Exhibit 10.1

 

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TERM LOAN AGREEMENT

dated as of

September 6, 2006

Between

HARTE-HANKS, INC.

The LENDERS Party Hereto,

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Administrative Agent, Sole Lead Arranger and Sole Bookrunner

 

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TABLE OF CONTENTS

 

         Page   ARTICLE I      DEFINITIONS   

SECTION 1.01.

 

Defined Terms

   1

SECTION 1.02.

 

Terms Generally

   12

SECTION 1.03.

 

Accounting Terms; GAAP

   12   ARTICLE II      THE CREDITS   

SECTION 2.01.

 

The Commitments

   12

SECTION 2.02.

 

Loans and Borrowings

   13

SECTION 2.03.

 

Requests for Borrowings

   13

SECTION 2.04.

 

Funding of Borrowings

   14

SECTION 2.05.

 

Interest Elections

   15

SECTION 2.06.

 

Increase of the Commitments

   16

SECTION 2.07.

 

Termination and Reduction of the Commitments

   19

SECTION 2.08.

 

Repayment of Loans; Evidence of Debt

   20

SECTION 2.09.

 

Prepayment of Loans

   21

SECTION 2.10.

 

Fees

   21

SECTION 2.11.

 

Interest

   22

SECTION 2.12.

 

Alternate Rate of Interest

   23

SECTION 2.13.

 

Increased Costs

   23

SECTION 2.14.

 

Break Funding Payments

   24

SECTION 2.15.

 

Taxes

   24

SECTION 2.16.

 

Payments Generally; Pro Rata Treatment; Sharing of Set-offs

   25

SECTION 2.17.

 

Mitigation Obligations; Replacement of Lenders

   27   ARTICLE III      REPRESENTATIONS AND WARRANTIES   

SECTION 3.01.

 

Organization; Powers

   28

SECTION 3.02.

 

Authorization; Enforceability

   28

SECTION 3.03.

 

Governmental Approvals; No Conflicts

   28

SECTION 3.04.

 

Financial Condition; No Material Adverse Change

   28

SECTION 3.05.

 

Properties

   29

SECTION 3.06.

 

Litigation and Environmental Matters

   29

SECTION 3.07.

 

Compliance with Laws and Agreements

   29

SECTION 3.08.

 

Investment and Holding Company Status

   29

SECTION 3.09.

 

Taxes

   30

SECTION 3.10.

 

ERISA

   30

 

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SECTION 3.11.

 

Disclosure

   30

SECTION 3.12.

 

Use of Credit

   30

SECTION 3.13.

 

Certain Agreements and Liens.

   30

SECTION 3.14.

 

Subsidiaries

   30

SECTION 3.15.

 

Deferred Compensation and Incentive Plans

   31   ARTICLE IV      CONDITIONS   

SECTION 4.01.

 

Effective Date

   31

SECTION 4.02.

 

Each Credit Event

   32   ARTICLE V      AFFIRMATIVE COVENANTS   

SECTION 5.01.

 

Financial Statements and Other Information

   32

SECTION 5.02.

 

Notices of Material Events

   33

SECTION 5.03.

 

Existence; Conduct of Business

   34

SECTION 5.04.

 

Payment of Obligations

   34

SECTION 5.05.

 

Maintenance of Properties; Insurance

   34

SECTION 5.06.

 

Books and Records; Inspection Rights

   34

SECTION 5.07.

 

Compliance with Laws

   34   ARTICLE VI      NEGATIVE COVENANTS   

SECTION 6.01.

 

Liens

   35

SECTION 6.02.

 

Fundamental Changes

   36

SECTION 6.03.

 

Sale and Leasebacks

   36

SECTION 6.04.

 

Transactions with Affiliates

   37

SECTION 6.05.

 

Subsidiary Indebtedness

   37

SECTION 6.06.

 

Certain Financial Covenants

   38   ARTICLE VII      EVENTS OF DEFAULT      ARTICLE VIII      THE
ADMINISTRATIVE AGENT   

 

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  ARTICLE IX      MISCELLANEOUS   

SECTION 9.01.

 

Notices

   42

SECTION 9.02.

 

Waivers; Amendments

   43

SECTION 9.03.

 

Expenses; Indemnity; Damage Waiver

   44

SECTION 9.04.

 

Successors and Assigns

   45

SECTION 9.05.

 

Survival

   48

SECTION 9.06.

 

Counterparts; Integration; Effectiveness

   48

SECTION 9.07.

 

Severability

   48

SECTION 9.08.

 

Right of Setoff

   48

SECTION 9.09.

 

Governing Law; Jurisdiction; Etc.

   49

SECTION 9.10.

 

Waiver of Jury Trial

   49

SECTION 9.11.

 

Headings

   50

SECTION 9.12.

 

Treatment of Certain Information; Confidentiality

   50

SECTION 9.13.

 

USA Patriot Act

   51

SECTION 9.14.

 

Interest Rate Limitation

   51

SECTION 9.15.

 

ENTIRE AGREEMENT

   51

 

SCHEDULE I

   -    Commitments

SCHEDULE II

   -    Certain Agreements and Liens

SCHEDULE III

   -    Litigation

SCHEDULE IV

   -    Environmental Matters

SCHEDULE V

   -    Subsidiaries

EXHIBIT A

   -    Form of Assignment and Assumption

EXHIBIT B

   -    Form of Opinion of Counsel to the Borrower

 

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TERM LOAN AGREEMENT

This TERM LOAN AGREEMENT dated as of September 6, 2006, between HARTE-HANKS,
INC., a Delaware corporation (the “Borrower”), each Lender (as herein defined)
from time to time party hereto, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Administrative Agent.

The Borrower has requested that the Lenders provide a term loan facility, and
the Lenders have indicated their willingness to lend on the terms and conditions
hereof. Accordingly, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans constituting such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

“Additional Commitment Increase” has the meaning assigned to such term in
Section 2.06(b).

“Additional Commitment Increase Amendment” has the meaning assigned to such term
in Section 2.06(b).

“Additional Commitment Increase Effective Date” has the meaning assigned to such
term in Section 2.06(b).

“Adjusted LIBO Rate” means, for the Interest Period for any Eurodollar Borrowing
(other than a Daily Floating Eurodollar Borrowing), an interest rate per annum
(rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO
Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate for
such Interest Period.

“Administrative Agent” means Wells Fargo Bank, National Association, in its
capacity as administrative agent for the Lenders hereunder and its permitted
successor or successors as administrative agent for the Lenders under this
Agreement.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

“Agreement” means this Term Loan Agreement (as the same may be amended,
modified, supplemented, or restated from time to time).

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate for such day plus 1/2 of

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1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or
the Federal Funds Effective Rate shall be effective from and including the
effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, as the case may be.

“Annual Report” has the meaning assigned to such term in Section 5.01(a).

“Applicable Percentage” means, with respect to any Lender, (a) on any date of
determination prior to the Commitment Termination Date, the percentage that such
Lender’s Commitment bears to the aggregate Commitments of all the Lenders;
(b) on any date of determination on or after the Commitment Termination Date,
the percentage that such Lender’s Credit Exposure bears to the aggregate Credit
Exposure of all the Lenders.

“Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar
Loan, or with respect to the facility fees payable hereunder, as the case may
be, the applicable rate per annum set forth below under the caption
“ABR Margin”, “Eurodollar Margin” or “Facility Fee Rate”, respectively, based
upon the Leverage Ratio as of the most recent determination date:

 

Maximum Leverage Ratio

   ABR Margin     Eurodollar Margin     Facility Fee Rate  

Category 1

Less than 1.50x

   0.000 %   0.315 %   0.085 %

Category 2

Equal to or greater than 1.50x but less than or equal to 2.50x

   0.000 %   0.500 %   0.125 %

Category 3

Greater than 2.50x

   0.000 %   0.600 %   0.150 %

For purposes of the foregoing, (i) the Leverage Ratio shall be determined as of
the end of each fiscal quarter of the Borrower’s fiscal year based upon the
Borrower’s consolidated financial statements delivered pursuant to
Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting
from a change in the Leverage Ratio shall be effective during the period
commencing on and including the date three Business Days after delivery to the
Administrative Agent of such consolidated financial statements indicating such
change and ending on the date immediately preceding the effective date of the
next such change; provided that (i) the Leverage Ratio shall be deemed to be in
Category 3 (A) at any time that an Event of Default has occurred and is
continuing and (B) if the Borrower fails to deliver the consolidated financial
statements required to be delivered by it pursuant to Section 5.01(a) or (b),
during the period from the expiration of the time for delivery thereof until
such consolidated financial statements are delivered; and (ii) until the date
three Business Days after the first delivery of the Borrower’s consolidated
financial statements pursuant to Section 5.01, the “Applicable Rate” shall be
the applicable rate per annum set forth above under the captions “Eurodollar
Margin” and “Facility Fee Rate” in Category 1.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

 

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“Arranger” means Wells Fargo Bank, National Association., in its capacity as
sole lead arranger and sole bookrunner.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

“Availability Period” means the period from and including the Effective Date to
the Commitment Termination Date.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

“Borrower” means Harte-Hanks, Inc., a Delaware corporation.

“Borrowing” means (a) all ABR Loans or Daily Floating Eurodollar Loans made,
converted or continued on the same date, or (b) all Eurodollar Loans (other than
Daily Floating Eurodollar Loans) of the same Type that have the same Interest
Period. For purposes hereof, the date of a Borrowing comprising Loans that have
been converted or continued shall be the effective date of the most recent
conversion or continuation of such Loans.

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Dallas, Texas and San Francisco, California are
authorized or required by law to remain closed; provided that, when used in
connection with a Eurodollar Loan, the term “Business Day” shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) 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.

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of shares
representing more than 25% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Borrower; (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated; or (c) the
acquisition of direct or indirect Control of the Borrower by any Person or
group.

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender (or, for purposes of
Section 2.13, by any lending office of such Lender or by such Lender’s holding
company, if

 

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any) 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.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Commitment” means, with respect to each Lender on any date of determination,
the commitment of such Lender to make Loans hereunder, as such commitment may be
(a) reduced from time to time pursuant to Section 2.07, (b) increased pursuant
to Section 2.06, (c) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04, and (d) reduced from
time to time by such Lender’s Applicable Percentage of the Funded Amount. The
initial amount of each Lender’s Commitment is set forth on Schedule I, or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its
Commitment, as applicable. The initial aggregate amount of the Lenders’
Commitments is $50,000,000.

“Commitment Termination Date” means the earliest of (i) the first anniversary of
the Effective Date, (ii) the Maturity Date, and (iii) any date upon which all of
the Commitments of the Lenders to make Loans have been terminated in accordance
with the terms of this Agreement.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

“Credit Exposure” means, with respect to any Lender at any time, the sum of the
outstanding principal amount of such Lender’s Loans.

“Daily Floating Eurodollar Borrowing” mean a Borrowing consisting of Loans that
bear interest at a rate determined by reference to the Daily Floating Eurodollar
Rate.

“Daily Floating Eurodollar Loan” means a Loan that bears interest at a rate
determined by reference to the Daily Floating Eurodollar Rate.

“Daily Floating Eurodollar Rate” means, for any day, the rate per annum equal to
the British Bankers Association LIBO Rate (“BBA LIBOR”), as published by the
Telerate Service (or any successor to or substitute for such Service, providing
quotations comparable to those currently provided by such Service, as determined
by the Administrative Agent from time to time for purposes of providing
quotations of BBA LIBOR applicable to Dollar deposits in the London interbank
market) at approximately 11:00 a.m. (London time) on such day (if such day is a
Business Day) or the immediately preceding Business Day (if such day is not a
Business Day), for U.S. dollar deposits with a term equivalent to one (1) month.

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

“Disclosed Matters” means the actions, suits and proceedings disclosed in
Schedule III and the environmental matters disclosed in Schedule IV.

“Disposition” means any sale, assignment, transfer or other disposition of any
property (whether now owned or hereafter acquired) by the Borrower or any of its
Subsidiaries to any other Person (other than the Borrower or any of its
Subsidiaries) excluding (i) any sale, assignment, transfer or other disposition
of any property sold or disposed of in the ordinary course of business and on
ordinary business terms and (ii) any loss or damage to, or any condemnation or
taking of, any property.

 

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“Dollars” or “$” refers to lawful money of the United States of America.

“EBITDA” means, for any period, the sum, for the Borrower and its Subsidiaries
(determined on a consolidated basis without duplication in accordance with
GAAP), of the following: (a) income (loss) from operations (calculated before
Interest Expense, taxes, extraordinary and unusual items and income or loss
attributable to equity in Affiliates) for such period plus (b) depreciation,
amortization and other non-cash charges (to the extent deducted in determining
income (loss) from operations) for such period. Notwithstanding the foregoing,
if during any period for which EBITDA is being determined, the Borrower or any
of its Subsidiaries shall have consummated any acquisition or shall have
consummated any Disposition, then, for all purposes of this Agreement, EBITDA
shall be determined on a pro forma basis as if such acquisition or such
Disposition had been made or consummated on the first day of such period.

“Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by 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” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Equity Rights” means, with respect to any Person, any subscriptions, options,
warrants, commitments, preemptive rights or agreements of any kind (including
any shareholders’ or voting trust agreements) for the issuance, sale,
registration or voting of, or securities convertible into, any additional shares
of capital stock of any class, or partnership or other ownership interests of
any type in, such Person.

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

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any

 

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Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan
or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by
the Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate 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.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to such
Loan, or the Loans constituting such Borrowing, that are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate or, solely during the
period between the Effective Date and the Initial Commitment Increase Date, the
Daily Floating Eurodollar Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or
any other recipient of any payment to be made by or on account of any obligation
of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America, or by the jurisdiction under
the laws of which such recipient is organized or in which its principal office
is located or, in the case of any Lender, in which its applicable lending office
is located, (b) any branch profits taxes imposed by the United States of America
or any similar tax imposed by any other jurisdiction in which the Borrower is
located and (c) in the case of a Foreign Lender (other than an assignee pursuant
to a request by the Borrower under Section 2.17(b)), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office) or
is attributable to such Foreign Lender’s failure or inability to comply with
Section 2.15(e), except to the extent that such Foreign Lender (or its assignor,
if any) was entitled, at the time of designation of a new lending office (or
assignment), to receive additional amounts from the Borrower with respect to
such withholding tax pursuant to Section 2.15(a).

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

“Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of the Borrower.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

“Fund” means 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 its business.

 

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“Funded Amount” means, on any date of determination, the aggregate principal
amount of all Loans made on and after the Effective Date to such date of
determination, including any Loans which have been repaid prior to such date of
determination, but excluding the aggregate principal amount of any Loans repaid
on any Increase Effective Date with the proceeds of Loans concurrently made on
such Increase Effective Date.

“GAAP” means generally accepted accounting principles in the United States of
America.

“Governmental Authority” means the government of the United States of America,
or of 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.

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of the guarantor, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment thereof, (b) to purchase or lease property, securities or services
for the purpose of assuring the owner of such Indebtedness of the payment
thereof, (c) to maintain working capital, equity capital or any other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness or (d) as an account party in respect
of any letter of credit or letter of guaranty issued to support such
Indebtedness; provided that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business.

“Hazardous Materials” means 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” means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.

“Increase Effective Date” means the Initial Commitment Increase Effective Date
or any Additional Commitment Increase Effective Date.

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money (or with respect to deposits or advances of any
kind that have substantially the same effect as obligations for borrowed money),
(b) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid (excluding current accounts payable incurred in the
ordinary course of business), (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, and (i) all obligations,
contingent or otherwise, of such Person in respect of bankers’ acceptances. The
Indebtedness

 

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of any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Initial Commitment Increase” has the meaning assigned to such term in
Section 2.06(a).

“Initial Commitment Increase Amendment” has the meaning assigned to such term in
Section 2.06(a).

“Initial Commitment Increase Effective Date” has the meaning assigned to such
term in Section 2.06(a).

“Interest Coverage Ratio” means, as at any date of determination thereof, the
ratio of (a) EBITDA for the period of four fiscal quarters ending on or most
recently ended prior to such date to (b) Interest Expense for such period.

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.05.

“Interest Expense” means, for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness (including the interest component of any payments in respect of
Capital Lease Obligations) accrued or capitalized during such period (whether or
not actually paid during such period) plus (b) the net amount payable (or minus
the net amount receivable) under Hedging Agreements relating to interest during
such period (whether or not actually paid or received during such period).
Notwithstanding the foregoing, if during any period for which Interest Expense
is being determined, the Borrower or any of its Subsidiaries shall have
consummated any acquisition or Disposition, then, for all purposes of this
Agreement, Interest Expense shall be determined on a pro forma basis as if such
acquisition or Disposition (and any Indebtedness incurred by the Borrower or any
of its Subsidiaries in connection with such acquisition or repaid as a result of
such Disposition) had been made or consummated (and such Indebtedness incurred
or repaid) on the first day of such period.

“Interest Payment Date” means (a) with respect to any ABR Loan, each Quarterly
Date, (b) with respect to any Eurodollar Loan (other than a Daily Floating
Eurodollar Loan), the last day of each Interest Period therefor and, in the case
of any Interest Period for a Eurodollar Loan of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
three-month intervals after the first day of such Interest Period, and (c) with
respect to any Daily Floating Eurodollar Loan on each Quarterly Date and on the
Initial Commitment Increase Effective Date.

“Interest Period” means for any Eurodollar Loan (other than a Daily Floating
Eurodollar Loan), the period commencing on the date of such Eurodollar Loan and
ending (a) solely with respect to Eurodollar Loans made during the thirty
(30) day calendar period following any Increase Effective Date, on the date that
is 7, 14, 21, and 28 days thereafter or (b) on the numerically corresponding day
in the calendar month that is one, two, three or six months thereafter, as
specified in the applicable Borrowing Request or Interest Election Request;
provided, that (i) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest

 

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Period shall end on the next preceding Business Day, and (ii) any Interest
Period (other than a 7, 14, 21, or 28 day Interest Period) that commences on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar month of such
Interest Period. For purposes hereof, the date of a Loan initially shall be the
date on which such Loan is made and, thereafter shall be the effective date of
the most recent conversion or continuation of such Loan.

“Lenders” means the Persons listed on Schedule I and any other Person that shall
have become a party hereto pursuant to an Assignment and Assumption, the Initial
Commitment Increase Amendment, or any Additional Commitment Increase Amendment
(other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Assumption).

“Leverage Ratio” means, as at any date, the ratio of (a) Indebtedness of the
Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) on such date to (b) EBITDA for the period
of four fiscal quarters ending on or most recently ended prior to such date.

“LIBO Rate” means, for the Interest Period for any Eurodollar Borrowing (other
than a Daily Floating Eurodollar Borrowing), the rate appearing on Page 3750 of
the Telerate Service (or on any successor or substitute page of such Service, or
any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to Dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for the
offering of Dollar deposits with a maturity comparable to such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance securing the performance of an obligation,
charge or security interest in, on or of such asset (including, in the case of
any account or other receivable, any sale thereof other than sales thereof in
the ordinary course of business for purposes of collection of past-due
receivables) and (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset.

“Loan Documents” means this Agreement and documents, instruments, and
certificates delivered pursuant to or in connection with this Agreement,
including, without limitation, any Initial Commitment Increase Amendment and any
Additional Commitment Increase Amendment.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

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

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, properties, operations, prospects or condition, financial or otherwise,
of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any of its obligations under this Agreement or any of the
other Loan Documents or (c) the rights of or benefits available to the Lenders
under this Agreement or any of the other Loan Documents.

 

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“Material Indebtedness” means Indebtedness (other than the Loans), or
obligations in respect of one or more Hedging Agreements, of any one or more of
the Borrower and its Subsidiaries in an aggregate principal amount exceeding
$20,000,000. For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of any Person in respect of any Hedging Agreement at
any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that such Person would be required to pay if such Hedging Agreement
were terminated at such time.

“Material Subsidiary” means any Subsidiary which (i) accounts for more than 5%
of the total consolidated revenue of the Borrower and its Subsidiaries or
(ii) represents more than 5% of the total consolidated assets of the Borrower
and its Subsidiaries.

“Maturity Date” means the earliest of (a) the fifth anniversary of the Effective
Date, (b) if the Initial Commitment Increase Effective Date has not occurred on
or before October 31, 2006, the 90th day following the Effective Date, or
(c) the date upon which the maturity of the Loans has been accelerated;
provided, however, that, in each case, if such date is not a Business Day, the
Maturity Date shall be the preceding Business Day.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to any Loan Document.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

“Permitted Encumbrances” means:

(a) Liens imposed by law for taxes that are not yet due or are being contested
in compliance with Section 5.04;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.04;

(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) cash 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;
and

(e) judgment liens in respect of judgments that do not constitute an Event of
Default under clause (k) of Article VII.

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

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

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“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by Wells Fargo as its prime rate in effect at its principal office in
San Francisco; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.

“Quarterly Dates” means the last Business Day of the three full-calendar month
period immediately following the Effective Date and the last Business Day of
each three-calendar month period thereafter.

“Quarterly Report” has the meaning assigned to such term in Section 5.01(b).

“Register” has the meaning set forth in Section 9.04(c).

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

“Required Lenders” means, at any time, Lenders having Credit Exposures and
unused Commitments representing more than 50% of the sum of the aggregate amount
of the Credit Exposures and unused Commitments of all the Lenders at such time.

“Statutory Reserve Rate” means, for any Eurodollar Borrowing (determined daily
with respect to any Daily Floating Eurodollar Borrowings and determined for the
applicable Interest Period with respect to all other Eurodollar Borrowings), for
any Eurodollar Borrowing, a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the
arithmetic mean, taken over each day in such Interest Period, of the aggregate
of the maximum reserve percentages (including any marginal, special, emergency
or supplemental reserves) expressed as a decimal established by the Board to
which the Administrative Agent is subject for eurocurrency funding (currently
referred to as “Eurocurrency liabilities” in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, 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, limited liability company, partnership, association or other entity
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. Unless otherwise specified, “Subsidiary” means
a Subsidiary of the Borrower.

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

 

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“Transactions” means the execution, delivery and performance by the Borrower of
this Agreement and the other Loan Documents, the borrowing of Loans, and the use
of the proceeds thereof.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans constituting such Borrowing, is
determined by reference to the Adjusted LIBO Rate, the Daily Floating Eurodollar
Rate, or the Alternate Base Rate.

“Wells Fargo” means Wells Fargo Bank, National Association.

“Withdrawal Liability” means 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 1.02. 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”.
Unless the context requires otherwise (a) 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 from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

SECTION 1.03. Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Administrative Agent that the Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

ARTICLE II

THE CREDITS

SECTION 2.01. The Commitments. Subject to the terms and conditions set forth
herein, each Lender severally agrees to make Loans to the Borrower from time to
time, on any Business Day during the Availability Period in an aggregate
principal amount not to exceed such Lender’s Applicable Percentage of (a) on or
after the Effective Date but prior to the Initial Commitment Increase Effective
Date, $50,000,000, and (b) on and after each Increase Effective Date, the
Aggregate Commitments of the Lenders as increased on such Increase Effective
Date. Each Borrowing shall consist of Loans made simultaneously by the Lenders
in accordance with their respective Applicable Percentages.

 

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Amounts borrowed under this Section 2.01 and repaid or prepaid may not be
reborrowed (except such prepayments and concurrent reborrowings required to
effect increases in the Commitments pursuant to Section 2.06).

SECTION 2.02. Loans and Borrowings.

(a) Obligations of Lenders. Each Loan shall be made as part of a Borrowing
consisting of Loans of the same Type made by the Lenders ratably in accordance
with their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender’s failure to make Loans as
required.

(b) Type of Loans. Subject to Section 2.12, each Loan shall be constituted
entirely of ABR Loans or of Eurodollar Loans as the Borrower may request in
accordance herewith; provided that, Daily Floating Eurodollar Loans may only be
made during the period from and including the Effective Date to the Initial
Commitment Increase Effective Date. Each Lender at its option may make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement.

(c) Minimum Amounts; Limitation on Number of Borrowings. Each Eurodollar
Borrowing shall be in an aggregate amount of $5,000,000 or a larger multiple of
$1,000,000. Each ABR Borrowing shall be in an aggregate amount equal to
$5,000,000 or a larger multiple of $1,000,000; provided that an ABR Borrowing
may be in an aggregate amount that is equal to the entire unused balance of the
aggregate Commitments. Borrowings of more than one Type may be outstanding at
the same time; provided that there shall not at any time be more than a total of
fifteen (15) Eurodollar Borrowings outstanding.

(d) Limitations on Interest Periods. Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request Eurodollar Borrowings
(or to elect to convert to, or continue as, a Eurodollar Borrowing) prior to the
Maturity Date if the Interest Period requested therefor would end after the
Maturity Date; provided further that Borrower shall not be entitled to request
Daily Floating Eurodollar Borrowings on and after the Initial Commitment
Increase Effective Date.

SECTION 2.03. Requests for Borrowings.

(a) Notice by the Borrower. To request a Borrowing, the Borrower shall notify
the Administrative Agent of such request by telephone (i) in the case of a
Eurodollar Borrowing (other than a Daily Floating Eurodollar Borrowing), not
later than 10:00 a.m., Dallas, Texas time, three Business Days before the date
of the proposed Borrowing or (ii) in the case of an ABR Borrowing or a Daily
Floating Eurodollar Borrowing, not later than 10:00 a.m., Dallas, Texas time,
one Business Day before the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Borrower.

