federal
Funds Rate or LIBOR, respectively.

 

- 4 -

 

 

"Base Rate Loan" shall mean Loans bearing interest at the Base Rate.

 

"Base Rate Revolving Loan" shall mean a Revolving Loan which bears interest at a
rate based on the Base Rate.

 

"Board of Governors" shall mean the Board of Governors of the Federal Reserve
System.

 

"Borrower Agent" has the meaning given such term in Section 2.21.

 

"Borrowing" shall mean a borrowing consisting of Loans of the same Type made,
converted or continued on the same date.

 

"Borrowing Base Trigger Event" shall mean the FIFO Inventory Amount at any time
is less than $275,000,000.

 

"Business Day" shall mean any day other than (i) a Saturday, Sunday or other day
on which commercial banks in the States of Alabama, Georgia or Tennessee are
authorized or required by law to close and (ii) if such day relates to a
Borrowing of, a payment or prepayment of principal or interest on, a conversion
of or into, or an Interest Period for, a LIBOR Loan or a notice with respect to
any of the foregoing, any day on which banks are not open for dealings in Dollar
deposits in the London interbank market.

 

"Capital Lease Obligations" of any Person shall mean all obligations of such
Person to pay rent or other amounts under any lease (or other arrangement
conveying the right to use) of real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.

 

"Capital Stock" shall mean all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a corporation, partnership, limited liability company
or equivalent entity whether voting or nonvoting, including common stock,
preferred stock or any other "equity security" (as such term is defined in Rule
3a 11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Exchange Act).

 

"Cardinal" shall mean, collectively, and Cardinal Health 110, LLC, a Delaware
limited liability company, and Cardinal Health 411, INC., an Ohio corporation.

 

"Cardinal Intercreditor Agreement" shall mean that certain Lien Subordination
Agreement dated on or about the Closing Date between Administrative Agent and
Cardinal and acknowledged by Loan Parties.

 

"Cardinal Inventory" shall have the meaning given such term in the Cardinal
Intercreditor Agreement.

 

- 5 -

 

 

"Cash Collateral" shall mean any cash and any interest or other income earned
thereon which is from time to time delivered to Administrative Agent to Cash
Collateralize any Obligations.

 

"Cash Collateralize" shall mean the delivery of cash to Administrative Agent as
security for the payment of Obligations in an amount equal to (a) with respect
to LC Obligations, 105% of the aggregate LC Obligations and (b) with respect to
any inchoate, contingent or other Obligations (including Secured Bank Product
Obligations), Administrative Agent's good faith estimate of the amount due or to
become due, including all fees and other amounts relating to such Obligations.
"Cash Collateralization" has a correlative meaning.

 

"Cash Investments" shall mean (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one (1) year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within one (1) year from the date of acquisition thereof and, at the
time of acquisition, having one of the two highest ratings obtainable from
either S&P or Moody's, (c) commercial paper maturing no more than two hundred
seventy (270) days from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-l from S&P or at least P-l from
Moody's, (d) certificates of deposit or bankers' acceptances maturing within one
(1) year from the date of acquisition thereof issued by any bank organized under
the laws of the United States or any state hereof having at the date of
acquisition thereof combined capital and surplus of not less than $250,000,000,
(e) demand deposit accounts maintained with any bank organized under the laws of
the United States or any state thereof so long as such bank is insured by the
Federal Deposit Insurance Corporation, and (f) investments in money market funds
substantially all of whose assets are invested in the types of assets described
in clauses (a) through (e) above.

 

"Change in Control" shall mean the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in a single transaction
or a series of related transactions) of all or substantially all of the assets
of Parent to any Person or "group" (within the meaning of the Exchange Act in
effect, (ii) the acquisition of ownership, directly or indirectly, beneficially
or of record, by any Person or "group" (within the meaning of the Exchange Act
as in effect of 30% or more of the outstanding shares of the voting equity
interests of Parent, or (iii) occupation of a majority of the seats of the board
of directors (other than vacant seats) by Persons who were neither (a) nominated
by the current board of directors or (b) appointed by directors so nominated.

 

"Change in Law" shall mean (i) the adoption of any Applicable Law or applicable
rule or regulation after the date of this Agreement, (ii) any change in any
Applicable Law or applicable rule or regulation, or any change in the
interpretation, implementation or application thereof, by any Governmental
Authority after the date of this Agreement, or (iii) compliance by any Lender
(or its Applicable Lending Office) (or, for purposes of Section 2.16(b), by the
Parent Company of such Lender, if applicable) with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Agreement; provided that notwithstanding
anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and
Consumer Protection Act and all requests, rules, guidelines or directives
thereunder or issued in connection therewith, (ii) all requests, rules,
guidelines or directives promulgated by the Bank for International Settlements,
the Basel Committee on Banking Supervision (or any successor or similar
authority) or the United States or foreign regulatory authorities, in each case
pursuant to Basel III, and (iii) all requests, rules, guidelines or directives
issued by a Governmental Authority in connection with a Lenders submission or
re-submission of a capital plan under 12 C.F.R. § 225.8 or a Governmental
Authority's assessment thereof shall in each case be deemed to be a "Change in
Law," regardless of the date enacted, adopted or issued.

 

- 6 -

 

 

"Claims" shall mean, without duplication, all liabilities, obligations, losses,
damages, penalties, judgments, proceedings, interest, costs, disbursements, and
expenses of any kind (including fees, costs, and expenses of attorneys and
paralegals, experts, agents, consultants, and advisors, and Extraordinary
Expenses) at any time (including before or after the Closing Date, after Payment
in Full of the Obligations, or resignation or replacement of Administrative
Agent) incurred by or asserted against or imposed on any Indemnitee as a result
of, or arising from or in connection with, (a) any Loans, Letters of Credit,
Loan Documents, or the use thereof or transactions relating thereto; (b) any
action taken or omitted to be taken by any Indemnitee in connection with any
Loan Documents; (c) the existence or perfection of any Liens, or realization
upon any Collateral; (d) exercise of any rights or remedies under any Loan
Documents or Applicable Law; or (e) failure by any Loan Party to perform or
observe any terms of any Loan Document, in each case including all costs and
expenses relating to any investigation, litigation, arbitration, or other
proceeding (including an Insolvency Proceeding or appellate proceedings),
whether or not the applicable Indemnitee is a party thereto.

 

"Closing Date" shall have the meaning given such term in Section 3.1.

 

"Code" shall mean the Internal Revenue Code of 1986, as amended and in effect
from time to time.

 

"Collateral" shall have the meaning given such term in the Security Agreement.

 

"Commitment" shall mean a Revolving Commitment or the Swingline Commitment, as
the context shall require. "Commitments" shall mean the aggregate amount of all
Revolving Commitments.

 

"Commodity Exchange Act" shall mean the Commodity Exchange Act (7 U.S.C. § 1 et
seq.).

 

"Compliance Certificate" shall mean a certificate from a Responsible Officer of
Borrower Agent in the form of, and containing the certifications set forth in,
the certificate attached hereto as Exhibit D.

 

"Connection Income Taxes" shall mean Other Connection Taxes that are imposed on
or measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

 

"Control" shall mean, with respect to any asset, right, or Property with respect
to which a security interest therein is perfected by a secured party's having
"control" thereof (whether pursuant to the terms of an agreement or through the
existence of certain facts and circumstances), that the intended Secured Party
has "control" of such asset, right, or Property as contemplated in the UCC and
otherwise on terms acceptable to such intended secured party.

 

"Controlled Account" shall mean a Deposit Account established or maintained by a
Borrower at Regions Bank, which Deposit Account shall be utilized for, among
other purposes, the purpose of receiving or collecting payments made by such
Borrower's Account Debtors and other Proceeds of Collateral and over which
Administrative Agent shall have Control.

 

"Default" shall mean any condition or event that, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.

 

"Default Interest" shall have the meaning set forth in Section 2.11(c).

 

- 7 -

 

 

"Defaulting Lender" shall mean, subject to Section 2.23, any Lender that (a) has
failed to (i) fund all or any portion of its Loans within two (2) Business Days
of the date such Loans were required to be funded hereunder unless such Lender
notifies Administrative Agent and Borrower Agent in writing that such failure is
the result of such Lender's reasonable determination that one or more conditions
precedent to funding (each of which conditions precedent, together with any
applicable default, shall be specifically identified in such writing) has not
been satisfied, or (ii) pay to Administrative Agent, LC Issuer, Swingline Lender
or any other Lender any other amount required to be paid by it hereunder
(including in respect of its participation in Letters of Credit or Swingline
Loans) within two (2) Business Days of the date when due, (b) has notified
Borrower Agent, Administrative Agent, LC Issuer or Swingline Lender in writing
that it does not intend to comply with its funding obligations hereunder, or has
made a public statement to that effect (unless such writing or public statement
relates to such Lender's obligation to fund a Loan hereunder and states that
such position is based on such Lender's reasonable determination that a
condition precedent to funding (which condition precedent, together with any
applicable default, shall be specifically identified in such writing or public
statement) cannot be satisfied), (c) has failed, within three (3) Business Days
after written request by Administrative Agent or Borrower Agent, to confirm in
writing to Administrative Agent and Borrower Agent that it will comply with its
prospective funding obligations hereunder (provided that such Lender shall cease
to be a Defaulting Lender pursuant to this clause (c) upon receipt of such
written confirmation by Administrative Agent and Borrower Agent), or (d) has, or
has a direct or indirect parent company that has, (i) become the subject of any
Insolvency Proceeding or (ii) had appointed for it a receiver, custodian,
conservator, trustee, administrator, assignee for the benefit of creditors or
similar Person charged with reorganization or liquidation of its business or
assets, including the Federal Deposit Insurance Corporation or any other state
or federal regulatory authority acting in such a capacity; provided that a
Lender shall not be a Defaulting Lender solely by virtue of the ownership or
acquisition of any equity interest in that Lender or any direct or indirect
parent company thereof by a Governmental Authority so long as such ownership
interest does not result in or provide such Lender with immunity from the
jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Lender (or such
Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts
or agreements made with such Lender. Any determination by Administrative Agent
that a Lender is a Defaulting Lender under any one or more of clauses (a)
through (d) above shall be conclusive and binding absent manifest error, and
such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.23)
upon delivery of written notice of such determination to Borrower, LC Issuer,
Swingline Lender and each Lender.

 

"Deposit Account Control Agreement" shall have the meaning given such term in
the Security Agreement.

 

"Dollar(s)" and the sign "$" shall mean lawful money of the United States.

 

"Enforcement Action" shall mean any action to collect any Obligations or enforce
any Loan Document or to realize upon any Collateral (whether by judicial action,
self-help, notification of Account Debtors, exercise of setoff or recoupment, or
otherwise).

 

"EnTrust" shall mean Reeves-Sain Drug Store, Inc., a Tennessee corporation.

 

"Entrust Acquisition" shall mean the Acquisition of EnTrust by FSOT.

 

"EnTrust Earnout Debt" shall mean the Indebtedness of FSOT, guaranteed by
Parent, evidenced by the EnTrust Earnout Notes.

 

"EnTrust Earnout Notes" shall mean, collectively, the Non-Negotiable
Subordinated Adjusted Promissory Notes, each in the original face amount of
$6,500,000, issued by FSOT to each of Richard H. Sain and Bradley Woolridge,
each an individual resident of the State of Tennessee.

 

- 8 -

 

 

"Environmental Laws" shall mean all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by or with any Governmental Authority relating in
any way to the environment, preservation or reclamation of natural resources,
the management, Release or threatened Release of any Hazardous Material or to
health and safety matters.

 

"Environmental Liability" shall mean any liability, contingent or otherwise
(including any liability for damages, costs of environmental investigation and
remediation, costs of administrative oversight, fines, natural resource damages,
penalties or indemnities), of any Borrower or any of its Subsidiaries directly
or indirectly resulting from or based upon (i) any actual or alleged violation
of any Environmental Law, (ii) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (iii) any actual or
alleged exposure to any Hazardous Materials, (iv) the Release or threatened
Release of any Hazardous Materials or (v) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.

 

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and the regulations
promulgated and rulings issued thereunder.

 

"ERISA Affiliate" shall mean any person that for purposes of Title I or Title IV
of ERISA or Section 412 of the Code would be deemed at any relevant time to be a
"single employer" or otherwise aggregated with any Borrower or any of its
Subsidiaries under Section 414(b), (c), (m) or (o) of the Code or Section 4001
of ERISA.

 

"ERISA Event" shall mean (i) any "reportable event" as defined in Section 4043
of ERISA with respect to a Plan (other than an event as to which the PBGC has
waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section
4043 the requirement of Section 4043(a) of ERISA that it be notified of such
event); (ii) any failure to make a required contribution to any Plan that would
result in the imposition of a lien or other encumbrance or the provision of
security under Section 430 of the Code or Section 303 or 4068 of ERISA, or the
arising of such a lien or encumbrance, there being or arising any "unpaid
minimum required contribution" or "accumulated funding deficiency" (as defined
or otherwise set forth in Section 4971 of the Code or Part 3 of Subtitle B of
Title 1 of ERISA), whether or not waived, or any filing of any request for or
receipt of a minimum funding waiver under Section 412 of the Code or Section 303
of ERISA with respect to any Plan or Multiemployer Plan, or that such filing may
be made, or any determination that any Plan is, or is expected to be, in at-risk
status under Title IV of ERISA; (iii) any incurrence by any Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates of any material
liability under Title IV of ERISA with respect to any Plan or Multiemployer Plan
(other than for premiums due and not delinquent under Section 4007 of ERISA);
(iv) any institution of proceedings, or the occurrence of an event or condition
which would reasonably be expected to constitute grounds for the institution of
proceedings by the PBGC, under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan; (v) any incurrence by any
Borrower, any of its Subsidiaries or any of their respective ERISA Affiliates of
any material liability with respect to the withdrawal or partial withdrawal from
any Plan or Multiemployer Plan, or the receipt by any Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates of any notice that a
Multiemployer Plan is in endangered or critical status under Section 305 of
ERISA; (vi) any receipt by any Borrower, any of its Subsidiaries or any of their
respective ERISA Affiliates of any notice, or any receipt by any Multiemployer
Plan from any Borrower, any of its Subsidiaries or any of their respective ERISA
Affiliates of any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA; (vii) engaging in a
non-exempt prohibited transaction within the meaning of Section 4975 of the Code
or Section 406 of ERISA; or (viii) any filing of a notice of intent to terminate
any Plan if such termination would require material additional contributions in
order to be considered a standard termination within the meaning of Section
4041(b) of ERISA, any filing under Section 4041(c) of ERISA of a notice of
intent to terminate any Plan, or the termination of any Plan under Section
4041(c) of ERISA.

 

- 9 -

 

 

"Event of Default" shall have the meaning set forth in Section 8.1.

 

"Excess Availability" shall mean, at any time of determination prior to the
occurrence of the Borrowing Base Trigger Event, the amount, if any, by which the
Aggregate Revolving Commitments exceed the Aggregate Revolving Obligations.

 

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended and in
effect from time to time.

 

"Excluded Subsidiary" shall mean each of (a) National Equipment Management and
Leasing, Inc., a Tennessee corporation, (b) Dublin Aviation, Inc., a Tennessee
corporation, (c) National Pharmaceutical Network, Inc., a Tennessee corporation,
(d) TT Transport, LLC, a Delaware limited liability company, (e) ARI - Alabama
Four, LLC, a Georgia limited liability company, (f) ARI – Glennville, LLC, a
Georgia limited liability company, and (g) each other Subsidiary listed on
Schedule 4.14 that is not a Loan Party as of the Closing Date, in each case, so
long as such Person does not own any Property that would constitute Credit Card
Receivables (as defined in the Security Agreement), Inventory (as defined in the
Security Agreement), Pharmacy Receivables (as defined in the Security Agreement)
or Pharmacy Scripts (as defined in the Security Agreement).

 

"Excluded Swap Obligation" shall mean, with respect to any Loan Party, any Swap
Obligation if, and to the extent that, all or a portion of any guaranty of such
Loan Party of, or the grant under a Loan Document by such Loan Party of a Lien
to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal
under the Commodity Exchange Act (or the application or official interpretation
thereof) by virtue of such Loan Party's failure for any reason to constitute an
"eligible contract participant" as defined in the Commodity Exchange Act
(determined after giving effect to Article XI hereof and any and all guaranties
of such Loan Party's Swap Obligations by other Loan Parties) at the time the
guaranty of such Loan Party, or grant by such Loan Party of a Lien, becomes
effective with respect to such Swap Obligation. If a Swap Obligation arises
under a master agreement governing more than one Hedging Agreement, such
exclusion shall apply only to the portion of such Swap Obligation that is
attributable to Hedging Agreements for which such guaranty or Lien becomes
illegal.

 

"Excluded Taxes" shall mean any of the following Taxes imposed on or with
respect to a Recipient or required to be withheld or deducted from a payment to
a Recipient, (a) Taxes imposed on or measured by net income (however
denominated), franchise Taxes, and branch profits Taxes, in each case, (i)
imposed as a result of such Recipient being organized under the laws of, or
having its principal office or, in the case of any Lender, its applicable
lending office located in, the jurisdiction imposing such Tax (or any political
subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of
a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for
the account of such Lender with respect to an applicable interest in a Loan or
Commitment pursuant to a law in effect on the date on which (i) such Lender
acquires such interest in the Loan or Commitment (other than pursuant to an
assignment request by Borrowers under Section 2.18 or (ii) such Lender changes
its lending office, except in each case to the extent that, pursuant to Section
2.18, amounts with respect to such Taxes were payable either to such Lender's
assignor immediately before such Lender became a party hereto or to such Lender
immediately before it changed its lending office, (c) Taxes attributable to such
Recipient's failure to comply with Section 2.18(f) and (d) any U.S. federal
withholding Taxes imposed under FATCA.

 

"Existing Letters of Credit" shall mean the Letters of Credit listed on Schedule
2.

 

- 10 -

 

 

"Extraordinary Expenses" shall have the meaning given such term in Section
10.3(b).

 

"FATCA" shall mean Sections 1471 through 1474 of the Code as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code.

 

"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with member banks of the
Federal Reserve System arranged by Federal funds brokers, as published by the
Federal Reserve Bank of New York on the next succeeding Business Day or, if such
rate is not so published for any Business Day, the Federal Funds Rate for such
day shall be the average (rounded upwards, if necessary, to the next 1/100 of
1%) of the quotations for such day on such transactions received by
Administrative Agent from three Federal funds brokers of recognized standing
selected by Administrative Agent.

 

"Fee Letter" shall mean the fee letter agreement between Administrative Agent
and Borrowers dated March 9, 2015, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

"FIFO Inventory Amount" shall mean, on any date of determination, the value of
Borrowers' Inventory, determined on the basis of the lower of cost (as
determined in accordance with GAAP) or market, calculated on a first-in,
first-out basis, and excluding any portion of cost attributable to intercompany
profit among Parent and its Affiliates, as determined pursuant to the most
recent Inventory reporting delivered pursuant to Section 5.1(d). The calculation
of the FIFO Inventory Amount as of January 31, 2015 is set forth on Exhibit H
attached hereto.

 

"Fiscal Quarter" shall mean any fiscal quarter of Loan Parties.

 

"Fiscal Year" shall mean any fiscal year of Loan Parties.

 

"Foreign Lender" shall mean any Lender that is organized under the laws of a
jurisdiction other than the laws of the United States or any state or district
thereof.

 

"Foreign Plan" shall mean any employee benefit plan or arrangement (a)
maintained or contributed to by any Loan Party or Subsidiary that is not subject
to the laws of the United States; or (b) mandated by a government other than the
United States for employees of any Loan Party or Subsidiary.

 

"Fronting Exposure" shall mean, at any time there is a Defaulting Lender, (a)
with respect to LC Issuer, such Defaulting Lender's Pro Rata Share of
outstanding LC Obligations with respect to Letters of Credit issued by such LC
Issuer other than Letter of Credit Obligations as to which such Defaulting
Lender's participation obligation has been reallocated to other Lenders or Cash
Collateralized in accordance with the terms hereof, and (b) with respect to the
Swingline Lender, such Defaulting Lender's Pro Rata Share of outstanding
Swingline Loans made by such Swingline Lender other than Swingline Loans as to
which such Defaulting Lender's participation obligation has been reallocated to
other Lenders.

 

"FSOT" shall mean Fred's Stores of Tennessee, Inc., a Tennessee corporation, a
Borrower.

 

"GAAP" shall mean generally accepted accounting principles in the United States
applied on a consistent basis and subject to the terms of Section 1.2.

 

- 11 -

 

 

"Governmental Approvals" shall mean all authorizations, consents, approvals,
licenses, and exemptions of, registrations and filings with, and required
reports to, all Governmental Authorities.

 

"Governmental Authority" shall mean the government of the United States, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

 

"Guarantor" shall have the meaning given such term in the recitals hereto.

 

"Guarantor Payment" has the meaning given such term in Section 11.3(b).

 

"Hazardous Materials" shall mean all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

 

"Hedging Agreement" has the meaning for swap agreement as defined in 11 U.S.C. §
101, as in effect from time to time, or any successor statute, and in addition
thereto, shall extend to and include: (a) any rate swap agreement, basis swap,
credit derivative transaction, forward rate agreement, commodity swap, commodity
option, forward commodity contract, equity or equity index swap or option, bond
or bond price or bond index swap or option or forward bond or forward bond price
or forward bond index transaction, interest rate option, forward foreign
exchange agreement, spot foreign exchange agreement, rate cap agreement, rate
floor agreement, rate collar agreement, currency swap agreement, cross-currency
rate swap agreement, currency option and any other similar agreement, or any
other similar transactions or any combination of any of the foregoing (including
any options or warrants to enter into any of the foregoing), whether or not any
such transaction is governed by, or otherwise subject to, any master agreement
or any netting agreement, in each case, as the same may be amended, restated,
supplemented, or otherwise modified from time to time, and (b) any and all
transactions or arrangements of any kind, and the related confirmations, which
are subject to the terms and conditions of, or governed by, any form of master
agreement (or similar documentation) published from time to time by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such agreement or
documentation, together with any related schedules), including any such
obligations or liabilities under any such master agreement.

 

"Indebtedness" shall mean, with respect to any Person and without duplication as
to such Person, any liability, whether or not contingent, (a) which (i) arises
in respect of borrowed money, (ii) is evidenced by bonds, notes, debentures, or
similar instruments, or (iii) accrues interest or is a type upon which interest
or finance charges are customarily paid (excluding trade payables owing in the
Ordinary Course of Business), (b) representing the balance deferred and unpaid
of the purchase price of any Property or services (other than an account payable
to a trade creditor incurred in the Ordinary Course of Business of such Person
and payable in accordance with customary trade practices), (c) all Capital Lease
Obligations, (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any debt described in this
definition of another Person, including any such debt, directly or indirectly
guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such
debt, or any security therefor, or to provide funds for the payment or discharge
thereof, or to maintain solvency, assets, level of income, or other financial
condition, (e) all obligations with respect to redeemable stock and redemption
or repurchase obligations under any Capital Stock or other equity securities
issued by such Person, except to the extent such obligations can be satisfied
with Capital Stock of such Person, (f) all reimbursement obligations and other
liabilities of such Person with respect to surety bonds (whether bid,
performance, or otherwise), letters of credit, bankers' acceptances, drafts or
similar documents or instruments issued for such Person's account, (g) all debt
of another Person otherwise described in this definition which is secured by any
Lien on any Property of such Person, whether or not such debt is assumed by or
is a personal liability of such Person, (h) all net obligations, liabilities,
and debt of such Person (marked-to-market) arising under Hedging Agreements, (i)
debt of any partnership or joint venture in which such Person is a general
partner or a joint venturer to the extent such person is liable therefor as a
result of such Person's ownership interest in such entity, except to the extent
that the terms of such debt expressly provide that such Person is not liable
therefor or such Person has no liability therefor under Applicable Law, (j) the
principal and interest portions of all rental obligations of such Person under
any synthetic lease or similar off-balance sheet financing where such
transaction is considered to be borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP, (k) all obligations of
such Person under conditional sale or other title retention agreements relating
to property purchased by such Person, and (l) all obligations of such Person
under take or pay or similar arrangements.

 

- 12 -

 

 

"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.

 

"Insolvency Proceeding" shall mean any case or proceeding commenced by or
against a Person under any state, federal, or foreign law for, or any agreement
of such Person to, (a) the entry of an order for relief under the Bankruptcy
Code, or any other insolvency, debtor relief or debt adjustment law; (b) the
appointment of a receiver, trustee, liquidator, administrator, conservator, or
other custodian for such Person or any part of its Property; or (c) an
assignment or trust mortgage for the benefit of creditors.

 

"Intellectual Property" shall mean all intellectual and similar Property of a
Person including (a) inventions, designs, patents, patent applications,
copyrights, trademarks, service marks, trade names, trade secrets, confidential
or proprietary information, customer lists (including, without limitation,
Pharmacy Scripts (as defined in the Security Agreement)), know-how, software,
and databases; (b) all embodiments or fixations thereof and all related
documentation, applications, registrations, and franchises; (c) all licenses or
other rights to use any of the foregoing; and (d) all books and records relating
to the foregoing.

 

"Interest Period" shall mean, in connection with the making, conversion, or
continuation of any LIBOR Loan, an interest period of one, two, three or six
months (or such other period that is twelve months or less so long as
Administrative Agent and all Lenders consent in writing on a case by case
basis); provided, however, that:

 

(a)          each Interest Period shall commence on the date the Loan is made or
continued as, or converted into, a LIBOR Loan, and shall expire on the
numerically corresponding day in the final calendar month;

 

(b)          if any Interest Period commences on a day for which there is no
corresponding day in the final calendar month or if such corresponding day falls
after the last Business Day of such month, then the Interest Period shall expire
on the last Business Day of such month and, if any Interest Period would expire
on a day that is not a Business Day, the Interest Period shall expire on the
next Business Day; and

 

(c)          no Interest Period shall extend beyond the date set forth in clause
(a) of the definition of Revolving Commitment Termination Date.

 

- 13 -

 

 

"Investments" shall mean, with respect to any Person, any loan, advance, or
extension of credit by such Person to, or any guaranty with respect to the
Capital Stock, Funded Indebtedness, or other obligations of, or any
contributions to the capital of, any other Person, or any ownership, purchase,
or other acquisition by such Person of any Capital Stock of any other Person,
other than any Acquisition. In determining the aggregate amount of Investments
outstanding at any particular time, (a) the amount of any Investment represented
by a guaranty shall be the higher of (i) the stated or determinable amount of
the obligation guaranteed and (ii) the maximum amount for which the guarantor
may be liable pursuant to the terms of the instrument embodying such guaranty
(and, if such amounts are not determinable, the maximum reasonably anticipated
liability in respect thereof, as determined by the Person providing such
guaranty in good faith); (b) there shall be deducted in respect of each such
Investment any amount received as a return of principal or capital (including by
repurchase, redemption, retirement, repayment, liquidating, or other dividend or
distribution); (c) there shall not be deducted in respect of any Investment any
amounts received as earnings on such Investment, whether as dividends, interest,
or otherwise; (d) there shall not be deducted from or added to the aggregate
amount of Investments any decrease or increases, as the case may be, in the
market value thereof; and (e) 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, forgiveness or conversion to
equity of Indebtedness, or write-ups, write-downs, or write-offs with respect to
such Investment.

 

"IRS" shall mean the United States Internal Revenue Service.

 

"Joinder Agreement" shall mean a joinder agreement in the form of Exhibit E or
such other form as may be acceptable to Administrative Agent from time to time
pursuant to which either: (i) a Subsidiary shall become a Borrower pursuant to
Section 5.11 or (ii) if consented to by Administrative Agent in its sole and
absolute discretion, a Subsidiary shall become a Guarantor and a Loan Party.

 

"LC Application" shall mean an application by Borrower Agent to LC Issuer for
issuance of a Letter of Credit, in form and substance satisfactory to LC Issuer
and Administrative Agent.

 

"LC Conditions" shall mean each of the following conditions precedent with
respect to the issuance of a Letter of Credit: (a) each of the conditions
precedent to the issuance of such Letter of Credit set forth in Article III
shall have been satisfied; (b) LC Issuer shall have received an LC Request, an
LC Application, and such other instruments, documents, or agreements as LC
Issuer customarily requires for the issuance of letters of credit of similar
purpose and amount, in each case, at least eight (8) Business Days before the
requested date of issuance of such Letter of Credit (or such shorter period as
LC Issuer may permit in writing in its discretion); (c) after giving effect to
the issuance of such Letter of Credit, the LC Obligations shall not exceed the
LC Sublimit; (d) the expiration date of such Letter of Credit shall be (i) in
the case of a standby Letter of Credit, no more than three hundred sixty-five
(365) days from issuance; (ii) in the case of a documentary Letter of Credit, no
more than one hundred twenty (120) days from issuance; and (iii) at least thirty
(30) days before the date set forth in clause (a) of the definition of Revolving
Commitment Termination Date; (e) the date on which such Letter of Credit is to
be issued shall be at least thirty (30) days before the date set forth in clause
(a) of the definition of Revolving Commitment Termination Date; (f) such Letter
of Credit and payments thereunder shall be denominated in Dollars; (g) the
purpose and form of such Letter of Credit shall be reasonably acceptable to each
of Administrative Agent and LC Issuer and (h) in the event that any Lender is at
such time a Defaulting Lender, the applicable LC Issuer has entered into
arrangements satisfactory to such LC Issuer (in its sole discretion) with
Borrowers or such Defaulting Lender to eliminate such LC Issuer's Fronting
Exposure with respect to such Lender (after giving effect to Section 2.23(a)(iv)
and any Cash Collateral provided by the Defaulting Lender), including by Cash
Collateralizing such Defaulting Lender's Pro Rata Share of the outstanding
amount of LC Obligations in a manner reasonably satisfactory to Administrative
Agents.

 

"LC Documents" shall mean all documents, instruments, certificates and
agreements (including LC Requests and LC Applications) delivered by any
Borrower, Borrower Agent or any other Person to LC Issuer or Administrative
Agent in connection the issuance, amendment, extension or renewal of, or payment
under, any Letter of Credit.

 

- 14 -

 

 

"LC Issuer" shall mean Regions Bank or an Affiliate of Regions Bank, together
with its successors and assigns.

 

"LC Obligations" shall mean, at any time of determination, the sum (without
duplication) of (a) all amounts owing by Borrowers for any drawings under
Letters of Credit and (b) the aggregate undrawn amount of all outstanding
Letters of Credit.

 

"LC Request" shall mean each request for issuance of a Letter of Credit provided
by Borrower Agent to Administrative Agent and LC Issuer, in form and substance
satisfactory to Administrative Agent and LC Issuer.

 

"LC Sublimit" shall mean $25,000,000.

 

"Lenders" has the meaning given such term in the preamble to this Agreement and,
in any event, includes Swingline Lender in its capacity as a provider of
Swingline Loans and any other Person who hereafter becomes a "Lender" pursuant
to an Assignment and Acceptance.

 

"Letter of Credit" shall mean any standby or documentary letter of credit issued
by LC Issuer for the account of a Borrower and including, without limitation,
each of the Existing Letters of Credit.

 

"LIBOR" shall mean, for any Interest Period: (x) a per annum rate of interest
(rounded upward, if necessary, to the nearest 1/16th of 1%), determined by
Administrative Agent at approximately 11:00 a.m. (London time) two (2) Business
Days before commencement of such Interest Period, for a term comparable to such
Interest Period, equal to (i) the ICE Benchmark Administration LIBOR Rate ("ICE
LIBOR"), as published by Reuters (or other commercially available source
designated by Administrative Agent) or (ii) or in the event the rate referenced
in the preceding subclause (i) does not appear on such page or service or if
such page or service shall cease to be available, the rate per annum (rounded
upward to the next whole multiple of one sixteenth of one percent (1/16 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 settlement rate for
deposits with a term equivalent to such Interest Period in Dollars, determined
as of approximately 11:00 a.m. (London, England time) two (2) Business Days
before the commencement of such Interest Period, or (iii) in the event the rates
referenced in the preceding subclauses (a) and (b) are not available, the rate
per annum (rounded upward to the next whole multiple of one sixteenth of one
percent (1/16 of 1%)) equal to quotation rate (or the arithmetic mean of rates)
offered to first class banks in the London interbank market for deposits in
Dollars of amounts in same day funds comparable to the principal amount of the
applicable Loan of Regions Bank or any other Lender selected by Administrative
Agent, for which the Index Rate is then being determined with maturities
comparable to such Interest Period as of approximately 11:00 a.m. (London,
England time) two (2) Business Days before the commencement of such Interest
Period; divided by (y) the sum of 1 minus the Applicable Reserve Requirement.
Notwithstanding anything contained herein to the contrary, LIBOR shall not be
less than zero.

 

"LIBOR Index Rate" shall mean, for any LIR Loan, shall mean a per annum rate
equal to LIBOR determined with respect to an Interest Period of one month,
determined monthly on the first Business Day of each month and shall be
increased or decreased, as applicable, automatically and without notice to any
Person on the date of each such determination. Upon Borrower Agent's request
from time to time, Administrative Agent will quote the current LIBOR Index Rate
to Borrower Agent.

 

"LIBOR Loan" shall mean each set of LIBOR Revolving Loans having a common length
and commencement of Interest Period.

 

- 15 -

 

 

"LIBOR Revolving Loan" shall mean a Revolving Loan (other than a LIR Loan) which
bears interest at a rate based on LIBOR.

 

"License" shall mean any license or agreement under which a Loan Party is
authorized to use Intellectual Property in connection with (a) any manufacture,
marketing, distribution, or disposition of Collateral, (b) the provision of any
service or (c) any other use of Property or conduct of its business.

 

"Licensor" shall mean any Person from whom a Loan Party obtains the right to use
any Intellectual Property.

 

"Lien" shall mean any mortgage, pledge, security interest, lien (statutory or
otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement,
or other arrangement having the practical effect of any of the foregoing or any
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement and any capital lease having the same economic effect as any
of the foregoing).

 

"LIR Loan" shall mean Loans bearing interest at the LIBOR Index Rate.

 

"LIR Revolving Loan" shall mean a Revolving Loan which bears interest at a rate
based on the LIBOR Index Rate.

 

"License" shall mean any license or agreement under which a Loan Party is
authorized to use Intellectual Property in connection with (a) any manufacture,
marketing, distribution, or disposition of Collateral, (b) the provision of any
service or (c) any other use of Property or conduct of its business.

 

"Licensor" shall mean any Person from whom a Loan Party obtains the right to use
any Intellectual Property.

 

"Loan Documents" shall mean, collectively, this Agreement, the Addendum, the
Security Agreement, the Notes, the Fee Letter, the Cardinal Intercreditor
Agreement, each LC Document, each Deposit Account Control Agreement, and any and
all other instruments, agreements, documents and writings executed in connection
with any of the foregoing.

 

"Loan Parties" shall mean (i) each Borrower, (ii) each Guarantor, and (iii) each
other Person that is party to this Agreement on the Closing Date other than a
Secured Party or, by execution of a Joinder Agreement, agrees to become a
Borrower or a Guarantor hereunder on or after the Closing Date.

 

"Loan Year" shall mean each twelve-month period commencing on the Closing Date
and ending on each anniversary of the Closing Date.

 

"Loans" shall mean all Revolving Loans and Swingline Loans in the aggregate.

 

"Margin Stock" has the meaning given such term in Regulation U of the Board of
Governors.

 

"Material Adverse Effect" shall mean, with respect to any event, act, condition
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singularly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences whether or not related,
resulting in a material adverse change in, or a material adverse effect on, (i)
the business, results of operations, financial condition, assets, liabilities or
prospects of Parent and its Subsidiaries taken as a whole, (ii) the ability of
Loan Parties to perform any of their material obligations under the Loan
Documents, (iii) the material rights and remedies of Administrative Agent, or
Lenders under any of the material Loan Documents or (iv) the legality, validity
or enforceability of any of the material Loan Documents.

 

- 16 -

 

 

"Material Contract" shall mean any agreement or arrangement to which a Loan
Party is party (other than the Loan Documents) (a) for which the breach,
termination, non-performance or failure to renew could reasonably be expected to
have a Material Adverse Effect on Parent and its Subsidiaries taken as a whole;
or (b) which relates to any Material Indebtedness.

 

"Material Indebtedness" shall mean any Indebtedness (other than the Loans) of
Parent or any of its Subsidiaries individually or in an aggregate committed or
outstanding principal amount exceeding $10,000,000 or any Subordinated Debt of
any amount in an aggregate committed or outstanding principal amount exceeding
$10,000,000.

 

"Moody's" shall mean Moody's Investors Service, Inc. and its successors.

 

"Multiemployer Plan" shall mean any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, which is contributed to by (or to which there is or
may be an obligation to contribute of) a Borrower, any of its Subsidiaries or an
ERISA Affiliate, and each such plan for the five-year period immediately
following the latest date on which a Borrower, any of its Subsidiaries or an
ERISA Affiliate contributed to or had an obligation to contribute to such plan.

 

"Notes" shall mean each Revolving Note, the Swingline Note and any other
promissory note executed by Borrowers, or any of them, to evidence any
Obligations, as amended, restated, supplemented, or otherwise modified from time
to time.

 

"Notice of Borrowing" shall mean a Notice of Borrowing in the form of Exhibit F
or such other form acceptable to Administrative Agent from time to time.

 

"Notice of Conversion/Continuation" shall mean a notice substantially in the
form of Exhibit G or in such other form acceptable to Administrative Agent from
time to time.

 

"Obligations" shall mean all (a) principal of and premium, if any, on the Loans;
(b) LC Obligations and other obligations of the Loan Parties with respect to
Letters of Credit; (c) interest, expenses, fees, and other sums payable by the
Loan Parties under this Agreement or the other Loan Documents (including any
interest on pre-petition Obligations accruing after the commencement of any
Insolvency Proceeding by or against any Loan Party, whether or not allowable in
such Insolvency Proceeding); (d) obligations of the Loan Parties under any
indemnity for Claims; (e) Extraordinary Expenses; (f) Secured Bank Product
Obligations; and (g) other Debts, obligations, and liabilities of any kind owing
by the Loan Parties pursuant to the terms of the Loan Documents, whether now
existing or hereafter arising, whether evidenced by a note or other writing,
whether allowed in any Insolvency Proceeding, whether arising from an extension
of credit, issuance of a letter of credit, acceptance, loan, guaranty,
indemnification, or otherwise, and whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, joint or several;
provided, however, that the "Obligations" of a Loan Party shall exclude any
Excluded Swap Obligations with respect to such Loan Party.

 

"OFAC" shall mean the U.S. Department of the Treasury's Office of Foreign Assets
Control.

 

"Ordinary Course of Business" shall mean the ordinary course of business of any
Loan Party or Subsidiary, consistent with past practices and undertaken in good
faith.

 

- 17 -

 

 

"Organizational Documents" shall mean, with respect to any Person, its charter,
certificate or articles of incorporation, bylaws, articles of organization,
limited liability agreement, operating agreement, members agreement,
shareholders agreement, partnership agreement, certificate of partnership,
certificate of formation, voting trust agreement, or similar agreement or
instrument governing the formation or operation of such Person.

 

"OSHA" shall mean the Occupational Safety and Health Act of 1970, as amended
from time to time, and any successor statute.

 

"Other Taxes" shall mean any and all present or future stamp, court or
documentary, intangible, recording, filing or similar Taxes that arise from any
payment made hereunder or under any other Loan Document or from the execution,
delivery, performance or enforcement or registration of, from the receipt or
perfection of a security interest under, or otherwise with respect to, this
Agreement or any other Loan Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
made pursuant to Section 10.4).

 

"Overadvance" shall have the meaning given such term in the Addendum.

 

"Parent Company" shall mean, with respect to a Lender, the "bank holding
company" as defined in Regulation Y, if any, of such Lender, and/or any Person
owning, beneficially or of record, directly or indirectly, a majority of the
shares of such Lender.

 

"Participant" shall have the meaning set forth in Section 10.4(d).

 

"PATRIOT Act" shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub.
L. No. 107-56, 115 Stat. 272 (2001), as amended and in effect from time to time.

 

"Payment Item" shall mean each check, draft, or other item of payment payable to
a Borrower, including those constituting Proceeds of any Collateral.

 

"Payment in Full" shall mean, with respect to any Obligations, (a) the full and
indefeasible cash payment thereof, including any interest, fees, and other
charges and charges accruing during an Insolvency Proceeding (whether or not
allowed in the proceeding); (b) if such Obligations are LC Obligations or
inchoate or contingent in nature, Cash Collateralization thereof (or delivery of
a standby letter of credit reasonably acceptable to Administrative Agent, in the
amount of required Cash Collateral); (c) termination of the Commitments; and (d)
a release of any Claims of all Loan Parties against Administrative Agent, LC
Issuer, and Lenders arising on or before the payment date.

 

"Payment Office" shall mean the office of Administrative Agent located in
Atlanta, Georgia or such other location as to which Administrative Agent shall
have given written notice to Borrower Agent and the other Lenders.

 

"PBGC" shall mean the U.S. Pension Benefit Guaranty Corporation referred to and
defined in ERISA, and any successor entity performing similar functions.

 

"Permitted Encumbrances" shall mean:

 

(a)          Liens imposed by law for taxes not yet due or that are being
Property Contested;

 

- 18 -

 

 

(b)          statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other Liens imposed by law in the Ordinary Course of Business
for amounts not yet due or that are being Property Contested;

 

(c)          pledges and deposits made in the Ordinary Course of Business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations;

 

(d)          deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the Ordinary Course of
Business;

 

(e)          judgment and attachment liens not giving rise to an Event of
Default or Liens created by or existing from any litigation or legal proceeding
that are being Property Contested;

 

(f)          customary rights of set-off, revocation, refund or chargeback under
deposit agreements or under the UCC or common law of banks or other financial
institutions where a Borrower or any of its Subsidiaries maintains deposits
(other than deposits intended as cash collateral) in the Ordinary Course of
Business; and

 

(g)          easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the Ordinary Course
of Business that do not secure any monetary obligations and do not materially
detract from the value of the affected Property or materially interfere with the
Ordinary Conduct of Business of Parent and its Subsidiaries taken as a whole;

 

provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.

 

"Person" shall mean any individual, partnership, firm, corporation, association,
joint venture, limited liability company, trust or other entity, or any
Governmental Authority.

 

"Plan" shall mean any "employee benefit plan" as defined in Section 3 of ERISA
(other than a Multiemployer Plan) maintained or contributed to by a Borrower or
any ERISA Affiliate or to which a Borrower or any ERISA Affiliate has or may
have an obligation to contribute, and each such plan that is subject to Title IV
of ERISA for the five-year period immediately following the latest date on which
a Borrower or any ERISA Affiliate maintained, contributed to or had an
obligation to contribute to (or is deemed under Section 4069 of ERISA to have
maintained or contributed to or to have had an obligation to contribute to, or
otherwise to have liability with respect to) such plan.

 

"Prime Rate" shall mean that rate announced by Regions Bank from time to time as
its "prime rate" of interest. Regions Bank's prime rate is merely a reference
rate and is not necessarily the lowest or best rate which Regions Bank makes
loans or otherwise extends credit.

 

"Pro Rata Share" shall mean (i) with respect to any Commitment or Loan of any
Lender at any time, a percentage, the numerator of which shall be such Lender's
Commitment (or if such Commitment has been terminated or expired or the Loans
have been declared to be due and payable, such Lender's Revolving Credit
Exposure), and the denominator of which shall be the sum of all Commitments of
all Lenders (or if such Commitments have been terminated or expired or the Loans
have been declared to be due and payable, all Revolving Credit Exposure of all
Lenders) and (ii) with respect to Commitments and Loans of any Lender at any
time, the numerator of which shall be the sum of such Lender's Revolving
Commitment (or if such Revolving Commitment has been terminated or expired or
the Loans have been declared to be due and payable, such Lender's Revolving
Credit Exposure) and the denominator of which shall be the sum of all Lenders'
Revolving Commitments (or if such Revolving Commitments have been terminated or
expired or the Loans have been declared to be due and payable, all Revolving
Credit Exposure of all Lenders funded under such Commitments). Notwithstanding
any provision herein to the contrary, the failure of a Lender to advance its Pro
Rata Share of a Loan, shall not relieve any other Lender from the obligation to
advance Loans for the full amount of its Commitments.

 

- 19 -

 

 

"Projections" shall mean, for any fiscal period, projections of Borrowers' and
the Subsidiaries' consolidated balance sheets, results of operations, cash flow,
and Excess Availability for such period, all of which shall be in form and
substance satisfactory to Administrative Agent.

 

"Properly Contested" shall mean, with respect to any obligation of any Person,
(a) the obligation is subject to a bona fide dispute regarding amount or such
Person's liability to pay; (b) the obligation is being properly contested in
good faith by appropriate proceedings promptly instituted and diligently
pursued; (c) appropriate reserves have been established in accordance with GAAP;
(d) non-payment of such obligation could not have a Material Adverse Effect, nor
result in forfeiture or sale of any assets of such Person; (e) no Lien is
imposed on assets of such Person, unless bonded and stayed to the satisfaction
of Administrative Agent and junior to Administrative Agent's Liens on any or all
of such assets; and (f) if such obligation results from entry of a judgment or
other order, such judgment or order is stayed pending appeal or other judicial
review.

 

"Property" shall mean any interest in any kind of property or asset, whether
real, personal, or mixed or tangible or intangible.

 

"Protective Advances" shall have the meaning given such term in the Security
Agreement.

 

"Qualified ECP Guarantor" shall mean, in respect of any Swap Obligation, each
Loan Party that, at the time its guaranty (or grant of Lien, as applicable)
becomes or would become effective with respect to such Swap Obligation, has
total assets exceeding $10,000,000 or such other Loan Party as constitutes an
"eligible contract participant" under the Commodity Exchange Act and which may
cause another Person to qualify as an "eligible contract participant" with
respect to such Swap Obligation at such time by entering into a keepwell under
Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

"Real Estate" shall mean all right, title, and interest (whether as owner,
lessor, or lessee) in any Property which constitutes real property and all
improvements thereon or thereto.

 

"Recipient" shall mean, as applicable, (a) Administrative Agent, (b) any Lender
and (c) LC Issuer.

 

"Regions Bank" shall mean Regions Bank, an Alabama bank and its successors and
assigns.

 

"Register" has the meaning given such term in Section 2.9.

 

"Regulation D" shall mean Regulation D of the Board of Governors, as the same
may be in effect from time to time, and any successor regulations.

 

"Regulation T" shall mean Regulation T of the Board of Governors, as the same
may be in effect from time to time, and any successor regulations.

 

"Regulation U" shall mean Regulation U of the Board of Governors, as the same
may be in effect from time to time, and any successor regulations.

 

- 20 -

 

 

"Regulation X" shall mean Regulation X of the Board of Governors, as the same
may be in effect from time to time, and any successor regulations.

 

"Regulation Y" shall mean Regulation Y of the Board of Governors, as the same
may be in effect from time to time, and any successor regulations.

 

"Reimbursement Date" has the meaning given such term in Section 2.22(b)(i).

 

"Related Parties" shall mean, with respect to any specified Person, such
Person's Affiliates and the respective directors and officers of such Person and
such Person's Affiliates.

 

"Release" shall mean any release, spill, emission, leaking, dumping, injection,
pouring, deposit, disposal, discharge, dispersal, leaching or migration into the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata) or within any building, structure, facility or fixture.

 

"Required Lenders" shall mean, subject to Section 2.23, Lenders having (a)
Revolving Commitments in excess of fifty percent (50%) of the aggregate
Revolving Commitments and (b) if the Revolving Commitments have terminated,
Revolving Credit Exposure in excess of fifty percent (50%) of the aggregate
Revolving Credit Exposure; provided, that (i) at any time there are two Lenders,
Required Lenders shall mean both Lenders, and (ii) at any time when there are
three or more Lenders, Required Lenders shall mean at least two Lenders which
are not affiliated with each other, provided, further, that the Revolving
Commitments and Revolving Credit Exposure of any Defaulting Lender shall be
excluded from such calculation.

 

"Responsible Officer" shall mean any of the president, the chief executive
officer, the chief financial officer, the chief accounting officer, the
treasurer or the secretary of a Borrower or such other representative of such
Borrower as may be designated in writing by any one of the foregoing with the
consent of Administrative Agent.

 

"Restricted Payment" shall mean, for any Person, any dividend or distribution on
any class of its Capital Stock.

 

"Revolving Note" shall mean a promissory note executed by Borrowers in favor of
a Lender in the form of Exhibit A, which note shall be in the amount of such
Lender's Revolving Commitment and shall evidence the Revolving Loans made by
such Lender.

 

"Revolving Commitment" shall mean, with respect to each Lender, the commitment
of such Lender to make Revolving Loans to Borrowers as set forth in Section 2.2
and the commitment of such Lender to refinance Swingline Loans as set forth in
Section 2.4, in an aggregate principal amount not exceeding the amount set forth
with respect to such Lender on Schedule 1, or, in the case of a Person becoming
a Lender after the Closing Date, the amount of the assigned "Revolving
Commitment" as provided in the Assignment and Acceptance executed by such Person
as an assignee, or the joinder executed by such Person, in each case as such
commitment may subsequently be increased or decreased pursuant to the terms
hereof.

 

"Revolving Commitment Termination Date" shall mean the earliest of (i) April 9,
2020, (ii) the date on which the Revolving Commitments are terminated pursuant
to Section 2.6 and (iii) the date on which all amounts outstanding under this
Agreement have been declared or have automatically become due and payable by
acceleration.

 

- 21 -

 

 

"Revolving Credit Exposure" shall mean on any date, for each Lender, the
aggregate amount (without duplication) of such Lender's outstanding Revolving
Loans and its participation in Swingline Loans (or, in the case of Swingline
Lender, its Swingline Loans (net of any participations therein by other
Lenders)) and LC Obligations on such date.

 

"Revolving Loan" shall mean a loan made by a Lender (other than a Swingline
Lender) to Borrowers under its Revolving Commitment, which shall be either a LIR
Loan, a LIBOR Loan or a Base Rate Loan.

 

"S&P" shall mean Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.

 

"Sanctioned Entity" shall mean (a) a country or government of a country; (b) an
agency of the government of a country; (c) an organization directly or
indirectly controlled by a country or its government; (d) a Person resident in
or determined to be a resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.

 

"Sanctioned Person" shall mean a person named on the list of Specially
Designated Nationals maintained by OFAC.

 

"Secured Bank Product Provider" shall mean any Lender or Affiliate of a Lender
that is providing a Bank Product.

 

"Secured Bank Product Obligations" shall mean Indebtedness and other obligations
of any Loan Party or any of its Subsidiaries to any Secured Bank Product
Provider arising from Bank Products.

 

"Secured Parties" shall mean Administrative Agent, LC Issuer, Lenders and
Secured Bank Product Providers; and "Secured Party" shall mean any of such
Persons.

 

"Security Agreement" shall mean that certain Security Agreement dated on or
about the date hereof by Loan Parties in favor of Administrative Agent, on
behalf of Secured Parties.

 

"Settlement Report" shall mean a report delivered by Administrative Agent to
Lenders summarizing the Revolving Loans and participations in LC Obligations
outstanding as of a given settlement date, allocated among Lenders based on
their Pro Rata Shares.

