exv10w4



 



Exhibit 10.4


FIRST AMENDMENT AND WAIVER

TO CREDIT AND SECURITY AGREEMENT






          FIRST AMENDMENT AND WAIVER TO CREDIT AND SECURITY AGREEMENT, dated as of
January 23, 2003 (the “Amendment”), among FRANK’S NURSERY & CRAFTS, INC., a
Delaware corporation (“Borrower”), and KIMCO CAPITAL CORP., as lender
(“Lender”):





W I T N E S S E T H:



          WHEREAS, Borrower and Lender are parties to that certain Credit and
Security Agreement, dated as of May 20, 2002, (as the same may be further
amended, modified or supplemented from time to time, the “Credit Agreement”);
and





          WHEREAS, Borrower has advised Lender that it has failed to comply with
certain covenants and requirements set forth in the Credit Agreement and, as a
result, certain Defaults and Events of Default identified on Schedule A hereto
have occurred and are continuing (collectively, the “Existing Defaults”); and





          WHEREAS, Borrower has requested that Lender waive the Existing Defaults
and, subject to the terms and conditions of this Amendment, Lender has agreed
to waive the Existing Defaults; and





          WHEREAS, Borrower has requested and Lender has agreed, subject to the
terms and conditions of this Amendment, to increase the Revolving Credit
Commitment by $10,000,000; and





          WHEREAS, Borrower and Lender have agreed, subject to and upon the terms
and conditions set forth herein, to amend the Credit Agreement as set forth
herein; and





          WHEREAS, in consideration of the foregoing, Borrower has agreed to grant
to Lender a mortgage in the Additional Property (as defined herein) and a
security interest in the Inventory Collateral (as defined in Exhibit A hereto);
and





          NOW, THEREFORE, the parties hereto hereby agree as follows:





          1. Definitions. As used herein, all terms that are defined in the Credit
Agreement shall have the same meanings herein.





          2. Waiver. Subject to the terms and conditions hereof, Lender hereby
agrees to waive (the “Waiver”) the Existing Defaults with the exception of the
Event of Default pursuant to Section 6(n) of the Credit Agreement which has
occurred and is continuing as a result of Borrower’s default under the Working
Capital Facility (the





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“Congress Default”). Lender hereby further agrees to forbear during the
Forbearance Period (as defined below) from the exercise of remedies available
under the Credit Agreement and the other Fundamental Documents as a result of
the Congress Default. As used herein, the term “Forbearance Period” shall mean
the period beginning on the First Amendment Effective Date and ending on the
earliest to occur of: (i) February 7, 2003, and (ii) the date on which the
Borrower shall have satisfied the condition subsequent set forth in Section
7(a) hereof. Upon the satisfaction by Borrower of the condition subsequent set
forth in Section 7(a) hereof within the Forbearance Period, the Congress
Default shall be deemed waived as of the First Amendment Effective Date in
accordance with the first sentence of this Section 2.





          3. Amendments. The Credit Agreement is hereby amended by inserting each
of the provisions which appear with computerized underscoring and by deleting
each of the provisions which appear with computerized strike-through in the
document annexed hereto as Exhibit A.





          4. Ratification. Except to the extent hereby amended, the Credit
Agreement and each of the Fundamental Documents remain in full force and effect
and are hereby ratified and affirmed.





          5. Representations and Warranties. Borrower represents and warrants to,
and agrees with, Lender that:





     (i)  Borrower has the corporate power and authority to (x) execute, deliver
and perform, as applicable, its obligations under this Amendment and any other
documents contemplated hereby or thereby to which it is or will be a party and
(y) upon execution and delivery of the Intercreditor Agreement, grant to Lender
a security interest in the Inventory Collateral;





     (ii)  the execution, delivery and performance of this Amendment, the grant
to Lender of the security interest in the Inventory Collateral as contemplated
by this Amendment and the other Fundamental Documents (as amended) to which it
is or will be a party (a) have been duly authorized by all necessary corporate
action on the part of Borrower, (b) upon execution and delivery of the
Intercreditor Agreement, will not constitute a violation of any provision of
any Applicable Law or any order of any Governmental Authority applicable to
Borrower or any of its properties or assets, (c) will not violate any provision
of the Certificate of Incorporation, By-Laws, or any other organizational
document of, or other similar instrument to which Borrower is a party or by
which Borrower or any of its properties or assets are bound or to which
Borrower is subject, (d) upon execution and delivery of the Intercreditor
Agreement, will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or create any right
to terminate, any indenture, agreement, bond, note, mortgage, deed of trust, or
other instrument to which Borrower is a party or by which Borrower or any of
its properties or assets are bound or to which Borrower is subject and (e) will
not result in the creation or imposition of (or the obligation to create or
impose) any Lien, charge or encumbrance of any nature whatsoever upon any of
the properties or





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assets of Borrower other than pursuant to the Credit Agreement (as amended) or
the other Fundamental Documents (as amended);





     (iii)  upon its execution and delivery by Borrower, this Amendment and each
Fundamental Document amended pursuant hereto shall constitute or continue to
constitute the legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights general and to general principles of equity, whether such
enforceability is considered in a proceeding at law or in equity;





     (iv)  Borrower has good and marketable title to the Inventory Collateral
and such property is free and clear of Liens, except Permitted Liens (as
defined in the Credit Agreement, as amended hereby);





     (v)  after giving effect to the Waiver herein, there are no outstanding
Defaults or Events of Default under the Credit Agreement;





     (vi)  Borrower is not in violation of any Applicable Law (including,
without limitation, any Environmental Law) or any restrictions of record or
agreements affecting the Collateral or the Inventory Collateral, except for
violations which in the aggregate could not reasonably be expected to have a
Material Adverse Effect; and





     (vii)  Upon the execution of the Additional Warrant Agreement, (i) the
holder of the warrants under the Additional Warrant Agreement will acquire good
and marketable title to such warrants, free and clear of all Liens. Upon
exercise of the warrants under the Additional Warrant Agreement, in whole or,
from time to time, in part, and upon payment of the exercise price therefor, in
accordance with the terms of the warrants under the Additional Warrant
Agreement, (i) the holder of such warrants will acquire good and marketable
title to the shares of Borrower’s common stock, par value $.001 per share (the
“Common Stock”) issued pursuant thereto, free and clear of all Liens, and (ii)
such shares of Common Stock (A) will be validly issued, fully paid and
nonassessable, (B) will not subject the holder thereof to any personal
liability by reason of being such holder and (C) will not be issued in
violation of any preemptive right, right of first refusal or similar right.
The Board of Directors has approved the issuance of the warrants under the
Additional Warrant Agreement and the shares of Common Stock to be issued
thereunder pursuant to the terms hereof and thereof. The shares of Common
Stock issuable pursuant to the Additional Warrant Agreement are “Registrable
Securities” as that term is defined in the Investors’ Rights Agreement, dated
as of May 20, 2002, by and between the Borrower and the signatories thereto.
There are no anti-dilution or price adjustment provisions contained in any
security issued by the Borrower (or in any agreement providing rights to
security holders) that will be triggered by the issuance of the warrants and,
upon exercise, the shares of Common Stock issuable pursuant to the Additional
Warrant Agreement.





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          6. Conditions to Effectiveness. This Amendment shall become effective
(the “First Amendment Effective Date”) upon Lender being satisfied that each of
the following conditions shall have been satisfied:






		
	 	     (i) Lender shall have received executed counterparts of this
Amendment which, when taken together, bear the signatures of Lender and
Borrower;
	 
	 	     (ii) Lender, Congress and Borrower shall have entered into an
Intercreditor Agreement in form and substance substantially similar to
Exhibit B;
	 
	 	     (iii) Borrower shall have (a) duly executed and delivered to Lender
a First Amendment to Mortgage, Open End Mortgage, Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Financing
Statement, substantially in the form of Exhibit C hereto, for each Fee
Property and each Leased Property and (b) provided evidence reasonably
satisfactory to Lender that Borrower has paid (or reimbursed Lender), or
deposited with Lender an amount sufficient for payment of, all applicable
mortgage recording taxes, transfer taxes, filing fees and any other fees,
costs or expenses in connection with the foregoing;
	 
	 	     (iv) Borrower shall have duly executed and delivered to Lender the
Additional Warrant Agreement substantially in the form of Exhibit D
hereto;
	 
	 	     (v) Lender shall have received such UCC amendments and UCC financing
statements as requested by Lender each of which, when filed, will modify
the existing UCC financing statements previously filed pursuant to the
Credit Agreement and/or create in favor of Lender a perfected security
interest in the Inventory Collateral;
	 
	 	     (vi) Lender shall have received a favorable written opinion of
Michael McBride, Esq., general counsel to Borrower, dated the date of
this Amendment covering the items listed in Exhibit E hereto and in form
and substance reasonably satisfactory to Lender and its counsel;
	 
	 	     (vii) Borrower shall have reimbursed Lender for the fees and
expenses incurred by counsel to Lender in connection with the
preparation, execution and delivery of this Amendment;
	 
	 	     (viii) Borrower shall have duly executed and delivered to Lender a
Closing Certificate substantially in the form of Exhibit F hereto,
together with any certificates, exhibits and schedules thereto; and
	 
	 	     (viii) Borrower shall have delivered to Lender such other documents
and information as Lender may reasonably request.



          7. Conditions Subsequent. (a) By no later than February 7, 2003, Borrower
shall deliver to Lender evidence in form and substance satisfactory to Lender





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of the waiver by Congress of any defaults or events of default that have
occurred as of the date of such waiver of delivery under the Working Capital
Facility.





     (b)  By no later than the date which is 90 days from the First Amendment
Effective Date, Borrower shall (a) duly execute and deliver to Lender a
Mortgage on certain real property acceptable to Lender (the “Additional
Property”) (it being understood that a first priority Mortgage on Borrower’s
fee property located in Huntington, New York or a second priority Mortgage on
each of Borrower’s fee properties referred to as stores numbered 99, 101, 106,
140, 163, 623 and 628 (subject only to first mortgages on such properties in
the aggregate of not more than $7,900,000) shall be acceptable to Lender),
which, when filed, will create in favor of Lender a perfected security interest
in and mortgage on the Additional Property free and clear of Liens other than
Permitted Liens, all in form and substance satisfactory to Lender in its sole
and absolute discretion; (b) cause to be delivered to Lender, an ALTA form loan
policy or policies from the Title Company (I) insuring the Mortgage on the
Additional Property to be a valid lien with respect to such Fee Property, (II)
without exceptions and subject to no Liens (other than Permitted Liens), (III)
in policy amounts acceptable to Lender, (IV) with such endorsements and
affirmative coverage as Lender shall require and (V) otherwise in form and
substance acceptable to Lender in its sole and absolute discretion; (c) provide
evidence reasonably satisfactory to Lender that Borrower has paid (or
reimbursed Lender), or deposited with Lender an amount sufficient for the
payment of, all applicable mortgage recording taxes, transfer taxes, title
charges, filing fees and any other fees, costs or expenses in connection with
the foregoing; and Lender shall be satisfied that Borrower has sufficient
right, title and interest in and to the Additional Property; (d) deliver to
Lender updated Schedules to the Credit Agreement reflecting the addition of the
Additional Property to the Collateral and such other documents or information
as Lender may reasonably request.





          8. Fees and Expenses. Borrower agrees that its obligations set forth in
Section 7.4 of the Credit Agreement shall extend to the preparation, execution
and delivery of this Amendment, including the reasonable and necessary fees and
disbursements of counsel to Lender.





          9. Limitations. This Amendment shall be limited precisely as written and
shall not be deemed (a) to be a consent granted pursuant to, or a waiver (other
than the Waiver) or modification of, any other term or condition of the Credit
Agreement or any of the instruments or agreements referred to therein or (b) to
prejudice any right or rights which Lender may now have or have in the future
under or in connection with the Credit Agreement or any of the instruments or
agreements referred to therein. Whenever the Credit Agreement is referred to
in the Credit Agreement or any of the instruments, agreements or other
documents or papers executed or delivered in connection therewith, such
reference shall be deemed to mean the Credit Agreement as modified by this
Amendment.





          10. Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which





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when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same instrument.





          11. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.





[Signature Page Follows]





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






	 	BORROWER:








	 	FRANK’S NURSERY & CRAFTS, INC.








	 	By: /s/ Michael D. McBride     

Name: Michael D. McBride

Title: Vice President Legal and Secretary








	 	LENDER:








	 	KIMCO CAPITAL CORP.








	 	By: /s/ David Samber     

Name: David Samber

Title: Vice President









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INDEX OF EXHIBITS AND SCHEDULE TO

FIRST AMENDMENT






Exhibit A – Blackline of Credit Agreement

Exhibit B – Form of Intercreditor Agreement

Exhibit C – Form of First Amendment to Mortgage

Exhibit D – Form of Additional Warrant Agreement

Exhibit E – Items to be Covered by Opinion of Counsel

Exhibit F – Form of Closing Certificate

Schedule A – Existing Defaults

















 



Exhibit A


[EXECUTION VERSION]









CREDIT AND SECURITY AGREEMENT






Dated as of May 20, 2002






between






FRANK’S NURSERY & CRAFTS, INC.

as Borrower






and






KIMCO CAPITAL CORP.

as Lender














CONFORMED TO REFLECT MODIFICATIONS SET FORTH IN THE FIRST AMENDMENT AND WAIVER
TO CREDIT AND SECURITY AGREEMENT DATED AS OF JANUARY 23, 2003





 







 


     CREDIT AND SECURITY AGREEMENT, dated as of May 20, 2002 (as this agreement
may be further amended, amended and restated, supplemented or otherwise
modified, renewed or replaced from time to time, the “Credit Agreement”),
between FRANK’S NURSERY & CRAFTS, INC., a Delaware corporation (“Borrower”)
and KIMCO CAPITAL CORP., as Lender (in such capacity, “Lender”).





INTRODUCTORY STATEMENT






     Subject to and upon the terms and conditions set forth herein, Lender is
willing to make available to Borrower: (a) Revolving Credit Loans (as defined
herein) in the amount of $[10,000,000,]20,000,000, and (b) a Term Loan (as
defined herein) in the amount of $20,000,000.





     To provide assurance for the repayment of the Loans (as defined herein)
hereunder and the other Obligations (as defined herein) of Borrower hereunder,
Borrower will, among other things, provide or cause to be provided to Lender,
Mortgages and other Security Documents (each as defined herein) with respect to
the Collateral [(]and the Inventory Collateral (each as defined herein).





     Accordingly, the parties hereto hereby agree as follows:





1. THE LOANS






     SECTION 1.1 Term Loan. The Lender agrees, upon the terms and subject to
the conditions hereinafter set forth to make a term loan (the “Term Loan”) to
Borrower on the Closing Date in a single draw in a principal amount up to the
Term Loan Commitment. Once repaid, the Term Loan may not be re-borrowed.





     SECTION 1.2 Revolving Credit Loans. (a) The Lender agrees, upon the
terms and subject to the conditions hereinafter set forth, to make loans equal
to the Revolving Credit Commitment (each a “Revolving Credit Loan” and
collectively, the “Revolving Credit Loans”) to Borrower on any Business Day and
from time to time from the Closing Date to but excluding the Revolving Credit
Commitment Termination Date; provided, that such Revolving Credit Loans when
added to the aggregate principal amount of all Revolving Credit Loans then
outstanding, do not exceed the Revolving Credit Commitment (after giving effect
to all Revolving Credit Loans repaid concurrently with the making of any
Revolving Credit Loans); provided, further that Borrower shall not request more
than four (4) Borrowings during any one Accounting Period.





     (b)  Subject to the terms and conditions of this Credit Agreement, at any
time prior to the Revolving Credit Commitment Termination Date, Borrower may
borrow, repay and re-borrow amounts constituting the Revolving Credit Loans.





     SECTION 1.3 Disbursement of Funds and Notice of Borrowing. (a) The
Borrower shall give Lender prior written or facsimile notice of each Borrowing
hereunder; such notice shall be irrevocable and to be effective, must be
received by Lender not later than 12:00 noon (Eastern time), no less than three (3) Business Days
prior to the date on which such Loan is





 







 


to be made. Each such written notice
shall be given in substantially the form of the Borrowing Certificate
appropriately completed to specify (A) the amount of the proposed Borrowing and
(B) the date thereof (which shall be a Business Day).





     (b)  The aggregate amount of any Borrowing of a Revolving Credit Loan shall
be in a minimum aggregate principal amount of $100,000 or such greater amount
which is an integral multiple thereof (or such lesser amount as shall equal the
available but unused portion of the Revolving Credit Commitment then in
effect).





     (c)  The Lender shall disburse the proceeds of Loans by depositing them on
the date of the Borrowing in an account of Borrower as Borrower may specify to
Lender in writing.





     SECTION 1.4 Repayment; Extension of Initial Maturity Date; Evidence of
Debt; Administration. (a) The Loans shall be subject to voluntary prepayment
as provided in Section 1.8 hereto, to mandatory prepayment as provided in
Section 1.9 hereof, and to acceleration as provided in Article 6 hereof.





     (b)  The outstanding principal balance of the Revolving Credit Loans shall
be payable in full on the Revolving Credit Commitment Termination Date, and the
outstanding principal balance of the Term Loans shall be payable in full on the
Term Loan Maturity Date.





     (c)  The Initial Maturity Date shall be extended for a period of up to two
years (any such period, an “Extension Period”) with respect to all or a portion
of the principal amount of Loans outstanding, at Borrower’s option, provided,
however, that (i) at the time of the commencement of any such Extension Period,
no Default or Event of Default shall have occurred and be continuing, (ii) at
least thirty (30) days prior to the Initial Maturity Date, Borrower shall
provide to Lender written notice of such extension, the length of the Extension
Period and the Loans to which such extension shall apply and (iii) concurrently
with the giving of notice as set forth in clause (ii) of this subsection,
Borrower shall pay to Lender a fee (the “Extension Fee”) in an amount equal to
one percent (1%) of the principal amount of Loans with respect to which the
Initial Maturity Date is being extended, pro-rated to the extent that the
Extension Period is less than two years.





     (d)  The Lender shall maintain an account or accounts evidencing the
indebtedness of Borrower to Lender resulting from each Loan made by Lender,
including the amounts of principal and interest payable and paid to Lender from
time to time hereunder.





     (e)  The entries made in the account(s) maintained pursuant to
sub-paragraph (d) of this Section shall be prima facie evidence of the
existence and amounts of the Obligations recorded therein; provided, however,
that the failure of Lender to maintain such account(s) or any error therein
shall not in any manner affect the obligation of Borrower to repay the Loans
and other Obligations in accordance with the terms of this Credit Agreement.





     (f)  The Lender may request that Loans made by it be evidenced by a
promissory note. In such event, Borrower shall promptly prepare, execute and
deliver to Lender a promissory note payable to the order of Lender (or, if
requested by Lender, to Lender and its registered assigns), in a form furnished
by Lender and reasonably acceptable to Borrower. Thereafter, the Loans evidenced by such promissory note and interest
thereon shall at all times





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(including after assignment pursuant to Section 7.3
hereof) be represented by one or more promissory notes in such form payable to
the order of the payee named therein.





     SECTION 1.5 Interest. (a) Interest shall be payable at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to ten and one quarter percent (10.25%); provided that in the event
that Borrower shall elect to extend the Initial Maturity Date in accordance
with Section 1.4(c), interest shall be payable during the Extension Period at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to ten and three quarters percent (10.75%). Interest
shall be payable in arrears on the last Business Day of each March, June,
September and December, on the Term Loan Maturity Date and on the Revolving
Credit Commitment Termination Date.





     (b)  Interest in respect of any Loan hereunder shall accrue from and
including the date of such Loan to but excluding the date on which such Loan is
paid.





     (c)  Anything in this Credit Agreement or in any note evidencing any Loan
hereunder to the contrary notwithstanding, the interest rate on the Loans shall
in no event be in excess of the maximum rate permitted by Applicable Law.





     SECTION 1.6 Loan Fee. The Borrower agrees to pay to Lender a loan fee in
the amount of $300,000, payable as follows: (a) $75,000 on the Closing Date;
(b) $75,000 on the date that is 90 days after the Closing Date; (c) $75,000 on
the date that is 180 days after the Closing Date; and (d) $75,000 on the date
that is 270 days after the Closing Date; provided that upon the occurrence of
an Event of Default or the Revolving Credit Commitment Termination Date, the
entire remaining balance of the loan fee shall become immediately due and
payable.





     SECTION 1.7 Termination and/or Reduction of the Revolving Credit
Commitment[ and the Term Loan Commitment]. (a) Upon at least three (3)
Business Days’ prior written notice to Lender, Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Revolving Credit Commitment. In the case of a partial reduction, each such
reduction shall be in a minimum aggregate principal amount of $1,000,000 or an
integral multiple thereof; provided, however, that the Revolving Credit
Commitment may not be reduced to an amount less than the aggregate principal
amount of all Revolving Credit Loans then outstanding.





