Exhibit
10.1


 




 





J.P.Morgan


 


CREDIT
AGREEMENT


 


Dated
as of May 13, 2009


 


among


 


SEALY
MATTRESS COMPANY,

as Borrower


 


SEALY
MATTRESS CORPORATION,

as Holdings and a Guarantor


 


SEALY
CORPORATION,

as Parent


 


The
Several Lenders

from Time to Time Parties Hereto


 


JPMORGAN
CHASE BANK, N.A.,

as Administrative Agent and Collateral Agent


 


J.P.
MORGAN SECURITIES INC.,

as Joint Lead Arranger and Joint Bookrunner


 


GE
CAPITAL MARKETS, INC.,

as Joint Lead Arranger and Joint Bookrunner


 


GENERAL
ELECTRIC CAPITAL CORPORATION,

as Co-Collateral Agent,


 


CITIGROUP
GLOBAL MARKETS INC., 

as Joint Lead Arranger and Joint Bookrunner


 


and


 


MIZUHO
CORPORATE BANK, LTD., 

as Syndication Agent




 





 

















 


TABLE CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
  SECTION 1.          DEFINITIONS

  	
   

  
	
  1.1.

  	
  Defined Terms

  	
  1

  
	
  1.2.

  	
  Exchange Rates

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 2.          AMOUNT AND TERMS OF CREDIT

  	
   

  
	
  2.1.

  	
  Commitments

  	
  36

  
	
  2.2.

  	
  Minimum Amount of Each Borrowing; Maximum Number of
  Borrowings

  	
  39

  
	
  2.3.

  	
  Notice of Borrowing

  	
  39

  
	
  2.4.

  	
  Disbursement of Funds

  	
  40

  
	
  2.5.

  	
  Repayment of Loans; Evidence of Debt

  	
  41

  
	
  2.6.

  	
  Conversions and Continuations

  	
  41

  
	
  2.7.

  	
  Pro  rata Borrowings

  	
  42

  
	
  2.8.

  	
  Interest

  	
  42

  
	
  2.9.

  	
  Interest Periods

  	
  43

  
	
  2.10.

  	
  Increased Costs, Illegality, etc

  	
  44

  
	
  2.11.

  	
  Compensation

  	
  46

  
	
  2.12.

  	
  Change of Lending Office

  	
  46

  
	
  2.13.

  	
  Notice of Certain Costs

  	
  46

  
	
  2.14.

  	
  Defaulting Lenders

  	
  46

  
	
  2.15.

  	
  Incremental Facilities

  	
  49

  
	
   

  	
   

  	
   

  
	
  SECTION 3.          LETTERS OF CREDIT

  	
   

  
	
  3.1.

  	
  Letters of Credit

  	
  50

  
	
  3.2.

  	
  Letter of Credit Requests

  	
  51

  
	
  3.3.

  	
  Letter of Credit Participations

  	
  51

  
	
  3.4.

  	
  Agreement to Repay Letter of Credit Drawings

  	
  53

  
	
  3.5.

  	
  Increased Costs

  	
  54

  
	
  3.6.

  	
  Successor Letter of Credit Issuer

  	
  55

  
	
  3.7.

  	
  Existing Letters of Credit

  	
  55

  
	
   

  	
   

  	
   

  
	
  SECTION 4.          FEES; COMMITMENTS

  	
   

  
	
  4.1.

  	
  Fees

  	
  55

  
	
  4.2.

  	
  Voluntary Reduction of Commitments

  	
  56

  
	
  4.3.

  	
  Mandatory Termination of Commitments

  	
  56

  
	
   

  	
   

  	
   

  
	
  SECTION 5.          PAYMENTS

  	
   

  
	
  5.1.

  	
  Voluntary Prepayments

  	
  57

  
	
  5.2.

  	
  Mandatory Prepayments

  	
  57

  



 

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  5.3.

  	
  Payments Generally

  	
  58

  
	
  5.4.

  	
  Net Payments

  	
  60

  
	
  5.5.

  	
  Computations of Interest and Fees

  	
  63

  
	
  5.6.

  	
  Limit on Rate of Interest

  	
  63

  
	
   

  	
   

  	
   

  
	
  SECTION 6.          CONDITIONS PRECEDENT TO INITIAL
  BORROWING

  	
   

  
	
  6.1.

  	
  Credit Documents

  	
  64

  
	
  6.2.

  	
  Collateral

  	
  64

  
	
  6.3.

  	
  Legal Opinions

  	
  64

  
	
  6.4.

  	
  No Default

  	
  64

  
	
  6.5.

  	
  Concurrent Financings

  	
  64

  
	
  6.6.

  	
  Existing Credit Agreement

  	
  65

  
	
  6.7.

  	
  Effective Date Certificates

  	
  65

  
	
  6.8.

  	
  Corporate Proceedings of Each Credit Party

  	
  65

  
	
  6.9.

  	
  Corporate Documents

  	
  65

  
	
  6.10.

  	
  Fees

  	
  65

  
	
  6.11.

  	
  Representations and Warranties

  	
  65

  
	
  6.12.

  	
  Borrowing Base Certificate

  	
  65

  
	
  6.13.

  	
  Closing Availability

  	
  65

  
	
  6.14.

  	
  Solvency

  	
  65

  
	
  6.15.

  	
  Pledged Stock; Stock Powers; Pledged Notes

  	
  65

  
	
  6.16.

  	
  Lien Searches

  	
  66

  
	
  6.17.

  	
  Insurance

  	
  66

  
	
  6.18.

  	
  Perfection Certificate

  	
  66

  
	
   

  	
   

  	
   

  
	
  SECTION 7.          CONDITIONS PRECEDENT TO ALL
  CREDIT EVENTS

  	
   

  
	
  7.1.

  	
  No Default; Representations and Warranties

  	
  66

  
	
  7.2.

  	
  Notice of Borrowing; Letter of Credit Request

  	
  66

  
	
  7.3.

  	
  Availability

  	
  66

  
	
   

  	
   

  	
   

  
	
  SECTION 8.          REPRESENTATIONS, WARRANTIES AND
  AGREEMENTS

  	
   

  
	
  8.1.

  	
  Corporate Status

  	
  67

  
	
  8.2.

  	
  Corporate Power and Authority

  	
  67

  
	
  8.3.

  	
  No Violation

  	
  67

  
	
  8.4.

  	
  Litigation

  	
  68

  
	
  8.5.

  	
  Margin Regulations

  	
  68

  
	
  8.6.

  	
  Governmental Approvals

  	
  68

  
	
  8.7.

  	
  Investment Company Act

  	
  68

  
	
  8.8.

  	
  True and Complete Disclosure

  	
  68

  
	
  8.9.

  	
  Financial Condition; Financial Statements

  	
  68

  
	
  8.10.

  	
  Tax Returns and Payments

  	
  69

  
	
  8.11.

  	
  Compliance with ERISA

  	
  69

  
	
  8.12.

  	
  Subsidiaries

  	
  69

  
	
  8.13.

  	
  Labor Matters

  	
  70

  
	
  8.14.

  	
  Patents, etc

  	
  70

  
	
  8.15.

  	
  Environmental Laws

  	
  70

  



 


ii

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  8.16.

  	
  Properties

  	
  70

  
	
  8.17.

  	
  Solvency

  	
  70

  
	
   

  	
   

  	
   

  
	
  SECTION 9.          AFFIRMATIVE COVENANTS

  	
   

  
	
  9.1.

  	
  Information Covenants

  	
  71

  
	
  9.2.

  	
  Books, Records and Inspections

  	
  74

  
	
  9.3.

  	
  Maintenance of Insurance

  	
  74

  
	
  9.4.

  	
  Payment of Taxes

  	
  75

  
	
  9.5.

  	
  Consolidated Corporate Franchises

  	
  75

  
	
  9.6.

  	
  Compliance with Statutes, Obligations, etc

  	
  75

  
	
  9.7.

  	
  ERISA

  	
  75

  
	
  9.8.

  	
  Good Repair

  	
  76

  
	
  9.9.

  	
  Transactions with Affiliates

  	
  76

  
	
  9.10.

  	
  End of Fiscal Years; Fiscal Quarters

  	
  76

  
	
  9.11.

  	
  Additional Subsidiary Guarantors and Grantors

  	
  76

  
	
  9.12.

  	
  Pledges of Additional Stock and Evidence of Indebtedness

  	
  77

  
	
  9.13.

  	
  Use of Proceeds

  	
  77

  
	
  9.14.

  	
  Changes in Business

  	
  77

  
	
  9.15.

  	
  Further Assurances

  	
  77

  
	
  9.16.

  	
  Appraisals

  	
  78

  
	
  9.17.

  	
  Field Examinations

  	
  79

  
	
  9.18.

  	
  Asset Sales; Casualty and Condemnation

  	
  79

  
	
  9.19.

  	
  Post-Closing Covenant

  	
  79

  
	
   

  	
   

  	
   

  
	
  SECTION 10.          NEGATIVE COVENANTS

  	
   

  
	
  10.1.

  	
  Limitation on Indebtedness

  	
  81

  
	
  10.2.

  	
  Limitation on Liens

  	
  84

  
	
  10.3.

  	
  Limitation on Fundamental Changes

  	
  85

  
	
  10.4.

  	
  Limitation on Sale of Assets

  	
  87

  
	
  10.5.

  	
  Limitation on Investments

  	
  88

  
	
  10.6.

  	
  Limitation on Restricted Payments

  	
  90

  
	
  10.7.

  	
  Limitations on Debt Payments and Certain Amendments

  	
  91

  
	
  10.8.

  	
  Limitations on Sale Leasebacks

  	
  92

  
	
  10.9.

  	
  Fixed Charge Coverage Ratio

  	
  92

  
	
   

  	
   

  	
   

  
	
  SECTION 11.          EVENTS OF DEFAULT

  	
   

  
	
  11.1.

  	
  Payments

  	
  92

  
	
  11.2.

  	
  Representations, etc

  	
  93

  
	
  11.3.

  	
  Covenants

  	
  93

  
	
  11.4.

  	
  Default Under Other Agreements

  	
  93

  
	
  11.5.

  	
  Bankruptcy, etc

  	
  93

  
	
  11.6.

  	
  ERISA

  	
  94

  
	
  11.7.

  	
  Guarantee

  	
  94

  
	
  11.8.

  	
  Pledge Agreement

  	
  94

  
	
  11.9.

  	
  Security Agreement

  	
  94

  
	
  11.10.

  	
  Mortgages

  	
  95

  



 


iii

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  11.11.

  	
  Subordination

  	
  95

  
	
  11.12.

  	
  Judgments

  	
  95

  
	
  11.13.

  	
  Change of Control

  	
  95

  
	
   

  	
   

  	
   

  
	
  SECTION 12.          THE AGENTS

  	
   

  
	
  12.1.

  	
  Appointment

  	
  96

  
	
  12.2.

  	
  Delegation of Duties

  	
  96

  
	
  12.3.

  	
  Exculpatory Provisions

  	
  96

  
	
  12.4.

  	
  Reliance by Administrative Agent and Security Agents

  	
  96

  
	
  12.5.

  	
  Notice of Default

  	
  97

  
	
  12.6.

  	
  Non-Reliance on Administrative Agent, Security Agents and
  Other Lenders

  	
  97

  
	
  12.7.

  	
  Indemnification

  	
  97

  
	
  12.8.

  	
  Administrative Agent and Security Agents in Their
  Individual Capacities

  	
  98

  
	
  12.9.

  	
  Successor Agent

  	
  98

  
	
  12.10.

  	
  Withholding Tax

  	
  99

  
	
  12.11.

  	
  Reports

  	
  99

  
	
  12.12.

  	
  Security  Agents

  	
  99

  
	
   

  	
   

  	
   

  
	
  SECTION 13.          [RESERVED]

  	
   

  
	
   

  	
   

  
	
  SECTION 14.          MISCELLANEOUS

  	
   

  
	
  14.1.

  	
  Amendments and Waivers

  	
  100

  
	
  14.2.

  	
  Notices

  	
  101

  
	
  14.3.

  	
  No Waiver; Cumulative Remedies

  	
  103

  
	
  14.4.

  	
  Survival of Representations and Warranties

  	
  103

  
	
  14.5.

  	
  Payment of Expenses and Taxes

  	
  103

  
	
  14.6.

  	
  Successors and Assigns; Participations and Assignments

  	
  104

  
	
  14.7.

  	
  Replacements of Lenders under Certain Circumstances

  	
  108

  
	
  14.8.

  	
  Adjustments; Set-off

  	
  108

  
	
  14.9.

  	
  Counterparts

  	
  109

  
	
  14.10.

  	
  Severability

  	
  109

  
	
  14.11.

  	
  Integration

  	
  109

  
	
  14.12.

  	
  GOVERNING LAW

  	
  109

  
	
  14.13.

  	
  Submission to Jurisdiction; Waivers

  	
  110

  
	
  14.14.

  	
  Acknowledgments

  	
  110

  
	
  14.15.

  	
  WAIVERS
  OF JURY TRIAL

  	
  110

  
	
  14.16.

  	
  Confidentiality

  	
  111

  
	
  14.17.

  	
  USA PATRIOT Act

  	
  111

  



 


iv

















 


	
  SCHEDULES

  	
   

  
	
   

  	
   

  
	
  Schedule 1.1(a)

  	
  Mortgaged Properties

  
	
  Schedule 1.1(b)

  	
  Commitments of Lenders

  
	
  Schedule 1.1(c)

  	
  Immaterial Subsidiaries

  
	
  Schedule 1.1(d)

  	
  Existing Letters of Credit

  
	
  Schedule 8.12

  	
  Subsidiaries

  
	
  Schedule 10.1

  	
  Effective Date
  Indebtedness

  
	
  Schedule 10.2

  	
  Effective Date Liens

  
	
  Schedule 10.3

  	
  Effective Date Parent
  Assets

  
	
  Schedule 10.5

  	
  Effective Date Investments

  



 


v






 


 


 


 












 


CREDIT AGREEMENT dated as
of May 13, 2009, among SEALY MATTRESS COMPANY, an Ohio corporation (the “Borrower”),
SEALY MATTRESS CORPORATION, a Delaware corporation (“Holdings”), SEALY
CORPORATION, a Delaware corporation (“Parent”),
the lending institutions from time to time parties hereto (each a “Lender”
and, collectively, the “Lenders”), GENERAL ELECTRIC CAPITAL CORPORATION,
as Co-Collateral Agent, and JPMORGAN CHASE BANK, N.A. (as Administrative Agent
and Collateral Agent (such term and each other capitalized term used but not
defined in this introductory statement having the meaning provided in
Section 1)).


 


The parties hereto hereby
agree as follows:


 


SECTION 1.                                                             Definitions


 


1.1.                              Defined Terms.


 


(a)           As
used herein, the following terms shall have the meanings specified in this
Section 1.1 unless the context otherwise requires (it being understood
that defined terms in this Agreement shall include in the singular number the
plural and in the plural the singular):


 


“ABR” shall mean,
for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16
of 1%) equal to the greatest of (a) the Prime Rate in effect on such day,
(b) the Federal Funds Effective Rate in effect on such day plus 1⁄2 of 1%
and (c) the Eurodollar Rate for a three month Interest Period on such day
(or if such day is not a Business Day, the immediately preceding Business Day)
plus 1%; provided that, for the avoidance of doubt, the Eurodollar Rate
for any day shall be calculated on a daily basis in a manner consistent with
the definition of “Eurodollar Rate”.  Any
change in the ABR due to a change in the Prime Rate, the Federal Funds
Effective Rate or the Eurodollar Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate, the Federal
Funds Effective Rate or the Eurodollar Rate, respectively.


 


“ABR Loan” shall
mean each Loan bearing interest at the rate provided in
Section 2.8(a) and, in any event, shall include all Swingline Loans
and Protective Advances.


 


“ABR Margin” shall
mean 3.00% per annum.


 


“Account” shall
mean, individually and collectively, any “Account” referred to in the Security
Agreement.


 


“Account Debtor”
shall mean any Person obligated on an Account.


 


“Account Reserves”
shall mean any and all reserves which the Security Agents deem necessary, in
their Permitted Discretion, to maintain (including, without limitation,
Dilution Reserves, reserves for rebates, discounts, warranty claims and
inventory returns and reserves for Permitted Liens on Eligible Accounts ranking
prior to the Lien of the Administrative Agent for the benefit of the Secured
Parties) with respect to the Eligible Accounts. 
The Security Agents may, from time to time, in their Permitted
Discretion, adjust Account Reserves used in 


 

















 


computing the Borrowing Base
upon not less than one Business Day’s prior written notice to the Borrower.


 


“Adjusted Eligible
Accounts” shall mean the excess, if any, of (i) Eligible Accounts over
(ii) Account Reserves.


 


“Adjusted Eligible
Inventory” shall mean the excess, if any, of (i) Eligible Inventory over
(ii) Inventory Reserves.


 


“Administrative Agent”
shall mean JPMorgan Chase Bank, N.A., together with its affiliates, as the
arranger of the Commitments and as the administrative agent for the Lenders
under this Agreement and the other Credit Documents.


 


“Administrative
Agent’s Office” shall mean the office of the Administrative Agent located
at 270 Park Avenue, New York, New York 10017, or such other office as the
Administrative Agent may hereafter designate in writing as such to the other
parties hereto.


 


“Affiliate” shall
mean, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with
such Person.  A Person shall be deemed to
control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.


 


“Agents” shall
mean each Joint Lead Arranger, the Administrative Agent, the Security Agents
and the Syndication Agent.


 


“Agreement” shall
mean this Credit Agreement, as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time.


 


“Applicable Percentage”
shall mean, with respect to any Lender, (a) with respect to Revolving
Credit Loans, Letters of Credit Outstanding or Swingline Loans, a percentage
equal to a fraction the numerator of which is such Lender’s Commitment and the
denominator of which is the Total Commitment (if the Total Commitment has
terminated or expired, the Applicable Percentages shall be determined based
upon such Lender’s share of the Total Credit Exposure at that time); provided
that in the case of Section 2.14 when a Defaulting Lender shall exist, any
such Defaulting Lender’s Commitment shall be disregarded in the calculation and
(b) with respect to Protective Advances or with respect to the Total
Credit Exposure, a percentage based upon its share of the Total Credit Exposure
and the unused Commitments; provided that in the case of
Section 2.14 when a Defaulting Lender shall exist, any such Defaulting
Lender’s Commitment shall be disregarded in the calculation.


 


“Approved Fund”
shall have the meaning provided in Section 14.6.


 


“Assignment and
Acceptance” shall mean a customary assignment and acceptance substantially
in form reasonably satisfactory to the Administrative Agent.


 


2

















 


“Authorized Officer”
shall mean the Chairman of the Board, the President, the Chief Financial
Officer, the Treasurer or any other senior officer of the Borrower designated
as such in writing to the Administrative Agent and Collateral Agent by the
Borrower.


 


“Availability”
shall mean, at any time, an amount equal to (a) the lesser of (i) the
Total Commitment and (ii) the Borrowing Base minus (b) the
Total Credit Exposure.


 


“Available Commitment”
shall mean an amount equal to the excess, if any, of (a) the amount of the
Total Commitment over (b) the sum of (i) the aggregate principal
amount of all Revolving Credit Loans then outstanding and (ii) the
aggregate Letters of Credit Outstanding at such time.


 


“Bankruptcy Code”
shall have the meaning provided in Section 11.5.


 


“Board” shall mean
the Board of Governors of the Federal Reserve System of the United States (or
any successor).


 


“Borrower” shall
have the meaning provided in the preamble to this Agreement.


 


“Borrowing” shall
mean and include (a) the incurrence of Swingline Loans from the Swingline
Lender on a given date, (b) the incurrence of a Protective Advance from
the Administrative Agent on a given date, and (c) the incurrence of one
Type of Revolving Credit Loan on a given date (or resulting from conversions on
a given date) having, in the case of Eurodollar Loans, the same Interest Period
(provided that ABR Loans incurred pursuant to
Section 2.10(b) shall be considered part of any related Borrowing of
Eurodollar Loans).


 


“Borrowing Base”
shall mean, at any time, the sum of (a) the product of 85% multiplied  by
the Adjusted Eligible Accounts at such time, plus (b) the lesser of
(i) the product of 65% multiplied  by the Adjusted Eligible Inventory, valued at
the lower of cost or market value, determined on a first-in-first-out basis, at
such time and (ii) the product of 85% multiplied  by the Net
Orderly Liquidation Value percentage identified in the most recent inventory
appraisal ordered by the Security Agents multiplied  by Adjusted
Eligible Inventory, valued at the lower of cost or market value, determined on
a first-in-first-out basis, at such time, minus (c) Reserves.


 


“Borrowing Base
Certificate” shall mean a certificate, duly completed and signed by an
Authorized Officer of the Borrower, in a form on the Effective Date which is
satisfactory to each Initial Lender and following the Effective Date in such
form or another form which is reasonably acceptable to the Security Agents in
their sole discretion.


 


“Business Day”
shall mean any day excluding Saturday, Sunday and any day that shall be in The
City of New York a legal holiday or a day on which banking institutions are
authorized by law or other governmental actions to close, provided that,
when used in connection with a Eurodollar Loan, the term “Business Day” shall
also exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market.


 


“Canadian Dollars”
and shall mean the lawful money of Canada.


 


3

















 


“Canadian Letter of
Credit Sublimit” shall mean $5,000,000, as the same may be reduced from
time to time pursuant to Section 3.1.


 


“Capital Expenditures”
shall mean, for any period, the aggregate of all expenditures (whether paid in
cash or accrued as liabilities and including in all events all amounts expended
or capitalized under Capital Leases, but excluding any amount representing
capitalized interest or amounts expended or expensed under leases that are not
Capital Leases) by Parent, Holdings, the Borrower and the Restricted
Subsidiaries during such period that, in conformity with GAAP, are or are
required to be included as additions during such period to property, plant or
equipment reflected in the consolidated balance sheet of the Parent, provided
that the term “Capital Expenditures” shall not include (a) expenditures
made in connection with the replacement, substitution or restoration of assets
to the extent financed (i) from insurance proceeds paid on account of the
loss of or damage to the assets being replaced or restored or (ii) with
awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced, (b) the purchase price of
equipment that is purchased simultaneously with the trade-in of existing
equipment to the extent that the gross amount of such purchase price is reduced
by the credit granted by the seller of such equipment for the equipment being
traded in at such time or (c) the purchase of plant, property or equipment
made within one year of the sale of any asset (other than sales of inventory in
the ordinary course of business) to the extent purchased with the proceeds of
such sale.


 


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


 


“Capitalized Lease
Obligations” shall mean, as applied to any Person, all obligations under
Capital Leases of such Person or any of its Subsidiaries, in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.


 


“Cash Dominion Period”
shall mean (i) each period commencing on any date that Availability shall
have either (A) been less than the greater of (x) 15.0% of the Total
Commitment and (y) $15.0 million for five consecutive Business Days or
(B) been less than the lower of (x) 10.0% of the Borrowing Base and
(y) 10.0% of the Total Commitment on any Business Day and ending on the
date that Availability shall have been at least equal to the greater of
(x) 15.0% of the Total Commitment and (y) $15.0 million for 30
consecutive calendar days, (ii) each period during which an Event of
Default under Section 11.1 or 11.5 shall have occurred and is continuing
or (iii) each period commencing on the later of (A) the occurrence of
an Event of Default under (x) Section 11.3(a), 11.4, 11.7, 11.8,
11.9, 11.10 or 11.11 or (y) Section 11.3(b) (but in the case of
Section 11.3(b), solely to the extent resulting from a breach of
Section 9.1(a), 9.1(b), 9.2, 9.16 or 9.17) or (z) Section 11.2
(but solely to the extent that such representation or warranty relates to
financial statements referred to in Section 9.1(a) or 9.1(b) or
a Borrowing Base Certificate delivered pursuant to Section 9.1(e) and
an inaccuracy therein resulting in such Event of Default (I) resulted in a
Borrowing that would not have been otherwise permitted by this Agreement,
(II) resulted in the violation of a covenant set forth in Section 10
or (III) was the basis for avoiding an earlier Cash Dominion Period) and
(B) the date on which the Administrative Agent, the Security Agents or the
Required Lenders have provided written notice 


 


4

















 


to the Borrower of an
election to commence a Cash Dominion Period as a result of such Event of
Default, and ending on the date on which such Event of Default has been cured
or waived.


 


“Cash Management
Agreement” shall mean any agreement or arrangement to provide cash
management services, including treasury, depository, overdraft, credit or debit
card, purchase card, electronic funds transfer, controlled disbursement
services, foreign exchange facilities, merchant services (other than those
constituting a line of credit) and other cash management arrangements.


 


“Cash Management Bank”
shall mean any Person that at the time it enters into a Cash Management
Agreement is a Lender or an Affiliate of a Lender, in its capacity as a party
to such Cash Management Agreement.


 


“Change of Control”
shall mean the occurrence of any of the following:


 


(1)                                  the acquisition by any Person or group
(within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act, or any successor provision),
including any group acting for the purpose of acquiring, holding or disposing of
securities (within the meaning of Rule 13d-5(b)(1) under the Exchange
Act), other than the Permitted Holders, in a single transaction or in a related
series of transactions, by way of merger, consolidation or other business
combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or
more of the total voting power of the Voting Stock of Parent or any of its
direct or indirect parent corporations;


 


(2)                                  Holdings shall cease to own  directly and of record 100% of the equity
interests of the Borrower; or


 


(3)                                  Parent shall cease to own directly and of
record 100% of the equity interests of Holdings.


 


“Co-Collateral Agent”
shall mean General Electric Capital Corporation, as the co-collateral agent for
the Lenders under this Agreement and the other Credit Documents.


 


“Code” shall mean
the Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.  Section references to the Code are to
the Code, as in effect at the date of this Agreement, and any subsequent
provisions of the Code, amendatory thereof, supplemental thereto or substituted
therefor.


 


“Collateral” shall
have the meaning assigned to such term in the Pledge Agreement, the Security
Agreement or any Mortgage, as applicable, and shall include any equivalent term
in any such document.


 


“Collateral Access
Agreement” shall have the meaning assigned to such term in the Security
Agreement.


 


 “Collateral Agent” shall mean JPMorgan
Chase Bank, N.A., as the Administrative Agent, (i) in its capacity as
“secured party” named in all Uniform Commercial 


 


5

















 


Code financing statements
(or similar filings under other personal property security legislation) filed
pursuant to the Credit Documents and (ii) as “collateral agent” for the
Secured Parties under the Security Documents, together with its successors in
any such capacity (it being understood that JPMorgan Chase Bank, N.A. shall serve
in such capacity as “secured party” subject to direction by the Security
Agents).


 


“Collection Account”
shall have the meaning assigned to such term in the Security Agreement.


 


“Commitment” shall
mean (a) with respect to each Initial Lender, the amount set forth
opposite such Initial Lender’s name on Schedule 1.1(b) as such Initial
Lender’s “Commitment” and (b) in the case of any Lender that becomes a
Lender after the Signing Date, the amount specified as such Lender’s
“Commitment” in the Assignment and Acceptance pursuant to which such Lender
assumed a portion of the Total Commitment, in each case of the same may be
changed from time to time pursuant to terms hereof.  The aggregate amount of the Commitments as of
the Signing Date is $100,000,000.


 


“Commitment Fee Rate”
shall mean, with respect to the Available Commitment on any day, the rate per
annum set forth below opposite the Status in effect on such day:


 


	
  Status

  	
   

  	
  Commitment

  Fee Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Level
  I Status

  	
   

  	
  1.00

  	
  %

  
	
  Level
  II Status

  	
   

  	
  0.75

  	
  %

  



 


Notwithstanding the
foregoing, the term “Commitment Fee Rate” shall mean 1.00%, during the period
from and including the Effective Date to but excluding November 30, 2009.


 


“Commitment
Utilization Percentage” shall mean, on any date, the percentage equivalent
to a fraction (a) the numerator of which is the Total Credit Exposure and
(b) the denominator of which is the Total Commitment.


 


“Confidential
Information” shall have the meaning provided in Section 14.16.


 


“Consolidated Earnings”
shall mean, for any period, “income (loss) before the deduction of income
taxes” of Parent, Holdings, the Borrower and the Restricted Subsidiaries,
excluding extraordinary losses and extraordinary gains, for such period,
determined in accordance with GAAP, provided that any “income (loss)
before the deduction of income taxes” from disposed or discontinued operations
shall be excluded.