 

"Solvent" shall mean, with respect to any Person on a particular date, that on
such date (a) the fair value of the property of such Person is greater than the
total amount of liabilities, including subordinated and contingent liabilities,
of such Person; (b) the present fair saleable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts and liabilities, including subordinated and
contingent liabilities as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that would reasonably be expected to
become an actual or matured liability.

 

"Specified Loan Party" shall mean any Loan Party that is, at the time on which
the guaranty (or grant of Lien, as applicable) becomes effective with respect to
a Swap Obligation, a corporation, partnership, proprietorship, organization,
trust or other entity that would not be an "eligible contract participant" under
the Commodity Exchange Act at such time but for the effect of Article XI.

 

- 22 -

 

 

"Subordinated Debt" shall mean Indebtedness incurred by a Borrower that is
expressly subordinate and junior in right of payment to Payment in Full of all
Obligations on terms (including maturity, interest, fees, repayment, covenants,
and subordination) satisfactory to Administrative Agent, including, without
limitation, the EnTrust Earnout Debt.

 

"Subsidiary" shall mean, with respect to any Person (the "parent") at any date,
any corporation, partnership, joint venture, limited liability company,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, partnership, joint venture, limited liability
company, association or other entity (i) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held,
or (ii) that is, as of such date, otherwise controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent. Unless otherwise indicated, all references to "Subsidiary" hereunder
shall mean a Subsidiary of a Borrower.

 

"Swap Obligation" shall mean with respect to any Loan Party, any obligation to
pay or perform under any agreement, contract or transaction that constitutes a
"swap" within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

"Sweep Arrangement" shall mean the arrangements addressing deemed request for a
Loan as set forth in Section 2.3(b).

 

"Swingline Commitment" shall mean the commitment of Swingline Lender to make
Swingline Loans in an aggregate principal amount at any time outstanding not to
exceed $20,000,000.

 

"Swingline Lender" shall mean Regions Bank.

 

"Swingline Loan" shall mean a Loan made to Borrowers by Swingline Lender under
the Swingline Commitment.

 

"Swingline Note" shall mean a promissory note executed by Borrowers in favor of
the Swingline Lender in the form of Exhibit B, which note shall be in the
maximum amount of Swingline Loans which the Swingline Lender has agreed to make
to Borrowers pursuant to Section 2.4(a) and shall evidence the Swingline Loans
made by the Swingline Lender.

 

"Taxes" shall mean any and all present or future taxes, levies, imposts, duties,
deductions, assessments, fees, charges or withholdings imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.

 

"Treasury Services" has the meaning given such term in the definition of "Bank
Products."

 

"Type", when used in reference to a Loan or a Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to LIBOR, the LIBOR Index Rate or the Base Rate.

 

- 23 -

 

 

"UCC" shall mean the Uniform Commercial Code as in effect in the State of
Georgia or, when the laws of any other jurisdiction govern the perfection or
enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.

 

"Unfunded Pension Liability" of any Plan shall mean the amount, if any, by which
the value of the accumulated plan benefits under the Plan, determined on a plan
termination basis in accordance with actuarial assumptions at such time
consistent with those prescribed by the PBGC for purposes of Section 4044 of
ERISA, exceeds the fair market value of all Plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions).

 

"United States" or "U.S." shall mean the United States of America.

 

"U.S. Person" shall mean any Person that is a "United States person" as defined
in Section 7701(a)(30) of the Code.

 

"U.S. Tax Compliance Certificate" shall have the meaning set forth in Section
2.18(e)(ii).

 

"Voting Capital Stock" shall mean, with respect to any Person, those classes of
Capital Stock issued by such Person (however designated), the holders of which
are at the time entitled, as such holders, to vote for the election of a
majority of the directors, managers (or persons performing similar functions) of
such Person, whether or not the right so to vote exists by reason of the
happening of a contingency.

 

"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

 

Section 1.2.          Accounting Terms and Determination. Unless otherwise
defined or specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP as in effect from time to time, applied on a basis
consistent with the most recent audited consolidated financial statement of
Parent delivered pursuant to Section 5.1(a). Notwithstanding any other provision
contained herein, all terms of an accounting or financial nature used herein
shall be construed, and all computations of amounts and ratios referred to
herein shall be made, without giving effect to any election under Accounting
Standards Codification Section 825-10 (or any other Financial Accounting
Standard having a similar result or effect) to value any Indebtedness or other
liabilities of any Loan Party or any Subsidiary of any Loan Party at "fair
value" as defined therein.

 

Section 1.3.          Uniform Commercial Code. Any term used in this Agreement
or in any other Loan Document or in any financing statement filed in connection
herewith which is defined in the UCC and not otherwise defined in this Agreement
or in any other Loan Document shall have the meaning given such term in the UCC,
including "Account," "Account Debtor," "Chattel Paper," "Commercial Tort Claim,"
Commodities Account, ""Consignment," "Deposit Account," "Document," "Electronic
Chattel Paper," "Equipment," "General Intangibles," "Goods," "Instrument,"
"Investment Property," "Letter-of-Credit Right," "Proceeds," "Securities
Account" and "Supporting Obligation."

 

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Section 1.4.          Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." The word "will"
shall be construed to have the same meaning and effect as the word "shall," In
the computation of periods of time from a specified date to a later specified
date, the word "from" shall mean "from and including" and the word "to" shall
mean "to but excluding." Unless the context requires otherwise (i) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as it was originally executed or as it may from time to time be amended,
restated, supplemented or otherwise modified (subject to any restrictions on
such amendments, supplements or modifications set forth herein), (ii) any
reference herein to any Person shall be construed to include such Person's
successors and permitted assigns, (iii) the words "hereof," "herein" and
"hereunder" and words of similar import shall be construed to refer to this
Agreement as a whole and not to any particular provision hereof, (iv) all
references to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v)
all references to a time shall be construed to refer to Eastern Standard Time or
Eastern Daylight Savings Time, as applicable, unless otherwise indicated.

 

Article 2

 

AMOUNT AND TERMS OF THE COMMITMENTS

 

Section 2.1.          General Description of Facility. Subject to and upon the
terms and conditions herein set forth, (a) Lenders hereby establish in favor of
Borrowers a revolving credit facility pursuant to which each Lender severally
agrees (to the extent of such Lender's Revolving Commitment) to make Revolving
Loans to Borrowers in accordance with Section 2.2; (b) Swingline Lender agrees
to make Swingline Loans in accordance with Section 2.4; and (c) LC Issuer agrees
to issue Letters of Credit in accordance with Section 2.22.

 

Section 2.2.          Revolving Loans.

 

(a)          Revolving Loans. Subject to the terms and conditions of this
Agreement, each Lender agrees, severally (and not jointly) based on its Pro Rata
Share up to its Revolving Commitment, to make Revolving Loans to Borrowers from
time to time on any Business Day through the Revolving Commitment Termination
Date. Subject to the terms and conditions of this Agreement, the Revolving Loans
may be repaid and reborrowed. No Lender shall have any obligation to honor any
request for a Revolving Loan if doing so would cause (i) such Lender's Pro Rata
Share of the Aggregate Revolving Obligations to exceed such Lender's Revolving
Commitment or (ii) the Aggregate Revolving Obligations would exceed the
Revolving Commitments. Borrowers shall execute and deliver a Revolving Note to
each Lender requesting a Revolving Note.

 

(b)          Overline. Any amount by which the Aggregate Revolving Obligations
exceed the Revolving Commitments shall (A) be immediately due and payable on
demand and, once paid to Administrative Agent, shall be applied, first, to the
payment of any Swingline Loans; second, to all other Revolving Loans which are
Base Rate Loans or LIR Loans; third to Revolving Loans which are LIBOR Loans;
and, fourth, to Cash Collateralize the LC Obligations; (B) constitute
Obligations secured by the Collateral; and (C) be entitled to all benefits of
the Loan Documents. In no event shall Administrative Agent be required to honor
any request for a Revolving Loan when an Overadvance exists or would result
therefrom.

 

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Section 2.3.          Procedure for Revolving Borrowings.

 

(a)          Notice of Borrowing. Borrower Agent shall give Administrative Agent
a Notice of Borrowing (or telephonic notice promptly confirmed in writing by a
Notice of Borrowing) of each borrowing of Revolving Loans, which notice may be
transmitted by electronic mail subject to the limitations set forth in Section
10.1, (x) prior to 11:00 on the same Business Day as the requested LIR Loan or
Base Rate Loan and (y) prior to 11:00 a.m. three (3) Business Days in advance
for each LIBOR Loan. Each Notice of Borrowing shall be irrevocable and shall
specify (i) the aggregate principal amount of such Borrowing, (ii) the date of
such Borrowing (which shall be a Business Day), and (iii) the duration of the
initial Interest Period applicable thereto for a LIBOR Loan (subject to the
provisions of the definition of Interest Period). Any request for a borrowing of
Revolving Loans received after 11:00 a.m. shall be deemed delivered on the next
Business Day. Each borrowing of Revolving Loans shall consist entirely of LIR
Loans, LIBOR Loans or Base Rate Loans as elected by Borrower Agent. If Borrowers
do not specify an Interest Period with respect to any LIBOR Loan, then the
Interest Period for such Loan shall be one month. Each Notice of Borrowing and
request for a Revolving Loan received by Administrative Agent shall be
irrevocable. The aggregate principal amount of each Revolving Loan shall not be
less than $2,000,000 or a larger multiple of $1,000,000. At no time shall the
total number of LIBOR Loans outstanding at any time exceed six (6). Promptly
following the receipt of a Notice of Borrowing in accordance herewith,
Administrative Agent shall advise each Lender of the details thereof and the
amount of such Lender's Revolving Loan to be made as part of the requested
borrowing of Revolving Loans.

 

(b)          Sweep Arrangement.

 

(i)          The becoming due of any Obligations shall be deemed to be a request
for (x) subject to Section 2.4, a Swingline Loan or (y) if a Swingline Loan is
not made and subject to Section 2.6(e), an LIR Revolving Loan, on the due date
therefor in the amount of such Obligations, and, upon the making of such Loan,
Administrative Agent shall apply the proceeds thereof in direct payment of such
Obligations. In addition, Administrative Agent may, at its option, debit any of
Borrowers' Deposit Accounts maintained at Administrative Agent (or any of its
Affiliates) by the amount of any Obligations which are then due and apply the
proceeds thereof to the payment of such Obligations.

 

(ii)         If Borrowers have established a controlled disbursement Deposit
Account with Administrative Agent (or any of its Affiliates), then the
presentation for payment of any check or other item of payment drawn on such
Deposit Account at a time when there are insufficient funds on deposit therein
to pay the same shall be deemed to be a request for (x) subject to Section 2.4,
a Swingline Loan or (y) if a Swingline Loan is not and subject to Section
2.6(e), an LIR Revolving Loan, on the date of such presentation in the amount of
the checks and such other Payment Items presented for payment. The proceeds of
such Loan may be disbursed directly to the controlled disbursement Deposit
Account or other appropriate Deposit Account.

 

(iii)        If Borrowers have established a controlled disbursement Deposit
Account with Administrative Agent (or any of its Affiliates), then, at the end
of each Business Day, if the aggregate amount of presentations for payment of
all checks and other items of payment drawn on such Deposit Account during such
Business Day is less than funds on deposit therein, then such excess funds shall
be applied, first, to the payment of any Swingline Loans; and second, retained
in such Deposit Account as a credit balance in favor of Borrowers.

 

(iv)        Swingline Lender, at any time and from time to time in its sole
discretion, may, on behalf of Borrowers (which hereby irrevocably authorize and
direct Swingline Lender to act on their behalf), give a Notice of Borrowing to
Administrative Agent requesting that Lenders make a Revolving Loan in an amount
equal to their Pro Rata Share of the unpaid principal amount of any outstanding
Swingline Loan as, subject to Section 2.6(e), an LIR Revolving Loan, which shall
thereafter be deemed a Revolving Loan. If such notice is received by 11:00 a.m.
by a Lender, such Lender will make the proceeds of its Revolving Loan available
by 2:00 p.m. to Administrative Agent for the account of Swingline Lender.

 

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Section 2.4.          Swingline Commitment.

 

(a)          Swingline Loans. In addition to the Sweep Arrangement pursuant to
Section 2.3(b), Swingline Lender agrees to advance Swingline Loans to Borrowers,
up to an aggregate outstanding amount of $20,000,000 from time to time and in
such amount as Borrowers may request. Swingline Lender shall not be required to
advance a Swingline Loan to Borrowers (including, without limitation, with
respect to the Sweep Arrangement pursuant to Section 2.3(b)) if (i) such
Swingline Loan would cause the total amount of Swingline Loans to exceed
$20,000,000 or the Revolving Credit Exposure of Regions Bank to exceed the
Revolving Commitment of Regions Bank, (ii) any condition precedent set forth in
Section 3.2 is not satisfied at the time of the requested advance of such Swing
Loan, (iii) such Swingline Loan would cause an Overadvance (as defined in the
Addendum), or (iv) such Swingline Loan would cause the Aggregate Revolving
Obligations to exceed the Aggregate Revolving Commitments. Swingline Loans shall
constitute Revolving Loans, except that payments thereon shall be made to
Swingline Lender for its own account until Lenders have funded their
participations therein as provided below. Promptly upon Swingline Lender's
request, Borrowers shall execute and deliver to Swingline Lender the Swingline
Note to evidence the Swingline Loans. For the avoidance of doubt, Swingline
Loans may be made in any amount and without respect to the minimum amounts and
increments set forth in Section 2.3(a).

 

(b)          Settlement. Settlement of Loans, including Swingline Loans, among
Swingline Lender, Lenders and Administrative Agent shall take place on a date
determined from time to time by Swingline Lender (but at least weekly) with same
day notice from Swingline Lender to Lenders by 11:00 a.m., based on their Pro
Rata Shares in accordance with the Settlement Report delivered by Administrative
Agent to Lenders. Loans of a given Type, including Swingline Loans, shall be
settled among Lenders as Loans of such Type. Between settlement dates,
Administrative Agent may in its discretion apply payments on Revolving Loans to
Swingline Loans, regardless of any designation by Borrowers or any provision
herein to the contrary. Each Lender hereby purchases, without recourse or
warranty, an undivided participation based on its Pro Rata Share in all
Swingline Loans outstanding from time to time until settled. If a Swingline Loan
cannot be settled among Lenders, whether due to a Loan Party's Insolvency
Proceeding or for any other reason, each Lender shall pay the amount of its
participation in the Loan to Administrative Agent, for the account of the
Swingline Lender, in immediately available funds, within one Business Day after
Administrative Agent's or Swingline Lender's request therefor. Lenders'
obligations to make settlements and to fund participations are absolute,
irrevocable and unconditional, without offset, counterclaim or other defense,
and whether or not the Commitments have terminated or the conditions in Article
III are satisfied. The provisions of this Section 2.4 are solely for the benefit
of Swingline Lender, Administrative Agent and the other Lenders, and none of the
Loan Parties may rely on this Section 2.4 or have any standing to enforce its
terms.

 

Section 2.5.          Funding of Borrowings.

 

(a)          Each Lender will make available each Loan to be made by it
hereunder on the proposed date thereof by wire transfer in immediately available
funds by 2:00 p.m. for same-day Borrowings or 11:00 a.m. for other Borrowings,
to Administrative Agent at the Payment Office; provided that Swingline Loans
will be made as set forth in Section 2.4. Administrative Agent will make such
Loans available to Borrowers by promptly crediting the amounts that it receives,
in like funds by the close of business on such proposed date, to an account
maintained by Borrower Agent, on behalf of Borrowers, with Administrative Agent
or, at Borrower Agent's option, by effecting a wire transfer of such amounts to
an account designated in writing by Borrower Agent to Administrative Agent.

 

- 27 -

 

 

(b)          Unless Administrative Agent shall have been notified by any Lender
prior to 5:00 p.m. one (1) Business Day prior to the date of a Borrowing in
which such Lender is to participate that such Lender will not make available to
Administrative Agent such Lender's share of such Borrowing, Administrative Agent
may assume that such Lender has made such amount available to Administrative
Agent on such date, and Administrative Agent, in reliance on such assumption,
may make available to Borrowers on such date a corresponding amount. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender on the date of such Borrowing, Administrative Agent shall be
entitled to recover such corresponding amount on demand from such Lender
together with interest (x) at the Federal Funds Rate until the second Business
Day after such demand and (y) at the Base Rate at all times thereafter. If such
Lender does not pay such corresponding amount forthwith upon Administrative
Agent's demand therefor, Administrative Agent shall promptly notify Borrower
Agent, and Borrowers shall immediately pay such corresponding amount to
Administrative Agent together with interest at the rate specified for such
Borrowing. Nothing in this Section 2.5(b) shall be deemed to relieve any Lender
from its obligation to fund its Pro Rata Share of any Borrowing hereunder or to
prejudice any rights which Borrowers may have against any Lender as a result of
any default by such Lender hereunder.

 

(c)          All fundings of borrowings of Revolving Loans shall be made by
Lenders on the basis of their respective Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in its obligations hereunder,
and each Lender shall be obligated to make its Loans provided to be made by it
hereunder, regardless of the failure of any other Lender to make its Loans
hereunder.

 

Section 2.6.          Interest Elections.

 

(a)          Each Borrowing initially shall be specified in the applicable
Notice of Borrowing (except as otherwise described herein with respect to the
Sweep Arrangement). Thereafter, Borrowers may elect to convert a Borrowing or to
continue such Borrowing, all as provided in this Section 2.6. Borrowers may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among
Lenders holding Loans comprising such Borrowing, and the Loans comprising each
such portion shall be considered a separate Borrowing. Notwithstanding any
provision in this Section 2.6 to the contrary, no conversion or continuation
shall be required with respect to Loans that do not have an Interest Period.

 

(b)          To make an election pursuant to this Section 2.6, Borrower Agent
shall give Administrative Agent a Notice of Conversion/Continuation (or
telephonic notice promptly confirmed in writing by a Notice of
Conversion/Continuation) of each Borrowing that is to be converted or continued,
by 11:00 a.m. three (3) Business Days prior to a continuation of or conversion
of a LIBOR Loan. Each such Notice of Conversion/Continuation shall be
irrevocable and shall specify (i) the Borrowing to which such Notice of
Conversion/Continuation applies and, if different options are being elected with
respect to different portions thereof, the portions thereof that are to be
allocated to each resulting Borrowing (in which case the information to be
specified pursuant to clauses (ii) and (iii) shall be specified for each
resulting Borrowing), (ii) the effective date of the election made pursuant to
such Notice of Conversion/Continuation, which shall be a Business Day, and (iii)
if the resulting Borrowing is to be a Revolving Borrowing at LIBOR, the Interest
Period applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of "Interest Period." If any such Notice
of Conversion/Continuation does not specify an Interest Period, Borrowers shall
be deemed to have selected an Interest Period of one (1) month. The principal
amount of any resulting Borrowing shall satisfy the minimum borrowing amount for
Revolving Borrowings set forth in Section 2.3.

 

(c)          If, on the expiration of any Interest Period in respect of any
LIBOR Loan, Borrower Agent shall have failed to deliver a Notice of
Conversion/Continuation, then, unless such Borrowing is repaid as provided
herein, Borrowers shall be deemed to have elected to convert such Borrowing to a
LIBOR Loan with a one month Interest Period. No conversion of any LIBOR Loan
shall be permitted except on the last day of the Interest Period with respect
thereto.

 

- 28 -

 

 

(d)          Upon receipt of any Notice of Conversion/Continuation,
Administrative Agent shall promptly notify each Lender of the details thereof
and of such Lender's portion of each resulting Borrowing.

 

(e)          Subject to Sections 2.14 and 2.15, (i) all Swingline Loans shall
constitute LIR Revolving Loans and (ii) so long as Regions Bank is also the only
Lender hereunder, all Loans shall, as applicable, be made or continued as, or
converted into, LIBOR Loans or LIR Loans. Notwithstanding anything to the
contrary set forth in this Agreement or any other Loan Document, LIR Loans
(other than Swingline Loans) shall only be available to Borrowers for so long as
either (i) Regions Bank is the only Lender under this Agreement, or (ii) each
Lender other than Regions Bank that holds a Revolving Commitment at any time
agrees in its sole discretion to provide LIR Loans at the time such Lender
acquires or provides its Revolving Commitment. If either of the foregoing
conditions is not satisfied at any time, all LIR Loans then outstanding (other
than Swingline Loans) shall convert, automatically and without notice to any
Person, into, and Borrowers shall be deemed to have elected, a LIBOR Loan with a
one month Interest Period in an amount equal to the aggregate principal amount
of all such LIR Loans, rounded upwards to the nearest $1,000,000, and no
Revolving Loans (other than Swingline Loans) shall thereafter be available to
Borrowers as LIR Loans.

 

(f)          All Loans made on the Closing Date (other than Swingline Loans)
shall be made as Base Rate Loans or LIR Loans, subject to Sections 2.6(e), 2.14
and 2.15.

 

Section 2.7.          Optional Reduction and Termination of Commitments.

 

(a)          Unless previously terminated, all Revolving Commitments and
Swingline Commitments, shall terminate on the Revolving Commitment Termination
Date.

 

(b)          Upon at least three (3) Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) to Administrative Agent (which
notice shall be irrevocable), Borrowers may reduce the Aggregate Revolving
Commitments in part or terminate the Aggregate Revolving Commitments in whole;
provided that (i) any partial reduction shall apply to reduce proportionately
and permanently the Revolving Commitment of each Lender, (ii) any partial
reduction pursuant to this Section 2.7 shall be in an amount of at least
$2,000,000 and any larger multiple of $1,000,000, and (iii) no such reduction
shall be permitted which would reduce the Aggregate Revolving Commitment Amount
to an amount less than the aggregate outstanding Revolving Credit Exposure of
all Lenders. Any such reduction in the Aggregate Revolving Commitment below the
principal amount of the Swingline Commitment shall result in a dollar-for-dollar
reduction in the Swingline Commitment.

 

(c)          With the written approval of Administrative Agent, Borrowers may
terminate (on a non-ratable basis) the unused amount of the Revolving Commitment
of a Defaulting Lender, provided that such termination will not be deemed to be
a waiver or release of any claim that any Borrower, Administrative Agent, or any
other Lender may have against such Defaulting Lender.

 

Section 2.8.          Repayment of Loans. The outstanding principal amount of
all Revolving Loans and Swingline Loans shall be due and payable (together with
accrued and unpaid interest and fees thereon) on the Revolving Commitment
Termination Date.

 

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Section 2.9.          Evidence of Indebtedness. Administrative Agent, acting
solely for this purpose as an agent of Borrowers, shall maintain a register (the
"Register") of (a) with respect to Lenders, the names and addresses of Lenders,
their Commitments and the principal amount of their Loans and (b) with respect
to Borrowers, each Loan, issuance of a Letter of Credit or other financial
accommodation from time to time made to Borrowers. Entries made in the Register
shall (i) constitute presumptive evidence of the information contained therein
and (ii) be conclusive and binding for all purposes, absent manifest error. Any
failure of Administrative Agent to make entries in the Register, or any error in
doing so, shall not limit or otherwise affect the obligations of Borrowers to
pay any amount owing hereunder. Administrative Agent also shall maintain a copy
of each Assignment and Acceptance delivered to and accepted by it and shall
modify the Register to give effect to each Assignment and Acceptance. Borrowers,
Administrative Agent, LC Issuer and Lenders may treat each Person (other than
Borrowers) whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. Administrative Agent may choose only to list
Borrower Agent in the Register, and each Borrower confirms that such arrangement
shall have no effect on the joint and several character of its liability for the
Obligations. The Register shall be available for inspection by Borrowers and any
Lender at any reasonable time and from time to time upon reasonable prior notice
and, if any information contained in the Register is provided to or inspected by
any such Person, then such information shall be conclusive and binding on such
Person for all purposes absent manifest error, except to the extent such Person
notifies Administrative Agent in writing within thirty (30) days after receipt
or inspection that specific information is subject to dispute.

 

Section 2.10.         Optional Prepayments. Borrowers shall have the right at
any time and from time to time to prepay any Borrowing, in whole or in part,
without premium or penalty, by giving written notice (or telephonic notice
promptly confirmed in writing) to Administrative Agent no later than (i) in the
case of any prepayment of any LIBOR Loan, 11:00 a.m. not less than three (3)
Business Days prior to the date of such prepayment; and (ii) in the case of any
other Borrowing, prior to 11:00 a.m. on the date of such prepayment. Each such
notice shall be irrevocable and shall specify the proposed date of such
prepayment and the principal amount of each Borrowing or portion thereof to be
prepaid. Upon receipt of any such notice, Administrative Agent shall promptly
notify each affected Lender of the contents thereof and of such Lender's Pro
Rata Share of any such prepayment. If such notice is given, the aggregate amount
specified in such notice shall be due and payable on the date designated in such
notice, together with accrued interest to such date on the amount so prepaid in
accordance with Section 2.11(e); provided that if a LIBOR Loan is prepaid on a
date other than the last day of an Interest Period applicable thereto, Borrowers
shall also pay all amounts required pursuant to Section 2.17. Each partial
prepayment of any Loan shall be in an amount that would be permitted in the case
of an advance of a Revolving Borrowing of the same Type pursuant to Section 2.2
or in the case of a Swingline Loan, pursuant to Section 2.4. Each prepayment of
a Borrowing shall be applied ratably to the Loans.

 

Section 2.11.         Interest on Loans.

 

(a)          Borrowers shall pay interest on each LIBOR Loan at LIBOR for the
applicable Interest Period in effect for such Loan plus the Applicable Margin in
effect from time to time. Borrowers shall pay interest on each LIR Loan at the
LIBOR Index Rate, as reset from time to time, plus the Applicable Margin in
effect from time to time. Borrowers shall pay interest on each Base Rate Loan at
the Base Rate in effect from time to time plus the Applicable Margin in effect
from time to time.

 

(b)          Borrowers shall pay interest on each Swingline Loan at the LIBOR
Index Rate, as reset from time to time, plus the Applicable Margin in effect
from time to time.

 

(c)          Notwithstanding Section 2.11(a), at the option of the Required
Lenders, if an Event of Default has occurred and is continuing, and
automatically after acceleration or with respect to any past due amount
hereunder, Borrowers shall pay interest ("Default Interest") with respect to all
Loans at the rate per annum equal to the Base Rate plus the highest Applicable
Margin with respect thereto plus 200 basis points.

 

- 30 -

 

 

(d)          Interest on all Loans shall accrue from and including the date such
Loans are made to but excluding the date of any repayment thereof. Interest on
all outstanding LIBOR Loans shall be payable on the last day of each Interest
Period applicable thereto, on all LIR Loans and Base Rate Loans on the first day
of each calendar month. All Loans shall be payable in full on the Revolving
Commitment Termination Date. Interest on any Loan which is converted into a Loan
of another Type or which is repaid or prepaid shall be payable on the date of
such conversion or on the date of any such repayment or prepayment (on the
amount repaid or prepaid) thereof. All Default Interest shall be payable on
demand.

 

(e)          Administrative Agent shall determine each interest rate applicable
to the Loans and, upon request by Borrower Agent or a Lender, shall promptly
notify hereunder Borrower Agent or such Lender of such rate in writing (or by
telephone, promptly confirmed in writing). Any such determination shall be
conclusive and binding for all purposes, absent manifest error.

 

(f)          LIBOR on the date hereof is 0.1875% per annum and, therefore, the
rate of interest in effect on the date hereof, expressed in simple interest
terms, is 1.4375% per annum for LIBOR Loans. The LIBOR Index Rate on the date
hereof is 0.1875% per annum and, therefore, the rate of interest in effect on
the date hereof, expressed in simple interest terms, is 1.4375% per annum for
LIR Revolving Loans. The Base Rate on the date hereof is 3.25% per annum and,
therefore, the rate of interest in effect on the date hereof, expressed in
simple interest terms, is 3.50% per annum for Base Rate Revolving Loans.

 

Section 2.12.         Fees.

 

(a)          Borrowers shall pay to Administrative Agent, for its own account,
the fees payable to Administrative Agent which are described in the Fee Letter,
all of which shall be due and payable in the amounts and at the times set forth
therein.

 

(b)          Prior to the Borrowing Base Trigger Event, Borrowers agree to pay
to Administrative Agent for the account of each Lender on the first day of each
calendar month ending after the Closing Date and on the Revolving Commitment
Termination Date, in arrears, a commitment fee in an amount equal to 0.20% per
annum times the average amount by which the Revolving Commitments exceeded the
Aggregate Revolving Obligations (other than Swingline Loans) on each day during
the immediately preceding calendar month. On and after the occurrence of the
Borrowing Base Trigger Event, Borrowers shall pay Administrative Agent for the
account of each Lender a commitment fee as more fully set forth in the Addendum.

 

(c)          On the first day of each Fiscal Quarter ending after the Closing
Date, Borrowers shall pay to Administrative Agent, in arrears and for the
account of Lenders, a letter of credit fee for each outstanding Letter of Credit
in an amount equal to (A) the Applicable Margin in effect for LIBOR Revolving
Loans plus, at all times when the Default Interest is being charged with respect
to Loans is in effect, 2.00% times (B) the average amount available to be drawn
on such outstanding Letters of Credit each day during the immediately preceding
Fiscal Quarter. At the time any Letter of Credit is issued, Borrowers shall pay
to LC Issuer, quarterly in arrears and for its own account, a fronting fee in an
amount equal to (A) the amount set forth in the Fee Letter, times (B) the
initial face amount of such Letter of Credit, times (C) the initial stated
duration of such Letter of Credit (which fee shall be fully earned upon issuance
of the Letter of Credit, and none of such fee shall be refundable, in whole or
in part, regardless of any cancellation, termination, or draw upon the Letter of
Credit). Additionally, Borrowers shall pay to LC Issuer, for its own account,
all customary charges associated with the issuance, amending, negotiating,
payment, processing, transfer, and administration of Letters of Credit, which
charges shall be paid as and when incurred.

 

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Section 2.13.         Computation of Interest and Fees. All interest and all
fees hereunder shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day). Each determination by Administrative Agent of an interest rate or fee
hereunder shall be made in good faith and, except for manifest error, shall be
final, conclusive and binding for all purposes. All fees payable under Section
2.12 are compensation for services and, to the extent of Applicable Law, are
not, and shall not be deemed to be, interest or any other charge for the use,
forbearance, or detention of money. A certificate as to amounts payable by
Borrowers under Sections 2.16 and 2.17, timely submitted to Borrower Agent by
Administrative Agent or the affected Lender, as applicable, shall be final,
conclusive, and binding for all purposes, absent manifest error, and Borrowers
shall pay such amounts to the applicable Person within ten (10) Business Days
following receipt of such certificate. All fees shall be fully earned when due
and shall not, absent manifest error, be subject to rebate, refund, or
proration, in whole or in part. All fees paid to Administrative Agent for the
account of Lenders, LC Issuer, or any other Person shall be paid by
Administrative Agent to such Persons promptly upon its receipt thereof and, with
respect to fees payable for the account of Lenders, in accordance with each such
Lender's Pro Rata Share thereof.

 

Section 2.14.         Inability to Determine Interest Rates. If, prior to the
commencement of any Interest Period for any LIBOR Loan:

 

(a)          Administrative Agent shall have determined (which determination
shall be conclusive and binding upon Borrowers) that, by reason of circumstances
affecting the relevant interbank market, adequate means do not exist for
ascertaining LIBOR for such Interest Period, or

 

(b)          Administrative Agent shall have received notice from the Required
Lenders that LIBOR does not adequately and fairly reflect the cost to such
Lenders of making, funding or maintaining their LIBOR Loans for such Interest
Period,

 

Administrative Agent shall give written notice (or telephonic notice, promptly
confirmed in writing) to Borrower Agent and to each Lender as soon as
practicable thereafter. Until Administrative Agent shall notify Borrower Agent
and each Lender that the circumstances giving rise to such notice no longer
exist, (i) the obligations of Lenders to make LIBOR Loans or to continue or
convert outstanding Loans as or into LIBOR Loans shall be suspended and (ii) all
such affected Loans shall be converted into Base Rate Loans on the last day of
the then current Interest Period applicable thereto unless Borrowers prepay such
Loans in accordance with this Agreement. Unless Borrower Agent notifies
Administrative Agent at least one (1) Business Day before the date of any LIBOR
Loan for which a Notice of Borrowing has previously been given that Borrowers
elect not to borrow, continue or convert to a LIBOR Loan on such date, then such
Borrowing shall be made as, continued as or converted into a Base Rate Loan.

 

Section 2.15.         Illegality. If any Change in Law shall make it unlawful or
impossible for any Lender to make, maintain or fund any LIBOR Loan and such
Lender shall so notify Administrative Agent, Administrative Agent shall promptly
give notice thereof to Borrower Agent and each other Lender, whereupon until
such Lender notifies Administrative Agent and Borrower Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Lender to make LIBOR Loans, or to continue or convert outstanding Loans as
or into LIBOR Loans, shall be suspended. In the case of the making of a LIBOR
Loan, such Lender's Revolving Loan shall be made as a Base Rate Loan as part of
the same Borrowing for the same Interest Period and, if the affected LIBOR Loan
is then outstanding, such Loan shall be converted to a Base Rate Loan either (i)
on the last day of the then current Interest Period applicable to such LIBOR
Loan if such Lender may lawfully continue to maintain such Loan to such date or
(ii) immediately if such Lender shall determine that it may not lawfully
continue to maintain such LIBOR Loan to such date. Notwithstanding the
foregoing, the affected Lender shall, prior to giving such notice to
Administrative Agent, designate a different Applicable Lending Office if such
designation would avoid the need for giving such notice and if such designation
would not otherwise be disadvantageous to such Lender in the good faith exercise
of its discretion.

 

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Section 2.16.         Increased Costs.

 

(a)          If any Change in Law shall:

 

(i)          impose, modify or deem applicable any reserve, special deposit or
similar requirement that is not otherwise included in the determination of LIBOR
hereunder against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in
LIBOR); or

 

(ii)         impose on any Lender, or the eurodollar interbank market any other
condition affecting this Agreement or any LIBOR Loans made by such Lender;

 

and the result of any of the foregoing is to increase the cost to such Lender of
making, converting into, continuing or maintaining a LIBOR Loan or to reduce the
amount received or receivable by such Lender hereunder (whether of principal,
interest or any other amount),

 

then, from time to time, such Lender may provide Borrower Agent (with a copy
thereof to Administrative Agent) with written notice and demand with respect to
such increased costs or reduced amounts, and within five (5) Business Days after
receipt of such notice and demand Borrowers shall pay to such Lender such
additional amounts as will compensate such Lender for any such increased costs
incurred or reduction suffered.

 

(b)          If any Lender shall have determined that on or after the date of
this Agreement any Change in Law regarding capital or liquidity requirements has
or would have the effect of reducing the rate of return on such Lender's capital
(or on the capital of the Parent Company of such Lender) as a consequence of its
obligations hereunder to a level below that which such Lender, or such Parent
Company could have achieved but for such Change in Law (taking into
consideration such Lender's policies or the policies of such Parent Company with
respect to capital adequacy), then, from time to time, such Lender may provide
Borrower Agent (with a copy thereof to Administrative Agent) with written notice
and demand with respect to such reduced amounts, and within five (5) Business
Days after receipt of such notice and demand Borrowers shall pay to such Lender
such additional amounts as will compensate such Lender or such Parent Company
for any such reduction suffered.

 

(c)          A certificate of such Lender setting forth the amount or amounts
necessary to compensate such Lender or the Parent Company of such Lender
specified in Section 2.16(a) or (b) shall be delivered to Borrower Agent (with a
copy to Administrative Agent), and shall be conclusive, absent manifest error.

 

(d)          Failure or delay on the part of any Lender to demand compensation
pursuant to this Section 2.16 shall not constitute a waiver of such Lender's
right to demand such compensation; provided that Borrowers shall not be required
to compensate a Lender under this Section 2.16 for any increased costs or
reductions incurred more than six (6) months prior to the date that such Lender
notifies Borrower Agent of such increased costs or reductions and of such
Lender's intention to claim compensation therefor; provided, further, that if
the Change in Law giving rise to such increased costs or reductions is
retroactive, then such six-month period shall be extended to include the period
of such retroactive effect.

 

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Section 2.17.         Funding Indemnity. In the event of (a) the payment of any
principal of a LIBOR Loan other than on the last day of the Interest Period
applicable thereto (including as a result of an Event of Default), (b) the
conversion or continuation of a LIBOR Loan other than on the last day of the
Interest Period applicable thereto, or (c) the failure by Borrowers to borrow,
prepay, convert or continue any LIBOR Loan on the date specified in any
applicable notice (regardless of whether such notice is withdrawn or revoked),
then, in any such event, Borrowers shall compensate each Lender, within five (5)
Business Days after written demand from such Lender, for any loss, cost or
expense attributable to such event. In the case of a LIBOR Loan, such loss, cost
or expense shall be deemed to include an amount determined by such Lender to be
the excess, if any, of (A) the amount of interest that would have accrued on the
principal amount of such LIBOR Loan if such event had not occurred at LIBOR
applicable to such LIBOR Loan for the period from the date of such event to the
last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such LIBOR Loan) over (B) the amount of interest that would
accrue on the principal amount of such LIBOR Loan for the same period if LIBOR
were set on the date such LIBOR Loan was prepaid or converted or the date on
which Borrowers failed to borrow, convert or continue such LIBOR Loan. A
certificate as to any additional amount payable under this Section 2.17
submitted to Borrower Agent by any Lender (with a copy to Administrative Agent)
shall be conclusive, absent manifest error.

 

Section 2.18.         Taxes.

 

(a)          LC Issuer. For purposes of this Section 2.18, the term "Lender"
shall include LC Issuer and the term "Applicable Law" shall include FATCA.

 

(b)          Payments Free of Taxes; Obligation to Withhold; Payments on Account
of Taxes. Any and all payments by or on account of any obligation of any Loan
Party hereunder or under any other Loan Document shall be made without deduction
or withholding for any Taxes, except as required by Applicable Law. If any
Applicable Law (as determined in the good faith discretion of an applicable
withholding agent) requires the deduction or withholding of any Tax from any
such payment by a withholding agent, then the applicable withholding agent shall
be entitled to make such deduction or withholding and shall timely pay the full
amount deducted or withheld to the relevant Governmental Authority in accordance
with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable
by the applicable Loan Party shall be increased as necessary so that after such
deduction or withholding has been made (including such deductions and
withholdings applicable to additional sums payable under this Section 2.18) the
applicable Recipient receives an amount equal to the sum it would have received
had no such deduction or withholding been made.

 

(c)          Payment of Other Taxes by the Loan Parties. The Loan Parties shall
timely pay to the relevant Governmental Authority in accordance with Applicable
Law, or at the option of Administrative Agent timely reimburse it for the
payment of, any Other Taxes.

 

(d)          Tax Indemnification. (i) The Loan Parties shall jointly and
severally indemnify each Recipient and shall make payment in respect thereof
within ten (10) Business Days after demand therefor, for the full amount of any
Indemnified Taxes (including Indemnified Taxes imposed or asserted on or
attributable to amounts payable under this Section 2.18) payable or paid by such
Recipient or required to be withheld or deducted from a payment to such
Recipient, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes were correctly or legally imposed
or asserted by the relevant Governmental Authority. A certificate as to the
amount of any such payment or liability delivered to Borrower Agent by a Lender
(with a copy to Administrative Agent), or by Administrative Agent on its own
behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

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(e)          Each Lender shall severally indemnify Administrative Agent within
ten (10) Business Days after demand therefor, for (i) any Indemnified Taxes
attributable to such Lender (but only to the extent that any Loan Party has not
already indemnified Administrative Agent for such Indemnified Taxes and without
limiting the obligation of the Loan Parties to do so), (ii) any Taxes
attributable to such Lender's failure to comply with the provisions of Section
10.4 relating to the maintenance of a participant register and (iii) any
Excluded Taxes attributable to such Lender, in each case, that are payable or
paid by Administrative Agent in connection with any Loan Document, and any
reasonable expenses arising therefrom or with respect thereto, whether or not
such Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to any Lender by Administrative Agent shall be conclusive
absent manifest error. Each Lender hereby authorizes Administrative Agent to set
off and apply any and all amounts at any time owing to such Lender under any
Loan Document or otherwise payable by Administrative Agent to Lender from any
other source against any amount due to Administrative Agent under this clause
(e).

 

(f)          Evidence of Payments. As soon as practicable after any payment of
Taxes by any Loan Party to a Governmental Authority pursuant to this Section
2.18, such Loan Party shall deliver to Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of a return reporting such payment or other evidence of
such payment reasonably satisfactory to Administrative Agent.

 

(g)          Status of Lenders; Tax Documentation. (i) Any Lender that is
entitled to an exemption from or reduction of withholding Tax with respect to
payments made under any Credit Document shall deliver to Borrower Agent and
Administrative Agent, at the time or times reasonably requested by Borrower
Agent or Administrative Agent, such properly completed and executed
documentation reasonably requested by Borrower Agent or Administrative Agent as
will permit such payments to be made without withholding or at a reduced rate of
withholding. In addition, any Lender, if reasonably requested by Borrower Agent
or Administrative Agent, shall deliver such other documentation prescribed by
Applicable Law or reasonably requested by Borrower Agent or Administrative Agent
as will enable Borrower Agent or Administrative Agent to determine whether or
not such Lender is subject to backup withholding or information reporting
requirements. Notwithstanding anything to the contrary in the preceding two
sentences, the completion, execution and submission of such documentation (other
than such documentation set forth in clauses (ii)(A), (ii)(B) and (ii)(D) below)
shall not be required if in Lender's reasonable judgment such completion,
execution or submission would subject such Lender to any material unreimbursed
cost or expense or would materially prejudice the legal or commercial position
of such Lender.

 

Without limiting the generality of the foregoing, in the event that a Borrower
is a U.S. Person:

 

(i)          any Lender that is a U.S. Person shall deliver to Borrower Agent
and Administrative Agent on or prior to the date on which such Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the
reasonable request of Borrower Agent or Administrative Agent), executed
originals of IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax;

 

(ii)         any Foreign Lender shall, to the extent it is legally entitled to
do so, deliver to Borrower Agent and Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of Borrower Agent or Administrative
Agent), whichever of the following is applicable:

 

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(A)         in the case of a Foreign Lender claiming the benefits of an income
tax treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the "interest" article of such tax treaty and (y) with respect to
any other applicable payments under any Loan Document, IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the "business profits" or "other income" article of such tax treaty;

 

(B)         executed originals of IRS Form W-8ECI;

 

(C)         in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under Section 881(c) of the Internal Revenue
Code, (x) a certificate substantially in form and content satisfactory to
Administrative Agent to the effect that such Foreign Lender is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, a "10
percent shareholder" of Borrower within the meaning of Section 881(c)(3)(B) of
the Internal Revenue Code, or a "controlled foreign corporation" described in
Section 881(c)(3)(C) of the Internal Revenue Code (a "U.S. Tax Compliance
Certificate") and (y) executed originals of IRS Form W-8BEN; or

 

(D)         to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a
U.S. Tax Compliance Certificate, IRS Form W-9, and/or other certification
documents from each beneficial owner, as applicable; provided that if the
Foreign Lender is a partnership and one or more direct or indirect partners of
such Foreign Lender are claiming the portfolio interest exemption, such Foreign
Lender may provide a U.S. Tax Compliance Certificate on behalf of each such
direct and indirect partner;

 

(iii)        any Foreign Lender shall, to the extent it is legally entitled to
do so, deliver to Borrower Agent and Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of Borrower Agent or Administrative
Agent), executed originals of any other form prescribed by Applicable Law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by Applicable Law to permit Borrower Agent or Administrative Agent to
determine the withholding or deduction required to be made; and

 

(iv)        if a payment made to a Lender under any Loan Document would be
subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to
fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Internal Revenue Code, as
applicable), such Lender shall deliver to Borrower Agent and Administrative
Agent at the time or times prescribed by law and at such time or times
reasonably requested by Borrower Agent or Administrative Agent such
documentation prescribed by Applicable Law (including as prescribed by Section
1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation
reasonably requested by Borrower or Administrative Agent as may be necessary for
Borrower Agent and Administrative Agent to comply with their obligations under
FATCA and to determine that such Lender has complied with such Lender's
obligations under FATCA or to determine the amount to deduct and withhold from
such payment. Solely for purposes of this clause (D), "FATCA" shall include any
amendments made to FATCA after the date of this Agreement.

 

Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify Borrower Agent and Administrative Agent
in writing of its legal inability to do so.

 

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(h)          Treatment of Certain Refunds. Unless required by Applicable Law, at
no time shall Administrative Agent have any obligation to file for or otherwise
pursue on behalf of a Lender, or have any obligation to pay to any Lender, any
refund of Taxes withheld or deducted from funds paid for the account of such
Lender. If any indemnified party determines, in its sole discretion exercised in
good faith, that it has received a refund of any Taxes as to which it has been
indemnified pursuant to this Section 2.18 (including by the payment of
additional amounts pursuant to this Section 2.18), it shall pay to the
indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Section 2.18 with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses (including Taxes) of
such indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund). Such indemnifying
party, upon the request of the indemnified party, shall repay to such
indemnified party the amount paid over pursuant to this clause (h) (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this clause (h), in no event will the indemnified party be required to pay
any amount to an indemnifying party pursuant to this clause (h) the payment of
which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid. This paragraph shall not be construed
to require any indemnified party to make available its Tax returns (or any other
information relating to its Taxes that it deems confidential) to the
indemnifying party or any other Person.

 

(i)          Survival. Each party's obligations under this Section 2.18 shall
survive the resignation or replacement of Administrative Agent or any assignment
of rights by, or the replacement of, a Lender, the termination of the
Commitments and the repayment, satisfaction or discharge of all obligations
under any Loan Document.

 

Section 2.19.         Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.

 

(a)          Borrowers shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or of amounts payable under
Section 2.16, 2.17 or 2.18, or otherwise) prior to 12:00 noon on the date when
due, in immediately available funds, free and clear of any defenses, rights of
set-off, counterclaim, or withholding or deduction of taxes. Any amounts
received after such time on any date may, in the discretion of Administrative
Agent, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. All such payments shall be made to
Administrative Agent at the Payment Office, except that payments pursuant to
Sections 2.16, 2.17, 2.18 and 10.3 shall be made directly to the Persons
entitled thereto. Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be made payable for the period of such extension. All
payments hereunder shall be made in Dollars.

 

(b)          Notwithstanding anything herein to the contrary, during an Event of
Default, if so directed by the Required Lenders or at Administrative Agent's
discretion, monies to be applied to the Obligations, whether arising from
payments by Loan Parties, realization on Collateral, setoff, or otherwise, shall
be allocated as set forth in the Security Agreement.

 

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(c)          If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or Swingline Loans that would result in such Lender
receiving payment of a greater proportion of the aggregate amount of its
Revolving Credit Exposure and accrued interest and fees thereon than the
proportion received by any other Lender with respect to its Revolving Credit
Exposure, then Lender receiving such greater proportion shall purchase (for cash
at face value) participations in the Revolving Credit Exposure of other Lenders
to the extent necessary so that the benefit of all such payments shall be shared
by Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Revolving Credit Exposure; provided that
(i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this Section 2.19(c) shall not be construed
to apply to any payment made by Borrowers pursuant to and in accordance with the
express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Revolving Credit Exposure to any assignee or participant, other than to
Borrowers (as to which the provisions of this Section 2.19(c) shall apply). Each
Borrower consents to the foregoing and agrees, to the extent it may effectively
do so under Applicable Law, that any Lender acquiring a participation pursuant
to the foregoing arrangements may, at any time an Event of Default exists,
exercise against Borrowers rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of
Borrowers in the amount of such participation.

 

(d)          Unless Administrative Agent shall have received notice from
Borrower Agent prior to the date on which any payment is due to Administrative
Agent for the account of Lenders hereunder that Borrowers will not make such
payment, Administrative Agent may assume that Borrowers have made such payment
on such date in accordance herewith and may, in reliance upon such assumption,
distribute to Lenders the amount or amounts due. In such event, if Borrowers
have not in fact made such payment, then each Lender severally agrees to repay
to Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to
Administrative Agent, at the greater of the Federal Funds Rate and a rate
determined by Administrative Agent in accordance with banking industry rules on
interbank compensation.

 

Section 2.20.         Mitigation of Obligations. If any Lender requests
compensation under Section 2.16, or if Borrowers are required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 2.18, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or Affiliates, if, in the sole judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable under
Section 2.16 or Section 2.18, as the case may be, in the future and (ii) would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. Borrowers hereby agree to pay all
reasonable costs and expenses incurred by any Lender in connection with such
designation or assignment.

 

Section 2.21.         Borrower Agent. Each Loan Party hereby designates Parent
("Borrower Agent") as its representative and agent for all purposes under the
Loan Documents, including requests for Loans and Letters of Credit, designation
of interest rates and Interest Periods, delivery or receipt of communications
(including any Notice of Borrowing, Notice of Conversion/Continuation, any
electronic mail notice or request for a Borrowing or the conversion, or
continuation of any Loan, or any request for the issuance of any Letter of
Credit), financial reports and Compliance Certificates, receipt and payment of
Obligations, requests for waivers, amendments, or other accommodations, actions
under the Loan Documents (including in respect of compliance with covenants),
and all other dealings with Administrative Agent, LC Issuer, or any Lender.
Borrower Agent hereby accepts such appointment. Administrative Agent, LC Issuer,
and Lenders may give any notice to, or communication with, a Loan Party
hereunder or under any other Loan Document to or with Borrower Agent on behalf
of such Loan Party. Each Loan Party agrees that any notice, election,
communication, representation, agreement, or undertaking made on its behalf by
Borrower Agent shall be binding upon and enforceable against it. Administrative
Agent, LC Issuer, and Lenders shall be entitled to rely upon, and shall be fully
protected in relying upon, the terms of this Section 2.21.

 

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Section 2.22.         Letter of Credit Facility.

 

(a)          Issuance of Letters of Credit. LC Issuer agrees to issue Letters of
Credit from time to time for Borrowers' account on the terms set forth in this
Agreement, including the following:

 

(i)          LC Issuer shall have no obligation to issue any Letter of Credit
unless each of the LC Conditions has been satisfied (as determined by LC Issuer
and Administrative Agent).

 

(ii)         If LC Issuer receives written notice from Administrative Agent or a
Lender at least five (5) Business Days before issuance of a Letter of Credit
that any LC Condition has not been satisfied, LC Issuer shall have no obligation
to issue the requested Letter of Credit (or any other Letter of Credit) until
such notice is withdrawn in writing by Administrative Agent or such Lender or
until the Required Lenders have waived the applicable LC Condition in accordance
with this Agreement. Before receipt of any such notice, LC Issuer shall not be
deemed to have knowledge of any failure to satisfy any LC Condition.

 

(iii)        Borrowers may request and employ Letters of Credit only (A) to
support obligations of any Borrower incurred in the Ordinary Course of Business
or (B) for such other purposes as Administrative Agent may approve from time to
time in writing. The renewal or extension of any Letter of Credit shall be
treated as the issuance of a new Letter of Credit, except that the applicable
Borrower or Borrowers need not deliver a new LC Application unless requested to
do so by LC Issuer.