(b) Content of Borrowing Requests. Each telephonic and written Borrowing Request
shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

 

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(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing, a Daily Floating
Eurodollar Borrowing, or a Eurodollar Borrowing (other than a Daily Floating
Eurodollar Borrowing;

(iv) in the case of a Eurodollar Borrowing (other than a Daily Floating
Eurodollar Borrowing), the Interest Period therefor, which shall be a period
contemplated by the definition of the term “Interest Period” and permitted under
Section 2.02(d); and

(v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.04.

(c) Notice by the Administrative Agent to the Lenders. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender’s Loan to be made as part of the requested Borrowing.

(d) Failure to Elect. If no election as to the Type of a Borrowing is specified,
then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Borrowing (other than a Daily
Floating Eurodollar Borrowing), then the requested Borrowing shall be made
instead as an ABR Borrowing.

SECTION 2.04. Funding of Borrowings.

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 11:00 a.m., Dallas, Texas time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower maintained with the Administrative Agent and designated by the Borrower
in the applicable Borrowing Request.

(b) Presumption by the Administrative Agent. Unless the Administrative Agent
shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with
paragraph (a) of this Section and may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. In such event, if a Lender has
not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the Borrower severally
agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrower to but excluding the date of payment to
the Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender’s Loan included in such Borrowing.

 

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SECTION 2.05. Interest Elections.

(a) Elections by the Borrower for Borrowings. The Loans constituting each
Borrowing initially shall be of the Type specified in the applicable Borrowing
Request and, in the case of a Eurodollar Borrowing (other than a Daily Floating
Eurodollar Borrowing), shall have the Interest Period specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing
to a Borrowing of a different Type or to continue such Borrowing as a Borrowing
of the same Type and, in the case of a Eurodollar Borrowing (other than a Daily
Floating Eurodollar Borrowing), may elect the Interest Period therefor, all as
provided in this Section; provided that, conversions to Daily Floating
Eurodollar Loans may only be made during the period from the Effective Date to
the Initial Commitment Increase Effective Date. The Borrower may elect different
options with respect to different portions of the affected Borrowing, in which
case each such portion shall be allocated ratably among the Lenders holding the
Loans constituting such Borrowing, and the Loans constituting each such portion
shall be considered a separate Borrowing.

(b) Notice of Elections. To make an election pursuant to this Section, the
Borrower shall notify the Administrative Agent of such election by telephone by
the time that a Borrowing Request would be required under Section 2.03 if the
Borrower were requesting a Borrowing of the Type resulting from such election to
be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.

(c) Content of Interest Election Requests. Each telephonic and written Interest
Election Request shall specify the following information in compliance with
Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) of this
paragraph shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing, a Daily
Floating Eurodollar Borrowing, or other Type of Eurodollar Borrowing; (it being
understood, that Daily Floating Eurodollar Borrowings are only available during
the period from and including the Effective Date to the Initial Commitment
Increase Date); and

(iv) if the resulting Borrowing is a Eurodollar Borrowing (other than Daily
Floating Eurodollar Borrowing), the Interest Period therefor after giving effect
to such election, which shall be a period contemplated by the definition of the
term “Interest Period” and permitted under Section 2.02(d).

(d) Notice by the Administrative Agent to the Lenders. Promptly following
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender’s portion of each
resulting Borrowing.

 

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(e) Failure to Elect; Events of Default. If the Borrower fails to deliver a
timely and complete Interest Election Request with respect to a Eurodollar
Borrowing (other than a Daily Floating Eurodollar Borrowing) prior to the end of
the Interest Period therefor, then, unless such Eurodollar Borrowing is repaid
as provided herein at the end of the applicable Interest Period, then such
Eurodollar Borrowing shall be converted to an ABR Borrowing. Notwithstanding any
contrary provision hereof, if an Event of Default has occurred and is continuing
and the Administrative Agent, at the request of the Required Lenders, so
notifies the Borrower, then, so long as an Event of Default is continuing (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar
Borrowing, (ii) unless repaid, each Eurodollar Borrowing (other than a Daily
Floating Eurodollar Borrowing) shall be converted to an ABR Borrowing at the end
of the Interest Period therefor; and (iii) each Daily Floating Eurodollar
Borrowing shall be converted to an ABR Borrowing.

SECTION 2.06. Increase of the Commitments.

(a) Initial Increase of Commitments. On any date after the Effective Date but on
or prior to October 31, 2006, the total aggregate Commitments may be increased
by an amount which, when aggregated on the Initial Commitment Increase Effective
Date with the then-existing Commitments and the then-existing Funded Amount,
would not exceed $200,000,000 (or such greater or lesser amount as Borrower and
the Administrative Agent may mutually agree, but in no event greater than
$250,000,000) (the “Initial Commitment Increase”), which Initial Commitment
Increase shall become effective on the date (the “Initial Commitment Increase
Effective Date”) that each of the following terms and conditions have been
satisfied (or waived by the Administrative Agent and each party to the Initial
Commitment Increase Amendment):

(i) One or more financial institutions and/or Funds (acceptable to the Borrower,
the Administrative Agent, and the Arranger) have committed to lend amounts equal
to the Initial Commitment Increase pursuant to this Agreement; the
Administrative Agent and the Borrower shall determine the final allocation of
such Initial Commitment Increase among such institutions;

(ii) No Default exists or arises after giving effect to the Initial Commitment
Increase; and

(iii) The Borrower, the Administrative Agent, any Lender who has agreed to
increase its Commitment, and each financial institution or Fund that has agreed
to provide all or a portion of the Initial Commitment Increase shall execute and
deliver an amendment and joinder agreement in form and upon terms acceptable to
the Administrative Agent and the Borrower (the “Initial Commitment Increase
Amendment”), and the Borrower shall have satisfied each of the conditions
precedent set forth therein, including without limitation:

(A) Payment of all fees required thereby or in connection therewith, including,
without limitation, reimbursement of the reasonable fees and expenses incurred
by the Administrative Agent and its counsel in connection with the Initial
Commitment Increase;

(B) Delivery to the Administrative Agent of a certificate dated as of the
Initial Commitment Increase Effective Date signed by the President, a Vice
President, or a Financial Officer of the Borrower (i) certifying and attaching
the resolutions adopted by the Borrower approving or consenting to the Initial
Commitment Increase; and

 

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(ii) certifying that, immediately before and after giving effect to such Initial
Commitment Increase, (x) the representations and warranties contained in
Article III and the other Loan Documents are true and correct, except to the
extent that such representations and warranties specifically refer to an earlier
date, in which case they are true and correct as of such earlier date, and
(y) no Default exists or arises after giving effect to the Initial Commitment
Increase or any Borrowings thereof on the Initial Commitment Increase Effective
Date;

(C) A compliance certificate signed by a Financial Officer of the Borrower
confirming compliance with Section 6.06 as of the Initial Commitment Increase
Effective Date and, on a pro forma basis, after giving effect to Borrowings of
the available Commitment as so increased;

(D) A favorable written opinion (addressed to the Administrative Agent and the
Lenders and dated the Initial Commitment Increase Effective Date) of Cox, Smith,
Mathews Incorporated, counsel for the Borrower, or such other legal counsel to
the Borrower reasonably acceptable to the Administrative Agent. with respect to
matters relating to the Borrower, and the Initial Commitment Increase Agreement,
as the Administrative Agent shall reasonably request (and the Borrower hereby
instructs such counsel to deliver such opinion to the Lenders and the
Administrative Agent), which opinion shall be in form and upon terms reasonably
acceptable to the Administrative Agent and its counsel; and

(E) Such other documents as the Administrative Agent or its special counsel may
reasonably request.

(b) Additional Increases of Commitments. After the Initial Commitment Increase
Effective Date and prior to the Commitment Termination Date if no Default then
exists, the Borrower may from time to time notify the Administrative Agent
(which shall promptly notify the Lenders) of the Borrower’s request to increase
the Commitments by an amount which, when aggregated on the respective Additional
Commitment Increase Effective Date with the then-existing Commitments and the
then-existing Funded Amount, would not exceed $250,000,000 (each an “Additional
Commitment Increase”); provided that (i) any such request for an increase shall
be in a minimum amount of $20,000,000, and (ii) the Borrower may not make more
than two such requests. At the time of sending such notice, the Borrower (in
consultation with the Administrative Agent) shall specify the time period within
which each Lender is requested to respond (which shall in no event be less than
ten Business Days from the date of delivery of such notice to the Lenders).

(i) Each Lender shall notify the Administrative Agent within such time period
whether or not it agrees to increase its Commitment and, if so, whether by an
amount equal to, greater than, or less than its ratable portion (based on such
Lender’s Applicable Percentage) of such requested increase. Any Lender not
responding within such time period shall be deemed to have declined to increase
its Commitment. To achieve the full amount of a requested increase, and subject
to the approval of the Administrative Agent (which approval shall not be
unreasonably withheld), the Borrower may also invite additional financial
institutions and/or Funds to become Lenders under this Agreement.

(ii) The Borrower, the Administrative Agent, any Lender who has agreed to
increase its Commitment, and each financial institution or Fund that has agreed
to

 

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provide all or a portion of an Additional Commitment Increase shall execute and
deliver an amendment and joinder agreement in form and upon terms acceptable to
the Administrative Agent and the Borrower (each an “Additional Commitment
Increase Amendment”), and the Borrower shall have satisfied each of the
conditions precedent set forth therein, including without limitation:

(A) Payment of all reasonable fees required thereby or in connection therewith,
including, without limitation, reimbursement of the fees and expenses incurred
by the Administrative Agent and its counsel in connection with the Additional
Commitment Increase;

(B) Delivery to the Administrative Agent of a certificate dated as of the
Additional Commitment Increase Effective Date signed by the President, a Vice
President, or a Financial Officer of the Borrower (i) certifying and attaching
the resolutions adopted by the Borrower approving or consenting to the
Additional Commitment Increase; and (ii) certifying that, before and after
giving effect to such Additional Commitment Increase, (x) the representations
and warranties contained in Article III and the other Loan Documents are true
and correct on and as of the Additional Commitment Increase Effective Date,
except to the extent that such representations and warranties specifically refer
to an earlier date, in which case they are true and correct as of such earlier
date, and (y) no Default exists or arises after giving effect to such Additional
Commitment Increase or any Borrowings thereof on the applicable Additional
Commitment Increase Effective Date;

(C) A compliance certificate signed by a Financial Officer of the Borrower
confirming compliance with Section 6.06 as of such Additional Commitment
Effective Date and, on a pro forma basis, after giving effect to Borrowings of
the available Commitment as so increased;

(D) A favorable written opinion (addressed to the Administrative Agent and the
Lenders and dated as of such Additional Commitment Increase Effective Date) of
Cox, Smith, Mathews Incorporated, counsel for the Borrower, or such other legal
counsel to the Borrower, reasonably acceptable to the Administrative Agent, with
respect to matters relating to the Borrower, and the Additional Commitment
Increase Agreement, as the Administrative Agent shall reasonably request (and
the Borrower hereby instructs such counsel to deliver such opinion to the
Lenders and the Administrative Agent), which opinion shall be in form and upon
terms reasonably acceptable to the Administrative Agent and its counsel;

(E) No Default then exists or arises after giving effect to such Additional
Commitment Increase; and

(F) Such other documents as the Administrative Agent or its special counsel may
reasonably request.

(iii) If the Commitments are increased in accordance with this Section 2.06(b),
the Administrative Agent and the Borrower shall determine the effective date
(each an “Additional Commitment Increase Effective Date”) and the final
allocation of such increase. The Administrative Agent shall promptly notify the
Borrower and the Lenders of the final allocation of such increase and the
Additional Commitment Increase Effective Date.

 

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(c) No Lender is obligated to increase its Commitment under any circumstances,
and no Lender’s Commitment may be increased except by its execution of an
amendment to this Agreement in accordance with this Section 2.06. On the Initial
Commitment Increase Effective Date, each financial institution or Fund executing
the Initial Commitment Increase Amendment shall be a “Lender” hereunder, and on
each Additional Commitment Increase Effective Date, each financial institution
or Fund executing an Additional Commitment Increase Amendment shall be a
“Lender” hereunder, in each case entitled to the rights and benefits, and
subject to the duties, of a Lender under the Loan Documents. In each case, each
Lender’s Applicable Percentage shall be recalculated to reflect the new
proportionate share of the revised total Commitments. In order to give effect to
the Initial Commitment Increase and any Additional Commitment Increase and the
related ratable allocation of the Credit Exposure and Commitments in accordance
with the adjusted Applicable Percentages of the Lenders, the Borrower shall
prepay any Loans outstanding on the Initial Commitment Increase Effective Date
and on each Additional Commitment Increase Effective Date and immediately
reborrow such Loans from the Lenders in accordance with such Lenders’ adjusted
Applicable Percentages; provided that if any such prepayment of a Eurodollar
Loan (other than a Daily Floating Eurodollar Loan) is made prior to the last day
of its applicable Interest Period, the Borrower shall also pay any additional
amounts required pursuant to Section 2.14. All Loans made during the
Availability Period after any Commitment increase effected pursuant to
Section 2.06(a) or (b) shall be funded in accordance with the Lenders’
Applicable Percentages as adjusted to reflect any such Commitment increase.