 


“Consolidated EBITDA”
shall mean, for any period, the sum, without duplication, of the amounts for
such period of (a) Consolidated Earnings and to the extent already
deducted in arriving at Consolidated Earnings for such period:
(b) Consolidated Interest Expense, (c) depreciation expense,
(d) amortization expense, including amortization of deferred financing
fees, (e) unusual or non-recurring charges and restructuring charges or
reserves (including severance, relocation costs and one-time compensation
charges and other costs related to closure of facilities) in an amount not to
exceed $15,000,000 in any Test Period, (f) non-cash charges 


 


6

















 


(other than accruals of
liabilities in the ordinary course of business) (provided that if any
such non cash charges represent an accrual or reserve for potential cash items
in any future period, the cash payment in respect thereof in such future period
shall be subtracted from Consolidated EBITDA to such extent, and excluding
amortization of a prepaid cash item that was paid in a prior period),
(g) losses on asset sales (other than sales of inventory in the ordinary course
of business), (h)  Transaction Expenses, (i) any expenses or charges
incurred in connection with any issuance of debt, equity securities or any
refinancing transaction and (j) any fees and expenses related to Permitted
Acquisitions, (k) any deduction for minority interest expense (except to
the extent of dividends to minority stockholders during such period),
(l) the amount of consulting and advisory fees and related expenses paid
to KKR Capstone, KKR or any of their respective Affiliates and directors and officers’
insurance premiums paid for the account of any of the foregoing in an amount
not to exceed $4,000,000 in any Test Period, less, without duplication,
the sum of the following amounts for such period to the extent they increased
Consolidated Earnings in such period of (m) non-recurring gains,
(n) non-cash gains (excluding (i) accruals of revenue in the ordinary
course of business and (ii) any such non-cash gain to the extent it
represents the reversal of an accrual or reserve for potential cash items that
reduced Consolidated EBITDA in any prior period) and (o) gains on asset
sales (other than sales of inventory in the ordinary course of business), all
as determined on a consolidated basis for Parent, Holdings, the Borrower and
the Restricted Subsidiaries in accordance with GAAP, provided that
(i) there shall be excluded from Consolidated Earnings for any period the
income from continuing operations before income taxes and extraordinary items
of all Unrestricted Subsidiaries for such period to the extent otherwise
included in Consolidated Earnings, except to the extent actually received in
cash by Holdings, the Borrower or its Restricted Subsidiaries during such
period through dividends or other distributions, (ii) there shall be
excluded in determining Consolidated EBITDA non-operating currency transaction
gains and losses and (iii) to the extent included in Consolidated
Earnings, there shall be excluded in determining Consolidated EBITDA for any
period any non-cash adjustments resulting from the application of Statement of
Financial Accounting Standards No. 133 and its related pronouncements and
interpretations.


 


“Consolidated Interest
Expense” shall mean, for any period, the cash interest expense (including
that attributable to Capital Leases in accordance with GAAP), net of cash
interest income, of Parent, Holdings, the Borrower and the Restricted
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of Parent, Holdings, the Borrower and the Restricted Subsidiaries,
including all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing and net costs
under Hedge Agreements (other than (x) currency swap agreements, currency
future or option contracts and other similar agreements and (y) any
non-cash interest expense attributable to the movement in the mark to market
valuation of obligations under Hedge Agreements or other derivative instruments
pursuant to Statement of Financial Accounting Standards No. 133), but
excluding, however, (a) amortization of deferred financing costs, debt
issuance costs, commissions, fees and expenses, (b) expensing of financing
fees and (c) any other amounts of non-cash interest, all as calculated on
a consolidated basis in accordance with GAAP; provided that there shall
be excluded from Consolidated Interest Expense for any period the cash interest
expense (or income) of all Unrestricted Subsidiaries for such period to the
extent otherwise included in Consolidated Interest Expense.


 


7

















 


“Consolidated Senior
Secured Debt” shall mean, as of any date of determination, the sum of all
Indebtedness of Parent, Holdings, the Borrower and the Restricted Subsidiaries
for borrowed money outstanding on such date under this Agreement, the Initial
Secured Notes and any Permitted Additional Secured Notes.


 


“Consolidated Senior
Secured Debt to Consolidated EBITDA Ratio” shall mean, as of any date of
determination, the ratio of (a) Consolidated Senior Secured Debt as of the
last day of the relevant Test Period to (b) Consolidated EBITDA for such
Test Period, provided that the Consolidated Senior Secured Debt to
Consolidated EBITDA Ratio shall be calculated on a Pro Forma Basis.


 


“Credit Documents”
shall mean this Agreement, the Intercreditor Agreement, the Security Documents,
each Letter of Credit and any promissory notes issued by the Borrower
hereunder.


 


“Credit Event”
shall mean and include the making (but not the conversion or continuation) of a
Loan and the issuance, extension or amendment (to the extent such amendment
increases the amount thereof) or renewal of a Letter of Credit.


 


“Credit Exposure”
shall mean with respect to any Lender the sum of the following on such
date:  (i) the outstanding amount of
Revolving Credit Loans of such Lender plus (ii) the Letter of
Credit Exposure of such Lender plus (iii) the Swingline Exposure of
such Lender plus (iv) an amount equal to such Lender’s Applicable
Percentage, if any, of the aggregate principal amount of Protective Advances
outstanding at such time.


 


“Credit Party”
shall mean each of the Borrower and the Guarantors.


 


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


 


“Defaulting Lender”
shall mean any Lender, as reasonably determined by the Administrative Agent in
good faith, that has (a) failed to fund any portion of its Loans or
participations in Letters of Credit, Swingline Loans or Protective Advances within
three Business Days of the date required to be funded by it hereunder,
(b) notified the Borrower, the Administrative Agent, the Letter of Credit
Issuer, the Swingline Lender or any Lender in writing that it does not intend
to comply with any of its funding obligations under this Agreement or has made
a public statement to the effect that it does not intend to comply with its
funding obligations under this Agreement or under other agreements generally
(as reasonably determined by the Administrative Agent) under which it has
committed to extend credit, (c) failed, within three Business Days after
written request by the Administrative Agent, to confirm that it will comply
with the terms of this Agreement relating to its obligations to fund prospective
Revolving Credit Loans and participations in then outstanding Letters of
Credit, Swingline Loans and Protective Advances, (d) otherwise failed to
pay over to the Administrative Agent or any other Lender any other amount
required to be paid by it hereunder within three Business Days of the date when
due, unless the subject of a good faith dispute, or (e) (i) become or
is insolvent or has a parent company that has become or is insolvent or
(ii) become the subject of a bankruptcy or insolvency proceeding, or has had
a receiver, conservator, trustee or custodian 


 


8

















 


appointed for it, or has
taken any action in furtherance of, or indicating its consent to, approval of
or acquiescence in any such proceeding or appointment or has a parent company
that has become the subject of a bankruptcy or insolvency proceeding, or has
had a receiver, conservator, trustee or custodian appointed for it, or has
taken any action in furtherance of, or indicating its consent to, approval of
or acquiescence in any such proceeding or appointment.


 


“Dilution Factors”
shall mean, without duplication, with respect to any period, the aggregate
amount of all deductions, credit memos, returns, adjustments, allowances, bad
debt write-offs and other non-cash credits which are recorded to reduce
accounts receivable.


 


“Dilution Ratio”
shall mean, at any date, the amount (expressed as a percentage) equal to
(a) the aggregate amount of the applicable Dilution Factors for the 12
most recently ended fiscal months divided by (b) total gross sales for the
12 most recently ended fiscal months.


 


“Dilution Reserve”
shall mean, at any date, the product of (a) the excess (if positive) of
(i) the applicable Dilution Ratio minus (ii) 5.0% multiplied
by (b) the Eligible Accounts of the applicable Credit Parties, as
the context may require, on such date.


 


“Document” shall
have the meaning assigned to such term in the Security Agreement.


 


“Dollar Equivalent”
shall mean, on any date of determination, (a) with respect to any amount
denominated in Dollars, such amount, and (b) with regard to any Letter of
Credit denominated in Canadian Dollars, the amount of Dollars which is
equivalent to the amount so expressed in Canadian Dollars at the applicable
quoted spot rate on the appropriate page of the Reuter’s Screen as
determined by the Administrative Agent at the relevant time.


 


“Dollars” and “$”
shall mean dollars in lawful currency of the United States of America.


 


“Domestic Subsidiary”
shall mean each Subsidiary of the Borrower that is organized under the laws of
the United States, any state thereof, or the District of Columbia.


 


“Drawing” shall
have the meaning provided in Section 3.4(b).


 


“Effective Date”
shall mean the date upon which the conditions set forth in Section 6 are
satisfied.


 


“Eligible Accounts”
shall mean, at any time, the Accounts of any Credit Party (other than Holdings)
which in accordance with the terms hereof are eligible as the basis for the
extension of Revolving Loans and Swingline Loans and the issuance of Letters of
Credit hereunder.  Eligible Accounts
shall not include any Account:


 


(a)                                  which is not subject to a first priority
perfected security interest in favor of the Administrative Agent (for the
benefit of the Secured Parties);


 


9

















 


(b)                                 which is subject to any Lien other than
(i) a Lien in favor of the Collateral Agent for the benefit of the Secured
Parties, (ii) a Permitted Lien and (iii) Liens permitted hereunder
pursuant to clause (h) of Section 10.2(A);


 


(c)                                  (i) which is unpaid more than 90
days after the date of the original invoice therefor (except that up to
$2,500,000 of Accounts which are unpaid more than 120 days after the date of
the original invoice but otherwise meet the requirements of this definition may
be included) or more than 60 days after the original due date, or
(ii) which has been written off the books of the Credit Parties or
otherwise designated as uncollectible;


 


(d)                                 which is owing by an Account Debtor for
which more than 50% of the Accounts owing from such Account Debtor and its
Affiliates are ineligible;


 


(e)                                  which is owing by an Account Debtor to
the extent the aggregate amount of Accounts owing from such Account Debtor and
its Affiliates to the Credit Parties exceeds 10.0% (or, in the case of an
Account Debtor (i) identified in writing to the Security Agents prior to
the Signing Date (and acknowledged in writing by the Security Agents), 15%,
(ii) with an Investment Grade Rating but not a High Investment Grade
Rating, 20.0% or (ii) with a High Investment Grade Rating, 30.0%) of the
aggregate amount of Eligible Accounts of the Credit Parties but only to the
extent of such excess over the applicable threshold;


 


(f)                                    with respect to which any covenant,
representation, or warranty contained in this Agreement or in the Security
Agreement has been breached or is not true in any material respect;


 


(g)                                 which (i) does not arise from the
sale of goods or performance of services in the ordinary course of business,
(ii) is not evidenced by an invoice or other documentation reasonably
satisfactory to the Security Agents which has been sent to the Account Debtor,
(iii) represents a progress billing, (iv) is contingent upon a Credit
Party’s completion of any further performance, (v) represents a sale on a
bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment,
cash-on-delivery or any other repurchase or return basis or (vi) relates
to payments of interest;


 


(h)                                 for which (i) the goods giving rise
to such Account have not been shipped to the Account Debtor or (ii) the
services giving rise to such Account have not been performed by the applicable
Credit Party or if such Account was invoiced more than once, unless,
(A) in the case of clause (h)(i) preceding, the Account Debtor on
such Account has instructed the applicable Credit Party in writing to deliver
such goods to a designated area at or near the applicable Credit Party’s
facility or otherwise store such goods for the account of such Account Debtor
and has agreed, pursuant to the terms of the quotation or purchase order for
such Account or by separate agreement, that such delivery or storage
constitutes delivery of such goods by the Borrower, in any such case in form
and substance reasonably satisfactory to the Security Agents;


 


10
















 


(i)                                     which is owed
by an Account Debtor which has (i) applied for, suffered, or consented to
the appointment of any receiver, custodian, trustee, or liquidator of its
assets, (ii) had possession of all or a material part of its property
taken by any receiver, custodian, trustee or liquidator, (iii) filed, or
had filed against it, any request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as bankrupt, winding-up or
voluntary or involuntary case under any state or federal bankruptcy laws unless
the Security Agents shall have determined in their sole discretion to include
such Accounts, (iv) admitted in writing its inability to pay its debts as
they become due, (v) become insolvent or (vi) ceased operation of its
business;


 


(j)                                     which is owed
by any Account Debtor which has sold all or a substantially all of its assets;


 


(k)                                  which is owed
by an Account Debtor which (i) does not maintain an office in the U.S. or
Canada (other than Quebec) or (ii) is not organized under applicable law
of the U.S., any state of the U.S. or the District of Columbia, Canada, or any
province or other political subdivision of Canada (other than Quebec) unless,
in either case, such Account is backed by a letter of credit reasonably
acceptable to the Security Agents which is in the possession of, has been
assigned to and is directly drawable by the Collateral Agent;


 


(l)                                     which is owed
in any currency other than U.S. dollars;


 


(m)                               which is owed
by (i) the government (or any department, agency, public corporation, or
instrumentality thereof) of any country other than the U.S. unless such Account
is backed by a letter of credit reasonably acceptable to the Security Agents
which is in the possession of and directly drawable by the Collateral Agent or (ii) the
government of the U.S., or any department, agency, public corporation, or
instrumentality thereof, unless the Federal Assignment of Claims Act of 1940,
as amended (31 U.S.C. § 3727 et  seq. and 41 U.S.C.
§ 15 et  seq.), and any
other steps necessary to perfect the Lien of the Collateral Agent in such
Account have been complied with to the Security Agents’ reasonable
satisfaction;


 


(n)                                 which is owed
by (i) any employee, officer, director, agent or direct stockholder of any
Credit Party or (ii) any other Affiliate of any Credit Party with respect to
which such Credit Party does not deal on an arms-length basis;


 


(o)                                 which is owed
by an Account Debtor or any Affiliate of such Account Debtor to which such
Credit Party is indebted, but only to the extent of such indebtedness or is
subject to any security, deposit, progress payment, advance payment or deposit,
retainage or other similar advance made by or for the benefit of an Account
Debtor, in each case to the extent thereof;


 


(p)                                 which is
subject to any counterclaim, deduction, defense, setoff or dispute but only to
the extent of any such counterclaim, deduction, defense, setoff or dispute;


 


(q)                                 which is
evidenced by any promissory note, chattel paper, or instrument;


 


11

















 


(r)                                    which is owed
by an Account Debtor located in any jurisdiction which requires filing of a
“Notice of Business Activities Report” or other similar report in order to
permit the Borrower to seek judicial enforcement in such jurisdiction of
payment of such Account, unless the Borrower has filed such report or qualified
to do business in such jurisdiction;


 


(s)                                  with respect to
which such Credit Party has made any agreement with the Account Debtor for any
reduction thereof, other than discounts and adjustments given in the ordinary
course of business, or any Account which was partially paid and such Credit
Party created a new receivable for the unpaid portion of such Account;


 


(t)                                    which does not
comply in all material respects with the requirements of all applicable laws
and regulations, whether Federal, state or local, including without limitation
the Federal Consumer Credit Protection Act, the Federal Truth in Lending Act
and Regulation Z of the Board;


 


(u)                                 which is for
goods that have been sold under a purchase order or pursuant to the terms of a
contract or other agreement or understanding (written or oral) that indicates
or purports that any Person other than a Credit Party has or has had an
ownership interest in such goods, or which indicates any party other than a
Credit Party as payee or remittance party;


 


(v)                                 which was
created on cash on delivery terms; or


 


(w)                               which the
Security Agents in their Permitted Discretion otherwise determine to be
ineligible.


 


In determining the amount of
an Eligible Account, the face amount of an Account may, in the Security Agents’
Permitted Discretion, be reduced by, without duplication, to the extent not
reflected in such face amount, (i) the amount of all accrued and actual
discounts, claims, credits or credits pending, promotional program allowances,
price adjustments, finance charges or other allowances (including any amount
that the applicable Credit Party may be obligated to rebate to an Account
Debtor pursuant to the terms of any agreement or understanding (written or
oral)) and (ii) the aggregate amount of all cash received in respect of
such Account but not yet applied by such Credit Party to reduce the amount of
such Account.


 


Standards of eligibility may
be made more restrictive (and such increased restrictiveness subsequently
reversed in whole or in part) from time to time solely by the Security Agents
in the exercise of their Permitted Discretion, with any such changes to be
effective one Business Day after delivery of written notice thereof to the
Borrower and the Lenders.


 


“Eligible Inventory”
shall mean, at any time, the Inventory of any Credit Party (other than
Holdings) which in accordance with the terms hereof is eligible as the basis
for the extension of Revolving Loans, Swingline Loans and the issuance of
Letters of Credit hereunder.  Eligible
Inventory shall not include any Inventory:


 


12

















 


(a)                                  which is not
subject to a first priority perfected Lien in favor of the Administrative Agent
(for the benefit of the Secured Parties);


 


(b)                                 which is
subject to any Lien other than (i) a Lien in favor of the Administrative
Agent for the benefit of the Secured Parties, (ii) a Permitted Lien and (iii) Liens
permitted hereunder pursuant to clause (h) of Section 10.2(A);


 


(c)                                  which is, in
the Security Agents’ Permitted Discretion, slow moving, obsolete,
unmerchantable, defective, unfit for sale or unacceptable due to age, type,
category and/or quantity;


 


(d)                                 with respect to
which any covenant, representation, or warranty contained in this Agreement or
the Security Agreement has been breached or is not true in any material respect
and which does not conform in any material respect to all standards imposed by
any Governmental Authority;


 


(e)                                  in which any
Person other than a Credit Party shall (i) have any direct or indirect
ownership, interest or title to such Inventory or (ii) be indicated on any
purchase order or invoice with respect to such Inventory as having or
purporting to have an interest therein;


 


(f)                                    which
constitutes spare or replacement parts, subassemblies, packaging and shipping
material, manufacturing supplies, samples, prototypes, displays or display
items, bill-and-hold goods, repossessed goods, defective or damaged goods,
goods held on consignment, or goods which are not of a type held for sale in
the ordinary course of business;


 


(g)                                 which is not
located in the U.S. or is in transit with a common carrier from vendors and
suppliers; provided that up to $5,000,000 of Inventory in transit of the
Credit Parties from vendors and suppliers may be included as eligible pursuant
to this clause (g) so long as (i) the Security Agents shall have
received (1) a true and correct copy of the bill of lading and other
shipping documents for such Inventory, (2) evidence of satisfactory
casualty insurance naming the Collateral Agent as loss payee and otherwise
covering such risks as the Security Agents may reasonably request and (3) if
the bill of lading is (A) non-negotiable and the inventory is in transit
within the United States, a duly executed Collateral Access Agreement from the
applicable customs broker for such Inventory or (B) negotiable,
confirmation that the bill is issued in the name of the Borrower and consigned
to the order of the Collateral Agent, and an acceptable agreement has been
executed with the Borrower’s customs broker, in which the customs broker agrees
that it holds the negotiable bill as agent for the Collateral Agent and has
granted the Collateral Agent access to the Inventory and (ii) the common
carrier is not an Affiliate of the applicable vendor or supplier;


 


(h)                                 which is
located in any location leased by a Credit Party unless (A) the lessor has
delivered to the Collateral Agent a Collateral Access Agreement or (B) a
Reserve for rent, charges and other amounts due or to become due with respect
to such facility has been established by the Security Agents in their Permitted
Discretion (which


 


13

















 


Reserve may be reduced if a
subsequent Collateral Access Agreement has been received by the Collateral
Agent);


 


(i)                                     which is
located in any third party warehouse or is in the possession of a bailee (other
than a third party processor) and is not evidenced by a Document (other than
bills of lading to the extent permitted by clause (g) above), unless (i) such
warehouseman or bailee has delivered to the Collateral Agent a Collateral
Access Agreement and such other documentation as the Security Agents may
require or (ii) an appropriate Inventory Reserve has been established by
the Security Agents in their Permitted Discretion;


 


(j)                                     which is being
processed offsite at a third party location or outside processor or is
in-transit to or from said third party location or outside processor;


 


(k)                                  which is a
discontinued product or component thereof;


 


(l)                                     which is the
subject of a consignment by such Credit Party as consignor, unless (i) a
protective UCC-1 financing statement has been properly filed against the
consignee and (ii) there is a written agreement acknowledging that such
Inventory is held on consignment, that such Credit Party retains title to such
Inventory, that no Lien arising by, through or under such consignee has
attached or will attach to such Inventory and requiring consignee to segregate
the consigned Inventory from the consignee’s other personal or movable property
and having such other terms as the Security Agents may require for consigned
Inventory in their Permitted Discretion;


 


(m)                               which contains
or bears any intellectual property rights licensed to such Credit Party unless
the Security Agents are satisfied that the Collateral Agent may sell or
otherwise dispose of such Inventory without (i) infringing the rights of
such licensor, (ii) violating any contract with such licensor, or (iii) incurring
any liability with respect to payment of royalties other than royalties
incurred pursuant to sale of such Inventory in the ordinary course under the
current licensing agreement;


 


(n)                                 which is not
reflected in a current perpetual inventory report of such Credit Party (unless
such Inventory is reflected in a report to the Collateral Agent as “in transit”
Inventory); or


 


(o)                                 for which
reclamation rights have been asserted by the seller.


 


Standards of eligibility may
be made more restrictive from time to time (and such increased restrictiveness
subsequently reversed in whole or in part) solely by the Security Agents in the
exercise of their Permitted Discretion, with any such changes to be effective
one Business Day after delivery of written notice thereof to the Borrower and
the Lenders.


 


“Environmental Claims”
shall mean any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations (other than internal reports prepared by the Borrower or any of
the Subsidiaries (a) in the ordinary course of such Person’s business or (b) as
required in connection with a financing transaction or an acquisition or
disposition of Real Estate) or proceedings relating in any way to any Environmental
Law or any permit issued, or any approval given,


 


14

















 


under any such Environmental
Law (hereinafter, “Claims”), including (i) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law and (ii) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.


 


“Environmental Law”
shall mean any applicable Federal, state, foreign or local statute, law, rule,
regulation, ordinance, code and rule of common law now or hereafter in
effect and in each case as amended, and any binding judicial or administrative
interpretation thereof, including any binding judicial or administrative order,
consent decree or judgment, relating to the environment, human health or safety
or Hazardous Materials.


 


“Equipment” shall
have the meaning assigned to such term in the Security Agreement.


 


“Equity Cure” shall
have the meaning set forth in Section 10.9.


 


“ERISA” shall mean
the Employee Retirement Income Security Act of 1974, as amended from time to
time.  Section references to ERISA
are to ERISA as in effect at the date of this Agreement and any subsequent
provisions of ERISA amendatory thereof, supplemental thereto or substituted
therefor.


 


“ERISA Affiliate”
shall mean each person (as defined in Section 3(9) of ERISA) that
together with the Borrower or a Subsidiary would be deemed to be a “single
employer” within the meaning of Section 414(b) or (c) of the
Code or, solely for purposes of Section 302 of ERISA and Section 412
of the Code, is treated as a single employer under Section 414 of the
Code.


 


“Eurodollar Loan”
shall mean any Revolving Credit Loan bearing interest at a rate determined by
reference to the Eurodollar Rate.


 


“Eurodollar Margin”
shall mean 4.00% per annum.


 


“Eurodollar Rate”
shall mean, with respect to any Eurodollar Loan for any Interest Period, the
rate appearing on Reuters Screen LIBOR01 Page (or on any successor or
substitute page of such Service, or any successor to or substitute for such
Service, providing rate quotations comparable to those currently provided on
such page of such Service, as determined by the Administrative Agent from
time to time for purposes of providing quotations of interest rates applicable
to dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity comparable to such
Interest Period.  In the event that such
rate is not available at such time for any reason, then the “Eurodollar Rate”
with respect to such Eurodollar Loan for such Interest Period shall be the rate
at which dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior
to the commencement of such Interest Period.


 


15

















 


“Event of Default”
shall have the meaning provided in Section 11.


 


“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.


 


“Excluded Subsidiary”
shall mean shall mean (a) each Domestic Subsidiary that is not a Material
Subsidiary, (b) any Domestic Subsidiary substantially all the assets of
which consist of capital stock or other equity interests of Foreign
Subsidiaries, (c) each Domestic Subsidiary that is prohibited by (i) any
Requirement of Law or (ii) any applicable contractual requirement existing
at the time such Subsidiary becomes a Restricted Subsidiary (and for so long as
such restriction or any replacement or renewal thereof is in effect), in each
case, from guaranteeing or granting Liens to secure the Obligations,  (d) each Domestic Subsidiary that is a
Subsidiary of a Foreign Subsidiary, (e) any other Domestic Subsidiary with
respect to which, in the reasonable judgment of the Administrative Agent
(confirmed in writing by notice to the Borrower), the cost or other
consequences (including any adverse tax consequences) of guaranteeing or
granting Liens to secure the Obligations shall be excessive in view of the
benefits to be obtained by the Lenders therefrom, (f) each Unrestricted
Subsidiary and (g) any non-wholly owned Subsidiary.  Each Domestic Subsidiary that is not a
Material Subsidiary as of the Signing Date is listed on Schedule 1.1(c).


 


“Existing Credit
Agreement” shall mean the Third Amended and Restated Credit Agreement,
dated as of August 25, 2006, among the Borrower, Holdings, Parent, Sealy
Canada Ltd. Ltee, as Canadian Borrower, the lending institutions from time to
time parties thereto, J. P. Morgan Securities Inc., as joint lead arranger and
joint bookrunner, Citigroup Global Markets Inc., as joint lead arranger and
joint bookrunner, Citibank, N.A., as syndication agent, JPMorgan Chase Bank,
N.A., as administrative agent, JPMorgan Chase Bank, N.A., Toronto Branch, as
Canadian administrative agent, and General Electric Capital Corporation, Wachovia
Bank, National Association, and LaSalle Bank National Association, as
co-documentation agents.


 


“Existing Letters of
Credit” shall mean the letters of credit identified on Schedule 1.1(d) hereto
and shall in any event include amendments, extensions and renewals thereof.


 


“Federal Funds Effective
Rate” shall mean, for any day, the weighted average of the per annum rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day that is a Business Day, the average of the quotations
for the day of such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it.


 


“Fees” shall mean all
amounts payable pursuant to, or referred to in, Section 4.1.


 


“Final Date” shall
mean the date on which the Commitments shall have terminated, no Loans shall be
outstanding, the Letters of Credit Outstanding shall have been reduced to zero
and all other Obligations under this Agreement (other than (a) obligations
under Secured Hedge Agreements not yet due and payable, (b) obligations
under Cash Management Agreements not yet due and payable and (c) contingent
indemnification and expense reimbursement obligations with respect to which no
claim has been asserted) shall have been paid in full.


 


16

















 


“Fitch” means Fitch
Ratings, Ltd., a division of Fitch, Inc., or any successor by merger or
consolidation to its business.


 


“Fixed Charge Coverage
Ratio” shall mean the ratio, for any Test Period, of (a) Consolidated
EBITDA for such Test Period minus the unfinanced portion of Capital
Expenditures made by Holdings, the Borrower and the Restricted Subsidiaries
during such Test Period minus expense for taxes paid in cash during such
Test Period net of cash refunds received during such Test Period to (b) Fixed
Charges for such Test Period, all calculated for Parent, Holdings, the Borrower
and the Restricted Subsidiaries on a consolidated basis, provided that
the Fixed Charge Coverage Ratio shall be calculated on a Pro Forma Basis.


 


“Fixed Charges” shall
mean, with reference to any Test Period, without duplication, cash Consolidated
Interest Expense paid during such Test Period plus payments of
Capitalized Lease Obligations during such Test Period plus scheduled
principal payments on Indebtedness made during such Test Period plus
Restricted Payments (other than refinancings of Indebtedness with the proceeds
of Permitted Refinancing Indebtedness) paid in cash during such Test Period
pursuant to Section 10.6(c) or (d), all calculated for Parent,
Holdings, the Borrower and the Restricted Subsidiaries on a consolidated basis,
provided that there shall be excluded from Fixed Charges for any Test
Period any of the foregoing items to the extent attributable to Unrestricted
Subsidiaries for such Test Period and to the extent otherwise included in Fixed
Charges for such Test Period, except to the extent actually paid in cash by
Parent, Holdings, the Borrower or its Restricted Subsidiaries during such
period (other than from dividends or other distributions from an Unrestricted
Subsidiary).


 


“Flood Insurance Laws”
shall mean, collectively, (i) the National Flood Insurance Act of 1968 as
now or hereafter in effect or any successor statute thereto, (ii) the
Flood Disaster Protection Act of 1973 as now or hereafter in effect or any
successor statute thereto, (iii) the National Flood Insurance Reform Act
of 1994 as now or hereafter in effect or any successor statute thereto and (iv) the
Flood Insurance Reform Act of 2004 as now or hereafter in effect or any
successor statute thereto.


 


“Foreign Subsidiary”
shall mean each Subsidiary of the Borrower that is not a Domestic Subsidiary.


 


“Forward Purchase
Contract” shall mean the letter agreement to be dated prior to the
Effective Date, by and among the Borrower, Parent and Sealy Holding LLC in form
reasonably satisfactory to each Initial Lender.


 


“Fronting Fee” shall
have the meaning provided in Section 4.1(c).


 


“GAAP” shall mean
generally accepted accounting principles in the United States of America as in
effect from time to time; provided, however, that if there occurs
after the date hereof any change in GAAP that affects in any respect the
calculation of any covenant contained in Section 10, the Lenders and the
Borrower shall negotiate in good faith amendments to the provisions of this
Agreement that relate to the calculation of such covenant with the intent of
having the respective positions of the Lenders and the Borrower after such
change in GAAP conform as nearly as possible to their respective positions as
of the date of this Agreement and,


 


17

















 


until any such amendments
have been agreed upon, the covenants in Section 10 shall be calculated as
if no such change in GAAP has occurred. 
Notwithstanding any other provision contained herein, all terms of an
accounting or financial nature used herein shall be construed, and all
computations of amounts and ratios referred to herein shall be made, without
giving effect to any election under Statement of Financial Accounting Standards
159 (or any other Financial Accounting Standard having a similar result or
effect) to value any Indebtedness or other liabilities of Parent, Holdings, the
Borrower or any Restricted Subsidiary at “fair value”, as defined therein.


 


“Governmental Authority”
shall mean any nation or government, any state, province, territory or other
political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.


 


“Guarantee” shall
mean the Guarantee, made by each Guarantor in favor of the Administrative Agent
for the benefit of the Secured Parties, in form reasonably satisfactory to each
Initial Lender, as the same may be amended, supplemented or otherwise modified
from time to time.


 


“Guarantee Obligations”
shall mean, as to any Person, any obligation of such Person guaranteeing or
intended to guarantee any Indebtedness of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, including any
obligation of such Person, whether or not contingent, (a) to purchase any
such Indebtedness or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or
payment of any such Indebtedness 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, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such
Indebtedness of the ability of the primary obligor to make payment of such
Indebtedness or (d) otherwise to assure or hold harmless the owner of such
Indebtedness against loss in respect thereof; provided, however,
that the term “Guarantee Obligations” shall not include endorsements of
instruments for deposit or collection in the ordinary course of business.  The amount of any Guarantee Obligation shall
be deemed to be an amount equal to the stated or determinable amount of the
Indebtedness in respect of which such Guarantee Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.