 

(iv)        In connection with its administration of and enforcement of rights
or remedies under any Letters of Credit or LC Documents, LC Issuer shall be
entitled to act, and shall be fully protected in acting, upon any certification,
documentation, or communication in whatever form believed by LC Issuer, in good
faith, to be genuine and correct and to have been signed, sent, or made by a
proper Person. LC Issuer may consult with and employ legal counsel, accountants,
and other experts to advise it concerning its obligations, rights, and remedies
with respect to the issuance and administration of Letters of Credit and LC
Documents and shall be entitled to act (or refuse to act) upon, and shall be
fully protected in any action taken (or refused to be taken) in good faith
reliance upon, any advice given by such Persons. LC Issuer may employ agents and
attorneys-in-fact in connection with any matter relating to Letters of Credit or
LC Documents and shall not be liable for the negligence or misconduct of agents
and attorneys-in-fact selected with reasonable care.

 

(b)          Reimbursement; Participations.

 

(i)          On the date LC Issuer honors any draw under a Letter of Credit
(each such date, a "Reimbursement Date"), Borrowers shall reimburse LC Issuer
the amount paid by LC Issuer on account of such draw, together with interest
from the Reimbursement Date until paid by Borrowers (at the interest rate for
Base Rate Revolving Loans. The obligation of Borrowers to reimburse LC Issuer
for any draw made under a Letter of Credit is absolute, unconditional, and
irrevocable, and Borrowers shall make such reimbursement without regard to any
lack of validity or enforceability of such Letter of Credit or the existence of
any claim, setoff, defense, or other right Borrowers may have at any time
against the beneficiary of such Letter of Credit. On each Reimbursement Date,
Borrowers shall be deemed to have requested a Borrowing of Base Rate Revolving
Loans in an amount necessary to pay the amounts due to LC Issuer on such date
(regardless of whether Borrower Agent submits a Notice of Borrowing therefor),
and each Lender shall fund its Pro Rata Share of such Borrowing, without offset,
counterclaim, or other defense and regardless of whether the Commitments have
terminated or any condition precedent to the making of Loans has not been
satisfied.

 

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(ii)         Upon the issuance of a Letter of Credit, each Lender shall be
deemed to have irrevocably and unconditionally purchased from LC Issuer, without
recourse or warranty, an undivided interest and participation in all LC
Obligations relating to such Letter of Credit in an amount equal to such
Lender's Pro Rata Share thereof. If LC Issuer honors any draw under a Letter of
Credit and Borrowers do not reimburse the amount thereof on the Reimbursement
Date, Administrative Agent (at LC Issuer's request) shall promptly notify
Lenders, and each Lender shall promptly (within one Business Day)
unconditionally pay to Administrative Agent, for the benefit of LC Issuer, such
Lender's Pro Rata Share of such draw. Upon request by a Lender, LC Issuer shall
furnish such Lender with copies of any Letters of Credit and LC Documents in its
possession at such time.

 

(iii)        The obligations of each Lender to make payments to Administrative
Agent for the account of LC Issuer in connection with LC Issuer's honoring any
draw under a Letter of Credit are absolute, unconditional, and irrevocable and
are not subject to any counterclaim, setoff, defense, qualification, or
exception, and such Lender shall perform such obligations, as applicable, (A)
irrespective of any lack of validity or unenforceability of any Loan Documents;
(B) regardless of whether the Commitments have been terminated or any condition
precedent to the making of any Loan has not been satisfied; (C) regardless of
whether any draft, certificate, or other document presented under a Letter of
Credit is determined to be forged, fraudulent, invalid, or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect; and
(D) regardless of the existence of any setoff or defense that any Loan Party may
have with respect to any Obligations. LC Issuer assumes no responsibility for
any failure or delay in performance or any breach by any Borrower or other
Person of any obligations under any LC Documents. LC Issuer makes no
representation, warranty, or guaranty, express or implied, with respect to the
Collateral, LC Documents, or any Loan Party. LC Issuer is not responsible for
(A) any recitals, statements, information, representations, or warranties
contained in, or for the execution, validity, genuineness, effectiveness, or
enforceability of, any LC Documents; (B) the validity, genuineness,
enforceability, collectability, value, or sufficiency of any Collateral or the
perfection of any Lien therein; or (C) the assets, liabilities, financial
condition, results of operations, business, creditworthiness, or legal status of
any Loan Party.

 

(iv)        No LC Issuer Indemnitee shall be liable to Administrative Agent, any
Lender, or any other Person for any action taken or omitted to be taken in
connection with any LC Documents except as a result of its actual gross
negligence or willful misconduct. LC Issuer shall have no liability to any
Lender if LC Issuer refrains from taking any action, or refuses to take any
action, under any Letter of Credit or LC Documents until it receives written
instructions from the Required Lenders.

 

(c)          Cash Collateral. If any LC Obligations, whether or not then due or
payable, shall for any reason be outstanding at any time (i) that an Event of
Default exists; (ii) after the Revolving Commitment Termination Date; or (iii)
within twenty (20) Business Days before the date set forth in clause (a) of the
definition of Revolving Commitment Termination Date, then Borrowers shall, at LC
Issuer or Administrative Agent's request, Cash Collateralize the stated amount
of all outstanding Letters of Credit and pay to LC Issuer the amount of all
other LC Obligations which are then outstanding. If Borrowers fail to provide
Cash Collateral as required herein, Lenders may (and, upon written request of
Administrative Agent, shall) advance, as Revolving Loans, the amount of the Cash
Collateral required (regardless of whether the Commitments have terminated or
any condition precedent to the making of any Loan has not been satisfied).

 

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Section 2.23.         Defaulting Lender.

 

(a)          Defaulting Lender Adjustments. Notwithstanding anything to the
contrary contained in this Agreement, if any Lender becomes a Defaulting Lender,
then, until such time as such Lender is no longer a Defaulting Lender, to the
extent permitted by Applicable Law:

 

(i)          Waivers and Amendments. Such Defaulting Lender's right to approve
or disapprove any amendment, waiver or consent with respect to this Agreement
shall be restricted as set forth in Section 10.2.

 

(ii)         Defaulting Lender Waterfall. Any payment of principal, interest,
fees or other amount (other than fees which any Defaulting Lender is not
entitled to receive pursuant to Section 2.23(a)(iii)) received by Administrative
Agent for the account of such Defaulting Lender (whether voluntary or mandatory,
at maturity, pursuant to Section 8.2 or otherwise, and including any amounts
made available to Administrative Agent by that Defaulting Lender pursuant to
Section 10.7), shall be applied at such time or times as may be determined by
Administrative Agent as follows: first, to the payment of any amounts owing by
that Defaulting Lender to Administrative Agent hereunder; second, to the payment
on a pro rata basis of any amounts owing by that Defaulting Lender to LC Issuer
or the Swingline Lender hereunder; third, to Cash Collateralize LC Issuer's
Fronting Exposure with respect to such Defaulting Lender in accordance with
Section 2.26; fourth, as Borrower Agent may request (so long as no Default or
Event of Default exists), to the funding of any Loan in respect of which that
Defaulting Lender has failed to fund its portion thereof as required by this
Agreement, as determined by Administrative Agent; fifth, if so determined by
Administrative Agent and Borrower Agent to be held in a non-interest bearing
deposit account and released in order to (x) satisfy such Defaulting Lender's
potential future funding obligations with respect to Loans under this Agreement
and (y) Cash Collateralize LC Issuer's future Fronting Exposure with respect to
such Defaulting Lender with respect to future Letters of Credit issued under
this Agreement, in accordance with Section 2.26; sixth, to the payment of any
amounts owing to Lenders, LC Issuer or Swingline Lender as a result of any
judgment of a court of competent jurisdiction obtained by any Lender, LC Issuer
or the Swingline Lender against that Defaulting Lender as a result of that
Defaulting Lender's breach of its obligations under this Agreement; seventh, so
long as no Default or Event of Default exists, to the payment of any amounts
owing to Borrowers, or any of them, as a result of any judgment of a court of
competent jurisdiction obtained by such Borrower or Borrowers against that
Defaulting Lender as a result of that Defaulting Lender's breach of its
obligations under this Agreement; and eighth, to that Defaulting Lender or as
otherwise directed by a court of competent jurisdiction; provided, that, if (x)
such payment is a payment of the principal amount of any Loans or LC Obligations
in respect of which that Defaulting Lender has not fully funded its appropriate
share and (y) such Loans or LC Obligations were made at a time when the
conditions set forth in Section 3.2 were satisfied or waived, such payment shall
be applied solely to the pay the Loans of, and LC Obligations owed to, all
Non-Defaulting Lenders based on their Pro Rata Shares prior to being applied to
the payment of any Loans of, or LC Obligations owed to, such Defaulting Lender
until such time as all Loans and funded and unfunded participations in LC
Obligations and Swingline Loans are held by Lenders based on their Pro Rata
Shares in accordance with their Revolving Commitments without giving effect to
Section 2.23(a)(iv). Any payments, prepayments or other amounts paid or payable
to a Defaulting Lender that are applied (or held) to pay amounts owed by a
Defaulting Lender or to post Cash Collateral pursuant to this Section
2.23(a)(ii) shall be deemed paid to (and the underlying obligations satisfied to
the extent of such payment) and redirected by that Defaulting Lender, and each
Lender irrevocably consents hereto.

 

(iii)        Certain Fees.

 

(A)         Such Defaulting Lender shall not be entitled to receive any
Commitment Fee, any fees with respect to Letters of Credit (except as provided
in clause (b) below) or any other fees hereunder for any period during which
that Lender is a Defaulting Lender (and Borrower shall not be required to pay
any such fee that otherwise would have been required to have been paid to that
Defaulting Lender).

 

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(B)         Each Defaulting Lender shall be entitled to receive fees with
respect to Letters of Credit for any period during which that Lender is a
Defaulting Lender only to the extent allocable to its Pro Rata Share of the
stated amount of Letters of Credit for which it has provided Cash Collateral
pursuant to Section 2.26.

 

(C)         With respect to any fee not required to be paid to any Defaulting
Lender pursuant to clause (A) or (B) above, Borrowers shall (x) pay to each
Non-Defaulting Lender that portion of any such fee otherwise payable to such
Defaulting Lender with respect to such Defaulting Lender's participation in LC
Obligations or Swingline Loans that has been reallocated to such Non-Defaulting
Lender pursuant to clause (iv) below, (y) pay to LC Issuer or Swingline Lender,
as applicable, the amount of any such fee otherwise payable to such Defaulting
Lender to the extent allocable to such LC Issuer's or Swingline Lender's
Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the
remaining amount of any such fee.

 

(iv)        Reallocation of Participations to Reduce Fronting Exposure. All or
any part of such Defaulting Lender's participation in LC Obligations and
Swingline Loans shall be reallocated among the Non-Defaulting Lenders in
accordance with their respective Pro Rata Shares (calculated without regard to
such Defaulting Lender's Revolving Commitment) but only to the extent that (x)
the conditions set forth in Section 3.2 are satisfied at the time of such
reallocation (and, unless Borrowers shall have otherwise notified Administrative
Agent at such time, Borrowers shall be deemed to have represented and warranted
that such conditions are satisfied at such time), and (y) such reallocation does
not cause the aggregate Revolving Credit Exposure at such time to exceed such
Non-Defaulting Lender's Revolving Commitment. No reallocation hereunder shall
constitute a waiver or release of any claim of any party hereunder against a
Defaulting Lender arising from that Lender having become a Defaulting Lender,
including any claim of a Non-Defaulting Lender as a result of such
Non-Defaulting Lender's increased exposure following such reallocation.

 

(v)         Cash Collateral, Repayment of Swingline Loans. If the reallocation
described in clause (iv) above cannot, or can only partially, be effected,
Borrower shall, without prejudice to any right or remedy available to it
hereunder or under law, (x) first, prepay Swingline Loans in an amount equal to
the Swingline Lenders' Fronting Exposure and (y) second, Cash Collateralize each
Issuing Banks' Fronting Exposure in accordance with the procedures set forth in
Section 2.26.

 

(b)          Defaulting Lender Cure. If Borrower Agent, Administrative Agent,
the Swingline Lender and LC Issuer agree in writing that a Lender is no longer a
Defaulting Lender, Administrative Agent will so notify the parties hereto,
whereupon as of the effective date specified in such notice and subject to any
conditions set forth therein (which may include arrangements with respect to any
Cash Collateral), that Lender will, to the extent applicable, purchase at par
that portion of outstanding Loans of the other Lenders or take such other
actions as Administrative Agent may determine to be necessary to cause the Loans
and funded and unfunded participations in Letters of Credit and Swingline Loans
to be held pro rata by Lenders in accordance with the Revolving Commitments
(without giving effect to Section 2.23(a)(iv), whereupon such Lender will cease
to be a Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of
Borrower while that Lender was a Defaulting Lender; and provided, further, that
except to the extent otherwise expressly agreed by the affected parties, no
change hereunder from Defaulting Lender to Lender will constitute a waiver or
release of any claim of any party hereunder arising from that Lender's having
been a Defaulting Lender.

 

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(c)          New Swingline Loans/Letters of Credit. So long as any Lender is a
Defaulting Lender, (i) the Swingline Lender shall not be required to fund
Swingline Loans unless it is satisfied that it will have no Fronting Exposure
after giving effect to such Swingline Loan (after giving effect to Section
2.23(a)(iv)), and (ii) no LC Issuer shall be required to issue, extend, renew or
increase any Letter of Credit unless it is satisfied that it will have no
Fronting Exposure after giving effect thereto (after giving effect to Section
2.23(a)(iv)).

 

Section 2.24.         One Obligation. The Loans, LC Obligations, and other
Obligations shall constitute one general, joint and several obligation of
Borrowers and (unless otherwise expressly provided in any Loan Document) shall
be secured by Administrative Agent's Lien upon all Collateral; provided,
however, that Administrative Agent and each Lender shall be deemed to be a
creditor of, and the holder of a separate claim against, each Borrower to the
extent of any Obligations jointly or severally owed by such Borrower.

 

Section 2.25.         Effect of Termination. On the Revolving Commitment
Termination Date, all Obligations shall be immediately due and payable, and each
Lender may terminate its and its Affiliates' Bank Products. All undertakings of
Borrowers contained in the Loan Documents shall survive any termination, and
Administrative Agent shall retain its Liens in the Collateral and all of its
rights and remedies under the Loan Documents, until Payment in Full of all
Obligations. Notwithstanding Payment in Full of all Obligations, Administrative
Agent shall not be required to terminate its Liens in any Collateral unless,
with respect to any damages Administrative Agent may incur as a result of the
dishonor or return of Payment Items applied to Obligations, Administrative Agent
receives (a) a written agreement in form and substance reasonably satisfactory
to Administrative Agent, executed by Borrowers and any Person whose advances are
used in whole or in part to satisfy the Obligations (which Person must be
acceptable to Administrative Agent), indemnifying Administrative Agent and
Lenders from any such damages, or (b) such Cash Collateral as Administrative
Agent deems reasonably necessary to protect against any such damages. The last
paragraph of the definition of "Applicable Margin," Sections 2.17, 2.22, 9, 10.3
and 10.15, this section, the obligation of each Loan Party and Lender with
respect to each indemnity given by it in any Loan Document, and each other term,
provision, or section of this Agreement or any other Loan Document which states
as much, shall survive Payment in Full of the Obligations and any release or
termination relating to this Agreement, the other Loan Documents, or the credit
facility established hereunder or thereunder.

 

Section 2.26.         Cash Collateral. At any time that there shall exist a
Defaulting Lender, within one (1) Business Day following the written request of
Administrative Agent or any Issuing Bank (with a copy to Administrative Agent)
Borrowers shall Cash Collateralize each applicable Issuing Banks' Fronting
Exposure with respect to such Defaulting Lender in an amount sufficient to cover
the applicable Fronting Exposure (after giving effect to Section 2.23(a)(iv) and
any Cash Collateral provided by the Defaulting Lender). Borrowers, and to the
extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants
to Administrative Agent, for the benefit of LC Issuer, and agrees to maintain, a
perfected first priority security interest in all such Cash Collateral as
security for the Defaulting Lenders' obligation to fund participations in
respect of LC Obligations, to be applied in the manner set forth below. If at
any time Administrative Agent determines that Cash Collateral is subject to any
right or claim of any Person other than Administrative Agent and LC Issuer as
herein provided, or that the total amount of such Cash Collateral is less than
the applicable Fronting Exposure, Borrowers will, promptly upon demand by
Administrative Agent, pay or provide to Administrative Agent additional Cash
Collateral in an amount sufficient to eliminate such deficiency (after giving
effect to Section 2.23(a)(iv) and any Cash Collateral provided by the Defaulting
Lender). Notwithstanding anything to the contrary contained in this Agreement,
Cash Collateral provided under this Section 2.26 or Section 2.23 in respect of
Letters of Credit shall be applied to the satisfaction of the Defaulting
Lender's obligation to fund participations in respect of LC Obligations
(including, as to Cash Collateral provided by a Defaulting Lender, any interest
accrued on such obligation) for which the Cash Collateral was so provided, prior
to any other application of such property as may otherwise be provided for
herein. Cash Collateral (or the appropriate portion thereof) provided to reduce
any Issuing Bank's Fronting Exposure shall no longer be required to be held as
Cash Collateral pursuant to this Section 2.26 following (i) the elimination of
the applicable Fronting Exposure (including by the termination of Defaulting
Lender status of the applicable Lender), or (ii) the determination by
Administrative Agent and each Issuing Bank that there exists excess Cash
Collateral; provided, however, (x) that Cash Collateral furnished by or on
behalf of a Loan Party shall not be released during the continuance of a Default
or Event of Default (and following application as provided in this Section 2.26
may be otherwise applied in accordance with Section 2.18(b)) but shall be
released upon the cure, termination or waiver of such Default or Event of
Default in accordance with the terms of this Agreement, and (y) the Person
providing Cash Collateral and any Issuing Bank or Swingline Lender, as
applicable, may agree that Cash Collateral shall not be released but instead
held to support future anticipated Fronting Exposure or other Obligations.

 

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Section 2.27.         Effectiveness of Addendum. Upon the occurrence of the
Borrowing Base Trigger Event, the terms and conditions of the Addendum shall be
of full force and effect without any further action by any Person. To the extent
a term or condition of the Addendum is duplicative of or in conflict with any
term or condition hereof, the term or condition, as applicable, of the Addendum
shall govern and control.

 

Article 3

 

CONDITIONS PRECEDENT TO LOANS

 

Section 3.1.          Conditions to Effectiveness. In addition to any other
conditions precedent set forth in this Agreement, none of Administrative Agent,
LC Issuer, nor any Lender shall be required to fund any requested Loan, issue
any Letter of Credit, or otherwise make any extension of credit or financial
accommodation to or for the benefit or account of any Borrower hereunder until
the date that each of the following conditions precedent has been satisfied (as
determined by Administrative Agent) or waived in accordance with the terms of
this Agreement (such date, the "Closing Date"):

 

(a)          Loan Documents. Notes shall have been executed by Borrowers and
delivered to each Lender that, before the Closing Date, has requested the
issuance of a Note. Each other Loan Document shall have been duly executed and
delivered to Administrative Agent by each of the signatories thereto, and each
Loan Party shall be in compliance with all terms thereof.

 

(b)          Evidence of Filings; Lien Searches. Administrative Agent shall have
received acknowledgments of all filings or recordations necessary to perfect its
Liens in the Collateral and UCC, Lien, and Intellectual Property searches and
all other searches and other evidence satisfactory to Administrative Agent that
such Liens are the only Liens upon the Collateral (other than Liens permitted by
Section 7.2).

 

(c)          Closing Certificates. Administrative Agent shall have received
certificates, in form and substance satisfactory to it, from a knowledgeable
Responsible Officer of each Loan Party certifying that, after giving effect to
the initial Loans and transactions hereunder, (i) such Loan Party is Solvent;
(ii) no Default or Event of Default exists; and (iii) the representations and
warranties set forth in Article IV are true and correct.

 

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(d)          Officer's Certificates. Administrative Agent shall have received a
certificate of a duly authorized officer of each Loan Party, certifying (i) that
attached copies of such Loan Party's Organizational Documents are true and
complete, and in full force and effect, without amendment except as shown; (ii)
that an attached copy of resolutions authorizing execution and delivery of the
Loan Documents is true and complete, and that such resolutions are in full force
and effect, were duly adopted by the appropriate governing body, have not been
amended, modified, or revoked, and constitute all resolutions adopted with
respect to the credit facility contemplated in this Agreement and the other Loan
Documents; and (iii) to the title, name, and signature of each Person authorized
to sign the Loan Documents on behalf of such Loan Party. Administrative Agent
may conclusively rely on this certificate until it is otherwise notified by the
applicable Loan Party in writing.

 

(e)          Organizational Documents; Good Standing Certificates.
Administrative Agent shall have received copies of the Organizational Documents
of each Loan Party, certified by the Secretary of State or other appropriate
official of such Loan Party's jurisdiction of organization. Administrative Agent
shall have received good standing certificates for each Loan Party issued by the
Secretary of State or other appropriate official of such Loan Party's
jurisdiction of organization and each jurisdiction where such Loan Party's
business activities or ownership of Property necessitates qualification.

 

(f)          Opinions of Counsel. Administrative Agent shall have received a
written opinion (which shall cover, among other things, authority, legality,
validity, execution and delivery, binding effect, enforceability, no conflict,
violation, or breach of Organizational Documents, Applicable Law, or material
agreements, and creation and perfection of Liens) of general counsel to Loan
Parties and outside finance counsel to Loan Parties in form and substance
satisfactory to Administrative Agent.

 

(g)          Insurance. Administrative Agent shall have received certificates of
insurance for the insurance policies carried by Loan Parties, all of which shall
be in compliance with the Loan Documents, together with such lender's loss
payable and additional insured endorsements showing Administrative Agent as
agent for the Secured Parties, each of which shall be in form and substance
satisfactory to Administrative Agent.

 

(h)          Due Diligence. Administrative Agent shall have received
satisfactory results (as determined by Administrative Agent) with respect to a
field examination related to Inventory and Inventory system controls conducted
by Administrative Agent and/or a third party, which may include a draft report
showing no material findings that are not acceptable to Administrative Agent,
updated Projections, and all credit investigations and background checks, and
the results, form, and substance of each of the foregoing items shall be
satisfactory to Administrative Agent.

 

(i)           Material Adverse Change. No material adverse change in the
financial condition of any Loan Party or in the quality, quantity or value of
any Collateral shall have occurred since November 1, 2014.

 

(j)           Payment of Fees. Borrowers shall have paid all fees and expenses
to be paid to Administrative Agent and Lenders on the Closing Date (including
pursuant to the Fee Letter) or Administrative Agent shall be satisfied with all
arrangements made to pay such fees and expenses on the Closing Date with the
proceeds of Loans to be made on the Closing Date.

 

(k)          Governmental and Third Party Consents. Administrative Agent shall
have received certified or executed (as applicable) copies all governmental,
shareholder, and third party consents and approvals deemed necessary in
connection with the transactions contemplated hereby and, to the extent
applicable, all waiting periods relating thereto shall have expired and no
investigation or inquiry by any governmental authority regarding this Agreement
or any other Loan Document or any transaction contemplated herein shall be
ongoing.

 

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(l)           Payoff Letter. Administrative Agent shall have received a payoff
letter, in form and substance satisfactory to Administrative Agent, regarding
the Indebtedness arising under Parent's existing credit facility agented by
Regions Bank, which will be paid on the Closing Date with proceeds of Loans.

 

(m)         No Litigation. There shall be no litigation in which any Loan Party
or any Subsidiary is a party defendant which would constitute an Event of
Default under Section 8.1(k) or which Administrative Agent determines could have
a Material Adverse Effect.

 

(n)          Notice of Borrowing; Payment Authorization. Administrative Agent
shall have received a Notice of Borrowing for Loans requested to be made in the
Closing Date, together with complete payment authorizations (including the
amount thereof) with respect to the disposition of the proceeds of such Loans on
the Closing Date.

 

(o)          PATRIOT Act. Lenders shall have received, sufficiently in advance
of the Closing Date, all documentation and other information required by bank
regulatory authorities under applicable "know your customer" and anti-money
laundering rules and regulations, including the PATRIOT Act.

 

Section 3.2.          Conditions to Each Credit Event. The obligation of each
Lender to make a Loan on the occasion of any Borrowing is subject to the
satisfaction of the following conditions:

 

(a)          No Default. No Default or Event of Default shall exist at the time
of, or result from, such funding, issuance, or grant;

 

(b)          Accuracy of Representations and Warranties. The representations and
warranties of each Loan Party in this Agreement and the other Loan Documents
shall be true and correct in all material respects on the date of, and after
giving effect to, such funding, issuance, or grant (except for representations
and warranties that expressly relate to an earlier date, in which case, they
shall have been true and correct as of such date and other than those
representations and warranties that are expressly qualified by a Material
Adverse Effect or other materiality, in which case such representations and
warranties shall be true and correct in all respects);

 

(c)          Conditions Precedent. All applicable conditions precedent in any
other Loan Document shall be satisfied or waived in accordance with the terms of
this Agreement and each other Loan Document, as applicable;

 

(d)          No Material Adverse Effect. No event shall have occurred since the
Closing Date or circumstance shall exist which has had or could be expected to
have a Material Adverse Effect;

 

(e)          LC Conditions. With respect to issuance of any Letter of Credit,
each of the LC Conditions shall be satisfied or waived in accordance with the
terms of this Agreement;

 

(f)          Additional Information, Etc. Administrative Agent shall have
received such other information, documents, instruments, and agreements as it
reasonably deems appropriate in connection with such funding, issuance, or
grant; and

 

(g)          Defaulting Lender. With respect to the issuance of any Letter of
Credit, there is no Defaulting Lender at the time such Letter of Credit is to be
issued, unless arrangements satisfactory to LC Issuer shall have been made to
address any fronting exposure (after giving effect to Section 2.23(a)(iv)) with
respect to the undivided interest and participation of such Defaulting Lender in
and to such Letter of Credit and all other Letters of Credit then outstanding,
which arrangements may include Borrowers' posting of Cash Collateral in an
amount equal to such Defaulting Lender's interest and participation therein on
terms satisfactory to Administrative Agent and LC Issuer.

 

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Each request (or deemed request) by Borrowers for funding of a Loan, issuance of
a Letter of Credit, or grant of an accommodation shall constitute a
representation by Borrowers that the foregoing conditions are satisfied on the
date of such request and on the date of such funding, issuance, or grant.

 

Section 3.3.          Delivery of Documents. All of the Loan Documents,
certificates, legal opinions and other documents and papers referred to in this
Article, unless otherwise specified, shall be delivered to Administrative Agent
for the account of each Secured Party in form and substance satisfactory in all
respects to Administrative Agent.

 

Article 4

 

REPRESENTATIONS AND WARRANTIES

 

Each Loan Party represents and warrants to Administrative Agent and each Lender
as follows:

 

Section 4.1.          Existence; Power. Such Loan Party and each of its
Subsidiaries (i) is duly organized, validly existing and in good standing as a
corporation, partnership or limited liability company, as applicable, under the
laws of the jurisdiction of its organization, (ii) has all requisite power and
authority to carry on its business as now conducted, and (iii) is duly qualified
to do business, and is in good standing, in each jurisdiction where such
qualification is required, except where a failure to be so qualified could not
reasonably be expected to result in a Material Adverse Effect with respect to
Parent and its Subsidiaries as a whole.

 

Section 4.2.          Organizational Power; Authorization. The execution,
delivery and performance by each Loan Party of the Loan Documents to which it is
a party are within such Loan Party's organizational powers and have been duly
authorized by all necessary organizational action. This Agreement has been duly
executed and delivered by such Loan Party and constitutes, and each other Loan
Document to which any Loan Party is a party, when executed and delivered by such
Loan Party, will constitute, valid and binding obligations of such Loan Party or
such other Loan Party (as the case may be), enforceable against it in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity.

 

Section 4.3.          Governmental Approvals; No Conflicts. The execution,
delivery and performance by each Loan Party of the Loan Documents to which it is
a party (a) to any Loan Party's knowledge, do not require Governmental
Approvals, or any other consent or approval of, registration or filing with, or
any action by, any Governmental Authority, except those as have been obtained or
made and are in full force and effect, (b) will not violate any Organizational
Document of any Loan Party or any of its Subsidiaries, any law, treaty, rule or
regulation, or determination of a Governmental Authority, in each case
applicable to or binding upon any Loan Party or any of its Subsidiaries or any
of such Person's Property or to which any Loan Party or any of its Subsidiaries
or any of such Person's Property is subject, or any judgment, order or ruling of
any Governmental Authority, (c) will not violate or result in a default under
any Material Contract of any Loan Party or any of its Subsidiaries or any of its
assets or give rise to a right thereunder to require any payment to be made by
any Loan Party or any of its Subsidiaries and (d) will not result in the
creation or imposition of any Lien on any asset of any Loan Party or any of its
Subsidiaries, except Liens created under the Loan Documents.

 

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Section 4.4.          Financial Statements. Loan Parties have furnished (with
such submission deemed made pursuant to prior filings by Parent of its periodic
reports under Section 13(a) or 15(d) of the Exchange Act) to each Lender (i) the
audited consolidated balance sheet of Parent and its Subsidiaries as of February
1, 2014, and the related audited consolidated statements of income,
shareholders' equity and cash flows for the Fiscal Year then ended, prepared by
BDO USA, LLP and (ii) the unaudited consolidated balance sheet of Parent and its
Subsidiaries as of November 1, 2014, and the related unaudited consolidated
statements of income and cash flows for the Fiscal Quarter and year-to-date
period then ended, certified by a Responsible Officer. Such financial statements
fairly present the consolidated financial condition of Parent and its
Subsidiaries as of such dates and the consolidated results of operations for
such periods in conformity with GAAP consistently applied, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii). Since November 1, 2014, there have been no changes
with respect to Parent and its Subsidiaries which have had or could reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect.

 

Section 4.5.          Litigation and Environmental Matters.

 

(a)          Except for the matters set forth on Schedule 4.5, no litigation,
investigation or proceeding of or before any arbitrators or Governmental
Authorities is pending against or, to the knowledge of such Loan Party,
threatened against or affecting any Loan Party or any of its Subsidiaries (i) as
to which there is a reasonable possibility of an adverse determination that
could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect or (ii) which in any manner draws into question the
validity or enforceability of this Agreement or any other Loan Document.

 

(b)          Except for the matters set forth on Schedule 4.5, to their
knowledge, no Loan Party nor any of its Subsidiaries (i) has failed to comply in
any material respect with any Environmental Law or to obtain, maintain or comply
with any material permit, license or other approval required under any
Environmental Law, (ii) has become subject to any material Environmental
Liability, (iii) has received notice of any claim with respect to any material
Environmental Liability or (iv) knows of any basis for any material
Environmental Liability.

 

Section 4.6.          Compliance with Laws and Agreements. Such Loan Party and
each of its Subsidiaries is in compliance with (a) all Requirements of Law and
all judgments, decrees and orders of any Governmental Authority and (b) all
indentures, agreements or other instruments binding upon it or its properties,
except, in each case, where non-compliance could not reasonably be expected to
result in a Material Adverse Effect.

 

Section 4.7.          Investment Company Act. No Loan Party nor any of any Loan
Party's Subsidiaries is (a) an "investment company" or is "controlled" by an
"investment company", as such terms are defined in, or subject to regulation
under, the Investment Company Act of 1940, as amended and in effect from time to
time, or (b) otherwise subject to any other regulatory scheme limiting its
ability to incur debt or requiring any approval or consent from, or registration
or filing with, any Governmental Authority in connection therewith.

 

Section 4.8.          Taxes. Such Loan Party and its Subsidiaries have timely
filed or caused to be filed all federal income tax returns and all other
material tax returns that are required to be filed by them, and have paid all
taxes shown to be due and payable on such returns or on any assessments made
against it or its property and all other material taxes or other charges imposed
on it or any of its property by any Governmental Authority, except where the
same are currently being Properly Contested. The charges, accruals and reserves
on the books of such Loan Party and its Subsidiaries in respect of such taxes
are adequate, and no tax liabilities that could be materially in excess of the
amount so provided are anticipated.

 

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Section 4.9.          Margin Regulations. None of the proceeds of any of the
Loans will be used, directly or indirectly, for "purchasing" or "carrying" any
Margin Stock within the respective meanings of each of such terms under
Regulation U or for any purpose that violates the provisions of Regulation T,
Regulation U or Regulation X. no Loan Party nor any of any Loan Party's
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
Margin Stock or to finance or refinance any commercial paper issued by any Loan
Party or any other Indebtedness of any Loan Party, other than Indebtedness
incurred by a Loan Party for general corporate or working capital purposes.

 

Section 4.10.         ERISA. To such Loan Party's knowledge, each Plan is in
substantial compliance in form and operation with its terms and with ERISA and
the Code (including, without limitation, the Code provisions compliance with
which is necessary for any intended favorable tax treatment) and all other
Applicable Law and applicable regulations. To such Loan Party's knowledge, each
Plan (and each related trust, if any) which is required to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service to the effect that it meets the requirements of
Sections 401(a) and 501(a) of the Code covering all applicable tax law changes,
or is comprised of a master or prototype plan that has received a favorable
opinion letter from the Internal Revenue Service, and nothing has occurred since
the date of such determination that would in any material respect adversely
affect such determination (or, in the case of a Plan with no determination,
nothing has occurred that would adversely affect the issuance of a favorable
determination letter or otherwise adversely affect such qualification). To such
Loan Party's knowledge, no ERISA Event has occurred or is reasonably expected to
occur that would cause a Material Adverse Effect. There exists no Unfunded
Pension Liability with respect to any Plan. None of any Loan Party, any of any
Loan Party's Subsidiaries or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has, within any of the five calendar years
immediately preceding the date this assurance is given or deemed given, made or
accrued an obligation to make, contributions to any Multiemployer Plan. There
are no actions, suits or claims pending against or involving a Plan (other than
routine claims for benefits) or, to the knowledge of such Loan Party, any of its
Subsidiaries or any ERISA Affiliate, threatened, which would reasonably be
expected to be asserted successfully against any Plan and, if so asserted
successfully, would reasonably be expected either singly or in the aggregate to
result in a material liability to such Loan Party or any of its Subsidiaries.

 

Section 4.11.         Ownership of Property; Insurance.

 

(a)          Such Loan Party and its Subsidiaries has good title to, or valid
leasehold interests in, all of its real and personal property material to the
operation of its business, including all such properties reflected in the
audited consolidated balance sheet of Parent and its Subsidiaries referred to in
Section 4.4 (except as sold or otherwise disposed of in the Ordinary Course of
Business), in each case free and clear of Liens prohibited by this Agreement.
All leases that individually or in the aggregate are material to the business or
operations of Parent and its Subsidiaries are valid and are in full force.

 

(b)          Such Loan Party and its Subsidiaries owns, or is licensed or
otherwise has the right to use, all patents, trademarks, service marks, trade
names, copyrights and other intellectual property material to its business, and
to their knowledge, the use thereof by such Loan Party and its Subsidiaries does
not infringe in any material respect on the rights of any other Person.

 

(c)          The properties of such Loan Party its Subsidiaries are insured with
financially sound and reputable insurance companies which are not Affiliates of
any Loan Party, in such amounts with such deductibles and covering such risks as
are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where such Loan Party or any applicable
Subsidiary operates.

 

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Section 4.12.         Disclosure. Such Loan Party has disclosed to Lenders all
agreements, instruments, and corporate or other restrictions to which such Loan
Party or any of its Subsidiaries is subject, and all other matters known to any
of them, that, either individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. None of the reports that such
Loan Party is required to file with the Securities and Exchange Commission,
financial statements, certificates or other information furnished by or on
behalf of such Loan Party to Administrative Agent or any Lender in connection
with the negotiation or syndication of this Agreement or any other Loan Document
or delivered hereunder or thereunder (as modified or supplemented by any other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, taken as a
whole in light of the circumstances under which they were made, not misleading.

 

Section 4.13.         Labor Relations. There are no strikes, lockouts or other
material labor disputes or grievances pending against such Loan Party or any of
its Subsidiaries, or, to such Loan Party's knowledge, threatened against or
affecting such Loan Party or any of its Subsidiaries, and except as disclosed in
Parent's most recent Form 10K and 10Q filed with the Securities and Exchange
Commission, no significant unfair labor practice charges or grievances are
pending against such Loan Party or any of its Subsidiaries, or, to such Loan
Party's knowledge, threatened against any of them before any Governmental
Authority. All payments due from such Loan Party or any of its Subsidiaries
pursuant to the provisions of any collective bargaining agreement have been paid
or accrued as a liability on the books of such Loan Party or any such
Subsidiary, except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect.

 

Section 4.14.         Subsidiaries. Schedule 4.14 sets forth the name of, the
ownership interests in, the jurisdiction of incorporation or organization of,
and the type of each Subsidiary of such Borrower, in each case as of the Closing
Date.

 

Section 4.15.         Solvency. After giving effect to the execution and
delivery of the Loan Documents and the making of the Loans under this Agreement,
each Loan Party is Solvent.

 

Section 4.16.         OFAC. No Loan Party or Subsidiary is in violation of any
of the country or list-based economic and trade sanctions administered and
enforced by OFAC. No Loan Party or Subsidiary (a) is a Sanctioned Person or a
Sanctioned Entity (b) has any of its assets located in Sanctioned Entities; or
(c) derives any revenues from investments in, or transactions with, Sanctioned
Persons or Sanctioned Entities. Loan Parties will not use the proceeds of any
extension of credit hereunder to fund any operation in, finance any investments
or activities in, or make payments to, a Sanctioned Person or Sanctioned Entity.

 

Section 4.17.         Anti-Terrorism Laws. Anti-Terrorism Laws. No Loan Party
nor any of its Subsidiaries nor any Affiliate of any Loan Party or any of its
Subsidiaries is in violation of any Anti-Terrorism Law or engages in or
conspires to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in any Anti-Terrorism Law.

 

(a)          Executive Order No. 13224. No Loan Party nor any of its
Subsidiaries nor any Affiliate of any Loan Party or any of its Subsidiaries is
any of the following (each a "Blocked Person"):

 

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(i)          a Person that is listed in the annex to, or is otherwise subject to
the provisions of, Executive Order No. 13224;

 

(ii)         a Person owned or controlled by, or acting for or on behalf of, any
Person that is listed in the annex to, or is otherwise subject to the provisions
of, Executive Order No. 13224;

 

(iii)        a Person or entity with which any bank or other financial
institution is prohibited from dealing or otherwise engaging in any transaction
by any Anti-Terrorism Law;

 

(iv)        a Person or entity that commits, threatens or conspires to commit,
or supports "terrorism" as defined in Executive Order No. 13224;

 

(v)         a Person or entity that is named as a "specially designated
national" on the most current list published by OFAC at its official website or
any replacement website or other replacement official publication of such list;
or

 

(vi)        a Person or entity who is affiliated with a Person or entity listed
above.

 

(b)          No Loan Party nor any of its Subsidiaries nor any Affiliate of any
Loan Party nor any of its Subsidiaries (x) conducts any business or engages in
making or receiving any contribution of funds, Goods or services to or for the
benefit of any Blocked Person or (y) deals in, or otherwise engages in any
transaction relating to, any property or interests in property blocked pursuant
to Executive Order No. 13224.

 

Section 4.18.         Enforceability. Each Loan Document is a legal, valid, and
binding obligation of each Loan Party thereto, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity).

 

Section 4.19.         Deposit Accounts; Securities Accounts; Commodities
Accounts. As of the Closing Date, no Loan Party has any Deposit Accounts,
Securities Accounts or Commodities Accounts other than those listed in Schedule
4.19.

 

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Section 4.20.         Intellectual Property. Each Loan Party and each of its
Subsidiaries possesses adequate assets, Licenses, patents, patent applications,
copyrights, service marks, trademarks, and trade names adequate to continue to
conduct its business in all material respects as heretofore conducted by it
without conflict with any rights of others. Schedule 4.20 sets forth with
respect to each Loan Party and each of its Subsidiaries (a) all of such Person's
federal, state, and foreign registrations of trademarks, service marks, and
other marks, trade names or other trade rights and all pending applications for
any such registrations; (b) all of such Person's patents and copyrights and
pending applications therefor; (c) all of such Person's other trademarks,
service marks, and other marks, trade names, and other trade rights used by such
Person in connection with its business, in each case material to the conduct of
such Person's business, and (d) all of such Person's Licenses material to the
conduct of such Person's business (collectively, the "Proprietary Rights"). Loan
Parties and their Subsidiaries are, among them, the owners of each of the
trademarks set forth on Schedule 4.20 as indicated on such Schedule 4.20, and no
other Person has the right to use any of such marks in commerce either in the
identical form or in such near resemblance thereto as may be likely to cause
confusion or to cause mistake or to deceive. Each of the trademarks set forth on
Schedule 4.20 is a federally registered trademark of a Loan Party or its
Subsidiary and has the registration number and issue date set forth on Schedule
4.20. The Proprietary Rights set forth on Schedule 4.20 are those material to
the conduct of the business of Loan Parties and their Subsidiaries. Except as
set forth on Schedule 4.20, no Person has a right to receive any Royalty or
similar payment in respect of any Proprietary Rights pursuant to any contractual
arrangements entered into by any Loan Party or any of its Subsidiaries and no
Person otherwise has a right to receive any royalty or similar payment in
respect of any such Proprietary Rights except as set forth on Schedule 4.20. No
Loan Party nor any of its Subsidiaries has granted any license or sold or
otherwise transferred any interest in any of the Proprietary Rights to any other
Person. No Loan Party nor any of its Subsidiaries' use of any the Proprietary
Rights infringes upon or otherwise violates the rights of any third party in or
to such Proprietary Rights, and no proceeding has been instituted against or
notice received by any Loan Party or any of its Subsidiaries that is presently
outstanding alleging that the use of any of the Proprietary Rights infringes
upon or otherwise violates the rights of any third party in or to any of the
Proprietary Rights. No Loan Party nor any of its Subsidiaries has given notice
to any Person that such Person is infringing on any of the Proprietary Rights.
To the best of each Loan Party and Subsidiary's knowledge, no Person is
infringing on any of the Proprietary Rights. Each Loan Party and its
Subsidiary's Proprietary Rights are valid and enforceable rights of such Person
and will not cease to be valid and in full force and effect by reason of the
execution and delivery of this Agreement or the Loan Documents or the
consummation of the transactions contemplated hereby or thereby. Loan Parties
have delivered to Administrative Agent complete and correct copies of each
License material to the conduct of the business of any Loan Party, including all
schedules and exhibits thereto. Each License material to the conduct of the
business of Loan Parties sets forth the entire agreement, arrangements, or
understandings, written or oral, relating to the matters covered thereby or the
rights of any Loan Party and is the legal, valid, and binding obligation of the
parties thereto, enforceable against such parties in accordance with its terms.
No default under any License material to the conduct of the business of Loan
Parties by any Loan Party has occurred, nor does any defense, offset, deduction
or counterclaim exist thereunder in favor of any Loan Party. No party to any
License material to the conduct of the business of Loan Parties has given any
Loan Party notice of its intention to cancel, terminate, or fail to renew any
such License.

 

Section 4.21.         Brokers. No brokerage commissions, finder's fees,
investment banking fees, or similar fees, commissions, or charges are payable or
will become payable under any circumstances in connection with any transactions
contemplated by this Agreement or the other Loan Documents.

 

Section 4.22.         Accuracy and Completeness of Information. All information
provided to Administrative Agent, LC Issuer, or any Lender by or on behalf of
any Loan Party or any of its Subsidiaries, in connection with, or pursuant to
this Agreement or any other Loan Document is true, accurate, and complete in
every material respect as of the date on which such information is dated or
certified and does not omit any material fact necessary to make such information
not misleading or at any time contain an untrue statement of a material fact. No
Loan Document contains any untrue statement of a material fact nor fails to
disclose any material fact necessary to make the statements contained therein
not materially misleading. To any Loan Party's knowledge, there is no fact or
circumstance that any Loan Party has failed to disclose to Administrative Agent
in writing that could reasonably be expected to have a Material Adverse Effect.

 

Section 4.23.         No Defaults. No Default or Event of Default exists. To any
Loan Party's knowledge, no Loan Party nor any of its Subsidiaries is in default,
and no event or circumstance has occurred or is known to any Loan Party to exist
that, with the passage of time or giving of notice, would constitute a default
under any Material Contract. No facts or circumstances is known to exist to any
Loan Party which would permit any party to a Material Contract (other than a
Loan Party or its Subsidiary) to terminate such Material Contract before its
scheduled termination date.

 

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Article 5

 

AFFIRMATIVE COVENANTS

 

Each Loan Party covenants and agrees that so long as any Lender has a Commitment
hereunder or any Obligation remains unpaid or outstanding:

 

Section 5.1.          Financial Statements and Other Information. Borrowers will
deliver to Administrative Agent and each Lender:

 

(a)          as soon as available and in any event within 120 days after the end
of each Fiscal Year of Parent, a copy of the annual audited report for such
Fiscal Year for Parent and its Subsidiaries, containing a consolidated balance
sheet of Parent and its Subsidiaries as of the end of such Fiscal Year and the
related consolidated statements of income, stockholders' equity and cash flows
(together with all footnotes thereto) of Parent and its Subsidiaries for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous Fiscal Year, all in reasonable detail and reported on by BDO USA, LLP
or other independent public accountants of nationally recognized standing
(without a "going concern" or like qualification, exception or explanation and
without any qualification or exception as to the scope of such audit) to the
effect that such financial statements present fairly in all material respects
the financial condition and the results of operations of Parent and its
Subsidiaries for such Fiscal Year on a consolidated basis in accordance with
GAAP and that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with generally
accepted auditing standards;

 

(b)          as soon as available and in any event within 45 days after the end
of the first three Fiscal Quarters of Parent of each Fiscal Year of Parent, an
unaudited consolidated balance sheet of Parent and its Subsidiaries as of the
end of such Fiscal Quarter and the related unaudited consolidated statements of
income and cash flows of Parent and its Subsidiaries for such Fiscal Quarter and
the then elapsed portion of such Fiscal Year, setting forth in each case in
comparative form the figures for the corresponding Fiscal Quarter and the
corresponding portion of Parent's previous Fiscal Year;

 

(c)          concurrently with the delivery of the financial statements referred
to in Sections 5.1(a) and (b), a Compliance Certificate signed by a Responsible
Officer of Borrower Agent: (i) certifying as to whether there exists a Default
or Event of Default on the date of such certificate and, if a Default or an
Event of Default then exists, specifying the details thereof and the action
which Borrowers have taken or proposes to take with respect thereto, (ii)
specifying any change in the identity of the Subsidiaries as of the end of such
Fiscal Year or Fiscal Quarter from the Subsidiaries identified to Lenders on the
Closing Date or as of the most recent Fiscal Year or Fiscal Quarter, as the case
may be, (iii) specifying the FIFO Inventory Amount, (iv) making the
representation and warranty set forth in Section 7.4(d)(x), (v) listing any new
Deposit Accounts opened during such Fiscal Quarter permitted pursuant to Section
5.16(c)(iii), and (vi) stating whether any change in GAAP or the application
thereof has occurred since the date of the mostly recently delivered audited
financial statements of Parent and its Subsidiaries, and, if any change has
occurred, specifying the effect of such change on the financial statements
accompanying such Compliance Certificate;

 

(d)          concurrently with the delivery of the financial statements referred
to in Section 5.1(b) and within forty-five (45) days after the end of the fourth
Fiscal Quarter of Parent of each Fiscal Year of Parent, a report (in form and
substance satisfactory to Administrative Agent) listing (A) all of Borrowers'
Inventory as of the last Business Day of the applicable reporting period; (B)
the type, cost, and location of all such Inventory; (C) all of such Inventory
which constitutes returned or repossessed Goods; (D) all Inventory which has not
been timely sold in the Ordinary Course of Business; (E) all Inventory which is
not located at Property owned or leased by a Borrower or that is in possession
of any Person other than a Borrower and a description of the reason why such
Inventory is so located or in the possession of such other Person; and (F) such
other information regarding Borrowers' Inventory as Administrative Agent may
request from time to time;

 

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(e)          in addition to Parent's 10K and 10Q Forms filed with the Securities
and Exchange Commission, promptly after the same become publicly available,
copies of all periodic and other reports, proxy statements and other materials
filed with the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all functions of said Commission, or with any national
securities exchange, or distributed by Parent to its shareholders generally, as
the case may be;

 

(f)          Within sixty (60) days after the commencement of each Fiscal Year,
Borrowers shall deliver to Administrative Agent, LC Issuer and Lenders
Projections for such Fiscal Year, prepared on a quarter-by-quarter basis. Such
Projections shall represent Borrowers' reasonable estimate of the future
financial performance of Borrowers and the Subsidiaries for the periods set
forth therein and shall have been prepared on the basis of assumptions that
Borrowers believe are fair and reasonable as of the date of preparation in light
of current and reasonably foreseeable business conditions (it being understood
that actual results may differ from those set forth in such Projections).
Borrowers shall provide Administrative Agent, LC Issuer and Lenders an update to
such Projections upon Administrative Agent's request from time to time; and

 

(g)          promptly following any request therefor, such other information
regarding the results of operations, business affairs and financial condition of
Parent or any of its Subsidiaries as Administrative Agent or any Lender may
reasonably request.

 

So long as Parent is required to file periodic reports under Section 13(a) or
Section 15(d) of the Exchange Act, Borrowers shall be deemed to have satisfied
their obligation to deliver the financial statements referred to in Sections
5.1(a) and (b) above from time to time with such periodic reports by the
inclusion of such statements therein.

 

Section 5.2.          Notices of Material Events. Borrower Agent, on behalf of
Borrowers, will furnish to Administrative Agent and each Lender prompt written
notice of the following:

 

(a)          the occurrence of any Default or Event of Default;

 

(b)          the filing or commencement of, or any material development in, any
action, suit or proceeding by or before any arbitrator or Governmental Authority
against or, to the knowledge of any Loan Party, affecting any Loan Party or any
of its Subsidiaries which, if adversely determined, could reasonably be expected
to result in a Material Adverse Effect upon Parent and its Subsidiaries taken as
a whole;

 

(c)          the occurrence of any event or any other development by which any
Loan Party or any of its Subsidiaries (i) fails to comply with any Environmental
Law or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) becomes subject to any Environmental
Liability, (iii) receives notice of any claim with respect to any Environmental
Liability, or (iv) becomes aware of any basis for any Environmental Liability,
in each case which, either individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect upon Parent and its Subsidiaries
as a whole;

 

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(d)          promptly and in any event within 30 days after (i) any Loan Party
knows or has reason to know that any ERISA Event has occurred that could
reasonably be expected to result in liability to Parent and its Subsidiaries in
an aggregate amount exceeding $5,000,000, a certificate of the chief financial
officer of Borrower Agent describing such ERISA Event and the action, if any,
proposed to be taken with respect to such ERISA Event and a copy of any notice
filed with the PBGC or the IRS pertaining to such ERISA Event and any notices
received by any Loan Party, any Subsidiary or ERISA Affiliate from the PBGC or
any other governmental agency with respect thereto, and (ii) becoming aware (1)
that there has been an increase in Unfunded Pension Liabilities (not taking into
account Plans with negative Unfunded Pension Liabilities) since the date the
representations hereunder are given or deemed given, or from any prior notice,
as applicable, in an aggregate amount exceeding $5,000,000, (2) of the existence
of any Withdrawal Liability in an aggregate amount exceeding $5,000,000, (3) of
the adoption of, or the commencement of contributions to, any Plan subject to
Section 412 of the Code by any Loan Party, any of its Subsidiaries or any ERISA
Affiliate, or (4) of the adoption of any amendment to a Plan subject to Section
412 of the Code which results in a material increase in contribution obligations
of any Loan Party, any of its Subsidiaries or any ERISA Affiliate, a detailed
written description thereof from the chief financial officer of Borrower Agent;

 

(e)          the occurrence of any material default or event of default, or the
receipt by any Loan Party of any written notice of an alleged material default
or event of default, with respect to any Material Contract of Parent or any of
its Subsidiaries; or

 

(f)          any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect upon Parent and its
Subsidiaries taken as a whole.