(d) Conflicting Provisions. This Section shall supersede any provisions in
Section 2.16 or 9.02 to the contrary.

SECTION 2.07. Termination and Reduction of the Commitments.

(a) Scheduled Termination. The Commitments shall automatically and permanently
reduce to zero at the close of business on the Commitment Termination Date.

(b) Voluntary Termination or Reduction. The Borrower may at any time terminate,
or from time to time reduce, the Commitments; provided that each reduction of
the Commitments shall be in an amount that is $10,000,000 or a larger multiple
of $5,000,000.

(c) Notice of Voluntary Termination or Reduction. The Borrower shall notify the
Administrative Agent of any election to terminate or reduce the Commitments
under paragraph (b) of this Section at least three Business Days prior to the
effective date of such termination or reduction, specifying such election and
the effective date thereof. Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
notice delivered by the Borrower pursuant to this Section shall be irrevocable;
provided that a notice of termination of the Commitments delivered by the
Borrower may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied.

(d) Effect of Termination or Reduction. Any termination or reduction of the
Commitments shall be permanent. Each reduction of the Commitments shall be made
ratably among the Lenders in accordance with their respective Commitments then
in effect.

 

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SECTION 2.08. Repayment of Loans; Evidence of Debt.

(a) Repayment. The Borrower shall repay the principal of the Loans outstanding
on the last day of the Availability Period (the “Drawn Amount”) in 15 quarterly
installments, commencing on the last Business Day of the three full-calendar
month period immediately following the Commitment Termination Date and
continuing on the last Business Day of each three-calendar month period
thereafter, with the remaining unpaid Drawn Amount being paid in full on the
Maturity Date. The principal amount of each quarterly installment shall be
calculated as a percentage of the Drawn Amount as set forth below.

 

Quarterly Installments

   Percentage of Drawn Amount

1 - 8

   2.50%/each

9 - 12

   3.75%/each

13 - 15

   5.00%/each

Maturity Date

   Remaining Principal Balance

In the event that the Initial Commitment Increase is not made available to the
Borrower on or prior to October 31, 2006, then, notwithstanding the foregoing,
the Borrower shall repay in full all principal amounts outstanding under the
Loan Documents, together with all accrued and unpaid interest and fees and other
amounts owed to the Lenders or the Administrative Agent under the Loan
Documents, on the 90th day after the Effective Date.

(b) Manner of Payment. Prior to any repayment or prepayment of any Borrowings
hereunder, the Borrower shall select the Borrowing or Borrowings to be paid and
shall notify the Administrative Agent by telephone (confirmed by telecopy) of
such selection not later than 10:00 a.m., Dallas, Texas time, three Business
Days before the scheduled date of such repayment; provided that each repayment
of Borrowings shall be applied to repay any outstanding ABR Borrowings and Daily
Floating Eurodollar Borrowings before any other Borrowings. If the Borrower
fails to make a timely selection of the Borrowing or Borrowings to be repaid or
prepaid, such payment shall be applied, first, to pay any outstanding
ABR Borrowings and Daily Floating Rate Borrowings; second, to other Borrowings
in the order of the remaining duration of their respective Interest Periods (the
Borrowing with the shortest remaining Interest Period to be repaid first). Each
payment of a Borrowing shall be applied ratably to the Loans included in such
Borrowing.

(c) Maintenance of Records by Lenders. Each Lender shall maintain in accordance
with its usual practice records evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.

(d) Maintenance of Records by the Administrative Agent. The Administrative Agent
shall maintain records in which it shall record (i) the amount of each Loan made
hereunder, the Type thereof and each Interest Period therefor, (ii) the amount
of any principal or interest due and payable or to become due and payable from
the Borrower to each Lender hereunder and (iii) the amount of any sum received
by the Administrative Agent hereunder for account of the Lenders and each
Lender’s share thereof.

(e) Effect of Entries. The entries made in the records maintained pursuant to
paragraph (c) or (d) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative

 

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Agent to maintain such records or any error therein shall not in any manner
affect the obligation of the Borrower to repay the Loans in accordance with the
terms of this Agreement.

(f) Promissory Notes. Any Lender may request that Loans made by it be evidenced
by a promissory note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) and
in a form approved by the Administrative Agent. Thereafter, the Loans evidenced
by such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.09. Prepayment of Loans.

(a) Right to Prepay Borrowings. The Borrower shall have the right at any time
and from time to time to prepay any Borrowing in whole or in part, subject to
the requirements of this Section.

(b) Notices, Etc. The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing (other than a Daily Floating Eurodollar
Loan, not later than 10:00 a.m., Dallas, Texas time, three Business Days before
the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing or
a Daily Floating Eurodollar Borrowing, not later than 10:00 a.m., Dallas, Texas
time, one Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid; provided that, if a notice of
prepayment is given in connection with a conditional notice of termination of
the Commitments as contemplated by Section 2.07(c), then such notice of
prepayment may be revoked if such notice of termination is revoked in accordance
with Section 2.07(c). Promptly following receipt of any such notice relating to
a Borrowing, the Administrative Agent shall advise the relevant Lenders of the
contents thereof. Each partial prepayment of any Borrowing shall be in an amount
that would be permitted in the case of a Borrowing of the same Type as provided
in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing. Prepayments shall be accompanied by
accrued interest to the extent required by Section 2.11 and shall be made in the
manner specified in Section 2.08(b).

SECTION 2.10. Fees.

(a) Facility Fee. The Borrower agrees to pay to the Administrative Agent for
account of each Lender a facility fee, which shall accrue at the Applicable Rate
for Facility Fees on (i) during the Availability Period, the sum of (A) the
actual daily amount of the Commitment of such Lender during the period from and
including the Effective Date to the Commitment Termination Date and (B) the
actual daily amount of such Lender’s Credit Exposure and (ii) thereafter until
such Lender has been paid in full, on the actual daily amount of such Lender’s
Credit Exposure. Accrued facility fees shall be payable on each Quarterly Date
and on the later of the date the Commitments terminate and the date upon which
the Loans of all of the Lenders shall have been paid in full, provided that
(i) any facility fees accruing after the Maturity Date shall be payable on
demand, and (ii) if any principal of any Loan is not paid when due, whether at
stated maturity, upon acceleration or otherwise, the facility fee in respect of
such principal shall be payable on demand. All facility fees shall be computed
on the basis of a year of 360 days and

 

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shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).

(b) Administrative Agent Fees. The Borrower agrees to pay to the Administrative
Agent, for its own account, fees payable in the amounts and at the times
separately agreed upon between the Borrower and the Administrative Agent.

(c) Payment of Fees. All fees payable hereunder shall be paid on the dates due,
in immediately available funds, to the Administrative Agent for distribution, in
the case of facility fees, participation fees and fronting fees, to the Lenders
entitled thereto. Fees paid shall not be refundable under any circumstances.

SECTION 2.11. Interest.

(a) ABR Loans. The Loans constituting each ABR Borrowing shall bear interest at
a rate per annum equal to the Alternate Base Rate plus the Applicable Rate.

(b) Eurodollar Loans. The Loans constituting each Eurodollar Borrowing shall
bear interest at a rate per annum equal to (i) in the case of Daily Floating
Eurodollar Borrowing, the Daily Floating Eurodollar Rate plus the Applicable
Rate for Eurodollar Loans, or (ii) in the case of all other Eurodollar
Borrowings, the Adjusted LIBO Rate for the Interest Period for such Borrowing
plus the Applicable Rate.

(c) Default Interest. Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided above
or (ii) in the case of any other amount, 2% plus the rate applicable to
ABR Loans as provided in paragraph (a) of this Section.

(d) Payment of Interest. Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and on the Maturity Date;
provided that (i) interest accrued pursuant to paragraph (c) of this Section
shall be payable on demand, (ii) in the event of any repayment or prepayment of
any Loan, accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event of
any conversion of any Eurodollar Borrowing (other than a Daily Floating
Eurodollar Borrowing) prior to the end of the Interest Period therefor, accrued
interest on such Borrowing shall be payable on the effective date of such
conversion.

(e) Computation. All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate the
Adjusted LIBO Rate, and the Daily Floating Eurodollar Rate shall be determined
by the Administrative Agent, and such determination shall be conclusive absent
manifest error.

 

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SECTION 2.12. Alternate Rate of Interest. If either prior to the commencement of
the Interest Period for any Eurodollar Borrowing (other than a Daily Floating
Rate Borrowing) or the date of any Daily Floating Rate Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate for such Interest Period; or

(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining their
respective Loans (or its Loan) included in such Borrowing for such Interest
Period;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or the
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and such Borrowing (unless prepaid) shall be continued as, or converted to, an
ABR Borrowing and (ii) if any Borrowing Request requests a Eurodollar Borrowing,
such Borrowing shall be made as an ABR Borrowing.

SECTION 2.13. Increased Costs.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or

(ii) impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender or
participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lenders of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or to
reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or otherwise), then the Borrower will pay to
such Lender such additional amount or amounts as will compensate such Lender for
such additional costs incurred or reduction suffered.

(b) Capital Requirements. If any Lender determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender’s capital or on the capital of such Lender’s holding
company, if any, as a consequence of this Agreement or the Loans made by such
Lender to a level below that which such Lender or such Lender’s holding company
could have achieved but for such Change in Law (taking into consideration such
Lender’s policies and the policies of such Lender’s holding company with respect
to capital adequacy), then from time to time the Borrower will pay to such
Lender such additional amount or amounts as will compensate such Lender or such
Lender’s holding company for any such reduction suffered.

 

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(c) Certificates from Lenders. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in paragraph (a) or (b) of this Section, shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.

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

SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan (except a Daily Floating Eurodollar Loan) other
than on the last day of an Interest Period therefor (including as a result of an
Event of Default), (b) the conversion of any Eurodollar Loan (except a Daily
Floating Eurodollar Loan) other than on the last day of an Interest Period
therefor, (c) the failure to borrow, convert, continue or prepay any Loan on the
date specified in any notice delivered pursuant hereto (regardless of whether
such notice is permitted to be revocable under Section 2.09(b) and is revoked in
accordance herewith), or (d) the assignment as a result of a request by the
Borrower pursuant to Section 2.17 of any Eurodollar Loan (except a Daily
Floating Eurodollar Loan) other than on the last day of an Interest Period
therefor, then, in any such event, the Borrower shall compensate each Lender for
the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan (other than a Daily Floating Eurodollar Loan), the loss to any
Lender attributable to any such event shall be deemed to include an amount
determined by such Lender to be equal to the excess, if any, of (i) the amount
of interest that such Lender would pay for a deposit equal to the principal
amount of such Loan for the period from the date of such payment, conversion,
failure or assignment to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, convert or continue, the
duration of the Interest Period that would have resulted from such borrowing,
conversion or continuation) if the interest rate payable on such deposit were
equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount
of interest that such Lender would earn on such principal amount for such period
if such Lender were to invest such principal amount for such period at the
interest rate that would be bid by such Lender (or an affiliate of such Lender)
for Dollar deposits from other banks in the eurodollar market at the
commencement of such period. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.

SECTION 2.15. Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the
Administrative Agent or Lender (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such

 

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deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.

(b) Payment of Other Taxes by the Borrower. In addition, the Borrower shall pay
any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.

(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent and each Lender within 10 days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such Lender on or with respect to any payment by or
on account of any obligation of the Borrower hereunder (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other 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 the Borrower by a Lender or by the Administrative Agent
on its own behalf or on behalf of a Lender shall be conclusive absent manifest
error.

(d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

(e) Foreign Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law or reasonably requested by the Borrower, such properly completed and
executed documentation prescribed by applicable law as will permit such payments
to be made without withholding or at a reduced rate.

SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Payments by the Borrower. The Borrower shall make each payment required to
be made by it hereunder (whether of principal, interest, fees or amounts payable
under Section 2.13, 2.14 or 2.15, or otherwise) prior to 11:00 a.m., Dallas,
Texas time, on the date when due, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any date may,
in the discretion of the 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 the Administrative Agent at its
offices at 201 3rd Street, 8th Floor, San Francisco, California 94596, except
payments pursuant to Sections 2.13, 2.14, 2.15 and 9.03, which shall be made
directly to the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by it for 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 payable for the period of
such extension. All payments hereunder shall be made in Dollars.

(b) Application of Insufficient Payments. If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal,

 

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interest and fees then due hereunder, such funds shall be applied (i) first, to
pay interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties; and (ii) second, to pay principal then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of principal then due to
such party.