     (b)  The Revolving Credit Commitment shall automatically and permanently
reduce on the date of any mandatory prepayment or repayment of Revolving Credit
Loans, pursuant to Sections 1.9(b) or (c)[,] in an amount equal to such
mandatory prepayment or repayment of Revolving Credit Loans.





     (c) In the event that either or both of the conditions subsequent set
forth in Section 7 of the First Amendment are neither satisfied by the Borrower
nor waived by Lender by the specified date, then as of such date the Revolving
Credit Commitment shall be automatically and permanently reduced by an amount
equal to $10,000,000.





     SECTION 1.8 Voluntary Prepayments. The Borrower shall have the right at
its option at any time and from time to time to prepay any Loan, in whole or in
part, upon two (2)





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Business Days’ prior written notice to Lender received not
later than 11:30 a.m. (Eastern time) on such day, in the principal amount of
$100,000 or such greater amount which is an integral multiple of $100,000 if
prepaid in part. Each notice of prepayment shall specify the prepayment date,
each Loan to be prepaid and the principal amount thereof, shall be irrevocable
and shall commit Borrower to prepay each such Loan in the amount and on the
date stated therein.





     SECTION 1.9 Mandatory Prepayments; Warrant Agreement. (a) If at any time
the sum of the aggregate principal amount of all Revolving Credit Loans
outstanding, shall exceed the Revolving Credit Commitment, Borrower will
immediately prepay such Revolving Credit Loans to the extent necessary to
eliminate such excess.





     (b)  Within two (2) Business Days of the receipt of any Net Cash Proceeds
by Borrower, Borrower shall prepay the Loans in an amount equal to 100% of the
Net Cash Proceeds received, provided, however, that prior to such prepayment
such Net Cash Proceeds (i) shall be deemed at all times to be held by Borrower
in trust for the benefit of Lender, (ii) shall be deposited and held in the
Kimco Collateral Account and (iii) shall at no time be deposited or held in
either the Concentration Account (as defined in the Working Capital Facility)
or any deposit account whose balances are transferred to such Concentration
Account under the Working Capital Facility.





     (c)  Subject to the terms of any lease on any Leased Property as in effect
on the Closing Date, within two (2) Business Days following the receipt by
Borrower (or, if applicable, by Lender as loss payee) of any payment of
proceeds of (x) any insurance (other than business interruption insurance)
required to be maintained pursuant to this Credit Agreement or any other
Fundamental Document on account of each separate loss, damage or injury in
excess of $500,000 to any property constituting Collateral or Inventory
Collateral, or (y) the condemnation (whether in whole or in any part) of any
property constituting Collateral, Borrower shall prepay or, to the extent
Lender is loss payee under any insurance policy, irrevocably direct Lender to
apply as a prepayment of the Loans, an amount equal to 100% of such insurance
or condemnation proceeds (or such lesser percentage which represents that
portion of such proceeds not expended or committed pursuant to the first
proviso of this Section), provided, however, that solely with respect to
insurance proceeds and so long as no Default or Event of Default shall have
occurred and then be continuing, such insurance proceeds (or any portion
thereof) may be expended or irrevocably committed by Borrower to repair or
replace such property (or, with respect to fixtures, to purchase new fixtures
used or useful in Borrower’s business; provided, further, that Borrower shall
execute all documents and take all other actions necessary to grant Lender a
first priority security interest in any such fixtures) within 270 days of such
loss, damage or injury and Borrower shall furnish to Lender evidence reasonably
satisfactory to Lender of such expenditure or commitment and shall have
certified to Lender that such proceeds (or such proceeds together with other
funds available to Borrower) are sufficient to repair or replace such property.
Prior to the making of any prepayment required pursuant to this Section
1.9(c), any such proceeds shall be (i) deposited and held in the Kimco
Collateral Account and, if permitted hereunder, withdrawn by Borrower upon
prior written notice to Lender as such repair costs are incurred and (ii) shall
at no time be deposited or held in either the Concentration Account (as defined in the Working Capital Facility) or any
deposit account whose balances are transferred to such Concentration Account
under the Working Capital Facility; provided, further, that if an Event of
Default shall have occurred and be continuing, all





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proceeds of insurance
required to be maintained pursuant to this Credit Agreement or any other
Fundamental Document which would otherwise be payable to Borrower shall be paid
to Lender and applied pursuant to Section 1.9(d).





     (d)  So long as no Default or Event of Default has occurred and is then
continuing, any prepayments required under Section 1.9(b) or (c) shall be
applied: (i) first to any outstanding unpaid Fees, costs and expenses of
Lender, (ii) second to any outstanding interest due hereunder, (iii) third to
the outstanding principal balance of the Term Loan and (iv) fourth to the
outstanding principal balance of the Revolving Credit Loans.





     (e)  In the event that Lender elects to exercise its purchase rights under
the Warrant Agreement by either application of unpaid principal of the Loans or
by payment to Borrower, in each case in accordance with section 1B(i)(d) of the
Warrant Agreement, such application or payment, as the case may be, may, at the
option of Lender, be deemed to be a prepayment of the Loans hereunder, and
Lender’s interest in the outstanding principal amount of Loans shall be reduced
by the amount so applied or paid, with such reduction applying first to the
outstanding principal amount of the Term Loans and next, to the extent that the
amount applied or paid exceeds the outstanding principal amount of the Term
Loans, such excess shall be applied to the reduction of the outstanding
principal amount of the Revolving Credit Loans.





     (f) In the event that either or both of the conditions subsequent set
forth in Section 7 of the First Amendment are neither satisfied by the Borrower
nor waived by Lender, then, Borrower will immediately prepay Revolving Credit
Loans in an amount equal to the amount by which the then outstanding principal
amount of Revolving Credit Loans exceeds $10,000,000.





     (g)  All prepayments under this Section shall be accompanied by accrued but
unpaid interest on the principal amount being prepaid to (but not including)
the date of prepayment.





     SECTION 1.10 Default Interest. In the event that, and for so long as, any
Event of Default shall have occurred and be continuing, Borrower shall on
demand from time to time pay interest, to the extent permitted by Applicable
Law, on all Loans and overdue amounts outstanding up to (but not including) the
date of actual payment of such Loan or overdue amount (after as well as before
judgment) for all Loans and for all other overdue amounts hereunder, at 2% in
excess of the rate then in effect for Loans.





     SECTION 1.11 INTENTIONALLY OMITTED.





     SECTION 1.12 Interest Adjustments. If the provisions of this Credit
Agreement or any note evidencing any of the Loans hereunder would at any time
require payment by Borrower to Lender of any amount of interest in excess of
the maximum amount then permitted by Applicable Law, the applicable interest
payments to Lender in connection with such Loan shall be reduced to the extent
and in such a manner as is necessary in order that Lender shall not receive interest in excess of such maximum amount. If,
as a result of the foregoing, Lender shall receive interest payments hereunder
with respect to a Loan or under a note evidencing such Loan in an amount less
than the amount otherwise provided hereunder or thereunder, such deficit





5







 


(hereinafter called the “Interest Deficit”) will, to the fullest extent
permitted by Applicable Law, cumulate and will be carried forward (without
interest) until the Facility Termination Date (except to the extent paid
pursuant to the immediately succeeding sentence). Interest otherwise payable
to Lender hereunder with respect to such Loan and under any note evidencing
such Loan for any subsequent period shall be increased by the maximum amount of
the Interest Deficit that may be so added without causing Lender to receive
interest in excess of the maximum amount then permitted by Applicable Law.





     The amount of any Interest Deficit relating to any Loan and any note
evidencing such Loan shall be treated as a prepayment premium and shall, to the
fullest extent permitted by Applicable Law, be paid in full at the time of any
optional prepayment by Borrower to Lender of all the Loans within the
applicable Tranche at that time outstanding pursuant to Section 1.8 hereof.
The amount of any Interest Deficit relating to a Loan and any note at the time
of any complete payment of the Loans within the applicable Tranche at that time
outstanding (other than an optional prepayment thereof pursuant to Section 1.8
hereof) shall be canceled and not paid.





     SECTION 1.13 Manner of Payments. All payments by Borrower hereunder and
under any notes evidencing the Loans hereunder shall be made without offset,
counterclaim, recoupment, defense, setoff or other deduction in Dollars, in
Federal or other immediately available funds, at JPMorgan Chase Bank, 380
Madison Avenue, New York, New York 10017-2591, ABA No. 021-000-021, For credit
to: Kimco Capital Corp. c/o Kimco Realty Corp. Agency Account, Account No.
006-007996, Reference: Frank’s Nursery Mortgage Loan, Attention Michael V.
Pappagallo (516-869-7185), no later than 1:00 p.m.(Eastern time), on the date
on which such payment shall be due. Any payment received after such time shall
be deemed received on the following Business Day.





     SECTION 1.14 Use of Proceeds. The Loans shall be used to finance
Borrower’s obligations under the Plan of Reorganization, to pay Fees and other
expenses incurred in connection with this Credit Agreement and for general
corporate purposes in accordance with the provisions of this Credit Agreement.





2. REPRESENTATIONS AND WARRANTIES






     In order to induce Lender to enter into this Credit Agreement and to make
Loans, Borrower makes the following representations and warranties to, and
agreements with, Lender, all of which shall survive the execution and delivery
of this Credit Agreement, the issuance of any notes evidencing any of the Loans
hereunder and the making of the Loans:





     SECTION 2.1 Existence and Power. (a) The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business and is in good standing in all jurisdictions where
either (i) the nature of its properties or business so requires or (ii) the
failure to be in good standing could reasonably be expected to have a Material Adverse Effect. Schedule 2.1(a)
hereto sets forth a list of all jurisdictions in which Borrower is so
qualified.





6







 


     (b)  The Borrower has the corporate power and authority (i) to own its
properties and carry on its business as now being, or as now intended to be,
conducted, (ii) to execute, deliver and perform, as applicable, its obligations
under the Fundamental Documents and any other documents contemplated hereby or
thereby to which it is or will be a party, and (iii) to grant to Lender a
security interest in the Collateral and the Inventory Collateral, in all cases
as contemplated by this Credit Agreement and the other Fundamental Documents to
which it is or will be a party; and to execute, deliver and perform its
obligations under this Credit Agreement and any notes evidencing any of the
Loans hereunder and to borrow hereunder.





     SECTION 2.2 Authority and No Violation. The execution, delivery and
performance of this Credit Agreement and the other Fundamental Documents to
which it is a party, the grant to Lender of the security interest in the
Collateral and the Inventory Collateral, in all cases as contemplated by this
Credit Agreement and the other Fundamental Documents to which it is or will be
a party, and, the Borrowings hereunder and the execution, delivery and
performance of any notes evidencing any of the Loans hereunder, (i) have been
duly authorized by all necessary corporate action on the part of Borrower, (ii)
will not constitute a violation of any provision of Applicable Law or any order
of any Governmental Authority applicable to Borrower or any of its properties
or assets, (iii) will not violate any provision of the Certificate of
Incorporation, By-Laws, or any other organizational document of, or any
provision of any material indenture, agreement, bond, note, mortgage, deed of
trust, or other similar instrument to which Borrower is a party or by which
Borrower or any of its properties or assets are bound or to which Borrower is
subject, (iv) upon execution and delivery of the Intercreditor Agreement by the
parties thereto, will not be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under, or
create any right to terminate, any such indenture, agreement, bond, note,
mortgage, deed of trust, or other instrument and (v) will not result in the
creation or imposition of (or the obligation to create or impose) any Lien,
charge or encumbrance of any nature whatsoever upon any of the properties or
assets of Borrower other than pursuant to this Credit Agreement or the other
Fundamental Documents.





     SECTION 2.3 Governmental Approval. (a) All authorizations, approvals,
orders, consents, licenses, registrations or filings from or with any
Governmental Authority (other than the Security Documents all of which will be
delivered to Lender in accordance with the terms of this Credit Agreement, in
form suitable for recording or filing with the appropriate filing office)
required for the execution, delivery and performance by Borrower of this Credit
Agreement and the other Fundamental Documents to which it is a party, and the
execution and delivery by Borrower of any notes evidencing any of the Loans
hereunder, have been duly obtained or made, and are in full force and effect,
and if any further authorizations, approvals, orders, consents, licenses,
registrations or filings should hereafter become necessary, Borrower shall
obtain or make all such authorizations, approvals, orders, consents, licenses,
registrations or filings.





     (b)  The Borrower has obtained and holds in full force and effect all
licenses, authorizations, consents, franchises, permits, certificates,
accreditations, easements, rights of way and other approvals necessary to own
its [respective] property and assets and
to carry on its [respective] business as now being, or as now intended to be, conducted,
other than those the absence of which is not reasonably likely to have a
Material Adverse Effect.





7







 


     SECTION 2.4 Binding Agreements. The Borrower has duly executed and
delivered this Credit Agreement and each other Fundamental Document to which it
is a party. Each of this Credit Agreement and the other Fundamental Documents
constitutes the legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights generally and to general principles of equity,
whether such enforceability is considered in a proceeding at law or in equity.





     SECTION 2.5 Title to Properties. (a) Except as set forth on Schedule
2.5(a) hereto, Borrower has good and marketable title to, or valid leasehold
interests in, the Collateral and other leasehold interests of Borrower listed
on Schedules 2.14(a) and 2.14(b) hereto (other than such properties or assets
disposed of in the ordinary course of business as permitted hereunder) and all
such properties and assets are free and clear of Liens, except Permitted Liens.





     (b)  The Borrower has complied in all material respects with all leases
constituting Collateral to which it is a party and as specified on Schedule
2.14(b), and, except as specified on Schedule 2.5(b), is aware of no defaults
by Borrower under any such lease or any conditions which with the passage of
time or delivery of notice would constitute a default thereunder and all such
leases are in full force and effect. The Borrower enjoys peaceful and
undisturbed possession of the leasehold interest in each Leased Property
subject to Permitted Liens.





     (c)  Except as set forth on Schedule 2.5(c) hereto, Borrower has not
received any notice of, nor has any knowledge of, any pending or contemplated
condemnation proceeding affecting any Collateral or any sale or disposition
thereof in lieu of condemnation which proceeding or sale or disposition is
reasonably likely to adversely affect Borrower’s current use of the property or
likely to result in a taking of a material portion of the real property to
which it relates or any portion of a building.





     (d)  The Borrower is not obligated under any right of first refusal, option
or other contractual right to sell, assign or otherwise dispose of any of the
Collateral or the Inventory Collateral or any interest therein except for such
rights of first refusal, options or other contractual rights described on
Schedule 2.5(d) hereto and, in the case of the Inventory Collateral, as may be
required under the Working Capital Facility.





     SECTION 2.6 Litigation; Judgments. (a) Except as set forth on Schedule
2.6 hereto, there are no actions, suits or other proceedings at law or in
equity by or before any arbitrator or arbitration panel, or any Governmental
Authority (including, but not limited to, matters relating to environmental
liability) or, to the best of Borrower’s knowledge, any investigation by any
Governmental Authority of the affairs of, or to the best of Borrower’s
knowledge, threatened action, suit or other proceeding against or affecting,
Borrower or any of its properties which could reasonably be expected to have a
Material Adverse Effect or which relate to this Credit Agreement, any
Fundamental Document, any of the Collateral or the Inventory Collateral or any
of the transactions contemplated hereby or
thereby or the Loans hereunder. The Borrower is not in default with respect to
any order, writ, injunction, decree, rule or regulation of any Governmental
Authority binding upon Borrower, which default could reasonably be expected to
have a Material Adverse Effect.





8







 


     (b)  There are no unpaid final, nonappealable judgments or decrees in an
aggregate amount of $500,000 or more entered by a court or courts of competent
jurisdiction against Borrower (other than any judgment as to which, and only to
the extent, a reputable insurance company has acknowledged coverage of such
claim in writing).





     SECTION 2.7 Taxes. Except as set forth on Schedule 2.7 hereto, Borrower
has filed or caused to be filed all United States federal tax returns, material
state income tax returns and all other material tax returns which are required
to be filed with any Governmental Authority after giving effect to applicable
extensions, and has paid or has caused to be paid all taxes as shown on said
returns or on any assessment received by them, to the extent that such taxes
have become due, except as permitted by Section 4.8 hereof. The Borrower has
no knowledge of any material additional assessments or any basis therefor. In
the reasonable, good faith opinion of Borrower, the charges, accruals and
reserves on the books of Borrower in respect of taxes or other governmental
charges are adequate.





     SECTION 2.8 Compliance with ERISA. (a) Each Plan has been maintained and
operated in all material respects in accordance with all Applicable Laws,
including ERISA and the Code except to the extent that any failure thereof
could not reasonably be expected to result in a material liability. Each Plan
intended to qualify under Section 401(a) of the Code so qualifies except to the
extent that any failure to so qualify could not reasonably be expected to
result in a material liability. No Reportable Event has occurred since the
effective date of the Plan of Reorganization. No Plan has an “accumulated
funding deficiency,” within the meaning of Section 412 of the Code or Section
302 of ERISA, or has applied for or received a waiver of the minimum funding
standards or an extension of any amortization period, within the meaning of
Section 412 of the Code or Section 303 or 304 of ERISA. No material liability
has been, and no circumstances exist pursuant to which any such material
liability could reasonably likely be, imposed upon any Credit Party or ERISA
Affiliate (i) under Sections 4971 through 4980B of the Code, Section 409,
502(i), 502(l) or 515 of ERISA, or under Title IV of ERISA with respect to any
Plan or Multiemployer Plan, or with respect to any plan heretofore maintained
by Borrower or ERISA Affiliate, or any entity that heretofore was an ERISA
Affiliate, or (ii) for the failure to fulfill any obligation to contribute to
any Multiemployer Plan. Neither Borrower nor any ERISA Affiliate has received
any notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, no Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated and, using
actuarial assumptions and computation methods consistent with Part 1 of
Subtitle E of Title IV of ERISA, the aggregate liabilities of Borrower and its
ERISA Affiliates to all Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Plan then ended would not exceed $1,000,000.





     (b)  Assuming Lender is not using assets of any employee benefit plan
subject to Title I of ERISA or any “plan” (within the meaning of Section
4975(e) of the Code) maintained by Borrower or any of its ERISA Affiliates to
make the Loans, the execution, delivery and performance of the Fundamental Documents and the consummation of the
transactions contemplated hereby and thereby will not involve any “prohibited
transaction” within the meaning of Section 406 of ERISA or Section 4975 of the
Code.





9







 


     SECTION 2.9 Agreements. (a) The Borrower is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which it is a party or
by which it or any of its property or assets is bound in any respect except for
defaults which could not reasonably be expected to result in a Material Adverse
Effect.





     (b)  Schedule 2.9(b) hereto is a true and complete listing as of the
Closing Date of (i) all material credit agreements, indentures, and other
agreements related to any Indebtedness of Borrower, other than the Fundamental
Documents, (ii) all material joint venture agreements to which Borrower is a
party, (iii) all material agreements or other arrangements pursuant to which
Borrower has granted a Lien to any Person, and (iv) all other contractual
arrangements entered into by Borrower or by which Borrower or any of its
property or assets is bound which arrangements are material to Borrower,
including but not limited to, Guaranties.





     SECTION 2.10 Security Documents. The Security Documents, (i) when
executed and delivered, will create in favor of Lender, a legal, valid and
enforceable first priority Lien on all of Borrower’s right, title and interest
in and to the Collateral and the proceeds thereof and (ii) from and after the
First Amendment Effective Date, will create in favor of Lender, a legal, valid
and enforceable Lien on all of Borrower’s right, title and interest in and to
the Inventory Collateral and the proceeds thereof, (in each case subject only
to Permitted Liens), and when the Security Documents are filed in the offices
specified on Schedule 2.10 hereto, the proper amount of mortgage recording or
similar taxes (if any and if not paid as a result of an exemption under 11
U.S.C. 1146(c)) are paid and when the UCC financing statements relating to
fixtures, Assigned Lease Proceeds, Inventory Collateral and all Proceeds (as
defined in the UCC) [relating to]of any of the foregoing are duly filed with
the filing offices listed on Schedule 2.10 hereto and in Delaware, the Security
Documents shall constitute fully perfected first priority Liens on, and fully
perfected first priority (or, in the case of (x) Inventory Collateral, junior
to the Liens in favor of the lenders under the Working Capital Facility and (y)
the Additional Property, junior only to the Liens in favor of the mortgagee of
such property (if any) as in effect as of the Closing Date) security interests
in, all right, title and interest of Borrower in the Collateral and the
Inventory Collateral and the proceeds thereof, in each case subject only to
Permitted Liens.