 

Borrower Agent will furnish to Administrative Agent and each Lender promptly and
in any event at least 30 days prior thereto, notice of any change (i) in any
Loan Party's legal name, (ii) in any Loan Party's chief executive office or its
principal place of business, (iii) in any Loan Party's identity or legal
structure, (iv) in any Loan Party's federal taxpayer identification number or
organizational number or (v) in any Loan Party's jurisdiction of organization;
and

 

Section 5.3.          Existence; Conduct of Business. Such Loan Party will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and maintain in full force and effect its legal
existence and its respective rights, licenses, permits, privileges, franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
business; provided that nothing in this Section 5.3 shall prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 7.3.

 

Section 5.4.          Compliance with Laws. Such Loan Party will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and
requirements of any Governmental Authority applicable to its business and
properties, including, without limitation, all Environmental Laws, ERISA and
OSHA, except where the failure to do so, either individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect upon Parent and its Subsidiaries taken as a whole.

 

Section 5.5.          Payment of Obligations. Such Loan Party will, and will
cause each of its Subsidiaries to, pay and discharge at or before maturity all
of its obligations and liabilities (including, without limitation, all taxes,
assessments and other governmental charges, levies and all other claims that
could result in a statutory Lien) before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, and such Loan Party or such Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP or (b) the failure to make payment could not reasonably be expected to
result in a Material Adverse Effect upon Parent and its Subsidiaries as a whole.

 

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Section 5.6.          Books and Records. Such Loan Party will, and will cause
each of its Subsidiaries to, keep proper books of record and account in which
full, true and correct entries shall be made of all dealings and transactions in
relation to its business and activities to the extent necessary to prepare the
consolidated financial statements of Parent in conformity with GAAP.

 

Section 5.7.          Visitation and Inspection. Such Loan Party will, and will
cause each of its Subsidiaries to, permit any representative of Administrative
Agent or any Lender to visit and inspect its properties, to examine its books
and records and to make copies and take extracts therefrom, and to discuss its
affairs, finances and accounts with any of its officers and with its independent
certified public accountants, all at such reasonable times and as often as
Administrative Agent or any Lender may reasonably request after reasonable prior
notice to Borrower Agent; provided, that if an Event of Default has occurred and
is continuing, no prior notice shall be required. Prior to the Borrowing Base
Trigger Event, any such visit and inspection will be at Lenders' expense.

 

Section 5.8.          Maintenance of Properties; Insurance. Such Loan Party
will, and will cause each of its Subsidiaries to, (a) keep and maintain all
property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain with financially
sound and reputable insurance companies which are not Affiliates of any Loan
Party insurance with respect to its properties and business, and the properties
and business of its Subsidiaries, against loss or damage of the kinds
customarily insured against by companies in the same or similar businesses
operating in the same or similar locations, and will, upon request of
Administrative Agent, furnish to each Lender at reasonable intervals a
certificate of a Responsible Officer setting forth the nature and extent of all
insurance maintained by Parent and its Subsidiaries in accordance with this
Section 5.8. On an annual basis (or at such other more frequent intervals as
Administrative Agent may request from time to time), such Loan Party shall
furnish to Administrative Agent summaries of all insurance policies (and, if
requested by Administrative Agent from time to time, true and complete copies
thereof) and evidence of insurance in the form of (i) the endorsements required
below and (ii) an Acord Form 27 with respect to casualty and property insurance
and an Acord Form 25 with respect to liability insurance and (iii) such other
forms as Administrative Agent may reasonably request. Unless Administrative
Agent shall agree otherwise, to the extent applicable, each policy shall include
endorsements satisfactory to Administrative Agent (i) showing Administrative
Agent as the sole lender loss payee with respect to property and casualty
insurance and additional insured with respect to liability insurance; (ii)
requiring (30) days prior written notice to Administrative Agent in the event of
cancellation of the policy for any reason whatsoever; and (iii) specifying that
the interest of Administrative Agent shall not be impaired or invalidated by any
act or neglect of any Person, nor by the occupation of the premises for purposes
more hazardous than are permitted by the insurance policy. If Loan Parties fail
to provide and pay for any insurance, Administrative Agent may, at its option,
but shall not be obligated to do so, procure the insurance and charge Loan
Parties therefor. Each Loan Party agrees to deliver to Administrative Agent,
promptly as rendered, copies of all reports made to insurance companies. All
proceeds (other than proceeds from workers' compensation and D&O insurance)
under each insurance policy shall be payable to Administrative Agent. While no
Event of Default exists, Loan Parties may settle, adjust, or compromise any
insurance claim so long as the proceeds are delivered to Administrative Agent.
If a Default or Event of Default exists, only Administrative Agent shall be
authorized to settle, adjust, and compromise such claims.

 

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Section 5.9.          Use of Proceeds; Margin Regulations. Such Loan Party will
use the proceeds of the Loans and any Letters of Credit only (a) to satisfy
Indebtedness existing as of the Closing Date that a Loan Party incurred for
working capital or general corporate purposes; (b) to pay fees and transaction
expenses associated with the closing of the credit facility evidenced herein;
(c) to pay Obligations in accordance with the terms of this Agreement; (d) for
Acquisitions permitted hereunder (including the EnTrust Acquisition); and (e)
for Borrowers' working capital and other general corporate (or company) purposes
to the extent permitted by this Agreement. Without limitation of the foregoing,
no portion of the proceeds of any Loan shall be used, directly or indirectly,
(i) to purchase or carry, any Margin Stock or in any manner that causes or might
cause a violation of Regulation T, Regulation U or Regulation X of the Board of
Governors as in effect from time to time, or to violate the Securities Exchange
Act of 1934, (ii) to fund any operation in, finance any investments or
activities in, or make any payments to, a Sanctioned Person or Sanctioned
Entity, (iii) for the purpose of refinancing any debt of any Loan Party when
such Person is unable to obtain a primary or anticipated source of funding, (iv)
in violation of the United States Foreign Corrupt Practices Act of 1977, or (v)
to refinance any commercial paper.

 

Section 5.10.         Casualty and Condemnation. Borrower Agent will furnish to
Administrative Agent and Lenders prompt written notice of any casualty or other
insured damage to any material portion of any Loan Party's assets or any
proceedings for the taking of any material portion of any Loan Party's assets
under power of eminent domain or by condemnation or similar proceeding.

 

Section 5.11.         Additional Subsidiaries. Such Loan Party will (i)
simultaneously with (x) the formation of a new direct or indirect Subsidiary of
such Loan Party or (y) a Subsidiary of such Loan Party that is an Excluded
Subsidiary on the Closing Date ceasing to be an Excluded Subsidiary (or at such
later date as may be agreed to by Administrative Agent in writing in its
discretion), and (ii) within thirty (30) days after a Person becoming a
Subsidiary of such Loan Party pursuant to an Acquisition permitted hereunder (or
at such later date as may be agreed to by Administrative Agent in writing in its
discretion), provide Administrative Agent with written notice thereof and (a)
with respect to all such Subsidiaries, cause such Subsidiary to execute and
deliver to Administrative Agent a Joinder Agreement, causing such Subsidiary to
become a party to this Agreement, as a joint and several "Borrower" (provided
that only a wholly-owned Subsidiary shall be permitted to be a Borrower), and
granting a first priority Lien upon its Collateral, subject to Liens permitted
by Section 7.2 or, if consented to by Administrative Agent in its discretion, a
"Guarantor"; (b) cause such Subsidiary that is added as a Borrower to execute
and deliver to Administrative Agent Notes in favor of Lenders, if so requested
by Lenders; and (c) deliver such other documentation as Administrative Agent may
reasonably request in connection with the foregoing, including appropriate UCC-1
financing statements, Deposit Account Control Agreements, evidence of insurance
as required by this Agreement or the other Loan Documents, certified resolutions
and other organizational and authorizing documents of such Subsidiary, and upon
the request of Administrative Agent, favorable opinions of counsel to such
Subsidiary (which shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation referred to above and the
attachment and perfection of security interests granted thereunder), all in
form, content, and scope reasonably satisfactory to Administrative Agent;
provided, however, that (x) nothing in this Section 5.11 shall authorize any
Borrower or any Subsidiary to consummate any Acquisition, form any Subsidiary;
(y) any document, agreement, or instrument executed or issued pursuant to this
Section 5.11 shall be a "Loan Document" for purposes of this Agreement.
Notwithstanding anything to the contrary set forth in this Section 5.11, no
Excluded Subsidiary shall be required to become a Loan Party hereunder unless
such Excluded Subsidiary ceases to be an Excluded Subsidiary.

 

Section 5.12.         ERISA. Such Loan Party will (a) make, or cause to be made,
prompt payment of contributions required to meet the minimum funding standards
set forth in ERISA with respect to each Borrower's and ERISA Affiliates' Plans;
(b) furnish to Administrative Agent, promptly upon Administrative Agent's
request therefor, copies of any annual report required to be filed pursuant to
ERISA in connection with each such Plan of each Borrower and ERISA Affiliate;
(c) notify Administrative Agent as soon as practicable (but in any event with
five Business Days) of any ERISA Event; and (d) furnish to Administrative Agent,
promptly upon Administrative Agent's request therefor, such additional
information concerning any such Plan as may be reasonably requested by
Administrative Agent from time to time.

 

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Section 5.13.         Environmental. Such Loan Party will:

 

(a)          In the event of the existence of a material Environmental
Liability, promptly upon the written request of Administrative Agent and at
Borrowers' expense, provide Administrative Agent with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm acceptable to Administrative Agent to assess with a reasonable
degree of certainty (i) the presence or absence of any Hazardous Materials and
the potential costs in connection with abatement, remediation, cleanup, or
removal of any Hazardous Materials found on, under, at, or within any Borrower's
or Subsidiaries' Properties and (ii) the compliance of such Loan Party or its
Subsidiary with Environmental Laws.

 

(b)          If any material Environmental Release occurs or is discovered at or
on any Borrower or Subsidiary's Property, act promptly and diligently to report
to all appropriate Governmental Authorities as required under Environmental Law
and to Administrative Agent the extent of, and to investigate and take remedial
action to contain, mitigate, and remediate such Environmental Release, whether
or not directed to do so by any Governmental Authority or required to do so by
Environmental Law.

 

(c)          Maintain compliance in all material respects with all Environmental
Laws.

 

(d)          (i) Generate, use, possess, store, release, treat, and dispose of
Hazardous Materials only in the Ordinary Course of Business and in compliance in
all material respects with all Environmental Laws, provided that in no instance
may Hazardous Materials be disposed of, abandoned or otherwise deposited
(whether by way of an Environmental Release or otherwise) in, at, on or under
the Property of any Borrower or Subsidiary by any Borrower or Subsidiary or any
other Person and (ii) shall not, except in the ordinary course of such Person's
business and in compliance in all material respects with all Environmental Laws,
(A) permit any Person to store of any Hazardous Material on any Borrower or
Subsidiary's Property or (B) transport or permit the transportation of Hazardous
Materials to or from any such Real Estate.

 

Section 5.14.         Margin Stock. If so requested by Administrative Agent,
such Loan Party will furnish Administrative Agent with (a) a statement or
statements in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U of said Board of Governors and (b) other documents
evidencing its compliance with the margin regulations, including an opinion of
counsel in form and substance satisfactory to Administrative Agent.

 

Section 5.15.         Taxes; Claims. Such Loan Party will pay and discharge all
Taxes and all lawful claims for labor, materials, and supplies which have become
due and payable and which by law have or may become a Lien upon any of its
Property before the date on which such Taxes or claims become delinquent or
penalties attach, unless such Taxes or claims are being Properly Contested.

 

Section 5.16.         Cash Management; Deposit Accounts. Such Loan Party will:

 

(a)          On or before the Closing Date, establish one or more Controlled
Accounts and, thereafter, maintain each such Controlled Account;

 

(b)          Hold in trust for Administrative Agent and promptly (but, in any
event, on the Business Day immediately following its receipt thereof) deposit
into a Controlled Account all tangible Payment Items and cash such Loan Party
receives on account of the payment of any of such Loan Party's Accounts, Credit
Card Receivables (as defined in the Security Agreement), Pharmacy Receivables
(as defined in the Security Agreement) or as Proceeds of any Inventory or other
Collateral, and, with respect to each Deposit Account for an individual retail
store location, shall promptly cause such tangible Payment Items and cash to be
transmitted to a Controlled Account with respect to balances in any such Deposit
Account for an individual retail store location in excess of (i) prior to the
Borrowing Base Trigger Event, $5,000, and (ii) on or after the Borrowing Base
Trigger Event, $3,000, in each case consistent with the historical practices of
Loan Parties;

 

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(c)          Not establish or maintain any Deposit Accounts other than Deposit
Accounts (i) listed in Schedule 4.19; (ii) maintained at Regions Bank; (iii)
maintained in the Ordinary Course of Business for an individual retail store
location of such Loan Party opened after the Closing Date in accordance with the
historical practices of such Loan Party; and (iv) which Borrowers deem necessary
and use only for payroll, payroll taxes, employee benefits, petty cash, and
local trade payables; and

 

(d)          Notwithstanding anything to the contrary set forth in this Section
5.16, Administrative Agent shall not exercise dominion over any Controlled
Account unless an Account Control Period (as defined in the Addendum) exists.

 

Section 5.17.         Further Assurances. Borrowers will, and will cause each
other Loan Party to, execute any and all further documents, agreements and
instruments, and take all such further actions which may be required under any
Applicable Law, or which Administrative Agent or the Required Lenders may
reasonably request, to effectuate the transactions contemplated by the Loan
Documents.

 

Article 6

 

[RESERVED]

 

Article 7

 

NEGATIVE COVENANTS

 

Each Loan Party covenants and agrees that so long as any Lender has a Commitment
hereunder or any Obligation remains outstanding:

 

Section 7.1.          Indebtedness. Such Loan Party will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, except:

 

(a)          Indebtedness created pursuant to the Loan Documents;

 

(b)          Indebtedness of Parent and its Subsidiaries existing on the date
hereof and set forth on Schedule 7.1 and extensions, renewals and replacements
of any such Indebtedness that do not, unless otherwise permitted hereunder,
increase the outstanding principal amount thereof (immediately prior to giving
effect to such extension, renewal or replacement) or shorten the maturity or the
weighted average life thereof;

 

(c)          Indebtedness arising under any Hedging Agreement entered into in
accordance with Section 7.8;

 

(d)          Indebtedness (other than the Obligations) (i) for payment of any of
the purchase price of any fixed or capital asset which Indebtedness does not
exceed the cost of acquiring such fixed or capital asset, including any related
transaction costs, and (ii) incurred at the time of, or within ten days before
or after, the acquisition of such fixed or capital asset, for the purpose of
financing all or a portion of the purchase price therefor which Indebtedness
does not exceed the cost of acquiring such fixed or capital asset, including any
related transaction costs so long as (x) such Indebtedness and related Lien
permitted pursuant to Section 7.2(d) (if any) are incurred not more than ten
days after the acquisition of the fixed asset which is the subject thereof and
(y) the aggregate amount of such Indebtedness does not, at any one time, exceed
$5,000,000;

 

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(e)          (i) Unsecured Subordinated Debt constituting the EnTrust Earnout
Debt and guaranties thereof, so long as such Indebtedness is subject to the
subordination provisions set forth in the EnTrust Earnout Notes and related
guaranties, and (ii) other unsecured Subordinated Debt in an aggregate original
principal amount not to exceed $5,000,000; and

 

(f)          other Indebtedness of Parent or its Subsidiaries that is not
included in any of the preceding clauses of this Section 7.1 and is not secured
by a Lien in an aggregate principal amount not to exceed $20,000,000 at any time
outstanding.

 

Section 7.2.          Liens. Such Loan Party will not, and will not permit any
of its Subsidiaries, to, create, incur, assume or suffer to exist any Lien on
any of its Property now owned or hereafter acquired, except:

 

(a)          Liens in favor of Agent, on behalf of Secured Parties, securing the
Obligations to the extent hereafter granted by any Loan Party or a Subsidiary of
any Loan Party;

 

(b)          Permitted Encumbrances;

 

(c)          Liens on any property or asset of Parent or any of its Subsidiaries
existing on the date hereof and set forth on Schedule 7.2;

 

(d)          purchase money Liens upon or in any fixed or capital assets to
secure the purchase price or the cost of construction or improvement of such
fixed or capital assets or to secure Indebtedness (to the extent such
Indebtedness is permitted pursuant to Section 7.1(d)) incurred solely for the
purpose of financing the acquisition, construction or improvement of such fixed
or capital assets (including Liens securing any Capital Lease Obligations);
provided that (i) such Lien secures only Indebtedness permitted pursuant to
Section 7.1(d), (ii) such Lien attaches to such asset concurrently or within 90
days after the acquisition or the completion of the construction or improvements
thereof, and (iii) such Lien does not extend to any other asset;

 

(e)          Liens on any Property not constituting Collateral of Parent or any
Subsidiary existing on the Closing Date or Liens existing on any Property not
constituting Collateral prior to such Property's acquisition by Parent or any
Subsidiary and which were not created in contemplation of such acquisition;

 

(f)          Liens in favor of Cardinal on the Cardinal Inventory (as such term
is defined in the Cardinal Intercreditor Agreement) so long as such Liens are
subject to the Cardinal Intercreditor Agreement; and

 

(g)          extensions, renewals, or replacements of any Lien referred to in
clauses (b) through (f) of this Section 7.2; provided that the principal amount
of the Indebtedness secured thereby is not increased and that any such
extension, renewal or replacement is limited to the assets originally encumbered
thereby;

 

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Section 7.3.          Fundamental Changes. Such Loan Party will not, and will
not permit any of its Subsidiaries to, merge into or consolidate into any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, lease, transfer or otherwise dispose of (in a single transaction or a
series of transactions) all or substantially all of its assets (in each case,
whether now owned or hereafter acquired) or all or substantially all of the
stock of any of its Subsidiaries (in each case, whether now owned or hereafter
acquired) or liquidate or dissolve; provided that if, at the time thereof and
immediately after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing, (i) such Loan Party or any Subsidiary may merge
with a Borrower if such Borrower (or such Subsidiary if such Loan Party is not a
party to such merger) is the surviving Person, (ii) any Subsidiary may merge
into another Subsidiary, provided that if any party to such merger is a
Borrower, such Borrower shall be the surviving Person, (iii) any Subsidiary may
sell, transfer, lease or otherwise dispose of all or substantially all of its
assets (and subsequently dissolve or liquidate) to a Borrower.

 

Section 7.4.          Investments, Loans. Such Loan Party will not make any
Investment, except:

 

(a)          Investments existing on the date hereof and set forth on Schedule
7.4 (including Investments in Subsidiaries);

 

(b)          loans or advances to employees, officers or directors of such Loan
Party or any of its Subsidiaries in the Ordinary Course of Business not to
exceed $1,000,000 in the aggregate at any time outstanding;

 

(c)          the EnTrust Acquisition, so long as:

 

(i)          no Default or Event of Default shall exist or result therefrom;

 

(ii)         Administrative Agent shall have received evidence reasonably
satisfactory to it that, both before and after giving pro forma effect to such
acquisition, each Loan Party is Solvent;

 

(iii)        the board of directors (or other comparable governing body) of the
Person being acquired or whose assets are being acquired shall have duly
approved such Acquisition and such Person shall not have announced that it will
oppose such Acquisition and shall not have commenced any action that alleges
that such Acquisition will violate Applicable Law;

 

(iv)        Borrowers shall have delivered to Administrative Agent a quality of
earnings report for EnTrust in form and substance satisfactory to Administrative
Agent;

 

(v)         such Acquisition shall be consummated on or before the date that is
ninety (90) days after the Closing Date;

 

(vi)        to the extent that a portion of the consideration for such
Acquisition constitutes the EnTrust Earnout Debt, such Indebtedness shall be
permitted pursuant to Section 7.1(e)(i); and

 

(vii)       the aggregate amount of cash consideration paid at closing with
respect to such Acquisition shall not exceed $54,000,000;

 

(d)          Acquisitions by a Borrower of all or substantially all of the
assets, a business unit or division, or more than fifty percent (50%) of the
Capital Stock of a Person organized under the laws of the United States of
America or any state thereof, so long as each of the following conditions is
satisfied as determined by Administrative Agent:

 

(i)          such acquired Person or assets, as applicable, are located in the
continental United States of America and engage in business in substantially the
same field as the business conducted by Parent and its Subsidiaries on the
Closing Date;

 

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(ii)         with respect to any Person that is or becomes a Subsidiary
organized in the United States, such Person shall deliver all of the documents
that are required by Section 5.11, and take all actions deemed necessary or
advisable by Administrative Agent to cause the Lien created by the Security
Agreement to be duly perfected in the Property of such Person constituting
Collateral, including the filing of financing statements in such jurisdictions
as may be requested by Administrative Agent;

 

(iii)        if the aggregate amount of cash and non-cash consideration
(including all cash and Indebtedness, including contingent obligations, incurred
or assumed and the maximum amount of any earnout or similar payment in
connection therewith (whether or not actually earned)) for any individual
Acquisition is less than $5,000,000, Borrowers shall certify, on the next
quarterly Compliance Certificate delivered in accordance with Section 5.1(c),
that Excess Availability, on the date of and after giving effect to such
Acquisition, was not less than $20,000,000;

 

(iv)        if the aggregate amount of cash and non-cash consideration
(including all cash and Indebtedness, including contingent obligations, incurred
or assumed and the maximum amount of any earnout or similar payment in
connection therewith (whether or not actually earned)) for any individual
Acquisition is equal to or in excess of $5,000,000 but less than $10,000,000,
the applicable Borrower has made available to Administrative Agent, not later
than ten (10) Business Days (or such later date to which Administrative Agent
may agree) prior to the proposed date of such acquisition, (i) a general
description of the business and assets of the Acquisition target, (ii) a
certificate from a Responsible Officer of Borrowers that (x) certifies
compliance with the conditions set forth in this Section 7.4(d), (y) that
certifies that Excess Availability, on the date of and after giving effect to
such Acquisition, shall not be less than $20,000,000 and (z) provides for other
customary closing certifications, and (iii) any and all other information
requested by Administrative Agent in its discretion;

 

(v)         if the aggregate amount of cash and non-cash consideration
(including all cash and Indebtedness, including contingent obligations, incurred
or assumed and the maximum amount of any earnout or similar payment in
connection therewith (whether or not actually earned)) for any individual
Acquisition is equal to or in excess of $10,000,000, (x) the applicable Borrower
has made available to Administrative Agent, not later than ten (10) Business
Days (or such later date to which Administrative Agent may agree) prior to the
proposed date of such acquisition, (i) a general description of the business and
assets of the Acquisition target, (ii) lien search results which reflect that,
after giving effect to the Acquisition and any contemplated releases, there
shall be no Liens other than those permitted pursuant to Section 7.2 with
respect to the Acquisition target, (iii) the acquisition documents (or drafts
thereof), including a copy of the purchase and sale agreement with all schedules
and exhibits thereto, (iv) evidence reasonably satisfactory to Administrative
Agent that, both before and after giving pro forma effect to such acquisition,
each Loan Party is Solvent, (v) evidence reasonably satisfactory to
Administrative Agent that the board of directors (or other comparable governing
body) of the Person being acquired or whose assets are being acquired shall have
duly approved such Acquisition and such Person shall not have announced that it
will oppose such Acquisition and shall not have commenced any action that
alleges that such Acquisition will violate Applicable Law, (vi) a certificate
from a Responsible Officer of Borrowers that (x) certifies compliance with the
conditions set forth in this Section 7.4(d), (y) that certifies that Excess
Availability, on the date of and after giving effect to such Acquisition, shall
not be less than $20,000,000 and (z) provides for other customary closing
certifications, including by attaching certified copies of the applicable
acquisition documents, certifying as to the closing of such Acquisition, and
that representations and warranties are true, correct and complete after giving
effect to such Acquisition, and (vii) any and all other information requested by
Administrative Agent in its discretion and (y) unless otherwise agreed by
Administrative Agent, and a collateral assignment of rights with respect to the
applicable acquisition documents executed by the applicable Borrower and
acknowledged and accepted by the seller and target of such Acquisition;

 

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(vi)        Loan Parties (and the Persons being acquired, if applicable) shall
have executed and delivered such amendments or supplements to this Agreement,
the Security Agreement or the other Loan Documents or such other documents as
Administrative Agent may deem necessary or advisable to grant Administrative
Agent a first priority Lien on all of the acquired assets to the extent
constituting Collateral;

 

(vii)       no Default or Event of Default shall exist or result therefrom; and

 

(viii)      the aggregate amount of cash and non-cash consideration (including
all cash and Indebtedness, including contingent obligations, incurred or assumed
and the maximum amount of any earnout or similar payment in connection therewith
(whether or not actually earned)) shall not exceed $25,000,000 for any
individual Acquisition;

 

(e)          guaranties of the Loan Parties permitted pursuant to Section 7.1;

 

(f)          Hedging Agreements permitted pursuant to Section 7.1;

 

(g)          Cash Investments; and

 

(h)          Investments constituting intercompany loans between Loan Parties
and their Subsidiaries (other than Excluded Subsidiaries) consistent with
historical practices.

 

Section 7.5.          Restricted Payments. Such Loan Party will not, and will
not permit any of its Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except:

 

(a)          dividends payable by a Loan Party solely in interests of any class
of its common equity; and

 

(b)          Restricted Payments made by any Subsidiary to a Loan Party; and

 

(c)          dividends or distributions that would otherwise constitute
Restricted Payments so long as (i) any such distributions and dividends during
any four consecutive Fiscal Quarters do not exceed $20,000,000 in the aggregate,
(ii) no Default or Event of Default exists at the time of any such distribution
or dividend or after giving effect thereto, (iii) any such dividend or
distribution is permitted by Applicable Law, (iv) Borrowers are Solvent both
before and after giving effect to any such dividend or distribution, and (v)
Excess Availability on the date of any such distribution or dividend and ending
after giving effect thereto shall not be less than $20,000,000; provided, that
Parent may make dividends in respect of Parent's common stock during any four
consecutive Fiscal Quarters that do not exceed $10,000,000 in the aggregate
(which dividends shall be included in the computation of aggregate dividends and
distributions pursuant to subclause (i) of this clause) without respect to
subclause (v) of this clause.

 

Section 7.6.          Sale of Assets. Except as permitted by Section 7.3, such
Loan Party will not, and will not permit any of its Subsidiaries to make or
consummate any Asset Disposition, except, so long as no Default or Event of
Default exists and all proceeds thereof are remitted to a Controlled Account
pursuant to Section 5.16, an Asset Disposition which constitutes or is:

 

(a)          a sale of Inventory in the Ordinary Course of Business;

 

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(b)          a disposition of Equipment which is obsolete, unmerchantable, or
otherwise unsalable in the Ordinary Course of Business;

 

(c)          a disposition of Inventory which is obsolete, unmerchantable, or
otherwise unsalable in the Ordinary Course of Business;

 

(d)          a sale or other disposition of Intellectual Property which is, in
the reasonable judgment of Borrowers, no longer economically practicable to
maintain or useful in the conduct of the Loan Parties and Subsidiaries'
business;

 

(e)          a write-off, discount, sale, or other disposition of defaulted or
past due Accounts and similar obligations in the Ordinary Course of Business and
not part of any financing of Accounts;

 

(f)          a sale, transfer, or other disposition, (i) by any Loan Party to
any other Loan Party; or (ii) any Subsidiary which is not a Loan Party to any
Loan Party for fair market value or for a value more favorable to such Loan
Party (in each case as determined by Borrowers and acceptable to Administrative
Agent) at the time of such sale, transfer, or disposition;

 

(g)          termination of a lease of Property in the Ordinary Course of
Business, which could not reasonably be expected to have a Material Adverse
Effect, and does not result from any Borrower or Subsidiary's default
thereunder;

 

(h)          a license or sublicense of Intellectual Property rights in the
Ordinary Course of Business not interfering, individually or in the aggregate,
in any material respect with the conduct of the business of the Loan Parties and
the Subsidiaries;

 

(i)           a lease, sublease, license, or sublicense of Real Estate granted
by any Borrower or Subsidiary to other Persons in the Ordinary Course of
Business not interfering in any material respect with any Borrower or
Subsidiary's business or Administrative Agent's access to any Collateral; or

 

(k)          the voluntary termination of Hedging Agreements to which a Borrower
or Subsidiary is a party.

 

Section 7.7.          Transactions with Affiliates. Such Loan Party will not,
and will not permit any of its Subsidiaries to enter into or be party to any
transaction with an Affiliate, except (a) transactions contemplated by the Loan
Documents; (b) transactions with Affiliates which were consummated before the
Closing Date and listed on Schedule 7.7; (c) any Restricted Payment permitted by
Section 7.5; and (d) transactions with Affiliates (not otherwise specifically
covered in this Section 7.7) in the Ordinary Course of Business, upon fair and
reasonable terms (which terms shall be fully disclosed to Administrative Agent
upon Administrative Agent's request), and (x) no less favorable than would be
obtained in a comparable arm's-length transaction with a non-Affiliate or (y)
otherwise on terms consistent with the business relationship of such Person and
such Affiliate before the Closing Date, if any; provided, that, in no event
shall the transactions contemplated by this clause (d) exceed $5,000,000 in the
aggregate in any Fiscal Year (excluding real Property and Equipment leasing
arrangements in the Ordinary Course of Business).

 

Section 7.8.          Hedging Agreement. Such Loan Party will not, and will not
permit any of its Subsidiaries to, enter into any Hedging Agreement, other than
Hedging Agreements entered into in the Ordinary Course of Business to hedge or
mitigate risks to which such Loan Party or any of its Subsidiaries is exposed in
the conduct of its business or the management of its liabilities.

 

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Section 7.9.          Amendment to Material Documents. Such Loan Party will not,
and will not permit any of its Subsidiaries to, amend, modify or waive any of
its rights under its certificate of incorporation, bylaws or other
organizational documents that would have an adverse effect on Lenders or
Administrative Agent.

 

Section 7.10.         Accounting Changes. Such Loan Party will not, and will not
permit any of its Subsidiaries to, make any significant change in accounting
treatment or reporting practices, except as required by or in compliance with
GAAP, or change the fiscal year of Parent or of any of its Subsidiaries, except
to change the fiscal year of a Subsidiary to conform its fiscal year to that of
Parent.

 

Section 7.11.         Government Regulation. Such Loan Party will not, and will
not permit any of its Subsidiaries to, (a) be or become subject at any time to
any law, regulation or list of any Governmental Authority of the United States
(including, without limitation, the OFAC list) that prohibits or limits Lenders
or Administrative Agent from making any advance or extension of credit to such
Loan Party or from otherwise conducting business with Loan Parties, or (b) fail
to provide documentary and other evidence of the identity of Loan Parties as may
be requested by Lenders or Administrative Agent at any time to enable Lenders or
Administrative Agent to verify the identity of the Loan Parties or to comply
with any Applicable Law or applicable regulation, including, without limitation,
Section 326 of the Patriot Act at 31 U.S.C. Section 5318.

 

Section 7.12.         Plans. Such Loan Party will not, and will not permit any
of its Subsidiaries to, become party to any Multiemployer Plan or Foreign Plan,
other than any in existence on the Closing Date. Fail to meet all of the
applicable minimum funding requirements of ERISA and the Code, without regard to
any waivers thereof, and, to the extent that the assets of any of their Plans
would be less (by $500,000 or more) than an amount sufficient to provide all
accrued benefits payable under such Plans, Borrowers shall make the maximum
deductible contributions allowable under the Code (based on Borrowers' current
actuarial assumptions). No Borrower shall, or shall cause or permit any ERISA
Affiliate to (a) cause or permit to occur any event that could result in the
imposition of a Lien under Section 412 of the Code or Section 302 or 4068 of
ERISA; or (b) cause or permit to occur an ERISA Event.

 

Section 7.13.         Sales and Leasebacks. Such Loan Party will not, and will
not permit any of its Subsidiaries to, enter into any arrangement, whereby one
Person shall, directly or indirectly, sell or transfer any Property to another
Person who shall then or thereafter rent or lease as lessee such Property or any
part thereof or other Property which such Person intends to use for
substantially the same purpose or purposes as the property sold or transferred.

 

Section 7.14.         Disqualified Capital Stock. Such Loan Party will not, and
will not permit any of its Subsidiaries to, issue or suffer to exist with
respect to such Person any Capital Stock that by its terms (or by the terms of
any other Capital Stock into which it is convertible or exchangeable) or
otherwise (a) matures or is subject to mandatory redemption or repurchase (other
than solely for Capital Stock that are not Disqualified Capital Stock) pursuant
to a sinking fund obligation or otherwise (except as a result of a change of
control or asset sale so long as any rights of the holder thereof upon the
occurrence of a change of control or asset sale event shall be subject to the
prior Payment in Full of the Obligations (other than any Obligations which
expressly survive termination) and termination of the Commitments); (b) is
convertible into or exchangeable or exercisable for Indebtedness or any
Disqualified Capital Stock at the option of the holder thereof; (c) may be
required to be redeemed or repurchased at the option of the holder thereof
(other than solely for Capital Stock that are not Disqualified Capital Stock),
in whole or in part, in each case on or before the date that is one hundred
twenty (120) days after the date set forth in clause (a) of the definition of
Revolving Commitment Termination Date; or (d) provides for scheduled payments of
dividends to be made in cash or be subject to any other obligation that requires
such Person to purchase, redeem, retire, or otherwise acquire for value any
Capital Stock of such Person, including any "put" or similar rights.

 

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Article 8

 

EVENTS OF DEFAULT

 

Section 8.1.          Events of Default. Each of the following shall be an
"Event of Default" hereunder, if the same shall occur for any reason whatsoever,
whether voluntary or involuntary, pursuant to any judgment or order of any court
or any order, rule, or regulation of any Governmental Authority, or otherwise:

 

(a)          Borrowers shall fail to pay any principal of any Loan when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment or otherwise, and, prior to the Borrowing Base Trigger
Event, such failure shall continue unremedied for a period of three (3) days; or

 

(b)          Borrowers shall fail to pay any interest on any Loan, any fee or
any other amount (other than an amount payable under Section 8.1(a) payable
under this Agreement or any other Loan Document, when and as the same shall
become due and payable, and such failure shall continue unremedied for a period
of five (5) Business Days; or

 

(c)          any material representation or warranty made or deemed made by or
on behalf of any Loan Party or any of its Subsidiaries in or in connection with
this Agreement or any other Loan Document (including the Schedules attached
hereto and thereto), or in any amendments or modifications hereof or waivers
hereunder, or in any certificate, report, financial statement or other document
submitted to Administrative Agent or Lenders by any Loan Party or any
representative of any Loan Party pursuant to or in connection with this
Agreement or any other Loan Document shall prove to be incorrect in any material
respect (other than any representation or warranty that is expressly qualified
by a Material Adverse Effect or other materiality, in which case such
representation or warranty shall prove to be incorrect in any respect) when made
or deemed made or submitted; or

 

(d)          any Loan Party shall fail to observe or perform any covenant or
agreement contained in Sections 5.1, 5.2, 5.3, 5.7, 5.8, 5.9, 5.14, 5.15, 5.16,
5.17, Article VII, the Security Agreement or the Addendum; or

 

(e)          any Loan Party shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those referred to in Section
8.1(a), (b) and (d)) or any other Loan Document and such failure shall remain
unremedied for 30 days after the earlier of (i) any Responsible Officer of any
Loan Party has actual knowledge of such failure, or (ii) notice thereof shall
have been given to Borrower Agent by Administrative Agent or any Lender; or

 

(f)          Parent or any of its Subsidiaries (whether as primary obligor or as
guarantor or other surety) shall fail to pay any principal or interest on, any
Material Indebtedness as the same shall become due and payable upon a default
being declared thereunder, subject to any applicable grace or cure period, if
any, specified in the agreement governing such Indebtedness; or

 

(g)          Parent or any of its Subsidiaries shall (i) commence a voluntary
case or other proceeding or file any petition seeking liquidation,
reorganization or other relief under any federal, state or foreign bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a custodian, trustee, receiver, liquidator or other similar
official of it or any substantial part of its property, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 8.1(h), (iii) apply for or consent
to the appointment of a custodian, trustee, receiver, liquidator or other
similar official for Parent or any such Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors, or (vi) take any action for the purpose of effecting any
of the foregoing;

 

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(h)          An Insolvency Proceeding shall be commenced against any Loan Party
or Subsidiary (i) liquidation, reorganization or other relief in respect of
Parent or any of its Subsidiaries or its debts, or any substantial part of its
assets, under any federal, state or foreign bankruptcy, insolvency or other
similar law now or hereafter in effect or (ii) the appointment of a custodian,
trustee, receiver, liquidator or other similar official for Parent or any of its
Subsidiaries or for a substantial part of its assets, and in any such case, such
proceeding or petition shall remain undismissed for a period of 60 days or an
order or decree approving or ordering any of the foregoing shall be entered; or

 

(i)          Any Loan Party shall become unable to pay, shall admit in writing
its inability to pay, or shall fail to pay, its debts as they become due; or

 

(j)           (i) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with other ERISA Events that have
occurred, could reasonably be expected to result in liability to Parent and its
Subsidiaries in an aggregate amount exceeding $10,000,000, (ii) there is or
arises an Unfunded Pension Liability (not taking into account Plans with
negative Unfunded Pension Liability) in an aggregate amount exceeding
$10,000,000, or (iii) there is or arises any potential Withdrawal Liability in
an aggregate amount exceeding $10,000,000; or

 

(k)          any judgment or order for the payment of money exceeding $5,000,000
in the aggregate in excess of existing insurance coverage shall be rendered
against Borrower or any of its Subsidiaries, and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be a period of 30 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or

 

(l)          a Change in Control shall occur or exist; or

 

(m)          (i) Any Loan Party shall repudiate, revoke, or attempt to revoke,
in whole or in part, any of its obligations hereunder or under any other Loan
Document or (ii) any Loan Party shall deny or contest the validity or
enforceability of this Agreement or any other Loan Document or all or any part
of the Obligations or the perfection or priority of any Lien granted to
Administrative Agent; or

 

(n)          (i) any loss, theft, damage, or destruction with respect to any
Property of Loan Parties or other casualty with respect to any Property of Loan
Parties or (ii) the condemnation or taking by eminent domain with respect to any
Property of Loan Parties by any Governmental Authority shall occur with respect
to any Collateral having a value (determined, for purposes of this clause (n),
as the greater of cost or market) greater than $10,000,000 in excess of
insurance coverage therefor; or

 

(o)          (i) Any Loan Party shall be enjoined, restrained, or in any way
prevented by any Governmental Authority from conducting any material part of its
business; (ii) any Loan Party shall suffer the loss, revocation, or termination
of any material license, permit, lease, or agreement necessary to its business;
(iii) any cessation of any material part of the business of any Loan Party shall
occur; (iv) any material default occurs under any Material Contract or any
Material Contract is terminated before its stated maturity or not renewed; or
(v) any strike, lockout, labor dispute, embargo, act of terrorism, or act of
God, or other casualty which causes, for more than 30 consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of any Loan Party shall occur, if any such event or circumstance could
reasonably be expected to have a Material Adverse Effect or is prohibited by the
terms of any Loan Document; or

 

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(p)          Any Loan Party or any of its officers is criminally indicted or
convicted for (i) a felony committed in the conduct of any such Loan Party's
business, or (ii) violating any state or federal law (including the Controlled
Substances Act, Money Laundering Control Act of 1986 and illegal Exportation of
War Materials Act), in each case, that could lead to forfeiture of any material
Property of any Loan Party or any Collateral.

 

Section 8.2.          Remedies upon Default. Upon the occurrence of an Event of
Default, Administrative Agent may, and upon the written request of the Required
Lenders shall, by notice to Borrower Agent, take any or all of the following
actions, at the same or different times: (a) terminate the Commitments,
whereupon the Commitment of each Lender shall terminate immediately, (b) declare
the principal of and any accrued interest on the Loans, and all other
Obligations owing hereunder, to be, whereupon the same shall become, due and
payable immediately, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Loan Party, (c) exercise all
remedies contained in any other Loan Document, including, without limitation,
the Security Agreement, and (d) exercise any other remedies available at law or
in equity; provided, that, if an Event of Default specified in either Section
8.1(g) or (h) shall occur, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon,
and all fees and all other Obligations shall automatically become due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by each Loan Party.

 

Section 8.3.          License. Each Loan Party hereby grants to Administrative
Agent an irrevocable, non-exclusive license or other right to use, license, or
sublicense (without payment of any royalty or other compensation to any Person),
exercisable during the existence of an Event of Default prior to the Payment in
Full of the Obligations, any or all of such Loan Party's Intellectual Property,
computing hardware, brochures, promotional and advertising materials, labels,
packaging materials, and other Property in connection with the advertising for
sale or lease, marketing, selling, leasing, liquidating, collecting, completing
manufacture of, or otherwise exercising any rights or remedies with respect to,
any Collateral, including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof. Each Loan Party's rights
and interests in and to any Intellectual Property shall inure to Administrative
Agent's benefit.

 

Section 8.4.          Receiver. In addition to any other remedy available to it,
Administrative Agent, upon the request of the Required Lenders, shall have the
absolute right, during the existence of an Event of Default, to seek and obtain
the appointment of a receiver to take possession of and operate and/or dispose
of the business and assets of any Loan Party and Subsidiaries, and Loan Parties
hereby consent (for themselves and on behalf of the Subsidiaries) to such rights
and such appointment and hereby waive any objection Loan Parties may have
thereto or the right to have a bond or other security posted by Administrative
Agent or any Lender in connection therewith.

 

Section 8.5.          Deposits; Insurance. Loan Parties (a) authorize
Administrative Agent to, during the existence of an Event of Default, settle,
collect, and apply against the Obligations any refund of insurance premiums or
any insurance proceeds payable to any Loan Party on account of any Loss or
otherwise and (b) irrevocably appoints Administrative Agent as its
attorney-in-fact to, during the existence of an Event of Default, indorse any
check or draft or take other action necessary to obtain such funds.

 

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Section 8.6.          Remedies Cumulative. All rights and remedies of
Administrative Agent or any Lender contained in the Loan Documents, the UCC, and
Applicable Law are cumulative and not in derogation or substitution of each
other. In particular, the rights and remedies of Administrative Agent, LC Issuer
and Lenders may be exercised at any time and from time to time, concurrently or
in any order, and shall not be exclusive of any other rights or remedies that
Administrative Agent, LC Issuer and Lenders may have, whether under any Loan
Document, the UCC, Applicable Law and shall include the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
any Loan Party of this Agreement or any of the other Loan Documents.
Administrative Agent may, and at the direction of the Required Lenders shall, at
any time or times, proceed directly against any Loan Party to collect the
Obligations without prior recourse to the Collateral. All rights and remedies
shall continue in full force and effect until Payment in Full of all
Obligations.

 

Article 9

 

ADMINISTRATIVE AGENT

 

Section 9.1.          Appointment of Administrative Agent. Each Lender
irrevocably appoints Regions Bank as Administrative Agent and authorizes it to
take such actions on its behalf and to exercise such powers as are delegated to
Administrative Agent under this Agreement and the other Loan Documents, together
with all such actions and powers that are reasonably incidental thereto.
Administrative Agent may perform any of its duties hereunder or under the other
Loan Documents by or through any one or more sub-agents or attorneys-in-fact
appointed by Administrative Agent. Administrative Agent and any such sub-agent
or attorney-in-fact may perform any and all of its duties and exercise its
rights and powers through their respective Related Parties. The exculpatory
provisions set forth in this Article shall apply to any such sub-agent,
attorney-in-fact or Related Party and shall apply to their respective activities
in connection with the syndication of the credit facilities provided for herein
as well as activities as Administrative Agent.

 

Section 9.2.          Nature of Duties of Administrative Agent. Administrative
Agent shall not have any duties or obligations except those expressly set forth
in this Agreement and the other Loan Documents. Without limiting the generality
of the foregoing, (a) Administrative Agent shall not be subject to any fiduciary
or other implied duties, regardless of whether a Default or an Event of Default
has occurred and is continuing, (b) Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
those discretionary rights and powers expressly contemplated by the Loan
Documents that Administrative Agent is required to exercise in writing by the
Required Lenders (or such other number or percentage of Lenders as shall be
necessary under the circumstances as provided in Section 10.2), and (c) except
as expressly set forth in the Loan Documents, Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to any Loan Party or any of its Subsidiaries that is
communicated to or obtained by Administrative Agent or any of its Affiliates in
any capacity. Administrative Agent shall not be liable for any action taken or
not taken by it, its sub-agents or its attorneys-in-fact with the consent or at
the request of the Required Lenders (or such other number or percentage of
Lenders as shall be necessary under the circumstances as provided in Section
10.2) or in the absence of its own gross negligence or willful misconduct.
Administrative Agent shall not be responsible for the negligence or misconduct
of any sub- agents or attorneys-in-fact selected by it with reasonable care.
Administrative Agent shall not be deemed to have knowledge of any Default or
Event of Default unless and until written notice thereof (which notice shall
include an express reference to such event being a "Default" or "Event of
Default" hereunder) is given to Administrative Agent by any Loan Party or any
Lender, and Administrative Agent shall not be responsible for or have any duty
to ascertain or inquire into (i) any statement, warranty or representation made
in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered hereunder or thereunder or in
connection herewith or therewith, (iii) the performance or observance of any of
the covenants, agreements, or other terms and conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article III or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to Administrative Agent. Administrative Agent may consult with legal
counsel (including counsel for any Loan Party) concerning all matters pertaining
to such duties.

 

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Section 9.3.          Lack of Reliance on Administrative Agent. Each of Lenders
acknowledges that it has, independently and without reliance upon Administrative
Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each of Lenders also acknowledges that it will, independently and
without reliance upon Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, continue to make its own
decisions in taking or not taking any action under or based on this Agreement,
any related agreement or any document furnished hereunder or thereunder.

 

Section 9.4.          Certain Rights of Administrative Agent. If Administrative
Agent shall request instructions from the Required Lenders with respect to any
action or actions (including the failure to act) in connection with this
Agreement, Administrative Agent shall be entitled to refrain from such act or
taking such act unless and until it shall have received instructions from such
Lenders, and Administrative Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, no Lender shall have
any right of action whatsoever against Administrative Agent as a result of
Administrative Agent acting or refraining from acting hereunder in accordance
with the instructions of the Required Lenders where required by the terms of
this Agreement.

 

Section 9.5.          Reliance by Administrative Agent. Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing (including any electronic message, posting or other
distribution) believed by it to be genuine and to have been signed, sent or made
by the proper Person. Administrative Agent may also rely upon any statement made
to it orally or by telephone and believed by it to be made by the proper Person
and shall not incur any liability for relying thereon. Administrative Agent may
consult with legal counsel (including counsel for any Loan Party), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or not taken by it in accordance with the advice of such
counsel, accountants or experts.

 

Section 9.6.          Administrative Agent in its Individual Capacity. The bank
serving as Administrative Agent shall have the same rights and powers under this
Agreement and any other Loan Document in its capacity as a Lender as any other
Lender and may exercise or refrain from exercising the same as though it were
not Administrative Agent; and the terms "Lenders," "Required Lenders," or any
similar terms shall, unless the context clearly otherwise indicates, include
Administrative Agent in its individual capacity. The bank acting as
Administrative Agent and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with any Loan Party or any
Subsidiary or Affiliate of any Loan Party as if it were not Administrative Agent
hereunder.

 

Section 9.7.          Successor Administrative Agent.

 

(a)          Administrative Agent may resign at any time by giving notice
thereof to Lenders and Borrower Agent. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Administrative Agent,
subject to approval by Borrower Agent provided that no Default or Event of
Default shall exist at such time. If no successor Administrative Agent shall
have been so appointed, and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of resignation, then the
retiring Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank organized under the laws
of the United States or any state thereof or a bank which maintains an office in
the United States, having a combined capital and surplus of at least
$500,000,000.

 

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(b)          Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement and the
other Loan Documents. If, within 45 days after written notice is given of the
retiring Administrative Agent's resignation under this Section 9.7, no successor
Administrative Agent shall have been appointed and shall have accepted such
appointment, then on such 45th day (i) the retiring Administrative Agent's
resignation shall become effective, (ii) the retiring Administrative Agent shall
thereupon be discharged from its duties and obligations under the Loan Documents
and (iii) the Required Lenders shall thereafter perform all duties of the
retiring Administrative Agent under the Loan Documents until such time as the
Required Lenders appoint a successor Administrative Agent as provided above.
After any retiring Administrative Agent's resignation hereunder, the provisions
of this Article shall continue in effect for the benefit of such retiring
Administrative Agent and its representatives and agents in respect of any
actions taken or not taken by any of them while it was serving as Administrative
Agent.

 

Section 9.8.          Withholding Tax. To the extent required by any applicable
law, Administrative Agent may withhold from any interest payment to any Lender
an amount equivalent to any applicable withholding tax. If the Internal Revenue
Service or any authority of the United States or any other jurisdiction asserts
a claim that Administrative Agent did not properly withhold tax from amounts
paid to or for the account of any Lender (because the appropriate form was not
delivered or was not properly executed, or because such Lender failed to notify
Administrative Agent of a change in circumstances that rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason),
such Lender shall indemnify Administrative Agent (to the extent that
Administrative Agent has not already been reimbursed by Borrowers and without
limiting the obligation of Borrowers to do so) fully for all amounts paid,
directly or indirectly, by Administrative Agent as tax or otherwise, including
penalties and interest, together with all expenses incurred, including legal
expenses, allocated staff costs and any out of pocket expenses.

 

Section 9.9.          Administrative Agent May File Proofs of Claim.

 

(a)          In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to any Loan Party, Administrative Agent
(irrespective of whether the principal of any Loan or any Revolving Credit
Exposure shall then be due and payable as herein expressed or by declaration or
otherwise and irrespective of whether Administrative Agent shall have made any
demand on Borrowers) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

 

(i)          to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans or Revolving Credit Exposure
and all other Obligations that are owing and unpaid and to file such other
documents as may be necessary or advisable in order to have the claims of
Lenders and Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of Lenders and Administrative
Agent and its agents and counsel and all other amounts due Lenders, and
Administrative Agent under Section 10.3) allowed in such judicial proceeding;
and

 

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(ii)         to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same.

 

(b)          Any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Lender to make such payments to Administrative Agent and, if
Administrative Agent shall consent to the making of such payments directly to
Lenders, to pay to Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of Administrative Agent and
its agents and counsel, and any other amounts due Administrative Agent under
Section 10.3.