 


“Guarantors” shall
mean Holdings and the Subsidiary Guarantors.


 


“Hazardous Materials”
shall mean (a) any petroleum or petroleum products, radioactive materials,
friable asbestos, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing regulated levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or
substances defined as or included in the definition of “hazardous substances”,
“hazardous waste”, “hazardous materials”, “extremely hazardous waste”,
“restricted hazardous waste”, “toxic substances”, “toxic pollutants”,
“contaminants”, or “pollutants”, or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or
substance, which is prohibited, limited or regulated by any Environmental Law.


 


18

















 


“Hedge Agreements”
shall mean interest rate swap, cap or collar agreements, interest rate future
or option contracts, currency swap agreements, currency future or option
contracts, commodity price protection agreements or other commodity price
hedging agreements, and other similar agreements entered into by the Borrower
or any Restricted Subsidiary.


 


“Hedge Bank” shall
mean any Person that (a) at the time it enters into a Secured Hedge
Agreement is a Lender or an Affiliate of a Lender or (b) with respect to
any Hedge Agreement entered into prior to the Signing Date, any Person that is
a Lender or an Affiliate of a Lender on the Signing Date, in its capacity as a
party to such Secured Hedge Agreement.


 


“High Investment Grade
Rating” shall mean with respect to any Person, such Person has at least the
minimum rating indicated below from two out of the three ratings agencies named
below:


 




	
  Ratings Agency

  	
   

  	
  Minimum Rating

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  S&P

  	
   

  	
  A-
  (stable)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Moody’s

  	
   

  	
  A3
  (stable)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fitch

  	
   

  	
  A-
  (stable)

  	
   

  






 


“Historical Financial
Statements” means as of the Signing Date, the audited financial statements
of Parent and its Subsidiaries, for the immediately preceding three fiscal
years, consisting of balance sheets and the related consolidated statements of
income, stockholders’ equity and cash flows for such fiscal years.


 


“Holdings” shall have
the meaning provided in the preamble to this Agreement.


 


“Increased Amount Date”
shall have the meaning provided in Section 2.15.


 


“Indebtedness” of any
Person shall mean (a) all indebtedness of such Person for borrowed money, (b) the
deferred purchase price of assets or services that in accordance with GAAP
would be included as liabilities in the balance sheet of such Person, (c) the
face amount of all letters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder, (d) all Indebtedness of
a second Person secured by any Lien on any property owned by such first Person,
whether or not such Indebtedness has been assumed, (e) all Capitalized
Lease Obligations of such Person, (f) all obligations of such Person under
Hedge Agreements and (g) without duplication, all Guarantee Obligations of
such Person with respect to the obligations of another Person of a type described
in clauses (a) through (f) above, provided that (i) Indebtedness
shall not include trade payables and accrued expenses, in each case payable
directly or through a bank clearing arrangement and arising in the ordinary
course of business and (ii) for purposes of Section 11.4, the amount
of any Indebtedness in respect of any Hedge Agreement at any time, shall be the
amount of any required early termination payment by the Borrower or any
Subsidiary at such time.


 


“Initial Lender”
shall mean each Lender listed on Schedule 1.1(b).


 


19

















 


“Initial PIK Convertible
Notes” shall mean an initial aggregate principal amount of 8.0% convertible
senior secured third lien notes due 2016 of Parent and the Borrower, as co-issuers
that, when aggregated with the aggregate principal amount of the Initial
Secured Notes, does not exceed $555,000,000 and shall include any increase in
such convertible senior secured third lien notes as a result of the payment of
in kind interest thereon, provided that the covenants and other material
terms in the Convertible Notes are consistent with the description of notes
delivered to the Initial Lenders on the Effective Date pursuant to the Forward
Purchase Contract.


 


“Initial Secured Notes”
shall mean an aggregate principal amount of the Borrower’s Senior Secured Notes
due 2016 issued on the Effective Date that when aggregated with the aggregate
initial principal amount of the Initial PIK Convertible Notes subject to the
Forward Purchase Contract does not exceed $555,000,000.


 


“Intercreditor Agreement”
shall mean the Intercreditor Agreement, to be dated as of the Effective Date,
by and among, the Administrative Agent, the collateral agent under the Secured
Notes Indenture and the collateral agent under the PIK Convertible Notes
Indenture in form reasonably acceptable to each Initial Lender, as the same may
be amended or supplemented or otherwise modified from time to time.


 


“Interest Payment Date”
shall mean (a) with respect to any ABR Loan (other than a Swingline Loan),
the first day of each January, April, July and October and the
Maturity Date, (b) with respect to any Eurodollar Loan, the last day of
the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurodollar Loan Borrowing with an Interest Period of more
than three months’ duration, each day prior to the last day of such Interest
Period that occurs at intervals of three months’ duration after the first day
of such Interest Period and the Maturity Date, and (c) with respect to any
Swingline Loan, the day that such Loan is repaid and the Maturity Date.


 


“Interest Period”
shall mean, with respect to any Eurodollar Loan, the interest period applicable
thereto, as determined pursuant to Section 2.9.


 


“Inventory” shall
have the meaning assigned to such term in the Security Agreement.


 


“Inventory Reserves”
shall mean any and all reserves which the Security Agents deem necessary, in
their Permitted Discretion, to maintain (including, without limitation, reserves
for slow moving Inventory, intercompany profits and Inventory shrinkage and
Permitted Liens on any Eligible Inventory ranking prior to the Liens of the
Administrative Agent for the benefit of the Secured Parties) with respect to
the Inventory or any Credit Party.  The
Security Agents may, from time to time, in their Permitted Discretion, adjust
Inventory Reserves used in computing the Borrowing Base upon not less than one
Business Day’s prior written notice to the Borrower.


 


“Investment” shall
have the meaning provided in Section 10.5.


 


“Investment Grade Rating”
shall mean with respect to any Person, such Person has at least the minimum
rating indicated below from two out of the three ratings agencies named below:


 


20






 












 


	
  Ratings Agency

  	
   

  	
  Minimum Rating

  
	
   

  	
   

  	
   

  
	
  S&P

  	
   

  	
  BBB- (stable)

  
	
   

  	
   

  	
   

  
	
  Moody’s

  	
   

  	
  Baa3 (stable)

  
	
   

  	
   

  	
   

  
	
  Fitch

  	
   

  	
  BBB- (stable)

  



 


“Joinder Agreement” shall mean an agreement
pursuant to which a New Commitment is implemented pursuant to Section 2.15
in form reasonably satisfactory to the Administrative Agent.


 


“Joint Lead Arrangers” shall mean J.P. Morgan
Securities Inc., GE Capital Markets, Inc. and Citigroup Global Markets
Inc., as the joint lead arrangers for the Lenders under this Agreement and the
other Credit Documents.


 


“JPMCB” shall mean JPMorgan Chase Bank, N.A.
and any successor thereto by merger, consolidation or otherwise.


 


“KKR” shall mean each of Kohlberg Kravis
Roberts & Co., L.P. and KKR Associates, L.P.


 


“L/C Maturity Date” shall mean the date that is
five Business Days prior to the Maturity Date.


 


“L/C Participant” shall have the meaning
provided in Section 3.3(a).


 


“L/C Participation” shall have the meaning
provided in Section 3.3(a).


 


“Lender” shall have the meaning provided in the
preamble to this Agreement.


 


“Letter of Credit” shall mean each standby
letter of credit issued pursuant to Section 3.1 and shall include the
Existing Letters of Credit.


 


“Letter of Credit Commitment” shall mean
$35,000,000, as the same may be reduced from time to time pursuant to Section 3.1.


 


“Letter of Credit Exposure” shall mean, with
respect to any Lender at any time, such Lender’s Applicable Percentage of the
Letters of Credit Outstanding at such time.


 


“Letter of Credit Fee” shall have the meaning
provided in Section 4.1(b).


 


“Letter of Credit Issuer” shall mean JPMCB, any
of its Affiliates or any successor pursuant to Section 3.6.  The Letter of Credit Issuer may, in its
discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of the Letter of Credit Issuer (including, without limitation,
JPMorgan Chase Bank, N.A., Toronto Branch), and in each such case the term “Letter
of Credit Issuer” shall include any such Affiliate with respect to Letters of
Credit issued by such Affiliate.  In the
event that there is more than one Letter of Credit Issuer at any time,
references


 


21

















 


herein and in the
other Credit Documents to the Letter of Credit Issuer shall be deemed to refer
to the Letter of Credit Issuer in respect of the applicable Letter of Credit or
to all Letter of Credit Issuers, as the context requires.


 


“Letter of Credit Request” shall have the
meaning provided in Section 3.2.


 


“Letters of Credit Outstanding” shall mean, at
any time, the sum of, without duplication, (a) the aggregate Stated Amount
of all outstanding Letters of Credit and (b) the aggregate amount of all
Unpaid Drawings in respect of all Letters of Credit.


 


“Level I Status” shall mean, on any date, the
Commitment Utilization Percentage for the fiscal quarter most recently ended
prior to such date was less than or equal to 50%.


 


“Level II Status” shall mean, on any date, the
Commitment Utilization Percentage for the fiscal quarter most recently ended
prior to such date was greater than 50%.


 


“Lien” shall mean any mortgage, pledge,
security interest, hypothecation, assignment, lien (statutory or other) or
similar encumbrance (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement or any lease in the nature
thereof).


 


“Loan” shall mean any Revolving Credit Loan,
Swingline Loan or Protective Advance.


 


“Management Group” shall mean, at any time, the
Chairman of the Board, any President, any Executive Vice President or Vice
President, any Managing Director, any Treasurer and any Secretary of any of
Holdings, the Borrower or any Subsidiaries at such time.


 


“Mandatory Borrowing” shall have the meaning
provided in Section 2.1(c).


 


“Material Adverse Effect” shall mean a
circumstance or condition affecting the business, assets, operations,
properties or financial condition of Holdings, the Borrower and the Restricted
Subsidiaries, taken as a whole, that would materially adversely affect (a) the
ability of Holdings, the Borrower and the other Credit Parties, taken as a
whole, to perform their obligations under this Agreement or any of the other
Credit Documents or (b) the rights and remedies of the Administrative
Agent, the Security Agents and the Lenders under this Agreement or any of the
other Credit Documents.


 


“Material Subsidiary” shall mean any Restricted
Subsidiary other than (i) a Restricted Subsidiary set forth on Schedule
1.1(c) or (ii) any other Restricted Subsidiary of the Borrower (a) whose
total assets at the last day of the Test Period ending on the last day of the
most recent fiscal period for which Section 9.1 Financials have been
delivered were less than or equal 5% of the consolidated total assets of
Parent, Holdings, the Borrower and the Restricted Subsidiaries at such date or (b) whose
gross revenues for such Test Period were less than or equal to 5% of the
consolidated gross revenues of Parent, Holdings, the Borrower and the
Restricted Subsidiaries for such period, in each case determined in accordance
with GAAP;  provided that, notwithstanding
subclauses (i) and (ii) above, “Material Subsidiary” shall also
include any of the Borrower’s Subsidiaries selected by the Borrower which is
required to ensure


 


22

















 


that all Material
Subsidiaries have in the aggregate (x) total assets at the last day of the
Test Period ending on the last day of the most recent fiscal period for which Section 9.1
Financials have been delivered equal to or greater than 95% of the total assets
of Parent, Holdings, the Borrower and the Restricted Subsidiaries at such date
and (y) gross revenues for such Test Period that were equal to or greater
than 95% of the consolidated gross revenues of Parent, Holdings, the Borrower
and the Restricted Subsidiaries for such period, in each case determined in
accordance with GAAP.


 


“Maturity Date” shall mean the date that is
four years after the Effective Date, or, if such date is not a Business Day,
the immediately preceding Business Day.


 


“Minimum Availability Period” shall mean any period
(a) commencing when Availability for any consecutive two calendar day
period is less than the greater of (i) 15% of the Total Commitment and (ii) $15,000,000
and (b) ending after Availability is at least the greater of (i) 15%
of the Total Commitment and (ii) $15,000,000 for a period of 30
consecutive days.


 


“Moody’s” shall mean Moody’s Investors Service, Inc.
or any successor by merger or consolidation to its business.


 


“Mortgage” shall mean a Mortgage, Assignment of
Leases and Rents, Security Agreement and Financing Statement or other security
document entered into by the owner of a Mortgaged Property (or, to the extent
any Credit Party holds a leasehold interest in any Mortgaged Property, by the
lessee of such Mortgaged Property) in favor of the Collateral Agent for the
benefit of the Secured Parties in respect of that Mortgaged Property, in form
reasonably satisfactory to each Initial Lender, as the same may be amended,
supplemented or otherwise modified from time to time.


 


“Mortgaged Property” shall mean, initially,
each parcel of real estate and the improvements thereto identified on Schedule
1.1(a), and includes each other parcel of real property and improvements
thereto with respect to which a Mortgage is granted pursuant to Section 9.15.


 


“Net Orderly Liquidation Value” shall mean,
with respect to Inventory of any Person, the net orderly liquidation value
thereof as determined in a manner reasonably acceptable to the Security Agents
by an appraiser reasonably acceptable to the Security Agents.


 


“New Commitments” shall have the meaning
provided in Section 2.15.


 


“New Lender” shall have the meaning provided in
Section 2.15.


 


“Non-Excluded Taxes” shall have the meaning
provided in Section 5.4(a).


 


“Notice of Borrowing” shall have the meaning
provided in Section 2.3.


 


“Notice of Conversion or Continuation” shall
have the meaning provided in Section 2.6.


 


23

















 


“Obligations” shall have the meaning assigned
to such term in the Security Agreement.


 


“Parent” shall have the meaning provided in the
preamble to this Agreement.


 


“Participant” shall have the meaning provided
in Section 14.6(c)(i).


 


“PBGC” shall mean the Pension Benefit Guaranty
Corporation established pursuant to Section 4002 of ERISA, or any successor
thereto.


 


“Perfection Certificate” shall mean a
certificate of the Borrower in a form approved by the Security Agents.


 


“Permitted Acquisition” shall mean the
acquisition, by merger or otherwise, by the Borrower or any of the Restricted
Subsidiaries of assets or capital stock or other equity interests, so long as (a) such
acquisition and all transactions related thereto shall be consummated in
accordance with applicable law; (b) such acquisition shall result in the
issuer of such capital stock or other equity interests becoming a Subsidiary
Guarantor to the extent required by Section 9.11; and (c) such
acquisition shall result in the Administrative Agent for the benefit of the
applicable Lenders, being granted a security interest in any capital stock or any
assets so acquired to the extent required by Sections 9.11, 9.12 and/or 9.15.


 


“Permitted Additional PIK Convertible Notes”
shall mean up to $25,000,000 aggregate initial principal amount of convertible
senior secured third lien notes due 2016 (including any increase in such
convertible senior secured third lien notes as a result of the payment of in
kind interest thereon) of Parent and the Borrower, as co-issuers, having terms
and conditions not less favorable to the Lenders than the Initial PIK Convertible
Notes and with respect to which the holders (or a trustee or agent on behalf of
such holders) shall have executed a supplement to the Intercreditor Agreement
agreeing to be bound thereby on the same terms applicable to the holders of
Initial PIK Convertible Notes.


 


“Permitted Additional Secured Notes” shall mean
any Indebtedness of the Borrower (other than the Initial Secured Notes) that is
secured by a Lien ranking pari passu with the Lien of the
Initial Secured Notes pursuant to the terms of the Intercreditor Agreement; provided
that (a) the terms of such Indebtedness do not provide for any scheduled
repayment, mandatory redemption or sinking fund obligation prior to the
Maturity Date (other than customary offers to purchase upon a change of
control, asset sale or event of loss and customary acceleration rights after an
event of default), (b) no Subsidiary of the Borrower other than a
Subsidiary Guarantor is a guarantor or obligor with respect to such
Indebtedness, (c) the holders of such Permitted Additional Secured Notes
(or a trustee or agent authorized to act on behalf of such holders) shall have
executed a supplement to the Intercreditor Agreement agreeing to be bound
thereby on the same terms applicable to the holders of Initial Secured Notes, (d) no
Event of Default shall have occurred and is continuing immediately after giving
effect to the issuance thereof and the application of proceeds therefrom and (e) either
(x) on a Pro Forma Basis immediately after giving effect to the issuance
of any Permitted Additional Secured Notes (i) the Consolidated Senior
Secured Debt to Consolidated EBITDA Ratio as of the last day of the most recent
Test Period for which Section 9.1 Financials have been delivered is less
than 2.75 to 1.0


 


24

















 


and (ii) the
Fixed Charge Coverage Ratio for the most recent Test Period for which Section 9.1
Financials have been delivered would be at least 1.1 to 1.0 (or, in the case of
Permitted Additional Secured Notes issued as Permitted Refinancing
Indebtedness, the Fixed Charge Coverage Ratio for such Test Period is higher
than immediately prior to such refinancing transaction) or (y) the
aggregate amount of Permitted Additional Secured Notes outstanding at the time
of issuance thereof does not exceed $50,000,000.


 


“Permitted Discretion” shall mean the Security
Agents’ commercially reasonable judgment, exercised in good faith in accordance
with their customary business practices for asset-based lending transactions; provided
that any standard of eligibility or reserve established or modified by the
Security Agents shall have a reasonable relationship to circumstances,
conditions, events or contingencies which are the basis for such standard of
eligibility or reserve, as reasonably determined, without duplication, by the
Security Agents in good faith.


 


“Permitted Holders” shall mean, collectively,
KKR, its Affiliates and the Management Group.


 


“Permitted Investments” shall mean (a) (i) Dollars,
Pounds Sterling, Euros and Canadian Dollars and (ii) securities issued or
unconditionally guaranteed by the United States government or any agency or
instrumentality thereof, in each case having maturities of not more than 24
months from the date of acquisition thereof; (b) securities issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof or any political subdivision of any
such state or any public instrumentality thereof having maturities of not more
than 24 months from the date of acquisition thereof and, at the time of
acquisition, having an investment grade rating from at least two out of the
three of Fitch, Moody’s and S&P; (c) commercial paper maturing no more
than 12 months after the date of creation thereof and, at the time of
acquisition, having a minimum rating from at least two out of three of the
ratings agencies as follows: S&P: A-2, Moody’s: P-2 and Fitch: F2; (d) domestic
and eurodollar certificates of deposit or bankers’ acceptances maturing no more
than two years after the date of acquisition thereof issued by any Lender or
any other bank having combined capital and surplus of not less than
$250,000,000 in the case of domestic banks and $100,000,000 (or the dollar
equivalent thereof) in the case of foreign banks; (e) repurchase
agreements with a term of not more than 30 days for underlying securities of
the type described in clauses (a)(ii), (b) and (d) above entered into
with any bank meeting the qualifications specified in clause (d) above or
securities dealers of recognized national standing; (f) marketable
short-term money market and similar securities, having a minimum rating from at
least two out of three of the ratings agencies as follows: S&P: A-2, Moody’s:
P-2 and Fitch: F2; (g) shares of investment companies that are registered
under the Investment Company Act of 1940 and invest solely in one or more of
the types of securities described in clauses (a) through (f) above;
and (h) in the case of investments by any Restricted Foreign Subsidiary,
other customarily utilized high-quality investments in the country where such
Restricted Foreign Subsidiary is located.


 


“Permitted Junior Lien or Unsecured Notes”
shall mean any Indebtedness of the Borrower (other than the Initial PIK
Convertible Notes and any Permitted Additional PIK Convertible Notes) that is
either unsecured or secured by a Lien ranking junior to the Lien securing the
Permitted Additional Secured Notes and the Obligations pursuant to the terms of
the Intercreditor Agreement; provided that (a) the terms of such
Indebtedness do not provide for any


 


25

















 


scheduled
repayment, mandatory redemption or sinking fund obligation prior to the
Maturity Date (other than customary offers to purchase upon a change of
control, asset sale or event of loss and customary acceleration rights after an
event of default), (b) no Subsidiary of the Borrower other than a
Subsidiary Guarantor is a guarantor or obligor with respect to such
Indebtedness, (c) if such Permitted Junior Lien or Unsecured Notes are
secured by any Liens, the holders of such Permitted Junior Lien or Unsecured
Notes (or a trustee or agent authorized to act on behalf of such holders) shall
have executed a supplement to the Intercreditor Agreement agreeing to be bound
thereby on the same terms applicable to the holders of Initial PIK Convertible
Notes giving effect to the priority of the Lien securing such Indebtedness and (d) on
a Pro Forma Basis after giving effect to the issuance of such Permitted Junior
Lien or Unsecured Notes and the application of proceeds therefrom, (i) no
Event of Default shall have occurred and is continuing and (ii) the Fixed
Charge Coverage Ratio for the most recent Test Period for which Section 9.1
Financials have been delivered would be at least 1.1 to 1.0 (or, in the case of
Permitted Junior Lien or Unsecured Notes issued as Permitted Refinancing
Indebtedness, the Fixed Charge Coverage Ratio for such Test Period is higher
than immediately prior to such refinancing transaction).


 


“Permitted Liens” shall mean (a) Liens for
taxes, assessments or governmental charges or claims not yet due or which are
being contested in good faith and by appropriate proceedings for which
appropriate reserves have been established in accordance with GAAP; (b) Liens
in respect of property or assets of the Borrower or any of the Subsidiaries
imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens and
other similar Liens arising in the ordinary course of business, in each case so
long as such Liens arise in the ordinary course of business and do not
individually or in the aggregate have a Material Adverse Effect; (c) Liens
arising from judgments or decrees in circumstances not constituting an Event of
Default under Section 11.12; (d) Liens incurred or deposits made in
connection with workers’ compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations incurred in
the ordinary course of business; (e) ground leases in respect of real
property on which facilities owned or leased by the Borrower or any of its
Subsidiaries are located; (f) easements, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the business of the
Borrower and its Subsidiaries, taken as a whole; (g) any interest or title
of a lessor or secured by a lessor’s interest under any lease permitted by this
Agreement; (h) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods; (i) Liens on goods the purchase price of which is
financed by a documentary letter of credit issued for the account of the
Borrower or any of its Subsidiaries, provided that such Lien secures
only the obligations of the Borrower or such Subsidiaries in respect of such
letter of credit to the extent permitted under Section 10.1(A); (j) leases
or subleases granted to others not interfering in any material respect with the
business of the Borrower and its Subsidiaries, taken as a whole and (k) Liens
(i) of a collecting bank arising in the ordinary course of business under Section 4-210
of the Uniform Commercial Code in effect in the relevant jurisdiction covering
only the items being collected upon or (ii) in favor of a banking
institution arising as a matter of law, encumbering amounts credited to deposit
or securities accounts (including the right of set-off) and which are within
the general parameters customary in the banking industry.


 


26

















 


“Permitted Refinancing Indebtedness” shall mean
any Indebtedness (“Refinancing Indebtedness”) incurred to refinance,
refund, renew or extend (including, without limitation, pursuant to any
exchange offer) any Indebtedness (the “Initial Indebtedness”) specified
in clause (i) or (k) of Section 10.1(A), provided that (a) the
principal amount of any Refinancing Indebtedness is not increased above the
principal amount of the Initial Indebtedness refinanced thereby (except by the
amount of any accrued and unpaid interest thereon and by the amount of any fees
and expenses payable in connection with such refinancing), (b) Initial
Indebtedness of the Borrower or a Subsidiary Guarantor may not be refinanced
with Refinancing Indebtedness incurred or guaranteed by any Restricted
Subsidiary that is not a Guarantor, (c) except in the case of a
refinancing of the Subordinated Notes, if the Initial Indebtedness is
subordinated to the Obligations, then such Refinancing Indebtedness shall be
subordinated to the Obligations to at least the same extent, (d) such
Refinancing Indebtedness (x) does not have a final maturity prior to the
final maturity of the Initial Indebtedness refinanced thereby and (y) does
not have a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Initial Indebtedness and (e) except in the
case of Refinancing Indebtedness constituting Permitted Additional Secured
Notes or Permitted Junior Lien or Unsecured Notes, the Refinancing Indebtedness
is not secured by a Lien on any assets of the Borrower or any of the Restricted
Subsidiaries other than any assets subject to a Lien securing the Initial
Indebtedness, provided  further that no Permitted Refinancing
Indebtedness in respect of the Initial PIK Convertible Notes or any Permitted
Additional PIK Convertible Notes (or any Permitted Refinancing Indebtedness in
respect thereof) shall provide (a) for any cash interest payments or other
cash distributions in respect thereof on or prior to the Maturity Date, (b) by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable or exercisable) or upon the happening of any event
that such Indebtedness (i)(x) matures or becomes mandatorily redeemable
pursuant to a sinking fund obligation or otherwise (other than for equity
interests of Parent), (y) that such Indebtedness becomes convertible or
exchangeable at the option of the holder thereof for Indebtedness or other
securities that do not meet the requirements of this proviso or (z) become
redeemable at the option of the holder thereof (other than as a result of a
change of control event or in exchange for equity interests of Parent), in
whole or in part, in each case on or prior to the first anniversary of the
Maturity Date or (c) provide holders thereunder with any rights to require
redemption or repayment (other than in equity interests of Parent) upon the
occurrence of a “change of control” event prior to the Final Date.


 


“Permitted Sale Leaseback” shall mean any Sale
Leaseback consummated by the Borrower or any of the Restricted Subsidiaries
after the Effective Date, provided that (i) with respect to any
property owned as of the Signing Date, the value of such Sale Leasebacks shall
not exceed $50,000,000 in the aggregate and (ii) such Sale Leaseback is
consummated for fair value as determined at the time of consummation in good
faith by the Borrower and, in the case of any Sale Leaseback (or series of
related Sales Leasebacks) the aggregate proceeds of which exceed $20,000,000,
the board of directors of the Borrower (which such determination may take into
account any retained interest or other investment of the Borrower or such
Restricted Subsidiary in connection with, and any other material economic terms
of, such Sale Leaseback).


 


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


 


27

















 


“PIK Convertible Note Indenture” shall mean the
Indenture among Parent, the Borrower, the guarantors party thereto and the
trustee thereunder in the form contemplated by the Forward Purchase Contract,
pursuant to which the Initial PIK Convertible Notes are issued, as the same may
be amended, supplemented or otherwise modified from time to time.


 


“Plan” shall mean any multiemployer or
single-employer plan, as defined in Section 4001 of ERISA and subject to
Title IV of ERISA, that is or was within any of the preceding five plan years
maintained or contributed to by (or to which there is or was an obligation to
contribute or to make payments to) the Borrower, a Subsidiary or an ERISA
Affiliate.


 


“Pledge Agreement” shall mean the Pledge
Agreement, entered into by Holdings, the Borrower, the other pledgors party thereto
and the Collateral Agent for the benefit of the Secured Parties, in form
reasonably satisfactory to each Initial Lender, as the same may be amended,
supplemented or otherwise modified from time to time.


 


“Prime Rate” shall mean the rate of interest per
annum publicly announced from time to time by the Administrative Agent as its
reference rate in effect at its principal office in New York City (the Prime
Rate not being intended to be the lowest rate of interest charged by JPMCB in
connection with extensions of credit to debtors).


 


“Pro Forma Adjustment” shall mean, for any Test
Period that includes any of the six fiscal quarters first ending following any
acquisition or disposition of any Restricted Subsidiary or division or line of
business, the pro forma increase or decrease in Consolidated EBITDA, projected
by the Borrower in good faith as a result of reasonably identifiable and
factually supportable recurring net cost savings or recurring additional net
costs, as the case may be, realizable during such period as a result of such
transaction, provided that so long as such net cost savings or
additional net costs will be realizable at any time during such six-quarter
period, it shall be assumed, for purposes of projecting such pro forma increase
or decrease to Consolidated EBITDA, that such net cost savings or additional
net costs will be realizable during the entire such period; provided  further
that any such pro forma increase or decrease to Consolidated EBITDA shall be
without duplication of net cost savings or additional net costs actually
realized during such period and already included in Consolidated EBITDA.


 


“Pro Forma Adjustment Certificate” shall mean
any certificate of an Authorized Officer of the Borrower delivered pursuant to Section 9.1(i) or
setting forth the information described in clause (iv) to Section 9.1(d).


 


“Pro Forma Basis” shall mean, with respect to
any financial test specified herein as of any date (a “Determination Date”)
such test shall be determined on a pro forma basis after giving effect to:


 


(A)                              any acquisition or disposition of any
Restricted Subsidiary or division or line of business made following the first
day of the most recent Test Period ending prior to the Determination Date (the “Relevant
Test Period”) and on or prior to such Determination Date as though such
acquisition or disposition had occurred on the first day of the Relevant Test
Period;


 


28

















 


(B)                                any designation of a Restricted
Subsidiary as an Unrestricted Subsidiary or any redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary and any Restricted Payment,
in each case, following the first day of the Relevant Test Period and on or
prior to the Determination Date as though such designation, redesignation or
Restricted Payment had occurred on the first day of the Relevant Test Period;


 


(C)                                any incurrence or repayment of
Indebtedness during the Relevant Test Period and on or prior to the
Determination Date as though such incurrence or repayment had occurred on the
first day of the Relevant Test Period;


 


(D)                               any other transaction to occur on or
prior to the Determination Date which requires that any financial ratio be
calculated on a Pro Forma Basis as though such Transaction had occurred on the
first day of the Relevant Test Period; and


 


(E)                                 any applicable Pro Forma Adjustment.


 


“Protective Advance” shall have the meaning
assigned to such term in Section 2.1.