     SECTION 2.11 Disclosure. Neither this Credit Agreement nor any other
Fundamental Document nor any agreement, document, certificate or statement
furnished to Lender by or on behalf of Borrower in connection with the
transactions contemplated hereby, at the time it was furnished or delivered,
contained any untrue statement of a material fact regarding Borrower or, when
taken together with all such other agreements, documents, certificates and
statements, omitted to state a material fact necessary under the circumstances
under which it was made in order to make the statements contained herein or
therein not misleading.





     SECTION 2.12 Environmental Matters. Except as set forth on Schedule 2.12
hereto:





     (a)  There are no past, pending, or, to the knowledge of Borrower,
threatened Environmental Claims against, affecting or with respect to
Borrower’s or any Premises, and





10







 


Borrower is not aware of any facts or
circumstances which could reasonably be expected to form the basis for any such
Environmental Claim, except to the extent that any such Environmental Claims,
individually or in the aggregate, would not have a Material Adverse Effect;





     (b)  No Premises is currently or was formerly used for the handling,
storage, treatment, disposal, manufacture, processing or generation of
Hazardous Materials, except to the extent that any such activity, individually
or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect;





     (c)  The Borrower and any tenants, operators or occupants of any Premises
have obtained and hold all required material Environmental Permits, except to
the extent that any failure to obtain or hold any such Environmental Permit,
individually or in the aggregate, would not have a Material Adverse Effect;





     (d)  The Borrower is in compliance with all terms, conditions and
provisions of all applicable (1) Environmental Permits, and (2) Environmental
Laws, except to the extent that any such non-compliance, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect;





     (e)  No Releases of Hazardous Materials have occurred at, from, in, to, on,
or under any Premises, and no Hazardous Materials are present in, on, about or
migrating to or from any Premises, except to the extent that any such Releases
or presence of Hazardous Materials, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect;





     (f)  Neither Borrower, nor any predecessor of Borrower, nor any entity
previously owned by Borrower, has transported or arranged for the treatment,
storage, handling, disposal, or transportation of any Hazardous Material to any
location (other than any Premises) which could result in an Environmental Claim
against Borrower, except to the extent that any such activity, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect;





     (g)  No Premises is a current, or to the knowledge of Borrower, a proposed
Environmental Clean-up Site, except to the extent as would not reasonably be
expected to have a Material Adverse Effect;





     (h)  There are no (i) underground storage tanks (active or abandoned), (ii)
polychlorinated biphenyl containing equipment, (iii) asbestos-containing
material at any Premises, or (iv) lead-based paint located at any Premises,
except to the extent that the presence of any of the foregoing, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect; and





     (i)  There have been no material environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or on behalf of, and
which are in the possession of Borrower with respect to any Premises which have
not been delivered to Lender except for such investigations, studies, audits,
tests, reviews or analyses which do not individually or in the aggregate reveal
environmental conditions that could have a Material Adverse Effect.





11







 


     SECTION 2.13 Compliance with Laws. (a) The Borrower is not in violation
of any Applicable Law (including, without limitation, any Environmental Law) or
any restrictions of record or agreements affecting the Collateral or the
Inventory Collateral, except for such violations which in the aggregate are not
reasonably likely to have a Material Adverse Effect.





     (b)  The Borrower is not in violation of any zoning or building law,
ordinance, rule, regulation or restriction affecting any of the Collateral or
any building permit, including, without limitation, any certificate of
occupancy, where such violation could reasonably be expected to result in a
Material Adverse Effect.





     SECTION 2.14 Real Property. (a) Schedule 2.14(a) is a true and complete
list as of the Closing Date of (i) the facility number and street address of
each Fee Property, (ii) the lease(s), if any, to which each such Fee Property
is subject, together with any amendments thereto, and (iii) the name and
address of the lessee of each such Fee Property. Subject to Section 2.5
hereof, the Borrower has a fee simple title to each Fee Property.





     (b)  Schedule 2.14(b) is a true and complete list as of the Closing Date of
(i) the facility number and the street address of each Leased Property and each
of the other leases to which Borrower is a party, (ii) the name and address of
the owner/lessor of each such leased property, (iii) the leases to which each
such leased property is subject, together with any amendments thereto, and (v)
the name and address of any sublessee of each such leased property. Subject to
Section 2.5 hereof, the Borrower has a valid leasehold interest in each leased
property on Schedule 2.14(b).





     SECTION 2.15 No Default. No Default or Event of Default exists under or
with respect to any Fundamental Document.





     SECTION 2.16 No Tenants in Possession. Except as set forth on Schedule
2.16 hereto, or as may be otherwise agreed to in writing between the parties
hereto, there are no tenants in possession with respect to any of the
Collateral.





     SECTION 2.17 Subsidiaries. (a) Except as set forth on Schedule 2.17,
Borrower does not have any direct or indirect Subsidiaries or Affiliates and is
not engaged in any joint venture or partnership.





     (b)  Borrower is the record and beneficial owner of all issued and
outstanding shares of capital stock of each of its Subsidiaries listed on
Schedule 2.17 and there are no proxies, irrevocable or otherwise, with respect
to such shares and no equity securities of any of the Subsidiaries are or may
become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any kind or nature and there are no
contracts, commitments, understandings or arrangements by which any such
Subsidiary is or may become bound to issue additional shares of its capital stock or securities
convertible into or exchangeable for such shares.





     (c)  None of Borrower’s Subsidiaries is engaged in any business or
operation nor has title to any asset material to the business or operation of
Borrower.





12







 


     SECTION 2.18 Compliance with Securities Laws. Borrower has not taken, and
will not take, any action which would subject the issuance of the warrants
under the Warrant Agreement or the Additional Warrant Agreement or the shares
of Borrower’s common stock, par value $.001 per share (the “Common Stock”),
issued pursuant to the Warrant Agreement or the Additional Warrant Agreement to
the provisions of Section 5 of the Securities Act of 1933, or violate the
registration or qualification provisions of any securities laws or “blue-sky”
laws of any applicable jurisdiction, and, the issuance of the warrants under
the Warrant Agreement or the Additional Warrant Agreement, and the issuance of
the shares of Common Stock from time to time upon exercise of the warrants
under the Warrant Agreement or the Additional Warrant Agreement, complies with
all applicable requirements of applicable federal securities laws and
“blue-sky” laws. The issuance of the warrants under the Warrant Agreement or
the Additional Warrant Agreement to the holder of such warrants will not be
integrated with any other issuance of Borrower’s securities (past, current or
future) which would result in a violation of the Securities Act of 1933. The
issuance of the warrants under the Additional Warrant Agreement and the shares
of Borrower’s Common Stock constitute a transaction exempt from the
registration requirement of Section 5 of the Securities Act of 1933.





3.     CONDITIONS TO THE EFFECTIVENESS OF THIS CREDIT AGREEMENT AND THE MAKING OF
THE LOANS





     SECTION 3.1 Conditions Precedent to the Effectiveness of This Credit
Agreement and the Making of the Loans. The effectiveness of this Credit
Agreement and the making of the Loans are subject to the satisfaction in full
or waiver of the following conditions precedent:





     (a)  The Credit Agreement. The Lender shall have received executed
counterparts of this Credit Agreement, which, when taken together, bear the
signatures of Lender and Borrower;





     (b)  The Warrant Agreement. The Lender shall have received executed
counterparts of the Warrant Agreement, which, when taken together, bear the
signatures of all parties thereto;





     (c)  Opinion of Counsel. The Lender shall have received the written
opinion of Willkie, Farr & Gallagher, counsel to Borrower, dated the Closing
Date and addressed to Lender with respect to such matters relating to this
Credit Agreement and the Fundamental Documents as may be requested by Lender
and its counsel, which opinion shall be in form and substance satisfactory to
Lender and its counsel;





     (d)  Material Agreements. The Lender or its counsel shall have received a
copy, certified by Borrower, of each agreement listed on Schedule 2.9(b)
hereto;





     (e)  Security Documents. The Lender shall have received duly executed
Mortgages, appropriate UCC financing statements, and any other Security
Documents requested by Lender with respect to the Collateral, and evidence
satisfactory to Lender that Borrower has





13







 


paid (or reimbursed Lender) all
applicable mortgage recording taxes, transfer taxes, title charges, filing fees
and any other fees, costs or expenses in connection with the foregoing;





     (f)  Title Policies; Surveys. (i) The Lender shall have received from
the Title Company an ALTA-form loan policy or policies (A) insuring each
Mortgage to be a valid first lien with respect to each Fee Property and each of
the following nine (9) Leased Properties: 8, 38, 53, 95, 96, 97, 203, 207 and
647 (as identified on Schedule 2.14(b)), (B) without exceptions and subject to
no Liens (other than the Permitted Liens), (C) in policy amounts acceptable to
Lender, (D) with such endorsements and affirmative coverage as Lender shall
require (including, without limitation, such “date down” endorsements as Lender
may desire from time to time to insure Lender’s first lien position) and (E)
otherwise in form and substance acceptable to Lender in its sole and absolute
discretion;





          (ii) With respect to each Fee Property, Lender shall have received a
current ALTA survey in form and substance acceptable to Lender together with
any affidavits of Borrower sufficient to remove the standard survey exception,
or Lender shall have received a current ALTA survey in form and substance
acceptable to Lender in its sole and absolute discretion (A) updated to within
30 days of the Closing, (B) certified to the Title Company, Lender and their
respective successors and assigns, and (C) prepared, signed and sealed by a
surveyor in the state in which each Fee Property is located. In addition,
Lender shall have received a subordination agreement in favor of Lender from
any tenant or subtenant of any Fee Property unless such lease shall be
subordinate by its terms;





     (g)  Zoning Laws, etc. The Lender shall be satisfied with Borrower’s
compliance with all zoning, environmental and other laws, ordinances, rules and
regulations affecting or relating to each Fee Property and each Leased
Property;





     (h)  Leases. The Lender or its counsel shall have received certified true
and complete copies of (i) all leases with respect to each Leased Property and
each of the other leased properties listed on Schedule 2.14(b), (ii) a
recordable memorandum of lease or evidence of a previously recorded memorandum
of lease satisfactory in all respects to Lender of each Leased Property
together with such executed and acknowledged subordination, non-disturbance and
attornment agreements as Lender may request from the holder of each mortgage
encumbering the fee interest with respect to each such Leased Property
identified on Schedule 2.14(b)(1), (iii) such estoppel certificates as Lender
may request, in form and substance reasonably satisfactory to Lender and
Borrower, and (iv) such other certificates, documents and agreements
respecting each Leased Property as Lender may, in its sole discretion,
reasonably request (including, but not limited to, estoppel certificates
identified on Schedule 2.14(b)(2) from lessors under any such lease, consents
from lessors under any lease of each Leased Property identified on Schedule
2.14(b)(3), and modifications of any lease of any Leased Property identified on
Schedule 2.14(b)(4) to incorporate customary leasehold financing provisions);





     (i)  Evidence of Title. The Lender shall be satisfied that Borrower has
sufficient right, title and interest in and to the Collateral, and other assets
which it purports to own, as set forth in the documents and other materials
presented to Lender to enable Borrower to grant to Lender for the benefit of
Lender the security interests contemplated by the Fundamental Documents, and
that all financing statements, mortgages and other filings under Applicable Law





14







 


necessary to provide Lender with a first priority perfected security interest
in the Collateral and proceeds thereof (subject to Permitted Liens, if any)
have been filed, or, have been delivered to Lender in satisfactory form for
filing and all taxes, recording or other fees due and payable with respect
thereto have been paid; provided, however, that with respect to the Fee
Properties, the delivery of a lender’s title insurance policy in accordance
with Section 3.1(f) shall satisfy this condition;





     (j)  Insurance. The Lender shall have received (i) a summary of all
existing insurance coverage maintained by Borrower which summary shall include
for each insurance policy, the policy number, the type of coverage, the policy
limits and deductibles, the insurer and the expiration date and (ii) evidence
acceptable to Lender that the insurance policies required by Section 4.5 have
been obtained and are in full force and effect, including Certificates of
Insurance with respect to all existing insurance coverage maintained by
Borrower which is set forth on the summary delivered pursuant to clause (i)
above, which certificates shall comply with the requirements set forth in
Section 4.5 hereof;





     (k)  Payment of Fees. The Lender shall have received all Fees due and
payable on or before the Closing Date pursuant to this Credit Agreement;





     (l)  Notes. If Lender requests that the Loans made by it be evidenced by a
promissory note, Lender shall have received one or more promissory notes each
duly executed on behalf of Borrower, dated the date hereof and payable to the
order of Lender in the principal amount equal to Lender’s Term Loan and
Revolving Credit Commitment;





     (m)  Payment of Other Fees and Expenses. All reasonable out-of-pocket
expenses incurred by Lender in connection with this Credit Agreement and the
transactions contemplated hereby, including, without limitation, all statements
presented for reasonable fees and disbursements of any financial, accounting or
valuation advisors or special counsel retained by Lender (including, but not
limited to, Morgan, Lewis & Bockius LLP, counsel to Lender), shall have been
paid by Borrower;





     (n)  Litigation. No litigation, inquiry, injunction or restraining order
shall be pending, entered or threatened which involves this Credit Agreement or
any of the other Fundamental Documents or which could reasonably be expected to
have a Material Adverse Effect;





     (o)  Representations and Warranties; No Default. The representations and
warranties set forth in Article 2 hereof and in any other Fundamental Documents
then in existence shall be true and correct in all material respects, and no
Default or Event of Default shall have occurred and be continuing hereunder;





     (p)  Closing Certificate. The Lender shall have received a closing
certificate signed by an Authorized Officer of Borrower, substantially in the
form of Exhibit C hereto;





     (q)  Final Order. A Final Order approving the Plan of Reorganization and
the credit facilities contemplated hereby shall have been entered by the
Bankruptcy Court (which shall, among other things, approve this Credit
Agreement, the Fundamental Documents, the





15







 


Loans and the transactions contemplated by this Credit Agreement and the Fundamental Documents);





     (r)  Termination Documents. The Lender shall have received, in form and
substance satisfactory to Lender, all releases, terminations and such other
documents as Lender may request to evidence and effectuate the termination by
Wells Fargo Retail Finance LLC and the other existing lenders of their
respective financing arrangements with Borrower and the termination and release
by such lenders of any interest in and to the Collateral;





     (s)  Post-Closing Undertaking. The Lender shall have received executed
counterparts of the Post-Closing Undertaking which, when taken together, bear
the signatures of all parties thereto; and





     (t)  Other Documents. The Lender and its counsel shall have received fully
executed originals of such other documentation as Lender or its counsel may
reasonably request.





     SECTION 3.2 Conditions Precedent to Each Revolving Credit Loan. The
obligation of Lender to make each Revolving Credit Loan (including the initial
Revolving Credit Loan) is subject to the following conditions precedent:





     (a)  Borrowing Certificate. The Lender shall have received a Borrowing
Certificate with respect to such Borrowing, duly executed by an Authorized
Officer of Borrower;





     (b)  Representations and Warranties. The representations and warranties
set forth in Article 2 hereof and in the other Fundamental Documents shall be
true and correct in all material respects on and as of the date of each
Borrowing (except to the extent that such representations and warranties
expressly relate to an earlier date) with the same effect as if made on and as
of such date;





     (c)  No Event of Default. On the date of each Borrowing hereunder, no
Default or Event of Default shall have occurred and be continuing, nor shall
any such Default or Event of Default occur by reason of the making of the
requested Revolving Credit Loan; and





     (d)  [Total ]Revolving Credit Commitment. After giving effect to the
Revolving Credit Loans to be made, the aggregate principal amount outstanding
of all Revolving Credit Loans shall not exceed the [Total ]Revolving Credit
Commitment.





Each request for a Borrowing hereunder shall be deemed to be a representation
and warranty by Borrower on the date of such Borrowing hereunder as to the
matters specified in paragraphs (b), (c) and (d) of this Section.





4. AFFIRMATIVE COVENANTS






     From the date hereof and for so long as any Commitments shall be in
effect, any amount remains outstanding with respect to any Loan, or any
Obligation remains unpaid or unsatisfied, Borrower agrees that, unless Lender
shall otherwise consent in writing, it will:





16







 


     SECTION 4.1 Financial Statements and Reports. Furnish or cause to be
furnished to Lender:





     (a)  As soon as available, but in any event simultaneously with the
delivery of any such financial statements pursuant to the Working Capital
Facility, the annual, quarterly and monthly balance sheets of Borrower, as at
the end of, and the related statements of income, stockholders’ equity and cash
flows for, such period, and the corresponding figures as at the end of, and
for, the preceding period, together with any accompanying opinions, officers
certificates or other documents delivered pursuant to the Working Capital
Facility;





     (b)  Promptly and in any event within five (5) Business Days after receipt
of any material notice or correspondence from any company or agent for any
company providing insurance coverage to Borrower relating to any material loss
or loss with respect to any item of Collateral or (from and after the First
Amendment Effective Date) Inventory Collateral, copies of such notices and/or
correspondence;





     (c)  Simultaneously with the delivery pursuant to the Working Capital
Facility, copies of any documents, agreements, notices, reports, financial
statements or other information required to be delivered pursuant to the
Working Capital Facility (other than borrowing notices)[;] including, without
limitation, perpetual inventory reports and inventory reports by location and
category (as required by Section 7.1(a)(ii) of the Congress Credit Agreement)
and if requested by Congress (from and after the First Amendment Effective
Date) copies of purchase orders, invoices and delivery documents for Inventory
Collateral (as required by Section 7.1(a)(iv) of the Congress Credit
Agreement).





     (d)  From time to time such additional information regarding the financial
condition or business of Borrower or any Collateral or (from and after the
First Amendment Effective Date) Inventory Collateral, promptly following a
request by Lender; provided that Borrower shall not be obligated hereby to
provide such additional information unless it is information (w) prepared for
[Congress]the agent or a lender under the Working Capital Facility, (x)
prepared pursuant to any other agreements of Borrower, (y)prepared in the
ordinary course of Borrower’s business, or (z) is otherwise available from
Borrower’s records.





     SECTION 4.2 Compliance with Laws. (a) Do or cause to be done all things
necessary (i) to preserve, renew and keep in full force and effect its
existence, licenses, permits, franchises, certificates (including, without
limitation, certificates of need), authorization, accreditations, easements,
rights of way and other rights, consents and approvals the nonexistence of
which is reasonably likely to have a Material Adverse Effect and (ii) to comply
with all applicable statutes, ordinances, rules, regulations and orders of, and
all applicable restrictions or requirements imposed by, any Governmental
Authority (including, without limitation, Environmental Laws, all zoning and
building codes and ERISA) or any other Requirements except where the necessity of compliance therewith is
contested in good faith by the appropriate proceedings or where such
noncompliance in the aggregate would not reasonably be expected to have a
Material Adverse Effect; provided, in each case, that Borrower shall have set
aside on its books reasonable reserves (the presentation of which is segregated
to the extent required by GAAP) with respect thereto if such reserves are
required by GAAP or where such





17







 


noncompliance in the aggregate would not
reasonably be expected to have a Material Adverse Effect.





     (b)  Obtain or make all further authorizations, approvals, orders,
consents, licenses, registration or filings from or with any Governmental
Authority required for the performance by Borrower of this Credit Agreement and
the other Fundamental Documents to which it is a party.





     SECTION 4.3 Maintenance of Properties. Keep each item of Collateral[,] and (from
and after the First Amendment Effective Date) Inventory Collateral in
good repair, working order and condition (ordinary wear and tear and damage by
casualty excepted) and, from time to time (i) subject to the terms hereof, make
all necessary, proper and material repairs, renewals, replacements, additions
and improvements thereto and (ii) comply at all times with the provisions of
all leases and other material agreements to which it is a party so as to
prevent any loss or forfeiture thereof or thereunder unless compliance
therewith is being currently contested in good faith by appropriate proceedings
and appropriate reserves have been established in accordance with GAAP or where
such noncompliance in the aggregate would not reasonably be expected to have a
Material Adverse Effect.