 

Nothing contained herein shall be deemed to authorize Administrative Agent to
authorize or consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Lender or to authorize Administrative Agent to vote in
respect of the claim of any Lender in any such proceeding.

 

Section 9.10.         Authorization to Execute Other Loan Documents. Each Lender
hereby authorizes Administrative Agent to execute on behalf of all Lenders all
Loan Documents other than this Agreement.

 

Section 9.11.         Administrative Agent Titles. Each Lender, other than
Administrative Agent, that is designated (on the cover page of this Agreement or
otherwise) by Administrative Agent as an "Arranger," "Documentation Agent," or
"Syndication Agent" of any type shall not have any right, power, responsibility,
or duty under any Loan Documents other than those applicable to all Lenders and
shall in no event be deemed to have any fiduciary relationship with any other
Lender.

 

Section 9.12.         Bank Product Providers. Each holder of Secured Bank
Product Obligations agrees to be bound by the Loan Documents. Each holder of
Secured Bank Product Obligations shall indemnify, defend and hold harmless
Administrative Agent Indemnitees, to the extent not reimbursed by Loan Parties,
against all Claims that may be incurred by or asserted against any
Administrative Agent Indemnitee in connection with such provider's Secured Bank
Product Obligations.

 

Section 9.13.         No Third Party Beneficiaries. This Section 9 is an
agreement solely among Administrative Agent, LC Issuer, and Lenders and shall
survive Payment in Full of the Obligations. This Section 9 does not confer any
rights or benefits upon Loan Parties or any other Person, and no Loan Party
shall have any standing to enforce this Section 9. As between Loan Parties and
Administrative Agent, any action that Administrative Agent may take under any
Loan Documents or with respect to any Obligations shall be conclusively presumed
to have been authorized and directed by LC Issuer and Lenders, as applicable.

 

Section 9.14.         Certifications From Lenders and Participants; PATRIOT Act;
No Reliance.

 

(a)          PATRIOT Act Certifications. Each Lender or assignee or Participant
of a Lender that is not incorporated under the laws of the United States of
America or a state thereof (and is not excepted from the certification
requirement contained in Section 313 of the PATRIOT Act and the applicable
regulations because it is both (i) an affiliate of a depository institution or
foreign bank that maintains a physical presence in the United States or foreign
country, and (ii) subject to supervision by a banking authority regulating such
affiliated depository institution or foreign bank) shall deliver to
Administrative Agent the certification, or, if applicable, recertification,
certifying that such Lender, assignee or Participant is not a "shell" and
certifying to other matters as required by Section 313 of the PATRIOT Act and
the applicable regulations: (1) within ten (10) days after the Closing Date, and
(2) as such other times as are required under the PATRIOT Act.

 

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(b)          No Reliance. Each Lender acknowledges and agrees that neither such
Lender, nor any of its Affiliates, Participants or assignees, may rely on
Administrative Agent to carry out such Lender's, Affiliate's, Participant's or
assignee's customer identification program, or other obligations required or
imposed under or pursuant to the PATRIOT Act or the regulations thereunder,
including the regulations contained in 31 CFR 1020.220 (as hereafter amended or
replaced, the "CIP Regulations"), or any other Anti-Terrorism Law, including any
programs involving any of the following items relating to or in connection with
any of the Loan Parties, their Affiliates or their agents, the Loan Documents or
the transactions hereunder or contemplated hereby: (i) any identity verification
procedures, (ii) any recordkeeping, (iii) comparisons with government lists,
(iv) customer notices or (v) other procedures required under the CIP Regulations
or such other Anti-Terrorism Laws.

 

Article 10

 

MISCELLANEOUS

 

Section 10.1.          Notices.

 

(a)          Written Notices. Except in the case of notices and other
communications expressly permitted to be given otherwise, all notices and other
communications to any party herein to be effective shall be in writing and shall
be delivered by hand or overnight courier service, or mailed by certified or
registered mail, as follows:

 

To any Loan Party:

Fred's, Inc.

4300 New Getwell Road

Memphis, Tennessee 38116

Attn:      Jerry A. Shore,

Chief Executive Officer

Facsimile: (901) 365-6815

    To Regions Bank: the address set forth on the signature page of Regions Bank
hereto     To any other Lender:

the address set forth on the signature page of such Lender hereto or in the
Administrative Questionnaire or the Assignment and Acceptance executed by such
Lender

 

Any party hereto may change its address for notices and other communications
hereunder by notice to the other parties hereto. All such notices and other
communications shall be effective upon actual receipt by the relevant Person or,
if delivered by overnight courier service, upon the first Business Day after the
date deposited with such courier service for overnight (next-day) delivery or,
if mailed, upon the third Business Day after the date deposited into the mail
or, if delivered by hand, upon delivery; provided that notices delivered to
Administrative Agent shall not be effective until actually received by such
Person at its address specified in this Section 10.1.

 

(b)          Electronic Communications.

 

(i)          Notices and other communications to Lenders hereunder may be
delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by Administrative
Agent, provided that the foregoing shall not apply to notices to any Lender
pursuant to Article II unless such Lender, as applicable, and Administrative
Agent have agreed to receive such notices thereof by electronic communication
and have agreed to the procedures governing such communications.

 

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(ii)         Administrative Agent or Borrower Agent may, in its discretion,
agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by each; provided that approval
of such procedures may be limited to particular notices or communications and
shall not include notices of a Default or Event of Default.

 

(iii)        Unless Administrative Agent otherwise prescribes, (x) 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 (y) 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 (x) of notification that such notice or communication is
available and identifying the website address therefor.

 

Section 10.2.          Waiver; Amendments.

 

(a)          No failure or delay by Administrative Agent or any Lender in
exercising any right or power hereunder or under any other Loan Document, and no
course of dealing between any Loan Party and Administrative Agent or any Lender,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such right or power, preclude any other or further exercise thereof or
the exercise of any other right or power hereunder or thereunder. The rights and
remedies of Administrative Agent and Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies
provided by law. No waiver of any provision of this Agreement or of any other
Loan Document or consent to any departure by any Loan Party therefrom shall in
any event be effective unless the same shall be permitted by Section 10.2(b),
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan shall not be construed as a waiver of any
Default or Event of Default, regardless of whether Administrative Agent or any
Lender may have had notice or knowledge of such Default or Event of Default at
the time.

 

(b)          No amendment or waiver of any provision of this Agreement or of the
other Loan Documents nor consent to any departure by any Loan Party therefrom,
shall in any event be effective unless the same shall be in writing and signed
by each Loan Party and the Required Lenders, or each Loan Party and
Administrative Agent with the consent of the Required Lenders, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided that, in addition to the
consent of the Required Lenders, no amendment, waiver or consent shall:

 

(i)          increase the Commitment of any Lender without the written consent
of each Lender;

 

(ii)         reduce the principal amount of any Loan or reduce the rate of
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby;

 

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(iii)        postpone the date fixed for any payment of any principal of, or
interest on, any Loan or any fees hereunder or reduce the amount of, waive or
excuse any such payment, or postpone the scheduled date for the termination or
reduction of any Commitment, without the written consent of each Lender affected
thereby;

 

(iv)        change Section 2.19(b) or (c) in a manner that would alter the pro
rata sharing of payments required thereby, without the written consent of each
Lender;

 

(v)         change any of the provisions of this Section 10.2(b) or the
definition of "Required Lenders" or any other provision hereof specifying the
number or percentage of Lenders which are required to waive, amend or modify any
rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender;

 

(v)         change the definition of "Borrowing Base Trigger Event" or "FIFO
Inventory Amount" without the written consent of each Lender;

 

(vi)        change any provision of Section 13 of the Security Agreement or,
prior to the Borrowing Base Trigger Event, change any provision of Section 16 of
the Security Agreement, without the written consent of each Lender;

 

(vii)       except to the extent provided herein, release any Loan Party from
liability for any Obligations, without the written consent of each Lender; or

 

(viii)      release all or substantially all of the Collateral without the
written consent of each Lender, contractually subordinate any of Administrative
Agent's Liens in and to the Collateral, except to the extent expressly permitted
by the terms hereof or subordinate the payment of any Obligations;

 

provided, further, that no such amendment, waiver or consent shall amend, modify
or otherwise affect the rights, duties or obligations of Administrative Agent or
Swingline Lender without the prior written consent of such Person.

 

Notwithstanding anything to the contrary herein, no Defaulting Lender shall have
any right to approve or disapprove any amendment, waiver or consent hereunder,
except that the Commitment of such Lender may not be increased or extended, and
amounts payable to such Lender hereunder may not be permanently reduced, without
the consent of such Lender (other than reductions in fees and interest in which
such reduction does not disproportionately affect such Lender). Notwithstanding
anything contained herein to the contrary, this Agreement may be amended and
restated without the consent of any Lender (but with the consent of each Loan
Party and Administrative Agent) if, upon giving effect to such amendment and
restatement, such Lender shall no longer be a party to this Agreement (as so
amended and restated), the Commitments of such Lender shall have terminated (but
such Lender shall continue to be entitled to the benefits of Sections 2.16,
2.17, 2.18 and 10.3), such Lender shall have no other commitment or other
obligation hereunder and such Lender shall have been paid in full all principal,
interest and other amounts owing to it or accrued for its account under this
Agreement.

 

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Section 10.3.          Expenses; Indemnification.

 

(a)          Loan Parties shall pay (i) all reasonable, out-of-pocket costs and
expenses of Administrative Agent and its Affiliates, including the reasonable
fees, charges and disbursements of counsel for Administrative Agent and its
Affiliates, in connection with the syndication of the credit facilities provided
for herein, the preparation and administration of the Loan Documents and any
amendments, modifications or waivers thereof (whether or not the transactions
contemplated in this Agreement or any other Loan Document shall be consummated),
including the reasonable fees, charges and disbursements of counsel for
Administrative Agent and its Affiliates, (ii) all out-of-pocket costs and
expenses (including, without limitation, Extraordinary Expenses and the
reasonable fees, charges and disbursements of outside counsel and the allocated
cost of inside counsel) incurred by Administrative Agent or any Secured Party in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section 10.3, or in connection
with the Loans made hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans. As used herein, "Extraordinary Expenses" shall mean all costs, expenses,
or advances that Administrative Agent may incur during a Default or Event of
Default or during the pendency of an Insolvency Proceeding of a Loan Party,
including those relating to (a) any audit, inspection, field examination,
repossession, storage, repair, appraisal, insurance, manufacture, preparation,
or advertising for sale, sale, collection, or other preservation of or
realization upon any Collateral; (b) any action, arbitration or other proceeding
(whether instituted by or against Administrative Agent, any Lender, any Loan
Party, any representative of creditors of a Loan Party or any other Person) in
any way relating to any Collateral (including the validity, perfection,
priority, or avoidability of Administrative Agent's Liens with respect to any
Collateral), Loan Documents, Letters of Credit, or Obligations, including any
lender liability or other Claims; (c) the exercise, protection or enforcement of
any rights or remedies of Administrative Agent in, or the monitoring of, any
Insolvency Proceeding; (d) settlement or satisfaction of any taxes, charges, or
Liens with respect to any Collateral; (e) any Enforcement Action; (f)
negotiation and documentation of any amendment, restatement, supplement,
modification, waiver, workout, restructuring, or forbearance with respect to any
Loan Documents or Obligations; and (g) Protective Advances. Such costs,
expenses, and advances include transfer fees, Other Taxes, storage fees,
insurance costs, permit fees, utility reservation and standby fees, legal fees
(including all costs of internal counsel or, in lieu thereof, a documentation
fee comparable in amount thereto), appraisal fees, brokers' fees and
commissions, auctioneers' fees and commissions, accountants' fees, turnaround
and financial consultants and experts' fees, environmental study fees and
remedial response costs, wages and salaries paid to employees of any Loan Party
or independent contractors in liquidating any Collateral, and travel expenses.

 

(b)          Loan Parties shall indemnify Administrative Agent (and any
sub-agent thereof), each Secured Party and each Related Party of any of the
foregoing Persons (each such Person being called an "Indemnitee") against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (including the reasonable fees, charges and
disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or
asserted against any Indemnitee by any other Person, and arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective
obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby, (ii) any Loan or the use or proposed use of the
proceeds therefrom, (iii) any actual or alleged presence or Release of Hazardous
Materials on or from any property owned or operated by Parent or any of its
Subsidiaries, or any Environmental Liability related in any way to Parent or any
of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by any
Loan Party, and regardless of whether any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
have resulted from (x) the gross negligence or willful misconduct of such
Indemnitee or (y) a claim brought by any Loan Party against an Indemnitee for
breach in bad faith of such Indemnitee's obligations hereunder or under any
other Loan Document. No Indemnitee shall be liable for any damages arising from
the use by others of any information or other materials obtained through
Syndtrak, Intralinks or any other Internet or intranet website, except as a
result of such Indemnitee's gross negligence or willful misconduct.

 

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(c)          Loan Parties shall pay, and hold Administrative Agent and each
Secured Party harmless from and against, any and all present and future stamp,
documentary, and other similar taxes with respect to this Agreement and any
other Loan Documents, any collateral described therein or any payments due
thereunder, and save Administrative Agent and Secured Party harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission to pay such taxes.

 

(d)          To the extent that Loan Parties fail to pay any amount required to
be paid to Administrative Agent or Swingline Lender under Section 10.3(a), (b)
or (c), each Lender severally agrees to pay to Administrative Agent or Swingline
Lender such Lender's Pro Rata Share (in accordance with its respective Revolving
Commitment (or Revolving Credit Exposure, as applicable) determined as of the
time that the unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified payment,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against Administrative Agent or Swingline Lender in its capacity as
such.

 

(e)          To the extent permitted by Applicable Law, no Loan Party shall
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to actual or direct damages) arising out of, in connection with or as a result
of this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby, the transactions contemplated therein, any Loan or the use
of proceeds thereof.

 

(f)          To the extent permitted by Applicable Law, Administrative Agent and
Lenders shall not assert, and hereby waive, any claim against any Loan Party and
its Subsidiaries, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to actual or direct damages)
arising out of, in connection with or as a result of this Agreement, any other
Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated therein, any Loan or the use of proceeds thereof.

 

(e)          All amounts due under this Section 10.3 shall be payable promptly
after written demand therefor.

 

Section 10.4.          Successors and Assigns.

 

(a)          The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that no Loan Party may assign or otherwise transfer any
of its rights or obligations hereunder without the prior written consent of
Administrative Agent and each Lender, and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an assignee in
accordance with the provisions of Section 10.4(b), (ii) by way of participation
in accordance with the provisions of Section 10.4(d) or (iii) by way of pledge
or assignment of a security interest subject to the restrictions of Section
10.4(f) (and any other attempted assignment or transfer by any party hereto
shall be null and void). 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. Participants to the extent
provided in Section 10.4(d) and, to the extent expressly contemplated hereby,
the Related Parties of each of Administrative Agent and Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

 

(b)          Any Lender may at any time assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitments, Loans and other Revolving Credit Exposure at the
time owing to it); provided that any such assignment shall be subject to the
following conditions:

 

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(i)           Minimum Amounts.

 

(A)         in the case of an assignment of the entire remaining amount of the
assigning Lender's Commitments, Loans and other Revolving Credit Exposure at the
time owing to it or in the case of an assignment to a Lender, an Affiliate of a
Lender or an Approved Fund, no minimum amount need be assigned; and

 

(B)         in any case not described in Section 10.4(b)(i)(A), the aggregate
amount of the Commitment (which for this purpose includes Loans and Revolving
Credit Exposure outstanding thereunder) or, if the applicable Commitment is not
then in effect, the principal outstanding balance of the Loans and Revolving
Credit Exposure of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to Administrative Agent or, if "Trade Date" is specified
in the Assignment and Acceptance, as of the Trade Date) shall not be less than
$5,000,000 with respect to Revolving Loans and in minimum increments of
$1,000,000, unless each of Administrative Agent and, so long as no Event of
Default has occurred and is continuing, Borrower Agent otherwise consents (each
such consent not to be unreasonably withheld or delayed).

 

(ii)         Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement with respect to the Loans, other Revolving
Credit Exposure or the Commitments assigned.

 

(iii)        Required Consents. No consent shall be required for any assignment
except to the extent required by Section 10.4(b)(i)(B) and, in addition:

 

(A)         the consent of Borrower Agent (such consent not to be unreasonably
withheld or delayed) shall be required unless (x) an Event of Default has
occurred and is continuing at the time of such assignment or (y) such assignment
is to a Lender, an Affiliate of such Lender or an Approved Fund of such Lender;
and

 

(B)         the consent of Administrative Agent (such consent not to be
unreasonably withheld or delayed) shall be required unless such assignment is to
a Lender, an Affiliate of such Lender or an Approved Fund of such Lender.

 

(iv)        Assignment and Acceptance. The applicable Lender and assignee with
respect to each assignment shall deliver to Administrative Agent (A) a duly
executed Assignment and Acceptance, (B) an Administrative Questionnaire unless
the assignee is already a Lender, (C) a processing fee in the amount of $3,500
(or such lesser amount agreed to by Administrative Agent in its discretion), and
(D) the documents required under Section 2.18(e).

 

(v)         No Assignment to Loan Parties. No such assignment shall be made to
Parent or any of Parent's Affiliates or Subsidiaries.

 

(vi)        No Assignment to Natural Persons. No such assignment shall be made
to a natural person.

 

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Subject to acceptance and recording thereof by Administrative Agent pursuant to
Section 10.4(c), from and after the effective date specified in each Assignment
and Acceptance, the assignee thereunder shall be a party to this Agreement and,
to the extent of the interest assigned by such Assignment and Acceptance, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto) but shall continue to be entitled to the benefits of Sections
2.16, 2.17, 2.18 and 10.3 with respect to facts and circumstances occurring
prior to the effective date of such assignment; provided that, except to the
extent otherwise expressly agreed by the affected parties, no assignment by a
Defaulting Lender will constitute a waiver or release of any claim of any party
hereunder arising from such Lender's having been a Defaulting Lender. Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section 10.4(b) shall be treated for purposes of
this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with Section 10.4(d). If the consent of Borrower Agent
to an assignment is required hereunder (including a consent to an assignment
which does not meet the minimum assignment thresholds specified above), Borrower
Agent shall be deemed to have given its consent unless it shall object thereto
by written notice to Administrative Agent within five (5) Business Days after
notice thereof has actually been delivered by the assigning Lender (through
Administrative Agent) to Borrower Agent.

 

(c)          Any Lender may at any time, without the consent of, or notice to,
any Loan Party, Administrative Agent or Swingline Lender, sell participations to
any Person (other than a natural person, Parent or any of Parent's Affiliates or
Subsidiaries) (each, a "Participant") in all or a portion of such Lender's
rights and/or obligations under this Agreement (including all or a portion of
its Commitment and/or the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) Loan Parties, Swingline Lender, Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement.

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver with respect to the following to the
extent affecting such Participant: (i) increase the Commitment of such Lender;
(ii) reduce the principal amount of any Loan or reduce the rate of interest
thereon, or reduce any fees payable hereunder; (iii) postpone the date fixed for
any payment of any principal of, or interest on, any Loan or any fees hereunder
or reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date for the termination or reduction of any Commitment; (iv) change
Section 2.19(b) or (c) in a manner that would alter the pro rata sharing of
payments required thereby; (v) change any of the provisions of Section 10.2(b)
or the definition of "Required Lenders" or any other provision hereof specifying
the number or percentage of Lenders which are required to waive, amend or modify
any rights hereunder or make any determination or grant any consent hereunder.
Subject to Section 10.4(e), each Loan Party agrees that each Participant shall
be entitled to the benefits of Sections 2.16, 2.17. and 2.18 to the same extent
as if it were a Lender and had acquired its interest by assignment pursuant to
Section 10.4(b); provided that such Participant agrees to be subject to Section
2.20 as though it were a Lender. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.7 as though it
were a Lender; provided that such Participant agrees to be subject to Section
2.19 as though it were a Lender.

 

(d)          Each Lender that sells a participation shall, acting solely for
this purpose as an agent of Loan Parties, maintain a register in the United
States on which it enters the name and address of each Participant and the
principal amounts (and stated interest) of each Participant's interest in the
Loans or other obligations under the Loan Documents (the "Participant
Register"). The entries in the Participant Register shall be conclusive, absent
manifest error, and such Lender shall treat each person whose name is recorded
in the Participant Register as the owner of such participation for all purposes
of this Agreement notwithstanding any notice to the contrary. Borrower Agent and
Administrative Agent shall have inspection rights to such Participant Register
(upon reasonable prior notice to the applicable Lender) solely for purposes of
demonstrating that such Loans or other obligations under the Loan Documents are
in "registered form" for purposes of the Code.

 

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(e)          A Participant shall not be entitled to receive any greater payment
under Sections 2.16 and 2.18 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 with Borrower Agent's
prior written consent. A Participant shall not be entitled to the benefits of
Section 2.18 unless Borrower Agent is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of Loan Parties, to
comply with Section 2.18(e) and (f) as though it were a Lender.

 

(f)          Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

 

(g)          If any Lender requests compensation under Section 2.16, or if a
Borrower is required to pay any Indemnified Taxes or additional amounts to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.18 and, in each case, such Lender has declined or is unable to
designate a different lending office in accordance with Section 2.20, or if any
Lender is a Defaulting Lender, then such Borrower may, at its sole expense and
effort, upon notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in, and consents required by, this Section 10.4),
all of its interests, rights (other than its existing rights to payments
pursuant to Section 2.16 or Section 2.18) and obligations under this Agreement
and the related Loan Documents to another Person that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that:

 

(i)          Borrowers shall have paid to the Administrative Agent the
assignment fee specified in Section 10.4(b)(iv);

 

(ii)         such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder and under
the other Loan Documents (including any amounts under Section 2.17) from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or Borrowers (in the case of all other amounts);

 

(iii)        in the case of any such assignment resulting from a claim for
compensation under Section 2.16 or payments required to be made pursuant to
Section 2.18, such assignment will result in a reduction in such compensation or
payments thereafter; and

 

(iv)        such assignment does not conflict with Applicable Law.

 

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling Borrowers to require such assignment and delegation
cease to apply.

 

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Section 10.5.          Governing Law; Jurisdiction; Consent to Service of
Process.

 

(a)          THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE
SPECIFIED BY THE TERMS HEREOF OR THEREOF OR UNLESS THE LAWS OF ANOTHER
JURISDICTION MAY, BY REASON OF MANDATORY PROVISIONS OF LAW, GOVERN THE
PERFECTION, PRIORITY, OR ENFORCEMENT OF SECURITY INTERESTS IN THE COLLATERAL,
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA, WITHOUT GIVING EFFECT TO
ANY CONFLICT OF LAW PRINCIPLES OR OTHER RULE OF LAW WHICH WOULD CAUSE THE
APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE LAW OF THE STATE OF
GEORGIA (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).

 

(b)          EACH LOAN PARTY HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF GEORGIA AND THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF GEORGIA, IN RESPECT OF ANY PROCEEDING, DISPUTE, OR
LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
AGREEMENT, THE LOAN DOCUMENTS, OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY PARTY WITH RESPECT
HERETO OR THERETO AND AGREES THAT ANY SUCH PROCEEDING, DISPUTE, OR LITIGATION
MAY BE BROUGHT BY IT IN SUCH COURTS. WITH RESPECT TO SUCH COURTS, EACH LOAN
PARTY IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS, AND DEFENSES IT MAY HAVE
REGARDING PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE, OR INCONVENIENT FORUM.
EACH PARTY HERETO WAIVES PERSONAL SERVICE OF PROCESS OF ANY AND ALL PROCESS
SERVED UPON IT AND IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 10.1, SUCH SERVICE TO BE EFFECTIVE AT THE TIME
SUCH NOTICE WOULD BE DEEMED DELIVERED UNDER SECTION 10.1. Nothing herein shall
limit the right of Administrative Agent or any Lender to bring proceedings
against any Loan Party in any other court, nor limit the right of any party to
serve process in any other manner permitted by Applicable Law. Nothing in this
Agreement shall be deemed to preclude enforcement by Administrative Agent of any
judgment or order obtained in any forum or jurisdiction.

 

(c)          Each Loan Party irrevocably and unconditionally waives any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding described in Section 10.1(b) and brought in any court
referred to in Section 10.1(b). Each of the parties hereto irrevocably waives,
to the fullest extent permitted by Applicable Law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

(d)          Each party to this Agreement irrevocably consents to the service of
process in any manner permitted by law.

 

Section 10.6.          WAIVERS.

 

(a)          EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.6.

 

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(b)          NO PARTY TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY SUCCESSOR OR ASSIGNEE OF SUCH PERSON, OR ANY THIRD PARTY
BENEFICIARY, OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH ANY SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY, SPECIAL, OR CONSEQUENTIAL DAMAGES AS A
RESULT OF ANY TRANSACTION CONTEMPLATED HEREUNDER OR UNDER ANY OTHER LOAN
DOCUMENT.

 

(c)          To the fullest extent permitted by Applicable Law and subject to
the specific provisions of any Loan Document, each Loan Party waives (i)
presentment, demand, protest, notice of presentment, notice of dishonor,
default, non-payment, maturity, release, compromise, settlement, extension, or
renewal of any commercial paper, accounts, documents, instruments, chattel
paper, and guaranties at any time held by Administrative Agent or any Lender on
which a Loan Party may in any way be liable; (ii) notice before taking
possession or control of any Collateral; (iii) any bond or security that might
be required by a court before allowing Administrative Agent or Lender to
exercise any rights or remedies under this Agreement or the other Loan
Documents; (iv) any claim against Administrative Agent or any Lender on any
theory of liability, for special, indirect, consequential, exemplary, or
punitive damages (as opposed to direct or actual damages) in any way relating to
any Enforcement Action, Obligations, this Agreement or the other Loan Documents,
or transactions relating hereto or thereto; (v) notice of acceptance hereof;
(vi) all rights to interpose any claims, deductions, setoffs, or counterclaims
of any nature (other than compulsory counterclaims) in any action or proceeding
with respect to this Agreement, the other Loan Documents, the Obligations, the
Collateral, or any matter arising therefrom or relating hereto or thereto; and
(vii) any claim under any law or equitable principle requiring Administrative
Agent or any Lender to marshal any assets in favor of any Loan Party or against
any Obligations or otherwise attempt to realize upon any Collateral or
collateral of any Loan Party, or any appraisement, evaluation, stay, extension,
homestead, redemption, or exemption laws now or hereafter in force to prevent or
hinder the enforcement of this Agreement. Each Loan Party acknowledges that the
foregoing waivers are a material inducement to Administrative Agent, LC Issuer
and Lenders' entering into this Agreement and that Administrative Agent, LC
Issuer and Lenders are relying upon the foregoing in their dealings with Loan
Parties.

 

(d)          Each Loan Party has reviewed the foregoing waivers with its legal
counsel and has knowingly and voluntarily waived its jury trial and other rights
following consultation with legal counsel. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.

 

Section 10.7.          Right of Set-off. In addition to any rights now or
hereafter granted under Applicable Law and not by way of limitation of any such
rights, each Lender shall have the right, at any time or from time to time upon
the occurrence and during the continuance of an Event of Default, without prior
notice to any Loan Party, any such notice being expressly waived by each Loan
Party to the extent permitted by Applicable Law, to set off and apply against
all deposits (general or special, time or demand, provisional or final) of any
Loan Party at any time held or other obligations at any time owing by such
Lender to or for the credit or the account of Borrowers against any and all
Obligations held by such Lender, irrespective of whether such Lender shall have
made demand hereunder and although such Obligations may be unmatured. Each
Lender agrees promptly to notify Administrative Agent and Borrower Agent after
any such set-off and any application made by such Lender; provided that the
failure to give such notice shall not affect the validity of such set-off and
application. Each Lender agrees to apply all amounts collected from any such
set-off to the Obligations in the manner set forth in Section 2.19 before
applying such amounts to any other Indebtedness or other obligations owed by any
Loan Party or any of its Subsidiaries to such Lender.

 

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Section 10.8.          Counterparts; Integration. This Agreement may be executed
by one or more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. This Agreement, the other Loan
Documents, and any separate letter agreements relating to any fees payable to
Administrative Agent and its Affiliates constitute the entire agreement among
the parties hereto and thereto regarding the subject matters hereof and thereof
and supersede all prior agreements and understandings, oral or written,
regarding such subject matters. Delivery of an executed counterpart to this
Agreement or any other Loan Document by facsimile transmission or by electronic
mail in pdf format shall be as effective as delivery of a manually executed
counterpart hereof.

 

Section 10.9.          Survival. All covenants, agreements, representations and
warranties made by Loan Parties herein and in the certificates, reports, notices
or other instruments delivered in connection with or pursuant to this Agreement
shall be considered to have been relied upon by the other parties hereto and
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the making of any Loans, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that Administrative
Agent or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.16, 2.17, 2.18, and 10.3 and
Article IX shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the Commitments or the termination of this Agreement.

 

Section 10.10.         Severability. Any provision of this Agreement or any
other Loan Document held to be illegal, invalid or unenforceable in any
jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of
such illegality, invalidity or unenforceability without affecting the legality,
validity or enforceability of the remaining provisions hereof or thereof; and
the illegality, invalidity or unenforceability of a particular provision in a
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.

 

Section 10.11.         Confidentiality. Each of Administrative Agent and Lenders
agrees to take normal and reasonable precautions to maintain the confidentiality
of any information relating to Parent or any of its Subsidiaries or any of their
respective businesses and provided to it by or on behalf of Parent or any of its
Subsidiaries, other than any such information that is available to
Administrative Agent or any Lender on a non-confidential basis prior to
disclosure by Parent or any of its Subsidiaries, except that such information
may be disclosed (i) to any Related Party of Administrative Agent or any such
Lender including, without limitation, accountants, legal counsel and other
advisors, (ii) to the extent required by Applicable Law, applicable regulations
or by any subpoena or similar legal process, (iii) to the extent requested by
any regulatory agency or authority purporting to have jurisdiction over it
(including any self-regulatory authority such as the National Association of
Insurance Commissioners), (iv) to the extent that such information becomes
publicly available other than as a result of a breach of this Section 10.11, or
which becomes available to Administrative Agent, any Lender or any Related Party
of any of the foregoing on a non-confidential basis from a source other than any
Loan Party or any of its Subsidiaries, (v) in connection with the exercise of
any remedy hereunder or under any other Loan Documents or any suit, action or
proceeding relating to this Agreement or any other Loan Documents or the
enforcement of rights hereunder or thereunder, (vi) subject to execution by such
Person of an agreement containing provisions substantially the same as those of
this Section 10.11, to (A) any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, or (B) any actual or prospective party (or its Related Parties) to
any swap or derivative or other transaction under which payments are to be made
by reference to any Loan Party and its obligations, this Agreement or payments
hereunder, (vii) to any rating agency, (viii) to the CUSIP Service Bureau or any
similar organization, or (ix) with the consent of Borrower Agent. Any Person
required to maintain the confidentiality of any information as provided for in
this Section 10.11 shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such information as such Person would accord its own
confidential information.

 

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Section 10.12.         Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which may be treated as
interest on such Loan under Applicable Law (collectively, the "Charges"), shall
exceed the maximum lawful rate of interest (the "Maximum Rate") which may be
contracted for, charged, taken, received or reserved by a Lender holding such
Loan in accordance with Applicable Law, the rate of interest payable in respect
of such Loan hereunder, together with all Charges payable in respect thereof,
shall be limited to the Maximum Rate and, to the extent lawful, the interest and
Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section 10.12 shall be cumulated
and the interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Rate to
the date of repayment (to the extent permitted by Applicable Law), shall have
been received by such Lender.

 

Section 10.13.         Patriot Act. Administrative Agent and each Lender hereby
notifies the Loan Parties that, pursuant to the requirements of the Patriot Act,
it is required to obtain, verify and record information that identifies each
Loan Party, which information includes the name and address of such Loan Party
and other information that will allow such Lender or Administrative Agent, as
applicable, to identify such Loan Party in accordance with the Patriot Act.

 

Section 10.14.         No Advisory or Fiduciary Responsibility. In connection
with all aspects of each transaction contemplated hereby (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document), each Loan Party acknowledges and agrees and acknowledges
its Affiliates' understanding that (i) (A) the services regarding this Agreement
provided by Administrative Agent and/or Lenders are arm's-length commercial
transactions between each Loan Party and their respective Affiliates, on the one
hand, and Administrative Agent and Lenders, on the other hand, (B) each Loan
Party has consulted their own legal, accounting, regulatory and tax advisors to
the extent they have deemed appropriate, and (C) each Loan Party is capable of
evaluating and understanding, and understands and accepts, the terms, risks and
conditions of the transactions contemplated hereby and by the other Loan
Documents; (ii) (A) each of Administrative Agent and Lenders is and has been
acting solely as a principal and, except as expressly agreed in writing by the
relevant parties, has not been, is not, and will not be acting as an advisor,
agent or fiduciary for any Loan Party or any of their respective Affiliates, or
any other Person, and (B) neither Administrative Agent nor any Lender has any
obligation to any Loan Party or any of their Affiliates with respect to the
transaction contemplated hereby except those obligations expressly set forth
herein and in the other Loan Documents; and (iii) Administrative Agent, Lenders
and their respective Affiliates may be engaged in a broad range of transactions
that involve interests that differ from those of Loan Parties and their
respective Affiliates, and each of Administrative Agent and Lenders has no
obligation to disclose any of such interests to any Loan Party or any of their
respective Affiliates. To the fullest extent permitted by law, each Loan Party
hereby waives and releases any claims that it may have against Administrative
Agent or any Lender with respect to any breach or alleged breach of agency or
fiduciary duty in connection with any aspect of any transaction contemplated
hereby.

 

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Section 10.15.         Revival and Reinstatement of Obligations. If the
incurrence or payment of the Obligations by or on behalf of any Borrower or the
transfer to Administrative Agent, LC Issuer, or any Lender of any Property
(including through setoff) should for any reason subsequently be declared to be
void or voidable under any state or federal law relating to creditors' rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
Property (collectively, a "Voidable Transfer"), and if Administrative Agent, LC
Issuer or any Lender, or any of them, is required to repay or restore, in whole
or in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that such Persons, or any of them, is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys' fees of such
Persons related thereto, the liability of Borrowers automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.

 

Section 10.16.         Time is of the Essence. Time is of the essence of this
Agreement and the other the Loan Documents.

 

Article 11

 

NATURE AND EXTENT OF EACH LOAN PARTY'S LIABILITY

 

Section 11.1.          Joint and Several Liability. Each Loan Party agrees that
it is jointly and severally liable for, and absolutely and unconditionally
guarantees to Administrative Agent, LC Issuer and Lenders the prompt payment and
performance of, all Obligations and all agreements under the Loan Documents.
Each Loan Party agrees that its guaranty obligations hereunder constitute a
continuing guaranty of payment and not of collection, that such obligations
shall not be discharged until Payment in Full of the Obligations, and that such
obligations are absolute and unconditional, irrespective of (i) the genuineness,
validity, regularity, enforceability, subordination, or any future modification
of, or change in, any Obligations or Loan Document, or any other document,
instrument, or agreement to which any Loan Party is or may become a party or be
bound; (ii) the absence of any action to enforce this Agreement (including this
Section 11) or any other Loan Document, or any waiver, consent, or indulgence of
any kind by Administrative Agent, LC Issuer, or any Lender with respect thereto;
(iii) the existence, value, or condition of, or failure to perfect a Lien, or to
preserve rights against, any security or guaranty for the Obligations or any
action, or the absence of any action, by Administrative Agent, LC Issuer, or any
Lender in respect thereof (including the release of any security or guaranty);
(iv) the insolvency of any Loan Party or Subsidiary; (v) any election by
Administrative Agent, LC Issuer, or any Lender in an Insolvency Proceeding for
the application of Section 1111(b)(2) of the Bankruptcy Code; (vi) any borrowing
or grant of a Lien by any other Loan Party, as debtor-in-possession under
Section 364 of the Bankruptcy Code or otherwise; (vii) the disallowance of any
claims of Administrative Agent, LC Issuer or any Lender against any Loan Party
for the repayment of any Obligations under Section 502 of the Bankruptcy Code or
otherwise; or (viii) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except Payment in Full of all Obligations.

 

Section 11.2.          Waivers.

 

(a)          Each Loan Party expressly waives all rights that it may have now or
in the future under any statute, at common law, in equity or otherwise, to
compel Administrative Agent or any other Secured Party to marshal assets or to
proceed against any Loan Party, other Person or security for the payment or
performance of any Obligations before, or as a condition to, proceeding against
such Loan Party. Each Loan Party waives all defenses available to a surety,
guarantor, or accommodation co-obligor other than Payment in Full of all
Obligations. It is agreed among each Loan Party, Administrative Agent, LC Issuer
and Lenders that the provisions of this Section 11 are of the essence of the
transaction contemplated by the Loan Documents and that, but for such
provisions, Administrative Agent, LC Issuer and Lenders would decline to make
Loans and issue Letters of Credit. Each Loan Party acknowledges that its
guaranty pursuant to this Section 11 is necessary to the conduct and promotion
of its business and can be expected to benefit such business.

 

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(b)          Administrative Agent and Lenders may, in their discretion, pursue
such rights and remedies as they deem appropriate, including realization upon
Collateral by judicial foreclosure or non-judicial sale or enforcement, without
affecting any rights and remedies under this Section 11. If, in taking any
action in connection with the exercise of any rights or remedies, Administrative
Agent, LC Issuer or any Lender shall forfeit any other rights or remedies,
including the right to enter a deficiency judgment against any Loan Party or
other Person, whether because of any Applicable Laws pertaining to "election of
remedies" or otherwise, each Loan Party consents to such action and waives any
claim based upon it, even if the action may result in loss of any rights of
subrogation that any Loan Party might otherwise have had. Any election of
remedies that results in denial or impairment of the right of Administrative
Agent, LC Issuer or any Lender to seek a deficiency judgment against any Loan
Party shall not impair any Loan Party's obligation to pay the full amount of the
Obligations. To the extent permitted by applicable law, each Loan Party waives
all rights and defenses arising out of an election of remedies, such as
non-judicial foreclosure with respect to any security for the Obligations, even
though that election of remedies destroys such Loan Party's rights of
subrogation against any other Person. Administrative Agent may bid all or a
portion of the Obligations at any foreclosure or trustee's sale or at any
private sale, and the amount of such bid need not be paid by Administrative
Agent but shall be credited against the Obligations. The amount of the
successful bid at any such sale, whether Administrative Agent or any other
Person is the successful bidder, shall be conclusively deemed to be the fair
market value of the Collateral, and the difference between such bid amount and
the remaining balance of the Obligations shall be conclusively deemed to be the
amount of the Obligations guaranteed under this Section 11, notwithstanding that
any present or future law or court decision may have the effect of reducing the
amount of any deficiency claim to which Administrative Agent, LC Issuer or any
Lender might otherwise be entitled but for such bidding at any such sale.

 

Section 11.3.          Extent of Liability; Contribution.

 

(a)          Notwithstanding anything herein to the contrary, each Loan Party's
liability under this Section 11 shall be limited to the greater of (A) all
amounts for which such Loan Party is primarily liable, as described below and
(B) such Loan Party's Allocable Amount.

 

(b)          If any Loan Party makes a payment under this Section 11 of any
Obligations (other than amounts for which such Loan Party is primarily liable)
(a "Guarantor Payment") that, taking into account all other Guarantor Payments
previously or concurrently made by any other Loan Party, exceeds the amount that
such Loan Party would otherwise have paid if each Loan Party had paid the
aggregate Obligations satisfied by such Guarantor Payments in the same
proportion that such Loan Party's Allocable Amount bore to the total Allocable
Amounts of all Loan Parties, then such Loan Party shall be entitled to receive
contribution and indemnification payments from, and to be reimbursed by, each
other Loan Party for the amount of such excess, pro rata based upon their
respective Allocable Amounts in effect immediately before such Guarantor
Payment. The "Allocable Amount" for any Loan Party shall be the maximum amount
that could then be recovered from such Loan Party under this Section 11 without
rendering such payment voidable under Section 548 of the Bankruptcy Code or
under any applicable state fraudulent transfer or conveyance act, or similar
statute or common law.

 

(c)          Nothing contained in this Section 11 shall limit the liability of
any Loan Party to pay Loans made directly or indirectly to that such Loan Party
(including Loans advanced to any other Loan Party and then remade or otherwise
transferred to, or for the benefit of, such Loan Party), LC Obligations relating
to Letters of Credit issued to support such Loan Party's business, and all
accrued interest, fees, expenses, and other related Obligations with respect
thereto, for which such Loan Party shall be primarily liable for all purposes
hereunder.

 

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Section 11.4.          Joint Enterprise. Each Loan Party has requested that
Administrative Agent, LC Issuer and Lenders make this credit facility available
to Borrowers on a combined basis, to finance Borrowers' business most
efficiently and economically. Loan Parties' business is a mutual and collective
enterprise, and Loan Parties believe that consolidation of their credit
facilities will enhance the borrowing power of each Borrower and ease the
administration of their relationship with credit providers (including
Administrative Agent, LC Issuer and Lenders), all to the mutual advantage of
Borrowers. Each Loan Party acknowledges and agrees that Administrative Agent, LC
Issuer and Lenders' willingness to extend credit to Borrowers and to administer
the Collateral on a combined basis, as set forth herein, is done solely as an
accommodation to Loan Parties and at Loan Parties' request.

 

Section 11.5.          Subordination. Each Loan Party hereby subordinates any
claims, including any rights at law or in equity, to payment, subrogation,
reimbursement, exoneration, contribution, indemnification, or set off, that it
may have at any time against any other Loan Party, howsoever arising, to Payment
in Full of all Obligations.

 

Section 11.6.          Keepwell. Loan Parties hereby agree to cause each
Qualified ECP Guarantor to jointly and severally absolutely, unconditionally and
irrevocably undertake to provide such funds or other support as may be needed
from time to time by each Specified Loan Party to honor all of such Specified
Loan Party's obligations under its guaranty and the Security Documents in
respect of Swap Obligations (provided, however, that each Qualified ECP
Guarantor shall only be liable under its undertaking pursuant to this Section 11
for the maximum amount of such liability that can be hereby incurred without
rendering such Qualified ECP Guarantor's obligations and undertakings under its
guaranty, voidable under the Bankruptcy Code and other applicable debtor relief
laws, and not for any greater amount). The obligations and undertakings of each
Qualified ECP Guarantor under this Section 11 shall remain in full force and
effect until Payment in Full of the Obligations. Each Loan Party, for itself and
on behalf of each Qualified ECP Guarantor, intends that this Section 11 (and any
corresponding provision of any applicable guaranty) constitute, and this Section
11 (and any corresponding provision of any applicable guaranty) shall be deemed
to constitute, a "keepwell, support, or other agreement" for the benefit of each
Specified Loan Party for all purposes of section 1a(18)(A)(v)(II) of the
Commodity Exchange Act.

 

Article 12

 

GUARANTEE

 

Section 12.1.          Guaranty. Each Guarantor unconditionally guarantees,
jointly with the other Guarantors and severally, as a primary obligor and not
merely as a surety, the due and punctual payment of the Obligations. Each
Guarantor agrees that the Obligations may be extended or renewed without notice
to or further assent from it, and that it will, until Payment in Full of the
Obligations, remain bound upon this guaranty notwithstanding any extension or
renewal of the Obligations.

 

Section 12.2.          Obligations Not Waived. To the extent permitted by
Applicable Law, each Guarantor waives presentment, demand of payment from and
protest to any Borrower of any of the Obligations, and also waives notice of
acceptance of this guaranty and notice of protest for nonpayment. To the extent
permitted by Applicable Law, the obligations of each Guarantor hereunder shall
not be affected by: (a) the failure of Administrative Agent or any Lender to
assert any claim or demand or to enforce or exercise any right or remedy against
any Borrower or any other Guarantor under the provisions of the Credit
Agreement, any other Loan Document, (b) any waiver, amendment or modification
of, or any release of any other Guarantor from any of the terms or provisions of
this Agreement or any other Loan Document, or (c) the failure to take, perfect
any security interest in, or the release of security (if any) held by
Administrative Agent or any Lender.

 

- 87 -

 

 

Section 12.3.          Guarantee of Payment. Each Guarantor agrees that its
guaranty constitutes a guarantee of payment when due and not of collection, and
waives any right to require that prior resort be made by Administrative Agent or
any Lender to any Borrower, to any security held for payment of the Obligations
or to any balance of any deposit account or credit on the books of
Administrative Agent or any Lender.

 

Section 12.4.          No Discharge or Diminishment of Guaranty. The obligations
of each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination (other than the payment of the Obligations), including
any claim of waiver, release, surrender, alteration or compromise of any of the
Obligations, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination by reason of the invalidity or unenforceability of the
Obligations. Without limiting the generality of the foregoing, the obligations
of each Guarantor hereunder shall not be discharged or otherwise affected by the
failure of Administrative Agent or any Lender to assert any claim or demand or
to enforce any remedy under the Credit Agreement or any other Loan Document or
by any waiver or modification of any provision thereof.

 

Section 12.5.          Defenses of Borrowers Waived. To the extent permitted by
Applicable Law, each Guarantor waives any defense based on or arising out of any
defense of any Borrower other than payment of the Obligations. Administrative
Agent and Lenders may, at their election, foreclose or realize upon any security
held by one or more of them by one or more judicial or nonjudicial sales, accept
an assignment of any such security in lieu of foreclosure, compromise or adjust
any part of the Obligations, make any other accommodation with any Borrower or
any other Guarantor, without impairing the liability of any Guarantor hereunder
except to the extent the Obligations have been paid.

 

Section 12.6.          Subordination. Upon payment by any Guarantor of any sums
hereunder, all rights of such Guarantor against any Borrower arising as a result
thereof by way of right of subrogation, contribution, indemnity or otherwise
shall be subordinate and junior in right of payment to the prior payment of the
Obligations. In addition, any indebtedness of any Borrower to any Guarantor is
subordinated in right of payment to the prior payment of the Obligations,
provided however, nothing herein shall prohibit the payment of any such
indebtedness by any Borrower to any Guarantor, prior to the existence of an
Event of Default. If any amount shall erroneously be paid to any Guarantor on
account of (i) such subrogation, contribution, indemnity or similar right or
(ii) any such indebtedness of any Borrower, then such amount shall be held in
trust for the benefit of Administrative Agent and Lenders and shall forthwith be
paid to Administrative Agent and credited towards the payment of the Obligations
in accordance with the terms of the Loan Documents.

 

Section 12.7.          Information. Each Guarantor, assumes responsibility for
keeping itself informed of Borrowers' financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Obligations and
the nature, scope and extent of the risks that such Guarantor assumes hereunder,
and agrees that Administrative Agent or Lenders will have no duty to advise
Guarantors of information known to it or any of them regarding such
circumstances or risks.

 

[Remainder of page left intentionally blank; signatures appear on following
pages.]

 

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

 

  BORROWERS:       FRED'S, INC., a Tennessee corporation,   as "Borrower Agent"
and a "Borrower"       By: /s/ Jerry A. Shore   Name: Jerry A. Shore   Title:
Chief Executive Officer       [CORPORATE SEAL]       Attest: /s/ Mark C. Dely  
Name: Mark C. Dely   Title: Secretary       FRED'S STORES OF TENNESSEE, INC., a
Tennessee corporation, as a "Borrower"       By: /s/ Jerry A. Shore   Name:
Jerry A. Shore   Title: Chief Executive Officer       [CORPORATE SEAL]      
Attest: /s/ Mark C. Dely   Name: Mark C. Dely   Title: Secretary       FRED'S
DOLLAR STORE OF MCCOMB, INC., a Mississippi corporation, as a "Borrower"      
By: /s/ Jerry A. Shore   Name: Jerry A. Shore   Title: Chief Executive Officer  
    [CORPORATE SEAL]       Attest: /s/ Mark C. Dely   Name: Mark C. Dely  
Title: Secretary

 

[Signatures continue on following page.]

 

Credit Agreement (Fred's)

 

 

 

 

  FRED'S CAPITAL FINANCE INC., a Delaware corporation, as a "Borrower"       By:
/s/ Andrew T. Panaccione   Name: Andrew T. Panaccione   Title: President      
[CORPORATE SEAL]       Attest: /s/ Pamela A. Jasinski   Name: Pamela A. Jasinski
  Title: Secretary       FRED'S CAPITAL MANAGEMENT COMPANY, a Delaware
corporation, as a "Borrower"       By: /s/ Andrew T. Panaccione   Name: Andrew
T. Panaccione   Title: President       [CORPORATE SEAL]         Attest: /s/
Pamela A. Jasinski   Name: Pamela A. Jasinski   Title: Secretary       NATIONAL
PHARMACEUTICAL NETWORK, INC., a Florida corporation, as a "Borrower"       By:
/s/ Jerry A. Shore   Name: Jerry A. Shore   Title: President       [CORPORATE
SEAL]       Attest: /s/ Mark C. Dely   Name: Mark C. Dely   Title: Secretary

 

[Signatures continue on following pages.]

 

Credit Agreement (Fred's)

 

 

 

 

  ADMINISTRATIVE AGENT, LC ISSUER, AND LENDERS:       REGIONS BANK, an Alabama
bank, as "Administrative Agent," "Swingline Lender," "LC Issuer" and a "Lender"
      By: /s/ Richard A. Gere   Name: Richard A. Gere   Title: Senior Vice
President

      Address:       1180 West Peachtree St., N.W.   Suite 1000   Atlanta, GA
30309   Tel: (404) 221-4588  

Fax: (404) 221-4361

Attention: Fred's Loan Administration

      With a copy to:       250 Park Avenue   6th Floor   New York, NY 10177  
Tel: (212) 935-4585   Fax: (212) 935-7458   Attention: Fred's Loan
Administration

 

[Signatures continue on following page.]

 

Credit Agreement (Fred's)

 

 

 

 

  BANK OF AMERICA, N.A., a national banking association, as a "Lender       By:
/s/ Christine M. Scott   Name: Christine M. Scott   Title: SVP - Director      
Address:       Bank of America N.A.   100 Federal Street, 9th Floor   Boston, MA
02110

  Tel: 617-434-4078

  Fax: 617-310-3459

  Attn: Christine Scott

 

Credit Agreement (Fred's)

 

 

 

 

EXECUTION VERSION

 

EXHIBITS TO CREDIT AGREEMENT

 

by and among

 

FRED'S, INC., AND

 

AND CERTAIN OF ITS SUBSIDIARIES,

 

JOINTLY AND SEVERALLY,

 

as the "Borrowers"

 

ANY OTHER LOAN PARTIES PARTY HERETO FROM TIME TO TIME

 

and

 

THE FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME

 

as the "Lenders,"

 

REGIONS BANK

 

as the "Administrative Agent"

 

and

 

REGIONS BUSINESS CAPITAL, a division of Regions Bank, as Sole Book Runner and
Sole Lead Arranger

 

CLOSING DATE: APRIL 9, 2015

 

 

 

  

EXHIBIT A

 

FORM OF REVOLVING NOTE

 

U.S. [$________] ___________, 20__

 

FOR VALUE RECEIVED, the undersigned (collectively, "Borrowers" and individually,
a "Borrower"), hereby unconditionally and jointly and severally promise to pay
to the order of __________________________ (herein, together with any subsequent
holder hereof, called the "Holder") the principal sum of
[____________________________________ ($________)] or if less, the outstanding
principal amount of all Revolving Loans (as defined in the Credit Agreement (as
defined below)) made by Holder pursuant to the terms of the Credit Agreement on
the date on which such outstanding principal amount becomes due and payable
pursuant to the Credit Agreement, in strict accordance with the terms thereof.
Borrowers likewise unconditionally and jointly and severally agree to pay to
Holder interest from and after the date hereof on the outstanding principal
amount of Revolving Loans evidenced hereby at such interest rates, payable at
such times, and computed in such manner as are specified in the Credit
Agreement, in strict accordance with the terms thereof.