 


“Qualified PIK Securities” shall mean (1) any
preferred capital stock or preferred equity interest of Parent (a) that
does not provide for any cash dividend payments or other cash distributions in
respect thereof on or prior to the Maturity Date and (b) that by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable or exercisable) or upon the happening of any event does not (i)(x) mature
or become mandatorily redeemable pursuant to a sinking fund obligation or
otherwise, (y) become convertible or exchangeable at the option of the
holder thereof for Indebtedness or preferred stock that is not Qualified PIK
Securities or (z) become redeemable at the option of the holder thereof
(other than as a result of a change of control event), in whole or in part, in
each case on or prior to the first anniversary of the Maturity Date and (ii) provide
holders thereunder with any rights upon the occurrence of a “change of control”
event prior to the Final Date and (2) any Indebtedness of Parent which has
payments terms at least as favorable to the Borrower and Lenders as described
in clause (1)(a) above and is subordinated and has other terms, other than
with respect to interest rates, at least as favorable to the Borrower and
Lenders as the Subordinated Notes.


 


“Real Estate” shall have the meaning given to
that term in Section 9.1(g).


 


“Register” shall have the meaning provided in Section 14.6(b)(iv).


 


“Regulation D” shall mean Regulation D of the
Board as from time to time in effect and any successor to all or a portion
thereof establishing reserve requirements.


 


“Regulation T” shall mean Regulation T of the
Board as from time to time in effect and any successor to all or a portion
thereof establishing margin requirements.


 


“Regulation U” shall mean Regulation U of the
Board as from time to time in effect and any successor to all or a portion
thereof establishing margin requirements.


 


29

















 


“Regulation X” shall mean Regulation X of the
Board as from time to time in effect and any successor to all or a portion
thereof establishing margin requirements.


 


“Regulation Z” shall mean Regulation Z of the
Board as from time to time in effect and any successor to all or a portion
thereof establishing margin requirements.


 


“Related Parties” shall mean, with respect to
any specified Person, such Person’s Affiliates and the directors, officers,
employees, agents, trustees, advisors of such Person and any Person that
possesses, directly or indirectly, the power to direct or cause the direction
of the management or policies of such Person, whether through the ability to
exercise voting power, by contract or otherwise.


 


“Report” shall mean reports prepared by the
Administrative Agent, any Security Agent or another Person showing the results
of appraisals, field examinations or audits pertaining to the Credit Parties’
assets from information furnished by or on behalf of the Credit Parties, after
the Administrative Agent or any Security Agent has exercised its rights of
inspection pursuant to this Agreement, which Reports may be distributed to the Lenders
by the Administrative Agent or any such Security Agent.


 


“Reportable Event” shall mean an event
described in Section 4043 of ERISA and the regulations thereunder.


 


“Required Lenders” shall mean, at any date,
Lenders having or holding a majority of the Total Commitment at such date or,
if the Total Commitment has been terminated, Lenders having a majority of the
Total Credit Exposure at such date.


 


“Required Supermajority Lenders” shall mean, at
any date, Lenders having Commitments representing at least 75% of the Total
Commitment at such date or, if the Total Commitment has terminated, having at
least 75% of the Total Credit Exposure at such date.


 


“Requirement of Law” shall mean, as to any
Person, the Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or assets or to which such Person or any of its property or assets is
subject.


 


“Reserves” shall mean any and all reserves
(other than Account Reserves and Inventory Reserves) which the Security Agents
deem necessary, in their Permitted Discretion, to maintain (including, without
limitation, reserves for accrued and unpaid interest on the Obligations,
reserves for rent at locations leased by any Credit Party and for consignee’s,
warehousemen’s and bailee’s charges (unless a Collateral Access Agreement shall
be in effect with respect to the subject property), reserves for Secured Hedge
Agreements (but in the case of such Secured Hedge Agreements, only with the
consent of the Borrower), reserves for contingent liabilities of any Credit
Party, reserves for uninsured losses of any Credit Party, reserves for
uninsured, underinsured, un-indemnified or under-indemnified liabilities or
potential liabilities with respect to any litigation and reserves for taxes,
fees, assessments and other governmental charges) with respect to the
Collateral or any Credit Party.  The
Security Agents may, from time


 


30

















 


to time, in their
Permitted Discretion, adjust Reserves upon not less than one Business Day’s
prior written notice to the Borrower.


 


“Restricted Domestic Subsidiary” shall mean
each Restricted Subsidiary that is also a Domestic Subsidiary.


 


“Restricted Foreign Subsidiary” shall mean a
Foreign Subsidiary that is a Restricted Subsidiary.


 


“Restricted Payment” shall mean (a) any dividend
or other distribution (whether in cash, securities or other property) with
respect to any equity interests of Parent, Holdings or the Borrower, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such equity interests in
Parent, Holdings or the Borrower or any option, warrant or other right to
acquire any such equity interests in Parent, Holdings or the Borrower
(including the Initial PIK Convertible Notes and any Permitted Additional PIK
Convertible Notes) and any payment under any cash-settled incentive awards
payable to employees or directors of Parent or any of its Subsidiaries with
reference to any such equity interest, warrant or right to acquire, other than (i) dividends,
distributions, payments or purchases made with common stock of Parent or
warrants or options to purchase such common stock or made with common stock
upon the conversion or exercise of any options, warrants or rights (including
upon conversion of any Initial PIK Convertible Notes or Permitted Additional
PIK Convertible Notes) or (ii) the receipt of replacement rights
(excluding payments except as provided above) under any replacement incentive
award program, (b) the designation of any Restricted Subsidiary as an
Unrestricted Subsidiary (which shall be deemed to be a Restricted Payment in an
amount equal to the sum of (i) the net worth of such designated Subsidiary
immediately prior to such designation (such net worth to be calculated without
regard to any guarantee provided by such designated Subsidiary) and (ii) the
aggregate principal amount of any Indebtedness owed by such designated
Subsidiary to the Borrower or any Restricted Subsidiary immediately prior to
such designation), all calculated, except as set forth in the parenthetical to
clause (b), on a consolidated basis in accordance with GAAP and (c) any
payment pursuant to the Forward Purchase Contract by Holdings, the Borrower or
any Restricted Subsidiary including any return of cash collateral or any other
property or securities of any Credit Party other than (i) the issuance of
the Initial PIK Convertible Notes or common stock of Parent or warrants or
options to purchase common stock, (ii) a return by Holdings, the Borrower
and the Restricted Subsidiaries of a portion of the cash collateral deposited
pursuant to the Forward Purchase Contract to Sealy Holding LLC solely upon
issuance of the Initial PIK Convertible Notes and solely to the extent of and
with the net cash proceeds received by the Borrower from the issuance and sale
of Initial PIK Convertible Notes or (iii) payments to Sealy Holding LLC by
Holdings, the Borrower and the Restricted Subsidiaries of (x) fees paid on
the date of execution of the Forward Purchase Contract of up to $1,000,000 and (y) cash
interest on the cash collateral deposited pursuant to the Forward Purchase
Contract (prior to settlement or return to Sealy Holding LLC) in respect of the
period from deposit to no later than September 30, 2009 at a rate equal to
one month LIBOR plus 3.00% per annum.


 


“Restricted Subsidiary” shall mean any
Subsidiary of the Borrower other than an Unrestricted Subsidiary.


 


31
















 


“Revolving Credit
Loans” shall have the meaning provided in Section 2.1(a).


 


“S&P” shall
mean Standard & Poor’s Ratings Services or any successor by merger or
consolidation to its business.


 


“Sale Leaseback”
shall mean any transaction or series of related transactions pursuant to which
the Borrower or any of the Restricted Subsidiaries (a) sells, transfers or
otherwise disposes of any property, real or personal, whether now owned or
hereafter acquired, and (b) as part of such transaction, thereafter rents or
leases such property or other property that it intends to use for substantially
the same purpose or purposes as the property being sold, transferred or
disposed.


 


“SEC” shall mean
the Securities and Exchange Commission or any successor thereto.


 


“Section 9.1
Financials” shall mean the financial statements delivered, or required to
be delivered, pursuant to Section 9.1(a) or (b) together with
the accompanying officer’s certificate delivered, or required to be delivered,
pursuant to Section 9.1(d).


 


“Secured Cash
Management Agreement” shall mean any Cash Management Agreement that is
entered into by and between the Borrower or any of its Restricted Subsidiaries
and any Cash Management Bank.


 


“Secured Hedge
Agreement” shall mean any Hedge Agreement that is entered into by and
between the Borrower or any of its Restricted Subsidiaries and any Hedge Bank.


 


“Secured Note
Indenture” shall mean the Indenture to be dated as of the Effective Date,
among the Borrower, the guarantors party thereto and The Bank of New York
Mellon Trust Company, N.A., as trustee, in form reasonably satisfactory to each
Initial Lender pursuant to which the Initial Secured Notes are issued, as the
same may be amended, supplemented or otherwise modified from time to time.


 


“Secured Parties” shall
have the meaning assigned to such term in the applicable Security Documents.


 


“Security Agents”
shall mean the Collateral Agent and the Co-Collateral Agent.


 


“Security Agreement”
shall mean the Security Agreement entered into by the Borrower, the other
grantors party thereto and the Collateral Agent for the benefit of the Secured
Parties, in form reasonably satisfactory to each Initial Lender, as the same
may be amended, supplemented or otherwise modified from time to time.


 


“Security Documents”
shall mean, collectively, (a) the Guarantee, (b) the Pledge
Agreement, (c) the Security Agreement, (d) the Mortgages and (e) each
other security agreement or other instrument or document executed and delivered
pursuant to Section 9.11, 9.12 or 9.15 or pursuant to any of the Security
Documents to secure any of the Obligations.


 


32

















 


“Signing Date”
shall mean the date of execution and delivery of the Credit Agreement by each
of the parties listed on the signature pages hereto, which date was May 13,
2009.


 


“Solvent” shall
mean, with respect to the Borrower, that as of the Effective Date, both (i) (a) the
sum of the Borrower’s debts (including contingent liabilities) does not exceed
the present fair saleable value of the Borrower’s present assets; (b) the
Borrower’s capital is not unreasonably small in relation to its business as
contemplated on the Effective Date; and (c) the Borrower has not incurred
and does not intend to incur, or believe that it will incur, debts including
current obligations beyond its ability to pay such debts as they become due
(whether at maturity or otherwise); and (ii) the Borrower is “solvent”
within the meaning given that term and similar terms under applicable laws
relating to fraudulent transfers and conveyances.  For purposes of this definition, the amount
of any contingent liability at any time shall be computed as the amount that,
in light of all of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability (irrespective of whether such contingent liabilities meet the
criteria for accrual under Statement of Financial Accounting Standard No. 5).


 


“Specified Secured
Hedge Agreement” shall mean any Secured Hedge Agreement with respect to
which, with the consent of the Borrower at the time such Reserve is
established, the Security Agents maintain a Reserve.


 


“Specified Subsidiary”
shall mean, at any date of determination, (a) any Material Subsidiary or (b) any
Unrestricted Subsidiary (i) whose total assets at the last day of the Test
Period ending on the last day of the most recent fiscal period for which Section 9.1
Financials have been delivered (when taken together with all other Unrestricted
Subsidiaries as to which a specified condition applies) were equal to or
greater than 15% of the consolidated total assets of the Borrower and the
Subsidiaries at such date or (ii) whose gross revenues for such Test
Period (when taken together with all other Unrestricted Subsidiaries as to
which a specified condition applies) were equal to or greater than 15% of the
consolidated gross revenues of the Borrower and the Subsidiaries for such
period, in each case determined in accordance with GAAP.


 


“Stated Amount” of
any Letter of Credit shall mean, at any time, the Dollar Equivalent of the
maximum amount available to be drawn thereunder at such time, determined
without regard to whether any conditions to drawing could then be met.


 


“Status” shall
mean, as to the Borrower as of any date, the existence of Level I Status or
Level II Status, as the case may be, on such date.  Changes in Status shall become effective as
of the end of each fiscal quarter of Holdings.


 


“Statutory Reserve
Rate” shall mean for any day as applied to any Eurodollar Loan, a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the maximum
reserve percentages that are in effect on that day (including any marginal,
special, emergency or supplemental reserves), expressed as a decimal, as
prescribed by the Board and to which the Administrative Agent is subject, for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board).  Such reserve
percentages shall


 


33

















 


include those imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation.  The Statutory
Reserve Rate shall be adjusted automatically on and as of the effective date of
any change in any reserve percentage.


 


“Subordinated Note
Indenture” shall mean the Indenture dated as of April 6, 2004, among
the Borrower, the guarantors party thereto and The Bank of New York, as
trustee, pursuant to which the Subordinated Notes were issued, as the same may
be amended, supplemented or otherwise modified from time to time.


 


“Subordinated Notes”
shall mean the Borrower’s 8.25% Subordinated Notes due 2014 outstanding on the
Effective Date.


 


“Subsidiary” of
any Person shall mean and include (a) any corporation more than 50% of
whose stock of any class or classes having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time owned by such Person directly or indirectly through
Subsidiaries and (b) any partnership, association, joint venture or other
entity in which such Person directly or indirectly through Subsidiaries has
more than a 50% equity interest at the time. 
Unless otherwise expressly provided, all references herein to a “Subsidiary”
shall mean a Subsidiary of the Borrower.


 


“Subsidiary Guarantors”
shall mean (a) each Domestic Subsidiary on the Effective Date (other than
any Excluded Subsidiary) and (b) each Restricted Domestic Subsidiary that
becomes a party to the Guarantee after the Effective Date pursuant to Section 9.11.


 


“Swingline Commitment”
shall mean $25,000,000.


 


“Swingline Exposure”
shall mean, with respect, to any Lender at any time, such Lender’s Applicable
Percentage of the outstanding Swingline Loans at such time.


 


“Swingline Lender”
shall mean JPMCB in its capacity as lender of Swingline Loans hereunder.


 


“Swingline Loans”
shall have the meaning provided in Section 2.1(b).


 


“Swingline Maturity
Date” shall mean, with respect to any Swingline Loan, the date that is five
Business Days prior to the Maturity Date.


 


“Syndication Agent”
shall mean Mizuho Corporate Bank, Ltd., as the syndication agent for the
Lenders under this Agreement and the other Credit Documents.


 


“Test Period”
shall mean, for any date of determination under this Agreement, the four
consecutive fiscal quarters of the Borrower then last ended.


 


34

















 


“Total Commitment”
shall mean the sum of the Commitments of all Lenders.


 


“Total Credit Exposure”
shall mean, at any date, the sum of the Credit Exposures of all Lenders.


 


“Transaction Expenses”
shall mean any fees or expenses incurred or paid by Holdings or any of its
Subsidiaries in connection with the Transactions, including, without
limitation, early termination payments under the Borrower’s interest rate
hedging agreements with respect to the Existing Credit Agreement.


 


“Transactions”
shall mean (i) the negotiation, execution and delivery of this Agreement,
the Forward Purchase Contract,  Initial
PIK Convertible Notes Indenture and the Initial Secured Notes Indenture, (ii) the
repayment in full of the Existing Credit Agreement and the termination of all
commitments thereunder and (iii) all other transactions in connection with
the foregoing (including the rights offering contemplated by the Forward
Purchase Contract).


 


“Transferee” shall
have the meaning provided in Section 14.6(e).


 


“Type” shall mean,
as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.


 


“Unfunded Current
Liability” of any Plan shall mean the amount, if any, by which the present
value of the accrued benefits under the Plan as of the close of its most recent
plan year, determined in accordance with Statement of Financial Accounting
Standards No. 87 as in effect on the date hereof, based upon the actuarial
assumptions that would be used by the Plan’s actuary in a termination of the
Plan, exceeds the fair market value of the assets allocable thereto.


 


“Unpaid Drawing”
shall have the meaning provided in Section 3.4(a).


 


“Unrestricted
Subsidiary” shall mean (a) any Subsidiary of the Borrower that is
formed or acquired after the Effective Date (other than a Subsidiary that
becomes or is required to become a Credit Party hereunder), provided
that at such time (or promptly thereafter) the Borrower designates such
Subsidiary an Unrestricted Subsidiary in a written notice to the Administrative
Agent, (b) any Restricted Subsidiary (other than a Restricted Subsidiary
that is or becomes a Credit Party) subsequently re-designated as an
Unrestricted Subsidiary by the Borrower in a written notice to the Administrative
Agent, provided that no Default would result from such re-designation
and (c) each Subsidiary of an Unrestricted Subsidiary; provided, however,
that at the time of any written re-designation by the Borrower to the
Administrative Agent that any Unrestricted Subsidiary shall no longer
constitute an Unrestricted Subsidiary, such Unrestricted Subsidiary shall cease
to be an Unrestricted Subsidiary to the extent no Default would result from
such re-designation.  On or promptly
after the date of its formation, acquisition or re-designation, as applicable,
each Unrestricted Subsidiary (other than an Unrestricted Subsidiary that is a
Foreign Subsidiary) shall have entered into a tax sharing agreement containing
terms that, in the reasonable judgment of the Administrative Agent, provide for
an appropriate allocation of tax liabilities and benefits.


 


35

















 


“Voting Stock”
shall mean, with respect to any Person, shares of such Person’s capital stock
having the right to vote for the election of directors of such Person under
ordinary circumstances.


 


“Weekly Reporting
Period” shall mean any period during which the Availability is less than
the greater of (x) 20.0% of the Total Commitments and (y) $20,000,000.


 


“Weighted Average Life
to Maturity” when applied to any Indebtedness at any date, means the number
of years obtained by dividing (1) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payment of principal, including payment
at final maturity, in respect thereof by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment by (2) the then outstanding principal amount of
such Indebtedness.


 


(b)                                 The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section references are to Sections of this Agreement unless otherwise
specified.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.


 


1.2.                              Exchange Rates. 
For purposes of determining compliance under Section  10.4, 10.5 or
10.6  with respect to any amount in a
foreign currency, such amount shall be deemed to equal the Dollar equivalent
thereof based on the average exchange rate for such foreign currency for the
most recent twelve-month period immediately prior to the date of determination
in a manner consistent with that used in calculating Consolidated EBITDA for
the related period.  For purposes of
determining compliance with Sections 10.1 and 10.2, with respect to any amount
of Indebtedness in a foreign currency, compliance will be determined at the
time of incurrence thereof using the Dollar equivalent thereof at the exchange
rate in effect for such currency at the time of such incurrence.


 


SECTION 2.                                Amount and Terms of Credit


 


2.1.                              Commitments.


 


(a)                                  (i)  Subject to and upon the terms
and conditions herein set forth, each Lender severally agrees to make a loan or
loans denominated in Dollars (each a “Revolving Credit Loan”) to the Borrower
which Revolving Credit Loans (A) shall be made at any time and from time
to time on and after the Effective Date and prior to the Maturity Date, (B) may,
at the option of the Borrower be incurred and maintained as, and/or converted
into, ABR Loans or Eurodollar Loans, provided that all Revolving Credit
Loans made by each of the Lenders pursuant to the same Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Revolving Credit
Loans of the same Type, (C) may be repaid and reborrowed in accordance
with the provisions hereof, (D) shall not, for any such Lender, result in
such Lender’s Credit Exposure at such time exceeding such Lender’s Commitment
at such time and (E) shall not result in the Total Credit Exposure
exceeding the lesser of (i) the Total Commitment at such time and (ii) the
Borrowing Base at such time.


 


36

















 


(ii)                                  Each Lender may at its option make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan, provided that (A) any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan and (B) in
exercising such option, such Lender shall use its reasonable efforts to
minimize any increased costs to the Borrower resulting therefrom (which
obligation of the Lender shall not require it to take, or refrain from taking,
actions that it determines would result in increased costs for which it will
not be compensated hereunder or that it determines would be otherwise
disadvantageous to it and in the event of such request for costs for which
compensation is provided under this Agreement, the provisions of Section 3.5
shall apply).


 


(b)                                 Subject to and upon the terms and
conditions herein set forth, the Swingline Lender in its individual capacity
agrees, at any time and from time to time on and after the Effective Date and
prior to the Swingline Maturity Date, to make a loan or loans (each a “Swingline
Loan” and, collectively, the “Swingline Loans”) to the Borrower in
Dollars, which Swingline Loans (i) shall be ABR Loans, (ii) shall
have the benefit of the provisions of Section 2.1(c), (iii) shall not
exceed at any time outstanding the Swingline Commitment, (iv) shall not
result at any time in the Total Credit Exposure at such time exceeding the
lesser of (i) the Total Commitment at such time and (ii) the
Borrowing Base at such time and (v) may be repaid and reborrowed in
accordance with the provisions hereof. 
On the Swingline Maturity Date, each outstanding Swingline Loan shall be
repaid in full.  The Swingline Lender
shall not make any Swingline Loan after receiving a written notice from the
Borrower or any Lender stating that a Default exists and is continuing until
such time as the Swingline Lender shall have received written notice of (i) rescission
of all such notices from the party or parties originally delivering such notice
or (ii) the waiver of such Default in accordance with the provisions of Section 14.1.


 


(c)                                  On any Business Day, the Swingline Lender
may, in its sole discretion, give notice to the Lenders that all
then-outstanding Swingline Loans shall be funded with a Borrowing of Revolving
Credit Loans (and, if any Swingline Loan is outstanding on the seventh calendar
day following the date of Borrowing of such Swingline Loan, then on the first
Business Day following such seventh calendar day, the Swingline Lender shall be
required to give such notice), in which case Revolving Credit Loans
constituting ABR Loans (each such Borrowing, a “Mandatory Borrowing”)
shall be made on the immediately succeeding Business Day by all Lenders with
Commitments pro  rata based on each Lender’s Applicable
Percentage, and the proceeds thereof shall be applied directly to the Swingline
Lender to repay the Swingline Lender for such outstanding Swingline Loans.  Each Lender hereby irrevocably agrees to make
such Revolving Credit Loans upon one Business Day’s notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified to it in writing by the Swingline Lender notwithstanding
(i) that the amount of the Mandatory Borrowing may not comply with the
minimum amount for each Borrowing specified in Section 2.2, (ii) whether
any conditions specified in Section 7 are then satisfied, (iii) whether
a Default has occurred and is continuing, (iv) the date of such Mandatory
Borrowing or (v) any reduction in the Total Commitment or Availability
after any such Swingline Loans were made. 
In the event that, in the sole judgment of the Swingline Lender, any
Mandatory Borrowing cannot for any reason be made on the date otherwise
required above (including as a result of the commencement of a proceeding under
the Bankruptcy Code in respect of the Borrower), each Lender hereby agrees that
it shall forthwith purchase from the Swingline Lender (without recourse or
warranty) such participation of the outstanding Swingline Loans as shall be


 


37

















 


necessary to cause such Lenders to share in such Swingline Loans
ratably based upon their Applicable Percentages, provided that all
principal and interest payable on such Swingline Loans shall be for the account
of the Swingline Lender until the date the respective participation is
purchased and, to the extent attributable to the purchased participation, shall
be payable to the Lender purchasing the same from and after such date of
purchase.


 


(d)                                 Subject to the limitations set forth
below, the Administrative Agent is authorized by the Borrower and the Lenders,
from time to time in the Administrative Agent’s sole discretion (but shall have
absolutely no obligation to), to make Loans to the Borrower, on behalf of all
Lenders, which the Administrative Agent, in its reasonable discretion, deems
necessary or desirable (i) to preserve or protect the Collateral, or any
portion thereof, (ii) to enhance the likelihood of, or maximize the amount
of, repayment of the Loans and other Obligations or (iii) to pay any other
amount chargeable to or required to be paid by the Credit Parties pursuant to
the terms of this Agreement, including payments of reimbursable expenses
(including costs, fees, and expenses as described in Section 14.5) and
other sums payable under the Credit Documents (any of such Loans are herein
referred to as “Protective Advances”); provided that, the aggregate
amount of Protective Advances outstanding at any time shall not at any time
exceed the lesser of (x) $7,500,000 and (y) 7.5% of the Total
Commitment; provided  further that the aggregate amount of
outstanding Protective Advances plus the aggregate amount of the other Total
Credit Exposure shall not exceed the Total Commitment.  Protective Advances may be made even if the
conditions precedent set forth in Section 7 have not been satisfied.  The Protective Advances shall be secured by
the Security Documents and shall constitute Obligations hereunder and under the
other Credit Documents.  All Protective
Advances shall be ABR Loans.  The
Administrative Agent’s authorization to make Protective Advances may be revoked
at any time by the Required Lenders.  Any
such revocation must be in writing and shall become effective prospectively
upon the Administrative Agent’s receipt thereof.  At any time that there is sufficient
Availability and the conditions precedent set forth in Section 7 have been
satisfied, the Administrative Agent may request the Lenders to make a Revolving
Credit Loan to repay a Protective Advance. 
At any other time the Administrative Agent may require the Lenders to
fund their risk participations described in Section 2.1(e).


 


(e)                                  Upon the making of a Protective Advance
by the Administrative Agent (whether before or after the occurrence of a
Default), each Lender shall be deemed, without further action by any party
hereto, to have unconditionally and irrevocably purchased from the Administrative
Agent without recourse or warranty an undivided interest and participation in
such Protective Advance in proportion to its Applicable Percentage.  On any Business Day, the Administrative Agent
may, in its sole discretion, give notice to the Lenders that the Lenders are
required to fund their risk participations in Protective Advances (and, if any
Protective Advance is outstanding on the thirtieth calendar day following the
date of Borrowing of such Protective Advance, then on the first Business Day
following such thirtieth calendar day, the Administrative Agent shall give such
notice) in which case each Lender shall fund its participation on the date
specified in such notice. From and after the date, if any, on which any Lender
is required to fund its participation in any Protective Advance purchased
hereunder, the Administrative Agent shall promptly distribute to such Lender,
such Lender’s Applicable Percentage of all payments of principal and interest
and all proceeds of Collateral received by the Administrative Agent in respect
of such Protective Advance.


 


38

















 


2.2.                              Minimum Amount of Each Borrowing; Maximum
Number of Borrowings.  Each Borrowing of Revolving Credit Loans
shall be in a minimum amount of $2,000,000 and in an integral multiple of
$1,000,000 and Swingline Loans shall be in a multiple of $100,000 (except that
Mandatory Borrowings shall be made in the amounts required by Section 2.1(c) and
Revolving Credit Loans made to refinance Protective Advances pursuant to Section 2.1(e)).  More than one Borrowing may be incurred on
any date, provided that at no time shall there be outstanding more than
10 Borrowings of Eurodollar Loans under this Agreement.


 


2.3.                              Notice of Borrowing.


 


(a)                                  Whenever the Borrower desires to incur
Revolving Credit Loans hereunder (other than Mandatory Borrowings, Borrowings
to repay Unpaid Drawings or Borrowings to repay Protective Advances), it shall
give the Administrative Agent at the Administrative Agent’s Office, (i) prior
to 12:00 Noon (New York time) at least three Business Days’ prior written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing
of Eurodollar Loans, and (ii) prior to 12:00 Noon (New York time) at least
one Business Day’s prior written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of ABR Loans (each such notice, a “Notice
of Borrowing”).  Each such Notice of
Borrowing, except as otherwise expressly provided in Section 2.10, shall
be irrevocable and shall specify (i) the aggregate principal amount of the
Revolving Credit Loans to be made pursuant to such Borrowing, (ii) the
date of Borrowing (which shall be a Business Day) and (iii) whether the
respective Borrowing shall consist of ABR Loans or Eurodollar Loans and, if
Eurodollar Loans, the Interest Period to be initially applicable thereto.  The Administrative Agent shall promptly give
each Lender written notice (or telephonic notice promptly confirmed in writing)
of each proposed Borrowing of Revolving Credit Loans, of such Lender’s
Applicable Percentage thereof and of the other matters covered by the related
Notice of Borrowing.


 


(b)                                 Whenever the Borrower desires to incur
Swingline Loans hereunder, it shall give the Administrative Agent written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing
of Swingline Loans prior to 2:30 p.m. (New York time) on the date of such
Borrowing.  Each such notice shall be
irrevocable and shall specify (i) the aggregate principal amount of the
Swingline Loans to be made pursuant to such Borrowing and (ii) the date of
Borrowing (which shall be a Business Day). 
The Administrative Agent shall promptly give the Swingline Lender
written notice (or telephonic notice promptly confirmed in writing) of each proposed
Borrowing of Swingline Loans and of the other matters covered by the related
Notice of Borrowing.


 


(c)                                  Mandatory Borrowings shall be made upon
the notice specified in Section 2.1(c), with the Borrower irrevocably
agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory
Borrowings as set forth in such Section.


 


(d)                                 Borrowings to reimburse Unpaid Drawings
shall be made upon the notice specified in Section 3.4(a).


 


(e)                                  Without in any way limiting the
obligation of the Borrower to confirm in writing any notice it may give
hereunder by telephone, the Administrative Agent may act prior to receipt of
written confirmation without liability upon the basis of such telephonic notice
believed


 


39

















 


by the
Administrative Agent in good faith to be from an Authorized Officer of the
Borrower.  In each such case, the
Borrower hereby waives the right to dispute the Administrative Agent’s record
of the terms of any such telephonic notice.


 


2.4.                              Disbursement of Funds.


 


(a)                                  No later than 12:00 Noon (New York time)
on the date specified in each Notice of Borrowing (including Mandatory
Borrowings) of Revolving Credit Loans, each Lender will make available its
Applicable Percentage, if any, of each Borrowing of Revolving Credit Loans
requested to be made on such date in the manner provided below.  No later than 3:00 p.m. (New York time)
on the date specified in each Notice of Borrowing relating to Swingline Loans,
the Swingline Lender shall make available to the Borrower its Swingline Loan to
be made on such date.