     SECTION 4.4 Notice of Material Events. (a) Promptly upon, but in any
event within five (5) days after, an Authorized Officer or other executive
officer of Borrower obtaining knowledge of (i) any (X) Default or (Y) Event of
Default, (ii) any Material Adverse Effect, (iii) any action, event or condition
(other than market conditions generally except those that may affect the
industries in which Borrower operates) which could reasonably be expected to
have a Material Adverse Effect, (iv) the opening of any office of Borrower or
the change of the chief executive office or the principal place of business of
Borrower or of the location of Borrower’s books and records with respect to any
Collateral or (from and after the First Amendment Effective Date) Inventory
Collateral (v) any change in the name, corporate structure or the jurisdiction
of organization of Borrower, (vi) a change in the organizational identification
number of Borrower; (vii) any other event which could reasonably be expected to
materially decrease the value of any of the Collateral or (from and after the
First Amendment Effective Date) Inventory Collateral, (viii) any proposed
material amendment to any agreements that are a material part of or relate to
any of the Collateral or (from and after the First Amendment Effective Date)
Inventory Collateral or (ix) any Person giving any notice to Borrower or taking
any other action to enforce remedies with respect to a claimed default or event
or condition of the type referred to in paragraphs (g), (h), (i) or (j) of
Article 6, (ix) any strike, walkout, work stoppage or other material labor
difficulty with respect to Borrower, (x) any pending or contemplated
condemnation proceeding affecting any of the Collateral which would result in
Net Cash Proceeds of $500,000 or more, give written notice thereof to Lender
specifying the nature and period of existence of any such condition or event,
or specifying the notice given or action taken by such Person and the nature of
such claimed Event of Default or condition and what action Lender has taken, is
taking and proposes to take with respect thereto.





     (b)  Promptly upon, but in any event within ten (10) days after, an
Authorized Officer or other executive officer of Borrower obtains knowledge of
(i) the institution of, or threat of, any action, suit, proceeding,
investigation or arbitration by any Governmental Authority or other Person
against or affecting Borrower or any of its assets including, without





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limitation, any of the Collateral or (from and after the First Amendment
Effective Date) Inventory Collateral, but excluding any condemnation proceeding
or any sale or disposition in lieu of condemnation with respect to any of the
Collateral which would result in Net Cash Proceeds of less than $500,000 and
(ii) any material development in any such action, suit, proceeding,
investigation or arbitration (whether or not previously disclosed to Lender),
which, in the case of clause (i) or (ii) above, is reasonably likely to have a
Material Adverse Effect, Borrower shall promptly give written notice thereof to
Lender and provide such other information as may be available to it to enable
Lender to evaluate such matters; and, in addition to the requirements set forth
in clauses (i) and (ii) of this subsection (b), Borrower upon request shall
promptly give notice to Lender of the status of any action, suit, proceeding,
investigation or arbitration covered by a report delivered to Lender pursuant
to this subsection and provide such other information as may be reasonably
available to it to enable Lender to evaluate such matters.





     SECTION 4.5 Insurance. (a) Keep the Collateral and (from and after the
First Amendment Effective Date) the Inventory Collateral, or cause its tenants
under applicable leases to keep its Collateral and (from and after the First
Amendment Effective Date) Inventory Collateral insured at all times with
financially sound and reputable insurance companies, against such risks as is
customary for companies of the same or similar size in the same or similar
businesses; provided, that such insurance shall (i) insure the Collateral and
(from and after the First Amendment Effective Date) Inventory Collateral
against all risk of loss or damage including, without limitation, loss by fire,
explosion, theft and such other casualties as may be reasonably satisfactory to
Lender, but in no event in an amount less than the replacement cost value
thereof, and (ii) insure Borrower, and Lender, against comprehensive general
and automobile liability, such policies to be in accordance with customary
industry practice and in such form and amounts and having such coverage as is
customary for companies of the same or similar size in the same or similar
businesses or as otherwise may be reasonably satisfactory to Lender. All such
insurance shall (i) contain a lender’s Loss Payable Endorsement in all loss or
damage insurance policies, (ii) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least thirty (30) days after written notice to Lender thereof, (iii)
name Lender as loss payee for physical damage insurance with respect to
property which constitutes Collateral and, from and after the date upon which
all of the obligations under the Working Capital Facility shall have been
satisfied in full, Inventory Collateral, as to which a Lien has been granted to
Lender, with the right, if an Event of Default has occurred and is then
continuing, to adjust losses and claims with respect to such property, and as
an additional insured for liability insurance, (iv) state that Lender shall not
be responsible for premiums, commissions, club calls, assessments or advances
and (v) be reasonably satisfactory in all other respects (including
deductibles) to Lender.





     (b)  Upon the request of Lender, furnish to such Lender, an updated
schedule describing all insurance maintained by Borrower, which schedule shall
set forth, for each insurance policy, the policy number, the type of coverage,
the policy limits and deductibles, the insurer and the expiration date.





     (c)  Furnish to Lender, to the extent not previously delivered, original
certificates of insurance for all insurance maintained by Borrower which
certificates shall comply with the requirements of this Section 4.5 set forth
above and contain signatures of duly authorized representatives of the insurer,
at all times prior to policy termination, cessation or cancellation.





19







 


     SECTION 4.6 Books and Records. (a) Maintain or cause to be maintained at
all times, in accordance with GAAP, true and complete books and records of its
financial operations.





     (b)  Provide Lender and its representatives (at Borrower’s expense) access
to such books and records and to any of its properties or assets upon
reasonable notice and during regular business hours in order that Lender may
make such audits and examinations and make abstracts from such books, accounts,
records and other papers of Borrower pertaining to any of the Collateral and
(from and after the First Amendment Effective Date) Inventory Collateral and
upon notification to Borrower, permit Lender or its representatives to discuss
the affairs, finances and accounts with, and be advised as to the same by,
officers and independent accountants, all as Lender may deem appropriate for
the purpose of verifying any report delivered by Borrower to Lender pursuant to
this Credit Agreement or for otherwise ascertaining compliance with this Credit
Agreement or any other Fundamental Document. The Lender will not prohibit any
representative of Borrower from being present at such meetings or discussions.





     SECTION 4.7 Observance of Agreements. (a) Duly observe and perform all
material terms and conditions of any agreement relating to any of the
Collateral and (from and after the First Amendment Effective Date) Inventory
Collateral, or any other agreement which is material to Borrower and diligently
protect and enforce the rights of Borrower under all such agreements in a
manner consistent with prudent business judgment and subject to the terms and
conditions of such agreements.





     (b)  Promptly provide Lender copies of any and all agreements amending,
altering, modifying, waiving or supplementing in any material respect any
agreement set forth on Schedule 2.9(b).





     (c)  Promptly provide Lender copies of any Licenses.





     SECTION 4.8 Taxes and Charges. (a) Duly pay and discharge, or cause to
be paid and discharged, before the same shall become in arrears (after giving
effect to applicable extensions), all taxes, assessments, levies and other
governmental charges, imposed upon Borrower or its properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies which if unpaid might by
law become a Lien upon any property of any Borrower; provided, however, that
any tax, assessment, levy, governmental charge or claim for labor, material or
supplies need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if Borrower shall have
set aside on its books reasonable reserves (the presentation of which is
segregated to the extent required by GAAP) with respect thereto if such
reserves are required by GAAP; and provided, further, that Borrower will pay
all such taxes, assessments, levies or other governmental charges and claims
for labor, material or supplies forthwith upon the commencement of proceedings to foreclose any Lien which
may have attached as security therefor.





     (b)  Unless and until such time as Borrower’s long-term unsecured debt
shall be rated at least investment grade by either Standard & Poor’s, a
division of The McGraw-Hill Companies or Moody’s Investors Services, Inc.,
deposit with Lender on the first Business Day of





20







 


each month a sum equal to the
amount of all general and special real estate taxes and assessments next due
and payable by Borrower upon the Collateral divided by the number of months to
elapse before one month prior to the date when such taxes and assessments will
become due and payable. If such deposits are insufficient to pay any such
taxes or assessments when the same become due and payable by Borrower,
Borrower, within ten days after the receipt of a demand therefor from Lender,
shall deposit such additional funds as may be necessary to eliminate such
insufficiency. If such deposits exceed the amount required to pay such taxes
and assessments for any tax payment period, the excess shall be credited
against the next succeeding deposit or deposits to be made by Borrower. Such
deposits shall be used for the payment of taxes and assessments on the
Collateral next due and payable by Borrower when they become due, provided,
however, that Lender shall not be liable for any failure to apply such deposits
to the payment of such taxes and assessments unless Lender shall have received
from Borrower a request for payment accompanied by the bills for such taxes and
assessments not less than thirty days prior to the due date. Except as may be
required by Applicable Law, such deposits may be commingled with other funds of
Lender. Upon the request of Borrower, Lender shall account to Borrower for the
amounts then on deposit.





     SECTION 4.9 Liens. Defend the Collateral and (from and after the First
Amendment Effective Date) the Inventory Collateral against any and all Liens,
claims and other impediments howsoever arising, other than Permitted Liens, and
in any event defend the same against any attempted foreclosure.





     SECTION 4.10 Further Assurances; Security Interests. (a) Upon the
request of Lender, duly execute and deliver, or cause to be duly executed and
delivered, at the cost and expense of Borrower, such further instruments as may
be necessary in the reasonable judgment of Lender or its counsel to carry out
the provisions and purposes of this Credit Agreement and the other Fundamental
Documents.





     (b)  Upon the request of Lender, promptly execute and deliver or cause to
be executed and delivered, at the cost and expense of Borrower, such further
instruments as may be appropriate in the reasonable judgment of Lender or its
counsel, to provide Lender a perfected first priority Lien in the Collateral
and (from and after the First Amendment Effective Date) Inventory Collateral (subject
to Permitted Liens), and any and all documents (including, without
limitation, an amendment or supplement of any financing statement and a
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other Applicable Law
of the United States or any other jurisdiction which Lender may deem reasonably
necessary or advisable, and perform or cause to be performed such other
ministerial acts which are reasonably necessary or advisable, from time to
time, in order to grant and maintain in favor of Lender the security interest
in the Collateral and (from and after the First Amendment Effective Date)
Inventory Collateral contemplated hereunder and under the other Fundamental
Documents, subject only to Permitted Liens.





     (c)  Promptly undertake to deliver or cause to be delivered to Lender from
time to time such other documentation, consents, authorizations and approvals,
in form and substance reasonably satisfactory to Lender, as Lender or its
counsel shall reasonably deem necessary or advisable to perfect or maintain the
Liens (and security interests) of Lender contemplated hereby and pursuant to
the other Fundamental Documents.





21







 


     (d)  Without limiting the generality of the foregoing provisions of this
Section 4.10, use commercially reasonable efforts to correct as soon as
practicable, matters with respect to title concerning each Fee Property not
otherwise permitted hereunder.





     SECTION 4.11 Environmental Laws. (a) Promptly notify Lender upon
Borrower gaining actual knowledge of any violation or non-compliance with, or
liability or potential liability under, any Environmental Laws which, when
taken together with all other violations of, or liability under, Environmental
Law is reasonably expected to have a Material Adverse Effect, and promptly
furnish to Lender all written notices of any nature which Borrower may receive
from any Governmental Authority or other Person with respect to any violation,
or potential violation or non-compliance with, or liability or potential
liability under, any Environmental Laws which, in any case or when taken
together with all such other notices, could reasonably be expected to have a
Material Adverse Effect.





     (b)  Comply with and use reasonable efforts to ensure compliance by all
tenants and subtenants with all Environmental Laws, and obtain and comply in
all respects with and maintain and use reasonable efforts to ensure that all
tenants and subtenants obtain and comply in all respects with and maintain any
and all Environmental Permits required by Environmental Laws, except where
failure to do so is not reasonably likely to have a Material Adverse Effect.





     (c)  Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under all
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities, except where failure to
do so would not have a Material Adverse Effect. Any order or directive whose
lawfulness is being contested in good faith by appropriate proceedings shall be
considered a lawful order or directive when such proceedings, including any
judicial review of such proceedings, have been finally concluded by the
issuance of a final non-appealable order; provided, however, that Borrower
shall have set aside on its books reasonable reserves (the presentation of
which is segregated to the extent required by GAAP) with respect thereto.





     (d)  Indemnify, defend and hold harmless Lender, and its respective
officers, directors, shareholders, employees, agents, representatives,
successors and assigns from and against any liability, fine, penalty, loss,
damage, suit, settlement, action, expense and cost (including, but not limited
to, reasonable attorneys’ fees (including cost of in-house counsel) and
environmental consultant fees), arising out of or relating to: (A) the
presence or Release of any Hazardous Materials at, to, on, under, from, or
about any Premises; (B) any violation of any Environmental Law or Environmental
Permit by Borrower; (C) the transportation or the arrangement for the
transportation, handling, treatment, or disposal of any Hazardous Materials to
any location other than any Premises by or on behalf of Borrower; (D) any
Environmental Claim relating to any Premises or any activities conducted at any
Premises; and (E) any breach of any environmental representation or covenant in
this Credit Agreement or any other Fundamental Document (but excluding any such liability, fine, penalty,
loss, damage, suit, settlement, action, expense or cost of an indemnified party
to the extent primarily caused by the gross negligence or willful misconduct of
such indemnified party as determined by a final judgment of a court of
competent jurisdiction). The obligations of Borrower under this Section
4.11(d) shall survive the Facility Termination Date, the termination of this
Credit Agreement and the payment of the Obligations hereunder indefinitely.





22







 


     (e)  Promptly, but in no event later than sixty (60) days after the Closing
Date, undertake the following activities and submit a report to Lender, in form
and substance reasonably satisfactory to Lender, confirming that such
activities have been undertaken: (1) bring the water supply wells located at
the Fee Properties located at 7141 East Broad Street, Columbus, Ohio and 840
Route 46, Roxbury, New Jersey into compliance with applicable Environmental
Laws (including but not limited to undertaking all required water sampling and
testing and submission of the same to applicable Governmental Authorities) and
develop and implement a compliance program to ensure that Borrower will
continue to be in compliance with such requirements in the future; or (2) close
such water supply wells in compliance with applicable Environmental Laws.





     SECTION 4.12 Lease Agreements. From time to time (i) furnish to Lender
such information and reports regarding any lease agreement with respect to any
Fee Property, Leased Property or any other property listed on Schedule 2.14(b)
to which Borrower is a party as Lender may reasonably request and (ii) upon the
occurrence and continuation of an Event of Default and the reasonable request
of Lender, make such demands and requests for information, reports or action to
the other parties to a lease agreement to which Borrower is a party, as
Borrower is entitled to make under each such lease agreement.





     SECTION 4.13 Use of Proceeds of Loans. Use the proceeds of the Loans for
the purposes identified in Section 1.14.





     SECTION 4.14 ERISA Plan Compliance and Reports. Furnish to Lender (i) as
soon as possible, and in any event within thirty (30) days after any executive
officer of Borrower has knowledge that (A) any Reportable Event with respect to
any Plan has occurred, a statement of an executive officer of Borrower, setting
forth details as to such Reportable Event and the action which it proposes to
take with respect thereto, together with a copy of the notice, if any, required
to be filed of such Reportable Event given to the PBGC or (B) an accumulated
funding deficiency has been incurred or an application has been made to the
Secretary of the Treasury for a waiver or modification of the minimum funding
standard or an extension of any amortization period under Section 412 of the
Code with respect to a Plan or Multiemployer Plan has been or is proposed to be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA, proceedings have been instituted to terminate a Plan if such Plan is
subject to Title IV of ERISA, an action has been instituted pursuant to Section
515 of ERISA to collect a delinquent contribution to a Multiemployer Plan, or
Borrower or ERISA Affiliate will incur any liability to or on account of the
termination of or withdrawal from a Plan subject to Title IV of ERISA or
Multiemployer Plan under Sections 4062, 4063, 4201 or 4204 of ERISA, a
statement of an executive officer of Borrower, setting forth details as to such
event and the action Borrower proposes to take with respect thereto, (ii)
promptly upon reasonable request of Lender, copies of each annual and other
report with respect to each Plan and (iii) promptly after receipt thereof, a
copy of any notice Borrower or ERISA Affiliate may receive from the PBGC
relating to the PBGC’s intention to terminate any Plan subject to Title IV of
ERISA or to appoint a trustee to administer any Plan subject to Title IV of
ERISA.





     SECTION 4.15 Kimco Collateral Account. By no later than May 30, 2002,
establish a deposit account (the “Kimco Collateral Account”) with a bank
acceptable to Lender into which all [cash ]Collateral in the form of cash and
cash proceeds[ of] of Collateral and





23







 


from and after the date upon which all of
the obligations under the Working Capital Facility shall have been satisfied in
full, proceeds of Inventory Collateral shall be deposited in accordance with
the terms hereof, which account shall be for all purposes part of the
Collateral hereunder.





     SECTION 4.16 Covenants Regarding Inventory Collateral. From and after the
First Amendment Effective Date: (a) Borrower shall at all times maintain
inventory records satisfactory to Lender, keeping correct and accurate records
itemizing and describing the kind, type, quality and quantity of Inventory
Collateral, Borrower’s cost therefore and daily withdrawals therefrom and
additions thereto; (b) Borrower shall conduct a physical count of the Inventory
Collateral at least once each year but at any time or times as Lender may
request on or after an Event of Default, and promptly following such physical
count shall supply Lender with a report in the form and with such specificity
as may be satisfactory to Lender concerning such physical count, and Borrower
shall conduct cycle counts of the Inventory Collateral in the ordinary course
of its business consistent with past practices by at any time or times as
Lender may request on or after an Event of Default, and promptly following such
cycle count shall supply Lender with a report in the form and with such
specificity as may be satisfactory to Lender concerning such cycle count; (c)
Borrower shall not remove any Inventory Collateral from the locations set forth
or permitted herein, without the prior written consent of Lender, except for
sales of Inventory Collateral in the ordinary course of its business and except
to move Inventory Collateral directly from one location set forth or permitted
herein to another such location and except for Inventory Collateral shipped
from manufacturer thereof to Borrower which is in transit to the locations set
forth or permitted herein; (d) upon Lender’s request, Borrower shall, at its
expense, no more than four (4) times in any twelve (12) month period, but at
any time or times as Lender may request on or after an Event of Default or a
Minimum Inventory Violation (as such term is defined in the Working Capital
Facility), deliver or cause to be delivered to Lender written appraisals as to
the Inventory Collateral in form, scope and methodology acceptable to Lender
and by an appraiser acceptable to Lender addressed to lender and upon which
Lender is expressly permitted to rely; (e) Borrower shall produce, use, store
and maintain the Inventory Collateral with all reasonable care and caution and
in accordance with applicable standards of any insurance and in conformity with
applicable laws (including the requirements of the Federal Fair Labor Standards
Act of 1938, as amended and all rules, regulations and orders related thereto);
(f) except as set forth on Schedule 7.3 to the Congress Credit Agreement none
of the Inventory Collateral constitutes farm products or the proceeds thereof
or is subject to the trust imposed under the Perishable Agricultural
Commodities Act; (g) Borrower assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the
Inventory Collateral; (h) Borrower shall not sell Inventory Collateral to any
customer on approval, or any other basis which entitles the customer to
return or may obligate Borrower to repurchase such Inventory Collateral,
except in the ordinary course of Borrower’s business consistent with past
practices; (i) Borrower shall keep the Inventory Collateral in good and
marketable condition; and (j) Borrower shall not acquire or accept any
Inventory Collateral on consignment or approval unless as may be permitted
under the Working Capital Facility.