 

This Revolving Note (this "Note") is issued pursuant to, and is one of the
"Revolving Notes" referred to in, the Credit Agreement dated April 9, 2015 (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among Borrowers, and the other "Loan Parties"
party thereto from time to time, Regions Bank, an Alabama banking corporation,
in its capacity as administrative and collateral agent (together with its
successors and assigns in such capacity, "Administrative Agent"), the financial
institutions party thereto from time to time in their capacities as lenders
(collectively, the "Lenders"), and the other parties thereto from time to time,
and Holder is and shall be entitled to all benefits thereof and of all Loan
Documents executed and delivered in connection therewith. This Note is subject
to certain restrictions on transfer or assignment as provided in the Credit
Agreement. All capitalized terms used herein, unless otherwise defined herein,
shall have the meanings ascribed to such terms in the Credit Agreement.

 

The repayment of the principal balance of this Note is subject to the provisions
of the Credit Agreement. The entire unpaid principal balance and all accrued
interest on this Note shall be due and payable immediately upon the termination
of the Commitments as set forth in the Credit Agreement.

 

All payments of principal and interest shall be made in Dollars in immediately
available funds as specified in the Credit Agreement.

 

Upon the occurrence of an Event of Default, the principal balance and all
accrued interest of this Note may be declared (or shall become) due and payable
in the manner and with the effect provided in the Credit Agreement, and the
unpaid principal balance hereof shall bear Default Interest as and when provided
in the Credit Agreement. If this Note is collected by or through an attorney at
law, then Borrowers shall be jointly and severally obligated to pay, in addition
the principal balance and accrued interest hereof, reasonable out-of-pocket
attorneys' fees, expenses and court costs.  

 

All principal amounts of Revolving Loans made by Holder to each Borrower
pursuant to the Credit Agreement, and all accrued and unpaid interest thereon,
shall be deemed outstanding under this Note and shall continue to be owing by
Borrowers until paid in accordance with the terms of this Note and the Credit
Agreement.

 

 

 

  

In no contingency or event whatsoever, whether by reason of advancement of the
proceeds hereof or otherwise, shall the amount paid or agreed to be paid to
Holder for the use, forbearance or detention of money advanced hereunder exceed
the highest lawful rate permissible under any law which a court of competent
jurisdiction may deem applicable hereto; and, in the event of any such payment
inadvertently paid by any Borrower or inadvertently received by Holder, such
excess sum shall be, at Borrowers' option, returned to Borrowers forthwith or
credited as a payment of principal, but shall not be applied to the payment of
interest. It is the intent hereof that Borrowers not pay or contract to pay, and
that Holder not receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by any Borrower
under Applicable Law.

 

Time is of the essence of this Note. To the fullest extent permitted by
Applicable Law, each Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice of
dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and the benefit of any exemption or insolvency laws.

 

Wherever possible each provision of this Note shall be interpreted in such a
manner as to be effective and valid under Applicable Law, but if any provision
of this Note shall be prohibited or invalid under Applicable Law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Holder in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Holder of any right or
remedy preclude any other right or remedy. Holder, at its option, may enforce
its rights against any Collateral securing this Note without Administrative
Agent or Holder enforcing its rights against any Borrower, any Guarantor of the
indebtedness evidenced hereby or any other property or indebtedness due or to
become due to any Borrower. Each Borrower agrees that, without releasing or
impairing such Borrower's liability hereunder, Holder or Administrative Agent
may at any time release, surrender, substitute or exchange any Collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.

 

The rights of Holder and obligations of each Borrower hereunder shall be
construed in accordance with and governed by the laws (without giving effect to
the conflict of law principles thereof) of the State of Georgia.

 

[Remainder of page intentionally left blank; signatures appear on following
page]

 

- 2 -

 

 

IN WITNESS WHEREOF, each Borrower has caused this Note to be executed and
delivered by its duly authorized officers under seal on the date first above
written.

 

    BORROWERS:       ATTEST:   FRED'S, INC., a Tennessee corporation         By:
  Mark C. Dely, Secretary   Name:   Jerry A. Shore [SEAL]   Title: Chief
Executive Officer       ATTEST:   FRED'S STORES OF TENNESSEE, INC., a
Tennessee corporation           By:   Mark C. Dely, Secretary   Name:  Jerry A.
Shore [SEAL]   Title:     Chief Executive Officer       ATTEST:   FRED'S DOLLAR
STORE OF MCCOMB,
INC., a Mississippi corporation           By:   Mark C. Dely, Secretary   Name:
  Jerry A. Shore [SEAL]   Title:     President     ATTEST:   FRED'S CAPITAL
FINANCE INC., a Delaware
corporation           By:   Pamela A. Jasinski, Secretary   Name:    Andrew T.
Panaccione [SEAL]   Title:      President       ATTEST:   FRED'S CAPITAL
MANAGEMENT
COMPANY, a Delaware corporation           By:   Pamela A. Jasinski, Secretary  
Name:    Andrew T. Panaccione [SEAL]   Title:      President

 

[Signatures continue on following page.]

 

Revolving Note (Fred's)

 

 

 

 

ATTEST:  

NATIONAL PHARMACEUTICAL

NETWORK, INC., a Florida corporation

          By:      Mark C. Dely, Secretary   Name: Jerry A. Shore [SEAL]  
Title:    President

 

Revolving Note (Fred's)

 

 

 

 

EXHIBIT B

 

FORM OF SWINGLINE NOTE

 

U.S. $_______________ __________ __, 20__

 

FOR VALUE RECEIVED, the undersigned (collectively "Borrowers" and each
individually a "Borrower") hereby unconditionally and jointly and severally
promise to pay to the order of ______________________ (herein, together with any
subsequent holder hereof, called the "Holder") the principal sum of
___________________________ ($____________) or if less, the outstanding
principal amount of the Swingline Loan (as defined in the Credit Agreement (as
defined below)) made by Holder pursuant to the terms of the Credit Agreement on
the date on which such outstanding principal amount becomes due and payable
pursuant to the Credit Agreement, in strict accordance with the terms thereof.
Borrowers likewise unconditionally and jointly and severally agree to pay to
Holder interest from and after the date hereof on the unpaid principal balance
hereof at such interest rates, payable at such times and computed in such manner
as are specified in the Credit Agreement, in strict accordance with the terms
thereof.

 

This Swingline Note (this "Note") is issued pursuant to, and is the "Swingline
Note" referred to in, the Credit Agreement dated April 9, 2015 (as the same may
be amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Borrowers, and the other "Loan Parties" party thereto
from time to time, the financial institutions from time to time party thereto
(each, a "Lender" and, collectively, "Lenders"), Regions Bank, an Alabama bank
("Regions"), in its capacity as Swingline Lender and LC Issuer (as each capacity
is defined in the Credit Agreement) and as a Lender, and Regions, in its
capacity as collateral and administrative agent for the Lenders, Swingline
Lender, LC Issuer and other Secured Parties (in such capacity, "Administrative
Agent"), and the other parties thereto from time to time, and Holder is and
shall be entitled to all benefits thereof and of all Loan Documents executed and
delivered in connection therewith. This Note is subject to certain restrictions
on transfer or assignment as provided in the Credit Agreement. All capitalized
terms used herein, unless otherwise defined herein, shall have the meanings
ascribed to such terms in the Credit Agreement.

 

This Note is subject to mandatory prepayment in accordance with the provisions
of the Credit Agreement. The entire unpaid principal balance of and accrued
interest on this Note shall be due and payable immediately upon the termination
of the Commitments as set forth in the Credit Agreement.

 

All payments of principal and interest shall be made in Dollars in immediately
available funds as specified in the Credit Agreement.

 

Upon the occurrence of an Event of Default, the principal balance and all
accrued interest of this Note may be declared (or shall become) due and payable
in the manner and with the effect provided in the Credit Agreement and the
unpaid balance hereof shall bear Default Interest as and when provided in of the
Credit Agreement. If this Note is collected by or through an attorney at law,
then Borrowers shall be jointly and severally obligated to pay, in addition the
principal balance and accrued interest hereof, reasonable out-of-pocket
attorneys' fees, expenses and court costs.

 

In no contingency or event whatsoever, whether by reason of advancement of the
proceeds hereof or otherwise, shall the amount paid or agreed to be paid to
Holder for the use, forbearance or detention of money advanced hereunder exceed
the highest lawful rate permissible under any law which a court of competent
jurisdiction may deem applicable hereto; and, in the event of any such payment
inadvertently paid by any Borrower or inadvertently received by Holder, such
excess sum shall be, at Borrowers' option, returned to Borrowers forthwith or
credited as a payment of principal, but shall not be applied to the payment of
interest. It is the intent hereof that Borrowers not pay or contract to pay, and
that Holder not receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by any Borrower
under Applicable Law.

 

 

 

  

Time is of the essence of this Note. To the fullest extent permitted by
Applicable Law, each Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice of
dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and the benefit of any exemption or insolvency laws.

 

Wherever possible each provision of this Note shall be interpreted in such a
manner as to be effective and valid under Applicable Law, but if any provision
of this Note shall be prohibited or invalid under Applicable Law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Holder in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Holder of any right or
remedy preclude any other right or remedy. Holder, at its option, may enforce
its rights against any Collateral securing this Note without enforcing its
rights against any Borrower, any Guarantor of the indebtedness evidenced hereby
or any other property or indebtedness due or to become due to any Borrower. Each
Borrower agrees that, without releasing or impairing such Borrower's liability
hereunder, Holder may at any time release, surrender, substitute or exchange any
Collateral securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.

 

The rights of Holder and obligations of each Borrower hereunder shall be
construed in accordance with and governed by the laws (without giving effect to
the conflict of law principles thereof) of the State of Georgia.

 

[Remainder of page intentionally left blank; signatures appear on following
page]

 

- 2 -

 

 

IN WITNESS WHEREOF, each Borrower has caused this Note to be executed and
delivered under seal by its duly authorized officers on the date first above
written.

  

    BORROWERS:           FRED'S, INC., a Tennessee corporation ATTEST:        
By:   Mark C. Dely, Secretary   Name:  Jerry A. Shore [SEAL]   Title:     Chief
Executive Officer       ATTEST:   FRED'S STORES OF TENNESSEE, INC., a Tennessee
corporation           By:   Mark C. Dely, Secretary   Name:   Jerry A. Shore
[SEAL]   Title:     Chief Executive Officer       ATTEST:   FRED'S DOLLAR STORE
OF MCCOMB, INC., a Mississippi corporation           By:   Mark C. Dely,
Secretary   Name:  Jerry A. Shore [SEAL]   Title:     President       ATTEST:  
FRED'S CAPITAL FINANCE INC., a Delaware corporation           By:   Pamela A.
Jasinski, Secretary   Name:    Andrew T. Panaccione [SEAL]   Title:   
  President       ATTEST:   FRED'S CAPITAL MANAGEMENT COMPANY, a Delaware
corporation           By:   Pamela A. Jasinski, Secretary   Name:    Andrew T.
Panaccione [SEAL]   Title:      President

 

[Signatures continue on following page.]

 

Swingline Note (Fred's)

 

 

 

 

ATTEST:   NATIONAL PHARMACEUTICAL NETWORK, INC., a Florida corporation          
By:   Mark C. Dely, Secretary   Name:   Jerry A. Shore [SEAL]   Title:  
President

 

Swingline Note (Fred's)

 

 

 

 

EXHIBIT C

 

FORM OF ASSIGNMENT AND ACCEPTANCE

 

Dated as of ______, 20__

 

Reference is made to that certain Credit Agreement dated April 9, 2015 (at any
time amended, restated, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among FRED'S, INC., a Tennessee corporation, and
certain of its Subsidiaries (collectively, "Borrowers"), REGIONS BANK, an
Alabama banking corporation, in its capacity as administrative and collateral
agent (together with its successors and assigns in such capacity,
"Administrative Agent"), and the financial institutions party thereto from time
to time in their capacities as lenders (collectively, the "Lenders"), among
others. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Credit Agreement.

 

______________________ ("Assignor") and ___________________________ ("Assignee")
agree as follows:

 

1.          Assignor hereby assigns to Assignee and Assignee hereby purchases
and assumes from Assignor (i) a principal amount of $________ of the outstanding
Revolving Loans held by Assignor and $________ of participations of Assignor in
LC Obligations (which amounts, according to the records of Administrative Agent,
represent _______% of the total principal amount of outstanding Revolving Loans
and LC Obligations) and (ii)  a principal amount of $________ of Assignor's
Revolving Commitment (which amount includes Assignor's outstanding Revolving
Loans being assigned to Assignee pursuant to clause (i) above and which,
according to the records of Administrative Agent, represents (____%) of the
total Revolving Commitments of Lenders under the Credit Agreement) (the items
described above being herein collectively referred to as the "Assigned
Interest"), together with an interest in the Loan Documents corresponding to the
Assigned Interest. This Agreement shall be effective from the date (the
"Assignment Effective Date") on which Assignor receives both (x) the principal
amount of the Assigned Interest in the Loans on the Assignment Effective Date,
if any, and (y) a copy of this Agreement duly executed by Assignee. From and
after the Assignment Effective Date, Assignee hereby expressly assumes, and
undertakes to perform, all of Assignor's obligations in respect of Assignor's
Commitments to the extent, and only to the extent, of Assignee's Assigned
Interest, and all principal, interest, fees and other amounts which would
otherwise be payable to or for Assignor's account in respect of the Assigned
Interest shall be payable to or for Assignee's account, to the extent such
amounts have accrued subsequent to the Assignment Effective Date.

 

After giving effect to the assignment and assumption set forth herein, on the
Effective Date, Assignee’s Commitments will be $____________. After giving
effect to the assignment and assumption set forth herein, on the Effective Date,
Assignor’s Commitments will be $______________.

  

2.         Assignor (i) represents that as of the date hereof, the aggregate of
its Commitments under the Credit Agreement (without giving effect to assignments
thereof, which have not yet become effective) is $________, and the outstanding
balance of its Loans and participations in LC Obligations (unreduced by any
assignments thereof, which have not yet become effective) is $________;
(ii) makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or any
other instrument or document furnished pursuant thereto, other than that
Assignor is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; [and]
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Loan Party, the performance or
observance by any Loan Party of any of its obligations under the Credit
Agreement or any of the Loan Documents[; and (iv) attaches the Notes held by it
and requests that Administrative Agent exchange such Notes for new Notes payable
to Assignee and the Assignor in the principal amounts set forth on Schedule A
hereto].

 

 

 

  

3.          Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Assumption; (ii) confirms that it has received
a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.1 thereof, and copies of
such other Loan Documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption; (iii) agrees that it shall, independently and without reliance upon
the Assignor and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iv) confirms that it is eligible
to become an Assignee; (v) appoints and authorizes Administrative Agent to take
such action as Administrative Agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to Administrative Agent by the terms
thereof, together with such powers as are incidental thereto; (vi) agrees that
it will strictly observe and perform all the obligations that are required to be
performed by it as a "Lender" under the terms of the Credit Agreement and the
other Loan Documents; (vii) agrees that it will keep confidential all
information with respect to each Loan Party furnished to it by such Loan Party
or Assignor to the extent provided in the Credit Agreement; (viii) represents
and warrants that the assignment evidenced hereby will not result in a
non-exempt "prohibited transaction" under Section 406 of ERISA; and (ix) agrees
to pay the Administrative Agent the processing fee specified in Section 10.4 of
the Credit Agreement..

 

4.          Assignee acknowledges and agrees that it will not sell or otherwise
dispose of the Assigned Interest or any portion thereof, or grant any
participation therein, in a manner which, or take any action in connection
therewith which, would violate the terms of any of the Loan Documents.

 

5.          ASSIGNEE ACKNOWLEDGES AND AGREES THAT IT HAS REVIEWED AND HEREBY
CONFIRMS THAT IT WILL BE SUBJECT IN ALL RESPECTS TO THE CONFIDENTIALITY
PROVISIONS THAT ARE CONTAINED IN SECTION 10.11 OF THE CREDIT AGREEMENT.

 

6.          This Agreement and all rights and obligations shall be interpreted
in accordance with and governed by the laws of the State of Georgia. If any
provision hereof would be invalid under Applicable Law, then such provision
shall be deemed to be modified to the extent necessary to render it valid while
most nearly preserving its original intent; no provision hereof shall be
affected by another provision's being held invalid.

 

7.          Each notice or other communication hereunder shall be in writing,
shall be sent by messenger, by telecopy or facsimile transmission or by
first-class mail, shall be deemed given when sent and shall be sent as follows:

 

(a)If to Assignee, to the following address (or to such other address as
Assignee may designate from time to time):

 

__________________________

__________________________

__________________________

 

(b)If to Assignor, to the following address (or to such other address as
Assignor may designate from time to time):

 

- 2 -

 

  

__________________________

__________________________

__________________________

__________________________

 

Payments hereunder shall be made by wire transfer of immediately available
Dollars as follows:

 

If to Assignee, to the following account (or to such other account as Assignee
may designate from time to time):

 

__________________________

ABA No.___________________

__________________________

Account No._______________

Reference: ______________________

 

If to Assignor, to the following account (or to such other account as Assignor
may designate from time to time):

 

__________________________

__________________________

__________________________

ABA No.___________________

For Account of:______________

Reference: _____________________

 

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

 

      ("Assignor")       By:       Name:                    Title:              
("Assignee")         By:       Name:       Title:  

 

- 3 -

 

  

SCHEDULE A TO ASSIGNMENT AND ASSUMPTION

 

 

 

 

EXHIBIT D

 

FORM OF COMPLIANCE CERTIFICATE

 

[Letterhead of Borrower Agent]

 

__________________, 20__

 

Regions Bank, as Administrative Agent

1180 West Peachtree St., N.W.

Suite 1000

Atlanta, GA 30309

Tel: (404) 221-4588

Fax: (404) 221-4361

Attention: Fred's Loan Administration

 

The undersigned, a Responsible Officer of FRED'S, INC., a Tennessee corporation
("Parent"), gives this Compliance Certificate (this "Certificate") to Regions
Bank, an Alabama banking corporation, in its capacity as administrative and
collateral agent (together with its successors and assigns in such capacity,
"Administrative Agent"), in accordance with the requirements of Section 5.1 of
that certain Credit Agreement dated April 9, 2015 (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Parent, certain of its Subsidiaries as Borrowers
(collectively, "Borrowers"), certain of its Subsidiaries as Loan Parties,
Administrative Agent and the financial institutions party thereto from time to
time in their capacities as lenders (collectively, "Lenders"), among others.
Capitalized terms used in this Certificate, unless otherwise defined herein,
shall have the meanings ascribed to them in the Credit Agreement.

 

1.          [Attached hereto are the consolidated balance sheets and a
consolidated income statement and statement of cash flows of Parent and its
Subsidiaries for the Fiscal [Year][Quarter] ending __________________, 20__ and
the other reports required by Section 5.1[(a)][(b)] of the Credit Agreement.
Such financial statements and other reports are true and correct and fairly
present, in all material respects, the consolidated financial condition and
results of operations of Parent and its Subsidiaries for the period presented
and such financial statements were prepared in accordance with GAAP (except,
with respect to statements delivered for any Fiscal Quarter, the absence of
footnotes and subject to normal year-end adjustments).][Parent has filed the
periodic report under [Section 13(a)] or [Section 15(d)] of the Exchange Act for
the Fiscal [Year][Quarter] ending __________________, 20__ , such periodic
report includes the statements and the other reports required by
Section 5.1[(a)][(b)] of the Credit Agreement, and such period report can be
accessed at the following link: ______________________].

 

2.          No Default or Event of Default exists on the date hereof, other
than: __________________________________________________________________ [if
none, so state][if a Default or an Event of Default exists, state Loan Parties'
intention with respect thereto].

  

3.         Attached hereto is a list of all changes to the identities of the
Subsidiaries of Parent since the date of the previous Compliance Certificate
delivered in accordance with Section 5.1(c) of the Credit Agreement through the
date of this Certificate.

 

 

 

  

4.          For any individual Acquisition made since the date of the previous
Compliance Certificate delivered in accordance with Section 5.1(c) of the Credit
Agreement through the date of this Certificate with an aggregate amount of cash
and non-cash consideration (including all cash and Indebtedness, including
contingent obligations, incurred or assumed and the maximum amount of any
earnout or similar payment in connection therewith (whether or not actually
earned)) of less than $5,000,000, Excess Availability, on the date of and after
giving effect to such Acquisition, was not less than $20,000,00. [Note: This
tracks language in Credit Agreement.]

 

5.           Attached hereto is a list of all new Deposit Accounts opened during
since the date of the previous Compliance Certificate delivered in accordance
with Section 5.1(c) of the Credit Agreement through the date of this
Certificate.

 

6.          The FIFO Inventory Amount as of _____________ ___, 20___ is
$_______________.

 

7.           [No change in GAAP or the application thereof has occurred since
the date of the mostly recently delivered audited financial statements of Parent
and its Subsidiaries]. [A change in GAAP or the application thereof has occurred
since the date of the mostly recently delivered audited financial statements of
Parent and its Subsidiaries, and the effect of such change on the financial
statements accompanying this Certificate is as follows: _______________].

 

8.          As of the date hereof, each Borrower is current in its payment of
all accrued rent and other charges to Persons who own or lease any premises
where any of the Collateral is located, and there are no pending disputes or
claims regarding any Borrower's failure to pay or delay in payment of any such
rent or other charges.

 

9.          [The Fixed Charge Coverage Ratio for the ___ Fiscal [Month][Quarter]
period ending as of __________________, 20__, is ____ to 1.00, which is [in
compliance][not in compliance] with the Credit Agreement requirement of a Fixed
Charge Coverage Ratio equal to or exceeding 1.00 to 1.00 for such period.]1

 

10.         [Attached hereto is a schedule showing the calculations that support
Borrowers' [compliance][non-compliance] with such financial covenants.]1

 

  Very truly yours,           Responsible Officer

 

 

 

1 Provide calculation only if a Borrowing Base Trigger Event has occurred.

 

 

 

 

EXHIBIT E

 

FORM OF JOINDER AGREEMENT

 

THIS JOINDER AGREEMENT TO CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS (this
"Agreement") is made and entered into on _____________ __, 20___, by and among
________________, a ______________ ("New Loan Party"), FRED'S, INC., a Tennessee
corporation, and certain of its Subsidiaries other than New Loan Party
(collectively, "Existing Loan Parties"; Existing Loan Parties and New Loan Party
are each a "Loan Party" and collectively "Loan Parties"), and REGIONS BANK, an
Alabama banking corporation, in its capacity as collateral and administrative
agent (together with its successors and assigns in such capacity,
"Administrative Agent"), for various financial institutions ("Lenders").

 

Recitals:

 

Administrative Agent, Lenders and Existing Loan Parties are parties to that
certain Credit Agreement dated on or about April 9, 2015 (as at any time
amended, restated, supplemented or otherwise modified the "Credit Agreement"),
pursuant to which Lenders have made certain Loans and letter of credit
accommodations to or for the benefit of Existing Loan Parties.

 

Existing Loan Parties have requested that New Loan Party become a
[Borrower][Guarantor] under the Credit Agreement and the other Loan Documents,
and as a condition to Lenders' willingness to make loans or otherwise extend
credit or other financial accommodations from time to time based on the assets
of New Loan Party under the Credit Agreement, New Loan Party has agreed to
execute this Agreement in order to become a ["Borrower"]["Guarantor"] under the
Credit Agreement and the other Loan Documents.

 

NOW, THEREFORE, for Ten Dollars ($10.00) in hand paid and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged by the parties hereto, Administrative Agent and Loan Parties agree
as follows: 

 

1.         Definitions; Certain Matters of Construction. All capitalized terms
used in this Agreement, unless otherwise defined herein, shall have the meaning
ascribed to such terms in the Credit Agreement. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references to
any Person shall mean and include the successors and permitted assigns of such
Person. All references to any of the Loan Documents shall include any and all
amendments or modifications thereto and any and all restatements, extensions or
renewals thereof. Wherever the phrase "including" shall appear in this
Agreement, such word shall be understood to mean "including, without
limitation."

 

2.          Addition of New Loan Party. By its execution and delivery of this
Agreement, New Loan Party (a) acknowledges and agrees that, as of the Agreement
Effective Date (as hereinafter defined), it is a "["Borrower"]["Guarantor"]
under the Credit Agreement and the other Loan Documents with the same force and
effect as if originally named therein as ["Borrower"]["Guarantor"], (b)
covenants with Administrative Agent that it will hereafter observe and perform
the terms and provisions of the Credit Agreement and the other Loan Documents to
the same extent as if it were an original party thereto, and (c) confirms that
it has received a copy of the Credit Agreement and the other Loan Documents. The
parties hereto agree that each reference in the Credit Agreement and the other
Loan Documents to ["Borrower"]["Guarantor"] or terms of similar import shall
hereafter be deemed to include New Loan Party.

 

 

 

  

3.          Joint and Several Liability; Borrowers' Representative. New Loan
Party acknowledges that it has requested Lenders to extend financial
accommodations to it and to Existing Loan Parties on a combined basis in
accordance with the provisions of the Credit Agreement, as hereby amended. In
accordance with and subject to the terms of the Credit Agreement, New Loan Party
acknowledges and agrees that, as of the Agreement Effective Date, it shall be
jointly and severally liable in its capacity as a ["Borrower"]["Guarantor"] for
any and all Loans and other Obligations heretofore or hereafter made or extended
by Lenders to any and all of Loan Parties and for all interest, fees and other
charges payable in connection therewith. New Loan Party hereby appoints and
designates Parent as the representative and agent of New Loan Party for all
purposes, including requesting borrowings and receiving accounts statements and
other notices and communications to it from Administrative Agent and Lenders.

 

Grant of Security Interest. To secure the full and final payment and performance
of all Obligations, New Loan Party hereby grants to Administrative Agent, for
the benefit of Secured Parties, a continuing security interest in and to, and
Lien upon, all right, title, and interest in all Property of New Loan Party,
including all of the following Property, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"):

 

(a)          All of such Loan Party's present and after-acquired Inventory,
Accounts (including, without limitation, Pharmacy Receivables, Credit Card
Receivables and other accounts and receivables, whether constituting Accounts or
General Intangibles), Pharmacy Scripts and related customer lists of such Loan
Party;

 

(b)          all Investment Property, General Intangibles, books and records,
Documents, Chattel Paper, Deposit Accounts, Securities Accounts, other bank
accounts, cash and Cash Investments, Instruments and Supporting Obligations, in
each case, arising out of the items set forth in clause (a) above; and

 

(c)          all monies, whether or not in the possession or under the control
of Administrative Agent, a Lender, or a bailee or Affiliate of Administrative
Agent or a Lender, including any Cash Collateral;

 

(d)          all products and cash and non-cash Proceeds of the foregoing,
including Proceeds of and unearned premiums with respect to insurance policies,
and claims against any Person for loss, damage, or destruction of any of the
foregoing; and

 

(e)          all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs, and computer records)
pertaining to the foregoing.

 

Capitalized terms used in this Section 3 and not otherwise defined herein or in
the Credit Agreement shall have the meaning given such terms in the Security
Agreement.

 

4.          Ratification and Reaffirmation. Each Loan Party hereby ratifies and
reaffirms the Obligations, each of the Loan Documents and all of such Loan
Party's covenants, duties, indebtedness and liabilities under the Loan
Documents.

 

5.          Acknowledgments and Stipulations. Each Loan Party acknowledges and
stipulates that all of the Obligations are owing and payable without defense,
offset or counterclaim (and to the extent there exists any such defense, offset
or counterclaim on the date hereof, the same is hereby waived by such Loan
Party) and that the security interests and Liens granted by each Loan Party in
favor of Administrative Agent are duly perfected and, except as provided in the
Credit Agreement, first priority security interests and Liens.

 

- 4 -

 

  

6.          Representations and Warranties. To induce Administrative Agent to
enter into this Agreement, each Loan Party hereby makes the following
representations and warranties to Administrative Agent, which representations
and warranties shall survive the delivery of this Agreement and the making of
additional Loans under the Credit Agreement as amended hereby:

 

(a)          Authorization of Agreements. Such Loan Party has the right and
power, and has taken all necessary action to authorize it, to execute, deliver
and perform this Agreement and each other agreement contemplated hereby to which
it is a party in accordance with their respective terms. This Agreement and each
other such agreement contemplated hereby to which it is a party has been duly
executed and delivered by the duly authorized officers of such Loan Party and
each is, or each when executed and delivered in accordance with this Agreement
will be, a legal, valid and binding obligation of such Loan Party, enforceable
in accordance with its terms;

 

(b)          Compliance of Agreements with Laws. The execution, delivery and
performance by such Loan Party of this Agreement and each other agreement
contemplated hereby to which it is a party in accordance with their respective
terms do not and will not, by the passage of time, the giving of notice or
otherwise,

 

(i)          require any Governmental Approval that has not been obtained or
violate any Applicable Law relating to such Loan Party or any of its
Subsidiaries,

 

(ii)         conflict with, result in a breach of or constitute a default under
the articles or certificate of incorporation or by-laws or other constituent or
entity documents or any shareholders' or members' agreement of such Loan Party
or any of its Subsidiaries, any material provisions of any Material Contract to
which such Loan Party, any of its Subsidiaries or any of such Loan Party's or
such Subsidiaries' property may be bound or any law, treaty, rule or regulation,
or determination of a Governmental Authority to which such Loan Party or its
Subsidiaries or any of such Person’s Property is bound or any judgment, order or
ruling of a Governmental Authority, or [Note: This language tracks the Credit
Agreement.]

 

(iii)        result in or require the creation or imposition of any Lien upon or
with respect to any property now owned or hereafter acquired by such Loan Party
other than Liens in favor of Administrative Agent;

 

(c)          Schedules. The Schedules attached hereto contain true, accurate and
complete information with respect to New Loan Party and the matters addressed in
the Schedules to the Credit Agreement, including, without limitation, the
matters represented and warranted by Loan Parties pursuant to Section 4 of the
Credit Agreement. The Schedules attached hereto shall be deemed to supplement
and be a part of the Schedules to the Credit Agreement;

 

(d)          No Defaults. After giving effect to this Agreement and to the
updated Schedules attached hereto, no Default or Event of Default exists on the
date hereof and all of the representations and warranties made by each Loan
Party in the Credit Agreement are true and correct in all material respects on
and as of the date hereof; and

 

(e)          Loan Parties. After giving effect to this Agreement, each Person
that is a Subsidiary of any Existing Loan Party (other than any Excluded
Subsidiary) is a party to the Credit Agreement as a "Loan Party."

 

- 5 -

 

  

7.          Additional Covenants. To induce Administrative Agent to enter into
this Agreement, each New Loan Party covenants and agrees to deliver to
Administrative Agent, on or before the date hereof, each of the following
documents, in form and substance satisfactory to Administrative Agent:

 

(a)          Evidence of Perfection and Priority of Liens. Copies of all filing
receipts or acknowledgments to evidence any filing or recordation necessary to
perfect the Liens of Administrative Agent in the Collateral of New Loan Party
and evidence in form satisfactory to Administrative Agent that such Liens
constitute valid and perfected security interests and Liens, and that there are
no other Liens upon any Collateral except for Permitted Liens;

 

(b)          Organization Documents; Resolutions. Copies of the certificate or
articles of incorporation or organization, certified by the Secretary of State
or other appropriate officials of New Loan Party's state of incorporation, and
copies of the by-laws or similar agreement or instrument governing the operation
of New Loan Party, and all amendments thereto, and certified copies of
resolutions of New Loan Party's board of directors, duly authorizing and
empowering New Loan Party to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a party;

 

(c)          Good Standing Certificates. Good standing certificates for New Loan
Party, issued by the Secretary of State or other appropriate official of New
Loan Party's jurisdiction of incorporation and each jurisdiction where the
conduct of New Loan Party's business activities or ownership of its property
necessitates qualification and where failure to be qualified would have a
Material Adverse Effect on New Loan Party;

 

(d)          Opinion Letters. At Administrative Agent's request, the favorable,
written opinions of counsel to New Loan Party as to the due organization, valid
existence, legal name, good standing and qualification as a foreign corporation
of New Loan Party, the number of issued and outstanding equity interests of New
Loan Party, the due authorization, execution and delivery of this Agreement and
the other Loan Documents contemplated hereby to be delivered in connection
herewith, the enforceability of this Agreement and the Credit Agreement as
amended hereby and such other Loan Documents, and such other matters as
Administrative Agent or its counsel may reasonably request;

 

(e)          Other Documents. Such other joinders, agreements, documents and
instruments as Administrative Agent may reasonably request.

 

8.          References to Credit Agreement. Upon the effectiveness of this
Agreement, each reference in the Credit Agreement to "this Agreement,"
"hereunder," or words of like import shall mean and be a reference to the Credit
Agreement, as amended by this Agreement.

 

9.          Breach of Agreement. This Agreement shall be part of the Credit
Agreement and a breach of any representation, warranty or covenant herein shall
constitute an Event of Default.

 

10.         Effectiveness of Agreement. The provisions of this Agreement shall
become effective on the date executed by New Loan Party, the Loan Parties and
the Administrative Agent (the "Agreement Effective Date") and when the Schedules
required under Section 7(c) hereof, in form and substance satisfactory to
Administrative Agent, have been delivered to Administrative Agent.

 

- 6 -

 

  

11.         Expenses of Administrative Agent. Borrowers jointly and severally
agree to pay, on demand, all costs and expenses incurred by Administrative Agent
in connection with the preparation, negotiation and execution of this Agreement
and any other Loan Documents executed pursuant hereto and any and all
amendments, modifications, and supplements thereto, including the costs and fees
of Administrative Agent's legal counsel and any taxes or expenses associated
with or incurred in connection with any instrument or agreement referred to
herein or contemplated hereby.

 

12.         Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Georgia.

 

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

 

14.         No Novation, etc. Except as otherwise expressly provided in this
Agreement, nothing herein shall be deemed to amend or modify any provision of
the Credit Agreement or any of the other Loan Documents, each of which shall
remain in full force and effect. This Agreement is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and the Credit
Agreement as herein modified shall continue in full force and effect.

 

15.         Severability. In case any provision in or obligation under this
Agreement 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.

 

16.         Counterparts; Electronic Signatures. This Agreement may be executed
in any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile or electronic mail transmission
shall be deemed to be an original signature hereto.

 

17.         Entire Agreement; Schedules. This Agreement and the other Loan
Documents, together with all other instruments, agreements and certificates
executed by the parties in connection therewith or with reference thereto,
embody the entire understanding and agreement between the parties hereto and
thereto with respect to the subject matter hereof and thereof and supersede all
prior agreements, understandings and inducements, whether express or implied,
oral or written. Each of the Schedules attached hereto is incorporated into this
Agreement and by this reference made a part hereof.

 

18.         Further Assurances. Each Loan Party agrees to take such further
actions as Administrative Agent shall reasonably request from time to time in
connection herewith to evidence or give effect to the amendments set forth
herein or any of the transactions contemplated hereby.

 

19.         Section Titles. Section titles and references used in this Agreement
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreements among the parties hereto.

 

20.         Waiver of Jury Trial. To the fullest extent permitted by Applicable
Law, the parties hereto each hereby waives the right to trial by jury in any
action, suit, counterclaim or proceeding arising out of or related to this
Agreement.

 

[Remainder of page intentionally left blank; signatures begin on following
page.]

 

- 7 -

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date and year first above written.

 

    NEW LOAN PARTY:       ATTEST:   [____________________________]           By:
      Name:   Secretary   Title:
                                                         [CORPORATE SEAL]    

 

[Signatures continue on following page.]

 

Joinder Agreement

 

 

 

  

    EXISTING LOAN PARTIES:       ATTEST:               By:            Name:  
Secretary   Title:         [SEAL]           ATTEST:               By:      
Name:   Secretary   Title:         [SEAL]           ATTEST:               By:  
    Name:   Secretary   Title:         [SEAL]           ATTEST:              
By:      Name:   Secretary   Title:         [SEAL]           ATTEST:            
  By:      Name:   Secretary   Title:       [SEAL]    

 

Joinder Agreement

 

 

 

  

  REGIONS BANK, as Administrative Agent       By:               Name:     Title:
 

 

Joinder Agreement

 

 

 

  

SCHEDULES TO

Joinder Agreement

 

See attached.

 

 

 

 

EXHIBIT F

 

Form of Notice of Borrowing

 

___________ __, 20__

 

Regions Bank, as Administrative Agent

1180 West Peachtree St., N.W.

Suite 1000

Atlanta, GA 30309

Tel: (404) 221-4588

Fax: (404) 221-4361

Attention: Fred's Loan Administration

 

Ladies and Gentlemen:

 

1.This Notice of Borrowing is delivered pursuant to Section 4.1 of that certain
Credit Agreement dated April 9, 2015 (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among FRED'S, INC., a Tennessee corporation, and certain of its Subsidiaries
(collectively, "Loan Parties"), Regions Bank, an Alabama banking corporation, in
its capacity as administrative and collateral agent (together with its
successors and assigns in such capacity, "Administrative Agent"), and the
financial institutions party thereto from time to time in their capacities as
lenders (collectively, the "Lenders"), among others. Capitalized terms used
herein shall have the meanings given such terms in the Credit Agreement.

 

Borrower Agent, on behalf of Borrowers, hereby gives you notice, irrevocably,
pursuant to Section 2.21 of the Credit Agreement, that Borrowers hereby request
the following Loan(s) be made under the Credit Agreement and, in that regard,
sets forth below the information relating to such Loan (the "Proposed
Borrowing"), as required by Section 2.3 of the Credit Agreement:

 

FOR A REVOLVING LOAN: Principal Amount   Date Loan to Be Made       Apply the
proceeds of this Loan as follows:     Name of Bank: [________________]    
Account Name: [________________]     Account Number: [________________]     ABA
Routing Number: [________________]     Reference: [________________]     Other:
[Swingline Loan][Base Rate Loan][LIBOR Loan]    

 

Borrower Agent, on behalf of Borrowers, hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
Proposed Borrowing:  

 

(a)          the representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects before and after giving effect to the Proposed Borrowing and to the
application of the proceeds therefrom, as though made on and as of such date,
except to the extent that such representations and warranties expressly relate
solely to an earlier date (in which case such representations and warranties
shall have been accurate and complete in all material respects on and as of such
earlier date);

 

 

 

  

(b)          no event has occurred and is continuing, or would result from the
making of such Proposed Borrowing or from the application of the proceeds
thereof, which constitutes a Default or an Event of Default;

 

(c)          the Proposed Borrowing satisfies all limitations set forth in the
Credit Agreement (including, without limitation, availability under the
Borrowing Base and the Commitments); and

 

(d)          all of the other conditions to the Proposed Borrowing set forth in
Section 3.2 of the Credit Agreement have been satisfied (or waived in accordance
with the terms of the Credit Agreement).

 

  FRED'S, INC.,   on behalf of Borrowers in its capacity as Borrower Agent
pursuant to Section 2.21 of the Credit Agreement         By:     Name:    
Title:  

 

 

 

 

EXHIBIT G

 

Form of NOTICE OF Conversion/Continuation

 

Date ______________, 20__

 

Regions Bank, as Administrative Agent

1180 West Peachtree St., N.W.

Suite 1000

Atlanta, GA 30309

Tel: (404) 221-4588

Fax: (404) 221-4361

Attention: Fred's Loan Administration

 

Re:Credit Agreement dated April 9, 2015 (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among FRED'S, INC., a Tennessee corporation ("Parent"), and certain of its
Subsidiaries (collectively, "Loan Parties"), Regions Bank, an Alabama banking
corporation, in its capacity as administrative and collateral agent (together
with its successors and assigns in such capacity, "Administrative Agent"), and
the financial institutions party thereto from time to time in their capacities
as lenders (collectively, the "Lenders"), among others.

 

Ladies and Gentlemen:

 

This Notice of Conversion/Continuation is delivered to you pursuant to
Section 3.1 of the Credit Agreement. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings attributable thereto in
the Credit Agreement. Borrower Agent, on behalf of Borrowers, hereby gives
notice of its request for a conversion of Loans from one Type to another, as
follows:

 

Check as applicable:

 

¨ A conversion of Loans from one Type to another, as follows:

 

(i)The requested date of the proposed conversion is ______________, 20__ (the
"Conversion Date");

 

(ii)The Type of Loans to be converted pursuant hereto are presently
__________________ [select either LIR Loans or Base Rate Loans] in the principal
amount of [$________] outstanding as of the Conversion Date;

 

(iii)The portion of the aforesaid Loans to be converted on the Conversion Date
is [$________] (the "Conversion Amount");

 

(iv)The Conversion Amount is to be converted into a ____________ [select a LIBOR
Loan, LIR Loan or a Base Rate Loan] (the "Converted Loan") on the Conversion
Date.

 

 

 

  

(v)[In the event Borrower Agent selects a LIBOR Loan:] Borrower Agent hereby
requests that the Interest Period for such Converted Loan be for a duration of
_____ [insert length of Interest Period].

 

¨ A continuation of LIBOR Loans for a new Interest Period, as follows:

 

(i)The requested date of the proposed continuation is _______________, 20__ (the
"Continuation Date");

 

(ii)The aggregate amount of the LIBOR Loans subject to such continuation is
$__________________;

 

(iii)The duration of the selected Interest Period for the LIBOR Loans which are
the subject of such continuation is: _____________ [select duration of
applicable Interest Period];

 

Borrower Agent, on behalf of Borrowers, hereby ratifies and reaffirms all of
Borrowers' liabilities and obligations under the Loan Documents and certifies
that no Default or Event of Default exists on the date hereof.

 

Borrower Agent has caused this Notice of Conversion/Continuation to be executed
and delivered by its duly authorized representative on the date first set forth
above.

 

  FRED'S, INC., on behalf of Borrowers in its capacity as Borrower Agent
pursuant to Section 2.21 of the Credit Agreement         By:     Name:    
Title:  

 

 

 

 

EXHIBIT H

 

Form of FIFO INVENTORY AMOUNT CALCULATION

Warehouse

  LC Merchandise not Received   Inventory in transit   Profit in
InterCompany  Inv   Stores       Pharmacy   LIFO Reserve       Total, as
reported in financial statements       Add back LIFO Reserve       FIFO
Inventory value  

 

 

 

 

EXECUTION VERSION

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this "Agreement") is dated as of April 9, 2015, by and
among (A) FRED'S, INC., a Tennessee corporation ("Parent"); (B) the Subsidiaries
of Parent identified on the signature pages hereto and any other Subsidiaries of
Parent which may become Borrowers under the Credit Agreement (as defined below)
from time to time (together with Parent, each, a "Borrower" and, collectively,
"Borrowers"); (C) the Subsidiaries of Parent identified on the signature pages
hereto and any other Subsidiaries of Parent which may become Guarantors under
the Credit Agreement (as defined below) from time to time (each, a "Guarantor"
and, collectively, "Guarantors"); and (D) REGIONS BANK, an Alabama bank (as
further defined below, "Regions"), in its capacity as administrative agent and
collateral agent for the Lenders (as defined in the Credit Agreement), LC Issuer
(as defined in the Credit Agreement) and other Secured Parties (as defined in
the Credit Agreement) (in such capacity and as further defined below,
"Administrative Agent" or "Agent").

 

RECITALS:

 

Borrowers have requested that Administrative Agent and Lenders establish a
revolving credit facility and that LC Issuer establish a letter of credit
sub-facility pursuant to that certain Credit Agreement dated on or about the
date hereof among Loan Parties, Lenders, LC Issuer and Administrative Agent (as
at any time amended, restated, supplemented or otherwise modified, the "Credit
Agreement").

 

Administrative Agent, Lenders and LC Issuer are unwilling to provide such
revolving credit facility and letter of credit sub-facility unless, among other
things, Borrowers and the other Loan Parties party hereto enter into this
Agreement to, among other things, grant to Administrative Agent, for the benefit
of Secured Parties, a Lien (as defined in the Credit Agreement) in the
Collateral (as defined below).

 

To induce Administrative Agent, Lenders and LC Issuer to provide such revolving
credit facility and letter of credit sub-facility, Borrowers and the other Loan
Parties desire to enter into this Agreement to, among other things, grant to
Administrative Agent, for the benefit of Secured Parties, a Lien in the
Collateral (as defined below).

 

NOW, THEREFORE, in consideration of the foregoing premises, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
mutually acknowledged, each Loan Party and Administrative Agent, each intending
to be legally bound, hereby covenant and agree as follows:

 

Section 1.          Definitions. Capitalized terms that are not otherwise
defined herein shall have the meanings set forth in the Credit Agreement. As
used in this Agreement, the following terms shall have the following meanings:

 

"Cash Investments Collateral" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof, (c)
commercial paper maturing no more than two hundred seventy (270) days from the
date of creation thereof, (d) certificates of deposit or bankers' acceptances
issued by any bank organized under the laws of the United States or any state
hereof, (e) demand deposit accounts maintained with any bank organized under the
laws of the United States or any state thereof, and (f) investments in money
market funds substantially all of whose assets are invested in the types of
assets described in clauses (a) through (e) above.

 

 

 

 

"Collateral Disclosure Certificate" means each collateral disclosure certificate
substantially in the form of Exhibit A (or such other form as may be approved by
Administrative Agent from time to time), executed and delivered by a Loan Party
as of the Closing Date or thereafter in accordance with Section 10.

 

"Credit Card Agreements" means all agreements now or hereafter entered into by a
Loan Party or for the benefit of a Loan Party with any Credit Card Issuer or any
Credit Card Processor in respect of the issuance, servicing or processing or
credit or debit cards.

 

"Credit Card Issuer" means any Person who issues or whose members issue credit
cards, including MasterCard or VISA bank credit or debit cards or other bank
credit or debit cards issued through MasterCard International, Inc., Visa
U.S.A., Inc., or Visa International or otherwise and American Express, Discover,
Diners Club, Carte Blanche, and other non-bank credit or debit cards.

 

"Credit Card Processor" means any servicing or processing agent or any factor or
financial intermediary which facilitates, services, processes, or manages the
credit authorization, billing transfer, and/or payment procedures with respect
to a Loan Party's sales transactions involving credit card or debit card
purchases by customers using credit cards or debit cards issued by any Credit
Card Issuer.

 

"Credit Card Receivables" means amounts, together with all income, payments and
proceeds thereof, owed by a Credit Card Issuer or Credit Card Processor to a
Loan Party resulting from charges by a customer of a Loan Party on credit or
debit cards issued by such Credit Card Issuer or processed by such Credit Card
Processor (including, without limitation, electronic benefits transfers) in
connection with the sale of goods by a Loan Party, or services performed by a
Loan Party, in each case in the Ordinary Course of Business.

 

"Deposit Account Control Agreement" shall mean, with respect to any Loan Party's
Deposit Account, any agreement (in form and substance satisfactory to
Administrative Agent and as the same may be amended, restated, supplemented, or
otherwise modified from time to time) among Administrative Agent, such Loan
Party, and the depository institution at which such Deposit Account has been
established, pursuant to which, among other things, Administrative Agent shall
obtain Control over such Deposit Account.

 

"Fiscal Intermediary" means any qualified insurance company or other Person that
has entered into an ongoing relationship with any Governmental Authority to make
payments to payees under Medicare, Medicaid or any other Federal, state or local
public health care or medical assistance program pursuant to any of the Health
Care Laws.

 

"Health Care Laws" means all Federal, state and local laws, rules, regulations,
interpretations, guidelines, ordinances and decrees primarily relating to
patient healthcare, any health care provider, medical assistance and cost
reimbursement programs, as now or at any time hereafter in effect, applicable.

 

"Permitted Location" means (a) any location described on Schedule 2 to this
Agreement, (b) any retail store location of any Borrower as of the Closing Date,
(c) any retail store location of any Borrower opened after the Closing Date in
the Ordinary Course of Business or acquired in connection with an Acquisition
permitted pursuant to Section 7.4(c) or (d) of the Credit Agreement, and (d) any
other location in the continental United States of which Borrower Agent has
provided at least 30 days' written notice to Administrative Agent, and
Administrative Agent shall have consented in writing before such location's
being a "Permitted Location."

 

- 2 -

 

 

"Pharmacy Receivables" means as to each Loan Party, all present and future
rights of such Loan Party to payment from a Third Party Payor arising from the
sale of prescription drugs by such Loan Party (it being understood that the
portion of the purchase price for such prescription drugs payable by the
purchaser of such prescription drugs or any Person other than a Third Party
Payor shall not be deemed to be a Pharmacy Receivable).

 

"Pharmacy Script" means, as to each Loan Party, all of such Loan Party’s now
owned or hereafter existing or acquired retail customer files with respect to
prescriptions for retail customers and other medical information related
thereto, maintained by the retail pharmacies of Loan Parties, wherever located.

 

"Protective Advance" shall have the meaning given such term in Section 16.

 

"Third Party" means any (a) lessor, mortgagee, mechanic or repairman, warehouse
operator or warehouseman, processor, packager, consignee, shipper, customs
broker, freight forwarder, bailee, or other third party which may have
possession of any Collateral or lienholders' enforcement rights against any
Collateral; (b) Licensor whose rights in or with respect to any Collateral limit
or restrict or may, in Administrative Agent's determination, limit or restrict
Loan Parties' or Administrative Agent's rights to sell or otherwise dispose of
such Collateral; or (c) any Credit Card Issuer or Credit Card Processor.

 

"Third Party Agreement" means an agreement in form and substance satisfactory to
Administrative Agent pursuant to which a Third Party, as applicable and as
required by Administrative Agent, in each case containing terms reasonably
acceptable to Administrative Agent and as the same may be amended, restated,
supplemented, or otherwise modified from time to time, among other things (a)
waives or subordinates in favor of Administrative Agent any Liens such Third
Party may have in and to any Collateral or any setoff, recoupment, or similar
rights such Third Party may have against any Loan Party; (b) grants
Administrative Agent access to Collateral which may be located on such Third
Party's premises or in the custody, care, or possession of such Third Party for
purposes of allowing Administrative Agent to inspect, remove or repossess, sell,
store, or otherwise exercise its rights under the Credit Agreement or any other
Loan Document with respect to such Collateral; (c) authorizes Administrative
Agent (with or without the payment of any royalty or licensing fee, as
determined by Administrative Agent) to (i) complete the manufacture of
work-in-process (if the manufacturing of such Goods requires the use or
exploitation of a Third Party's Intellectual Property) and (ii) dispose of
Collateral bearing, consisting of, or constituting a manifestation of, in whole
or in part, such Third Party's Intellectual Property; (d) agrees to hold any
negotiable Documents in its possession relating to the Collateral as agent or
bailee of Administrative Agent for purposes of perfecting Administrative Agent's
Lien in and to such Collateral under the UCC; (e) with respect to Third Parties
other than landlords, agrees to deliver the Collateral to Administrative Agent
upon request or, upon payment of applicable fees and charges to deliver such
Collateral in accordance with Administrative Agent's instructions; (f) agrees to
terms regarding Collateral held on Consignment by such Third Party; or (g) with
respect to any Third Party which is a Credit Card Processor or Credit Card
Issuer, (i) acknowledges Administrative Agent's security interest in all funds
due and to become due to a Loan Party under a Credit Card Agreement and (ii)
agrees to transfer all such funds to a Collection Account or such other Deposit
Account as Administrative Agent may designate from time to time.