 


(b)                                 Each Lender shall make available all
amounts it is to fund to the Borrower under any Borrowing in Dollars in
immediately available funds to the Administrative Agent at the Administrative
Agent’s Office and the Administrative Agent will (except in the case of
Mandatory Borrowings and Borrowings to repay Unpaid Drawings and Protective
Advances) make available to the Borrower, by depositing to the Borrower’s
account at the Administrative Agent’s Office the aggregate of the amounts so
made available in Dollars.  Unless the
Administrative Agent shall have been notified by any Lender prior to the date
of any such Borrowing that such Lender does not intend to make available to the
Administrative Agent its portion of the Borrowing or Borrowings to be made on
such date, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on such date of Borrowing, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower
a corresponding amount.  If such
corresponding amount is not in fact made available to the Administrative Agent
by such Lender and the Administrative Agent has made available the same to the
Borrower, the Administrative Agent shall be entitled to recover such
corresponding amount from such Lender. 
If such Lender does not pay such corresponding amount forthwith upon the
Administrative Agent’s demand therefor the Administrative Agent shall promptly
notify the Borrower and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent.  The
Administrative Agent shall also be entitled to recover from such Lender or the
Borrower interest on such corresponding amount in respect of each day from the
date such corresponding amount was made available by the Administrative Agent
to the Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (i) if paid by such
Lender, the greater of (x) the Federal Funds Effective Rate and (y) a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation or (ii) if paid by the Borrower, the
then-applicable rate of interest for ABR Loans.


 


(c)                                  Nothing in this Section 2.4 shall be
deemed to relieve any Lender from its obligation to fulfill its commitments
hereunder or to prejudice any rights that the Borrower may have against any
Lender as a result of any default by such Lender hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any
other Lender to fulfill its commitments hereunder).


 


40
















 


2.5.                              Repayment of Loans; Evidence
of Debt.


 


(a)                                  The Borrower
shall repay to the Administrative Agent in Dollars, for the benefit of the
Lenders, on the Maturity Date, the then-unpaid Revolving Credit Loans.  The Borrower shall repay to the
Administrative Agent in Dollars, for the account of the Swingline Lender, on
the Swingline Maturity Date, the then-unpaid Swingline Loans.  The Borrower shall repay to the
Administrative Agent the then-unpaid amount of each Protective Advance on the
earlier of the Maturity Date and demand by the Administrative Agent.


 


(b)                                 On each
Business Day during any Cash Dominion Period, the Administrative Agent shall
apply all funds credited to the Collection Account the previous Business Day
(whether or not immediately available) first to prepay any Protective
Advances that may be outstanding, second to prepay any Swingline Loans
outstanding, third to prepay any Revolving Credit Loans and fourth
to cash collateralize outstanding Letter of Credit Exposure at one hundred five
percent (105%).


 


(c)                                  Each Lender
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to the appropriate lending office
of such Lender resulting from each Loan made by such lending office of such Lender
from time to time, including the amounts of principal and interest payable and
paid to such lending office of such Lender from time to time under this
Agreement.


 


(d)                                 The
Administrative Agent shall maintain the Register pursuant to Section 14.6(b),
and a subaccount for each Lender, in which Register and subaccounts (taken
together) shall be recorded (i) the amount of each Loan made hereunder,
whether such Loan is a Revolving Credit Loan, a Swingline Loan or a Protective
Advance, the Type of each Loan made and the Interest Period applicable thereto,
(ii) the amount of any principal or interest due and payable or to become
due and payable from the Borrower to each Lender, the Swingline Lender or the Administrative
Agent hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender’s share
thereof.


 


(e)                                  The entries
made in the Register and accounts and subaccounts maintained pursuant to
paragraphs (c) and (d) of this Section 2.5 shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Borrower therein recorded; provided, however,
that the failure of any Lender or the Administrative Agent to maintain such
account, such Register or such subaccount, as applicable, or any error therein,
shall not in any manner affect the obligation of the Borrower to repay (with
applicable interest) the Loans made to the Borrower in accordance with the
terms of this Agreement.


 


2.6.                              Conversions and Continuations.


 


(a)                                  The Borrower
shall have the option on any Business Day to convert all or a portion equal to
at least $2,000,000 of the outstanding principal amount of Revolving Credit
Loans made to the Borrower from one Type into a Borrowing or Borrowings of
another Type and the Borrower shall have the option on any Business Day to
continue the outstanding principal amount of any Eurodollar Loans as Eurodollar
Loans for an additional Interest Period, provided that (i) no partial
conversion of Eurodollar Loans shall reduce the outstanding principal 


 


41





















 


amount
of Eurodollar Loans made pursuant to a single Borrowing to less than
$2,000,000, (ii) ABR Loans may not be converted into Eurodollar Loans if a
Default is in existence on the date of the conversion and the Administrative
Agent has or the Required Lenders have determined in its or their sole
discretion not to permit such conversion, (iii) Eurodollar Loans may not
be continued as Eurodollar Loans for an additional Interest Period if a Default
is in existence on the date of the proposed continuation and the Administrative
Agent has or the Required Lenders have determined in its or their sole
discretion not to permit such continuation, (iv) no conversion or
continuation of Eurodollar Loans may be made on a day other than the last day
of the Interest Period applicable thereto and (v) Borrowings resulting
from conversions pursuant to this Section 2.6 shall be limited in number
as provided in Section 2.2.  Each
such conversion or continuation shall be effected by the Borrower by giving the
Administrative Agent at the Administrative Agent’s Office prior to 12:00 noon
(New York time) at least three Business Days’ (or one Business Day’s notice in
the case of a conversion into ABR Loans) prior written notice (or telephonic
notice promptly confirmed in writing) (each a “Notice of Conversion or
Continuation”) specifying the Revolving Credit Loans to be so converted or
continued, the Type of Revolving Credit Loans to be converted or continued into
and, if such Revolving Credit Loans are to be converted into or continued as
Eurodollar Loans, the Interest Period to be initially applicable thereto.  The Administrative Agent shall give each
Lender notice as promptly as practicable of any such proposed conversion or
continuation affecting any of its Revolving Credit Loans.


 


(b)                                 If any Default
is in existence at the time of any proposed continuation of any Eurodollar
Loans and the Administrative Agent has or the Required Lenders have determined
in its or their sole discretion not to permit such continuation, such
Eurodollar Loans shall be automatically converted on the last day of the
current Interest Period into ABR Loans. 
If upon the expiration of any Interest Period in respect of Eurodollar
Loans, the Borrower has failed to elect a new Interest Period to be applicable
thereto as provided in paragraph (a) above, the Borrower shall be deemed
to have elected to continue such Borrowing of Eurodollar Loans into a Borrowing
of ABR Loans effective as of the expiration date of such current Interest
Period.


 


2.7.                              Pro  rata
Borrowings.  Each Borrowing of
Revolving Credit Loans under this Agreement shall be granted by the Lenders pro
rata on the basis of their Applicable Percentages.  It is understood that no Lender shall be
responsible for any default by any other Lender in its obligation to make Loans
hereunder and that each Lender shall be obligated to make the Loans provided to
be made by it hereunder, regardless of the failure of any other Lender to
fulfill its commitments hereunder.


 


2.8.                              Interest.


 


(a)                                  The unpaid
principal amount of each ABR Loan shall bear interest from the date of the
Borrowing thereof until maturity (whether by acceleration or otherwise) at a
rate per annum that shall at all times be the ABR Margin plus the ABR in effect
from time to time.


 


(b)                                 The unpaid
principal amount of each Eurodollar Loan shall bear interest from the date of
the Borrowing thereof until maturity thereof (whether by acceleration or otherwise)
at a rate per annum that shall at all times be the Eurodollar Margin in effect
from time to time plus the relevant Eurodollar Rate.


 


42





















 


(c)                                  If all or a
portion of (i) the principal amount of any Loan or (ii) any interest
payable thereon or Fee shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum that is (x) in the case of overdue principal,
the rate that would otherwise be applicable thereto plus 2% or (y) in
the case of any overdue interest or Fee, to the extent permitted by applicable
law, the rate described in Section 2.8(a) plus 2% from and
including the date of such non-payment to but excluding the date on which such
amount is paid in full (after as well as before judgment).


 


(d)                                 Accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and upon termination of the Commitments; provided that (i) in
the event of any repayment or prepayment of any Loan (other than a prepayment
of an ABR Loan that is a Revolving Credit Loan prior to the Maturity Date),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (ii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.


 


(e)                                  All
computations of interest hereunder shall be made in accordance with Section 5.5.


 


(f)                                    The
Administrative Agent, upon determining the interest rate for any Borrowing of
Eurodollar Loans, shall promptly notify the Borrower and the relevant Lenders
thereof.  Each such determination shall,
absent clearly demonstrable error, be final and conclusive and binding on all
parties hereto.


 


2.9.                              Interest Periods.  At the time the Borrower gives a Notice of Borrowing
or Notice of Conversion or Continuation in respect of the making of, or
conversion into or continuation as, a Borrowing of Eurodollar Loans (in the
case of the initial Interest Period applicable thereto) or prior to 10:00 a.m.
(New York time) on the third Business Day prior to the expiration of an Interest
Period applicable to a Borrowing of Eurodollar Loans, the Borrower shall have
the right to elect by giving the Administrative Agent written notice (or
telephonic notice promptly confirmed in writing) the Interest Period applicable
to such Borrowing, which Interest Period shall, at the option of the Borrower,
be a three, six or, if agreed to by each Lender, a nine or twelve month period
or any shorter period.  Notwithstanding
anything to the contrary contained above:


 


(i)                                     the initial Interest Period
for any Borrowing of Eurodollar Loans shall commence on the date of such
Borrowing (including the date of any conversion from a Borrowing of ABR Loans)
and each Interest Period occurring thereafter in respect of such Borrowing
shall commence on the day on which the next preceding Interest Period expires;


 


(ii)                                  if any Interest Period
relating to a Borrowing of Eurodollar Loans begins on the last Business Day of
a calendar month or begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period,
such Interest Period shall end on the last Business Day of the calendar month
at the end of such Interest Period;


 


43

















 


(iii)                               if any Interest Period would
otherwise expire on a day that is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day, provided that if any
Interest Period in respect of a Eurodollar Loan would otherwise expire on a day
that is not a Business Day but is a day that is after the last Business Day in such
month, such Interest Period shall expire on the next preceding Business Day;
and


 


(iv)                              the Borrower shall not be
entitled to elect any Interest Period in respect of any Eurodollar Loan if such
Interest Period would extend beyond the Maturity Date.


 


2.10.                        Increased Costs, Illegality,
etc.


 


(a)                                  In the event
that (x) in the case of clause (i) below, the Administrative Agent or
(y) in the case of clauses (ii) and (iii) below, any Lender
shall have reasonably determined (which determination shall, absent clearly
demonstrable error, be final and conclusive and binding upon all parties
hereto):


 


(i)                                     on any date for determining
the Eurodollar Rate for any Interest Period that (x) deposits in the
principal amounts of the Loans comprising such Eurodollar Loan Borrowing are
not generally available in the relevant market, (y) by reason of any
changes arising on or after the Signing Date affecting the interbank eurodollar
market, adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of Eurodollar Rate or
(z) the Administrative Agent is advised in writing by the Required Lenders
that the Eurodollar Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders of making or maintaining their Loans
included in such Borrowing for such Interest Period; or


 


(ii)                                  at any time, that such
Lender shall incur increased costs or reductions in the amounts received or
receivable hereunder with respect to any Eurodollar Loans (other than any such
increase or reduction attributable to taxes) because of (x) any change
since the date hereof in any applicable law, governmental rule, regulation,
guideline or order (or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule, regulation,
guideline or order), such as, for example, without limitation, a change in
official reserve requirements, and/or (y) other circumstances affecting
the interbank eurodollar market or the position of such Lender in such market;
or


 


(iii)                               at any time, that the making
or continuance of any Eurodollar Loan has become unlawful by compliance by such
Lender in good faith with any law, governmental rule, regulation, guideline or
order (or would conflict with any such governmental rule, regulation, guideline
or order not having the force of law even though the failure to comply
therewith would not be unlawful), or has become impracticable as a result of a
contingency occurring after the date hereof that materially and adversely
affects the interbank eurodollar market;


 


then, and in any such event, such Lender (or
the Administrative Agent, in the case of clause (i) above) shall within a
reasonable time thereafter give notice (if by telephone, confirmed in writing)
to the Borrower and to the Administrative Agent of such determination (which
notice 


 


44

















 


the Administrative Agent shall promptly
transmit to each of the other Lenders). 
Thereafter (x) in the case of clause (i) above, Eurodollar
Loans shall no longer be available until such time as the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to
such notice by the Administrative Agent no longer exist (which notice the Administrative
Agent agrees to give at such time when such circumstances no longer exist), and
any Notice of Borrowing or Notice of Conversion given by the Borrower with
respect to Eurodollar Loans that have not yet been incurred shall be deemed
rescinded by the Borrower, (y) in the case of clause (ii) above, the
Borrower shall pay to such Lender, promptly after receipt of written demand
therefor such additional amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
reasonable discretion shall determine) as shall be required to compensate such
Lender for such increased costs or reductions in amounts receivable hereunder
(it being agreed that a written notice as to the additional amounts owed to
such Lender, showing in reasonable detail the basis for the calculation
thereof, submitted to the Borrower by such Lender shall, absent clearly
demonstrable error, be final and conclusive and binding upon all parties
hereto) and (z) in the case of clause (iii) above, the Borrower shall
take one of the actions specified in Section 2.10(b) as promptly as
possible and, in any event, within the time period required by law.


 


(b)                                 At any time
that any Eurodollar Loan is affected by the circumstances described in Section 2.10(a)(ii) or
(iii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant
to Section 2.10(a)(iii) shall) either (x) if the affected
Eurodollar Loan is then being made pursuant to a Borrowing, cancel such
Borrowing by giving the Administrative Agent telephonic notice (confirmed
promptly in writing) thereof on the same date that the Borrower was notified by
a Lender pursuant to Section 2.10(a)(ii) or (iii) or (y) if
the affected Eurodollar Loan is then outstanding, upon at least three Business
Days’ notice to the Administrative Agent, require the affected Lender to
convert each such Eurodollar Loan into an ABR Loan, provided that if
more than one Lender is affected at any time, then all affected Lenders must be
treated in the same manner pursuant to this Section 2.10(b).


 


(c)                                  If, after the
date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, the
National Association of Insurance Commissioners, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by a Lender or its parent with any request or directive made or adopted after
the date hereof regarding capital adequacy (whether or not having the force of
law) of any such authority, association, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Lender’s or its
parent’s or its Related Party’s capital or assets as a consequence of such
Lender’s commitments or obligations hereunder to a level below that which such
Lender or its parent or its Related Party could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration such Lender’s or
its parent’s policies with respect to capital adequacy), then from time to
time, promptly after demand by such Lender (with a copy to the Administrative
Agent), the Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender or its parent for such reduction, it being
understood and agreed, however, that a Lender shall not be entitled to such compensation
as a result of such Lender’s compliance with, or pursuant to any request or
directive to comply with, any such law, rule or regulation as in effect on
the date hereof.  Each Lender, upon
determining in good faith that any additional amounts will be 


 


45





















 


payable
pursuant to this Section 2.10(c), will give prompt written notice thereof
to the Borrower (on its own behalf) which notice shall set forth in reasonable
detail the basis of the calculation of such additional amounts, although the
failure to give any such notice shall not, subject to Section 2.13,
release or diminish any of the Borrower’s obligations to pay additional amounts
pursuant to this Section 2.10(c) upon receipt of such notice.


 


2.11.                        Compensation.  If (a) any payment of principal of any
Eurodollar Loan is made by the Borrower to or for the account of a Lender other
than on the last day of the Interest Period for such Eurodollar Loan as a
result of a payment or conversion pursuant to Section 2.5, 2.6, 2.10, 5.1
or 5.2 or a required assignment pursuant to Section 14.7, as a result of
acceleration of the maturity of the Loans pursuant to Section 11 or for
any other reason, (b) any Borrowing of Eurodollar Loans is not made as a
result of a withdrawn Notice of Borrowing, (c) any ABR Loan is not
converted into a Eurodollar Loan as a result of a withdrawn Notice of
Conversion or Continuation, (d) any Eurodollar Loan is not continued as a
Eurodollar Loan as a result of a withdrawn Notice of Conversion or Continuation
or (e) any prepayment of principal of any Eurodollar Loan is not made as a
result of a withdrawn notice of prepayment pursuant to Section 5.1 or 5.2,
the Borrower shall, after receipt of a written request by such Lender (which
request shall set forth in reasonable detail the basis for requesting such
amount), pay to the Administrative Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses that such Lender may reasonably incur as a result of such payment,
failure to convert, failure to continue or failure to prepay, including any
loss, cost or expense (excluding loss of anticipated profits) actually incurred
by reason of the liquidation or reemployment of deposits or other funds
acquired by any Lender to fund or maintain such Eurodollar Loan.


 


2.12.                        Change of Lending Office.  Each Lender agrees that, upon the occurrence
of any event giving rise to the operation of Section 2.10(a)(ii),
2.10(a)(iii), 2.10(b), 3.5 or 5.4 with respect to such Lender, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any
Loans affected by such event, provided that such designation is made on
such terms that such Lender and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section.  Nothing in this Section 2.12 shall
affect or postpone any of the obligations of the Borrower or the right of any
Lender provided in Section 2.10, 3.5 or 5.4.


 


2.13.                        Notice of Certain Costs.  Notwithstanding anything in this Agreement to
the contrary, to the extent any notice required by Section 2.10, 2.11, 3.5
or 5.4 is given by any Lender more than 180 days after such Lender has
knowledge (or should have had knowledge) of the occurrence of the event giving
rise to the additional cost, reduction in amounts, loss, tax or other
additional amounts described in such Sections, such Lender shall not be
entitled to compensation under Section 2.10, 2.11, 3.5 or 5.4, as the case
may be, for any such amounts incurred or accruing prior to the 180th day prior
to the giving of such notice to the Borrower.


 


2.14.                        Defaulting Lenders.  Notwithstanding any provision of this Agreement
to the contrary, if any Lender becomes a Defaulting Lender, then the following
provisions shall apply for so long as such Lender is a Defaulting Lender:


 


46

















 


(a)                                  fees shall
cease to accrue on the Available Commitment of such Defaulting Lender pursuant
to Section 4.1(a);


 


(b)                                 the Commitment
and Credit Exposure of such Defaulting Lender shall not be included in
determining whether all Lenders or the Required Lenders have taken or may take
any action hereunder (including any consent to any amendment or waiver pursuant
to Section 14.1), provided that any waiver, amendment or
modification requiring the consent of all Lenders or each affected Lender which
affects such Defaulting Lender differently than each other applicable Lender
shall require the consent of such Defaulting Lender;


 


(c)                                  if any
Swingline Loan or Letters of Credit Outstanding exists at the time a Lender becomes
a Defaulting Lender then:


 


(i)                                     all or any part
of such Swingline Loan and Letters of Credit Outstanding shall be reallocated
among the non-Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent (x) the sum of all non-Defaulting
Lenders’ Credit Exposures plus such Defaulting Lender’s Swingline Exposure and
Letter of Credit Exposure does not exceed the total of all non-Defaulting
Lenders’ Commitments and (y) the conditions set forth in Section 7
are satisfied at such time;


 


(ii)                                  if the
reallocation described in clause (i) above cannot, or can only partially,
be effected, the Borrower shall within one Business Day following notice by the
Administrative Agent (x) first, prepay such Defaulting Lender’s
Swingline Exposure (after giving effect to any partial reallocation pursuant to
clause (i) above) and (y) second, cash collateralize such
Defaulting Lender’s Letter of Credit Exposure (after giving effect to any
partial reallocation pursuant to clause (i) above) in accordance with the
procedures set forth in Section 5.2(a) for so long as such Letter of
Credit Exposure is outstanding;


 


(iii)                               if the Borrower
cash collateralizes any portion of such Defaulting Lender’s Letter of Credit
Exposure pursuant to this Section 2.14(c), the Borrower shall not be
required to pay any fees to such Defaulting Lender pursuant to Section 4.1(b) with
respect to such cash collateralized portion of such Defaulting Lender’s Letter
of Credit Exposure during the period such Letter of Credit Exposure is cash
collateralized;


 


(iv)                              to the extent
the Letter of Credit Exposure of the non-Defaulting Lenders is reallocated
pursuant to this Section 2.14(c), then the fees payable to the Lenders
pursuant to Section 4.1(a) and Section 4.1(b) shall be
adjusted in accordance with such non-Defaulting Lenders’ Applicable
Percentages;


 


(v)                                 to the extent
any Defaulting Lender’s Letter of Credit Exposure is neither cash
collateralized nor reallocated pursuant to this Section 2.14(c), then,
without prejudice to any rights or remedies of the Letter of Credit Issuer or
any Lender hereunder, all fees that would have otherwise been payable to such 


 


47

















 


Defaulting Lender under Section 4.1(b) with
respect to such portion of such Letter of Credit Exposure shall instead be
payable to the Letter of Credit Issuer until such portion of such Defaulting
Lender’s Letter of Credit Exposure is cash collateralized and/or reallocated;


 


(vi)                              so long as any
Lender is a Defaulting Lender, the Swingline Lender shall not be required to
fund any Swingline Loan and the Letter of Credit Issuer shall not be required
to issue, amend or increase any Letter of Credit, unless it is satisfied that
the related exposure will be 100% covered by the Commitments of the
non-Defaulting Lenders and/or cash collateral will be provided by the Borrowers
in accordance with Section 2.14(c), and participating interests in any
such newly issued or increased Letter of Credit or newly made Swingline Loan
shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.14(c)(i) (and
Defaulting Lenders shall not participate therein); and


 


(vii)                           any amount
payable to such Defaulting Lender hereunder (whether on account of principal,
interest, fees or otherwise and including any amount that would otherwise be
payable to such Defaulting Lender pursuant to Section 14.8(b) but
excluding Section 14.7) shall, in lieu of being distributed to such Defaulting
Lender, be retained by the Administrative Agent in a segregated account and,
subject to any applicable requirements of law, be applied at such time or times
as may be determined by the Administrative Agent (i) first, to the
payment of any amounts owing by such Defaulting Lender to the Administrative
Agent hereunder, (ii) second, pro  rata, to the
payment of any amounts owing by such Defaulting Lender to the Letter of Credit
Issuer or Swingline Lender hereunder, (iii) third, if so determined
by the Administrative Agent or requested by a Letter of Credit Issuer or
Swingline Lender, to be held in such account as cash collateral for future
funding obligations of the Defaulting Lender of any participating interest in
any Swingline Loan or Letter of Credit, (iv) fourth, to the funding
of any Loan in respect of which such Defaulting Lender has failed to fund its
portion thereof as required by this Agreement, as determined by the Administrative
Agent, (v) fifth, if so determined by the Administrative Agent and
the Borrower, held in such account as cash collateral for future funding
obligations of the Defaulting Lender of any Revolving Credit Loans under this Agreement,
(vi) sixth, to the payment of any amounts owing to the Lenders, in
respect of obligations under this Agreement, a Letter of Credit Issuer or
Swingline Lender as a result of any judgment of a court of competent
jurisdiction obtained by any Lender, such Letter of Credit Issuer or Swingline
Lender against such Defaulting Lender as a result of such Defaulting Lender’s
breach of its obligations under this Agreement, (vii) seventh, to
the payment of any amounts owing to the Borrower as a result of any judgment of
a court of competent jurisdiction obtained by the Borrower against such
Defaulting Lender as a result of such Defaulting Lender’s breach of its
obligations under this Agreement, and (viii) eighth, to such Defaulting
Lender or as otherwise directed by a court of competent jurisdiction; provided
that if such payment is (x) a prepayment of the principal amount of any
Revolving Credit Loans or drawings in respect of Letter of Credits for which a 


 


48

















 


Defaulting Lender has funded
its participation obligations and (y) made at a time when the conditions
set forth in Section 7 are satisfied, such payment shall be applied solely
to prepay the Revolving Credit Loans of, and reimbursement obligations owed to,
all non-Defaulting Lenders pro  rata prior to being applied to the
prepayment of any Revolving Credit Loans, or reimbursement obligations owed to,
any Defaulting Lender; and


 


(d)                                 in the event
that the Administrative Agent, the Borrower, the Letter of Credit Issuer and
the Swingline Lender each agree that a Defaulting Lender has adequately
remedied all matters that caused such Lender to be a Defaulting Lender, then
such Lender shall cease to be a Defaulting Lender, and the Swingline Exposure
and Letter of Credit Exposure of the Lenders shall be readjusted to reflect the
inclusion of such Lender’s Commitment and on such date such Lender shall
purchase at par such of the Loans of the other Lenders (other than Swingline
Loans) as the Administrative Agent shall determine may be necessary in order
for such Lender to hold such Loans in accordance with its Applicable Percentage.


 


2.15.                        Incremental Facilities.  The Borrower may by written notice to the
Administrative Agent elect to request, prior to the Maturity Date, an increase
to the existing Commitments (any such increase, the “New Commitments”)
by an amount not in excess of $25,000,000 in the aggregate and not less than
$10,000,000 individually (or such lesser amount which shall be approved by
Administrative Agent), and integral multiples of $5,000,000 in excess of that
amount.  Each such notice shall specify (A) the
date (each, an “Increased Amount Date”) on which the Borrower proposes
that the New Commitments shall be effective, which shall be a date not less than
10 Business Days after the date on which such notice is delivered to the Administrative
Agent and (B) the identity of each Lender or other Person that is an
eligible assignee pursuant to Section 14.6(b) (each, a “New Lender”)
to whom the Borrower proposes any portion of such New Commitments be allocated
and the amounts of such allocations; provided that the Borrower shall
first approach the Lenders to provide all of the New Commitments in accordance
with their Applicable Percentages (excluding for this purpose the Commitment of
any Lender that declines to provide any portion of the New Commitments) prior
to approaching any other Person that is an eligible assignee pursuant to Section 14.6(b) (and
no such Person shall be offered to provide the New Commitments on terms
(including with respect to upfront fees and other economic terms) that are more
favorable to such Person than the terms offered to the existing Lenders) and no
Lender shall provide a New Commitment unless the Administrative Agent, the
Swingline Lender and the Letter of Credit Issuer shall have consented thereto; provided
further that any Lender approached to provide all or a portion of the
New Commitments may elect or decline, in its sole discretion, to provide a New
Commitment.  Such New Commitments shall
become effective, as of such Increased Amount Date; provided that (1) no
Default shall exist on such Increased Amount Date before or after giving effect
to such New Commitments; (2) the New Commitments shall be effected
pursuant to one or more Joinder Agreements executed and delivered by the
Borrower, the Lender providing the New Commitment and Administrative Agent, and
each of which shall be recorded in the Register and shall be subject to the
requirements set forth in Section 5.4(c); (3) the Borrower shall make
any payments required pursuant to Section 2.11 in connection with the New
Commitments; and (4) the Borrower shall deliver or cause to be delivered
any legal opinions or other documents reasonably requested by Administrative
Agent in connection with any such transaction.


 


49
















 


On any Increased Amount Date, subject to the
satisfaction of the foregoing terms and conditions, (a) each of the
Lenders with Commitments shall assign to each of the New Lenders, and each of
the New Lenders shall purchase from each of the Lenders with Commitments, at
the principal amount thereof (together with accrued interest), such interests
in the Revolving Credit Loans outstanding on such Increased Amount Date as
shall be necessary in order that, after giving effect to all such assignments
and purchases, such Revolving Credit Loans will be held by existing Lenders
with Revolving Credit Loans and New Lenders ratably in accordance with their
respective Commitments after giving effect to the addition of such New
Commitments to the Commitments, (b) each New Commitment shall be deemed
for all purposes a Commitment and each Loan made thereunder shall be deemed,
for all purposes, a Revolving Credit Loan and (c) each New Lender shall
become a Lender with respect to the New Commitment and all matters relating thereto.


 


The Administrative Agent shall notify the Security
Agents and Lenders promptly upon receipt of the Borrower’s notice of each
Increased Amount Date and in respect thereof (y) the New Commitments and
the New Lenders and (z) the respective interests in such Lender’s
Revolving Credit Loans, in each case subject to the assignments contemplated by
this Section.


 


Each Joinder Agreement may, without the consent of
any other Lenders, effect such amendments to this Agreement (including with
respect to the interest rates and fees payable with respect to the New
Commitment only) and the other Credit Documents as may be necessary or
appropriate, in the opinion of the Administrative Agent, to effect the
provision of this Section 2.15.


 


SECTION 3.                                Letters of
Credit


 


3.1.                              Letters of Credit.


 


(a)                                  Subject to and
upon the terms and conditions herein set forth, at any time and from time to
time after the Effective Date and prior to the L/C Maturity Date, (i) the
Borrower, may request that the Letter of Credit Issuer issue for the account of
the Borrower a Letter of Credit or Letters of Credit in Dollars or Canadian
Dollars in such form as may be approved by the Letter of Credit Issuer in its
reasonable discretion.