24







 


5. NEGATIVE COVENANTS






     From the date hereof and for so long as any Commitments shall be in
effect, any amount remains outstanding with respect to any Loan, or any
Obligation remains unpaid or unsatisfied, Borrower agrees that, unless Lender
shall otherwise consent in writing, it will not:





     SECTION 5.1 Limitations on Indebtedness and Preferred Stock. Incur,
create, assume or suffer to exist any Preferred Stock or Indebtedness, other
than:





     (a)  the Indebtedness and other Obligations of Borrower under this Credit
Agreement, and any Indebtedness refinancing all or any portion of the
Indebtedness and/or other Obligations under this Credit Agreement; provided,
that the terms of any Indebtedness refinancing only a portion of the
Indebtedness and other Obligations under this Credit Agreement shall have been
approved in writing by Lender;





     (b)  existing Indebtedness of Borrower described on Schedule 5.1(b) hereto,
but not any extensions or renewals or refinancings thereof unless effected on
substantially the same terms or terms more favorable to Borrower (provided,
that the interest rate may be at the then prevailing rate for the same type of
Indebtedness);





     (c)  Indebtedness of Borrower under the Working Capital Facility;





     (d)  obligations of Borrower under Interest Rate Protection Agreements
entered into in the ordinary course of business and not for purposes of
speculation;





     (e)  (i) any revocable license (each, a “License”) demising an aggregate of
less than one thousand (1,000) useable square feet per Fee Property and per
Leased Property which is entered into after the date hereof, or (ii) any lease
of all or any portion of a Fee Property or Leased Property (each, a “Substitute
Lease”) which is entered into by Borrower after the date of this Agreement
which is entered into in substitution for a lease in effect as of the date of
this Agreement; provided, that in the case of either (i) or (ii), (w) such
License or Substitute Lease, as the case may be, is on a form license or lease
agreement previously approved in writing by Lender (which approval Lender shall
not unreasonably withhold or delay), (x) such License or Substitute Lease is on
not less than fair market rental terms as determined by Lender in its
reasonable discretion, (y) such License or Substitute Lease is by its express
terms subject and subordinate to each Mortgage, and (z) no Event of Default
shall have occurred under this Agreement or any other Fundamental Documents.;





     (f)  unsecured Indebtedness of Borrower not in excess of $500,000 in an
aggregate principal amount outstanding at any time;





     (g)  Indebtedness of Borrower secured by purchase money Liens not in excess
of $1,000,000 in an aggregate principal amount outstanding at any time;





     (h)  Indebtedness of Borrower incurred in connection with insurance premium
financing not in excess of $7,000,000 in an aggregate principal amount
outstanding at any time;





25







 


     (i)  Preferred Stock which does not require the redemption thereof at the
option of the holder prior to the Facility Termination Date; and





     (j)  extensions, renewals or refinancings by Borrower of any Indebtedness
permitted under this Section (“Refinancing Indebtedness”) so long as (i) such
Refinancing Indebtedness is in an original aggregate principal amount not
greater than the aggregate principal amount of and unpaid interest on the
Indebtedness being extended, renewed or refinanced plus the amount of any
premiums required to be paid thereon and fees and expenses associated
therewith, (ii) if the Indebtedness being extended, renewed or refinanced is
subordinated to the Obligations, such Refinancing Indebtedness is subordinated
to the Obligations on terms not less favorable to the Lender than the
subordination provisions governing the Indebtedness being extended, renewed or
refinanced, (iii) at the time of and after giving effect to such extension,
renewal or refinancing, no Event of Default shall have occurred and be
continuing, and (iv) the other terms and conditions of such Refinancing
Indebtedness (including, without limitation, amortization, interest rates and
fees) are no less favorable to Borrower than the Indebtedness being extended,
renewed or refinanced (provided that the restrictions set forth in clauses
(iii) and (iv) shall not be applicable to any refinancing of the Indebtedness
under the Working Capital Facility).





     SECTION 5.2 Limitations on Liens. Incur, create, assume or suffer to
exist any Lien on the Collateral and (from and after the First Amendment
Effective Date) Inventory Collateral, including, any right of first refusal,
option or other contractual right to sell, assign, lease or otherwise dispose
of any of the Collateral and (from and after the First Amendment Effective
Date) Inventory Collateral (and, in the case of Inventory Collateral, except as
required under the Working Capital Facility), whether now owned or hereafter
acquired, except:





     (a)  the Liens in favor of Lender under this Credit Agreement, the other
Fundamental Documents and any other document contemplated hereby or thereby;





     (b)  to the extent incurred after the Closing Date, Liens customarily
granted or incurred in the ordinary course of business with regard to services
rendered by carriers, warehouses, suppliers of materials and equipment,
mechanics and repairmen and other Liens imposed by Applicable Law which
obligations are not yet due and payable (unless such obligations are being
contested in good faith and with respect to which appropriate reserves have
been established in accordance with GAAP);





     (c)  existing Liens listed on Schedule 5.2(c) hereto;





     (d)  to the extent incurred after the Closing Date, Liens arising out of
attachments, judgments or awards as to which an appeal or other appropriate
proceedings for contest or review are timely commenced (and as to which
foreclosure and other enforcement proceedings shall not have been commenced (unless fully bonded or otherwise
effectively stayed)) and as to which appropriate reserves have been established
in accordance with GAAP;





     (e)  to the extent incurred after the Closing Date, Liens for taxes,
assessments or other governmental charges or levies not yet due and payable, or
the validity or amount of which





26







 


is currently being contested in good faith by
appropriate proceedings and for which reserves have been set aside on the books
of Borrower, in each case pursuant to and in accordance with the terms of
Section 4.8 hereof;





     (f)  to the extent incurred after the Closing Date, easements (including,
without limitation, reciprocal easement agreements and utility agreements),
rights of way requirements, restrictions (including, without limitation, zoning
restrictions), covenants, consents, reservations, encroachments, variations and
other similar restrictions, charges, encumbrances (whether or not recorded)
(but specifically excluding rights of first refusal, options and other
contractual rights to sell, assign or otherwise dispose of any Collateral or
any interest therein) on any Collateral which, in the aggregate, (i) do not
materially detract from the value of the applicable Collateral subject thereto,
(ii) do not materially interfere with the ordinary conduct of the business of
Borrower or any lessee under a lease or (iii) do not materially impair the use
of the applicable item of Collateral by Borrower or any lessee under a lease;





     (g)  to the extent incurred after the Closing Date, Liens securing
refinancing Indebtedness permitted by Section 5.1(b); provided, that such Liens
shall by their terms cover only such property or assets as are covered by the
Liens securing the Indebtedness being refinanced and no new or additional
property or assets and any Liens granted with respect to such refinancing
Indebtedness shall be subordinated to at least the same extent as the existing
Liens securing such Indebtedness being refinanced;





     (h)  to the extent incurred after the Closing Date, Liens securing purchase
money Indebtedness permitted by Section 5.1(g); provided that such Liens shall
by their terms cover only such property or assets as are covered by the Liens
securing such Indebtedness; [and]





     (i)  to the extent incurred after the Closing Date, Liens arising from the
filing of UCC financing statements or other documents (x) as to which Borrower
has not authorized such filing, (y) as to which Borrower shall promptly, after
it has knowledge thereof, use reasonable efforts to obtain a termination or
release, and (z) which have not been in place for more than 30 days after
Borrower has knowledge thereof[.]; and





     (j) Liens existing as of the Closing Date on the Inventory Collateral
securing the obligations under the Working Capital Facility.





     SECTION 5.3 Merger, Sale of Assets, Purchases, etc. Whether in one
transaction or a series of transactions, wind up, liquidate or dissolve its
affairs, or enter into any transaction of merger or consolidation, or sell or
otherwise dispose of any of the Collateral or (from and after the First
Amendment Effective Date) Inventory Collateral or agree to do or suffer any of
the foregoing, except for (i) sales or dispositions by Borrower of up to ten
(10) of the Fee Properties for fair market value in arms-length transactions,
the Net Cash Proceeds of which are applied as mandatory prepayments of the Loans as required by
Section 1.9(b) hereof, and (ii) the dissolution, liquidation, winding up or
merger of the Borrower’s Subsidiaries.





     SECTION 5.4 Places of Business; Change of Name. Change the location of
its chief executive office or principal place of business (except to another
location in Troy, Michigan with prior written notice to Lender) or any of the
locations where it keeps any portion





27







 


of the books and records with respect to
the Collateral and (from and after the First Amendment Effective Date)
Inventory Collateral, change its name or change its jurisdiction of
incorporation or organization, without in each case (i) giving Lender thirty
(30) days prior written notice of such change and (ii) filing any additional
UCC financing statements, Security Documents and such other documents requested
by either Lender to maintain perfection of the security interest of Lender in
the Collateral and (from and after the First Amendment Effective Date)
Inventory Collateral.





     SECTION 5.5 Sale and Leaseback. Enter into any arrangement with any
Person or Persons, whereby in contemporaneous transactions Borrower sells
essentially all of its right, title and interest in an asset and, in connection
therewith, acquires, leases or licenses back the right to use such asset,
except to the extent the asset subject to such sale and leaseback arrangement
was sold by Borrower in a transaction permitted by Section 5.3 hereof.





     SECTION 5.6 Changes to Material Agreements.





     (a)  Consent to any modification or waiver of any material agreement listed
on Schedule 2.9(b) hereto if such modification or waiver would have a Material
Adverse Effect with respect to Borrower. The Borrower will not consent to the
assignment by any other party to any material agreement of any rights,
obligations or interests of such party thereunder except as expressly permitted
by any such material agreement.





     (b)  Amend the [articles]certificate of incorporation or by-laws of
Borrower in any manner which could be reasonably expected to have a Material
Adverse Effect.





     SECTION 5.7 ERISA Compliance. Engage in a “prohibited transaction,” as
defined in Section 406 of ERISA or Section 4975 of the Code, with respect to
any Plan or Multiemployer Plan or knowingly consent to any “party in interest”
or any “disqualified person”, as such terms are defined in Section 3(14) or
ERISA and Section 4975(e)(2) of the Code, respectively, engaging in any
“prohibited transaction”, with respect to any Plan or Multiemployer Plan; or
permit any Plan to incur any “accumulated funding deficiency”, as defined in
Section 302 of ERISA or Section 412 of the Code; or terminate any Plan in a
manner which could result in the imposition of a Lien on any property of
Borrower or any ERISA Affiliate pursuant to Section 4068 of ERISA; or breach or
knowingly permit any employee or officer or any trustee or administrator of any
Plan to breach any fiduciary responsibility imposed under Title I of ERISA with
respect to any Plan; engage in any transaction which would result in the
incurrence of a liability under Section 4069 of ERISA; or fail to make
contributions to a Plan or Multiemployer Plan which could result in the
imposition of a Lien on any property of Borrower or any ERISA Affiliate
pursuant to Section 302(f) of ERISA or Section 412(n) of the Code, if the
occurrence of any of the foregoing events (alone or in the aggregate) would
result in a liability which has a Material Adverse Effect.





     SECTION 5.8 Hazardous Materials. Cause or permit any of its properties or
assets to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials, except in
compliance with all applicable Environmental Laws; nor release, discharge,
dispose of or permit or suffer any release or disposal as a result of any
intentional act or omission on its part of Hazardous Materials onto any such
property or asset





28







 


in violation of any Environmental Law or in a manner that
could result in liability under any Environmental Law, except as are not
reasonably likely to have a Material Adverse Effect.





     SECTION 5.9 Transactions with Subsidiaries. Except as otherwise permitted
hereunder, sell or transfer any property to, or sell, convey or purchase any
assets from, or enter into any other transaction (whether material or
otherwise) with, make any investment with or to, or engage in any other
business arrangement with, any Subsidiary or Affiliate of Borrower, or enter
into an agreement to do any of the foregoing.





6. EVENTS OF DEFAULT






     SECTION 6.1 Events of Default. In the case of the happening and during
the continuance of any of the following events (herein called “Events of
Default”):





     (a)  any representation, warranty, certification or statement made by
Borrower in this Credit Agreement or any other Fundamental Document to which it
is a party or in connection with this Credit Agreement or any Fundamental
Document or any statement or representation made by or on behalf of Borrower in
any report, financial statement, certificate or other document furnished to
Lender pursuant to, or in connection with, this Credit Agreement or any other
Fundamental Document, shall prove to have been false or misleading in any
material respect when made or delivered;





     (b)  default shall be made in the payment of principal of any of the Loans
as and when due and payable, whether at the due date thereof, by reason of
maturity, mandatory prepayment, acceleration or otherwise;





     (c)  default shall be made in the payment of interest on the Loans, the
Fees, or other amounts payable to Lender under this Credit Agreement, 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 by acceleration thereof or otherwise and
such default shall continue unremedied for two (2) Business Days, provided,
however, that such two Business Day period shall be extended to five (5)
Business Days if and only if (x) such default relates to amounts other than
interest and (y) no other such default has occurred during the immediately
preceding 12-month period;





     (d)  default shall be made by Borrower in the due observance or performance
of any covenant, condition or agreement contained in Sections 4.4, 4.5 or
Article 5 of this Credit Agreement;





     (e)  default shall be made by Borrower in the due observance or performance
of Section 4.1 of the Credit Agreement, and such default shall continue
unremedied for ten (10) days;





     (f)  default shall be made by Borrower in the due observance or performance
of any other covenant, condition or agreement to be observed or performed
pursuant to the terms of this Credit Agreement or any other Fundamental
Document (other than those covered by paragraphs (a), (b), (c), (d) or (e) of
this Article 6), and such default shall continue unremedied







29








 



for thirty (30)
days after Borrower receives written notice or obtains knowledge of such
occurrence, and Borrower shall not be diligently moving towards curing such
default;





     (g)  default shall be made by Borrower with respect to any payment, when
due, of any Indebtedness in excess of $500,000 of Borrower, or any other
default shall occur, if the effect of such non-payment default is to accelerate
the maturity of such Indebtedness or to permit the holder thereof to cause such
Indebtedness to become due prior to its stated maturity, and such default shall
not be remedied, cured, waived or consented to within the period of grace with
respect thereto; or any such Indebtedness shall become or be declared to be due
and payable prior to its stated maturity;





     (h)  Borrower shall generally not pay its debts as they become due or shall
admit in writing its inability to pay its debts, or shall make a general
assignment for the benefit of creditors; or Borrower shall commence any case,
proceeding or other action seeking to have an order for relief entered on its
behalf as a debtor or to adjudicate it a bankrupt or insolvent or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property or shall file an answer or other pleading in
any such case, proceeding or other action admitting the material allegations of
any petition, complaint or similar pleading filed against it or consenting to
the relief sought therein; or Borrower shall take any action to authorize, or
in contemplation of, any of the foregoing;





     (i)  any involuntary case, proceeding or other action against Borrower
shall be commenced seeking to have an order for relief entered against it as
debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
property, and such case, proceeding or other action (i) results in the entry of
any order for relief against it or (ii) shall remain undismissed for a period
of sixty (60) days;





     (j)  one or more judgment(s) for the payment of money in excess of $500,000
in the aggregate (other than a judgment as to which, and only to the extent, a
reputable insurance company has acknowledged coverage of such claim in writing
or which, but only to the extent, a surety bond has been provided by a
reputable insurance or other company) shall be rendered against Borrower and
either (i) within thirty (30) days from the entry of such judgment, shall not
have been discharged or stayed pending appeal, or shall not have been
discharged within thirty (30) days from the entry of a final order of
affirmance on appeal or (ii) enforcement proceedings shall be commenced by any
creditor on any such judgment;





     (k)  (i) failure by Borrower or any ERISA Affiliate to make any
contributions required to be made to a Plan subject to Title IV of ERISA or a
Multiemployer Plan, (ii) any accumulated funding deficiency (within the meaning of Section 4971(c) of
the Code) shall exist with respect to any Plan (whether or not waived), (iii)
failure by any Plan to satisfy the minimum funding standard required for any
plan year or part thereof under Section 412 of the Code or Section 302 of ERISA
or a waiver of such standard or an extension of any amortization period is





30







 


sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA,
(iv) Borrower or any ERISA Affiliate shall have been notified by the sponsor of
a Multiemployer Plan that it has incurred withdrawal liability to such
Multiemployer Plan, or that a Multiemployer Plan is in reorganization or is
being terminated, (v) a Reportable Event with respect to a Plan shall have
occurred, (vi) the withdrawal by Borrower or any ERISA Affiliate from a Plan
during a plan year in which it was a substantial employer (within the meaning
of Section 4001(a)(2) or 4062(e) of ERISA), (vii) the termination of a Plan, or
the filing of a notice of intent to terminate a Plan under Section 4041(c) of
ERISA, (viii) the institution of proceedings to terminate, or the appointment
of a trustee with respect to, a Plan by the PBGC, (ix) any other event or
condition which could constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or (x)
the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of
ERISA as to any Credit Party or ERISA Affiliate; and the occurrence of any of
the foregoing events, individually or in the aggregate, could reasonably be
expected to result in a liability in excess of $1,000,000;





     (l)  Borrower is liable under or in violation of any Environmental Law
which liability or violation is reasonably likely to have a Material Adverse
Effect and either (i) such liability or violation shall not have been resolved
within thirty (30) days after Borrower has knowledge thereof or (ii)
enforcement proceedings shall be commenced with respect to any such liability
or violation;





     (m)  (i) this Credit Agreement, any Mortgage, or any other Fundamental
Document shall, for any reason, not be or shall cease to be in full force and
effect or shall be declared null and void or any of the Fundamental Documents
shall not give or shall cease to give Lender the Liens, rights, powers and
privileges purported to be created thereby in favor of Lender, superior to and
prior to the rights of all third Persons and subject to no other Liens (other
than Permitted Liens), or (ii) the validity or enforceability of the Liens
granted, to be granted, or purported to be granted, by any of the Fundamental
Documents shall be contested by Borrower or any of its Affiliates;





     (n)  any Event of Default shall occur and be continuing under the Working
Capital Facility;





     (o)  at any time, for any reason, Borrower shall repudiate, or seek to
repudiate, any of its Obligations under any Fundamental Document to which it is
a party; and





     (p)  failure by Borrower, on or before June 19, 2002, to make any payments
required to be made by it under Section 6.02 of the Plan of Reorganization on
account of any executory contract and unexpired lease to be assumed by it under
the Plan of Reorganization;





then, in every such event and at any time thereafter during the continuance of
such event, Lender may take any or all of the following actions, at the same or
different times: (x) terminate forthwith the Commitments and/or (y) declare
the principal of and the interest on the Loans and
the notes evidencing the Loans hereunder and all other amounts payable
hereunder or thereunder to be forthwith due and payable, whereupon the same
shall become and be forthwith due and payable, without presentment, demand,
protest, notice of acceleration or other notice of any kind, all of which are
hereby expressly waived, anything in this Credit Agreement or in any note





31







 


evidencing any Loan hereunder to the contrary notwithstanding. If an Event of
Default specified in subsection (h) or (i) above shall have occurred, the
Commitments shall automatically terminate and the principal of, and interest
on, the Loans and any notes evidencing the Loans hereunder and all other
amounts payable hereunder and thereunder shall automatically become due and
payable without presentment, demand, protest, or other notice of any kind, all
of which are hereby expressly waived, anything in this Credit Agreement or any
note evidencing any Loan hereunder to the contrary notwithstanding. Such
remedies shall be in addition to any other remedy available to Lender pursuant
to Applicable Law or otherwise.





     SECTION 6.2 Certain Remedies. At any time an Event of Default exists or
has occurred and is continuing, Lender shall have all rights and remedies
provided in, and subject to, this Credit Agreement, the other Fundamental
Documents, the UCC and other Applicable Law, all of which rights and remedies
may be exercised without notice to or consent by Borrower, except as such
notice or consent is expressly provided for hereunder or required by Applicable
Law. All rights, remedies and powers granted to Lender hereunder, under any of
the other Fundamental Documents, the UCC or other Applicable Law, are
cumulative and not exclusive, and enforceable in Lender’s discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Credit Agreement or any of the other Fundamental Documents. Lender may at any
time or times, proceed directly against Borrower to collect the Obligations
without prior recourse to the Collateral or Inventory Collateral.





7. MISCELLANEOUS






     SECTION 7.1 Notices. (a) Notices and other communications provided for
herein shall be in writing and shall be delivered addressed:






	 	(i) if to Lender:

KIMCO CAPITAL CORP.

c/o Kimco Realty Corporation

3333 New Hyde Park Drive

New Hyde Park, NY 11042

Attn: Mr. David Samber








	 	With a courtesy copy to:








	 	Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, NY 10178

Attn: Neil E. Herman, Esq.

Facsimile No.: (212) 309-6273

E-mail: nherman@morganlewis.com








	 	(ii) if to Borrower:







32







 



	 	Frank’s Nursery & Crafts, Inc.

[1175 West Long Lake Road]580 Kirts Boulevard, Suite 300

Troy, Michigan [48098]48084

Attn: Mr. [Steven]Alan[Fishman]Minker

[Mr. Larry Lakin]Michael McBride, Esq.








	 	With a courtesy copy to:








	 	[Willkie Farr & Gallagher]Honigman, Miller, Schwartz & Cohn, LLC

2290 First National Building

[787 Seventh]660 Woodward Avenue

[New York, NY 10019-6099]Detroit, Michigan 48226-3583

Attn: [William E. Hiller]Donald Kunz, Esq.

Facsimile No.: [ (212)][728-8111]

E-mail: [whiller@willkie.com]







or such other address as such party may from time to time designate by giving
written notice to the other parties hereunder.





Any failure of any Person giving notice pursuant to this Section, to provide a
courtesy copy to a party as provided herein, shall not affect the validity of
such notice. All notices and other communications given to any party hereto in
accordance with the provisions of this Credit Agreement shall be deemed to have
been given (x) on the fifth Business Day after the date when sent by registered
or certified mail, postage prepaid, return receipt requested, if by mail, (y)
when delivered, if delivered by hand or overnight courier service or (z) when
receipt is acknowledged, if by facsimile communications equipment or e-mail in
each case addressed to such party as provided in this Section or in accordance
with the latest unrevoked written direction from such party.





     (b)  No notice to or demand on Borrower shall entitle Borrower to any other
or further notice or demand in the same, similar or other circumstances.