 

"Third Party Payor" shall mean any Person, such as a Fiscal Intermediary, Blue
Cross/Blue Shield, or private health insurance company, which is obligated to
reimburse or otherwise make payments to health care providers who provide
medical care or medical assistance or other goods or services for eligible
patients under any private insurance contract.

 

- 3 -

 

 

Section 2.          Grant of Security Interest. To secure the full and final
payment and performance of all Obligations, each Loan Party hereby grants to
Administrative Agent, for the benefit of Secured Parties, a continuing security
interest in and to, and Lien upon, all right, title, and interest in all of the
following Property of such Loan Party, whether now owned or hereafter created,
acquired or arising, and wherever located:

 

(a)          All of such Loan Party's present and after-acquired Inventory,
Accounts (including, without limitation, Pharmacy Receivables, Credit Card
Receivables and other accounts and receivables, whether constituting Accounts or
General Intangibles), Pharmacy Scripts and related customer lists of such Loan
Party;

 

(b)          all Investment Property, General Intangibles, books and records,
Documents, Chattel Paper, Deposit Accounts, Securities Accounts, other bank
accounts, cash and Cash Investments Collateral, Instruments and Supporting
Obligations, in each case, arising out of the items set forth in clause (a)
above; and

 

(c)          all monies, whether or not in the possession or under the control
of Administrative Agent, a Lender, or a bailee or Affiliate of Administrative
Agent or a Lender, including any Cash Collateral;

 

(d)          all products and cash and non-cash Proceeds of the foregoing,
including Proceeds of and unearned premiums with respect to insurance policies,
and claims against any Person for loss, damage, or destruction of any of the
foregoing; and

 

(e)          all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs, and computer records)
pertaining to the foregoing.

 

Section 3.          Certain Exceptions Relating to Collateral. Any term or
provision of this Agreement or any other Loan Document to the contrary
notwithstanding, (a) the Collateral shall not include, and none of the
Obligations shall be paid with or with the Proceeds of, any Account, Instrument,
Chattel Paper, or other obligation or Property of any kind due from, owed by, or
belonging to, a Sanctioned Person or Sanctioned Entity and (b) none of the
foregoing items or Properties nor any Proceeds thereof shall be applied to the
payment or reduction of the Obligations.

 

Section 4.          Care of Collateral. Except as expressly required by any
other Loan Document or Applicable Law, Administrative Agent (a) shall have no
obligation to (i) exercise any degree of care in connection with any Collateral
in its possession or (ii) take any steps necessary to preserve any rights in the
Collateral or to preserve any rights in the Collateral against senior or prior
parties (which steps Loan Parties agree to take) and (b) shall not be liable or
responsible for (i) any loss or damage to the Collateral or for any diminution
in the value thereof or (ii) any act or default of any Third Party having
possession of the Collateral. In any case, Administrative Agent shall be deemed
to have exercised reasonable care of the Collateral if Administrative Agent
takes such steps for the care and preservation of the Collateral or rights
therein as Borrower Agent reasonably requests Administrative Agent to take;
provided that Administrative Agent's omission to take any action requested by
Borrower Agent shall not be deemed a failure to exercise reasonable care.
Administrative Agent's segregation or specific allocation of specified items of
Collateral against any of Loan Parties' liabilities shall not waive or affect
any Lien against other items of Collateral or any of Administrative Agent's
options, powers, or rights under this Agreement, any other Loan Document or
Applicable Law.

 

- 4 -

 

 

Section 5.          Liens on Goods on Consignment. With respect to any Loan
Party's Inventory which such Loan Party has, is selling, or sells on Consignment
with a Person that is not a Loan Party, such Loan Party shall, at its expense
and upon request of Administrative Agent from time to time, promptly take
whatever actions are required by Administrative Agent to cause such Loan Party's
security interest in and to such consigned Goods to be perfected (with such
priority as Administrative Agent may require) in accordance with the UCC and
assigned in accordance with the UCC to Administrative Agent but in no event
shall such Inventory constitute Eligible Inventory (as defined in the Addendum)
without the prior written consent of Administrative Agent.

 

Section 6.          No Assumption of Liability. The Lien on Collateral granted
hereunder is given as security only and shall not subject Secured Party to, or
in any way modify, any obligation or liability of Loan Parties relating to any
Collateral.

 

Section 7.          Power of Attorney. Each Loan Party hereby constitutes and
appoints Administrative Agent (and all Persons designated from time to time by
Administrative Agent) as such Loan Party's true and lawful attorney (and
agent-in-fact) for the purposes provided in this Section 7, which power of
attorney is coupled with an interest and is, therefore, irrevocable.
Administrative Agent, or Administrative Agent's designee, may, without notice
and in either its or a Loan Party name, but at the cost and expense of Loan
Parties:

 

(a)          During an Account Control Period (as defined in the Addendum),
indorse a Loan Party's name on any Payment Item or other Proceeds of Collateral
(including proceeds of insurance) that come into Administrative Agent's
possession or control;

 

(b)          File any financing statements (and other similar filings or public
records or notices relating to the perfection of Liens) and amendments thereto
relating to the Collateral which Administrative Agent deems appropriate, each in
form and substance required by Administrative Agent, and to (i) describe the
Collateral thereon by specific collateral category or otherwise and (ii) include
therein all other information which is required by Article 9 of the UCC or other
Applicable Law with respect to the preparation or filing of a financing
statement (or other similar filings or public records or notices relating to the
perfection of Liens) or amendment thereto; and

 

(c)          During the existence of an Event of Default, (i) notify any Account
Debtors of the assignment of Accounts owed by such Account Debtors, demand and
enforce payment of Accounts by legal proceedings or otherwise, and generally
exercise any rights and remedies with respect to Accounts; (ii) settle, adjust,
modify, compromise, discharge, or release any Accounts or other Collateral or
any legal proceedings brought to collect Accounts or Collateral; (iii) sell or
assign any Accounts and other Collateral upon such terms, for such amounts, and
at such times as Administrative Agent deems advisable; (iv) collect, liquidate,
and receive balances in Deposit Accounts or investment accounts and take
control, in any manner, of Proceeds of Collateral; (v) prepare, file, and sign a
Loan Party's name to a proof of claim or other document in any bankruptcy or
similar proceeding of or relating to any Account Debtor or to any notice,
assignment, or satisfaction of Lien or similar document; (vi) receive, open, and
dispose of mail addressed to any Loan Party and notify postal authorities to
deliver any such mail to an address designated by Administrative Agent; (vii)
indorse any Chattel Paper, Document, Instrument, or other document or agreement
relating to any Accounts, Inventory or other Collateral; (viii) use any Loan
Party's stationery and sign its name to verifications of Accounts and notices to
Account Debtors; (ix) use information contained in any data processing,
electronic, or information systems relating to Collateral; (x) make and adjust
claims under insurance policies; (xi) take any action as may be necessary or
appropriate to obtain payment under any letter of credit, banker's acceptance,
or other instrument for which any Loan Party is a beneficiary; and (xii) take
all other actions as Administrative Agent deems appropriate to fulfill any Loan
Party's obligations under the Loan Documents.

 

- 5 -

 

 

Section 8.          Additional Collateral and Perfection Information. Schedule 1
sets forth, for each Loan Party and each of its Subsidiaries, (a) the address of
such Person's chief executive office and other locations where Collateral (other
than in-transit Inventory) is stored or books and records are kept; (b) such
Person's tax identification number and, if applicable and available,
organizational identification number; (c) any fictitious name or trade name used
by such Person during the past five years; and (d) a list of Third Parties which
hold any of such Person's Inventory with an aggregate book value in excess of
$5,000,000.

 

Section 9.          Collateral Disclosure Certificates. On the Closing Date and
within 30 days after the commencement of each Fiscal Year, Borrowers shall (i)
execute and deliver to Administrative Agent a Collateral Disclosure Certificate
with then current information which shall be in form and substance satisfactory
to Administrative Agent and (ii) supplement Schedules 1 and 2 hereto, Schedules
4.19 and 4.20 to the Credit Agreement, with respect to any matter hereafter
arising that, if existing or occurring at the Closing Date, would have been
required to be set forth or described in such Schedule or as an exception to
such representation or that is necessary to correct any information in such
Schedule or representation which has been rendered inaccurate thereby, and, in
each case such Collateral Disclosure Certificate or Schedule shall be
appropriately marked to show the changes made therein; provided that (A) neither
such Collateral Disclosure Certificate nor such supplement to any Schedule or
representation or warranty shall amend, supplement or otherwise modify such
Collateral Disclosure Certificate or any such Schedule or representation or
warranty, or be deemed a waiver of any Default or Event of Default resulting
from the matters disclosed therein, except as consented to by Administrative
Agent and the Required Lenders or Lenders, as applicable in accordance with
Section 10.2 of the Credit Agreement and (B) no supplement to any Schedule shall
be required or permitted with respect to representations and warranties that
relate solely to the Closing Date. All information set forth in the Collateral
Disclosure Certificates delivered on the Closing Date is true and correct as of
the Closing Date in all material respects, and all information in any Collateral
Disclosure Certificate delivered to Administrative Agent after the Closing Date
shall be true and correct as of the date thereof in all material respects.

 

Section 10.         Covenants Regarding Collateral and Property. Until Payment
in Full of the Obligations, each Loan Party shall, and shall cause each
Subsidiary, as applicable, to:

 

(a)          Protection of Collateral. Pay all expenses of protecting, storing,
warehousing, insuring, handling, maintaining, and shipping any Collateral, all
Taxes payable with respect to any Collateral (including any sale thereof), and
all other payments required to be made by Administrative Agent to any Person to
realize upon any Collateral.

 

(b)          Defense of Title to Collateral. Defend its title to Collateral and
Administrative Agent's Liens therein against all Persons, claims, and demands
whatsoever, except Liens permitted by Section 7.2 of the Credit Agreement.

 

(c)          Third Parties. If such Person's records or reports of the
Collateral are prepared or maintained by any other Person, irrevocably authorize
such Person (and such Person is hereby irrevocably authorized) to deliver, at
Administrative Agent's request from time to time, such records, reports, and
related documents to Administrative Agent and to discuss the same and all
information therein with Administrative Agent.

 

(d)          After-Acquired and Other Collateral.

 

(i)          Except as otherwise set forth in Section 5.11 of the Credit
Agreement, promptly (but in any event within ten (10) Business Days), at such
Person's expense, notify Administrative Agent in writing if, after the Closing
Date, any Borrower or Subsidiary obtains any interest in any Collateral
consisting of Deposit Accounts, Chattel Paper, Documents, Instruments,
Investment Property or any other Collateral which may be perfected by any means
other the filing of a financing statement, and, upon Administrative Agent's
request, promptly take such actions as Administrative Agent deems appropriate to
effect Administrative Agent's duly perfected, first-priority Lien upon such
Collateral.

 

- 6 -

 

 

(ii)         Exercise its commercially reasonable efforts to obtain and deliver
to Administrative Agent such Third Party Agreements as Administrative Agent may
reasonably request from time to time (with it being agreed that the success or
failure for whatever reason to obtain any such Third Party Agreements shall not
in any way limit Administrative Agent's right to institute Reserves (as defined
in the Addendum) or deem any corresponding Collateral to be ineligible).

 

(iii)        If any Collateral is in the possession of a Third Party, at
Administrative Agent's reasonable request, obtain an acknowledgment that such
Third Party holds the Collateral for the benefit of Administrative Agent (with
it being agreed that the success or failure for whatever reason to obtain any
such agreement shall not in any way limit Administrative Agent's right to
institute Reserves (as defined in the Addendum) or deem any Collateral not
subject to such an acknowledgment to be ineligible).

 

(iv)        Upon request, provide Administrative Agent with copies of all
existing agreements, and promptly after execution thereof provide Administrative
Agent with copies of all future agreements, between any Borrower or Subsidiary
and any Third Party or other Person which owns any premises at which any
material amount of Collateral may be kept or that otherwise may possess or
handle any material amount of Collateral.

 

(e)          Location of Collateral. Maintain all tangible Collateral (other
than in-transit Inventory) at a Permitted Location. Collateral shall not,
without the prior written approval of Administrative Agent, be moved from a
Permitted Location except, before a Default or an Event of Default, with respect
to sales or other dispositions of assets permitted pursuant to Section 7.6 of
the Credit Agreement.

 

(f)          Further Assurances. Promptly upon Administrative Agent's request,
Loan Parties shall provide such further assurances as are set forth in
Section 5.17 of the Credit Agreement.

 

Section 11.         Particular Covenants Relating to Accounts. Until Payment in
Full of the Obligations, each Loan Party shall, and shall cause each Subsidiary,
as applicable, to:

 

(a)          Taxes. Authorize Administrative Agent to, if an Account of any
Borrower includes a charge for any Taxes, pay the amount thereof to the proper
taxing authority for the account of such Borrower and to charge Loan Parties
therefor; provided, however, that neither Administrative Agent, LC Issuer nor
Lenders shall be liable for any Taxes that may be due from any Loan Party or
with respect to any Collateral.

 

(b)          Account Verification. Cooperate fully with Administrative Agent in
facilitating Administrative Agent's verification of the validity, amount, or any
other matter relating to any Accounts of Borrowers, and each Borrower, for
itself and on behalf of each of its Subsidiaries, grants Administrative Agent
the right, at any time and in the name of Administrative Agent, any designee of
Administrative Agent, or such Borrower or Subsidiary, to complete such
verification by mail, telephone, or otherwise.

 

(c)          Assignments of Accounts. If so requested by Administrative Agent
from time to time during the existence of an Event of Default, promptly execute
and deliver to Administrative Agent formal, written assignments of all of such
Borrowers' Accounts which have not, as of such date been included in any such
formal, written assignment.

 

- 7 -

 

 

(d)          Certain Notices Regarding Accounts and Account Debtors. Notify
Administrative Agent promptly (which notice may include disclosure in a
Borrowing Base Certificate (as defined in the Addendum) if delivery thereof
would constitute prompt notice pursuant to this clause (d)) of (i) the assertion
of any claims, offsets, defenses, or counterclaims by any Account Debtor, or any
disputes with Account Debtors, in each case, where the amount in controversy is
greater than $1,500,000 or any settlement, adjustment, or compromise thereof;
(ii) all material adverse information known to any Borrower relating to the
financial condition of any Account Debtor obligated in respect of Accounts
having an aggregate value greater than $1,500,000; and (iii) after the
occurrence of the Borrowing Base Trigger Event, any event or circumstance which,
to the knowledge of any Responsible Officer of any Borrower, would cause
Administrative Agent to consider any then existing Credit Card Receivables or
Pharmacy Receivables having a value greater than $1,500,000 as no longer
constituting Eligible Credit Card Receivables (as defined in the Addendum) or
Eligible Pharmacy Receivables (as defined in the Addendum), as applicable.

 

Section 12.         Particular Covenants Regarding Inventory. Until Payment in
Full of the Obligations, each Loan Party shall, and shall cause each Subsidiary,
as applicable, to:

 

(a)          Records and Reports of Inventory. Keep accurate and complete
records of its Inventory, including costs and daily withdrawals and additions.

 

(b)          Inventory Examinations. Conduct a physical inventory at least once
per calendar year (and, during the existence of an Event of Default, at such
other times as may be requested by Administrative Agent) and periodic cycle
counts consistent with historical practices and provide to Administrative Agent
a report based on each such inventory and count promptly upon completion
thereof, together with such supporting information as Administrative Agent may
request. Administrative Agent may participate in and observe each physical
count.

 

(c)          Returns of Inventory. Not return any Inventory to a supplier,
vendor, or other Person, whether for cash, credit, or otherwise, unless (i) such
return is in the Ordinary Course of Business; (ii) no Event of Default or
Overadvance (as defined in the Addendum and calculated by giving pro forma
effect to the removal of such Inventory from the Borrowing Base (as defined in
the Addendum)) exists or would result therefrom; and (iii) any payment received
by a Borrower for a return is promptly remitted to Administrative Agent for
application to the Obligations.

 

(d)          Acquisition, Sale, and Maintenance. (i) Not acquire or accept any
Inventory on Consignment or approval unless such acquisition or acceptance is in
the Ordinary Course of Business; (ii) take commercially reasonable steps to
assure that all Inventory is produced in accordance with Applicable Law,
including the Fair Labor Standards Act of 1938; (iii) not sell any Inventory on
Consignment or approval or any other basis under which the customer may return
or require a Loan Party to repurchase such Inventory unless such sale is in the
Ordinary Course of Business; (iv) use, store, and maintain all Inventory with
reasonable care and caution, in accordance with applicable standards of any
insurance and in compliance with all Applicable Law.

 

Section 13.         Post-Default Allocation of Payments. Notwithstanding
anything herein or in any other Loan Document to the contrary, during an Event
of Default, if so directed by the Required Lenders or at Administrative Agent's
discretion, monies to be applied to the Obligations, whether arising from
payments by Loan Parties, realization on Collateral, setoff, or otherwise, shall
be allocated as follows:

 

(a)          first, to all costs and expenses, including Extraordinary Expenses,
owing to Administrative Agent in its capacity as Administrative Agent;

 

- 8 -

 

 

(b)          second, to all costs and expenses reimbursable by Borrowers owing
to LC Issuer and Lenders;

 

(c)          third, to all amounts owing to Swingline Lender on Swingline Loans
(including principal and interest);

 

(d)          fourth, to all amounts owing to LC Issuer with respect to that
portion of the LC Obligations which constitutes unreimbursed draws under Letters
of Credit;

 

(e)          fifth, to all Obligations constituting fees to the extent not
already paid above (other than amounts which constitute Secured Bank Product
Obligations);

 

(f)          sixth, to all Obligations constituting interest to the extent not
already paid above (other than amounts which constitute Secured Bank Product
Obligations);

 

(g)          seventh, to the Cash Collateralization that portion of the LC
Obligations constituting undrawn amounts under outstanding Letters of Credit;

 

(h)          eighth, to (A) all Loans and (B) Secured Bank Product Obligations,
if and to the extent that the provider thereof has delivered written notice to
Administrative Agent, in form and substance satisfactory to Administrative
Agent, within ten (10) days following the later of the Closing Date or creation
of the Bank Product (i) describing the Bank Product and setting forth the
maximum amount to be secured by the Collateral and the methodology to be used in
calculating such amount and (ii) agreeing to be bound by Section 9.12 of the
Credit Agreement (including Cash Collateralization thereof), up to the amount of
Reserves (as defined in the Addendum) then imposed by Administrative Agent
relative thereto;

 

(i)          ninth, to all other Secured Bank Product Obligations described in
clause (viii) above, to the extent not already paid above; and

 

(j)          last, to all other Obligations, including any Secured Bank Product
Obligations not described in, and paid pursuant to, clause (h) or (i) above.

 

Amounts shall be applied to each of the foregoing categories of Obligations in
the order presented above before being applied to the following category. Where
applicable, all amounts to be applied to a given category will be applied on a
pro rata basis among those entitled to payment in such category. In determining
the amount to be applied to Secured Bank Product Obligations within any given
category, each Secured Bank Product Provider's pro rata share thereof shall be
based on the lesser of (x) the amount presented in the most recent notice from
such Secured Bank Product Provider to Administrative Agent and (y) the actual
amount of such Secured Bank Product Obligations, calculated in accordance with a
methodology presented to and approved by Administrative Agent by such Secured
Bank Product Provider to Administrative Agent. Administrative Agent has no duty
to investigate the actual amount of any Secured Bank Product Obligations and,
instead, is entitled to rely in all respects on the applicable Secured Bank
Product Provider's reasonably detailed written accounting thereof. If such
Secured Bank Product Provider does not submit such accounting of its own accord
and in a timely manner, Administrative Agent, may instead rely on any prior
accounting thereof. No notice to include obligations under any Bank Product in
the Obligations or notice to increase the maximum dollar amount of any Secured
Bank Product Obligations shall be effective if received by Administrative Agent
during the existence of an Event of Default (until such Event of Default is
waived in accordance with the terms of this Agreement). The allocations set
forth in this Section 13 are solely to determine the rights and priorities of
the Secured Parties among themselves and may be changed by agreement among them
without the consent of any Loan Party. No Loan Party is entitled to any benefit
under this Section 13 or has any standing to enforce this Section 13. Excluded
Swap Obligations with respect to any Loan Party shall not be paid with amounts
received from such Loan Party or such Loan Party's assets, but appropriate
adjustments shall be made with respect to payments from other Loan Parties to
preserve the allocation to Obligations otherwise set forth above in this Section
13. Administrative Agent shall not be liable for any application of amounts made
by it in good faith and, if any such application is subsequently determined to
have been made in error, the sole recourse of any Lender or other Person to
which such amount ought to have been made shall be to recover the amount from
the Person which actually received it (and, if such amount was received by any
Secured Party, then such Secured Party, by accepting the benefits of this
Agreement, agrees to return it).

 

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Section 14.         Remedies upon Default.

 

(a)          In addition to (and not in lieu of) Section 8.2 of the Credit
Agreement, upon the occurrence of an Event of Default under Section 8.1(g) or
(h) of the Credit Agreement, all Commitments shall, automatically and without
notice to any Person, terminate and all Obligations (other than Obligations
under any Hedging Agreements between a Loan Party and Administrative Agent or
any Lender (or any of their respective Affiliates), all of which shall be due in
accordance with and governed by the provisions of such Hedging Agreements)
shall, automatically and without notice to any Person, become immediately due
and payable, without diligence, presentment, demand, protest, or notice of any
kind, all of which are hereby waived by Loan Parties to the fullest extent
permitted by Applicable Law. During the existence of any Event of Default,
Administrative Agent may (and, at the written direction of the Required Lenders,
shall) do one or more of the following from time to time:

 

(i)          declare any Obligations immediately due and payable (other than
Obligations under any Hedging Agreements between a Loan Party and Administrative
Agent or any Lender (or any of their respective Affiliates), all of which shall
be due in accordance with and governed by the provisions of such Hedging
Agreements), whereupon they shall be due and payable without diligence,
presentment, demand, protest, or notice of any kind, all of which are hereby
waived by Loan Parties to the fullest extent permitted by law;

 

(ii)         (A) refuse to make Loans, issue Letters of Credit, or make other
extensions of credit to Borrowers; (B) terminate, reduce, or condition any
Commitment; and (C) require Loan Parties to Cash Collateralize LC Obligations,
Secured Bank Product Obligations, and other Obligations that are contingent or
not yet due and payable (and, if Loan Parties do not, for whatever reason,
promptly provide such Cash Collateral, Administrative Agent may provide such
Cash Collateral with the proceeds of a Revolving Loan and each Lender shall fund
its Pro Rata Share thereof regardless of whether an Overadvance exists or would
result therefrom or any condition precedent to the making of any Loan has not
been satisfied);

 

(iii)        (A) take possession of any Collateral; (B) require Loan Parties to
assemble Collateral, at Loan Parties' expense, and make it available to
Administrative Agent at a time and place designated by Administrative Agent; (C)
enter any premises where Collateral is located and store Collateral on such
premises until sold (and if the premises are owned or leased by a Loan Party,
such Loan Party shall not charge for such storage); (D) sell, lease, or
otherwise dispose of any Collateral in its then condition or after the
refurbishing, restoration, repair, or further manufacturing or processing
thereof, at public or private sale, with such notice as may be required by
Applicable Law, in lots or in bulk, at such locations, all as Administrative
Agent, in its discretion, deems advisable and at such prices or terms as
Administrative Agent may deem reasonable, for cash, upon credit, or for future
delivery; (E) demand, collect, invoice, and sue for all amounts owed pursuant to
Accounts, General Intangibles, Chattel Paper, Instruments, or Documents or for
proceeds of any Collateral (either in a Loan Party's name or Administrative
Agent's or any Lender's name, at Administrative Agent's option), with the right
to enforce, compromise, settle, or discharge any such amounts; and (F) require
or cause all invoices and statements sent to any Account Debtor to state that
the Accounts and such other obligations have been assigned to Administrative
Agent and are payable directly and only to Administrative Agent and Loan Parties
shall deliver to Administrative Agent such originals of documents evidencing the
sale and delivery of Goods or the performance of services giving rise to any
Accounts as Administrative Agent may require; and

 

- 10 -

 

 

(iv)        exercise such other rights and remedies which may be available to it
under this Agreement, the other Loan Documents, and agreements relating to Bank
Products, or Applicable Law (including the rights of a secured party under the
UCC), all of which shall be cumulative.

 

(b)          Administrative Agent shall not be liable or responsible in any way
for the safekeeping of any Collateral, for any loss or damage thereto (except
for reasonable care in its custody while Collateral is in Administrative Agent's
actual possession), for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other Person
whatsoever, but the same shall be at Loan Parties' sole risk.

 

Section 15.         Commercially Reasonable. Each Loan Party agrees that notice
of any proposed sale or other disposition of Collateral by Administrative Agent
shall be reasonable if such notice is delivered as provided in Section 10.1 of
the Credit Agreement at least ten (10) Business Days before the action to be
taken, and Loan Parties waive any other notice. Administrative Agent shall have
the right to conduct such sales on any Loan Party's premises, without charge,
and such sales may be adjourned from time to time in accordance with Applicable
Law. Administrative Agent may purchase any Collateral at public or, if permitted
by Applicable Law, private sale and, in lieu of actual payment of the purchase
price, may set off the amount of such price against the Obligations. Each Loan
Party shall be liable for any deficiencies, which shall bear Default Interest
(including interest arising after commencement any Loan Party's Insolvency
Proceeding, whether or not such interest is allowed in such Insolvency
Proceeding) and all costs and expenses of collection and enforcement, including
reasonable attorneys' fees and expenses, if the proceeds of the disposition of
the Collateral do not result in Payment in Full. To the extent that Applicable
Law imposes duties on Administrative Agent or any Lender to exercise remedies in
a commercially reasonable manner (which duties cannot be waived under Applicable
Law), each Loan Party acknowledges and agrees that it is not commercially
unreasonable for Administrative Agent or any other Secured Party, as applicable,
(a) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by Applicable Law, to fail to
obtain consents of any Governmental Authority or other third party for the
collection or disposition of Collateral to be collected or disposed of; (b) to
fail to exercise collection remedies against Account Debtors, secondary obligors
or other Persons obligated on Collateral or to remove Liens on or any adverse
claims against, Collateral; (c) to exercise collection remedies against Account
Debtors and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists; (d) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature; (e) to contact other
Persons, whether or not in the same business as any Loan Party, for expressions
of interest in acquiring all or any portion of the Collateral; (f) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature; (g) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so or that match buyers and sellers of assets; (h) to dispose of assets in
wholesale rather than retail markets; (i) to disclaim disposition warranties;
(j) to purchase, at Loan Parties' expense, insurance or credit enhancements to
insure Administrative Agent and any other Secured Party against risks of loss,
collection, or disposition of Collateral or to provide to Administrative Agent
and the other Secured Parties a guaranteed return from the collection or
disposition of Collateral; or (k) to the extent deemed appropriate by
Administrative Agent, to obtain the services of other brokers, investment
bankers, consultants, and other professionals to assist Administrative Agent in
the collection or disposition of any of the Collateral. Each Loan Party
acknowledges that the purpose of this Section 15 is to provide non-exhaustive
indications of what actions or omissions by Administrative Agent or any other
Secured Party would not be commercially unreasonable in the exercise by
Administrative Agent or any other Secured Party of remedies against the
Collateral and that other actions or omissions by Administrative Agent or any
other Secured Party shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section 15. Without limitation of the
foregoing, nothing contained in this Section 15 shall be construed to grant any
rights to any Loan Party or to impose any duties on Administrative Agent or the
other Secured Party that would not have been granted or imposed by this
Agreement, any other Loan Document, any agreement related to Bank Products, or
by Applicable Law in the absence of this Section 15.

 

- 11 -

 

 

Section 16.         Protective Advances.   From time to time, Administrative
Agent may, in its discretion, make one or more Base Rate Revolving Loans to
preserve, protect, or defend any Collateral or to increase or improve the
likelihood of collecting or obtaining repayment of any Obligations (in each
case, if Administrative Agent determines that doing so is necessary or
desirable) (a "Protective Advance"). Administrative Agent may make a Protective
Advance without regard to Excess Availability or the satisfaction of any
condition precedent to the making of Loans, unless (A) the Required Lenders
have, in writing, revoked Administrative Agent's authority to do so or (B)
Administrative Agent would have actual knowledge that, after giving effect
thereto, the aggregate outstanding principal amount of all Loans made as
Protective Advances (i) would exceed $15,000,000 or (ii) would cause the amount
of the Revolving Credit Exposure outstanding to exceed the aggregate of the
Revolving Commitments at such time or any individual Lender's Revolving
Commitment. If the terms of the foregoing clauses (A) and (B) are not
applicable, Administrative Agent's determination that funding of a Protective
Advance is appropriate shall be conclusive. Each Lender shall participate based
on its Pro Rata Share in each Protective Advance. The provisions of this Section
16 are solely for the benefit of Administrative Agent and Lenders, and none of
the Loan Parties may rely on this Section 16 or have any standing to enforce its
terms.

 

Section 17.         Credit Bidding. Each Lender agrees that, except as otherwise
provided in any Loan Documents or with the written consent of Administrative
Agent and Required Lenders, it will not take any Enforcement Action, accelerate
Obligations under any Loan Documents, or exercise any right that it might
otherwise have under Applicable Law to credit bid at foreclosure sales, UCC
sales, or other similar dispositions of Collateral. This Section 17 does not
confer any rights or benefits upon Loan Parties or any other Person, and no Loan
Party shall have any standing to enforce this Section 17.

 

Section 18.         Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid under Applicable
Law. To the extent any such provision is found to be invalid or unenforceable
under Applicable Law in a given jurisdiction, then (a) such provision shall be
ineffective only to such extent; (b) the remainder of such provision and the
other provisions of this Agreement shall remain in full force and effect in such
jurisdiction; and (c) such provision shall remain in full force and effect in
any other jurisdiction.

 

Section 19.         Cumulative Effect; Conflict of Terms. The parties
acknowledge that different provisions of this Agreement may contain
requirements, limitations, restrictions, or permissions relating to the same
subject matter and, in such case, all of such provisions shall be deemed to be
cumulative (rather than instead of one another) and must be satisfied or
performed, as applicable. Except as otherwise provided in another Loan Document
(by specific reference to the applicable provision of this Agreement), to the
extent any provision contained in this Agreement conflicts directly with any
provision in another Loan Document, then the provision in this Agreement shall
control.

 

- 12 -

 

 

Section 20.         Counterparts. This Agreement and any amendments, waivers, or
consents relating hereto may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together, shall constitute but one and the same instrument.

 

Section 21.         Fax or Other Transmission. Delivery by one or more parties
hereto of an executed counterpart of this Agreement via facsimile, telecopy or
other electronic method of transmission pursuant to which the signature of such
party can be seen (including Adobe Corporation's Portable Document Format or
PDF) shall have the same force and effect as the delivery of an original
executed counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by facsimile or other electronic method of
transmission shall also deliver an original executed counterpart, but the
failure to do so shall not affect the validity, enforceability, or binding
effect of this Agreement.

 

Section 22.         Governing Law. THIS AGREEMENT, UNLESS OTHERWISE SPECIFIED BY
THE TERMS HEREOF OR UNLESS THE LAWS OF ANOTHER JURISDICTION MAY, BY REASON OF
MANDATORY PROVISIONS OF LAW, GOVERN THE PERFECTION, PRIORITY, OR ENFORCEMENT OF
SECURITY INTERESTS IN THE COLLATERAL, SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF GEORGIA, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES OR OTHER
RULE OF LAW WHICH WOULD CAUSE THE APPLICATION OF THE LAW OF ANY JURISDICTION
OTHER THAN THE LAW OF THE STATE OF GEORGIA (BUT GIVING EFFECT TO FEDERAL LAWS
RELATING TO NATIONAL BANKS).

 

Section 23.         Submission to Jurisdiction. EACH LOAN PARTY HEREBY CONSENTS
TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF GEORGIA AND THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA, IN RESPECT OF
ANY PROCEEDING, DISPUTE, OR LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY PARTY WITH RESPECT
HERETO AND AGREES THAT ANY SUCH PROCEEDING, DISPUTE, OR LITIGATION MAY BE
BROUGHT BY IT IN SUCH COURTS. WITH RESPECT TO SUCH COURTS, EACH LOAN PARTY
IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS, AND DEFENSES IT MAY HAVE REGARDING
PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE, OR INCONVENIENT FORUM. EACH
PARTY HERETO WAIVES PERSONAL SERVICE OF PROCESS OF ANY AND ALL PROCESS SERVED
UPON IT AND IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED
FOR NOTICES IN THE CREDIT AGREEMENT, SUCH SERVICE TO BE EFFECTIVE AT THE TIME
SUCH NOTICE WOULD BE DEEMED DELIVERED PURSUANT TO THE CREDIT AGREEMENT. Nothing
herein shall limit the right of Administrative Agent or any Lender to bring
proceedings against any Loan Party in any other court, nor limit the right of
any party to serve process in any other manner permitted by Applicable Law.
Nothing in this Agreement shall be deemed to preclude enforcement by
Administrative Agent of any judgment or order obtained in any forum or
jurisdiction.

 

Section 24.         Waivers; Limitation on Damages; Limitation on Liability.

 

(a)          Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH LOAN PARTY, BY EXECUTION HEREOF, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF ANY PARTY WITH RESPECT HERETO OR THERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT TO ADMINISTRATIVE AGENT, LC ISSUER, AND THE LENDERS TO ENTER
INTO AND ACCEPT THIS AGREEMENT.

 

- 13 -

 

 

(b)          Waiver of Certain Damages. NO PARTY TO THIS AGREEMENT SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS AGREEMENT OR ANY SUCCESSOR OR
ASSIGNEE OF SUCH PERSON, OR ANY THIRD PARTY BENEFICIARY, OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH ANY SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY, SPECIAL, OR CONSEQUENTIAL DAMAGES AS A RESULT OF ANY TRANSACTION
CONTEMPLATED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT.

 

(c)          Acknowledgement of Waivers. Each Loan Party has reviewed the
foregoing waivers with its legal counsel and has knowingly and voluntarily
waived its jury trial and other rights following consultation with legal
counsel. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.

 

Section 25.         Time is of the Essence. Time is of the essence of this
Agreement and the other the Loan Documents.

 

[SIGNATURES ON FOLLOWING PAGES.]

 

- 14 -

 

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered under seal as
of the date set forth above.

 

  BORROWERS:       FRED'S, INC., a Tennessee corporation,   as "Borrower Agent"
and a "Borrower"       By: /s/ Jerry A. Shore   Name:  Jerry A. Shore   Title:
Chief Executive Officer       [CORPORATE SEAL]       Attest: /s/ Mark C. Dely  
Name: Mark C. Dely   Title: Secretary       FRED'S STORES OF TENNESSEE, INC., a
Tennessee corporation, as a "Borrower"       By: /s/ Jerry A. Shore   Name:
Jerry A. Shore   Title: Chief Executive Officer       [CORPORATE SEAL]      
Attest: /s/ Mark C. Dely   Name: Mark C. Dely   Title: Secretary       FRED'S
DOLLAR STORE OF MCCOMB, INC., a Mississippi corporation, as a "Borrower"      
By: /s/ Jerry A. Shore   Name: Jerry A. Shore   Title: President      
[CORPORATE SEAL]         Attest: /s/ Mark C. Dely   Name: Mark C. Dely   Title:
Secretary

 

[Signatures continue on following pages.]

 

Security Agreement (Fred's)

 

 

 

 

  FRED'S CAPITAL FINANCE INC., a Delaware corporation, as a "Borrower"       By:
/s/ Andrew T. Panaccione   Name: Andrew T. Panaccione   Title: President      
[CORPORATE SEAL]       Attest: /s/ Pamela A. Jasinski   Name: Pamela A. Jasinski
  Title: Secretary       FRED'S CAPITAL MANAGEMENT COMPANY, a Delaware
corporation, as a "Borrower"       By: /s/ Andrew T. Panaccione   Name: Andrew
T. Panaccione   Title: President       [CORPORATE SEAL]       Attest: /s/ Pamela
A. Jasinski   Name: Pamela A. Jasinski   Title: Secretary       NATIONAL
PHARMACEUTICAL NETWORK, INC., a Florida corporation, as a "Borrower"       By:
/s/ Jerry A. Shore   Name: Jerry A. Shore   Title: President       [CORPORATE
SEAL]       Attest: /s/ Mark C. Dely   Name: Mark C. Dely   Title: Secretary

 

[Signatures continue on following page.]

 

Security Agreement (Fred's)

 

 

 

 

  ADMINISTRATIVE AGENT:       REGIONS BANK, an Alabama bank, as "Administrative
Agent"       By: /s/ Richard A. Gere   Name: Richard A. Gere   Title: Senior
Vice President

 

Security Agreement (Fred's)

 

 

 

 

EXHIBIT A

 

Form of Collateral Disclosure Certificate

 

[See attached.]

 

 

 

 

SCHEDULE 1

 

Additional Collateral and Perfection Information

 

[See attached.]

 

 

 

 

SCHEDULE 2

 

Permitted Locations

 

[See attached.]

 

 

 

  

EXECUTION VERSION

 

ADDENDUM TO CREDIT AGREEMENT

 

THIS ADDENDUM TO CREDIT AGREEMENT (this "Addendum") is dated as of April 9,
2015, by and among (A) FRED'S, INC., a Tennessee corporation ("Parent"); (B) the
Subsidiaries of Parent identified on the signature pages hereto and any other
Subsidiaries of Parent which may become Borrowers under the Credit Agreement (as
defined below) from time to time (together with Parent, each, a "Borrower" and,
collectively, "Borrowers"); (C) the Subsidiaries of Parent identified on the
signature pages hereto and any other Subsidiaries of Parent which may become
Guarantors under the Credit Agreement (as defined below) from time to time
(each, a "Guarantor" and, collectively, "Guarantors"); (D) the financial
institutions from time to time party hereto (each, a "Lender" and, collectively,
"Lenders"); (E) REGIONS BANK, an Alabama bank (as further defined below,
"Regions"), in its capacity as the Swingline Lender (as defined below) and LC
Issuer (as defined below); and (F) Regions, in its capacity as administrative
agent and collateral agent for the Lenders, LC Issuer and other Secured Parties
(in such capacity and as further defined below, "Administrative Agent" or
"Agent").

 

RECITALS:

 

Borrowers have requested that Administrative Agent and Lenders establish a
revolving credit facility and that LC Issuer establish a letter of credit
sub-facility pursuant to that certain Credit Agreement dated on or about the
date hereof (as at any time amended, restated, supplemented or otherwise
modified, the "Credit Agreement").

 

Administrative Agent, Lenders and LC Issuer are unwilling to provide such credit
facility and letter of credit sub-facility unless, among other things, Borrowers
and the other Loan Parties party hereto enter into this Addendum.

 

To induce Administrative Agent, Lenders and LC Issuer to provide such credit
facility and letter of credit sub-facility, Borrowers and the other Loan Parties
desire to enter into this Addendum.

 

NOW, THEREFORE, in consideration of the foregoing premises, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
mutually acknowledged, each Loan Party, Administrative Agent, each Lender and LC
Issuer, each intending to be legally bound, hereby covenant and agree as
follows:

 

Section 1.          Application of Addendum. The Credit Agreement shall be
interpreted without reference to this Addendum until such time as a Borrowing
Base Trigger Event has occurred, after which time this Addendum shall be deemed
incorporated into the Credit Agreement and all terms contained herein shall
become applicable.

 

Section 2.          Definitions. Capitalized terms that are not otherwise
defined herein shall have the meanings set forth in the Credit Agreement. As
used in this Addendum, the following terms shall have the following meanings:

 

"Account Control Event" means (a) the occurrence of an Event of Default or (b)
at any time of determination, that Excess Availability is less than the greater
of (i) twelve and one-half percent (12.5%) of the Commitments and (ii)
$19,000,000.

 

 

 

  

"Account Control Period" means the period beginning on the occurrence of an
Account Control Event and ending on the first Business Day on which (a) no Event
of Default has existed and (b) Excess Availability has been greater than the
greater of (i) twelve and one-half percent (12.5%) of the Commitments and (ii)
$19,000,000, in each case for the preceding sixty (60) days.

 

"Aggregate Revolving Obligations" means, at any time of determination, the sum
(without duplication) of (a) the outstanding principal amount of all Revolving
Loans plus (b) the outstanding amount of all LC Obligations.

 

"Applicable Margin" means, subject to the terms of this definition and at any
time on or after the Borrowing Base Trigger Event, with respect to any Type of
Loan and at any time of determination, the percentage rate per annum set forth
in the following table, as determined by reference to Average Excess
Availability for the calendar quarter preceding each Determination Date (as
defined below), as further described below:

 

      Revolving Loans  Level  Average Excess 
Availability  Base
 Rate   LIR   LIBOR  I  Greater than $100,000,000   0.25%   1.25%   1.25% II 
Greater than or equal to $50,000,000
but less than or equal
to $100,000,000   0.50%   1.50%   1.50% III  Less than
$50,000,000   0.75%   1.75%   1.75%

 

The Applicable Margin shall be subject to reduction or increase, as applicable
and as set forth in the table above, on a quarterly basis on each Determination
Date, and any such reduction or increase shall be automatic and without notice
to any Person. Without limiting Administrative Agent's or Required Lenders'
rights to charge Default Interest, if (a) the Borrowing Base Certificate and
related reports setting forth the Borrowing Base and the basis therefor are not
received by Administrative Agent on or before the applicable dates required
pursuant to Section 7 of this Addendum, as applicable, or (b) an Event of
Default (whether resulting from a failure to timely deliver such Borrowing Base
Certificate and related reports or otherwise) occurs and, in either case,
Administrative Agent or Required Lenders so elect, then, in each case, from the
date such Borrowing Base Certificate or related reports were required to be
delivered or the date such Event of Default occurred, as applicable, the
Applicable Margin shall, at the option of Administrative Agent or the Required
Lenders, be at the Level with the highest rates of interest until such time as
such Borrowing Base Certificate and related reports are received by
Administrative Agent and any such Event of Default is waived in accordance with
the terms of the Credit Agreement; provided, that, if the Applicable Margin is
increased due to Loan Parties' failure to deliver such Borrowing Base
Certificate and related reports setting forth the Borrowing Base and the basis
therefor to Administrative Agent on or before the applicable date required
pursuant to Section 7 of this Addendum, such Applicable Margin shall be reduced
to the level otherwise applicable hereunder if Loan Parties deliver such
Borrowing Base Certificate and related reports setting forth the Borrowing Base
and the basis therefor on or before the date that is fifteen (15) days after the
applicable date required pursuant to Section 7 of this Addendum as of the date
immediately following such delivery.

 

Any of the foregoing to the contrary notwithstanding, after the occurrence of
the Borrowing Base Trigger Event to, but not including, the first Determination
Date, the Applicable Margin shall be equal to the rates set forth in Level II.
As used herein, "Determination Date" means the first day of Parent's Fiscal
Quarters beginning on or about the first day of each February, May, August and
November.

 

- 2 -

 

  

If any Borrowing Base Certificate or any other report on which Excess
Availability or Average Excess Availability is determined or reported to
Administrative Agent is shown to be inaccurate (regardless of whether the Credit
Agreement or any Commitments are or remain in effect when such inaccuracy is
discovered), and such inaccuracy, if corrected, would have led to the
application of a higher Applicable Margin for any period (an "Applicable
Period") than the Applicable Margin actually applied for such Applicable Period,
then (A) Borrowers shall immediately deliver to Administrative Agent a correct
Borrowing Base Certificate or related report for the Applicable Period; (B) the
Applicable Margin for such Applicable Period shall be determined by reference to
such Borrowing Base Certificate or related report; and (C) Borrowers shall
promptly pay Administrative Agent, ON DEMAND, the accrued additional interest
owing as a result of such increased Applicable Margin for such Applicable Period
and any other additional fee or charge which was based, in whole or in part, on
the Applicable Margin, which payment shall be promptly applied by Administrative
Agent for its own account and the account of Lenders and LC Issuer, as
applicable, in accordance with the terms hereof. If any inaccurate Borrowing
Base Certificate or other report on which Excess Availability or Average Excess
Availability is determined would, if corrected, have led to the application of a
lower Applicable Margin for any period for which interest has already been paid,
none of the Secured Parties shall be required to refund or return any portion of
such interest.

 

"Average Excess Availability" means, for any period, Excess Availability for
each day of such period, divided by the number of days in such period.

 

"Bank Product Reserve" means an amount determined from time to time by
Administrative Agent in its discretion as a reserve for Secured Bank Product
Obligations then provided to or outstanding with respect to any Loan Party or
any of its Subsidiaries.

 

"Borrowing Base" means, on any date of determination, an amount, calculated in
Dollars, equal to:

 

(a)          ninety percent (90%) of the total amount of Eligible Credit Card
Receivables; plus

 

(b)          ninety percent (90%) of the total amount of Eligible Pharmacy
Receivables; plus

 

(c)          ninety percent (90%) of the NOLV Percentage of Eligible Inventory;
plus

 

(d)          Pharmacy Scripts Availability; minus

 

(e)          Reserves.

 

Notwithstanding the foregoing, to the extent that the Borrowing Base Trigger
Event has occurred and subject to the satisfaction of the Specified Requirement
(as defined below), the "Borrowing Base" shall be deemed to be equal to
fifty-five percent (55%) of the book value of each Borrower's Inventory
beginning on the date that the Borrowing Base Trigger Event occurs and ending on
the later of: (i) the date that is 60 days after the date that the Borrowing
Base Trigger Event occurs or (ii) the date on which both (x) a field examination
of Borrowers' books and records or any other financial or Collateral matters as
Administrative Agent deems appropriate (and received the results thereof) has
been completed to the satisfaction of Administrative Agent and (y) a Qualified
Appraisal of Inventory and Pharmacy Scripts has been completed to the
satisfaction of Administrative Agent. For purposes hereof, the "Specified
Requirement" shall mean within 30 days after the date that the Borrowing Base
Trigger Event occurs, the delivery by Borrowers to Administrative Agent of all
information necessary to complete the field examination and Qualified Appraisal
referenced above and the providing of access by Borrowers to Administrative
Agent and its agents, including field examiners and appraisers, to Borrowers'
Collateral and physical locations .

- 3 -

 

  

"Borrowing Base Certificate" means a borrowing base certificate substantially in
such form as may be acceptable to Administrative Agent from time to time in its
discretion.

 

"Capital Expenditures" means, with respect to any Person for any fiscal period,
the aggregate amount of all expenditures incurred by any Person to acquire or
repair and maintain fixed assets, plant, and equipment (including renewals and
replacements) during such period, which would be required to be capitalized on
the balance sheet of such Person in accordance with GAAP.

 

"Collection Account" means a Deposit Account established or maintained by a
Borrower at Regions Bank, which Deposit Account shall be utilized solely for
purposes of receiving or collecting payments made by such Borrower's Account
Debtors and other Proceeds of Collateral and over which Administrative Agent
shall have Control.

 

"Consolidated Cash Taxes Paid" means, for any fiscal period and determined on a
consolidated basis in accordance with Applicable Law and GAAP consistently
applied, the sum of all income taxes paid in cash by Parent and its Subsidiaries
during such period ((including, without limitation, any federal, state. Local
and foreign income and similar taxes) net of all income tax refunds and credits
received in cash by Parent and its Subsidiaries during such period), which
number for the applicable period of computation shall not be less than zero.

 

"Consolidated EBITDA" means, for any fiscal period and determined on a
consolidated basis in accordance with Applicable Law and GAAP consistently
applied, the sum of Parent's and its Subsidiaries', (a) Consolidated Net Income,
plus (b) without duplication, the sum of the following to the extent included in
the calculation of Consolidated Net Income: (i) Consolidated Interest Expense,
(ii) income tax expense (including, without limitation, any federal, state,
local and foreign income and similar taxes) of Parent and its Subsidiaries for
such period, (iii) depreciation and amortization expense for such period and
(iv) non-cash losses, minus (c) non-cash gains; provided, that any non-cash
item, in the event any such item becomes a cash item in a later fiscal period,
shall be added back or deducted, as applicable, to the extent such item became a
cash item in such later fiscal period.

 

"Consolidated Interest Expense" means, for any fiscal period and determined on a
consolidated basis in accordance with Applicable Law and GAAP consistently
applied, all interest expense (including that attributable to the interest
component or portion of Capital Leases) of Parent and its Subsidiaries for such
period.

 

"Consolidated Interest Paid" means, for any fiscal period and determined on a
consolidated basis in accordance with Applicable Law and GAAP consistently
applied, all interest (including that attributable to the interest component or
portion of Capital Leases) paid by Parent and its Subsidiaries in cash during
such period.

 

"Consolidated Net Income" means, for any fiscal period and determined on a
consolidated basis in accordance with Applicable Law and GAAP consistently
applied, the net income (or net deficit) of Parent and its Subsidiaries for such
period (computed without regard to any extraordinary items of gain or loss);
provided that there shall be excluded from Consolidated Net Income the net
income (or net deficit) of any Person (other than a Subsidiary) in which Parent
or any of its Subsidiaries has a joint interest with a third party, except to
the extent such net income is actually paid in cash to Parent or any of its
Subsidiaries by dividend or other distribution during such period.

 

- 4 -

 

  

"Consolidated Unfinanced Capital Expenditures" means, at any time of
determination and determined on a consolidated basis in accordance with
Applicable Law and GAAP consistently applied for any applicable fiscal period,
all Capital Expenditures made by Parent and its Subsidiaries during such period
which were not financed with the proceeds of (a) Funded Indebtedness (other than
Revolving Loans) or (b) the issuance of Equity Interests.

 

"Credit Card Agreements" shall have the meaning given such term in the Security
Agreement.

 

"Credit Card Issuer" shall have the meaning given such term in the Security
Agreement.

 

"Credit Card Processor" shall have the meaning given such term in the Security
Agreement.

 

"Credit Card Receivables" shall have the meaning given such term in the Security
Agreement.