 


(b)                                 Notwithstanding
the foregoing, (i) no Letter of Credit shall be issued the Stated Amount
of which, when added to the Letters of Credit Outstanding at such time, would
exceed the Letter of Credit Commitment then in effect; (ii) no Letter of
Credit shall be issued, amended (to increase the Stated Amount thereof),
extended or renewed if, after giving effect to such issuance, amendment,
extension or renewal, the Total Credit Exposure would exceed the lesser of (x) the
Total Commitment then in effect and (y) the Borrowing Base then in effect;
(iii) no Letter of Credit denominated in Canadian Dollars shall be issued
the Stated Amount of which when added to the Stated Amount of all other Letters
of Credit denominated in Canadian Dollars would exceed the Canadian Letter of
Credit Sublimit; (iv) each Letter of Credit shall have an expiration date
occurring no later than one year after the date of issuance thereof, unless
otherwise agreed upon by the Administrative Agent and the Letter of Credit
Issuer, provided that in no event shall such expiration date occur later
than the L/C Maturity Date; (v) no Letter of Credit shall be issued if it
would be illegal under any applicable law for the beneficiary of the 


 


50





















 


Letter
of Credit to have a Letter of Credit issued in its favor; and (vi) no
Letter of Credit shall be issued by a Letter of Credit Issuer after it has
received a written notice from the Borrower or any Lender stating that a
Default has occurred and is continuing until such time as the Letter of Credit
Issuer shall have received a written notice of (x) rescission of such
notice from the party or parties originally delivering such notice or (y) the
waiver of such Default in accordance with the provisions of Section 14.1.


 


(c)                                  Upon at least
one Business Day’s prior written notice (or telephonic notice promptly confirmed
in writing) to the Administrative Agent and the Letter of Credit Issuer (which
notice the Administrative Agent shall promptly transmit to each of the
applicable Lenders), the Borrower shall have the right, on any day, permanently
to terminate or reduce the Letter of Credit Commitment in whole or in part, provided
that, after giving effect to such termination or reduction, the Letters of
Credit Outstanding shall not exceed the Letter of Credit Commitment.


 


3.2.                              Letter of Credit Requests.


 


(a)                                  Whenever the
Borrower desires that a Letter of Credit be issued for its account, it shall
give the Administrative Agent and the Letter of Credit Issuer at least five (or
such lesser number as may be agreed upon by the Administrative Agent and the
Letter of Credit Issuer) Business Days’ written notice thereof.  Each notice shall be executed by the Borrower
and shall be in a form reasonably acceptable to the Letter of Credit Issuer and
the Administrative Agent (each a “Letter of Credit Request”).  The Administrative Agent shall promptly
transmit copies of each Letter of Credit Request to each Lender.


 


(b)                                 The making of
each Letter of Credit Request shall be deemed to be a representation and
warranty by the Borrower that the Letter of Credit may be issued in accordance
with, and will not violate the requirements of, Section 3.1(b).


 


3.3.                              Letter of Credit
Participations.


 


(a)                                  Immediately
upon the issuance by the Letter of Credit Issuer of any Letter of Credit, the
Letter of Credit Issuer shall be deemed to have sold and transferred to each
other Lender that has a Commitment (each such other Lender, in its capacity
under this Section 3.3, an “L/C Participant”), and each such L/C
Participant shall be deemed irrevocably and unconditionally to have purchased
and received from the Letter of Credit Issuer, without recourse or warranty, an
undivided interest and participation (each an “L/C Participation”), to
the extent of such L/C Participant’s Applicable Percentage of such Letter of
Credit, each substitute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto, and any
security therefor or guaranty pertaining thereto (although Letter of Credit
Fees will be paid directly to the Administrative Agent for the ratable account
of the L/C Participants as provided in Section 4.1(b) and the L/C
Participants shall have no right to receive any portion of any Fronting Fees).


 


(b)                                 In determining
whether to pay under any Letter of Credit, the Letter of Credit Issuer shall
have no obligation relative to the L/C Participants other than to confirm that
any documents required to be delivered under such Letter of Credit have been
delivered and that 


 


51





















 


they
appear to comply on their face with the requirements of such Letter of
Credit.  Any action taken or omitted to
be taken by the Letter of Credit Issuer under or in connection with any Letter
of Credit issued by it, if taken or omitted in the absence of gross negligence
or willful misconduct, shall not create for the Letter of Credit Issuer any
resulting liability.


 


(c)                                  In the event
that the Letter of Credit Issuer makes any payment under any Letter of Credit
issued by it and the Borrower shall not have repaid such amount in full to the
respective Letter of Credit Issuer pursuant to Section 3.4(a), the Letter
of Credit Issuer shall promptly notify the Administrative Agent and each L/C
Participant of such failure, and each L/C Participant shall promptly and
unconditionally pay to the Administrative Agent, for the account of the Letter
of Credit Issuer, the amount of such L/C Participant’s Applicable Percentage of
such unreimbursed payment in Dollars and in immediately available funds; provided,
however, that no L/C Participant shall be obligated to pay to the
Administrative Agent for the account of the Letter of Credit Issuer its
Applicable Percentage of such unreimbursed amount arising from any wrongful payment
made by the Letter of Credit Issuer under a Letter of Credit as a result of
acts or omissions constituting willful misconduct or gross negligence on the
part of the Letter of Credit Issuer.  If
the Letter of Credit Issuer so notifies, prior to 11:00 a.m. (New York
time) on any Business Day, any L/C Participant required to fund a payment under
a Letter of Credit, such L/C Participant shall make available to the
Administrative Agent for the account of the Letter of Credit Issuer such L/C
Participant’s Applicable Percentage of the amount of such payment on such
Business Day in immediately available funds. 
If and to the extent such L/C Participant shall not have so made its
Applicable Percentage of the amount of such payment available to the Administrative
Agent, for the account of the Letter of Credit Issuer, such L/C Participant
agrees to pay to the Administrative Agent, for the account of the Letter of
Credit Issuer, forthwith on demand, such amount, together with interest thereon
for each day from such date until the date such amount is paid to the
Administrative Agent, for the account of the Letter of Credit Issuer at a rate
equal to the greater of (x) the Federal Funds Effective Rate and (y) a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation. 
The failure of any L/C Participant to make available to the
Administrative Agent, for the account of the Letter of Credit Issuer its
Applicable Percentage of any payment under any Letter of Credit shall not
relieve any other L/C Participant of its obligation hereunder to make available
to the Administrative Agent, for the account of the Letter of Credit Issuer its
Applicable Percentage of any payment under such Letter of Credit on the date
required, as specified above, but, except as provided Section 2.14, no L/C
Participant shall be responsible for the failure of any other L/C Participant
to make available to the Administrative Agent such other L/C Participant’s
Applicable Percentage of any such payment.


 


(d)                                 Whenever the
Letter of Credit Issuer receives a payment in respect of an unpaid
reimbursement obligation as to which the Administrative Agent has received for
the account of the Letter of Credit Issuer any payments from the L/C
Participants pursuant to paragraph (c) above, the Letter of Credit Issuer
shall pay to the Administrative Agent and the Administrative Agent shall
promptly pay to each L/C Participant that has paid its Applicable Percentage of
such reimbursement obligation, in Dollars and in immediately available funds,
an amount equal to such L/C Participant’s share (based upon the proportionate
aggregate amount originally funded by such L/C Participant to the aggregate
amount funded by all L/C Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of
the respective L/C Participations.


 


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(e)                                  The obligations
of the L/C Participants to make payments to the Administrative Agent for the
account of the Letter of Credit Issuer with respect to Letters of Credit shall
be irrevocable and not subject to counterclaim, set-off or other defense or any
other qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances,
including under any of the following circumstances:


 


(i)                                     any lack of validity or
enforceability of this Agreement or any of the other Credit Documents;


 


(ii)                                  the existence of any claim,
set-off, defense or other right that the Borrower may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, the Letter of Credit Issuer, any Lender or other Person,
whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including any
underlying transaction between the Borrower and the beneficiary named in any
such Letter of Credit);


 


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


 


(iv)                              the surrender or impairment
of any security for the performance or observance of any of the terms of any of
the Credit Documents; or


 


(v)                                 the occurrence of any
Default;


 


provided, however,
that no L/C Participant shall be obligated to pay to the Administrative Agent
for the account of the Letter of Credit Issuer its Applicable Percentage of any
unreimbursed amount arising from any wrongful payment made by the Letter of
Credit Issuer under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of the Letter
of Credit Issuer.


 


3.4.                              Agreement to Repay Letter of
Credit Drawings.


 


(a)                                  The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment in
Dollars to the Administrative Agent in immediately available funds for any
payment or disbursement made by the Letter of Credit Issuer under any Letter of
Credit (the Dollar Equivalent of each such amount so paid until reimbursed, an “Unpaid
Drawing”) immediately after, and in any event on the date of, such payment,
with interest on the amount so paid or disbursed by the Letter of Credit
Issuer, to the extent not reimbursed prior to 5:00 p.m. (New York time) on
the date of such payment or disbursement, from and including the date paid or
disbursed to but excluding the date the Letter of Credit Issuer is reimbursed
therefor at a rate per annum that shall at all times be the ABR Margin plus the
ABR as in effect from time to time, provided that, notwithstanding
anything contained in this Agreement to the contrary, (i) unless the Borrower
shall have notified the Administrative Agent and the Letter of Credit Issuer
prior to 10:00 a.m. (New York time) on the date of such drawing that the
Borrower intends to reimburse the Letter of Credit Issuer for the amount of
such drawing with funds other than the proceeds of 


 


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Loans,
the Borrower be shall be deemed to have given a Notice of Borrowing requesting
that the Lenders with Commitments make Revolving Credit Loans (which shall be
ABR Loans) on the date on which such drawing is honored in an amount equal to
the amount of such drawing and (ii) the Administrative Agent shall
promptly notify each relevant L/C Participant of such drawing and the amount of
its Revolving Credit Loan to be made in respect thereof, and, subject to the
conditions set forth in Section 2.1(a), each L/C Participant shall be
irrevocably obligated to make a Revolving Credit Loan to the Borrower in the
manner deemed to have been requested in the amount of its Applicable Percentage
of the applicable Unpaid Drawing by 12:00 noon (New York time) on such Business
Day by making the amount of such Revolving Credit Loan available to the
Administrative Agent.  Such Revolving
Credit Loans shall be made without regard to the minimum Borrowing amount for
ABR Loans set forth in Section 2.2. 
The Administrative Agent shall use the proceeds of such Revolving Credit
Loans solely for purpose of reimbursing the Letter of Credit Issuer for the
related Unpaid Drawing.


 


(b)                                 The obligations
of the Borrower under this Section 3.4 to reimburse the Letter of Credit
Issuer with respect to Unpaid Drawings (including, in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment that the
Borrower or any other Person may have or have had against the Letter of Credit
Issuer, the Administrative Agent or any Lender (including in its capacity as an
L/C Participant), including any defense based upon the failure of any drawing
under a Letter of Credit (each a “Drawing”) to conform to the terms of
the Letter of Credit or any non-application or misapplication by the
beneficiary of the proceeds of such Drawing, provided that the Borrower
shall not be obligated to reimburse the Letter of Credit Issuer for any
wrongful payment made by the Letter of Credit Issuer under the Letter of Credit
issued by it as a result of acts or omissions constituting willful misconduct
or gross negligence on the part of the Letter of Credit Issuer.


 


3.5.                              Increased Costs.  If after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or actual compliance by the Letter of Credit Issuer or
any L/C Participant with any request or directive made or adopted after the
date hereof (whether or not having the force of law), by any such authority,
central bank or comparable agency shall either (a) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar requirement
against letters of credit issued by the Letter of Credit Issuer, or any L/C
Participant’s L/C Participation therein, or (b) impose on the Letter of
Credit Issuer or any L/C Participant any other conditions affecting its
obligations under this Agreement in respect of Letters of Credit or L/C
Participations therein or any Letter of Credit or such L/C Participant’s L/C
Participation therein, and the result of any of the foregoing is to increase
the cost to the Letter of Credit Issuer or such L/C Participant of issuing,
maintaining or participating in any Letter of Credit, or to reduce the amount
of any sum received or receivable by the Letter of Credit Issuer or such L/C
Participant hereunder (other than any such increase or reduction attributable
to taxes) in respect of Letters of Credit or L/C Participations therein, then,
promptly after receipt of written demand to the Borrower by the Letter of
Credit Issuer or such L/C Participant, as the case may be, (a copy of which
notice shall be sent by the Letter of Credit Issuer or such L/C Participant to
the Administrative Agent), the Borrower shall pay to the Letter of Credit
Issuer or such L/C Participant such additional amount or amounts as will
compensate 


 


54

















 


the Letter of Credit Issuer or such L/C
Participant for such increased cost or reduction, it being understood and
agreed, however, that the Letter of Credit Issuer or a L/C Participant shall
not be entitled to such compensation as a result of such Person’s compliance
with, or pursuant to any request or directive to comply with, any such law, rule or
regulation as in effect on the date hereof. 
A certificate submitted to the Borrower by the relevant Letter of Credit
Issuer or a L/C Participant, as the case may be, (a copy of which certificate
shall be sent by the Letter of Credit Issuer or such L/C Participant to the
Administrative Agent) setting forth in reasonable detail the basis for the
determination of such additional amount or amounts necessary to compensate the
Letter of Credit Issuer or such L/C Participant as aforesaid shall be
conclusive and binding on the Borrower absent clearly demonstrable error.


 


3.6.                              Successor Letter of Credit
Issuer.  A Letter of Credit Issuer may
resign as Letter of Credit Issuer upon 60 days’ prior written notice to the
Administrative Agent, the Lenders and the Borrower.  If the Letter of Credit Issuer shall resign
as Letter of Credit Issuer under this Agreement, then the Borrower shall
appoint from among the Lenders (with the consent of such Lender) with
Commitments a successor issuer of Letters of Credit, whereupon such successor
issuer shall succeed to the rights, powers and duties of the Letter of Credit
Issuer, and the term “Letter of Credit Issuer” shall mean such successor issuer
effective upon such appointment (except with respect to Letters of Credit
issued by the resigning Letter of Credit Issuer).  After the resignation of the Letter of Credit
Issuer hereunder, the resigning Letter of Credit Issuer shall remain a party
hereto and shall continue to have all the rights and obligations of a Letter of
Credit Issuer under this Agreement and the other Credit Documents with respect
to Letters of Credit issued by it prior to such resignation, but shall not be
required to issue additional Letters of Credit. 
After any retiring Letter of Credit Issuer’s resignation as Letter of
Credit Issuer, the provisions of this Agreement relating to the Letter of
Credit Issuer shall inure to its benefit as to any actions taken or omitted to
be taken by it (a) while it was Letter of Credit Issuer under this
Agreement or (b) at any time with respect to Letters of Credit issued by
such Letter of Credit Issuer.


 


3.7.                              Existing Letters of Credit.  The parties hereto agree that the Existing Letters
of Credit shall be deemed to be Letters of Credit for all purposes under this
Agreement from and after the Effective Date, without any further action by the
Borrower, the Letter of Credit Issuer or any other Person.


 


SECTION 4.                                Fees;
Commitments


 


4.1.                              Fees.


 


(a)                                  The Borrower
agrees to pay to the Administrative Agent in Dollars, for the account of each
Lender having a Commitment (in each case pro  rata according to
the respective Applicable Percentages of all such Lenders), a commitment fee
for each day from and including the Effective Date to but excluding the
Maturity Date.  Such commitment fee shall
be payable in arrears (i) on the first day of each January, April, July and
October (for the three-month period (or portion thereof) ended on the
preceding day for which no payment has been received) and (ii) on the
Final Date (for the period ended on such date for which no payment has been
received pursuant to clause (i) above), and shall be computed for each day
during such period at a rate per 


 


55





















 


annum
equal to the Commitment Fee Rate in effect on such day on the Available
Commitments in effect on such day.


 


(b)                                 The Borrower
agrees to pay to the Administrative Agent in Dollars for the account of the
Lenders pro  rata on the basis of their respective Applicable
Percentages, a fee in respect of each Letter of Credit (the “Letter of
Credit Fee”), for the period from and including the date of issuance of
such Letter of Credit to but excluding the termination date of such Letter of
Credit computed at the per annum rate for each day equal to the Eurodollar
Margin for Revolving Credit Loans on the average daily Stated Amount of such
Letter of Credit.  Such Letter of Credit
Fees shall be due and payable quarterly in arrears on the first day of each
April, July, October and January and on the date upon which the Total
Commitment terminates and the Letters of Credit Outstanding shall have been
reduced to zero.


 


(c)                                  The Borrower
agrees to pay to the Administrative Agent in Dollars for the account of the
Letter of Credit Issuer a fee in respect of each Letter of Credit issued by it
(the “Fronting Fee”), for the period from and including the date of
issuance of such Letter of Credit to but excluding the termination date of such
Letter of Credit, computed at the rate for each day equal to 0.25% per annum on
the average daily Stated Amount of such Letter of Credit.  Such Fronting Fees shall be due and payable
quarterly in arrears on the first day of each April, July, October and January and
on the date upon which the Total Commitment terminates and the Letters of
Credit Outstanding shall have been reduced to zero.


 


(d)                                 The Borrower
agrees to pay directly to the Letter of Credit Issuer in Dollars upon each
issuance of, drawing under, and/or amendment of, a Letter of Credit issued by
it such Letter of Credit Issuer’s customary fees for issuances of, drawings
under or amendments of, letters of credit issued by it.


 


4.2.                              Voluntary Reduction of
Commitments.  Upon at
least one Business Day’s prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent at the Administrative Agent’s
Office (which notice the Administrative Agent shall promptly transmit to each
of the Lenders), the Borrower shall have the right, without premium or penalty,
on any day, permanently to terminate or reduce the Commitments in whole or in
part, provided that (a) any such reduction shall apply
proportionately and permanently to reduce the Commitment of each of the Lenders
in accordance with their Applicable Percentages, (b) any partial reduction
pursuant to this Section 4.2 shall be in the amount of at least $1,000,000
and (c) after giving effect to such termination or reduction and to any
prepayments of the Loans made on the date thereof in accordance with this
Agreement, (i) the Total Credit Exposure shall not exceed the lesser of (x) the
Total Commitment and (y) the Borrowing Base.


 


4.3.                              Mandatory Termination of
Commitments.


 


(a)                                  The Total
Commitment shall terminate at 5:00 p.m. (New York time) on the Maturity
Date.


 


(b)                                 The Swingline
Commitment shall terminate at 5:00 p.m. (New York time) on the Swingline
Maturity Date.


 


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SECTION 5.                                Payments


 


5.1.                              Voluntary Prepayments.  The Borrower shall have the right to prepay Revolving
Credit Loans and Swingline Loans in whole or in part from time to time on the
following terms and conditions:  (a) the
Borrower shall give the Administrative Agent at the Administrative Agent’s
Office written notice (or telephonic notice promptly confirmed in writing) of
its intent to make such prepayment, the amount of such prepayment and (in the
case of Eurodollar Loans) the specific Borrowing(s) pursuant to which
made, which notice shall be given by the Borrower no later than (i) in the
case of Revolving Credit Loans, 10:00 a.m. (New York time) one Business
Day prior to, or (ii) in the case of Swingline Loans or Protective Advances,
10:00 a.m. (New York time) on, the date of such prepayment and, in the
case of a prepayment of Revolving Credit Loans or Swingline Loans shall
promptly be transmitted by the Administrative Agent to each of the Lenders or
the Swingline Lender, as the case may be; (b) each partial prepayment of
any Borrowing of Revolving Credit Loans shall be in a multiple of $100,000 and
in an aggregate principal amount of at least $1,000,000 and each partial prepayment
of Swingline Loans or Protective Advances shall be in a multiple of $100,000
and in an aggregate principal amount of at least $100,000, provided that
no partial prepayment of Eurodollar Loans made pursuant to a single Borrowing
shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing
to an amount less than $2,000,000; and (c) any prepayment of Eurodollar
Loans pursuant to this Section 5.1 on any day other than the last day of
an Interest Period applicable thereto shall be subject to compliance by the
Borrower with the applicable provisions of Section 2.11.  Notwithstanding the foregoing, Borrower shall
not be permitted to prepay any Revolving Credit Loans or Swingline Loans under
this Agreement, in whole or in part, if at such time, any Protective Advances
are outstanding.


 


5.2.                              Mandatory Prepayments.


 


(a)                                  Mandatory
Prepayments of Loans.   If on any
date the Total Credit Exposure (excluding Protective Advances) exceeds the
lesser of (x) the Total Commitment and (y) the Borrowing Base, the
Borrower shall forthwith repay on such date the principal amount of Swingline
Loans and, after all Swingline Loans have been paid in full, Revolving Credit
Loans in an amount equal to such excess. 
If, after giving effect to the prepayment of all outstanding Swingline
Loans and Revolving Credit Loans, the Total Credit Exposure (excluding
Protective Advances) exceeds the lesser of (x) the Total Commitment and (y) the
Borrowing Base, the Borrower shall pay to the Administrative Agent an amount in
cash equal to such excess and the Administrative Agent shall hold such payment
for the benefit of the Lenders as security for the Obligations of the Borrower
hereunder (including one hundred five percent (105%) of Obligations in respect
of Letters of Credit Outstanding) pursuant to a cash collateral agreement to be
entered into in form and substance reasonably satisfactory to the Security
Agents.  Additionally, if on any date the
Total Credit Exposure exceeds the Total Commitment for any reason, the Borrower
shall forthwith reduce the Total Credit Exposure in the manner provided above
except that all Protective Advances, if any, outstanding, shall be repaid prior
to any Swingline Loans.


 


(b)                                 Application to
Revolving Credit Loans.  With
respect to each prepayment of Revolving Credit Loans required by Section 5.2(a),
the Borrower may designate the Types of Loans that are to be prepaid and the
specific Borrowing(s) pursuant to which made, provided that 


 


57





















 


(x) Eurodollar
Loans may be designated for prepayment pursuant to this Section 5.2 only
on the last day of an Interest Period applicable thereto unless all Eurodollar
Loans with Interest Periods ending on such date of required prepayment and all
ABR Loans have been paid in full; (y) if any prepayment by the Borrower of
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding amount of the Revolving Credit Loans made pursuant to such
Borrowing to an amount less than $2,000,000, such Borrowing shall immediately
be converted into ABR Loans; and (z) each prepayment of any Revolving
Credit Loans made pursuant to a Borrowing shall be applied pro  rata
among such Revolving Credit Loans of each Lender in accordance with their
respective Applicable Percentages.  In
the absence of a designation by the Borrower as described in the preceding
sentence, the Administrative Agent shall, subject to the above, make such
designation in its reasonable discretion with a view, but no obligation, to
minimize breakage costs owing under Section 2.11.


 


(c)                                  Interest
Periods.  In lieu of making any payment
pursuant to this Section 5.2 in respect of any Eurodollar Loan other than
on the last day of the Interest Period therefor so long as no Default shall
have occurred and be continuing, the Borrower at its option may deposit with
the Administrative Agent an amount equal to the amount of the Eurodollar Loan
to be prepaid and such Eurodollar Loan shall be repaid on the last day of the Interest
Period therefor in the required amount. 
Such deposit shall be held by the Administrative Agent in a corporate
time deposit account established on terms reasonably satisfactory to the
Administrative Agent, earning interest at the then-customary rate for accounts
of such type.  Such deposit shall
constitute cash collateral for the Obligations, provided that the
Borrower may at any time direct that such deposit be applied to make the
applicable payment required pursuant to this Section 5.2.


 


5.3.                              Payments Generally.


 


(a)                                  Except as
otherwise specifically provided herein, all payments under this Agreement shall
be made by the Borrower, without set-off, counterclaim or deduction of any
kind, to the Administrative Agent for the ratable account of the Lenders
entitled thereto, the Letter of Credit Issuer, the Administrative Agent or the
Swingline Lender, as the case may be, not later than 12:00 Noon (New York time)
on the date when due and shall be made in Dollars in immediately available
funds at the Administrative Agent’s Office, it being understood that written or
facsimile notice by the Borrower to the Administrative Agent to make a payment
from the funds in the Borrower’s account at the Administrative Agent’s Office
shall constitute the making of such payment to the extent of such funds held in
such account.  The Administrative Agent
will thereafter cause to be distributed on the same day (if payment was
actually received by the Administrative Agent prior to 2:00 p.m. (New York
time) on such day) like funds relating to the payment of principal or interest
or Fees ratably to the Lenders entitled thereto.


 


(b)                                 Any payments
under this Agreement that are made later than 2:00 p.m. (New York time)
shall be deemed to have been made on the next succeeding Business Day.  Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest shall be payable during such extension at
the applicable rate in effect immediately prior to such extension.


 


58
















 


(c)                                  Subject to the
terms of the Intercreditor Agreement, (x) any proceeds of the sale,
transfer or other disposition of Collateral outside of the ordinary course of
business received by the Administrative Agent after an Event of Default has
occurred and is continuing or (y) any other proceeds of Collateral
received by the Administrative Agent after an Event of Default specified in Section 11.5
or a termination of the Total Commitment or acceleration of the Obligations
under this Agreement pursuant to Section 11 has occurred and is continuing
shall in the case of either (x) or (y) be applied ratably first,
to pay any fees, indemnities, or expense reimbursements including amounts then
due to the Administrative Agent, the Security Agents and the Letter of Credit
Issuer from the Credit Parties (other than in connection with Secured Cash Management
Agreements and Secured Hedge Agreements), second, to pay any fees or
expense reimbursements then due to the Lenders from the Credit Parties (other
than in connection with Secured Cash Management Agreements and Secured Hedge
Agreements), third, to pay interest due in respect of the Protective Advances, fourth,
to pay the principal of the Protective Advances, fifth, to pay interest
then due and payable on the Loans (other than the Protective Advances) ratably,
sixth, to prepay principal on the remaining Loans, Unpaid Drawings and
any Specified Secured Hedge Agreement, ratably, seventh, to pay an
amount to the Administrative Agent equal to one hundred five percent (105%) of
the aggregate undrawn face amount of all outstanding Letters of Credit and the
aggregate amount of any unpaid Unpaid Drawings, to be held as cash collateral
for such Obligations, eighth, to the payment of any amounts owing with
respect to Secured Hedge Agreements, ninth, to payment of any amounts
owing with respect to Secured Cash Management Agreements, and tenth, to
the payment of any other Obligation due to the Administrative Agent or any
Secured Party.


 


(d)                                 At the election
of the Administrative Agent, all payments of principal, interest, Unpaid
Drawings, Fees, reimbursable expenses (including, without limitation, all reimbursement
for fees and expenses pursuant to Section 14.5), and other sums payable
under the Credit Documents that are not paid when due in accordance with the
Credit Documents (after giving effect to any applicable grace period(s)), may
be paid from the proceeds of Borrowings made hereunder whether made following a
request by the Borrower pursuant to Section 2.3 or a deemed request as provided
in this Section or may be deducted from any deposit account of the Credit
Parties maintained with the Administrative Agent.  The Borrower hereby irrevocably authorizes
solely to the extent a payment is not paid by a Credit Party by the time when
required to be paid, (i) the Administrative Agent to make a Borrowing for
the purpose of paying each payment of principal, interest and Fees as it
becomes due hereunder or any other amount due under the Credit Documents and
agrees that all such amounts charged shall constitute Loans (including
Swingline Loans, but such a Borrowing may only constitute a Protective Advance
if it is to reimburse costs, fees and expenses as described in Section 14.5)
and that all such Borrowings shall be deemed to have been requested pursuant to
Section 2.3 and (ii) the Administrative Agent to charge any deposit
account of any Credit Party maintained with the Administrative Agent for each
payment of principal, interest and Fees as it becomes due hereunder or any
other amount due under the Credit Documents; provided that in either
case the Administrative Agent shall promptly notify the Borrower of any such
Borrowing or charge.


 


(e)                                  Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders or the Letter of Credit Issuer hereunder that the Borrower will not
make such payment, the Administrative Agent may assume that the Borrower has
made such payment 


 


59





















 


on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders or the Letter of
Credit Issuer, as the case may be, the amount due.  In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Letter of Credit
Issuer, as the case may be, severally agrees to repay to the Administrative
Agent forthwith on demand the amount so distributed to such Lender or Letter of
Credit Issuer with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.


 


5.4.                              Net Payments.


 


(a)                                  Subject to the
following sentence, all payments made by or on behalf of the Borrower (or any
Credit Party) under this Agreement or any other Credit Document shall be made
free and clear of, and without deduction or withholding for or on account of,
any current or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings (including additions to tax, interest
and penalties with respect thereto), now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority (“Taxes”),
excluding (i) taxes imposed on or measured by its overall net income and
franchise taxes (imposed in lieu of net income taxes) imposed on the
Administrative Agent, any Lender or any other recipient of a payment hereunder
by the United States of America or a jurisdiction under the laws of which such
recipient is organized or in which its principal office is located, or in the
case of any Lender, in which its applicable lending office is located or as a
result of a current or former connection between such recipient and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any connections
arising solely from such recipient having executed, delivered, enforced, become
a party to, performed its obligations or received payments under, received or
perfected a security interest under, or engaged in any other transaction
pursuant to, any Credit Document), (ii) in the case of any Lender (or any
other recipient of a payment hereunder) that is not organized under the laws of
the United States of America or a state thereof (a “Non-U.S. Lender”),
any U.S. federal withholding tax that is imposed on amounts payable to such
Non-U.S. Lender under a law in effect at the time such Non-U.S. Lender becomes
a party to this Agreement (or, in the case of a Participant that is not
organized under the laws of the United States of America or a state thereof (a “Non-U.S.
Participant”), on the date such Non-U.S. Participant became a Participant
hereunder), except to the extent that (a) the indemnity payments or
additional amounts any Lender (or Participant) would be entitled to receive
(without regard to this subclause (ii)) do not exceed the indemnity payment or
additional amounts that the person making the assignment or participation to
such Lender (or Participant) would have been entitled to receive in the absence
of such assignment or participation or (b) such assignment or
participation was requested by the Borrower, (iii) in the case of a
Non-U.S. Lender who designates a new lending office, any U.S. federal withholding
tax that is imposed on amounts payable to such Non-U.S. Lender under a law in
effect at the time of such change in lending office, except to the extent that (a) such
Non-U.S. Lender was entitled, immediately prior to such change in lending
office, to receive additional amounts or indemnity payments from Borrower with
respect to such withholding tax pursuant to this Section 5.4 or (b) such
transfer was requested by the Borrower, (iv) any tax to the extent attributable
to a Lender’s failure to comply with Section 5.4(c) and (v) any
penalties caused by the gross negligence of the recipient of the 


 


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payment.  If
any such non-excluded Taxes, levies, imposts, duties, charges, fees, deductions
or withholdings (including additions to tax, interest and penalties with
respect thereto) (“Non-Excluded Taxes”) are required to be withheld from
any amounts payable under this Agreement, the Borrower (or applicable Credit
Party), shall increase the amounts payable to the Administrative Agent or such
Lender to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement.  Whenever any Non-Excluded
Taxes are payable by the Borrower (or another Credit Party) as promptly as
possible thereafter such Credit Party shall send to the Administrative Agent
for its own account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt (or other evidence acceptable to
such Lender, acting reasonably) received by the Borrower showing payment
thereof.  If the Borrower (or applicable
Credit Party) fails to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent the required
receipts or other required documentary evidence, such Credit Party shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest, costs or penalties that may become payable by the Administrative
Agent or any Lender as a result of any such failure.  The agreements in this Section 5.4(a) shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.