     SECTION 7.2 Survival of Agreement, Representations and Warranties, etc.
All warranties, representations and covenants made by Borrower herein, in any
other Fundamental Document or in any certificate or other instrument delivered
by it or on its behalf in connection with this Credit Agreement or any other
Fundamental Document shall be considered to have been relied upon by Lender
and, except for any terminations, amendments, modifications or waivers thereof
in accordance with the terms hereof, shall survive the execution and delivery
of this Credit Agreement, the making of the Loans herein contemplated and the
execution and delivery of any notes evidencing any Loan hereunder regardless of
any investigation made by Lender or on its behalf, and shall continue in full
force and effect so long as any Obligation is outstanding and unpaid and so
long as the Commitments have not been terminated. All statements in any such certificate or other instrument shall constitute
representations and warranties by Borrower hereunder.





     SECTION 7.3 Successors and Assigns; Syndications; Loan Sales;
Participations.





33







 


     (a)  Whenever in this Credit Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party; provided, however, that Borrower may not assign its
rights hereunder without the prior written consent of Lender, and all
covenants, promises and agreements by or on behalf of Borrower which are
contained in this Credit Agreement shall inure to the benefit of the successors
and assigns of Lender.





     (b)  The Lender may (but only with the prior written consent of Borrower,
which consent shall not be unreasonably withheld and which consent shall not be
required if at the time an Event of Default has occurred and is then
continuing) assign to an Eligible Assignee all or a portion of its interests,
rights and obligations under this Credit Agreement (including, without
limitation, all or a portion of any Loans at the time owing to it, any note
held by it evidencing such Loans, or all or a portion of its Commitment(s) and
the same portion of all Loans at the time owing to it and any notes held by it
evidencing its Loans) provided, however, that the aggregate amount of the
Commitment and/or Loans of Lender subject to each such assignment shall in no
event be less than $5,000,000 or, if less, the remaining portion of Lender’s
Commitment and/or Loans. The Lender and such assignee shall execute
appropriate documentation (i) evidencing such assignment, which documentation
shall set forth the respective rights and obligations of Lender and such
assignee and (ii) to the extent that Lender shall retain a portion of the
Commitment, appointing Kimco Capital Corp., as agent for Lender and such
assignee(s). Upon the effectiveness of such assignment, the assignee
thereunder shall become a party to this Credit Agreement. The Lender shall
give prompt written notice to Borrower of each assignment made hereunder. The
Borrower will promptly, at its own expense, execute such amendments to the Loan
Documents to which it is a party and such additional documents, and take such
other actions as Lender or the assignee of Lender may reasonably request in
order to give such assignee of Lender the full benefit of the Liens
contemplated by the Fundamental Documents.





     (c)  The Lender may, without the consent of Borrower, sell participations
to one or more banks, mutual funds or other financial institutions in all or a
portion of its rights and obligations under this Credit Agreement (including,
without limitation, all or a portion of any Term Loans at the time owing to it
and any note held by it evidencing such Loans or all or a portion of its
Revolving Credit Commitment and the same portion of all Revolving Credit Loans
(if any) at the time owing to it and any notes held by it evidencing its
Revolving Credit Loans); provided, however, that (i) Lender’s obligations under
this Credit Agreement shall remain unchanged, (ii) such participant shall not
be granted any voting rights or any right to control the vote of Lender under
this Credit Agreement, except that such participant may be granted voting
rights (or a right to control the vote of Lender under this Credit Agreement)
with respect to (A) proposed decreases to interest rates or fees, (B) subject
to Section 7.11 hereof, changes to the amount of the Revolving Credit
Commitment (except for a ratable decrease in the Revolving Credit Commitment),
(C) final maturity of any Loan and fees (in each case, as applicable to such
participant) and (D) releases of all or substantially all of the Collateral or
Inventory Collateral, (iii) Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, (iv) the participating banks or other
entities shall be entitled to the cost protection provisions contained in
Sections 1.12 hereof, but a participant shall not be entitled to receive
pursuant to such provisions an amount larger than its share of the amount to
which Lender granting such participation would have been entitled to receive
and (v) Borrower shall





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continue to deal solely and directly with Lender in
connection with Lender’s and its participants’ rights and obligations under
this Credit Agreement.





     (d)  The Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section, disclose to the
assignee or participant or proposed assignee or participant, any information
relating to Borrower furnished to Lender by or on behalf of Borrower; provided,
that prior to any such disclosure, each such assignee or participant or
proposed assignee or participant shall agree in writing to be bound by the
provisions of Section 7.16 hereof.





     (e)  Any assignment pursuant to subsection (a) of this Section shall
constitute an amendment of the Commitments as of the effective date of such
assignment.





     (f)  Notwithstanding anything contained in this Section Lender may at any
time assign or pledge all or any portion of its rights under this Agreement
without the prior written consent of Borrower to secure extensions of credit to
Lender or in support of obligations owed by Lender; provided that (i) no such
assignment or pledge shall release Lender from any of its obligations hereunder
or substitute any such assignee or pledgee for Lender as a the party hereto and
(ii) the right of any such assignee or pledgee to exercise any of Lender’s the
rights hereunder or to further transfer all or any portion of the rights
pledged or granted to it, whether by means of foreclosure or otherwise shall at
all times be subject to the other terms and provisions of this Section. In
order to facilitate such an assignment, Borrower shall, at the request of
Lender, duly execute and deliver to Lender a note or notes evidencing the Loans
made to Borrower by Lender hereunder.





     SECTION 7.4 Expenses; Documentary Taxes. Whether or not the transactions
hereby contemplated shall be consummated, Borrower agrees to pay (a) all
reasonable out-of-pocket expenses incurred by Lender in connection with, or
arising out of, the performance of due diligence, the negotiation, preparation,
execution, delivery, waiver or modification and administration of this Credit
Agreement and any other documentation contemplated hereby and the making of the
Loans, any Collateral, Inventory Collateral or any Fundamental Document,
including but not limited to, the reasonable out-of-pocket costs of Lender in
connection with the administration of this Credit Agreement, the verification
of financial data or the transactions contemplated hereby, and the reasonable
fees and disbursements of Morgan, Lewis & Bockius LLP, counsel for Lender, and
any other counsel that Lender shall retain and (b) all reasonable out-of-pocket
expenses incurred by Lender in the enforcement or protection (as distinguished
from administration) of the rights and remedies of Lender in connection with
this Credit Agreement, the other Fundamental Documents or any notes evidencing
the Loans hereunder, or as a result of any transaction, action or non-action
arising from any of the foregoing, including but not limited to, the reasonable
fees and disbursements of any counsel for Lender. Such payments shall be made
on the date this Credit Agreement is executed by Borrower and thereafter on
demand. The Borrower agrees that it shall
indemnify Lender from and hold them harmless against any documentary
taxes, assessments or charges made by any Governmental Authority by reason of
the execution and delivery of this Credit Agreement or any notes evidencing any
of the Loans hereunder. The obligations of Borrower under this Section shall
survive the Facility Termination Date, the termination of this Credit Agreement
and the payment of the Loans.





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     SECTION 7.5 Indemnity. The Borrower agrees to indemnify and hold harmless
Lender and its directors, officers, employees, trustees, investments advisors
and agents, and any professionals retained by them (each an “Indemnified
Party”) (to the full extent permitted by Applicable Law) from and against any
and all claims, demands, losses, judgments, damages and liabilities (including
liabilities for penalties) incurred by any of them as a result of, or arising
out of, or in any way related to, or by reason of, any investigation,
litigation or other proceeding (whether or not any Indemnified Party is a party
thereto) related to the entering into and/or performance of this Credit
Agreement or any other Fundamental Document or the use of the proceeds of any
Loans hereunder or the consummation of any other transaction contemplated in
this Credit Agreement or any other Fundamental Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses of an
Indemnified Party to the extent incurred by reason of the gross negligence or
willful misconduct of such Indemnified Party as determined by a final order or
judgment of a court of competent jurisdiction). The foregoing indemnity
agreement includes any reasonable costs incurred by an Indemnified Party in
connection with any action or proceeding which may be instituted in respect of
the foregoing by any other Person either against Lender or in connection with
which any officer or employee of Lender is called as a witness or deponent,
including, but not limited to, the reasonable fees and disbursements of Morgan,
Lewis & Bockius LLP, counsel to Lender, and any out-of-pocket costs incurred by
Lender in appearing as a witness or in otherwise complying with legal process
served upon them. The obligations of Borrower under this Section shall survive
the Facility Termination Date, the termination of this Credit Agreement and the
payment of the Loans and shall inure to the benefit of any Person who was a
Lender notwithstanding such Person’s assignment of all its Loans and its
Revolving Credit Commitment hereunder.





     If Borrower shall fail to do any act or thing which it has covenanted to
do hereunder or under a Fundamental Document, or any representation or warranty
of Borrower shall be breached, Lender may (but shall not be obligated to) upon
two Business Days’ notice to Borrower do the same or cause it to be done or
remedy any such breach, and there shall be added to the Obligations hereunder
the cost or expense incurred by Lender in so doing, and any and all amounts
expended by Lender in taking any such action shall be repayable to it upon its
demand therefor and shall bear interest at a rate per annum of 2% in excess of
the rate set forth in Section 1.10(a) from the date advanced to the date of
repayment.





     SECTION 7.6 CHOICE OF LAW. THIS CREDIT AGREEMENT, AND ANY NOTE EVIDENCING
ANY OF THE LOANS HEREUNDER, AND THE OTHER FUNDAMENTAL DOCUMENTS (EXCEPT AS MAY
BE OTHERWISE PROVIDED FOR THEREIN) SHALL IN ALL RESPECTS BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES AND BY FEDERAL LAW TO THE EXTENT APPLICABLE; PROVIDED, HOWEVER,
THAT WITH RESPECT TO ANY SECURITY DOCUMENT FILED IN A JURISDICTION OUTSIDE THE
STATE OF NEW YORK, THE LAWS OF SUCH JURISDICTION WHERE SUCH SECURITY DOCUMENT
WAS FILED SHALL APPLY.





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     SECTION 7.7 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT OR
THE SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY HERETO
ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THE
PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH
OTHER PARTIES HAVE RELIED, ARE RELYING AND WILL RELY IN ENTERING INTO THIS
CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT. ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF ANY OTHER PARTY TO THE WAIVER OF ITS RIGHTS TO TRIAL
BY JURY.





     SECTION 7.8 WAIVER WITH RESPECT TO DAMAGES. THE BORROWER ACKNOWLEDGES
THAT THE LENDER HAS NO FIDUCIARY RELATIONSHIP WITH, OR FIDUCIARY DUTY TO, THE
BORROWER ARISING OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY
OTHER FUNDAMENTAL DOCUMENT AND THE RELATIONSHIP BETWEEN THE BORROWER AND THE
LENDER IN CONNECTION THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER SHALL NOT ASSERT, AND THE
BORROWER HEREBY WAIVES, ANY CLAIMS AGAINST THE LENDER 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 CREDIT AGREEMENT, ANY FUNDAMENTAL DOCUMENT, ANY AGREEMENT OR
INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.





     SECTION 7.9 No Waiver. No failure on the part of Lender to exercise, and
no delay in exercising, any right, power or remedy hereunder, under any note
evidencing any Loan hereunder, or any other Fundamental Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law.





     SECTION 7.10 Extension of Payment Date. Except as otherwise specifically
provided in Article 1 hereof, should any payment or prepayment of principal of
or interest on any of the Loans or any other amount due hereunder, become due
and payable on a day other than a Business Day, the due date of such payment or
prepayment shall be extended to the next





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succeeding Business Day and, in the
case of a payment or prepayment of principal, interest shall be payable thereon
at the rate herein specified during such extension.





     SECTION 7.11 Amendments, etc. Unless otherwise specifically provided
herein any provision of this Credit Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by Borrower and
Lender.





     SECTION 7.12 Severability. Any provision of this Credit Agreement or of
any note evidencing any Loan hereunder which is invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without invalidating the remaining provisions hereof, and any such invalidity,
illegality or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.





     SECTION 7.13 SERVICE OF PROCESS. EACH PARTY HERETO (EACH A “SUBMITTING
PARTY”) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF
THE STATE OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SITTING IN NEW YORK
COUNTY, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
OR BASED UPON THIS CREDIT AGREEMENT (INCLUDING, BUT NOT LIMITED TO THE SUBJECT
MATTER HEREOF AND ANY OTHER FUNDAMENTAL DOCUMENT AND THE SUBJECT MATTER
THEREOF). EACH SUBMITTING PARTY TO THE EXTENT PERMITTED BY APPLICABLE LAW (A)
HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR
OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN THE
ABOVE-NAMED COURTS, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE
JURISDICTION OF SUCH COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM
ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THIS CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF AND ANY OTHER
FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER THEREOF (AS APPLICABLE) MAY NOT BE
ENFORCED IN OR BY SUCH COURT AND (B) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY
SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT
COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT
MATTER. EACH SUBMITTING PARTY HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT
THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TO IT PURSUANT TO SECTION 7.1
HEREOF. EACH SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION AND
CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF EACH
OF THE OTHER SUBMITTING PARTIES. FINAL JUDGMENT AGAINST ANY SUBMITTING PARTY IN ANY
SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A
CERTIFIED OR TRUE COPY OF WHICH





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SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF
THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF THE SUBMITTING PARTY THEREIN
DESCRIBED OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF
SUCH OTHER JURISDICTION.





     SECTION 7.14 Headings. Section headings used herein and the Table of
Contents are for convenience only and are not to affect the construction of or
be taken into consideration in interpreting this Credit Agreement.





     SECTION 7.15 Execution in Counterparts. This Credit Agreement may be
executed in any number of counterparts, each of which shall constitute an
original, but all of which taken together shall constitute one and the same
instrument. Signature pages may be detached from counterpart documents and
reassembled to form duplicate executed originals. Delivery of an executed
signature page to this Credit Agreement by facsimile shall be as effective as
delivery of a manually executed counterpart of this Credit Agreement.





     SECTION 7.16 Confidentiality. The Lender understands that some of the
information furnished to it pursuant to this Credit Agreement may be received
by it prior to the time that such information shall have been made public, and
Lender hereby agrees that it will keep all the information received by it in
connection with this Credit Agreement confidential except that Lender shall be
permitted to disclose information (i) to such of its officers, directors,
employees, agents, representatives, auditors, consultants, advisors, trustees,
investments advisors, lawyers and affiliates as need to know such information
in connection with this Credit Agreement or any other Fundamental Document;
(ii) to a proposed assignee or participant in accordance with Section 7.3(f)
hereof; (iii) to the extent required by Applicable Law and regulations or by
any subpoena or other legal process (in any which event Lender shall promptly
notify Borrower to the extent not prohibited by Applicable Law); (iv) to the
extent requested by any bank regulatory authority or other regulatory
authority; (v) to the extent such information (A) becomes publicly available
other than as a result of a breach of this Credit Agreement, (B) becomes
available to Lender on a nonconfidential basis from a source other than
Borrower or any of its Affiliates, which source is not known to Lender to be
prohibited from transmitting the information to Lender by any contractual or
other obligation to Borrower or (C) was available to Lender on a
nonconfidential basis prior to its disclosure to Lender; (vi) to the extent
Borrower shall have consented to such disclosure in writing; or (vii) in
connection with the servicing of the Loans hereunder, in protecting or
enforcing any rights and/or remedies in connection with any Fundamental
Document or in any proceeding in connection with any Fundamental Document or
any of the transactions contemplated thereby.





     SECTION 7.17 Entire Agreement. This Credit Agreement (including the
Exhibits and Schedules hereto) represents the entire agreement of the parties
with regard to the subject matter hereof and the terms of any letters and other
documentation entered into between any of the parties hereto (other than the
Commitment Letter) prior to the execution
of this Credit Agreement which relate to Loans to be made hereunder shall
be replaced by the terms of this Credit Agreement.





     SECTION 7.18 Enforcement of Rights; No Obligation to Marshall Assets. In
enforcing any rights under this Credit Agreement or any other Fundamental
Document, Lender





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shall not be required to resort to any particular security,
right or remedy through foreclosure or otherwise, or to proceed in any
particular order of priority, or to otherwise act or refrain from acting; and,
to the extent permitted by Applicable Law, Borrower hereby waives and releases
any right to a marshaling of assets or a sale in inverse order of alienation.





     SECTION 7.19 Reproduction of Documents. The Credit Agreement, all
documents constituting Schedules or Exhibits hereto, and all documents relating
hereto received by a party hereto, including, without limitation: (a)
consents, waivers and modifications that may hereafter be executed; (b) the
Fundamental Documents; and (c) financial statements, certificates, and other
information previously or hereafter furnished to Lender may be reproduced by
Lender by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process. Each of the parties hereto agrees and
stipulates that, to the extent permitted by Applicable Law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such party in the
regular course of business) and that, to the extent permitted by applicable
law, any enlargement, facsimile, or further reproduction of such reproduction
shall likewise be admissible in evidence.





     SECTION 7.20 Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law and without order
of or application to any court, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final, but excluding trust
funds) at any time held and other indebtedness at any time owing by Lender to
or for the credit or the account of Borrower against any and all of the
Obligations, irrespective of whether or not Lender shall have made any demand
under any Fundamental Document and although the Obligations may not have been
accelerated. The rights of Lender under this Section are in addition to other
rights and remedies which Lender may have upon the occurrence and during the
continuance of any Event of Default.





8. GRANT OF SECURITY INTEREST; REMEDIES






     SECTION 8.1 Security Interests. (a) As security for the due and
punctual payment of the Obligations (including interest accruing on and after
the filing of any petition in bankruptcy or of reorganization of Borrower
whether or not post filing interest is allowed in such proceeding), Borrower
hereby mortgages, pledges, assigns, transfers, sets over, conveys and delivers
to Lender and grants to Lender (i) a first priority security interest in the
Collateral (other than the Additional Property pending the satisfaction by
Borrower or waiver by Lender of the condition subsequent set forth in Section
7(b) of the First Amendment and, if satisfied, to the extent that the
Additional Property is subject to an existing first priority mortgage) and the
proceeds thereof, including, without limitation, the
Assigned Lease Proceeds and (ii) from and after the First Amendment
Effective Date, a security interest in the Inventory Collateral and the
proceeds thereof.





     (b)  It is expressly agreed and understood by Borrower that, with respect
to the Assigned Lease Proceeds, the foregoing security interests shall apply to
any future sale of the underlying lease whether such underlying lease is sold
individually or as a package, whether sold





40







 


as part of a merger or consolidation
or “going concern” sale of Borrower or its assets, and whether sold pursuant to
Section 363 or Section 365 of the Bankruptcy Code or otherwise. It is further
expressly agreed and understood by Borrower that the Lien and security interest
granted by Borrower to Lender herein in the Assigned Lease Proceeds shall also
apply and be fully enforceable in any future or subsequent bankruptcy filing by
Borrower under Chapter 7 or 11 of the Bankruptcy Code and in any bankruptcy
court as well as in Borrower’s existing bankruptcy case in the Bankruptcy
Court.





     (c)  It is the express intention of Borrower that Lender be treated in all
respects as a secured lender in any subsequent bankruptcy case of Borrower
under Chapter 7 or 11 and in any bankruptcy court and that Lender be treated as
a secured creditor under Section 506 of the Bankruptcy Code with a duly
perfected Lien and mortgage in all of Borrower’s Collateral and the proceeds
thereof, regardless of whether any such Collateral or any proceeds thereof is
conveyed under Section 363 or 365 of the Bankruptcy Code or by any other means
including, but not limited to, any secured creditor sale.





     (d)  Any Assigned Lease Proceeds received by Borrower shall be immediately
paid to Lender, provided, however, that prior to such payment, such Assigned
Lease Proceeds shall (i) be deemed at all times to be held by Borrower in trust
for the benefit of Lender, (ii) be deposited in the Kimco Collateral Account,
and (iii) at no time be deposited or held in either the Concentration Account
(as defined in the Working Capital Facility) or any deposit account whose
balances are transferred to such Concentration Account under the Working
Capital Facility.





     (e) It is the express intention of Borrower and Lender that all of
Lender’s rights with respect to its security interest in and to Inventory
Collateral be, and are hereby made, subject to the terms and conditions of the
Intercreditor Agreement.





     SECTION 8.2 Use of Collateral. So long as no Event of Default shall have
occurred and be continuing, and subject to the various provisions and
limitations of this Credit Agreement and the other Fundamental Documents,
Borrower may use the Collateral and (from and after the First Amendment
Effective Date) the Inventory Collateral in any lawful manner and as permitted
by the provisions of this Credit Agreement and the other Fundamental Documents.