 

"Eligible Credit Card Receivables" means at the time of any determination
thereof, each Credit Card Receivable that at all times satisfies the criteria
set forth below and which has been earned by performance and represents the bona
fide amounts due to a Borrower from a Credit Card Processor and/or Credit Card
Issuer, and in each case originated in the Ordinary Course of Business of such
Borrower. Without limiting the foregoing, in order to be an Eligible Credit Card
Receivable, an Account shall indicate no Person other than a Borrower as payee
or remittance party. In determining the amount to be so included, the face
amount of an Account shall be reduced by, without duplication, to the extent not
reflected in such face amount, (i) the amount of all accrued and actual fees,
discounts, claims or credits pending, promotional program allowances, price
adjustments, finance charges or other allowances (including any amount that a
Borrower may be obligated to rebate to a customer, a Credit Card Processor, or
Credit Card Issuer pursuant to the terms of any agreement or understanding
(written or oral)) and (ii) the aggregate amount of all cash received in respect
of such Account but not yet applied by the Loan Parties to reduce the amount of
such Credit Card Receivable. Except as otherwise determined by Administrative
Agent in its Permitted Discretion, Eligible Credit Card Receivables shall not
include any Credit Card Receivable:

 

(a)          which is unpaid more than five (5) Business Days after the date of
determination of eligibility thereof;

 

(b)          where such Credit Card Receivable or the underlying Credit Card
Agreement contravenes any laws, rules or regulations applicable thereto,
including, rules and regulations relating to truth-in-lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy or any party to the underlying Credit Card Agreement is in
violation of any such laws, rules or regulations;

 

(c)          which is not a valid, legally enforceable obligation of the
applicable Credit Card Issuer or Credit Card Processor with respect thereto;

 

(d)          which is disputed, is with recourse due to the creditworthiness of
the cardholder, or with respect to which a claim, chargeback, offset, deduction,
counterclaim, or other defense has been asserted (to the extent of such claim,
chargeback, offset, deduction or counterclaim, dispute or other defense);

 

(e)          that is not subject to a perfected first priority security interest
in favor of Administrative Agent, or with respect to which a Borrower does not
have good, valid and marketable title thereto, free and clear of any Lien, other
than Liens granted to Administrative Agent pursuant to the Security Agreement;

 

- 5 -

 

  

(f)          which does not conform in all material respects to all
representations, warranties or other provisions in this Addendum or the other
Loan Documents relating to Credit Card Receivables;

 

(g)          which does not constitute an Account or a Payment Intangible;

 

(h)          as to which the Credit Card Issuer or Credit Card Processor has
asserted the right to require a Loan Party to repurchase such Credit Card
Receivable from such Credit Card Issuer or Credit Card Processor;

 

(i)          which is due from a Credit Card Issuer or Credit Card Processor
which is the subject of an Insolvency Proceeding;

 

(j)          which is evidenced by Chattel Paper or an Instrument unless such
Chattel Paper or an Instrument, as applicable, is in the possession of
Administrative Agent, and to the extent necessary or appropriate, endorsed to
Administrative Agent;

 

(k)          which are Pharmacy Receivables;

 

(l)          which arise from a private label credit card of a Borrower or any
other proprietary credit card of a Borrower where such Borrower has liability
for the failure of the card holder to make payment thereunder as a result of the
financial condition of such card holder;

 

(m)          which is payable in any currency other than Dollars;

 

(n)          which do not direct payment thereof to be sent to (i) prior to the
applicable date set forth in Section 9(a) of this Addendum, a Controlled
Account, and (ii) on and after the applicable date set forth in Section 9(a) of
this Addendum, a Collection Account; or

 

(o)          which Administrative Agent, in its Permitted Discretion, deems not
to be an Eligible Credit Card Receivable.

 

"Eligible Inventory" means, as to Inventory owned only by Borrowers, the value
of such Inventory determined on the basis of the lower of cost (as determined in
accordance with GAAP) or market, calculated on a first-in, first-out basis, and
excluding any portion of cost attributable to intercompany profit among Parent
and its Affiliates, but excluding therefrom, without duplication, any Inventory:

 

(a)          which constitutes raw materials or work-in-process or which does
not constitute finished goods;

 

(b)          which is not subject to a valid, duly perfected, first priority
Lien in favor of Administrative Agent, or with respect to which a Borrower does
not have good, valid and marketable title thereto, free and clear of any Lien,
other than Liens granted to Administrative Agent pursuant to the Security
Agreement and, with respect to the Cardinal Inventory, Liens of Cardinal so long
as such Liens are subject to the Cardinal Intercreditor Agreement;

 

(c)          as to which any of the covenants, representations, and warranties
in this Addendum or the other Loan Documents respecting Inventory shall in any
material respect be untrue, misleading, or in default; provided, however, that
this clause (c) shall not (i) be deemed a waiver by the Required Lenders of any
Default or Event of Default which occurs under the Credit Agreement or any other
Loan Document as a result of any such representation, warranty, or covenant
being untrue or misleading, or in default or (ii) limit the ability of
Administrative Agent to institute Reserves in connection therewith to the extent
provided in this Addendum;

 

- 6 -

 

  

(d)          which is on Consignment (i.e., where such Borrower is the
consignee) from any seller, vendor, or supplier or subject to any agreement
whereby the seller, vendor, or supplier has retained any title to such Inventory
or the right to repurchase such Inventory;

 

(e)          which is on Consignment (i.e., where such Borrower is the
consignor) to any other Person;

 

(f)          which (in each case, as determined by Administrative Agent) (i) is
not new; (ii) is not in good and saleable condition; (iii) is damaged,
defective, unserviceable, or otherwise unmerchantable; (iv) constitutes returned
or repossessed Goods; (v) constitutes obsolete Goods; (vi) as applicable, fails
to meet standards of any Governmental Authority or Applicable Law regarding
manufacture, storage, use, or sale of such Inventory, or (vii) has been acquired
from a Sanctioned Person or Sanctioned Entity;

 

(g)          which is subject to any negotiable Document;

 

(h)          which is subject to any License with any Third Party which
materially limits or restricts or is likely to limit or restrict any Borrower or
Administrative Agent's right to sell or otherwise dispose of such Inventory
(unless such Third Party has entered into a Third Party Agreement) or which
constitute or are alleged to constitute infringing Goods or which have been
manufactured or sold in a manner which violates the Intellectual Property rights
of any Person;

 

(i)          which is not located at a Permitted Location in the Continental
United States;

 

(j)          with respect to warehouse locations, which is located at a
Permitted Location not owned and controlled by a Borrower, unless
(i) Administrative Agent has received from the Person owning or in control of
such Permitted Location a Third Party Agreement or (ii) if Administrative Agent
agrees to do so in lieu of a Third Party Agreement, Administrative Agent has
instituted a Rent and Charges Reserve in an amount determined by Administrative
Agent in its Permitted Discretion;

 

(k)          which consists of any packaging or shipping materials, supplies,
spare parts, catalysts, catalogs, labels, samples, display items or floor
models, tooling, or promotional materials; or

 

(l)          which Administrative Agent, in its Permitted Discretion, deems not
to be Eligible Inventory.

 

"Eligible Pharmacy Receivables" means, at the time of any determination thereof,
each Pharmacy Receivable that at all times satisfies the criteria set forth
below and which has been earned by performance, and in each case originated in
the Ordinary Course of Business of such Borrower. In determining the amount to
be so included, the face amount of a Pharmacy Receivable shall be reduced by,
without duplication, to the extent not reflected in such face amount, (1) any
and all returns, accrued rebates, discounts (which may, at Administrative
Agent’s option, be calculated on shortest terms), credits, allowances or sales
or excise taxes of any nature at any time issued, owing, claimed by Account
Debtors, granted, outstanding or payable in connection with such Pharmacy
Receivables at such time, and (2) the aggregate amount of all customer deposits,
unapplied cash, bonding subrogation rights to the extent not Cash
Collateralized. Except as otherwise determined by Administrative Agent in its
Permitted Discretion, Eligible Pharmacy Receivables shall be non-recourse and
adjudicated and shall not include any Pharmacy Receivable:

 

- 7 -

 

  

(a)          which is unpaid within the earlier of sixty (60) days following its
original due date or ninety (90) days following its original invoice date;

 

(b)          which is the obligation of an Account Debtor (or its Affiliates) if
fifty percent (50%) or more of the dollar amount of all Pharmacy Receivables
owing by that Account Debtor (or its Affiliates) are ineligible under the
criteria listed in clause (a) above;

 

(c)          where such Pharmacy Receivable or the underlying contract
contravenes any laws, rules or regulations applicable thereto, including, rules
and regulations relating to truth-in-lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and privacy
or any party to the underlying contract is in violation of any such laws, rules
or regulations;

 

(d)          which is not a valid, legally enforceable obligation of the
applicable Account Debtor with respect thereto;

 

(e)          which is disputed, or with respect to which a claim, chargeback,
offset, deduction, counterclaim or other defense has been asserted (to the
extent of such claim, chargeback, offset, deduction, counterclaim or other
defense);

 

(f)          which is not subject to a perfected first priority security
interest in favor of Administrative Agent, or with respect to which a Borrower
does not have good, valid and marketable title thereto, free and clear of any
Lien, other than Liens granted to Administrative Agent pursuant to the Security
Agreement;

 

(g)          which does not conform in all material respects to all
representations, warranties or other provisions in this Addendum or the other
Loan Documents relating to Pharmacy Receivables;

 

(h)          which does not constitute an Account or a Payment Intangible;

 

(i)          which is due from an Account Debtor which is the subject of an
Insolvency Proceeding;

 

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

 

(k)          which is evidenced by Chattel Paper or an Instrument of any kind
unless such Chattel Paper or Instrument, as applicable, is in the possession of
Administrative Agent, and to the extent necessary or appropriate, endorsed to
Administrative Agent;

 

(l)          which are Credit Card Receivables;

 

(m)          which do not direct payment thereof to be sent to (i) prior to the
applicable date set forth in Section 9(a) of this Addendum, a Controlled
Account, and (ii) on and after the applicable date set forth in Section 9(a) of
this Addendum, a Collection Account;

 

(n)          which is payable in any currency other than Dollars;

 

(o)          for which the Account Debtor is (i) any Governmental Authority
(including, without limitation, Medicare, Medicaid and food assistance
programs), or (ii) a Credit Card Issuer or Credit Card Processor;

 

- 8 -

 

  

(p)          for which the Account Debtor is not a Third Party Payor;

 

(q)          that do not arise from the sale of medication, medical equipment or
other medical items by such Borrower in the Ordinary Course of Business;

 

(r)          (i) with respect to Express Scripts and its Affiliates, whose total
obligations owing to Borrowers exceed twenty percent (20%) of all Eligible
Pharmacy Receivables, to the extent of the obligations owing by such Account
Debtor in excess of such percentage, or (ii) with respect to any other Account
Debtor whose total obligations owing to Borrowers exceed fifteen percent (15%)
of all Eligible Pharmacy Receivables, to the extent of the obligations owing by
such Account Debtor in excess of such percentage;

 

(s)          (i) upon which such Borrower’s right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever, or
(ii) as to which Pharmacy Receivable the Account Debtor is located in a state
requiring the filing of a Notice of Business Activities Report or similar report
in order to permit such Borrower to use the courts of such state or to otherwise
seek judicial enforcement of payment of such Pharmacy Receivable, in each case
unless such Borrower has qualified to do business in such state or has filed a
Notice of Business Activities Report (or equivalent report, as applicable) for
the most recent year for which such qualification or report is required (in each
case to the extent that Administrative Agent has determined to render such
Pharmacy Receivable ineligible), or (iii) if the Pharmacy Receivable represents
a progress billing or is subject to the equitable lien of a surety bond issuer;

 

(t)          to the extent any Borrower or any Subsidiary thereof is (i) liable
for goods sold or services rendered by the applicable Account Debtor to any
Borrower or any Subsidiary thereof, or (ii) liable for accrued and actual
discounts, claims, unpaid fees, credit or credits pending, promotional program
allowances, price adjustment, finance charges or other allowances (including any
amount that any Borrower or any Subsidiary thereof, as applicable, may be
obligated to rebate to a customer pursuant to the terms of any agreement or
understanding (whether written or oral), but in each such case only to the
extent of the potential offset resulting therefrom;

 

(u)          that is the obligation of an Account Debtor located in a foreign
country unless payment thereof is supported by an irrevocable letter of credit
reasonably satisfactory to Administrative Agent as to form, substance and issuer
or domestic confirming bank or is covered by credit insurance in form, substance
and amount, and by an insurer, reasonably satisfactory to Administrative Agent;

 

(v)         with respect to which an invoice has not been sent to the applicable
Account Debtor or such invoice does not include a true and correct statement of
the bona fide payment obligation incurred in the amount of the Pharmacy
Receivable for medication, medical equipment or other medical items sold to and
accepted by the applicable Account Debtor;

 

(w)          in a transaction wherein goods are placed on consignment or are
sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill
and hold, or any other terms by reason of which the payment by an Account Debtor
may be conditional;

 

(x)          as to which Pharmacy Receivable any check, draft or other items of
payment has previously been received which has been returned unpaid or otherwise
dishonored;

 

(y)          to the extent such Pharmacy Receivable consists of finance charges
as compared to obligations to such Borrower for goods sold;

 

- 9 -

 

  

(z)          which has terms which have not been modified, impaired, waived,
altered, extended or renegotiated since its origination in any way in any
material respect; or

 

(aa)         which Administrative Agent, in its Permitted Discretion, deems not
to be an Eligible Pharmacy Receivable.

 

"Eligible Pharmacy Scripts" means, at the time of any determination thereof,
each Pharmacy Script that at all times satisfies the criteria set forth below
and which arises and is maintained in the Ordinary Course of Business of such
Borrower and which is of a type included in an appraisal of Pharmacy Scripts
received by Administrative Agent in accordance with the requirements of
Administrative Agent (including Pharmacy Scripts acquired by such Borrower after
the date of such appraisal). Except as otherwise determined by Administrative
Agent in its Permitted Discretion, Eligible Pharmacy Scripts shall not include
any Pharmacy Scripts: (a) at premises other than those owned, leased or licensed
and in each case controlled by a Borrower; (b) which is not subject to a first
priority Lien in favor of Administrative Agent, or with respect to which a
Borrower does not have good, valid and marketable title, thereto, free and clear
of any Lien other than Liens granted to Administrative Agent pursuant to the
Security Agreement; (c) that are not in a form that may be sold or otherwise
transferred or are subject to regulatory restrictions on the transfer thereof
that are not acceptable to Administrative Agent in its Permitted Discretion; or
(d) which Administrative Agent, in its Permitted Discretion, deems not to be an
Eligible Pharmacy Script.

 

"Excess Availability" means, at any time of determination on or after the
Borrowing Base Trigger Event, the amount, if any, by which (a) the lesser of
(i) the Borrowing Base and (ii) the Revolving Commitments exceeds (b) the
Aggregate Revolving Obligations.

 

"Financial Covenant Threshold Amount" means Excess Availability at any time is
less than the greater of (a) $15,000,000 and (b) ten percent (10%) of the
Revolving Commitments.

 

"Fiscal Intermediary" shall have the meaning given such term in the Security
Agreement.

 

"Fixed Charge Coverage Ratio" means, at any time of determination and determined
with respect to any fiscal period, the ratio of (a) the sum of (i) Consolidated
EBITDA; minus (ii) Unfinanced Capital Expenditures; minus (iii) Consolidated
Cash Taxes Paid; minus (iv) Restricted Payments made in such period to (b) the
sum of (i) Consolidated Interest Paid for such period plus (ii) all regularly
scheduled payments of principal on Funded Indebtedness made during such period.

 

"Funded Indebtedness" means, with respect to any Person and without duplication,
(a) Indebtedness arising from the lending of money by another Person to such
Person (regardless of whether the same is with or without recourse to the credit
of such Person); (b) Indebtedness evidenced by notes, drafts, bonds, debentures,
credit documents, or similar instruments; (c) Indebtedness which accrues
interest or is of a type upon which interest or finance charges are customarily
paid (excluding trade payables owing in the Ordinary Course of Business); (d)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty; (e) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances; (f)
the Specified Value of all Hedging Agreements; (g) all mandatory obligations of
such Person to purchase, redeem, retire, defease, or otherwise make any payment
in respect of any Equity Interest of such Person; (h) Indebtedness which was
issued or assumed as full or partial payment for Property or services; (i) the
principal and interest portions of all rental obligations of such Person under
any synthetic lease, tax retention operating lease, off-balance sheet loan, or
similar off-balance sheet financing where such transaction is considered
borrowed money indebtedness for tax purposes but is classified as an operating
lease in accordance with GAAP; and (j) guaranties by such Person of any
Indebtedness of the foregoing types owing by another Person.

 

- 10 -

 

  

"Health Care Laws" shall have the meaning given such term in the Security
Agreement.

 

"Inventory Reserve" means, without duplication of any other reserve or any item
that is otherwise addressed or excluded through eligibility criteria, an amount
determined from time to time by Administrative Agent in its Permitted Discretion
as a reserve for changes in the merchantability of any Eligible Inventory in the
Ordinary Course of Business or such other factors that may negatively impact the
value of Eligible Inventory, including changes in salability, obsolescence,
seasonality, theft, shrinkage, imbalance, changes in composition or mix,
markdowns, vendor chargebacks, damage, or, if such Inventory consists of Goods,
the price of which is ascertainable from, published by, or quoted by one or more
recognized exchanges, any decrease in any such exchange's price therefor.

 

"NOLV" means, as to any Property, the expected dollar amount to be realized at
an orderly, negotiated sale of such Property, net of all operating expenses,
commissions and other liquidation expenses, as determined by Administrative
Agent from time to time based on the most recent Qualified Appraisal of such
Property.

 

"NOLV Percentage" means, at any time of determination, with respect to any
Inventory and expressed as a percentage, the amount of the value of such
Inventory expected to be realized at an orderly, negotiated sale of such
Inventory, net of all operating expenses, commissions and other liquidation
expenses divided by the value of such Inventory set forth in Loan Parties'
inventory stock ledger, as determined by Administrative Agent from time to time
based on the most recent Qualified Appraisal stating the NOLV of such Inventory.

 

"Overadvance" means, at any time of determination, the amount, if any, by which
the Aggregate Revolving Obligations exceed the Borrowing Base.

 

"Overadvance Loan" means a Base Rate Revolving Loan or, to the extent any such
Overadvance Loan constitutes a Swingline Loan, an LIR Revolving Loan made when
an Overadvance exists or is caused by the funding thereof.

 

"Permitted Discretion" means a determination made in good faith and in the
exercise of reasonable business judgment (from the perspective of a secured,
asset-based lender extending credit of similar amounts and types to similar
businesses, considered without regard to any course of dealing).

 

"Permitted Location" shall have the meaning given such term in the Security
Agreement.

 

"Pharmacy Receivables" shall have the meaning given such term in the Security
Agreement.

 

"Pharmacy Script" shall have the meaning given such term in the Security
Agreement.

 

"Pharmacy Scripts Availability" means, at any time, the lesser of: (a)
eighty-five percent (85%) of the product of the average per-Pharmacy Script NOLV
of Pharmacy Scripts based on the most recent Qualified Appraisal thereof,
multiplied by (ii) the number of Eligible Pharmacy Scripts for the period of
twelve (12) calendar months most recently ended, or (b) the amount equal to
thirty percent (30%) of clauses (a) through (c) of the Borrowing Base.

 

"Qualified Appraisal" means, with respect to any Property, an appraisal of such
Property conducted in a manner and with such scope and using such methods as are
acceptable to Administrative Agent by an appraiser selected by, or acceptable
to, Administrative Agent, the results of which are acceptable to Administrative
Agent in all respects, all in the Permitted Discretion of Administrative Agent.

 

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"Rent and Charges Reserve" means (a) with respect to any leased retail store
location, if the Inventory of a Loan Party located at such leased retail store
location is subject to the Lien of a Third Party arising by operation of law
that is pari passu or superior to the Lien of Administrative Agent, a reserve
equal to two months' rent at such leased retail store location, and (b) with
respect to any other location of a Loan Party, without duplication, an amount
determined from time to time by Administrative Agent in its Permitted Discretion
as a reserve for (i) rent, fees, Royalties, charges, and other amounts owing by
a Borrower to any Third Party, unless such Person has executed and delivered a
Third Party Agreement, and (ii) the amount of all accrued but unpaid or past due
rent, fees, Royalties, charges, or other amounts owing by a Borrower to Third
Parties.

 

"Reserves" means the sum of (without duplication) (a) the Inventory Reserve; (b)
the aggregate Rent and Charges Reserve; (c) the Bank Product Reserve; (d)
reserves for Royalties; (e) the aggregate amount of liabilities secured by Liens
upon any Collateral which are senior to Administrative Agent's Liens (but the
imposition of any such reserve shall not waive a Default or an Event of Default
arising therefrom); (f) reserves for price adjustments and damages, to the
extent such reserve relates to Accounts or Inventory included in Eligible Credit
Card Receivables, Eligible Pharmacy Receivables and Eligible Inventory, as
applicable, including returns, discounts, claims (including warranty claims),
credits, and allowances of any nature which are not paid pursuant to the
reduction of accounts; (g) reserves for special order goods and deferred
shipment sales, to the extent such reserve relates to Accounts or Inventory
included in Eligible Credit Card Receivables, Eligible Pharmacy Receivables and
Eligible Inventory, as applicable; (h) reserves for accrued but unpaid ad
valorem, excise, and personal property tax liability and for sale, use, or
similar taxes; (i) reserves for accrued but unpaid interest on the Obligations;
(j) reserves for any portion of the Obligations which Administrative Agent or
any Lender pays in accordance with authority granted in any Loan Document
(except to the extent such payment is made with the proceeds of a deemed
Revolving Loan); (k) reserves for all customer deposits or other prepayments
held by a Borrower; (l) reserves to reflect events, conditions, contingencies,
or risks which, as determined by Administrative Agent, adversely effect, or
would have a reasonable likelihood of adversely affecting either (i) the
Collateral, its value, or the amount that might be received by Administrative
Agent from the sale or other disposition or realization upon such Collateral;
(ii) the obligations or liabilities of any Loan Party; or (iii) the Liens and
other rights of Administrative Agent or any Secured Party in the Collateral
(including the enforceability, perfection, and priority thereof); (m) reserves
to reflect Administrative Agent's belief that any collateral report or financial
information furnished by or on behalf of a Loan Party to Administrative Agent is
or may have been incomplete, inaccurate, or misleading in any material respect;
(n) reserves in respect of any state of facts which Administrative Agent
determines constitutes a Default or an Event of Default; (o) reserves to reflect
testing variances identified as part of Administrative Agent's periodic field
examinations or to adjust the value of any Inventory or Pharmacy Scripts based
on the results of, or failure to obtain, a Qualified Appraisal; and (p) such
other reserves that Administrative Agent may establish from time to time for
such purposes as Administrative Agent shall deem necessary in its Permitted
Discretion. Except to the extent otherwise qualified (either in this definition
or any related definition used in this definition) or otherwise expressly
provided in this Addendum, Administrative Agent may implement Reserves and
establish the amounts thereof (from time to time) in its Permitted Discretion.
Administrative Agent may establish Reserves as a percentage of any applicable
amount or as an amount of money.

 

"Royalties" means all royalties, fees, expense reimbursement and other amounts
payable by a Borrower under a License.

 

"Specified Value" shall mean, for any Hedging Agreement and on any date of
determination, an amount equal to:

 

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(a)          in the case of a Hedging Agreement documented pursuant to an ISDA
Master Agreement, the amount, if any, that would be payable by any Person to its
counterparty to such Hedging Agreement, as if (i) such Hedging Agreement were
being terminated early on such date of determination and (ii) such Person was
the sole "Affected Party" (as such term is defined and used in such ISDA Master
Agreement);

 

(b)          in the case of a Hedging Agreement traded on an exchange, the
mark-to-market value of such Hedging Agreement, which will be the unrealized
loss, if any, on such Hedging Agreement to the Loan Party or Subsidiary which is
party to such Hedging Agreement, based on the settlement price of such Hedging
Agreement on such date of determination; or

 

(c)          in all other cases, the mark-to-market value of such Hedging
Agreement, which will be the unrealized loss, if any, on such Hedging Agreement
to such Loan Party or Subsidiary as the amount, if any, by which (i) the present
value of the future cash flows to be paid by such Person exceeds (ii) the
present value of the future cash flows to be received by such Person, in each
case pursuant to such Hedging Agreement.

 

"Third Party" shall have the meaning given such term in the Security Agreement.

 

"Third Party Agreement" shall have the meaning given such term in the Security
Agreement.

 

"Third Party Payor" shall have the meaning given such term in the Security
Agreement.

 

Section 3.          Making of Revolving Loans. After the occurrence of the
Borrowing Base Trigger Event, no Lender shall have any obligation to honor any
request for a Revolving Loan if doing so would cause the Aggregate Revolving
Obligations to exceed the lesser of (a) the Borrowing Base and (b) the Revolving
Commitments.

 

Section 4.          Overadvances.

 

(a)          Any Overadvance shall (i) be immediately due and payable on demand
and, once paid to Administrative Agent, shall be applied, first, to the payment
of any Swingline Loans; second, to all other Revolving Loans which are Base Rate
Loans or LIR Loans; third to Revolving Loans which are LIBOR Loans; and, fourth,
to Cash Collateralize the LC Obligations; (ii) constitute Obligations secured by
the Collateral; and (iii) be entitled to all benefits of the Loan Documents;

 

(b)          Unless otherwise directed in writing by the Required Lenders,
Administrative Agent may require Lenders to honor requests by Borrowers for
Overadvance Loans (in which event, and notwithstanding anything to the contrary
set forth in the Addendum Agreement, Lenders shall continue to make Revolving
Loans up to their Pro Rata Share of the Revolving Commitments) and to forbear
from requiring Borrowers to cure an Overadvance, if (1) the Overadvance does not
continue for a period of more than thirty (30) consecutive days, following which
no Overadvance exists for at least thirty (30) consecutive days before another
Overadvance exists, (2) the aggregate amount of the Revolving Credit Exposure
outstanding at any time does not exceed the aggregate of the Revolving
Commitments at such time or any individual Lender's Revolving Credit Exposure
does not exceed such Lender's Revolving Commitment, (3) the Overadvance does not
exceed five percent (5%) of the Borrowing Base, and (4) the sum of all
Overadvances plus all Protective Advances (as defined in the Security Agreement)
does not exceed ten percent (10%) of the Borrowing Base. In no event shall any
Borrower or any other Loan Party be deemed to be a beneficiary of this Section 4
or authorized to enforce any of the provisions of this Section 4.

 

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(c)          Neither the funding of any Overadvance Loan nor the continued
existence of an Overadvance shall constitute any waiver by Administrative Agent
or any Lender of any Event of Default which may exist at the time any
Overadvance Loan is made or which is caused thereby. Each Lender's obligations
under this Section 4 are absolute, unconditional, and irrevocable and are not
subject to any counterclaim, setoff, defense, qualification, or exception, and
each Lender shall perform such obligations, as applicable, regardless of whether
the Commitments have terminated, an Overadvance exists or any condition
precedent to the making of Loans has not been satisfied.

 

Section 5.          Credit Card Receivables and Pharmacy Receivables. In
determining which Accounts and General Intangibles are Eligible Credit Card
Receivables and Eligible Pharmacy Receivables, respectively, Administrative
Agent may rely on all statements and representations made by Borrowers with
respect thereto. Borrowers represent and warrant that, with respect to each
Account or General Intangible, as applicable (and, to the extent applicable, the
Account Debtor related thereto), at the time such Account or General Intangible,
as applicable, is included as an Eligible Credit Card Receivable or an Eligible
Pharmacy Receivable, as applicable, in a Borrowing Base Certificate, that:

 

(a)          such Account or General Intangible, as applicable, satisfies in all
material respects all of the requirements of an Eligible Credit Card Receivable
or an Eligible Pharmacy Receivable, as applicable, set forth in the applicable
definition thereof;

 

(b)          such Account or General Intangible, as applicable, is, in all
respects, genuine, and enforceable in accordance with its terms except for such
limits thereon arising from bankruptcy and similar laws relating to creditors'
rights;

 

(c)          such Account or General Intangible, as applicable, arises out of a
completed, bona fide sale and delivery of Goods or rendering of services in the
Ordinary Course of Business, substantially in accordance with any purchase
order, contract, or other document relating thereto;

 

(d)          such Account or General Intangible, as applicable, is for a sum
certain shown on the invoice covering such sale or rendering of services (or a
schedule thereto) and will mature as stated in such invoice;

 

(e)          a true and complete copy of the invoice relating to such Account or
General Intangible, as applicable, has been furnished to Administrative Agent
(but only to the extent Administrative Agent has requested a copy of such
invoice);

 

(f)          such Account Debtor absolutely owes such Account or General
Intangible, as applicable, without contingency in any respect;

 

(g)          no extension, compromise, settlement, modification, credit,
discount, allowance, deduction, or return has been authorized with respect to
such Account, except discounts or allowances granted in the Ordinary Course of
Business that are reflected on the face of the invoice related thereto and in
the reports submitted to Administrative Agent hereunder;

 

(h)          such Account or General Intangible, as applicable, is not subject
to any offset, Lien (other than Administrative Agent's Lien), deduction,
defense, dispute, counterclaim, or other adverse condition except as arising in
the Ordinary Course of Business;

 

- 14 -

 

  

(i)          no purchase order, agreement, document, or Applicable Law restricts
assignment of such Account or General Intangible, as applicable, to
Administrative Agent (regardless of whether, under the UCC, the restriction is
ineffective), and the applicable Borrower is the sole payee or remittance party
shown on the invoice;

 

(j)          to Borrowers' knowledge, (i) there are no facts, events, or
circumstances that are reasonably likely to impair the validity, enforceability,
or collectibility of such Account or General Intangible, as applicable, or
reduce the amount payable, or delay payment, thereunder; (ii) the related
Account Debtor had the capacity to contract when such Account or General
Intangible, as applicable, arose, continues to meet the applicable Borrower's
customary credit standards, is Solvent, is not contemplating or subject to an
Insolvency Proceeding, and has not failed or suspended or ceased doing business;
and (iii) there are no proceedings or actions threatened or pending against such
Account Debtor that could reasonably be expected to have a material adverse
effect on such Account Debtor's financial condition;

 

(k)          there are no written or oral agreements or understandings between
any Borrower and the related Account Debtor for the Account Debtor to make any
payment on such Account or General Intangible, as applicable, in any manner
inconsistent with the terms of this Addendum or the other Loan Documents; and

 

(l)          none of the transactions giving rise to such Account or General
Intangible, as applicable, violate any Applicable Law, all documentation
relating thereto is legally sufficient under such Applicable Law, and all such
documentation is legally enforceable in accordance with its terms.

 

Section 6.          Inspections; Appraisals. After the occurrence of the
Borrowing Base Trigger Event, until Payment in Full of the Obligations, each
Loan Party shall, and shall cause each Subsidiary, as applicable, to reimburse
Administrative Agent for all charges, costs, and expenses of Administrative
Agent and its agents (a) once per Loan Year, if an Event of Default has not
occurred at any time during such Loan Year or Excess Availability has not fallen
below the greater of (x) 25% of the Revolving Commitments and (y) $38,000,000 at
any time during such Loan Year, and (b) twice per Loan Year, if an Event of
Default has occurred at any time during such Loan Year or Excess Availability
has fallen below the greater of (x) 25% of the Revolving Commitments and (y)
$38,000,000 at any time during such Loan Year, in each case, in connection with
(i) field examinations of any Borrower or Subsidiary's books and records or any
other financial or Collateral matters as Administrative Agent deems appropriate
and (ii) appraisals of Inventory and Pharmacy Scripts; provided, however, that
all charges, costs, and expenses therefor shall be reimbursed by Borrowers
without regard to such limits in connection with the first such examination and
the first such appraisal initiated after the occurrence of the Borrowing Base
Trigger Event. Subject to and without limiting the foregoing, Borrowers
specifically agree to pay the standard charges of Administrative Agent's
internal field examination group (including Administrative Agent's then standard
per-person charges for each day that an employee or agent of Administrative
Agent or its Affiliates is engaged in any field examination activities). This
Section 6 shall not be construed to limit Administrative Agent's right to
conduct field examinations, obtain appraisals at any time in its discretion, or
use third parties for such purposes at Lenders' expense.

 

Section 7.          Borrowing Base Reporting; Financial and Other Information.
After the occurrence of the Borrowing Base Trigger Event, continuing until
Payment in Full of the Obligations, Borrowers shall deliver a fully completed
and executed Borrowing Base Certificate to Administrative Agent no later than
the 20th day of each Fiscal Month, prepared as of the end of the immediately
preceding Fiscal Month; provided, that, if Excess Availability is less than
fifteen percent (15%) of the Commitments or an Event of Default exists,
Administrative Agent shall be entitled to require Borrowers to deliver fully
completed and executed Borrowing Base Certificates to Administrative Agent at
greater frequency and as of the end of such periods as Administrative Agent may
require from time to time. Borrowers shall attach the following to each
Borrowing Base Certificate (if Borrowing Base Certificates are then required to
be delivered on a monthly basis) or each Borrowing Base Certificate specified
from time to time by Administrative Agent (if Borrowing Base Certificates are
then required to be delivered on a basis more frequently than monthly), each of
which shall be in form and substance satisfactory to Administrative Agent and
certified by a Responsible Officer of Borrower Agent to be complete and accurate
and in compliance with the terms of this Addendum and the other Loan Documents:

 

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(a)          Accounts Receivable Reports. A report (in form and substance
satisfactory to Administrative Agent) listing (A) all of Borrowers' Accounts,
Eligible Credit Card Receivables and Eligible Pharmacy Receivables as of the
last Business Day of the applicable reporting period; (B) the amount, age,
invoice date and due date of each Account on an original invoice and due date
aging basis and showing all discounts, allowances, credits, authorized returns,
and disputes; (C) the name and mailing address of each Account Debtor; (D) if
requested by Administrative Agent from time to time, copies of all or a portion
of the documents underlying or relating to Borrowers' Accounts; and (E) such
other information regarding Borrowers' Accounts which Administrative Agent may
reasonably request from time to time (each, an "Accounts Receivable Report").

 

(b)          Inventory Reports. A report (in form and substance satisfactory to
Administrative Agent) listing (A) all of Borrowers' Inventory and all Eligible
Inventory as of the last Business Day of the applicable reporting period; (B)
the type, cost, and location of all such Inventory; (C) all of such Inventory
which constitutes returned or repossessed Goods; (D) all Inventory which has not
been timely sold in the Ordinary Course of Business; (E) all Inventory which is
not located at Property owned or leased by a Borrower or that is in possession
of any Person other than a Borrower and a description of the reason why such
Inventory is so located or in the possession of such other Person; and (F) such
other information regarding Borrowers' Inventory as Administrative Agent may
reasonably request from time to time (each, an "Inventory Report").

 

(c)          Accounts Payable Reports. A report (in form and substance
satisfactory to Administrative Agent) listing (A) each of Borrowers' accounts
payable; (B) the number of days which have elapsed since the original date of
invoice of such account payable; (C) the name and address of each Person to whom
such account payable is owed; and (D) such other information concerning
Borrowers' accounts payable as Administrative Agent may reasonably request from
time to time (each, an "Accounts Payable Report").

 

Section 8.          Monthly Statements. In addition to the financial reporting
set forth in Section 5.1 of the Credit Agreement, after the occurrence of the
Borrowing Base Trigger Event if Excess Availability is less than fifteen percent
(15%) of the Commitments or an Event of Default exists, promptly upon becoming
available, but in no event later than thirty (30) days after the end of each
Fiscal Month, Borrowers shall deliver to Administrative Agent, LC Issuer and the
Lenders:

 

(a)          an unaudited consolidated and consolidating balance sheet of Parent
and its Subsidiaries at the end of such month and a consolidated income
statement and statement of cash flows and statement of shareholder's equity for
such month (and for the portion of the Fiscal Year ending with such period),
together with all supporting schedules, fairly presenting in all material
respects the consolidated financial position and the results of the operations
of Borrowers and the Subsidiaries as of the end of and through such month (and
for the portion of the Fiscal Year ending with such month), in each case setting
forth in comparative form the figures for the corresponding period or periods of
the preceding Fiscal Year;

 

(b)          a report reconciling (A) Borrowers' Accounts and Inventory as set
forth in the Accounts Receivable Report and the Inventory Report attached to the
Borrowing Base Certificate delivered to Administrative Agent which is as of the
same date to (B) Borrowers' aggregate Accounts and Inventory set forth in the
financial statements delivered pursuant to subsection (a); and

 

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(c)          a Compliance Certificate signed by a Responsible Officer of
Borrower Agent (i) stating that such statements and reports are true and correct
and fairly present, in all material respects, the consolidated financial
condition and results of operations of Borrowers and the Subsidiaries for the
period presented and that such statements were prepared in accordance with GAAP
(except the absence of footnotes and subject to normal year-end adjustments);
(ii) stating that no Default or Event of Default then exists or, if a Default or
Event of Default exists, the nature and duration thereof and Borrowers'
intention with respect thereto; (iii) if such Compliance Certificate is
delivered at the end of a Fiscal Month that is also the end of a Fiscal Quarter,
to which will be attached or accompanied by a spreadsheet showing Borrowers'
calculations of all financial covenants, which must be of such detail as
requested by Administrative Agent from time to time; and (iv) setting forth a
list of all Acquisitions, Investments, Restricted Payments, payments on
Subordinated Debt, the incurrence of Funded Indebtedness and Asset Dispositions
from the date of the preceding Compliance Certificate through the date of such
Compliance Certificate, together with the total amount for each of the foregoing
categories, which must be of such detail as requested by Administrative Agent
from time to time.

 

Section 9.          Cash Management; Deposit Accounts. After the occurrence of
the Borrowing Base Trigger Event, until Payment in Full of the Obligations, each
Loan Party shall:

 

(a)          on or before the date that is thirty (30) days after the date on
which the Borrowing Base Trigger Event occurs (or such later date as may be
agreed to by Administrative Agent in its discretion), (i) establish Collection
Accounts and lockboxes related thereto and, thereafter, maintain each such
Collection Account and lockbox and (ii) direct all of Borrowers' Account Debtors
to make all payments on Accounts to a Collection Account (if made
electronically) or lockbox (if in the form of a tangible Payment Item);

 

(b)          Hold in trust for Administrative Agent and promptly (but, in any
event, on the Business Day immediately following its receipt thereof) forward to
a lockbox or deposit into a Collection Account all tangible Payment Items and
cash such Borrower receives on account of the payment of any of such Borrower's
Accounts or as Proceeds of any Inventory or other Collateral;

 

(c)          To the extent requested by Administrative Agent from time to time,
take all actions requested by Administrative Agent to establish Administrative
Agent's Control over any of Borrowers' Deposit Accounts;

 

(d)          Notwithstanding anything to the contrary set forth in Section 9(a),
(b) or (c), Administrative Agent shall not exercise dominion over any Collection
Account or related lockbox unless an Account Control Period exists; and

 

(e)          (i) Promptly (but, in any event, within two (2) Business Days)
after any Borrower's entering into any Credit Card Agreement, provide notice of
such agreement to Administrative Agent, together with a true and complete copy
of such Credit Card Agreement, the name and address of such applicable Credit
Card Issuer, and such other information regarding the same as Administrative
Agent may request from time to time and (ii) upon Administrative Agent's
request, exercise commercially reasonable efforts to cause such Credit Card
Issuer to enter into a Third Party Agreement (and such Borrower's compliance
with the terms of this clause (e)(ii) shall not diminish Administrative Agent's
rights to establish a Reserve therefor).

 

Section 10.         Financial Covenant. Upon occurrence of the Borrowing Base
Trigger Event, until Payment in Full of the Obligations, and if at any time
Availability is less than the Financial Covenant Threshold Amount, Borrowers
shall, commencing with the most recent Fiscal Quarter for which financial
statements have been provided in accordance with Section 5.1 of the Credit
Agreement, as applicable, and as of each subsequent Fiscal Quarter ending
thereafter, maintain a Fixed Charge Coverage Ratio for the four Fiscal Quarters
then ending equal or in excess of 1.00 to 1.00.

 

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Section 11.         Commitment Fees. On and after the Borrowing Base Trigger
Event, Borrowers agree to pay to Administrative Agent for the account of each
Lender on the first day of each calendar month ending after the occurrence of
the Borrowing Base Trigger Event and on the Revolving Commitment Termination
Date, in arrears, a commitment fee in an amount equal to 0.25% per annum times
the average amount by which the Revolving Commitments exceeded the Aggregate
Revolving Obligations (other than Swingline Loans) on each day during the
immediately preceding calendar month.

 

Section 12.         Certain Agreements. No Loan Party will, and will not permit
any of its Subsidiaries to, (a) permit any Material Contract to be cancelled or
terminated before its stated maturity or expiration date unless such Loan Party
or Subsidiary, as applicable, procures a replacement contract acceptable to
Administrative Agent in its Permitted Discretion; (b) amend, restate,
supplement, or otherwise modify any Material Contract; (c) default in any
material respect in the performance under any Material Contract; or (d) agree to
or accept any waiver thereunder which would adversely affect the rights of any
Secured Party; provided, that nothing in this Section 12 shall prohibit the
repayment, prepayment, retirement, or extinguishment of any Indebtedness, to the
extent the same is otherwise permitted under this Agreement and the other Loan
Documents.

 

Section 13.         Borrowing Base Eligibility. After the occurrence of the
Borrowing Base Trigger Event, in connection with any Acquisition (whether by
purchase of Capital Stock, merger, or purchase of Property and whether in a
single transaction or series transactions) by a Loan Party for which the
aggregate amount of cash and non-cash consideration (including all cash and
Indebtedness, including contingent obligations, incurred or assumed and the
maximum amount of any earnout or similar payment in connection therewith
(whether or not actually earned)) is equal to or in excess of $10,000,000,
Administrative Agent shall have the right to determine in its Permitted
Discretion which Property so acquired shall be included in the Borrowing Base
(subject to the provisions of the definitions "Borrowing Base," "Eligible Credit
Card Receivables," "Eligible Pharmacy Receivables," "Eligible Inventory" "and
"Eligible Pharmacy Scripts" and any other provisions of this Addendum and the
other Loan Documents applicable to the computation and reporting of the
Borrowing Base). In connection with such determination, Administrative Agent may
obtain, at Loan Parties' expense, such appraisals, field exams and other
assessments of such assets as it may deem desirable and all such appraisals,
exams and other assessments shall be paid for by Loan Parties; provided, that in
no event shall the purchased Property be included in the Borrowing Base until
Administrative Agent has completed applicable appraisals, exams and other
assessments in form and substance satisfactory to Administrative Agent with
respect to such Property. For the avoidance of doubt, such appraisals, field
exams and other assessments shall be in addition to the appraisals, field exams
and other assessments at Loan Parties' expense as set forth in Section 6. After
the occurrence of the Borrowing Base Trigger Event, in connection with any
Acquisition (whether by purchase of Capital Stock, merger, or purchase of
Property and whether in a single transaction or series transactions) by a Loan
Party for which the aggregate amount of cash and non-cash consideration
(including all cash and Indebtedness, including contingent obligations, incurred
or assumed and the maximum amount of any earnout or similar payment in
connection therewith (whether or not actually earned)) is less than $10,000,000,
all Property so acquired shall be included in the Borrowing Base, subject to the
provisions of the definitions "Borrowing Base," "Eligible Credit Card
Receivables," "Eligible Pharmacy Receivables," "Eligible Inventory" "and
"Eligible Pharmacy Scripts" and any other provisions of this Addendum and the
other Loan Documents applicable to the computation and reporting of the
Borrowing Base.

 

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Section 14.         Amendments. Without the prior written consent of all Lenders
(except a Defaulting Lender), no amendment or modification to this Addendum
shall be effective that would increase the advance rates or amend the definition
of "Borrowing Base" (or any defined term used in such definition) if the effect
of such amendment is to increase borrowing availability. This Section 14 does
not confer any rights or benefits upon Loan Parties or any other Person, and no
Loan Party shall have any standing to enforce this Section 14.

 

Section 15.         Severability. Wherever possible, each provision of this
Addendum shall be interpreted in such manner as to be valid under Applicable
Law. To the extent any such provision is found to be invalid or unenforceable
under Applicable Law in a given jurisdiction, then (a) such provision shall be
ineffective only to such extent; (b) the remainder of such provision and the
other provisions of this Addendum shall remain in full force and effect in such
jurisdiction; and (c) such provision shall remain in full force and effect in
any other jurisdiction.

 

Section 16.         Cumulative Effect; Conflict of Terms. The parties
acknowledge that different provisions of this Addendum may contain requirements,
limitations, restrictions, or permissions relating to the same subject matter
and, in such case, all of such provisions shall be deemed to be cumulative
(rather than instead of one another) and must be satisfied or performed, as
applicable. Except as otherwise provided in another Loan Document (by specific
reference to the applicable provision of this Addendum), to the extent any
provision contained in this Addendum conflicts directly with any provision in
another Loan Document, then the provision in this Addendum shall control.

 

Section 17.         Counterparts. This Addendum and any amendments, waivers, or
consents relating hereto may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together, shall constitute but one and the same instrument.

 

Section 18.         Fax or Other Transmission. Delivery by one or more parties
hereto of an executed counterpart of this Addendum via facsimile, telecopy or
other electronic method of transmission pursuant to which the signature of such
party can be seen (including Adobe Corporation's Portable Document Format or
PDF) shall have the same force and effect as the delivery of an original
executed counterpart of this Addendum. Any party delivering an executed
counterpart of this Addendum by facsimile or other electronic method of
transmission shall also deliver an original executed counterpart, but the
failure to do so shall not affect the validity, enforceability, or binding
effect of this Addendum.

 

Section 19.         Governing Law. THIS ADDENDUM, UNLESS OTHERWISE SPECIFIED BY
THE TERMS HEREOF OR UNLESS THE LAWS OF ANOTHER JURISDICTION MAY, BY REASON OF
MANDATORY PROVISIONS OF LAW, GOVERN THE PERFECTION, PRIORITY, OR ENFORCEMENT OF
SECURITY INTERESTS IN THE COLLATERAL, SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF GEORGIA, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES OR OTHER
RULE OF LAW WHICH WOULD CAUSE THE APPLICATION OF THE LAW OF ANY JURISDICTION
OTHER THAN THE LAW OF THE STATE OF GEORGIA (BUT GIVING EFFECT TO FEDERAL LAWS
RELATING TO NATIONAL BANKS).

 

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Section 20.         Submission to Jurisdiction. EACH LOAN PARTY HEREBY CONSENTS
TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF GEORGIA AND THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA, IN RESPECT OF
ANY PROCEEDING, DISPUTE, OR LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ADDENDUM OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY PARTY WITH RESPECT
HERETO AND AGREES THAT ANY SUCH PROCEEDING, DISPUTE, OR LITIGATION MAY BE
BROUGHT BY IT IN SUCH COURTS. WITH RESPECT TO SUCH COURTS, EACH LOAN PARTY
IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS, AND DEFENSES IT MAY HAVE REGARDING
PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE, OR INCONVENIENT FORUM. EACH
PARTY HERETO WAIVES PERSONAL SERVICE OF PROCESS OF ANY AND ALL PROCESS SERVED
UPON IT AND IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED
FOR NOTICES IN THE CREDIT AGREEMENT, SUCH SERVICE TO BE EFFECTIVE AT THE TIME
SUCH NOTICE WOULD BE DEEMED DELIVERED PURSUANT TO THE CREDIT AGREEMENT. Nothing
herein shall limit the right of Administrative Agent or any Lender to bring
proceedings against any Loan Party in any other court, nor limit the right of
any party to serve process in any other manner permitted by Applicable Law.
Nothing in this Addendum shall be deemed to preclude enforcement by
Administrative Agent of any judgment or order obtained in any forum or
jurisdiction.

 

Section 21.         Waivers; Limitation on Damages; Limitation on Liability.

 

(a)          Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH LOAN PARTY, BY EXECUTION HEREOF, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ADDENDUM OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF ANY PARTY WITH RESPECT HERETO OR THERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT TO ADMINISTRATIVE AGENT, LC ISSUER, AND THE LENDERS TO ENTER
INTO AND ACCEPT THIS ADDENDUM.

 

(b)          Waiver of Certain Damages. NO PARTY TO THIS ADDENDUM SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS ADDENDUM OR ANY SUCCESSOR OR
ASSIGNEE OF SUCH PERSON, OR ANY THIRD PARTY BENEFICIARY, OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH ANY SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY, SPECIAL, OR CONSEQUENTIAL DAMAGES AS A RESULT OF ANY TRANSACTION
CONTEMPLATED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT.

 

(c)          Acknowledgement of Waivers. Each Loan Party has reviewed the
foregoing waivers with its legal counsel and has knowingly and voluntarily
waived its jury trial and other rights following consultation with legal
counsel. In the event of litigation, this Addendum may be filed as a written
consent to a trial by the court.

 

Section 22.         Time is of the Essence. Time is of the essence of this
Addendum and the other the Loan Documents.

 

[SIGNATURES ON FOLLOWING PAGES.]

 

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IN WITNESS WHEREOF, this Addendum has been executed and delivered under seal as
of the date set forth above.

 

  BORROWERS:       FRED'S, INC., a Tennessee corporation, as "Borrower Agent"
and a "Borrower"       By:   /s/ Jerry A. Shore   Name:   Jerry A. Shore  
Title:     Chief Executive Officer

 

  [CORPORATE SEAL]       Attest:    /s/ Mark C. Dely   Name:    Mark C. Dely  
Title:   Secretary

 

  FRED'S STORES OF TENNESSEE, INC., a Tennessee corporation, as a "Borrower"    
  By:   /s/ Jerry A. Shore   Name:   Jerry A. Shore   Title:     Chief Executive
Officer

 

  [CORPORATE SEAL]       Attest:   /s/ Mark C. Dely   Name:    Mark C. Dely  
Title:      Secretary

 

  FRED'S DOLLAR STORE OF MCCOMB, INC., a Mississippi corporation, as a
"Borrower"       By:   /s/ Jerry A. Shore   Name:   Jerry A. Shore   Title:    
President

 

  [CORPORATE SEAL]

 

  Attest: /s/ Mark C. Dely   Name: Mark C. Dely   Title:  Secretary

 

[Signatures continue on following pages.]

 

Addendum to Credit Agreement (Fred's)

 

 

 

 

 

  FRED'S CAPITAL FINANCE INC., a Delaware corporation, as a "Borrower"       By:
/s/ Andrew T. Panaccione   Name: Andrew T. Panaccione   Title: President      
[CORPORATE SEAL]       Attest: /s/ Pamela A. Jasinski   Name: Pamela A. Jasinski
  Title: Secretary       FRED'S CAPITAL MANAGEMENT COMPANY, a Delaware
corporation, as a "Borrower"       By: /s/ Andrew T. Panaccione   Name: Andrew
T. Panaccione   Title: President       [CORPORATE SEAL]       Attest: /s/ Pamela
A. Jasinski   Name: Pamela A. Jasinski   Title: Secretary       NATIONAL
PHARMACEUTICAL
NETWORK, INC., a Florida corporation, as a
"Borrower"       By: /s/ Jerry A. Shore   Name: Jerry A. Shore   Title:
President       [CORPORATE SEAL]       Attest: /s/ Mark C. Dely   Name: Mark C.
Dely   Title: Secretary

 

[Signatures continue on following page.]

 

Addendum to Credit Agreement (Fred's)

 

 

 

  

 

ADMINISTRATIVE AGENT, LC ISSUER,

AND LENDERS:

   

REGIONS BANK, an Alabama bank, as

"Administrative Agent," "Swingline Lender," "LC

Issuer," and a "Lender"

      By: /s/ Richard A. Gere   Name:  Richard A. Gere   Title: Senior Vice
President

 

[Signatures continue on following page.]

 

Addendum to Credit Agreement (Fred's)

 

 

 

 

  BANK OF AMERICA, N.A., a national banking association, as a "Lender       By:
/s/ Christine M. Scott   Name: Christine M. Scott   Title: SVP - Director

 

Addendum to Credit Agreement (Fred's)