 


(b)                                 The Borrower
shall indemnify the Administrative Agent and each Lender, within 20 days after
demand therefor, for the full amount of any Non-Excluded Taxes (including
Non-Excluded Taxes imposed or asserted on or attributable to amounts payable
under this Section) payable by the Administrative Agent or such Lender, as the
case may be, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Non-Excluded Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender (with a copy to the
Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.


 


(c)                                  Each Non-U.S.
Lender shall, to the extent it is legally able to do so:


 


(i)                                     deliver to the Borrower and
the Administrative Agent two copies of either (x) in the case of Non-U.S.
Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of “portfolio interest”,
Internal Revenue Service Form W-8BEN (together with a certificate
representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of
the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of
the Code) of the Borrower, is not a controlled foreign corporation related to
the Borrower (within the meaning of Section 864(d)(4) of the Code)
and that no payments in connection with the Credit Documents are effectively
connected with such Non-U.S. Lender’s conduct of a U.S. trade or business (a “Certificate”)),
(y) Internal Revenue Service Form W-8BEN or Form W-8ECI, in each
case properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or reduced rate of, U.S. Federal withholding tax on
payments by the Borrower under this Agreement or (z) in the case of a
Non-U.S. Lender that not the beneficial owner (for example, where the Non-U.S.
Lender is a partnership or participating Lender granting a typical 


 


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participation), Internal Revenue Service Form W-8IMY, accompanied
by a Form W-8ECI, W-8BEN, a Certificate, Form W-9 and/or other
certification documents from each beneficial owner, as applicable; provided
that, if the Non-U.S. Lender is a partnership (and not a participating Lender)
and one or more beneficial owners of such Non-U.S. Lender are claiming the
portfolio interest exemption, such Non-U.S. Lender may provide a Certificate on
behalf of such beneficial owner(s);


 


(ii)                                  deliver to the Borrower and
the Administrative Agent two further copies of any such form or certification
(or any applicable successor form) on or before the date that any such form or certification
expires or becomes obsolete, after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower and
the Administrative Agent; and


 


(iii)                               obtain such extensions of
time for filing and complete such forms or certifications as may reasonably be
requested by the Borrower or the Administrative Agent;


 


unless in any such case any change in treaty,
law or regulation has occurred prior to the date on which any such delivery
would otherwise be required that renders any such form inapplicable or would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender so advises the Borrower and the Administrative
Agent.  Each Person that shall become a
Participant pursuant to Section 14.6 or a Lender pursuant to Section 14.6
shall, upon the effectiveness of the related transfer, be required to provide
all the forms and statements required pursuant to this Section 5.4(c), provided
that in the case of a Participant such Participant shall furnish all such
required forms and statements to the Lender from which the related participation
shall have been purchased.


 


(d)                                 Each Lender
that is organized under the laws of the United States of America or a state
thereof shall deliver to the Borrower and the Administrative Agent on or prior
to the date on which such Lender becomes a Lender under this Agreement (and
from time to time thereafter as prescribed by applicable law, on or before the
date that any such form or certification expires or becomes obsolete, after the
occurrence of any event involving the Lender requiring a change in the most
recent form previously delivered by it or upon the request of Borrower or the
Administrative Agent) duly executed and properly completed copies of Internal
Revenue Service Form W-9 certifying that it is not subject to backup
withholding.


 


(e)                                  If the Borrower
determines in good faith that a reasonable basis exists for contesting any
Non-Excluded Taxes for which indemnification has been made hereunder, the
relevant Lender or the Administrative Agent, as applicable, shall use
reasonable efforts to cooperate with Borrower in challenging such taxes at
Borrower’s expense if so requested by Borrower in writing; provided that
nothing in this Section 5.4(e) shall obligate the Administrative
Agent or any Lender to take any action that, in its reasonable judgment, would
be materially disadvantageous to such person. If any Lender or the
Administrative Agent, as applicable, receives a refund of a Non-Excluded Tax
for which a payment has been made by the Borrower pursuant to this Agreement,
which refund in the sole good faith judgment of such Lender or Administrative
Agent, as the case may be, is attributable to such payment made by such
Borrower, then the Lender or the Administrative Agent, as the case may be,
shall reimburse 


 


62





















 


Borrower for such amount (without interest other
than any interest received by the Governmental Authority with respect to such
refund) as the Lender or Administrative Agent, as the case may be, determines
to be the proportion of the refund as will leave it, after such reimbursement,
in no better or worse net after-tax position than it would have been in if the
Non-Excluded Taxes giving rise to such refund had not been imposed in the first
instance; provided that the Borrower, upon the request of the
Administrative Agent or such Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in
the event the Administrative Agent or such Lender is required to repay such
refund to such Governmental Authority.  
Neither a Lender nor the Administrative Agent shall be obliged to
disclose any information regarding its tax affairs or computations to the
Borrower in connection with this paragraph (e) or any other provision of
this Section 5.4.


 


5.5.                              Computations of Interest and
Fees.


 


(a)                                  Interest on
Eurodollar Loans and, except as provided in the next succeeding sentence, ABR
Loans shall be calculated on the basis of a 360-day year for the actual days
elapsed.  Interest on ABR Loans in
respect of which the rate of interest is calculated on the basis of the Prime
Rate and interest on overdue interest shall be calculated on the basis of a
365- (or 366-, as the case may be) day year for the actual days elapsed.


 


(b)                                 Fees and
Letters of Credit Outstanding shall be calculated on the basis of a 360-day
year for the actual days elapsed.


 


5.6.                              Limit on Rate of Interest.


 


(a)                                  No Payment
Shall Exceed Lawful Rate. 
Notwithstanding any other term of this Agreement, the Borrower shall not
be obliged to pay any interest or other amounts under or in connection with
this Agreement in excess of the amount or rate permitted under or consistent
with any applicable law, rule or regulation.


 


(b)                                 Payment at
Highest Lawful Rate.  If the
Borrower is not obliged to make a payment which it would otherwise be required
to make, as a result of Section 5.6(a), the Borrower shall make such
payment to the maximum extent permitted by or consistent with applicable laws, rules and
regulations.


 


(c)                                  Adjustment if
Any Payment Exceeds Lawful Rate.  If any provision of this Agreement or any of
the other Credit Documents would obligate the Borrower to make any payment of
interest or other amount payable to any Lender in an amount or calculated at a
rate which would be prohibited by any applicable law, rule or regulation,
then notwithstanding such provision, such amount or rate shall be deemed to
have been adjusted with retroactive effect to the maximum amount or rate of
interest, as the case may be, as would not be so prohibited by law, such adjustment
to be effected, to the extent necessary, as follows:


 


(i)                                     firstly, by reducing the
amount or rate of interest required to be paid by the Borrower to the affected
Lender under Section 2.8; and


 


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(ii)                                  thereafter, by reducing any
fees, commissions, premiums and other amounts required to be paid by the
Borrower to the affected Lender.


 


Notwithstanding the foregoing, and after
giving effect to all adjustments contemplated thereby, if any Lender shall have
received from the Borrower an amount in excess of the maximum permitted by any
applicable law, rule or regulation, then the Borrower shall be entitled,
by notice in writing to the Administrative Agent to obtain reimbursement from
that Lender in an amount equal to such excess, and pending such reimbursement,
such amount shall be deemed to be an amount payable by that Lender to the
Borrower.  Any amount or rate of interest
referred to in this Section 5.6(c) shall be determined in accordance
with generally accepted actuarial practices and principles as an effective
annual rate of interest over the term that any Loan remains outstanding.


 


SECTION 6.                                Conditions
Precedent to Initial Borrowing


 


The initial Borrowing of Loans under this Agreement
or the initial issuance (or deemed issuance, in the case of Existing Letters of
Credit) of any Letter of Credit hereunder is subject to the satisfaction of the
following conditions precedent following the Signing Date and on or prior to
5:30 p.m, New York time on June 10, 2009:


 


6.1.                              Credit Documents.  The Administrative Agent and Security Agents
shall have received executed counterparts from each of the parties thereto of (i) the
Guarantee, (ii) the Intercreditor Agreement, (iii) the Pledge Agreement
and (iv) the Security Agreement.


 


6.2.                              Collateral.  All documents and instruments, including
Uniform Commercial Code or other applicable personal property security
financing statements reasonably requested by the Collateral Agent to be filed,
registered or recorded to create the Liens intended to be created by the
Security Agreement and perfect such Liens to the extent required by, and with
the priority required by, the Security Agreement shall have been filed,
registered or recorded or delivered to the Collateral Agent for filing,
registration or recording.


 


6.3.                              Legal Opinions.  The Administrative Agent shall have received
the executed legal opinions of (a) Simpson Thacher & Bartlett
LLP, special New York counsel to the Borrower, in form reasonably acceptable to
each Initial Lender, and (b) Kenneth L. Walker, General Counsel to the
Borrower, in form reasonably acceptable to each Initial Lender.  The Borrower, the other Credit Parties and
the Administrative Agent hereby instruct such counsel to deliver such legal
opinions.


 


6.4.                              No Default.  After giving effect to the Borrowings on the
Effective Date and the other transactions contemplated hereby, no Default shall
have occurred and is continuing.


 


6.5.                              Concurrent Financings.  Prior to or substantially simultaneously with
the initial credit extension, the Borrower shall have received not less than
$475.0 million in gross proceeds from the issuance and sale of the Initial
Secured Notes pursuant to the Secured Note Indenture and delivery of cash
collateral pursuant to the Forward Purchase Contract.


 


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6.6.                              Existing Credit Agreement.  The Administrative Agent and the Security
Agents shall have received evidence that the Existing Credit Agreement has
been, or concurrently with the Effective Date is being, terminated and all
amounts outstanding thereunder are being repaid in full and all liens securing
obligations under the Existing Credit Agreement have been, or concurrently with
the Effective Date are being, released.


 


6.7.                              Effective Date Certificates.  The Administrative Agent shall have received
a certificate of each Credit Party, dated the Effective Date, in form
reasonably acceptable to the Administrative Agent, with appropriate insertions,
executed by the President or any Vice President and the Secretary or any
Assistant Secretary of such Credit Party, and attaching the documents referred
to in Sections 6.8 and 6.9 (if applicable).


 


6.8.                              Corporate Proceedings of
Each Credit Party.  The
Administrative Agent shall have received a copy of the resolutions, in form and
substance satisfactory to the Administrative Agent, of the board of directors
of each Credit Party (or a duly authorized committee thereof) authorizing (a) the
execution, delivery and performance of the Credit Documents (and any agreements
relating thereto) to which it is a party and (b) in the case of the
Borrower, the extensions of credit contemplated hereunder.


 


6.9.                              Corporate Documents.  The Administrative Agent shall have received
true and complete copies of the certificate of incorporation and by laws (or
equivalent organizational documents) of each Credit Party.


 


6.10.                        Fees.  The Lenders shall have received the fees in
the amounts previously agreed in writing by the Agents and such Lenders to be
received on the Effective Date and all expenses (including the reasonable fees,
disbursements and other charges of counsel) for which invoices have been presented
on or prior to the Effective Date shall have been paid.


 


6.11.                        Representations and
Warranties.  On the
Effective Date, the representations and warranties made by each of Holdings and
the Borrower shall be true and correct in all material respects.


 


6.12.                        Borrowing Base Certificate.  The Security Agents shall have received a
Borrowing Base Certificate which calculates the Borrowing Base as of a date
preceding the Effective Date that is specified by the Security Agents.


 


6.13.                        Closing Availability.  After giving effect to all Borrowings to be
made on the Effective Date, the issuance of any Letters of Credit (or deemed
issuance, in the case of Existing Letters of Credit) on the Effective Date and
payment of all fees and expenses due hereunder, Availability shall not be less
than $30,000,000.


 


6.14.                        Solvency.  The Administrative Agent shall have received
a certificate as to the Solvency of the Borrower from an Authorized Officer in
form reasonably acceptable to each Initial Lender.


 


6.15.                        Pledged Stock; Stock Powers;
Pledged Notes.  The
collateral agent for the Initial Secured Notes shall have received (i) the
certificates representing the certificated equity interests pledged pursuant to
the Pledge Agreement, together with an undated stock power for 


 


65

















 


each such certificate
executed in blank by a duly authorized officer of the pledgor thereof, and (ii) each
promissory note (if any) pledged to the Collateral Agent pursuant to the
Security Agreement or the Pledge Agreement endorsed (without recourse) in blank
(or accompanied by an executed transfer form in blank) by the pledgor thereof.


 


6.16.                        Lien Searches.  The Administrative Agent shall have received
the results of a recent lien search report in such jurisdictions as may be
reasonably requested by the Administrative Agent and such reports shall reflect
no Liens other than Liens permitted by Section 10.2 and Liens securing the
Existing Credit Agreement to be terminated on the Effective Date.


 


6.17.                        Insurance.  The Administrative Agent shall have received
evidence of insurance coverage in form, scope and substance evidencing
compliance with the terms of Section 9.3 and the Security Agreement.


 


6.18.                        Perfection Certificate.  The Administrative Agent and the Security
Agents shall have received a duly completed and signed Perfection Certificate
together with all attachments thereto.


 


SECTION 7.                                Conditions
Precedent to All Credit Events


 


The agreement of each Lender to make any Loan
requested to be made by it on any date (excluding Mandatory Borrowings and
Protective Advances) and the obligation of the Letter of Credit Issuer to
issue, extend, renew or increase the amount of any Letters of Credit on any date
is subject to the satisfaction of the following conditions precedent:


 


7.1.                              No Default; Representations
and Warranties.  At the time
of each Credit Event and also after giving effect thereto (a) no Default
shall have occurred and be continuing and (b) all representations and
warranties made by any Credit Party contained herein or in the other Credit
Documents shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and as of
the date of such Credit Event (except where such representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects as of such
earlier date).


 


7.2.                              Notice of Borrowing; Letter
of Credit Request.


 


(a)                                  Prior to the
making of each Loan and each Swingline Loan, the Administrative Agent shall
have received a Notice of Borrowing (whether in writing or by telephone)
meeting the requirements of Section 2.3.


 


(b)                                 Prior to the
issuance of each Letter of Credit, the Administrative Agent and the Letter of
Credit Issuer shall have received a Letter of Credit Request meeting the requirements
of Section 3.2(a).


 


7.3.                              Availability.  After giving effect to any Borrowing or the
issuance of any Letter of Credit, Availability is not less than zero.


 


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The acceptance of the benefits of each Credit Event
shall constitute a representation and warranty by each Credit Party to each of
the Lenders that all the applicable conditions specified above exist as of that
time.


 


SECTION 8.                                Representations,
Warranties and Agreements


 


In order to induce the Lenders to enter into this
Agreement, to make the Loans and issue or participate in Letters of Credit as
provided for herein, Holdings and the Borrower make the following
representations and warranties to, and agreements with, the Lenders, all of
which shall survive the execution and delivery of this Agreement and the making
of the Loans and the issuance of the Letters of Credit:


 


8.1.                              Corporate Status.  Holdings, the Borrower, each Credit Party and
each Material Subsidiary (a) is a duly organized and validly existing
corporation or other entity in good standing under the laws of the jurisdiction
of its organization and has the corporate or other organizational power and authority
to own its property and assets and to transact the business in which it is engaged
and (b) is duly qualified and is authorized to do business and is in good
standing in all jurisdictions where it is required to be so qualified, except
where the failure to be so qualified could not reasonably be expected to result
in a Material Adverse Effect.


 


8.2.                              Corporate Power and
Authority.  Parent and
each Credit Party has the corporate or other organizational power and authority
to execute, deliver and carry out the terms and provisions of the Credit
Documents to which it is a party and has taken all necessary corporate or other
organizational action to authorize the execution, delivery and performance of
the Credit Documents to which it is a party. 
Parent and each Credit Party has duly executed and delivered each Credit
Document to which it is a party and each such Credit Document constitutes the
legal, valid and binding obligation of Parent or such Credit Party enforceable
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and subject to general principles of equity.


 


8.3.                              No Violation.  Neither the execution, delivery or
performance by Parent or any Credit Party of the Credit Documents to which it
is a party nor compliance with the terms and provisions thereof nor the
consummation of the Transactions and the other transactions contemplated hereby
or thereby will (a) contravene any applicable provision of any material
law, statute, rule, regulation, order, writ, injunction or decree of any court
or governmental instrumentality, (b) result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of any of Parent, Holdings, the
Borrower or any of the Restricted Subsidiaries (other than Liens created under
the Credit Documents and Liens securing the Initial Secured Notes and the
Initial PIK Convertible Notes) pursuant to, the terms of any material indenture
(including the Subordinated Note Indenture, the Secured Note Indenture and the
PIK Convertible Note Indenture), loan agreement, lease agreement, mortgage,
deed of trust, agreement or other material instrument to which Parent,
Holdings, the Borrower or any of the Restricted Subsidiaries is a party or by
which it or any of its property or assets is bound or (c) violate any
provision of the certificate of incorporation, By-Laws or other constitutional
documents of Parent, Holdings, the Borrower or any of the Restricted Subsidiaries.


 


67

















 


8.4.                              Litigation.  There are no actions, suits, investigations
or proceedings (including Environmental Claims) pending or, to the knowledge of
Holdings or the Borrower, threatened with respect to Holdings, the Borrower or any
of its Subsidiaries that could reasonably be expected to result in a Material
Adverse Effect.


 


8.5.                              Margin Regulations.  Neither the making of any extension of credit
hereunder nor the use of the proceeds thereof will violate the provisions of
Regulation T, U or X of the Board.


 


8.6.                              Governmental Approvals.  No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any Governmental Authority is required to authorize or is required
in connection with (a) the execution, delivery and performance of any
Credit Document or (b) the legality, validity, binding effect or enforceability
of any Credit Document, except any of the foregoing the failure to obtain or
make could not reasonably be expected to have a Material Adverse Effect.


 


8.7.                              Investment Company Act.  Neither Holdings nor the Borrower is an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.


 


8.8.                              True and Complete Disclosure.


 


(a)                                  None of the
factual information and data (taken as a whole) heretofore or contemporaneously
furnished by any of Holdings, the Borrower, any of the Subsidiaries or any of
their respective authorized representatives in writing to the Administrative
Agent, the Collateral Agent and/or any Lender on or before the Effective Date
(including all information contained in the Credit Documents) for purposes of
or in connection with this Agreement or any transaction contemplated herein
contained any untrue statement or omitted to state any material fact necessary
to make such information and data (taken as a whole) not misleading at such
time in light of the circumstances under which such information or data was
furnished, it being understood and agreed that for purposes of this Section 8.8(a),
such factual information and data shall not include projections and pro forma financial
information.


 


(b)                                 The projections
and pro forma financial information contained in the information and data
referred to in paragraph (a) above were based on good faith estimates and
assumptions believed by such Persons to be reasonable at the time made, it
being recognized by the Lenders that such projections as to future events are
not to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results.


 


8.9.                              Financial Condition;
Financial Statements.  The (a) unaudited
historical quarterly consolidated financial information of Parent filed with
the SEC for the most recently ended fiscal quarter prior to the Signing Date
(and the corresponding prior year period), and (b) the Historical
Financial Statements, in each case present or will, when provided, present
fairly in all material respects the combined financial position of the Borrower
at the respective dates of said information, statements and results of
operations for the respective periods covered thereby.  The financial statements referred to in
clause (b) of this Section 8.9 have been prepared in 


 


68

















 


accordance with GAAP
consistently applied except to the extent provided in the notes to said
financial statements.  There has been no
Material Adverse Effect since November 30, 2008.


 


8.10.                        Tax Returns and Payments.  Each of Holdings, the Borrower and the Subsidiaries
(a) has timely filed all federal income tax returns and all other material
tax returns, domestic and foreign, required to be filed by it and (b) has
paid all material Taxes and assessments payable by it that have become due,
other than those not yet delinquent or those being contested in good faith by
the appropriate proceedings and for which adequate reserves have been provided
in accordance with GAAP.  Each of
Holdings, the Borrower and each of the Subsidiaries has paid, or, in the case
of Taxes not yet due and payable or those being contested in good faith, has
provided adequate reserves (in the good faith judgment of the management of the
Borrower) in accordance with GAAP for the payment of, all material federal, state,
provincial and foreign Taxes applicable for all prior fiscal years and for the
current fiscal year to the Effective Date.


 


8.11.                        Compliance with ERISA.  Each Plan is in compliance with ERISA, the
Code and any applicable Requirement of Law; no Reportable Event has occurred
(or is reasonably likely to occur) with respect to any Plan; no Plan is
insolvent or in reorganization (or is reasonably likely to be insolvent or in
reorganization), and no written notice of any such insolvency or reorganization
has been given to any of Holdings, the Borrower, any Subsidiary or any ERISA
Affiliate; no Plan (other than a multiemployer plan) has an accumulated or
waived funding deficiency (or is reasonably likely to have such a deficiency);
none of Holdings, the Borrower, any Subsidiary or any ERISA Affiliate has
incurred (or is reasonably likely expected to incur) any liability to or on
account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the
Code or has been notified in writing that it will incur any liability under any
of the foregoing Sections with respect to any Plan; no proceedings have been
instituted (or are reasonably likely to be instituted) to terminate or to reorganize
any Plan or to appoint a trustee to administer any Plan, and no written notice
of any such proceedings has been given to any of Holdings, the Borrower, any
Subsidiary or any ERISA Affiliate; and no lien imposed under the Code or ERISA
on the assets of any of Holdings, the Borrower or any Subsidiary or any ERISA
Affiliate exists (or is reasonably likely to exist) nor has Holdings, the
Borrower, any Subsidiary or any ERISA Affiliate been notified in writing that
such a lien will be imposed on the assets of any of Holdings, the Borrower, any
Subsidiary or any ERISA Affiliate on account of any Plan, except to the extent
that a breach of any of the representations, warranties or agreements in this Section 8.11
would not result, individually or in the aggregate, in an amount of liability
that would be reasonably likely to have a Material Adverse Effect.  No Plan (other than a multiemployer plan) has
an Unfunded Current Liability that would, individually or when taken together
with any other liabilities referenced in this Section 8.11, be reasonably
likely to have a Material Adverse Effect. 
With respect to Plans that are multiemployer plans (as defined in Section 3(37)
of ERISA), the representations and warranties in this Section 8.11, other
than any made with respect to (a) liability under Section 4201 or
4204 of ERISA or (b) liability for termination or reorganization of such
Plans under ERISA, are made to the best knowledge of the Borrower.


 


8.12.                        Subsidiaries.  On the Effective Date, Holdings does not have
any Subsidiaries other than the Borrower and its Subsidiaries.  Schedule 8.12 lists each Subsidiary of the
Borrower (and the direct and indirect ownership interest of the Borrower
therein), in each 


 


69

















 


case existing on the Effective
Date.  Each Material Subsidiary as of the
Effective Date has been so designated on Schedule 8.12.


 


8.13.                        Labor Matters.  On the Effective Date, (a) there are no
strikes, slowdowns, work stoppages or controversies pending or, to the
best knowledge of any Credit Party after due inquiry, threatened between such
Credit Party and its employees, other than employee grievances arising in the
ordinary course of business which could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect and (b) hours
worked by and payment made to employees of the Credit Parties, comply in all
material respects with the Fair Labor Standards Act and each other federal,
state, provincial, local or foreign law applicable to such matters.


 


8.14.                        Patents, etc.  Holdings, the Borrower and each of the
Restricted Subsidiaries have obtained all patents, trademarks, servicemarks,
trade names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the operation of their respective businesses
as currently conducted and as proposed to be conducted, except where the
failure to obtain any such rights could not reasonably be expected to have a
Material Adverse Effect.


 


8.15.                        Environmental Laws.


 


(a)                                  Except as could
not reasonably be expected to have a Material Adverse Effect: (i) each of
Holdings, the Borrower and each of the Subsidiaries are in compliance with all
Environmental Laws in all jurisdictions in which Holdings, the Borrower and
each of the Subsidiaries are currently doing business (including having
obtained all material permits required under Environmental Laws); (ii) each
of Holdings and the Borrower will comply and cause each of the Subsidiaries to
comply with all such Environmental Laws (including all permits required under
Environmental Laws); and (iii) none of Holdings, the Borrower and each of
the Subsidiaries has become subject to any Environmental Claim or any other
liability under any Environmental Law.


 


(b)                                 None of
Holdings, the Borrower or any of the Subsidiaries has treated, stored,
transported, released or disposed of Hazardous Materials at or from any
currently or formerly owned Real Estate or facility relating to its business in
a manner that could reasonably be expected to have a Material Adverse Effect.


 


8.16.                        Properties.  Each of Holdings, the Borrower and each of
the Subsidiaries have good and marketable title to or leasehold interest in all
properties that are necessary for the operation of their respective businesses
as currently conducted and as proposed to be conducted, free and clear of all
Liens (other than any Liens permitted by this Agreement) and except where the
failure to have such good title could not reasonably be expected to have a
Material Adverse Effect.


 


8.17.                        Solvency.  On Effective Date, immediately after the
consummation of the Transactions to occur on the Effective Date, the Borrower
is Solvent.


 


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SECTION 9.                                Affirmative
Covenants


 


Each of Holdings and the Borrower hereby covenants
and agrees that from the Effective Date and thereafter, until the Final Date:


 


9.1.                              Information Covenants.  Holdings or the Borrower will furnish to each
Lender and the Administrative Agent:


 


(a)                                  Annual
Financial Statements.  As soon as
available and in any event on or before the date on which such financial
statements are required to be filed with the SEC (or, if such financial
statements are not required to be filed with the SEC, on or before the date
that is 90 days after the end of each such fiscal year), the consolidated
balance sheet of (i) Parent, Holdings, the Borrower and the Restricted
Subsidiaries and (ii) Parent, Holdings and its Subsidiaries, in each case
as at the end of such fiscal year, and the related consolidated statement of
operations and cash flows for such fiscal year, setting forth comparative
consolidated figures for the preceding fiscal year, and certified by independent
certified public accountants of recognized national standing whose opinion
shall not be qualified as to the scope of audit or as to the status of Parent,
Holdings, the Borrower or any of the Material Subsidiaries as a going concern,
together in any event with a certificate of such accounting firm stating that
in the course of its regular audit of the business of Parent, Holdings, the
Borrower and the Material Subsidiaries, which audit was conducted in accordance
with generally accepted auditing standards, such accounting firm has obtained
no knowledge of any Event of Default relating to Section 10.9 that has
occurred and is continuing or, if in the opinion of such accounting firm such
an Event of Default has occurred and is continuing, a statement as to the
nature thereof.  The requirements of this
Section 9.1(a) shall be satisfied by delivery of financial statements
of Parent and its Subsidiaries which otherwise meet the requirements hereof and
are accompanied by reconciliations for any difference between what is delivered
hereunder and what would have been delivered by Holdings and its Subsidiaries
pursuant to this Section 9.1(a).


 


(b)                                 Quarterly
Financial Statements.  As soon as
available and in any event on or before the date on which such financial
statements are required to be filed with the SEC with respect to each of the
first three quarterly accounting periods in each fiscal year of Parent (or, if
such financial statements are not required to be filed with the SEC, on or
before the date that is 45 days after the end of each such quarterly accounting
period), the consolidated balance sheet of (i) Parent, Holdings, the
Borrower and the Restricted Subsidiaries and (ii) Parent, Holdings and its
Subsidiaries, in each case as at the end of such quarterly period and the
related consolidated statement of operations for such quarterly accounting
period and for the elapsed portion of the fiscal year ended with the last day
of such quarterly period, and the related consolidated statement of cash flows
for the elapsed portion of the fiscal year ended with the last day of such
quarterly period, and setting forth comparative consolidated figures for the
related periods in the prior fiscal year or, in the case of such consolidated
balance sheet, for the last day of the prior fiscal year, all of which shall be
certified by an Authorized Officer of the Borrower, subject to changes resulting
from audit and normal year-end audit adjustments.


 


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(c)                                  Budgets.  Within 60 days after the commencement of each
fiscal year of Parent, budgets of Parent, Holdings and the Borrower,
collectively, in reasonable detail for the fiscal year (including for each
fiscal quarter in such fiscal year) as are customarily prepared by management
of Parent, Holdings and the Borrower for their internal use consistent in scope
with the financial statements provided pursuant to Section 9.1(a), setting
forth the principal assumptions upon which such budgets are based.