     SECTION 8.3 Borrower to Hold in Trust. Upon the occurrence and during the
continuance of an Event of Default, Borrower will, upon receipt by it of any
revenue, income, proceeds, profits or other sums in which a security interest
is granted by this Article 8 or by the other Fundamental Documents, payable
pursuant to any agreement or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the sum or instrument in trust for Lender, segregate such sum or
instrument from
Borrower’s own assets (including segregation from any Concentration
Account (as defined in the Working Capital Facility) and any deposit account
whose balances are transferred to such Concentration Account) by, in the case
of any such sum, depositing same into the Kimco Collateral Account and
forthwith, without any notice, demand or other action whatsoever (all notices,
demands, or other actions being expressly waived), endorse, transfer and
deliver any





41







 


such sums or instruments or both, to Lender to be applied to the
repayment of the Obligations in accordance with the provisions of this Credit
Agreement.





     SECTION 8.4 Application of Proceeds on Default. Upon the occurrence and
during the continuance of an Event of Default, all income and/or proceeds from
the Collateral and (from and after the First Amendment Effective Date)
Inventory Collateral shall be applied first toward payment of the reasonable
out-of-pocket costs and expenses paid or incurred by Lender in enforcing this
Credit Agreement or the other Fundamental Documents, in realizing on or
protecting any Collateral and (from and after the First Amendment Effective
Date) Inventory Collateral and in enforcing or collecting any Obligations,
including, without limitation, court costs, reasonable attorneys’ fees and
expenses and reasonable financial consultants’ fees incurred by Lender and then
to the indefeasible payment in full in cash of the Obligations in accordance
with the provisions of this Credit Agreement. Any amounts remaining after such
indefeasible payment in full shall be remitted to Borrower or as a court of
competent jurisdiction may otherwise direct.





     SECTION 8.5 Power of Attorney. Upon the occurrence and during the
continuance of an Event of Default (a) Borrower does hereby irrevocably make,
constitute and appoint Lender or any of its officers or designees its true and
lawful attorney-in-fact with full power in the name of Lender, such other
Person or Borrower to receive, open and dispose of all mail addressed to
Borrower, and to endorse any notes, checks, drafts, money orders or other
evidences of payment relating to the Collateral and (from and after the First
Amendment Effective Date) Inventory Collateral that may come into the
possession of Lender with full power and right to cause the mail of such
Persons to be transferred to Lender’s own offices or otherwise, and to do any
and all other acts necessary or proper to carry out the intent of this Credit
Agreement and the grant of the security interests hereunder and under the
Fundamental Documents, and Borrower does hereby ratify and confirm all that
Lender or its substitutes shall properly do by virtue hereof, and (b) Borrower
does hereby further irrevocably make, constitute and appoint Lender or any of
its officers or designees its true and lawful attorney-in-fact in the name of
Lender, such other Person or Borrower (i) to enforce all of Borrower’s rights
under and pursuant to all agreements with respect to the Collateral and (from
and after the First Amendment Effective Date) Inventory Collateral, all for the
sole benefit of Lender, (ii) to enter into and perform such agreements as may
be necessary in order to carry out the terms, covenants and conditions of the
Fundamental Documents that are required to be observed or performed by
Borrower, (iii) to execute such other and further mortgages, pledges and
assignments of the Collateral and (from and after the First Amendment Effective
Date) Inventory Collateral, and related instruments or agreements, as Lender
may reasonably require for the purpose of perfecting, protecting, maintaining
or enforcing the security interests granted to Lender hereunder and under the
other Fundamental Documents, and (iv) to do any and all other things necessary
or proper to carry out the intention of this Credit Agreement and the grant of
the security interests hereunder and under the other Fundamental Documents. The
Borrower
hereby ratifies and confirms in advance all that Lender as such
attorney-in-fact or its substitutes shall properly do by virtue of this power
of attorney in accordance with the terms hereof.





     SECTION 8.6 Financing Statements, Direct Payments. The Borrower hereby
authorizes Lender to file UCC financing statements and any amendments thereto
or continuations thereof and any other appropriate security documents or
instruments and to give





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any notices necessary or desirable to perfect its Lien
on the Collateral and (from and after the First Amendment Effective Date)
Inventory Collateral and proceeds thereof, in all cases without the signature
of Borrower or to execute such items as attorney-in-fact for Borrower;
provided, that Lender shall provide copies of any such documents or instruments
to Borrower. The Borrower further authorizes Lender upon the occurrence of a
default under Article 6(b) or Article 6(c) hereof, and during the continuation
of any such default, to notify any tenants that all sums payable to Borrower
relating to the Collateral shall be paid directly to Lender.





     SECTION 8.7 Further Assurances. Upon the request of Lender, Borrower
hereby authorizes Lender to file UCC financing statements and any amendments
thereto or continuations thereof and any other appropriate security documents
or instruments and to give any notices necessary or desirable to perfect its
Lien on the Collateral and (from and after the First Amendment Effective Date)
Inventory Collateral and proceeds thereof, in all cases without the signature
of Borrower or to execute such items as attorney-in-fact for Borrower;
provided, however that Lender shall provide copies of any such documents or
instruments to Borrower. The Borrower further authorizes Lender upon the
occurrence of a default under Article 6(b) or Article 6(c) hereof, and during
the continuation of any such default, to notify any tenants that all sums
payable to Borrower relating to the Collateral and (from and after the First
Amendment Effective Date) Inventory Collateral shall be paid directly to
Lender.





     SECTION 8.8 Termination and Release. (a) The security interests granted
under this Article 8 shall terminate on the Facility Termination Date. Upon
request by Borrower (and at its sole expense) following such termination,
Lender will take all reasonable action and do all things reasonably necessary,
including executing UCC termination statements, to terminate the security
interest granted to it hereunder and under the other Fundamental Documents.





     (b)  Upon the written request of Borrower, Lender shall at the sole cost
and expense of Borrower release its security interest, if any, in any
Collateral or Inventory Collateral sold, transferred or otherwise disposed of
by Borrower to the extent such sale, transfer or other disposition is permitted
by, and made in accordance with the terms of, this Credit Agreement.





     (c)  Upon payment in full of all of the Obligations and termination of the
Commitments (except by reason of the occurrence and continuance of an Event of
Default and the exercise of any remedies hereunder or under any other
Fundamental Document), deliver in recordable form upon the written request of
Borrower, at Borrower’s expense, to the person or entity making such payment,
at the election of such person or entity, either (i) (x) satisfactions of
Mortgage, or ([ii]y) if permitted by applicable law, an assignment without
recourse representation or warranty, of its right, title and interest in Mortgages,
and (ii) UCC termination statements with respect to the Inventory Collateral,
Assigned Lease Proceeds, other Collateral constituting cash and Proceeds
thereof.





     SECTION 8.9 Remedies Not Exclusive. The remedies conferred upon or
reserved to Lender in this Article 8 are intended to be in addition to, and not
in limitation of, any other remedy or remedies available to Lender under this
Credit Agreement, the other Fundamental Documents and applicable law. Without
limiting the generality of the foregoing,





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Lender shall have all rights and
remedies of a secured creditor under Article 9 of the UCC and under any other
Applicable Law.





     SECTION 8.10 Continuation and Reinstatement. The Borrower further agrees
that the security interest granted hereunder shall continue to be effective or
be reinstated, as the case may be, if at any time payment or any part thereof
of any Obligation is rescinded or must otherwise be restored by Lender upon the
bankruptcy or reorganization of Borrower or otherwise.





9. DEFINITIONS






     For the purposes hereof unless the context otherwise requires, all
references to Sections, Exhibits and Schedules shall be deemed references to
Sections of, and Exhibits and Schedules to, this Credit Agreement. The
following terms shall have the meanings indicated. All accounting terms not
otherwise defined herein shall have the respective meanings accorded to them
under GAAP and all terms defined in the UCC and not otherwise defined herein
shall have the respective meanings accorded to them therein. Whenever the
context may require, any pronoun shall include the masculine, feminine and
neuter forms. Unless the context otherwise requires, any of the following
terms may be used in the singular or the plural, depending on the reference:





     “Accounting Period” shall mean a four-week calendar period within a fiscal
year of Borrower with the first such period commencing on the first day of a
fiscal year and each subsequent such four-week calendar period commencing at
the end of the immediately preceding period such that there are thirteen
four-week periods in each fiscal year, provided, that the thirteenth such
period of any fiscal year may be a five-week period.





     “Additional Property” shall have the meaning given to such term in the
First Amendment.





     “Additional Warrant Agreement” shall mean that certain Stock Purchase
Warrant, dated as of January 23, 2003, and issued to Kimco Realty Services,
Inc.





     “Affiliate” shall mean with respect to any Person (including Borrower),
any other Person which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, a Person shall be deemed to be “controlled by” another Person if
such latter Person possesses, directly or indirectly, power either to (i) vote
fifteen percent (15%) or more of the securities or other ownership interests
having ordinary voting power for the election of directors (or the equivalent)
of such controlled Person or (ii) direct or cause the direction of the management and policies of such
controlled Person whether by contract or otherwise. For purposes of this
definition, neither Lender nor any of its affiliates shall be included in the
definition of the term “Affiliate” hereunder.





     “Affiliated Group” shall mean a group of Persons, each of which is an
Affiliate of some other Person in the group.





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     “Applicable Law” shall mean all applicable provisions of statutes, rules,
regulations and orders of the United States, any state thereof or municipality
therein or of any foreign governmental body or of any regulatory agency
applicable to the Person in question, and all orders and decrees of all courts
and arbitrators in proceedings or actions in which the Person in question is a
party.





     “Assigned Lease Proceeds” shall mean the proceeds of any assignment, sale,
lease or sublease or any other conveyance or transfer of any of the Leased
Properties and any of the other properties listed on Schedule 2.14(b). For the
avoidance of doubt, “Assigned Lease Proceeds” specifically includes any
proceeds from any future assignment, sale, lease or sublease or any other
conveyance or transfer of any of such leases whether assigned, sold, leased or
subleased individually or as a package with other assets, whether assigned,
sold, leased or subleased as part of a merger or consolidation or “going
concern” sale of Borrower or any of Borrower’s assets, and whether assigned,
sold, leased or subleased or otherwise conveyed or transferred pursuant to
Section 363 or Section 365 of the Bankruptcy Code or otherwise in any future or
subsequent bankruptcy filing by Borrower under Chapter 7 or 11 of the
Bankruptcy Code and in any bankruptcy court as well as in Borrower’s existing
bankruptcy case in the Bankruptcy Court.





     “Authorized Officer” shall mean, with respect to Borrower, the president,
vice president, chief financial officer, chief accounting officer, secretary or
treasurer.





     “Bankruptcy Code” shall mean the Bankruptcy Reform Act of 1978, as
heretofore and hereafter amended, as codified at 11 U.S.C. § 101 et seq.





     “Bankruptcy Court” shall mean the United States Bankruptcy Court for the
District of Maryland (Baltimore Division).





     “Borrower” shall have the meaning given to such term in the initial
paragraph of this Credit Agreement.





     “Borrowing” shall mean a Loan or group of Loans of the same Tranche.





     “Borrowing Certificate” shall mean a borrowing certificate, substantially
in the form of Exhibit A hereto, to be delivered by Borrower to Lender in
connection with each Borrowing.





     “Business Day” shall mean any day other than a Saturday, Sunday or other
day on which banks are required or permitted to close in the State of New York.





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





     “Capital Stock” shall mean (i) with respect to corporate stock, any and
all shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) corporate stock,
including without limitation, any Preferred Stock or (ii) with respect to any
other evidence of beneficial ownership of any entity which is not a





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corporation, any and all partnership interests or any other equity interests or
evidences of beneficial ownership, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated) a
partnership interest or other equity interest or evidence of beneficial
ownership.





     “Closing Date” shall mean the date on which the conditions precedent set
forth in Section 3.1 hereof have been satisfied or waived.





     “Code” shall mean the Internal Revenue Code of 1986, as heretofore and
hereafter amended, as codified at 26 U.S.C. § 1 et seq., and the applicable
regulations promulgated thereunder, or any successor provision thereto.





     “Collateral” shall mean, collectively, the Mortgaged Property, each Fee
Property, each Leased Property, the Assigned Lease Proceeds, the Kimco
Collateral Account and all funds deposited or held therein and (from and after
the date on which the condition subsequent set forth in Section 7(b) of the
First Amendment has been satisifed) the Additional Property, and all of the
proceeds of any kind of the foregoing.





     “Commitment” shall mean any of the commitments of Lender to make Loans,
i.e., whether the Term Loan Commitment or the Revolving Credit Commitment.





     “Commitment Letter” means that certain letter agreement, dated February 8,
2002, between Lender and Borrower.





     “Common Stock” shall have the meaning given to such term in Section 2.18.





     “Congress” shall mean Congress Financial Corporation (Central).





     “Credit Agreement” shall have the meaning given to such term in the
initial paragraph of this agreement.





     “Default” shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.





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





     “Eligible Assignee” shall mean any (x) Affiliate of Lender or (y)
commercial bank, insurance company, investment or mutual fund or other entity
with assets of at least $100,000,000 that is an “accredited investor” (as
defined in Regulation D under the Securities
Act) and which extends credit, buys loans and is in the business of
lending as one of its businesses.





     “Environment” shall mean any surface or subsurface water, groundwater,
water vapor, surface or subsurface land, air, fish, wildlife, microorganisms
and all other natural resources.





     “Environmental Claim” shall mean any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for





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information, proceedings, or other
written communication, whether criminal or civil, pursuant to or relating to
any applicable Environmental Law by any Person (including, but not limited to,
any Governmental Authority, private person and citizens’ group) based upon,
alleging, asserting, or claiming any actual or potential (i) violation of or
liability under any Environmental Law, (ii) violation of any Environmental
Permit, or (iii) liability for investigatory costs, cleanup costs, removal
costs, remedial costs, response costs, natural resource damages, damage,
property damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to the presence, Release, or threatened Release into
the Environment, of any Hazardous Materials at any location, including, but not
limited to, any Premises or any location other than any Premises to which
Hazardous Materials or materials containing Hazardous Materials were sent for
handling, storage, treatment, or disposal.





     “Environmental Clean-up Site” shall mean any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on
any similar state list of sites requiring investigation or cleanup, or which is
the subject of any pending action, suit, proceeding, or investigation related
to or arising from a Release, or a threatened or suspected Release of a
Hazardous Material.





     “Environmental Laws” shall mean any and all applicable federal, state,
local or municipal or foreign laws, rules, orders, regulations, statutes,
ordinances, codes, common law doctrines, decrees or enforceable requirements of
any Governmental Authority regulating, relating to, or imposing liability or
standards of conduct concerning, any Hazardous Material or environmental
protection or worker health and safety, as now or at any time hereafter in
effect, including without limitation, the Clean Water Act also known as the
Federal Water Pollution Control Act (“FWPCA”), 33 U.S.C. § 1251 et seq., the
Clean Air Act (“CAA”), 42 U.S.C. §§ 7401 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act (“FIFRA”), 7 U.S.C. §§ 136 et seq., the Surface
Mining Control and Reclamation Act (“SMCRA”), 30 U.S.C. §§ 1201 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act
(“CERCLA”), 42 U.S.C. § 9601 et seq., the Superfund Amendment and
Reauthorization Act of 1986 (“SARA”), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act (“EPCRA”), 42 U.S.C. § 11001
et seq., the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6901
et seq., the Occupational Safety and Health Act as amended (“OSHA”), 29 U.S.C.
§ 655 and § 657, together, in each case, with any amendment thereto, and the
regulations adopted and the publications promulgated thereunder and all
substitutions thereof.





     “Environmental Permit” shall mean any federal, state, local, provincial,
or foreign permits, licenses, approvals, consents or authorizations required by
any Governmental Authority under or in connection with any Environmental Law.





     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
heretofore and hereafter amended, as codified at 29 U.S.C. § 1001 et seq., and
applicable regulations promulgated thereunder, or any successor provision
thereto.





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     “ERISA Affiliate” shall mean each Person (as defined in Section 3(9) of
ERISA) which is treated as a single employer with Borrower under Section
414(b), (c), (m) or (o) of the Code.





     “Event of Default” shall have the meaning given to such term in Article 6
hereof.





     “Extension Fee” shall have the meaning given to such term in Section
1.4(c) hereof.





     “Extension Period” shall have the meaning given to such term in Section
1.4(c) hereof.





     “Facility Termination Date” shall mean the date on which all of the
Obligations have been indefeasibly paid in full in cash and the Revolving
Credit Commitment and the Term Loan Commitment have been permanently terminated
in their entirety.





     “Fee Property” shall mean each property identified on Schedule 2.14(a).





     “Fees” shall mean all fees payable pursuant to the terms of this Credit
Agreement.





     “Final Order” shall mean an order or judgment of the Bankruptcy Court, or
other court of competent jurisdiction with respect to the subject matter, as to
which no stay has been entered and which has not been reversed, modified,
vacated or overturned and as to which the time to appeal or to seek certiorari
has expired and no appeal or petition for certiorari is pending that (i) would
be material, (ii) related to this Credit Agreement or the Working Capital
Facility or (iii) related to the Plan of Reorganization.





     “First Amendment” shall mean that certain First Amendment and Waiver to
Credit and Security Agreement, dated as of January 23, 2003, between Borrower
and Lender.





     “First Amendment Effective Date” shall mean the date on which all of the
conditions to the effectiveness of the First Amendment shall have been
satisfied or waived.





     “Fundamental Documents” shall mean this Credit Agreement, the Warrant
Agreement, the Additional Warrant Agreement, any note issued to evidence any
Loan hereunder, each Mortgage and each of the other Security Documents, the
[Post-Closing]Intercreditor [Undertaking]Agreement and any other documentation
which is required to be or is otherwise executed by Borrower and delivered in
connection with this Credit Agreement or any of the other documents listed in
this definition.





     “GAAP” shall mean generally accepted accounting principles in the United
States of America as in effect from time to time, consistently applied (except
for accounting changes in response to FASB releases, or other authoritative
pronouncements).





     “Governmental Authority” shall mean any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
or any court, in each case whether of the United States or any foreign
jurisdiction.





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     “Guaranty” shall mean, as to any Person, any direct or indirect obligation
of such Person guaranteeing or intending to guarantee, or otherwise providing
credit support, for any Indebtedness, Capital Lease, dividend or other monetary
obligation (“primary obligation”) of any other Person (the “primary obligor”)
in any manner, whether directly or indirectly, by contract, as a general
partner or otherwise, including, without limitation, any obligation of such
Person, whether or not contingent, (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, or (c) to purchase property, securities or services from the primary
obligor or other Person, in each case, primarily for the purpose of assuring
the performance of the primary obligor of any such primary obligation or
assuring the owner of any such primary obligation of the repayment of such
primary obligation. The amount of any Guaranty shall be deemed to be an amount
equal to (x) the stated or determinable amount of the primary obligation in
respect of which such Guaranty is made (or, if the amount of such primary
obligation is not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder)) or (y) the stated maximum liability under such Guaranty, whichever
is less.





     “Hazardous Materials” shall mean any chemicals, materials, substances or
wastes in any amount or concentration which are now or hereafter become defined
as or included in the definition of “hazardous substances,” “hazardous
materials,” “hazardous wastes,” “extremely hazardous wastes,” “restricted
hazardous wastes,” “toxic substances,” “toxic pollutants,” “pollutants,”
“regulated substances,” “solid wastes,” or “contaminants” or words of similar
import, under any Environmental Law, including petroleum, petroleum
hydrocarbons or petroleum products, petroleum by-products, radioactive
materials, asbestos or asbestos-containing materials, gasoline, diesel fuel,
pesticides, radon, urea formaldehyde, lead or lead-containing materials,
polychlorinated biphenyls.





     “Indebtedness” shall mean (without duplication), at any time and with
respect to any Person, (i) indebtedness of such Person for borrowed money
(whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services purchased (other than amounts
constituting trade payables arising in the ordinary course of business and
payable in accordance with customary trading terms); (ii) all indebtedness of
such Person evidenced by a note, bond, debenture or similar instrument (whether
or not disbursed in full in the case of a construction loan); (iii)
indebtedness of others which such Person has directly or indirectly assumed or
guaranteed or otherwise provided credit support therefor; (iv) indebtedness of
others secured by a Lien on assets of such Person, whether or not such Person
shall have assumed such indebtedness (provided, that if such Person has not
assumed such
indebtedness of another Person then the amount of indebtedness of such
Person pursuant to this clause (iv) for purposes of this Credit Agreement shall
be equal to the lesser of the amount of the indebtedness of the other Person or
the fair market value of the assets of such Person which secures such other
indebtedness); (v) obligations of such Person in respect of letters of credit,
acceptance facilities, or drafts or similar instruments issued or accepted by
banks and other financial institutions for the account of such Person; (vi) any
Guaranty by such Person; (vii) obligations of such Person under Capital Leases;
(viii) all obligations of such Person under any





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Interest Rate Protection
Agreement; and (ix) deferred payment obligations of such Person resulting from
the adjudication or settlement of any litigation.





     “Initial Maturity Date” shall mean the third anniversary of the Closing
Date.