(c) Pro Rata Treatment. Except to the extent otherwise provided herein: (i) each
Borrowing shall be made from the Lenders, and each termination or reduction of
the amount of the Commitments under Section 2.07 shall be applied to the
respective Commitments of the Lenders, pro rata according to the amounts of
their respective Commitments then in effect; (ii) each payment of facility fees
under Section 2.10 shall be made for the account of the Lenders pro rata in
accordance with the amount of facility fees then due and payable to the
respective Lenders; (iii) each Borrowing shall be allocated pro rata among the
Lenders according to the amounts of their respective Commitments then in effect
(in the case of the making of Loans) or their respective Loans that are to be
included in such Borrowing (in the case of conversions and continuations of
Loans); (iv) each payment or prepayment of principal of Loans by the Borrower
shall be made for account of the Lenders pro rata in accordance with the
respective Credit Exposure held by them; and (v) each payment of interest on
Loans by the Borrower shall be made for account of the Lenders pro rata in
accordance with the amounts of interest on such Loans then due and payable to
the respective Lenders.

(d) Sharing of Payments by Lenders. 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 resulting in such Lender receiving
payment of a greater proportion of the aggregate amount of its Loans and accrued
interest thereon then due than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; 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 paragraph shall not be construed to apply to any payment made
by the Borrower 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 Loans to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). The 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 exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.

(e) Presumptions of Payment. Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment is due to the
Administrative Agent for account of the Lenders hereunder that the Borrower will
not make such payment, the Administrative Agent may assume that the Borrower has
made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender for each day from and including the date such amount
is distributed to it to but excluding the date of payment to the Administrative
Agent, at the greater of the

 

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Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation.

(f) Certain Deductions by the Administrative Agent. If any Lender shall fail to
make any payment required to be made by it pursuant to Section 2.04(b) or
2.16(e), then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid.

SECTION 2.17. Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests
compensation under Section 2.13, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for account of any
Lender pursuant to Section 2.15, 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 judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.13 or 2.15, 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. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under
Section 2.13, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for account of any Lender pursuant to
Section 2.15, or if any Lender defaults in its obligation to fund Loans
hereunder, then the 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 Section 9.04), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.13 or payments required to be made pursuant to
Section 2.15, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry
on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.

SECTION 3.02. Authorization; Enforceability. The Transactions are within the
Borrower’s corporate powers and have been duly authorized by all necessary
corporate and, if required, by all necessary shareholder action. This Agreement
has been duly executed and delivered by the Borrower and constitutes, and each
of the other Loan Documents when executed and delivered will constitute, a
legal, valid and binding obligation of the Borrower, enforceable in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors’ rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except (i) such as have been obtained or
made and are in full force and effect, (ii) as may be required to be filed with
the Securities & Exchange Commission after the date hereof, (b) will not violate
any applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or assets, or give rise to a right thereunder to require any
payment to be made by any such Person, and (d) will not result in the creation
or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.

SECTION 3.04. Financial Condition; No Material Adverse Change.

(a) Financial Condition. The Borrower has heretofore furnished to the Lenders
(i) its consolidated balance sheet and statements of income, stockholders’
equity and cash flows as of and for the fiscal year ended December 31, 2005,
reported on by KPMG LLP, independent public accountants and (ii) its
consolidated balance sheet and statements of income, stockholders’ equity and
cash flows as of and for the fiscal quarter and the portion of the fiscal year
ended June 30, 2006, certified by the chief financial officer of the Borrower.
Such financial statements present fairly, in all material respects, the actual
or pro forma, as the case may be, financial position and results of operations
and cash flows of the Borrower and its Subsidiaries as of such dates and for
such periods in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes in the case of the statements referred to in
clause (ii) of the first sentence of this paragraph. None of the Borrower nor
any of its Subsidiaries has on the date hereof any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in said balance sheet as at June 30,
2006.

 

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(b) No Material Adverse Change. Since December 31, 2005, there has been no
material adverse change in the business, assets, properties, operations,
prospects or condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole.

SECTION 3.05. Properties.

(a) Property Generally. Each of the Borrower and its Subsidiaries has good title
to, or valid leasehold interests in, all its real and personal property material
to their businesses, taken as a whole, subject only to Liens permitted by
Section 6.01 and except for minor defects in title that do not interfere with
its ability to conduct such businesses as currently conducted or to utilize such
properties for their intended purposes.

(b) Intellectual Property. Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to their businesses, taken as a whole, and the
use thereof by the Borrower and its Subsidiaries does not infringe upon the
rights of any other Person, except for any such infringements that, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.

SECTION 3.06. Litigation and Environmental Matters.

(a) Actions, Suits and Proceedings. There are no actions, suits or proceedings
by or before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of its Subsidiaries (i) could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.

(b) Environmental Matters. Except for the Disclosed Matters and except with
respect to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any of its Subsidiaries (i) has failed 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) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.

(c) Disclosed Matters. Since the date of this Agreement, there has been no
change in the status of the Disclosed Matters that, individually or in the
aggregate, has resulted in, or could reasonably be expected to result in, a
Material Adverse Effect.

SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its
Subsidiaries is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.

SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor
any of its Subsidiaries is (a) an “investment company” as defined in, or subject
to regulation under, the Investment Company Act of 1940 or (b) a “holding
company” as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935.

 

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SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed
or caused to be filed all Tax returns and reports required to have been filed
and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which such Person has set aside on its books adequate
reserves or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.

SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect.

SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

SECTION 3.12. Use of Credit. The proceeds of the Loans will be used (a) to pay
the fees and expenses incurred by the Borrower in connection with the
Transactions, and (b) for general corporate purposes of the Borrower, including,
without limitation, acquisitions and repurchases of shares of its stock. Neither
the Borrower nor any of its Subsidiaries is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying Margin Stock,
and after applying the proceeds of any extension of credit hereunder, not more
than 25% of the fair market value of the assets of the Borrower and its
Subsidiaries consists of Margin Stock.

SECTION 3.13. Certain Agreements and Liens.

(a) Certain Agreements. Part A of Schedule II is a complete and correct list of
each credit agreement, loan agreement, indenture, purchase agreement, guarantee,
letter of credit or other arrangement providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, the Borrower or any of its Subsidiaries outstanding
on the date hereof the aggregate principal or face amount of each of which
equals or exceeds (or may equal or exceed) $10,000,000, and the aggregate
principal or face amount outstanding or that may become outstanding under each
such arrangement is correctly described in Part A of Schedule II.

(b) Liens. Part B of Schedule II is a complete and correct list of each Lien
securing Indebtedness of any Person outstanding on the date hereof the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$10,000,000 and covering any property of the Borrower or any of its
Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by
each such Lien and the property covered by each such Lien is correctly described
in Part B of Schedule II.

SECTION 3.14. Subsidiaries. Set forth in Schedule V is a complete and correct
list of all of the Subsidiaries of the Borrower as of the date hereof, together
with, for each such Subsidiary, (i) the jurisdiction of organization of such
Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and
(iii) the nature of the ownership interests held by each such Person and the
percentage of

 

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ownership of such Subsidiary represented by such ownership interests. Except as
disclosed in Schedule V, on the date hereof, (x) each of the Borrower and its
Subsidiaries owns, free and clear of Liens, and has the unencumbered right to
vote, all outstanding ownership interests in each Person shown to be held by it
in Schedule V, (y) all of the issued and outstanding capital stock of each such
Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.

SECTION 3.15. Deferred Compensation and Incentive Plans. The Borrower has
heretofore delivered to the Lenders complete and correct copies of its Deferred
Compensation Plan, 2005 Omnibus Incentive Plan and 1998 Director Stock Plan,
each as in effect on the date hereof.

ARTICLE IV

CONDITIONS

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans
hereunder shall not become effective until the date on which the Administrative
Agent shall have received each of the following documents, each of which shall
be satisfactory to the Administrative Agent (and to the extent specified below,
to each Lender) in form and substance (or such condition shall have been waived
in accordance with Section 9.02):

(a) Executed Counterparts. From each party hereto either (i) a counterpart of
this Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page to this Agreement) that such party has
signed a counterpart of this Agreement.

(b) Opinion of Counsel to the Borrower. A favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
Cox, Smith, Mathews Incorporated, counsel for the Borrower, substantially in the
form of Exhibit B, and covering such other matters relating to the Borrower,
this Agreement or the Transactions as the Required Lenders shall reasonably
request (and the Borrower hereby instructs such counsel to deliver such opinion
to the Lenders and the Administrative Agent).

(c) Corporate Documents. Such documents and certificates as the Administrative
Agent or its counsel may reasonably request relating to the organization,
existence and good standing of the Borrower, the authorization of the
Transactions and any other legal matters relating to the Borrower, this
Agreement or the Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.

(d) Officer’s Certificate. A certificate, dated the Effective Date and signed by
the President, a Vice President or a Financial Officer of the Borrower,
confirming (i) compliance with the conditions set forth in the lettered clauses
of the first sentence of Section 4.02, (ii) that the Leverage Ratio does not
exceed 3.00 to 1 and (iii) that the Interest Coverage Ratio is not less than
2.75 to 1.

(e) Other Documents. Such other documents as the Administrative Agent or any
Lender or special counsel to Wells Fargo may reasonably request.

The obligation of any Lender to make its initial extension of credit hereunder
is also subject to the payment by the Borrower of such fees as the Borrower
shall have agreed to pay to any Lender or the Administrative Agent in connection
herewith, including the reasonable fees and expenses of

 

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Haynes and Boone, LLP, special counsel to Wells Fargo, in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
extensions of credit hereunder (to the extent that statements for such fees and
expenses have been delivered to the Borrower).

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) on or prior to 2:00 p.m., Dallas, Texas time, on
October 31, 2006 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).

SECTION 4.02. 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) the representations and warranties of the Borrower set forth in this
Agreement shall be true and correct on and as of the date of such Borrowing or
the date of issuance or amendment, as applicable; and

(b) at the time of and immediately after giving effect to such Borrowing, no
Default shall have occurred and be continuing.

Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in the preceding
sentence.

ARTICLE V

AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full the Borrower covenants and agrees with the Lenders that:

SECTION 5.01. Financial Statements and Other Information. The Borrower will
furnish to the Administrative Agent and each Lender:

(a) promptly, but in any event no later than 90 days after the end of each
fiscal year of the Borrower, the audited consolidated balance sheet and related
statements of operations, stockholders’ equity and cash flows of the Borrower
and its Subsidiaries as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, prepared in
accordance with GAAP consistently applied (the “Annual Report”), all reported on
by KPMG LLP or other independent public accountants of recognized national
standing (without a “going concern” or like qualification or exception and
without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;

(b) promptly, but in any event no later than 45 days after the end of each of
the first three fiscal quarters of each fiscal year of the Borrower, the
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows of the Borrower and its Subsidiaries as of the end of and
for such fiscal quarter and the then elapsed portion of the fiscal year, setting
forth in each case in comparative form the figures for the corresponding period
or

 

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periods of (or, in the case of the balance sheet, as of the end of) the previous
fiscal year (the “Quarterly Report”), all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes;

(c) concurrently with any delivery of financial statements under clause (a)
or (b) of this Section, a certificate of the Chief Executive Officer and Chief
Financial Officer of the Borrower (i) certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Section 6.06 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;

(d) concurrently with any delivery of financial statements under clause (a) of
this Section, a certificate of the accounting firm that reported on such
financial statements stating whether they obtained knowledge during the course
of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);

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

(f) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of the Borrower or any
of its Subsidiaries, or compliance with the terms of this Agreement and the
other Loan Documents, as the Administrative Agent or any Lender may reasonably
request.

SECTION 5.02. Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting the Borrower or
any of its Affiliates that could reasonably be expected to result in a Material
Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect;

(d) the assertion of any environmental matter by any Person against, or with
respect to the activities of, the Borrower or any of its Subsidiaries and any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any environmental matter or
alleged violation that (either individually or in the aggregate) could not
reasonably be expected to have a Material Adverse Effect; and

 

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(e) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause
each of its Subsidiaries to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.02.

SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of
its Subsidiaries to, pay its obligations, including Tax liabilities, that, if
not paid, could result in a Material Adverse Effect 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, (b) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.05. Maintenance of Properties; Insurance. The Borrower 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, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.

SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower will, and will cause
each of its Subsidiaries to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and
independent accountants, all at such reasonable times and as often as reasonably
requested.

SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each of
its Subsidiaries to, comply with all laws, rules, regulations and orders of any
Governmental Authority, including, but not limited to, Environmental Laws
applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

ARTICLE VI

NEGATIVE COVENANTS

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full the Borrower covenants and agrees with the Lenders that:

 

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SECTION 6.01. Liens. The Borrower will not, nor will it permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect of any
such income or revenues, except:

(a) Permitted Encumbrances;

(b) any Lien on any property or asset of the Borrower or any of its Subsidiaries
existing on the date hereof and set forth in Part B of Schedule II (or, to the
extent not meeting the minimum thresholds for required listing on Schedule II
pursuant to Section 3.13 and not otherwise listed in said Schedule II, (in a
footnote or otherwise) in an aggregate amount not exceeding $10,000,000);
provided that (i) no such Lien shall extend to any other property or asset of
the Borrower or any of its Subsidiaries and (ii) any such Lien shall secure only
those obligations which it secures on the date hereof and extensions, renewals
and replacements thereof that do not increase the outstanding principal amount
thereof;

(c) any Lien existing on any property or asset prior to the acquisition thereof
by the Borrower or any Subsidiary or existing on any property or asset of any
Person that becomes a Subsidiary after the date hereof prior to the time such
Person becomes a Subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming
a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other
property or assets of the Borrower or any Subsidiary and (iii) such Lien shall
secure only those obligations which it secures on the date of such acquisition
or the date such Person becomes a Subsidiary, as the case may be and extensions,
renewals and replacements thereof that do not increase the outstanding principal
amount thereof;

(d) Liens on assets acquired, constructed or improved by the Borrower or any
Subsidiary (including Liens created pursuant to Capital Lease Obligations);
provided that (i) such security interests and the Indebtedness secured thereby
are incurred prior to or within 365 days after such acquisition or the
completion of such construction or improvement, (ii) the Indebtedness secured
thereby does not exceed the cost of acquiring, constructing or improving such
assets, (iii) such security interests shall not apply to any other property or
assets of the Borrower or any Subsidiary and (iv) the aggregate principal amount
of Indebtedness secured by all such security interests under this paragraph (d)
shall not exceed $50,000,000;

(e) set-off rights arising with respect to intercompany claims between the
Borrower and one or more of its Subsidiaries against the Borrower and one or
more other Subsidiaries;

(f) With respect to letters of credit issued for the account of the Borrower or
its Subsidiaries pursuant to that certain Five-Year Credit Agreement dated as of
August 12, 2005, among the Borrower, certain lenders party thereto, and JPMorgan
Chase Bank, N.A., as the administrative agent thereunder (as amended, modified,
restated, or supplemented from time to time, the “Five-Year Credit Agreement”),
any cash collateral or defeasance account created with respect to any such
letter of credit in accordance with Sections 2.06(j) and (k) of the Five-Year
Credit Agreement;

(g) normal and customary set-off rights and bankers’ liens with respect to
deposit accounts; and

(h) Liens not otherwise permitted by the foregoing clauses of this Section 6.01
securing Indebtedness not in excess of $1,000,000 at any time outstanding.

 

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SECTION 6.02. Fundamental Changes.

(a) Mergers, Consolidations, Disposal of Assets, Etc. The Borrower will not, nor
will it permit any of its Subsidiaries to, merge into or consolidate with any
other Person, or permit any other Person to merge into or consolidate with it,
or sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) any of its assets, or any of the stock of any of its
Subsidiaries (in each case, whether now owned or hereafter acquired), if the
effect of any such sale of assets or stock or merger or consolidation would be
to sell, transfer, lease or otherwise dispose of all or substantially all of the
assets of the Borrower and its Subsidiaries (taken as a whole) or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing;

(i) any Person may merge into or consolidate with the Borrower in a transaction
in which the Borrower is the surviving corporation;

(ii) any Person may merge into or consolidate with any Subsidiary in a
transaction in which the surviving entity is a Subsidiary; provided that if any
such merger shall be between a Subsidiary and a wholly owned Subsidiary, then
the wholly owned Subsidiary shall be the continuing or surviving corporation;

(iii) the Borrower may merge into or consolidate with any other Person in a
transaction in which such Person is the surviving entity so long as (x) such
Person assumes all of the obligations of the Borrower under this Agreement by an
instrument in form and substance reasonably satisfactory to the Administrative
Agent and (y) such Person delivers such proof of corporate action, incumbency of
officers, opinions of counsel and other documents as is consistent with those
delivered by the Borrower pursuant to Section 4.01 on the Effective Date or as
the Administrative Agent shall have reasonably requested;

(iv) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets
to the Borrower or to another Subsidiary; and

(v) any Subsidiary may liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders.

(b) Lines of Business. The Borrower will not, nor will it permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto.

SECTION 6.03. Sale and Leasebacks. The Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, become or thereafter remain
liable as lessee or as guarantor or other surety with respect to the lessee’s
obligations under any lease, whether an operating lease or a capital lease, of
any property (whether real or personal or mixed) whether now owned or hereafter
acquired, (a) which the Borrower or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person or (b) which the
Borrower or any such Subsidiary intends to use for substantially the same
purpose as any other property which has been or is to be sold or transferred by
the Borrower or any such Subsidiary to any Person in connection with such lease,
if in the case of clause (a) or (b) above, such sale and such lease are part of
the same transaction or a series of related transactions or are with the same
other Person; provided that the Borrower or any Subsidiary may enter into any
such transaction so long as

 

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the sale price of all such transactions does not exceed $20,000,000 in the
aggregate during the term of this Agreement.

SECTION 6.04. Transactions with Affiliates. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except

(a) transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary than could be
obtained on an arm’s-length basis from unrelated third parties,

(b) transactions between or among the Borrower and its Subsidiaries not
involving any other Affiliate,

(c) loans to employees of the Borrower or any Subsidiary for relocation expenses
or other purposes; provided that the aggregate outstanding principal amount of
the loans permitted under this clause (c) shall not exceed $3,000,000 at any one
time,

(d) customary obligations to directors and officers of the Borrower and its
Subsidiaries in respect of indemnification and reimbursement of expenses,

(e) the payment of customary fees (in the form of cash, stock options or stock)
to directors of the Borrower,

(f) the payment of compensation to officers of the Borrower approved by the
Board of Directors of the Borrower, and the payment of deferred compensation to
officers of the Borrower pursuant to the Harte-Hanks, Inc. Deferred Compensation
Plan (including any amendments, modifications or replacements thereof; provided
that such amendment, modification or replacement does not substantially change
the character of such deferred compensation program),

(g) the payment of bonuses to officers and directors of the Borrower approved by
the Board of Directors of the Borrower,

(h) the issuance of stock of the Borrower and of options to purchase stock of
the Borrower pursuant to the Harte-Hanks 2005 Omnibus Incentive Plan (including
any amendments, modifications or replacements thereof; provided that such
amendment, modification or replacement does not substantially change the
character of such stock option program), and

(i) the purchase of stock of the Borrower and of options to purchase stock of
the Borrower pursuant to the Borrower’s stock repurchase program that was
publicly announced in January 1997.

SECTION 6.05. Subsidiary Indebtedness. The Borrower will not permit the
aggregate principal amount of Indebtedness of its Subsidiaries (excluding any
Indebtedness of a Subsidiary owed to the Borrower or another Subsidiary, but
including any Guarantee by a Subsidiary of Indebtedness of the Borrower) at any
time to exceed $20,000,000.

 

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SECTION 6.06. Certain Financial Covenants.

(a) Leverage Ratio. The Borrower will not permit the Leverage Ratio to exceed
3.00 to 1 at any time during the term of this Agreement.

(b) Interest Coverage Ratio. The Borrower will not permit the Interest Coverage
Ratio to be less than 2.75 to 1 at any time during the term of this Agreement.

ARTICLE VII

EVENTS OF DEFAULT

If any of the following events (“Events of Default”) shall occur:

(a) the Borrower 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 thereof or otherwise;

(b) the Borrower shall fail to pay any interest on any Loan, any facility fee,
any fronting fee or any participation fee 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 three or more Business Days;
or the Borrower shall fail to pay any other amount (other than an amount
referred to in clause (a) of this Article) 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 thirty or more days;

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower or any of its Subsidiaries in or in connection with this Agreement or
any other Loan Document or any amendment or modification hereof or thereof, or
in any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any other Loan Document or
any amendment or modification hereof or thereof, shall prove to have been
incorrect in any material respect when made or deemed made;

(d) the Borrower shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.02(a) or 5.03 (with respect to the Borrower’s
existence) or in Article VI;

(e) the Borrower shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement or any other Loan Document (other than
those specified in clause (a), (b) or (d) of this Article) and such failure
shall continue unremedied for a period of 30 or more days after notice thereof
from the Administrative Agent to the Borrower;

(f) the Borrower or any of its Material Subsidiaries shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable
(whether at stated maturity or on acceleration);

(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, but without any further lapse of time) the holder
or holders of any Material Indebtedness or any trustee or agent on its or their
behalf to cause any Material Indebtedness to become due, or to

 

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require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity; provided that this clause (g) shall not apply to
(i) secured Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness or (ii) the
voluntary prepayment of any Indebtedness that is not then otherwise due or
required to be prepaid pursuant to its terms;

(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any of its Material Subsidiaries or its debts, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any of its Material
Subsidiaries or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for a period of 60 or
more days or an order or decree approving or ordering any of the foregoing shall
be entered;

(i) the Borrower or any of its Material Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any of its Material
Subsidiaries 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;

(j) the Borrower or any of its Material Subsidiaries shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in
excess of $20,000,000 shall be rendered against the Borrower or any of its
Material Subsidiaries or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any of its
Material Subsidiaries to enforce any such judgment;

(l) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in a Material Adverse Effect;

(m) there shall have been asserted against the Borrower or any of its
Subsidiaries any claims or liabilities, whether accrued, absolute or contingent,
based on or arising from the generation, storage, transport, handling or
disposal of Hazardous Materials by the Borrower or any of its Subsidiaries that,
in the judgment of the Required Lenders, are reasonably likely to be determined
adversely to the Borrower or any of its Subsidiaries, and the amount thereof
(either individually or in the aggregate) is reasonably likely to have a
Material Adverse Effect (insofar as such amount is payable by the Borrower or
any of its Subsidiaries but after deducting any portion thereof that is
reasonably expected to be paid by other creditworthy Persons jointly and
severally liable therefor); or

(n) a Change in Control shall occur;

 

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then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h) or (i)
of this Article, the Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE VIII

THE ADMINISTRATIVE AGENT

Each of the Lenders hereby irrevocably appoints the Administrative Agent as its
agent hereunder and under the other Loan Documents and authorizes the
Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental
thereto.

The Person serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such
Person and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein and in the other Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby or by the other
Loan Documents that the Administrative Agent is required to exercise in writing
by the Required Lenders, and (c) except as expressly set forth herein and in the
other Loan Documents, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity. The Administrative Agent shall not be liable for any action taken
or not taken by it with the consent or at the request of the Required Lenders or
in the absence of its own gross negligence or willful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and the Administrative Agent shall not be responsible for
or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan

 

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Document or any other agreement, instrument or document, or (v) the satisfaction
of any condition set forth in Article IV or elsewhere herein or therein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.

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

The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, 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.

The Administrative Agent may resign at any time by notifying the Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right,
in consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent’s resignation shall
nonetheless become effective and (1) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and (2) the Required
Lenders shall perform the duties of the Administrative Agent (and all payments
and communications provided to be made by, to or through the Administrative
Agent shall instead be made by or to each Lender directly) until such time as
the Required Lenders appoint a successor agent as provided for above in this
paragraph. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring (or retired)
Administrative Agent and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder (if not already discharged therefrom
as provided above in this paragraph). The fees payable by the Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.
After the Administrative Agent’s resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for the benefit of such
retiring Administrative Agent, its sub agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Administrative Agent.

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

 

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Except as otherwise provided in Section 9.02(b) with respect to this Agreement,
the Administrative Agent may, with the prior consent of the Required Lenders
(but not otherwise), consent to any modification, supplement or waiver under any
of the Loan Documents.

ARTICLE IX

MISCELLANEOUS

SECTION 9.01. Notices.

(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to paragraph (b) of
this Section), all notices and other communications provided for herein shall be
in writing and shall be delivered by hand or overnight courier service, mailed
by certified or registered mail or sent by telecopy, as follows:

 

  (i) if to the Borrower, to:

Harte-Hanks, Inc.

200 Concord Plaza Drive, Suite 800

San Antonio, Texas 78216

Attention: Dean H. Blythe, Senior Vice President and

Chief Financial Officer

Telephone No. (210) 829-9138

Telecopy No. (210) 829-9139;

 

  (ii) if to the Administrative Agent, to:

 

  (A) with respect to Borrowing Requests, Interest Election Requests, and
payments, to:

Wells Fargo Bank, National Association, as Agent

201 3rd Street, 8th Floor

San Francisco, California 94596

Attention: Debby Moore, Operations Administrator

Telephone No. (415) 477-5379

Telecopy No. (415) 512-9408 or (415) 546-6353

 

  (B) with respect to all other matters, to:

Wells Fargo Bank, National Association, as Agent

1445 Ross Avenue, Suite 2320

Dallas, Texas 75202

Attention: Greg D. Campbell, Vice President,

US Corporate Banking

Telephone No. (214) 661-1202

Telecopy No. (214) 969-0371

 

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with copy to:

Haynes and Boone, LLP

901 Main Street, Suite 3100

Dallas, Texas 75202-3789

Attention: Karen S. Nelson, Esq.