     “Intercreditor Agreement” shall mean that certain Intercreditor Agreement
dated as of January 23, 2003, by Borrower, Lender and Congress a copy of which
is attached hereto as Exhibit E.





     “Interest Deficit” shall have the meaning given to such term in Section
1.12 hereof.





     “Interest Rate Protection Agreement” shall mean any interest rate swap
agreement, interest rate cap agreement, synthetic cap, collar or floor or other
financial agreement or arrangement designed to protect Borrower against
fluctuations in interest rates or to reduce the effect of any such
fluctuations.





     “Inventory Collateral” shall mean all of Borrower’s now owned or hereafter
existing or acquired goods, wherever located, which (a) are leased by Borrower
as lessor, (b) are held by Borrower for sale or lease or to be furnished under
a contract of service, (c) are furnished by Borrower under a contract of
service or (d) consist of raw materials, works in process, finished goods or
materials used or consumed in its business.





     “Kimco Collateral Account” shall have the meaning given to such term in
Section 4.15.





     “Leased Property” shall mean each property identified on Schedule 2.14(b)
with an asterisk.





     “Lender” shall have the meaning given to such term in the initial
paragraph of this Credit Agreement.





     “License” shall have the meaning given to such term in Section 5.1(e).





     “Lien” shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any agreement to grant a
security interest at a future date, any lease in the nature of security, and
the filing of, or agreement to give, any financing statement under the Uniform
Commercial Code of any jurisdiction).





     “Loans” shall mean, collectively, the Term Loan and the Revolving Credit
Loans. A “Loan” shall mean any one of such Loans individually.





     “Material Adverse Effect” shall mean any event or condition that (i) has a
material adverse effect on the business, assets, properties, performance,
operations, condition (financial or otherwise) of Borrower, (ii) materially
impairs the ability of Borrower to perform its respective obligations under any
Fundamental Document to which it is or will be a party or (iii) materially and
adversely affects the Liens granted to Lender or materially impairs the
validity or





50







 


enforceability of, or materially impairs the rights, remedies or
benefits available to Lender; provided, however, that any event or condition
will be deemed to have a “Material Adverse Effect” if such event or condition
when taken together with all other events and conditions occurring or in
existence at such time (including all other events and conditions which, but
for the fact that a representation, warranty or covenant is subject to a
“Material Adverse Effect” exception, would cause such representation or
warranty contained herein to be untrue or such covenant to be breached) would
result in a “Material Adverse Effect”, even though, individually, such event or
condition would not do so.





     “Mortgage” shall mean a Mortgage, Open End Mortgage, Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Financing Statement,
substantially in the form of Exhibit B hereto, executed and delivered by
Borrower to Lender for each Fee Property[
and], each Leased Property and the
Additional Property, and in each case, as such document may be amended, amended
and restated, supplemented or otherwise modified, renewed or replaced from time
to time.





     “Mortgaged Property” shall have the meaning given to such term in the
Mortgages with respect to each Fee Property[
and], each Leased Property and the
Additional Property.





     “Multiemployer Plan” shall mean a plan described in Section 4001(a)(3) of
ERISA to which Borrower or ERISA Affiliate is making or accruing an obligation
to make contributions, or has within any of the five (5) preceding plan years
made or accrued an obligation to make contributions.





     “Net Cash Proceeds” shall mean (a) the aggregate cash proceeds received by
Borrower in a transaction permitted under Section 5.3 hereof (including,
without limitation, as applicable, all cash proceeds received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received) and minus (b) the sum of (i)
reasonable and customary brokerage commissions and other reasonable and
customary fees and direct expenses (including reasonable and customary fees and
expenses of counsel and investment bankers actually paid by Borrower) related
to such transaction, (ii) payments made to retire Indebtedness (other than the
Loans) secured by any assets being sold or otherwise disposed of where payment
of such Indebtedness is required in connection with such sale or disposition,
(iii) reasonable reserves for indemnification obligations and (iv) taxes
payable in connection with such transaction; provided, that with respect to
taxes, expenses shall only include taxes to the extent that taxes are payable
in cash in the current year or in the next succeeding year with respect to the
current year as a direct result of the applicable transaction.





     “Obligations” shall mean (a) all obligations, whether direct or indirect,
contingent or absolute, of every type or description and at any time existing,
of Borrower to make due and punctual payment of principal of and all interest
on the Loans, the Fees, costs and attorneys’ fees and all other monetary
obligations of Borrower to Lender under or in respect of this Credit Agreement,
any note evidencing any of the Loans hereunder, any other Fundamental Document,
and (b) all other obligations of Borrower pursuant to this Credit Agreement or
any other Fundamental Document.





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





     “Permitted Liens” shall mean Liens permitted under Section 5.2 hereof.





     “Person” shall mean any natural person, corporation, division of a
corporation, partnership, limited liability partnership, limited liability
company, trust, joint venture, association, company, estate, unincorporated
organization or government or any agency or political subdivision thereof.





     “Plan” shall mean an employee pension benefit plan within the meaning of
Section 3(2) of ERISA, other than a Multiemployer Plan, maintained or
contributed to by Borrowers, or any ERISA Affiliate, or otherwise pursuant to
which Borrowers could have liability.





     “Plan of Reorganization” shall mean the plan of reorganization filed with
the Bankruptcy Court and confirmed by the order dated May 7, 2002 (as amended)
with respect to those certain cases pending under Chapter 11 of the Bankruptcy
Code in the District of Maryland (Baltimore Division) filed by (i) Borrower
(Case No. 01-52415-JS) and (ii) FNC Holdings, Inc. (Case No. 01-52416-JS),
which cases are jointly administered, together with such amendments as may be
approved by Lender.





     “Post-Closing Undertaking” shall mean that certain Post-Closing
Undertaking, dated as of the date hereof, between Lender and Borrower.





     “Preferred Stock” shall mean Capital Stock of any class or classes
(however designated) which is preferred as to the payment of dividends, or as
to the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of the issuer thereof, over shares of Capital Stock of any other
class of such issuer.





     “Premises” shall mean any real property currently or formerly owned,
leased or operated by Borrower, including, but not limited to, all soil,
surface water, or groundwater thereat.





     “Refinancing Indebtedness” shall have the meaning given to such term in
Section 5.2(j).





     “Release” shall mean any discharging, disposing, emitting, leaking,
pumping, pouring, emptying, injecting, escaping, leaching, dumping or spilling
of any Hazardous Material into the Environment.





     “Reportable Event” shall mean any reportable event as defined in Section
4043(c) of ERISA other than those events as to which the 30-day notice period
is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section
4043.





     “Requirements” shall mean all present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, injunctions, rules, regulations and
requirements of every Governmental Authority having jurisdiction over any item
of Collateral and Inventory





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Collateral and all restrictive covenants applicable
to any item of Collateral and Inventory Collateral.





     “Revolving Credit Commitment” shall mean the commitment of Lender to make
Revolving Credit Loans to Borrower from the Closing Date through the Revolving
Credit Commitment Termination Date up to an aggregate principal amount, at any
one time, not in excess of $[10,000,000,]20,000,000, as such amount may be
reduced from time to time in accordance with the terms of this Credit
Agreement.





     “Revolving Credit Commitment Termination Date” shall mean the earlier of
(i) the Revolving Credit Loan Maturity Date, and (ii) the date on which the
Revolving Credit Commitment shall terminate in accordance with Section 1.7 or
Article 6 hereof.





     “Revolving Credit Loan Maturity Date” shall mean the later of (i) the
Initial Maturity Date and (ii) the date to which such date is extended in
accordance with Section 1.4(c) hereof.





     “Revolving Credit Loans” shall have the meaning given to such term in
Section 1.2(a) hereof.





     “Security Documents” shall mean the Mortgages and any other agreements,
documents or instruments (including, without limitation, UCC financing
statements or other statements or filings pursuant to the UCC or Applicable
Law, as well as any amendments, supplements or modifications thereto) executed
in connection with or relating to Lender’s security interest in the Collateral
and (from and after the First Amendment Effective Date) Inventory Collateral.





     “Subsidiary” shall mean with respect to any Person, any corporation,
association, joint venture, partnership or other business entity (whether now
existing or hereafter organized) of which at least a majority of the voting
stock or other ownership interests having ordinary voting power for the
election of directors (or the equivalent) is, at the time as of which any
determination is being made, owned or controlled by such Person or one or more
subsidiaries of such Person or by such Person and one or more subsidiaries of
such Person.





     “Substitute Lease” shall have the meaning given to such term in Section
5.1(e).





     “Term Loan” shall have the meaning given such term in Section 1.1 hereof.





     “Term Loan Commitment” shall mean the commitment of Lender to make the
Term Loan to Borrower up to an aggregate principal amount, at any one time, not
in excess of
$20,000,000 as such amount may be reduced from time to time in accordance
with the terms of this Credit Agreement.





     “Term Loan Maturity Date” shall mean the earlier of (i) the later of (x)
the Initial Maturity Date and (y) the date to which such date is extended in
accordance with Section 1.4(c) hereof, and (ii) the date on which the Term Loan
shall become due and payable pursuant to Article 6 hereof.





53







 


     “Title Company” shall mean Fidelity National Title Insurance Company of
New York or any other title insurance company of recognized national standing
which is acceptable to Lender in its sole discretion.





     “Tranche” when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Credit
Loans or the Term Loan.





     “UCC” shall mean the Uniform Commercial Code in the State of New York as
in effect from time to time.





     “Warrant Agreement” shall mean those certain Stock Purchase Warrants, each
dated the date hereof, substantially in the form of Exhibit D hereto and issued
to each of Kimco Realty Services, Inc. and Third Avenue Trust, on behalf of the
Third Avenue Real Estate Value Fund Series.





     “Working Capital Facility” shall mean the financing arrangement evidenced
by that certain Loan and Security Agreement, dated as of May [     ]20, 2002 (the
“Congress Credit Agreement”),[ 2002,] among Borrower, Congress, the Lenders
named therein and Congress, as agent, and any agreements, instruments and
documents executed in connection therewith, in each case, as the same may be
amended or modified, and any subsequent financing arrangement that replaces or
refinances such financing arrangement, to the extent such refinancing is
permitted under Section 5.1(j).  In the event that the Working Capital
Facility shall be replaced or refinanced, (x) each reference herein to the
Working Capital Facility shall be deemed to be a reference to such replacement
or refinanced facility and (y) any terms used herein that derive their meanings
from the Working Capital Facility, or sections of the Working Capital Facility
referred to herein, shall be deemed to be a reference to the analogous term or
section in the replacement or refinanced facility.






[Signature [Pages On Following ]Page Follows]






54







 




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






	 	[BORROWER:]








	 	[FRANK’S NURSERY & CRAFTS, INC.]








	 	[By:              

Name:]

[Title:]








	 	[LENDER:]








	 	[KIMCO CAPITAL CORP.]








	 	[By:              

Name:]

[Title:]







55







 



	 	 	 	 	 	 	 
	INTRODUCTORY
STATEMENT
	 	 	1	 
	1.
	THE LOANS
	 	 	 	1	 
	 	SECTION 1.1 
	Term Loan
	 	 	1	 
	 	SECTION 1.2 
	Revolving Credit Loans
	 	 	1	 
	 	SECTION 1.3
	Disbursement of Funds and Notice of Borrowing
	 	 	1	 
	 	SECTION 1.4
	Repayment; Extension of Initial Maturity Date;
Evidence of Debt; Administration
	 	 	2	 
	 	SECTION 1.5
	Interest
	 	 	3	 
	 	SECTION 1.6
	Loan Fee
	 	 	3	 
	 	SECTION 1.7

	Termination and/or Reduction of the
Revolving Credit
	 	 	3	 
	 	SECTION 1.8
	Voluntary Prepayments
	 	 	3	 
	 	SECTION 1.9
	Mandatory Prepayments; Warrant Agreement
	 	 	4	 
	 	SECTION 1.10
	Default Interest
	 	 	5	 
	 	SECTION 1.11
	INTENTIONALLY OMITTED
	 	 	5	 
	 	SECTION 1.12
	Interest Adjustments
	 	 	5	 
	 	SECTION 1.13
	Manner of Payments
	 	 	6	 
	 	SECTION 1.14
	Use of Proceeds
	 	 	6	 
	2.
	REPRESENTATIONS
AND WARRANTIES
	 	6	 
	 	SECTION 2.1
	Existence and Power
	 	 	6	 
	 	SECTION 2.2
	Authority and No Violation
	 	 	[6]7

	 	SECTION 2.3
	Governmental Approval
	 	 	7	 
	 	SECTION 2.4
	Binding Agreements
	 	 	7	 
	 	SECTION 2.5
	Title to Properties
	 	 	[7]8

	 	SECTION 2.6
	Litigation; Judgments
	 	 	8	 
	 	SECTION 2.7
	Taxes
	 	 	[8]9

	 	SECTION 2.8
	Compliance with ERISA
	 	 	9	 
	 	SECTION 2.9
	Agreements
	 	 	[9]10

	 	SECTION 2.10
	Security Documents
	 	 	10	 
	 	SECTION 2.11
	Disclosure
	 	 	10	 
	 	SECTION 2.12
	Environmental Matters
	 	 	10	 
	 	SECTION 2.13
	Compliance with Laws
	 	 	[11]12

	 	SECTION 2.14
	Real Property
	 	 	[11]12






 







 



	 	 	 	 	 	 	 
	 	SECTION 2.15
	No Default
	 	 	12	 
	 	SECTION 2.16
	No Tenants in Possession
	 	 	12	 
	 	SECTION 2.17
	Subsidiaries
	 	 	12	 
	 	SECTION 2.18	Compliance with Securities Laws	 	 	13
	 
	3.
	CONDITIONS TO THE
EFFECTIVENESS OF THIS CREDIT AGREEMENT AND THE MAKING
OF THE LOANS	 	[12]13

	 	SECTION 3.1
	Conditions Precedent to the
Effectiveness of This Credit
Agreement and the Making of the Loans	 	 	[12]13

	 	SECTION 3.2
	Conditions Precedent to Each Revolving
Credit Loan
	 	 	[15]16

	4.
	AFFIRMATIVE
COVENANTS
	 	 	16	 
	 	SECTION 4.1
	Financial Statements and Reports
	 	 	16	 
	 	SECTION 4.2
	Compliance with Laws
	 	 	[16]17

	 	SECTION 4.3
	Maintenance of Properties
	 	 	[17]18

	 	SECTION 4.4
	Notice of Material Events
	 	 	[17]18

	 	SECTION 4.5
	Insurance
	 	 	[18]19

	 	SECTION 4.6
	Books and Records
	 	 	[18]20

	 	SECTION 4.7
	Observance of Agreements
	 	 	[19]20

	 	SECTION 4.8
	Taxes and Charges 
	 	 	[19]20

	 	SECTION 4.9
	Liens
	 	 	[20]21

	 	SECTION 4.10
	Further Assurances; Security Interests
	 	 	[20]21

	 	SECTION 4.11
	Environmental Laws
	 	 	[20]22

	 	SECTION 4.12
	Lease Agreements
	 	 	[22]23

	 	SECTION 4.13
	Use of Proceeds of Loans
	 	 	[22]23

	 	SECTION 4.14
	ERISA Plan Compliance and Reports
	 	 	[22]23

	 	SECTION 4.15
	Kimco Collateral Account
	 	 	[22]23

	 	SECTION 4.16
	Covenants Regarding Inventory
Collateral
	 	 	24

	5.
	NEGATIVE
COVENANTS
	 	 	[23]25

	 	SECTION 5.1
	Limitations on Indebtedness and
Preferred Stock
	 	 	[23]25

	 	SECTION 5.2
	Limitations on Liens
	 	 	[24]26

	 	SECTION 5.3
	Merger, Sale of Assets, Purchases, etc.
	 	 	[25]27

	 	SECTION 5.4
	Places of Business; Change of Name
	 	 	[25]27

	 	SECTION 5.5
	Sale and Leaseback
	 	 	[26]28

	 	SECTION 5.6
	Changes to Material Agreements
	 	 	[26]28






i







 



	 	 	 	 	 	 	 
	 	SECTION 5.7
	ERISA Compliance
	 	 	[26]28

	 	SECTION 5.8
	Hazardous Materials
	 	 	[26]28

	 	SECTION 5.9
	Transactions with Subsidiaries
	 	 	[26]29

	6.
	EVENTS OF
DEFAULT
	 	 	[27]29

	 	SECTION 6.1
	Events of Default
	 	 	29

	 	SECTION 6.2
	Certain Remedies
	 	 	32

	7.
	MISCELLANEOUS
	 	 	 	[30]32

	 	SECTION 7.1
	Notices
	 	 	[30]32

	 	SECTION 7.2
	Survival of Agreement, Representations and
Warranties, etc.
	 	 	[31]33

	 	SECTION 7.3
	Successors and Assigns; Syndications; Loan
Sales; Participations
	 	 	[31]33

	 	SECTION 7.4
	Expenses; Documentary Taxes
	 	 	[32]35

	 	SECTION 7.5
	Indemnity
	 	 	[33]36

	 	SECTION 7.6
	CHOICE OF LAW
	 	 	[34]36

	 	SECTION 7.7
	WAIVER OF JURY TRIAL
	 	 	[34]37

	 	SECTION 7.8
	WAIVER WITH RESPECT TO DAMAGES
	 	 	[34]37

	 	SECTION 7.9
	No Waiver
	 	 	[35]37

	 	SECTION 7.10
	Extension of Payment Date
	 	 	[35]37

	 	SECTION 7.11
	Amendments, etc.
	 	 	[35]38

	 	SECTION 7.12
	Severability
	 	 	[35]38

	 	SECTION 7.13
	SERVICE OF PROCESS
	 	 	[35]38

	 	SECTION 7.14
	Headings
	 	 	[36]39

	 	SECTION 7.15
	Execution in Counterparts
	 	 	[36]39

	 	SECTION 7.16
	Confidentiality
	 	 	[36]39

	 	SECTION 7.17
	Entire Agreement
	 	 	[37]39

	 	SECTION 7.18
	Enforcement of Rights; No Obligation to
Marshall Assets
	 	 	[37]39

	 	SECTION 7.19
	Reproduction of Documents
	 	 	[37]40

	 	SECTION 7.20
	Right of Set-Off
	 	 	[37]40

	8.
	GRANT OF SECURITY
INTEREST; REMEDIES
	 	 	[38]40

	 	SECTION 8.1
	Security Interests
	 	 	[38]40

	 	SECTION 8.2
	Use of Collateral
	 	 	[38]41

	 	SECTION 8.3
	Borrower to Hold in Trust
	 	 	[38]41

	 	SECTION 8.4
	Application of Proceeds on Default
	 	 	[39]42






ii







 



	 	 	 	 	 	 	 
	 	SECTION 8.5 
	Power of Attorney
	 	 	 [39]42
	 
	 	SECTION 8.6  
	Financing Statements, Direct Payments	 	 	 [40]42
	 
	 	SECTION 8.7  
	 Further Assurances	 	 	[40]43
	 
	 	SECTION 8.8 
	Termination and Release 	 	 	 [40]43	 
	 	SECTION 8.9 
	Remedies Not Exclusive 	 	 	 [40]43	 
	 	SECTION 8.10 
	Continuation and Reinstatement 	 	 	[41]43	 
	9.	DEFINITIONS 
	 	 	[41]44	 






	 	 	 
	Schedules	 	
	 
	2.1(a)	 	
List of jurisdictions where Borrower is qualified/not in good standing
	2.5(a)	 	
Matters Affecting Title to Property
	2.5(b)	 	
Defaults under Leases
	2.5(c)	 	
Condemnation Proceedings
	2.5(d)	 	
Contractual Obligations With Respect to Collateral
	2.6	 	
Litigation
	2.7	 	
Taxes
	2.9(b)	 	
Agreements
	2.10	 	
Filing Offices for the Mortgages and Fixture Filings
	2.12	 	
Environmental Matters
	2.14(a)	 	
Fee Properties
	2.14(b)	 	
Leased Properties
	2.14(b)(1)	 	
SNDA Agreements
	2.14(b)(2)	 	
Estoppel Certificates
	2.14(b)(3)	 	
Lessor Consents
	2.14(b)(4)	 	
Lease Modifications
	2.16	 	
Tenants in Possession
	2.17	 	
Subsidiaries
	3.1(c)	 	
Opinion of Willkie, Farr & Gallagher
	5.1(b)	 	
Existing Indebtedness
	5.2(c)	 	
Existing Liens



Exhibits




	 	 	 
	A	 	
Form of Borrowing Certificate
	B	 	
Form of Mortgage
	C	 	
Form of Closing Certificate
	D	 	
Form of Warrant Agreement
	E	 	
Intercreditor Agreement