Telephone No. (214) 651-5648

Telecopy No. (214) 200-0673

(iii) if to any other Lender, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.

(b) Electronic Communications. Notices and other communications to the Lenders
hereunder may be delivered or furnished by electronic communications (including
e mail and Internet or intranet websites) pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to Article II unless otherwise agreed by the Administrative Agent and
the applicable Lender. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.

(c) Change of Address, Etc. Any party hereto may change its address or telecopy
number for notices and other communications hereunder by notice to the other
parties hereto (or, in the case of any such change by a Lender, by notice to the
Borrower and the Administrative Agent). All notices and other communications
given to any party hereto in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of receipt.

SECTION 9.02. Waivers; Amendments.

(a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
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 a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, 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, regardless of whether the
Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.

(b) Amendments. Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such 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 adversely affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any
Loan, or any interest thereon, or any

 

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fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment, without
the written consent of each Lender adversely affected thereby, (iv) alter the
provisions of clause (c) or (d) of Section 2.16 in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, or (v) change any of the provisions of this Section or the
percentage in the definition of the term “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders 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; and provided
further that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Administrative Agent hereunder without the prior written
consent of the Administrative Agent. Notwithstanding the foregoing, with respect
to any amendment effecting an increase in the Commitments pursuant to
Section 2.06, such amendment need only be executed by the Borrower, the
Administrative Agent, the existing Lender increasing their respective
Commitments, if any, and any new Lenders being added pursuant to Section 2.06.

Anything in this Agreement to the contrary notwithstanding, no waiver or
modification of any provision of this Agreement that has the effect (either
immediately or at some later time) of enabling the Borrower to satisfy a
condition precedent to the making of a Loan shall be effective against the
Lenders for purposes of the Commitments unless the Required Lenders shall have
concurred with such waiver or modification.

For purposes of this Section, the “scheduled date of payment” of any amount
shall refer to the date of payment of such amount specified in this Agreement,
and shall not refer to a date or other event specified for the mandatory or
optional prepayment of such amount. In addition, whenever a waiver, amendment or
modification requires the consent of a Lender “adversely affected” thereby, such
waiver, amendment or modification shall, upon consent of such Lender, become
effective as to such Lender whether or not it becomes effective as to any other
Lender, so long as the Required Lenders consent to such waiver, amendment or
modification as provided above.

SECTION 9.03. Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated) and (ii) all
out-of-pocket expenses incurred by the Administrative Agent or any Lender,
including the fees, charges and disbursements of any counsel for the
Administrative Agent or any Lender, in connection with the enforcement or
protection of its rights in connection with this Agreement and the other Loan
Documents, including its rights under this Section, or in connection with the
Loans made hereunder, including in connection with any workout, restructuring or
negotiations in respect thereof.

(b) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent and each Lender, and each Related Party of any of the
foregoing Persons (each such Person being called an “Indemnitee”) against, and
to hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this

 

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Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby, (ii) any Loan
or the 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 the
Borrower or any of its Subsidiaries, or any Environmental Liability related in
any way to the Borrower 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 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 are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee.

(c) Reimbursement by Lenders. To the extent that the Borrower fails to pay any
amount required to be paid by it to the Administrative Agent under paragraph (a)
or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent such Lender’s Applicable Percentage (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent in its capacity as such.

(d) Waiver of Consequential Damages, Etc. To the extent permitted by applicable
law, the Borrower shall not assert, and hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan or the use of the
proceeds thereof.

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

SECTION 9.04. Successors and Assigns.

(a) Assignments Generally. 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 (i) the Borrower may not
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any attempted assignment or
transfer by the Borrower without such consent shall be null and void) and
(ii) no Lender may assign or otherwise transfer its rights or obligations
hereunder except in accordance with this Section 9.04. 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 paragraph (c) of this
Section) and, to the extent expressly contemplated hereby, Related Parties of
each of the Administrative Agent and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.

(b) Assignments by Lenders.

(i) Assignments Generally. Subject to the conditions set forth in clause (ii)
below, any Lender may 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
Commitment and the

 

45

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Loans at the time owing to it) with the prior written consent (such consent not
to be unreasonably withheld or delayed) of:

(A) the Borrower, provided that no consent of the Borrower shall be required for
an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an
Event of Default under clause (a), (b), (h) or (i) of Article VII shall have
occurred and is continuing, any other assignee; and

(B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment of any Commitment to an assignee that
is a Lender with a Commitment immediately prior to giving effect to such
assignment.

(ii) Certain Conditions to Assignments. Assignments shall be subject to the
following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default under
clause (a), (b), (h) or (i) of Article VII has occurred and is continuing;

(B) each partial assignment of any Commitment or Loans shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement in respect of such Commitment and Loans;

(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption in substantially the form of
Exhibit A hereto, together with a processing and recordation fee of $3,500; and

(D) the assignee, if it shall not already be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

(iii) Effectiveness of Assignments. Subject to acceptance and recording thereof
pursuant to paragraph (c) below, from and after the effective date specified in
each Assignment and Assumption the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Assumption,
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 Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption 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 rights
referred to in Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this Section 9.04 shall be treated for purposes of this Agreement as a sale
by such

 

46

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Lender of a participation in such rights and obligations in accordance with
paragraph (e) below.

(c) Maintenance of Register by the Administrative Agent. The Administrative
Agent, acting for this purpose as an agent of the Borrower, shall maintain at
one of its offices in San Francisco, California a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive, and the Borrower,
the Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

(d) Effectiveness of Assignments. Upon its receipt of a duly completed
Assignment and Assumption executed by an assigning Lender and an assignee, the
assignee’s completed Administrative Questionnaire (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in paragraph (b) above and any written consent to such assignment required by
said paragraph (b), the Administrative Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph (d).

(e) Participations. Any Lender may, without the consent of the Borrower or the
Administrative Agent sell participations to one or more banks or other financial
institutions (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement and the other Loan Documents (including all or
a portion of its Commitment and the Loans owing to it); provided that (i) such
Lender’s obligations under this Agreement and the other Loan Documents shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the Borrower,
the 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 and the other Loan Documents. 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 the
other Loan Documents and to approve any amendment, modification or waiver of any
provision of this Agreement or any other Loan Document; 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
described in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (f) below, the Borrower agrees that each Participant shall
be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent
as if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) above. To the extent permitted by law, each Participant also shall
be entitled to the benefits of Section 9.08 hereof as though it were a Lender,
provided such Participant agrees to be subject to Section 2.16(d) as though it
were a Lender hereunder.

(f) Limitations on Rights of Participants. A Participant shall not be entitled
to receive any greater payment under Section 2.13 or 2.15 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 the Borrower’s prior written consent. A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits

 

47

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of Section 2.15 unless the Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrower,
to comply with Section 2.15(e) as though it were a Lender.

(g) Certain Pledges. 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 any such pledge or assignment to a Federal
Reserve Bank, and this Section 9.04 shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such assignee for such Lender as a party hereto.

(h) No Assignments to the Borrower or Affiliates. Anything in this Section to
the contrary notwithstanding, no Lender may assign or participate any interest
in any Loan held by it hereunder to the Borrower or any of its Affiliates or
Subsidiaries without the prior consent of each Lender.

SECTION 9.05. Survival. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates 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 making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the 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 2.13, 2.14, 2.15 and 9.03 and Article VIII shall survive
and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or
termination of the Commitments or the termination of this Agreement or any
provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract between and among the parties relating to
the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
to this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time,

 

48

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to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other obligations at any time owing by such Lender or Affiliate to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Etc.

(a) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF TEXAS.

(b) SUBMISSION TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY AND OF
THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF TEXAS, DALLAS
DIVISION, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH TEXAS STATE COURT
OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL
AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST THE
BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c) WAIVER OF VENUE. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO
IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d) Service of Process. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.

SECTION 9.10. Waiver of Jury Trial. EACH PARTY HERETO HEREBY 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

 

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OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(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 BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 9.12. Treatment of Certain Information; Confidentiality.

(a) Treatment of Certain Information. The Borrower acknowledges that from time
to time financial advisory, investment banking and other services may be offered
or provided to the Borrower or one or more of its Subsidiaries (in connection
with this Agreement or otherwise) by any Lender or by one or more subsidiaries
or affiliates of such Lender and the Borrower hereby authorizes each Lender to
share any information delivered to such Lender by the Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such subsidiary or affiliate,
it being understood that any such subsidiary or affiliate receiving such
information shall be bound by the provisions of paragraph (b) of this Section as
if it were a Lender hereunder. Such authorization shall survive the repayment of
the Loans, the expiration or termination of the Commitments or the termination
of this Agreement or any provision hereof.

(b) Confidentiality. Each of the Administrative Agent and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (i) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (ii) to the extent requested by any regulatory
authority, (iii) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (iv) to any other party to this
Agreement, (v) in connection with the exercise of any remedies hereunder or
under any other Loan Document or any suit, action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (vi) subject to an agreement containing provisions substantially the
same as those of this Section, 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 counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrower and its
obligations, (vii) with the consent of the Borrower or (viii) to the extent such
Information (A) becomes publicly available other than as a result of a breach of
this Section or (B) becomes available to the Administrative Agent or any Lender
on a nonconfidential basis from a source other than the Borrower. For the
purposes of this Section, “Information” means all information received from the
Borrower relating to the Borrower or its business, other than any such
information that is available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by the Borrower; provided that, in the
case of information received from the Borrower after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has

 

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exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

SECTION 9.13. USA Patriot Act. Each Lender hereby notifies the Borrower that
pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107 56
(signed into law October 26, 2001)), such Lender may be required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Lender to identify the Borrower in accordance with said Act.

SECTION 9.14. 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 are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the 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 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 Effective Rate to the date of
repayment, shall have been received by such Lender.

SECTION 9.15. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[REMAINDER OF PAGE INTENTIONALLY BLANK;

SIGNATURE PAGES TO FOLLOW.]

 

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Signature Page to that certain Term Loan Agreement dated as of September 6,
2006, among Harte-Hanks, Inc., as Borrower, and Wells Fargo Bank, National
Association, as Administrative Agent, Sole Lead Arranger and Sole Bookrunner,
and certain Lenders named therein.

 

HARTE-HANKS, INC.

By:

 

/s/ Dean H. Blythe

 

Dean H. Blythe, Senior Vice President and

Chief Financial Officer

 

Signature Page to Term Loan Agreement

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

Signature Page to that certain Term Loan Agreement dated as of September 6,
2006, among Harte-Hanks, Inc., as Borrower, and Wells Fargo Bank, National
Association, as Administrative Agent, Sole Lead Arranger and Sole Bookrunner,
and certain Lenders named therein.

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Administrative Agent and a Lender

By:

 

/s/ Greg D. Campbell

 

Greg D. Campbell, Vice President

 

Signature Page to Term Loan Agreement

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

SCHEDULE I

Commitments

[See Section 1.01]

 

Name of Lender

   Commitment ($)

Wells Fargo Bank, National Association.

   $ 50,000,000.00       

Total

   $ 50,000,000.00

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

SCHEDULE II

Certain Agreements and Liens

[See Sections 3.13 and 6.01(b)]

Part A - Material Agreements

Borrower’s Letters of Credit in excess of $10,000,000:

 

Bank

   Amount    Beneficiary    Expiration    Autorenewal

Wells Fargo

   $ 10,100,000.00    Travelers Indemnity    9/30/06    Yes

Wells Fargo

   $ 10,714,741.00    Ace American Insurance    10/1/06    Yes

Borrower’s Five-Year Revolving Line of Credit in excess of $10,000,000:

 

Available

   Outstanding    Expiration

$125,000,000.00

   $ 93,000,000.00    8/12/10

Part B – Liens

None

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

SCHEDULE III

Litigation

[See Section 1.01—“Disclosed Matters”]

None.

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

SCHEDULE IV

Environmental Matters

[See Section 1.01 00 “Disclosed Matters”]

None.

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

SCHEDULE V

Subsidiaries

[See Section 3.14]

As of August 10, 2006

 

Name of Entity

   Jurisdiction of
Organization    % Owned

Avellino Technologies, Inc.

   Delaware    100%(8)

The Flyer Publishing Corporation

   Florida    100%

Harte-Hanks CRM Services Belgium NV

   Belgium    100%(2)

Harte-Hanks Data Services LLC

   Maryland    100%

Harte-Hanks Data Technologies, Inc.

   Delaware    100%

Harte-Hanks Direct, Inc.

   New York    100%(11)

Harte-Hanks Direct Marketing/Baltimore, Inc.

   Maryland    100%

Harte-Hanks Direct Marketing/Cincinnati, Inc.

   Ohio    100%

Harte-Hanks Direct Marketing/Dallas, L.P.

   Delaware    100%(6)

Harte-Hanks Direct Marketing/Fullerton, Inc.

   California    100%

Harte-Hanks Direct Marketing/Jacksonville, LLC

   Delaware    100%(9)

Harte-Hanks Direct Marketing/Kansas City, LLC

   Delaware    100%(1)

Harte-Hanks do Brazil Consultoria e Servicos Ltda.

   Brazil    100%(5)

Harte-Hanks Limited

   England    100%(3)

Harte-Hanks Market Intelligence, Inc.

   California    100%

Harte-Hanks Market Intelligence Espana LLC

   Colorado    100%

Harte-Hanks Market Intelligence Europe B.V.

   Netherlands    100%

Harte-Hanks Market Intelligence GmbH

   Germany    100%(4)

Harte-Hanks Market Intelligence Limited

   Ireland    100%(4)

Harte-Hanks Market Intelligence SAS

   France    100%(4)

Harte-Hanks Market Research, Inc.

   New Jersey    100%

Harte-Hanks Philippines, Inc.

   Philippines    100%

Harte-Hanks Postfuture, LP

   Delaware    100%(14)

Harte-Hanks Postfuture Management, LLC

   Delaware    100%(13)

Harte-Hanks Print, Inc.

   New Jersey    100%

Harte-Hanks Pty. Limited

   Australia    100%(3)

Harte-Hanks Response Management/Austin L.P.

   Delaware    100%(6)

Harte-Hanks Response Management/Boston, Inc.

   Massachusetts    100%

Harte-Hanks Shoppers, Inc.

   California    100%

Harte-Hanks Stock Plan, Inc.

   Delaware    100%

Harte-Hanks SRL

   Romania    100%(10)

Harte-Hanks Tampa Flyer, Inc.

   Delaware    100%

Harte-Hanks Teleservices, LLC

   Delaware    100%(7)

Harte-Hanks Trillium Software Germany GmbH

   Germany    100%(12)

Harte-Hanks Trillium UK Limited

   United Kingdom    100%(10)

Harte-Hanks UK Limited

   United Kingdom    100%

HTS, Inc.

   Connecticut    100%

NSO, Inc.

   Ohio    100%

Sales Support Services, Inc.

   New Jersey    100%

Southern Comprint Co.

   California    100%

 

(1) Owned by Sales Support Services, Inc.

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

(2) 99.84% Owned by Harte-Hanks, Inc.

     0.16% Owned by Harte-Hanks Direct, Inc.

 

(3) Owned by Harte-Hanks Data Technologies, Inc.

 

(4) Owned by Harte-Hanks Market Intelligence Europe B.V.

 

(5) 99.998% Owned by Harte-Hanks Data Technologies, Inc.

     .002% Owned by Harte-Hanks Stock Plan, Inc.

 

(6) 99% Owned by Harte-Hanks Stock Plan, Inc.

     1% Owned by Harte-Hanks Direct, Inc.

 

(7) Owned by Harte-Hanks Direct, Inc.

 

(8) Owned by Harte-Hanks Trillium UK Limited

 

(9) Owned by Harte-Hanks Direct Marketing/Cincinnati, Inc.

 

(10) Owned by Harte-Hanks UK Limited

 

(11) Owned by Harte-Hanks Print, Inc.

 

(12) Owned by Harte-Hanks Market Intelligence GmbH

 

(13) Owned by Harte-Hanks Stock Plan, Inc.

 

(14) 99% Owned by Harte-Hanks Stock Plan, Inc.

     1% Owned by Harte-Hanks Postfuture Management, LLC

 

2

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EXHIBIT A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Loan Agreement identified below (as amended, the
“Loan Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Loan Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Loan Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Loan Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

 

1.  

Assignor:

   _____________________________________ 2.  

Assignee:

   _____________________________________     

[and is an Affiliate/Approved Fund of [identify Lender]1]

3.   Borrower(s):    Harte-Hanks, Inc. 4.   Administrative Agent:    Wells Fargo
Bank, National Association, as the administrative agent under the Loan Agreement
5.  

Loan Agreement:

   The Term Loan Agreement dated as of September 6, 2006 among Harte-Hanks,
Inc., the Lenders parties thereto, and Wells Fargo Bank, National Association,
as Administrative Agent

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1 Select as applicable.

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6. Assigned Interest:

 

Facility Assigned

   Aggregate Amount of
Commitments/Loans for
all Lenders    Amount of
Commitment/Loans
Assigned    Percentage Assigned of
Commitment/Loans
(set forth, to at least 9
decimals, as a
percentage of the
Commitments/Loans of
all Lenders thereunder)

Commitment Assigned

   $    $        %

Loans

   $    $        %

Fees Assigned (if any):

   $    $        %

Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:       

Title:

 

ASSIGNEE

[NAME OF ASSIGNEE]

By:       

Title:

 

2

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Consented to and Accepted:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent

By       

Title:

 

Consented to:

HARTE-HANKS, INC.

By       

Title:

 

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ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the Loan
Agreement, (ii) the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any collateral thereunder,
(iii) the financial condition of the Borrower, any of its Subsidiaries or
Affiliates or any other Person obligated in respect of the Loan Agreement or
(iv) the performance or observance by the Borrower, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under the
Loan Agreement.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Loan Agreement, (ii) it satisfies the
requirements, if any, specified in the Loan Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Loan Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Loan Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, (v) if it is a Foreign Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by the Assignee pursuant to Section 2.15(e) of the Loan Agreement,
duly completed and executed by the Assignee, and (vi) if it is not already a
Lender under the Loan Agreement, an Administrative Questionnaire in the form
supplied by the Administrative Agent, duly completed by the Assignee; and
(b) agrees that (i) it will, independently and without reliance on the
Administrative Agent, the Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Agreement, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Agreement are required to be
performed by it as a Lender. The [Assignee/Assignor] shall pay the fee payable
to the Administrative Agent pursuant to Section 9.04(b) of the Loan Agreement.

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one

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instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption shall be governed by, and construed in accordance with, the law
of the State of Texas.

 

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EXHIBIT B

Form of Opinion of Counsel to the Borrower

September 6, 2006

To the Lenders and the Administrative

    Agent referred to below

c/o Wells Fargo Bank, National Association,

    as Administrative Agent

1445 Ross Avenue, Suite 2320

Dallas, Texas 75202

Ladies and Gentlemen:

We have acted as special counsel to Harte-Hanks, Inc., a Delaware corporation
(the “Borrower”), in connection with the Term Loan Agreement, dated as of
September 6, 2006 (the “Loan Agreement”) between the Borrower, Wells Fargo Bank,
National Association, as Administrative Agent, and the Lenders party thereto.
Capitalized terms not defined herein are used as defined in the Loan Agreement.
This opinion is being delivered pursuant to Section 4.01(b) of the Loan
Agreement.

For purposes of this opinion, we have reviewed the Loan Agreement. We have also
reviewed and relied upon the originals, or copies certified or otherwise
identified to our satisfaction, of corporate documents and records of the
Borrower and certificates of public officials and officers of the Borrower and
other documents, certificates, instruments and agreements as in our judgment are
necessary to enable us to deliver this opinion letter. As to questions of fact
material to the opinions, we have relied upon information received from officers
of the Borrower without independent verification.

In rendering our opinions, we have assumed:

 

  (a) the genuineness and authenticity of all signatures to all documents
submitted to us as originals (other than the Borrower’s signatures);

 

  (b) the conformity to authentic original documents of all documents submitted
to us as certified, conformed, or photostatic copies;

 

  (c) the correctness and accuracy of all facts set forth in all certificates
and documents delivered to us in connection with this opinion;

 

  (d) the Loan Agreement is enforceable against all parties thereto (except as
otherwise expressly stated with respect to the Borrower in Paragraph 4 of the
opinions expressed below); and

 

  (e) there are no agreements or understandings among the parties that would
define, supplement or qualify the terms of the Loan Agreement.

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Based upon and subject to the foregoing and subject also to the assumptions and
qualifications set forth below, and having considered such questions of law as
we have deemed necessary as a basis for the opinions expressed below, we are of
the opinion that:

 

  1. The Borrower is a validly existing corporation in good standing under the
laws of the State of Delaware. The Borrower has the requisite corporate power
and authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.

 

  2. The Transactions are within the corporate powers of the Borrower.

 

  3. The Transactions have been duly authorized by all necessary corporate
action on the part of the Borrower.

 

  4. The Loan Agreement has been duly executed and delivered by the Borrower and
constitutes the legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or other similar laws relating to or affecting the enforcement of
creditors’ rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), including, without limitation, (a) the possible
unavailability of specific performance, injunctive relief or any other equitable
remedy and (b) concepts of materiality, reasonableness, good faith and fair
dealing.

 

  5. The Transactions (a) do not require, on the part of the Borrower, any
consent or approval of, registration or filing with, or any other action by, any
Governmental Authority (except for any filings which are first required to be
made with the Securities and Exchange Commission after the date hereof),
(b) will not violate the charter or by-laws of the Borrower or, to our
knowledge, any applicable law or regulation or any order of any Governmental
Authority applicable to the Borrower, (c) to our knowledge, will not violate or
result in a default under any material indenture, agreement or other instrument
binding upon the Borrower or any of its Subsidiaries or assets, or give rise to
a right thereunder to require any payment to be made by any such Person and
(d) to our knowledge and except as provided in the Loan Documents, will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Material Subsidiaries.

 

  6. To our knowledge, there are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority now pending against or threatened
against or affecting the Borrower or any of its Subsidiaries (a) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect (other than Disclosed Matters) or
(b) that involve the Loan Agreement or the Transactions.

 

  7. The Borrower is not (a) an “investment company” as defined in, or subject
to regulation under, the Investment Company Act of 1940 or (b) a “holding
company” as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935.

 

2

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The foregoing opinions are subject to the following qualifications and
exceptions:

 

  (a) The foregoing opinions are limited to the Federal laws of the United
States of America, the General Corporation Law of the State of Delaware and
Texas law.

 

  (b) The qualification of any opinion or statement herein by the use of the
words “to our knowledge”, “known to us” or words of similar import means that
during the course of our representation as described herein, no information has
come to the attention of the attorneys in this firm directly involved in the
transactions described herein which gave such attorneys actual knowledge
contrary to the position stated.

 

  (c) In rendering the opinion set forth in Paragraph 5 hereof, we have reviewed
only (i) those statutes and regulations that a lawyer in the State of Texas
exercising customary professional diligence would reasonably recognize as being
directly applicable to the Borrower and the transactions contemplated by the
Loan Agreement and (ii) those indentures, agreements and instruments set forth
on the Exhibit Index to the Borrower’s Annual Report on Form 10-K for the year
ended December 31, 2005.

 

  (d) We express no opinion with respect to any provision contained in the Loan
Agreement prohibiting oral amendments to or waivers of provisions of such
documents or limiting the effect of a course of dealing between the parties
thereto.

 

  (e) This opinion letter is limited to the matters stated herein as of the date
hereof and is limited to present statutes, rules, laws and regulations and to
the facts as they currently exist. We assume no obligation to update this
opinion letter or to advise you of any changes in our opinions in the event of
changes in applicable law or facts becoming effective or occurring after the
date hereof or if additional newly discovered information is brought to our
attention after the date hereof.

 

  (f) We express no opinion as to usury laws.

 

  (g) The opinions set forth in Paragraph 4 of this opinion letter to the extent
covering Texas law, are also subject to the effect of generally applicable rules
of Texas law that:

 

  (i) provide forum selection clauses in contracts are not necessarily binding
on the court(s) in the forum selected;

 

  (ii) limit the enforceability of provisions releasing, exculpating or
exempting a party from, or requiring indemnification of a party for, liability
for its own action or inaction, to the extent the action or inaction involves
gross negligence, recklessness, willful misconduct or unlawful conduct;

 

  (iii) may permit a party who has materially failed to render or offer
performance required by the contract to cure that failure unless (i) permitting
a cure would unreasonably hinder the aggrieved party from making substitute
arrangements for performance, or (ii) it was important in the circumstances to
the aggrieved party that performance occur by the date stated in the contract;

 

  (iv) impose limitations on attorneys’ or trustees’ fees;

 

3

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  (v) limit or affect the enforceability of provisions for late charges,
prepayment charges, or yield maintenance charges, acceleration of future amounts
due (other than principal) without appropriate discount to present value,
liquidated damages, and “penalties”;

 

  (vi) limit or affect the enforceability of provisions that provide for the
acceleration of indebtedness upon any transfer or change in the control,
ownership, or management of any party; and

 

  (vii) limit or affect the enforcement of provisions of a contract that purport
to require waiver of jury trial.

This opinion letter is delivered to you solely for your benefit in connection
with the Loan Agreement. This opinion letter may not be relied on by you for any
other purpose, nor may it be furnished to, used by, circulated to, quoted to or
referred to by, any other person for any purpose without our prior express
written consent.

Very truly yours,

 

4