 


(d)                                 Officer’s
Certificates.  At the time
of the delivery of the financial statements provided for in Sections 9.1(a) and
(b), a certificate of an Authorized Officer of the Borrower to the effect that
no Default exists or, if any Default does exist, specifying the nature and
extent thereof, which certificate shall set forth (i) reasonably detailed
calculations required to establish the Fixed Charge Coverage Ratio and, during
any Minimum Availability Period, demonstrating compliance with the provisions
of Section 10.9 as of the end of such fiscal year or period, as the case
may be, (ii) a specification of any change in the identity of the
Restricted Subsidiaries, Unrestricted Subsidiaries and Foreign Subsidiaries as
at the end of such fiscal year or period, as the case may be, from the Restricted
Subsidiaries, Unrestricted Subsidiaries and Foreign Subsidiaries, respectively,
provided to the Lenders on the Signing Date or the most recent fiscal year or
period, as the case may be, (iii) the then applicable Status and (iv) the
amount of any Pro Forma Adjustment not previously set forth in a Pro Forma
Adjustment Certificate or any change in the amount of a Pro Forma Adjustment
set forth in any Pro Forma Adjustment Certificate previously provided and, in
either case, in reasonable detail, the calculations and basis therefor.


 


(e)                                  Borrowing Base
Certificate.  As soon as
available, but in any event within 15 Business Days of the end of each calendar
month (or, within five calendar days, or if the fifth calendar day is not a
Business Day, the immediately preceding Business Day, of the end of each
calendar week during any Weekly Reporting Period), a Borrowing Base Certificate
in form reasonably satisfactory to each Initial Lender, which calculates the
Borrowing Base as of the last day of the fiscal month ended on or around the
calendar month then ended (but in the case of any calendar week which is not
the end of a fiscal month, based on Eligible Inventory as of the end of the
most recent calendar month) and updated information thereto as required by such
Borrowing Base Certificate, together with supporting information in connection
therewith and any additional reports with respect to the Borrowing Base as the
Security Agents may reasonably request.


 


(f)                                    Notice of
Material Events.  Promptly
after an Authorized Officer of any of Holdings, the Borrower or any of the
Subsidiaries obtains knowledge thereof, notice of (i) the occurrence of
any event that constitutes a Default, which notice shall specify the nature
thereof, the period of existence thereof and what action any of Holdings or the
Borrower proposes to take with respect thereto, (ii) any litigation or
governmental proceeding pending against any of Holdings, the Borrower or any of
the Subsidiaries that could reasonably be expected to result in a Material
Adverse Effect, (iii) any Lien (other than Liens permitted by Section 10.02)
or material claim made or asserted in writing against any material portion of
the Collateral; (iv) any loss, damage or destruction to a material portion
of the Collateral in the amount of $5,000,000 or more, whether or not covered
by insurance; and (v) any and all default notices received under or with
respect 


 


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to
any leased location or public warehouse where Collateral with a cost in excess
of $250,000 is located (which shall be delivered within two Business Days after
receipt thereof).


 


(g)                                 Environmental
Matters.  Holdings and the Borrower will
promptly advise the Lenders in writing after obtaining knowledge of any one or
more of the following environmental matters, unless such environmental matters
would not, individually or when aggregated with all other such matters, be
reasonably expected to result in a Material Adverse Effect:


 


(i)                                     Any pending or
threatened Environmental Claim against any of Holdings, the Borrower or any of
the Subsidiaries or any Real Estate;


 


(ii)                                  Any condition
or occurrence on any Real Estate that (x) results in noncompliance by any
of Holdings, the Borrower or any of the Subsidiaries with any applicable Environmental
Law or (y) could reasonably be anticipated to form the basis of an
Environmental Claim against any of Holdings, the Borrower or any of the
Subsidiaries or any Real Estate;


 


(iii)                               Any condition
or occurrence on any Real Estate that could reasonably be anticipated to cause
such Real Estate to be subject to any restrictions on the ownership, occupancy,
use or transferability of such Real Estate under any Environmental Law; and


 


(iv)                              The taking of
any removal or remedial action in response to the actual or alleged presence of
any Hazardous Material on any Real Estate.


 


All such notices shall describe in reasonable
detail the nature of the claim, investigation, condition, occurrence or removal
or remedial action and the response thereto. 
The term “Real Estate” shall mean land, buildings and
improvements owned or leased by any of Holdings, the Borrower or any of the
Subsidiaries, but excluding all operating fixtures and equipment, whether or
not incorporated into improvements.


 


(h)                                 Other
Information.  Promptly
upon filing thereof, copies of any filings (including on Form 10-K, 10-Q
or 8-K) or registration statements with, and reports to, the SEC or any
analogous Governmental Authority in any relevant jurisdiction by any of
Holdings, the Borrower or any of the Subsidiaries (other than amendments to any
registration statement (to the extent such registration statement, in the form
it becomes effective, is delivered to the Lenders), exhibits to any
registration statement and, if applicable, any registration statements on Form S-8)
and copies of all financial statements, proxy statements, notices and reports
that Holdings, the Borrower or any of the Subsidiaries shall send to the
holders of any publicly issued debt of Holdings, the Borrower and/or any of the
Subsidiaries (including the Subordinated Notes and Initial Secured Notes, in
each case, whether publicly issued or not) in their capacity as such holders
(in each case to the extent not theretofore delivered to the Lenders pursuant
to this Agreement) and, with reasonable promptness, such other information
(financial or 


 


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otherwise)
as the Administrative Agent or either Security Agent, each on its own behalf or
on behalf of any Lender may reasonably request in writing from time to time.


 


(i)                                     Pro Forma
Adjustment Certificate.  Not
later than the consummation of the acquisition or disposition by the Borrower
or any Restricted Subsidiary for which there shall be a Pro Forma Adjustment or
not later than any date on which financial statements are delivered with
respect to any four-quarter period in which a Pro Forma Adjustment is made as a
result of the consummation of the acquisition or disposition by the Borrower or
any Restricted Subsidiary for which there shall be a Pro Forma Adjustment, a
certificate of an Authorized Officer of the Borrower setting forth the amount
of such Pro Forma Adjustment and, in reasonable detail, the calculations and
basis therefor.


 


9.2.                              Books, Records and
Inspections.  Each of
Holdings and the Borrower will, and will cause each of the Subsidiaries to,
permit officers and designated representatives of the Administrative Agent,
either Security Agent or the Required Lenders to visit and inspect any of the
properties or assets of Holdings, the Borrower and any such Subsidiary in
whomsoever’s possession to the extent that it is within such party’s control to
permit such inspection, and to examine the books of account of Holdings, the
Borrower and any such Subsidiary and discuss the affairs, finances and accounts
of Holdings, the Borrower and of any such Subsidiary with, and be advised as to
the same by, its and their officers and independent accountants, all at such
reasonable times and intervals and to such reasonable extent as the
Administrative Agent, either Security Agent or the Required Lenders may desire.


 


9.3.                              Maintenance of Insurance.


 


(a)                                  Each of
Holdings and the Borrower will, and will cause each of the Material
Subsidiaries to, at all times maintain in full force and effect, with insurance
companies that the Borrower believes (in the good faith judgment of the
management of the Borrower) are financially sound and responsible at the time
the relevant coverage is placed or renewed, insurance in at least such amounts
and against at least such risks (and with such risk retentions) as are usually
insured against in the same general area by companies engaged in the same or a
similar business; and will furnish to the Lenders, upon written request from
the Administrative Agent or Collateral Agent, information presented in
reasonable detail as to the insurance so carried.


 


(b)                                 If any portion
of any Mortgaged Property is at any time located in an area identified by the
Federal emergency Management Agency (or any successor agency) as a Special
Flood Hazard Area with respect to which flood insurance has been made available
under the National Flood Insurance Act of 1968 (not or as hereafter in effect
or successor act thereto), then the Borrower shall, or shall cause each Credit
Party to (i) maintain, or cause to be maintained, with a financially sound
and reputable insurer, flood insurance in an amount and otherwise sufficient to
comply with all applicable rules and regulations promulgated pursuant to
the Flood Insurance Laws and (ii) deliver to the Administrative Agent
evidence of such compliance in form and substance reasonably acceptable to the
Security Agents.


 


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9.4.                              Payment of Taxes.  Each of Holdings and the Borrower will pay
and discharge, and will cause each of the Subsidiaries to pay and discharge,
all material Taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits, or upon any properties belonging to it, prior
to the date on which material penalties attach thereto, and all lawful material
claims that, if unpaid, could reasonably be expected to become a material Lien
upon any properties of the Borrower or any of the Restricted Subsidiaries, provided
that neither Holdings, the Borrower nor any of the Subsidiaries shall be
required to pay any such Tax, assessment, charge, levy or claim that is being
contested in good faith and by proper proceedings if it has maintained adequate
reserves (in the good faith judgment of the management of the Borrower) with
respect thereto in accordance with GAAP.


 


9.5.                              Consolidated Corporate
Franchises.  Each of
Holdings and the Borrower will do, and will cause each Material Subsidiary to
do, or cause to be done, all things necessary to preserve and keep in full
force and effect its existence, corporate rights and authority, except to the
extent that the failure to do so could not reasonably be expected to have a
Material Adverse Effect; provided, however, that the Borrower and
its Subsidiaries may consummate any transaction permitted under Section 10.3,
10.4 or 10.5.


 


9.6.                              Compliance with Statutes,
Obligations, etc.  Each of
Holdings and the Borrower will, and will cause each Subsidiary to, comply with
all applicable laws, rules, regulations and orders, except to the extent the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.


 


9.7.                              ERISA.  Promptly after Holdings and the Borrower or
any Subsidiary or any ERISA Affiliate knows or has reason to know of the
occurrence of any of the following events that, individually or in the
aggregate (including in the aggregate such events previously disclosed or
exempt from disclosure hereunder, to the extent the liability therefor remains
outstanding), would be reasonably likely to have a Material Adverse Effect,
Parent, Holdings or the Borrower will deliver to each of the Lenders a
certificate of an Authorized Officer or any other senior officer of the
Borrower setting forth details as to such occurrence and the action, if any,
that Holdings, the Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices (required, proposed or
otherwise) given to or filed with or by Holdings, the Borrower, such Subsidiary,
such ERISA Affiliate, the PBGC, a Plan participant (other than notices relating
to an individual participant’s benefits) or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency has been incurred or an application is to be made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan;
that a Plan having an Unfunded Current Liability has been or is to be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA (including the giving of written notice thereof); that a Plan has an Unfunded
Current Liability that has or will result in a lien under ERISA or the Code;
that proceedings will be or have been instituted to terminate a Plan having an
Unfunded Current Liability (including the giving of written notice thereof);
that a proceeding has been instituted against the Borrower, a Subsidiary or an
ERISA Affiliate pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that the PBGC has notified Holdings, the Borrower, any
Subsidiary or any ERISA Affiliate of its intention to appoint a trustee to
administer any Plan; that Holdings, the Borrower, any Subsidiary 


 


75

















 


or any ERISA Affiliate has
failed to make a required installment or other payment pursuant to Section 412
of the Code with respect to a Plan; or that Holdings, the Borrower, any
Subsidiary or any ERISA Affiliate has incurred or will incur (or has been
notified in writing that it will incur) any liability (including any contingent
or secondary liability) to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971
or 4975 of the Code.


 


9.8.                              Good Repair.  Each of Holdings and the Borrower will, and
will cause each of the Restricted Subsidiaries to, ensure that its properties
and equipment used or useful in its business in whomsoever’s possession they
may be to the extent that it is within the control of such party to cause same,
are kept in good repair, working order and condition, normal wear and tear excepted,
and that from time to time there are made in such properties and equipment all
needful and proper repairs, renewals, replacements, extensions, additions,
betterments and improvements thereto, to the extent and in the manner customary
for companies in similar businesses and consistent with third party leases,
except in each case to the extent the failure to do so could not be reasonably
expected to have a Material Adverse Effect.


 


9.9.                              Transactions with Affiliates.  Each of Holdings and the Borrower will
conduct, and cause each of the Restricted Subsidiaries to conduct, all
transactions with any of its Affiliates on terms that are substantially as
favorable to Holdings, the Borrower or such Restricted Subsidiary as it would
obtain in a comparable arm’s-length transaction with a Person that is not an
Affiliate, provided that the foregoing restrictions shall not apply to (a) the
payment of customary annual fees to KKR and/or its Affiliates for management,
consulting and financial services rendered to Holdings, the Borrower and the Subsidiaries
and customary investment banking fees paid to KKR and its Affiliates for
services rendered to Holdings, the Borrower and the Subsidiaries in connection
with divestitures, acquisitions, financings and other transactions, (b) customary
fees paid to members of the board of directors of Holdings, the Borrower and
the Subsidiaries, (c) transactions permitted by Section 10.6 and (d) the
transactions pursuant to the Forward Purchase Contract and the Initial PIK
Convertible Notes.


 


9.10.                        End of Fiscal Years; Fiscal
Quarters.  Holdings
and the Borrower will, for financial reporting purposes, cause (a) each of
its, and each of its Subsidiaries’, fiscal years to end on the Sunday closest
to November 30 of each year (but in no event later than December 2)
and (b) each of its, and each of its Subsidiaries’, fiscal quarters to end
on dates consistent with such fiscal year-end and Holdings and the Borrower’s
past practice; provided, however, that Holdings and the Borrower
may, upon written notice to the Administrative Agent, change the financial
reporting convention specified above to any other financial reporting
convention reasonably acceptable to the Administrative Agent, in which case
Holdings and the Borrower and the Administrative Agent will, and are hereby
authorized by the Lenders to, make any adjustments to this Agreement that are
necessary in order to reflect such change in financial reporting.


 


9.11.                        Additional Subsidiary
Guarantors and Grantors.  Each
of Holdings and the Borrower will cause any direct or indirect Restricted
Domestic Subsidiary (other than an Excluded Subsidiary) (a) formed or
otherwise purchased or acquired after the Effective Date (including pursuant to
a Permitted Acquisition) or (b) which ceases to be an Excluded Subsidiary
following the Effective Date, in each case to execute a supplement to each of
the Guarantee and 


 


76

















 


the Security Agreement,
substantially in the form of Annex B or Annex 1, as applicable, to the respective
agreement in order to become a Guarantor under the Guarantee and a grantor
under the Security Agreement.


 


9.12.                        Pledges of Additional Stock
and Evidence of Indebtedness.


 


(a)                                  The Borrower
will pledge, and, if applicable, will cause each Subsidiary Guarantor to
pledge, to the Administrative Agent, for the benefit of the Secured Parties, (i) all
the capital stock of each Restricted Domestic Subsidiary and each Restricted
Foreign Subsidiary (but excluding any capital stock representing in excess of
65% of the issued and outstanding Voting Stock in any Foreign Subsidiary) held
by any Credit Party, in each case, formed or otherwise purchased or acquired
after the date hereof, in each case pursuant to the Pledge Agreement, (ii) all
evidences of Indebtedness in excess of $5,000,000 received by any Credit Party
in connection with any disposition of assets pursuant to Section 10.4(b),
in each case pursuant to the Pledge Agreement, substantially in the form of
Annex A thereto and (iii) any global promissory notes executed after the
date hereof evidencing Indebtedness of any of Holdings, the Borrower and each
Subsidiary that is owing to any Credit Party, in each case pursuant to the requirements
of the Pledge Agreement (it being understood that the equity interests of
Subsidiaries that are not Material Subsidiaries shall not be required to be
delivered to the Administrative Agent).


 


(b)                                 [Reserved].


 


(c)                                  Holdings will
pledge to the Administrative Agent, for the benefit of the Lenders, all capital
stock of the Borrower acquired by it after the Effective Date.


 


(d)                                 Holdings and the
Borrower agree that all Indebtedness in excess of $5,000,000 of any of
Holdings, the Borrower and each Subsidiary that is owing to any Credit Party to
the Pledge Agreement shall be evidenced by one or more global promissory notes.


 


9.13.                        Use of Proceeds.  The Letters of Credit and the proceeds of all
Loans will be used (a) to repay in full the Existing Credit Agreement, (b) pay
fees and expenses in connection with the Transactions and (c) for working
capital needs and general corporate purposes, including, without limitation,
for acquisitions, Restricted Payments, Investments and payments with respect to
Indebtedness, in each case, as permitted hereunder.


 


9.14.                        Changes in Business.  Holdings, the Borrower and the Subsidiaries,
taken as a whole, will not fundamentally and substantively alter the character
of their business, taken as a whole, from the business conducted by Holdings,
the Borrower and the Subsidiaries, taken as a whole, on the Signing Date and
other business activities incidental or related to any of the foregoing.


 


9.15.                        Further Assurances.


 


(a)                                  Each of
Holdings and the Borrower will, and will cause each other Credit Party to,
execute any and all further documents, financing statements, agreements and
instruments, and take all such further actions (including the filing and
recording of financing statements, fixture filings, mortgages, deeds of trust
and other documents), which may be 


 


77





















 


required under any applicable law, or which the
Administrative Agent, the Security Agents or the Required Lenders may
reasonably request, in order to grant, preserve, protect and perfect the validity
and priority of the security interests created or intended to be created by the
Security Agreement, the Pledge Agreement or any Mortgage, all at the expense of
Holdings, the Borrower and the Restricted Subsidiaries.


 


(b)                                 If any assets
(including any real estate or improvements thereto or any interest therein)
with a book value or fair market value in excess of $1,000,000 are acquired by
any Credit Party after the Effective Date (other than assets constituting
Collateral under the Security Agreement that become subject to the Lien of the
Security Agreement upon acquisition thereof) that are of the nature secured by
the Security Agreement or any Mortgage, as the case may be, the Borrower will
notify the Administrative Agent and the Lenders thereof, and, if requested by
the Administrative Agent or the Required Lenders, the Borrower will cause such
assets to be subjected to a Lien securing the Obligations and will take, and
cause the other Credit Parties to take, such actions as shall be necessary or
reasonably requested by the Administrative Agent to grant and perfect such
Liens consistent with the applicable requirements of the Security Documents,
including actions described in paragraph (a) of this Section, all at the
expense of the Credit Parties.  Any
Mortgage delivered to the Administrative Agent in accordance with the preceding
sentence shall be accompanied by (w) a policy or policies of title
insurance issued by a nationally recognized title insurance company insuring
the Lien of each Mortgage as a valid second Lien on the Mortgaged Property
described therein, free of any other Liens except as expressly permitted by Section 10.2,
together with such endorsements, coinsurance and reinsurance as the
Administrative Agent may reasonably request, (x) an opinion of local
counsel to the Borrower (or in the event a Subsidiary of the Borrower is the
mortgagor, to such Subsidiary) in form reasonably satisfactory to the
Administrative Agent with respect to customary matters, (y) a “Life-of-Loan”
Federal Emergency Management Agency Standard Flood Hazard Determination with
respect to each Mortgaged Property (together with a notice about special flood
hazard area status and flood disaster assistance duly executed by the Borrower
and each Credit Party relating thereto in the event any such Mortgaged Property
is located in a special flood hazard area) and (z) a copy of or a
certificate as to coverage under the insurance policies required by Section 9.3
(including, without limitation, flood insurance policies) and the applicable
provisions of the Security Documents.


 


9.16.                        Appraisals.  At any time that the Security Agents
reasonably request, Holdings and the Borrower will provide the Security Agents
with appraisals or updates thereof of their Inventory from an appraiser
selected and engaged by the Security Agents, and prepared on a basis
satisfactory to the Security Agents, such appraisals and updates to include,
without limitation, information required by applicable law and regulations; provided,
however, (a) only reasonable out-of-pocket costs of two such
appraisals per calendar year shall be at the sole expense of the Credit Parties
and (b) reasonable out-of-pocket costs of three such appraisals per
calendar year shall be at the sole expense of the Credit Parties if a Weekly
Reporting Period has occurred during such calendar year; provided  further,
however, if an Event of Default has occurred
and is continuing there shall be no limitation as to the number and frequency
of such appraisals during such calendar year at the sole expense of the Credit
Parties.  For purposes of this Section 9.16,
it is understood and agreed that a single appraisal may consist of examinations
conducted at multiple relevant sites and involve one or more relevant Credit
Parties and their 


 


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assets.  All such appraisals shall be commenced upon
reasonable notice to the Borrower and performed during normal business hours of
the Borrower.


 


9.17.                        Field Examinations.  At any time that the Security Agents
reasonably request, Holdings, the Borrower and the Subsidiaries will permit
upon reasonable notice the Security Agents to conduct field examinations or
updates thereof during normal business hours to ensure the adequacy of
Collateral included in the Borrowing Base and related reporting and control
systems; provided, however, (a) only reasonable costs of two
such field examination per calendar year shall be at the sole expense of the
Credit Parties and (b) reasonable costs of three such field examinations
per calendar year shall be at the sole expense of the Credit Parties if a
Weekly Reporting Period has occurred during such calendar year; provided
further, however, if an Event of
Default has occurred and is continuing during any calendar year there shall be
no limitation as to the number and frequency of such field examinations during
such calendar year at the sole expense of the Credit Parties.  For purposes of this Section 9.17, it is
understood and agreed that a single field examination may consist of
examinations conducted at multiple relevant sites and involve one or more
relevant Credit Parties and their assets.


 


9.18.                        Asset Sales; Casualty and
Condemnation.  The
Borrower will furnish to the Administrative Agent (for delivery to the Lenders)
prompt written notice of (i) any sale, transfer or other disposition of
any material portion of the Accounts or Inventory outside the ordinary course
of business or (ii) any casualty or other insured damage to any material
portion of the Collateral or the commencement of any action or proceeding for
the taking of any material portion of the Collateral or interest therein under
power of eminent domain or by condemnation or similar proceeding.


 


9.19.                        Post-Closing Covenant.  The Borrower shall deliver, furnish and/or
cause to be furnished all of the obligations set forth below within the time
periods specified therewith:  within
thirty (30) days after the Effective Date, in each case in form and substance
reasonably acceptable to the Security Agents:


 


(i)                                     Mortgages.  Fully executed counterparts of Mortgages
which Mortgages shall cover each Mortgaged Property (provided however that, in
the case of the Mortgaged Property located at 1799 S. Academy Boulevard,
Colorado Springs, Colorado, such Mortgage shall be delivered to the extent a
landlord consent, waiver and access agreement shall have been obtained after
Borrower shall have used of commercially reasonable efforts to obtain same),  together with evidence that counterparts of all the Mortgages
have been delivered to the Title Company for recording in all places to the
extent necessary or, in the reasonable opinion of the Security Agents, desirable
to effectively create a valid and enforceable second priority mortgage lien on
each Mortgaged Property in favor of the Collateral Agent for its benefit and
the benefit of the Secured Parties, securing the Obligations (provided
that in jurisdictions that impose mortgage recording taxes, such Mortgages
shall not secure indebtedness in an amount exceeding 100% of the fair market
value of such Mortgaged Property, as reasonably determined, in good faith, by
the Borrower and reasonably acceptable to the Security Agents), subject to
Permitted Liens of a type described in clause (iv) of this Section 9.19.


 


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(ii)                                  Landlord
Agreement.  In the case
of the Mortgaged Properties located at (y) 1799 S. Academy Boulevard,
Colorado Springs, Colorado, and (z) 3100 Fairfax Traffic Way, Kansas City,
Kansas, the Borrower shall use commercially reasonable efforts to obtain a
landlord consent, waiver and access agreement in a form and substance reasonably
acceptable to the Security Agents.


 


(iii)                               Counsel
Opinions.  Opinions
addressed to the Administrative Agent, Security Agents and the Lenders, of
local counsel in each jurisdiction where Mortgaged Property is located, in form
and substance reasonably acceptable to the Security Agents.


 


(iv)                              Title Insurance.  With respect to each Mortgage encumbering any
Mortgaged Property, a policy of title insurance (or commitment to issue such a
policy having the effect of a policy of title insurance) insuring (or
committing to insure) the lien of such Mortgage as a valid and enforceable
second priority mortgage or deed of trust lien on the Mortgaged Property
described therein, in an amount not less than 100% of the fair market value of
such Mortgaged Property as reasonably determined, in good faith, by the Borrower
and reasonably acceptable to the Security Agents, (such policies collectively,
the “Mortgage Policies”) issued by such Title Company, which reasonably
assures the Security Agents that the Mortgages on such Mortgaged Properties are
valid and enforceable mortgage liens on the respective Mortgaged Properties,
free and clear of all defects and encumbrances except (I) Permitted Liens
of the type described as (A) survey exceptions, encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other similar restrictions as to the use of real properties or liens
incidental to the conduct of the business of such person or to the ownership of
its properties which were not incurred in connection with debt and which do not
individually or in the aggregate materially adversely affect the value of the
property affected thereby or materially impair the use of such property in the
operation of the business of such person, (B) general real estate taxes
and assessments not yet delinquent or being contested in good faith for which
adequate reserves are maintained in accordance with GAAP; provided that the Borrower shall
bond over or take any other action necessary or required by the Title Company
to delete any exception to title relating to unpaid taxes and assessments, (C) other
liens (not securing Indebtedness) incidental to the conduct of the business of
the Borrower or any of its subsidiaries, as the case may be, or the ownership
of their assets which do not individually or in the aggregate materially
adversely affect the value of the property affected thereby or materially
impair the use of such property in the operation of the business of the
Borrower or its subsidiaries, (D) any warehousemen’s, materialmen’s,
landlord’s or other similar liens arising by law for sums not then due and
payable (or which, if due and payable, are being contested in good faith and
with respect to which adequate reserves are being maintained, to the extent
required by GAAP; provided
that the Borrower shall take any and all commercially reasonable actions
necessary or required by the Title Company to delete any exception to title
relating thereto, (E) leases, subleases, licenses or sublicenses granted
to others in the ordinary course of business so long as such leases, subleases,
licenses or sublicenses are subordinate in all respects to the liens granted
and evidenced by the Security Documents and which do not materially interfere
with the ordinary conduct of the business of the Borrower or any subsidiaries
and do not secure any Indebtedness, (II) Liens of the type 


 


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described
in clauses (a) and (h) of Section 10.2(A) and (III) such
other similar items as the Security Agents may consent to (such consent not to
be unreasonably withheld), and such Mortgage Policies shall otherwise be in
form and substance reasonably satisfactory to the Security Agents and shall
include such title endorsements as the Security Agents shall reasonably
request, to the extent available at commercially reasonably rates (excluding
endorsements or coverage related to creditor’s rights).


 


(v)                                 Survey.  Any and all surveys, opinions of special
counsel, or opinions or reports from architects, engineers or zoning report
companies as may be reasonably necessary to cause the Title Company to issue
the title insurance required pursuant to clause (iv) above.


 


(vi)                              Fixture filings.  Proper fixture filings under the Uniform Commercial Code on Form UCC-1 for
filing under the Uniform Commercial Code in the appropriate jurisdiction in which the Mortgaged Properties
are located, desirable to perfect the security interests in fixtures purported
to be created by the Mortgages in favor of the Collateral Agent for its benefit
and the benefit of the Secured Parties.


 


(vii)                           Flood Hazard
Determination.  A “Life-of-Loan”
Federal Emergency Management Agency Standard Flood Hazard Determination with
respect to each Mortgaged Property (together with a notice about special flood
hazard area status and flood disaster assistance duly executed by the Borrower
and each Credit Party relating thereto and evidence of flood insurance in
compliance with Section 9.3 of the Credit Agreement, in the event any such
Mortgaged Property is located in a special flood hazard area).


 


(viii)                        Mortgaged
Property Indemnification.  With
respect to each Mortgaged Property, such affidavits, certificates, instruments
of indemnification and other items (including a so-called “gap”
indemnification) as shall be reasonably required to induce the Title Company to
issue the Mortgage Policies and endorsements contemplated above.


 


(ix)                                Collateral Fees
and Expenses.  Evidence
reasonably acceptable to the Security Agents and the Secured Parties of payment
by the Borrower of all Mortgage Policy premiums, search and examination
charges, mortgage recording taxes, fees, charges, costs and expenses required
for the recording of the Mortgages, fixture filings and issuance of the Mortgage
Policies referred to above.


 


SECTION 10.                          Negative
Covenants


 


Each of Holdings and the Borrower hereby covenant
and agree that on the Effective Date and thereafter until the Final Date:


 


10.1.                        Limitation on Indebtedness.


 


(A)                              The Borrower
will not, and will not permit any of the Restricted Subsidiaries to, create,
incur, assume or suffer to exist any Indebtedness, except:


 


(a)                                  Indebtedness
arising under the Credit Documents;


 


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(b)           Indebtedness of (i) the
Borrower to any Restricted Subsidiary of the Borrower, (ii) any Subsidiary
Guarantor to the Borrower or any Restricted Subsidiary of the Borrower, (iii) any
Restricted Subsidiary of the Borrower which is not a Subsidiary Guarantor to
any other Restricted Subsidiary of the Borrower which is not a Subsidiary
Guarantor and (iv) subject to compliance with the requirements of Section 10.5,
the Borrower or any Subsidiary Guarantor to any Restricted Subsidiary of the
Borrower which is not a Subsidiary Guarantor; provided, that, any
Indebtedness of the Borrower or any Subsidiary Guarantor to any Restricted
Subsidiary which is not a Subsidiary Guarantor shall be subordinated in right
of payment to the Obligations following an Event of Default;


 


(c)           Indebtedness in
respect of any bankers’ acceptance, letter of credit, warehouse receipt or
similar facilities entered into in the ordinary course of business;


 


(d)           Guarantee
Obligations incurred by (i) Restricted Subsidiaries which are not Subsidiary
Guarantors in respect of Indebtedness of the Borrower or other Restricted
Subsidiaries that is permitted to be incurred under this Agreement, (ii) the
Borrower or Subsidiary Guarantors in respect of Indebtedness of the Borrower or
Restricted Subsidiaries that are Subsidiary Guarantors that is permitted to be
incurred under this Agreement (including where the Parent is the co-issuer of
such Indebtedness, a guarantee of the obligations of Parent thereunder) and (iii) subject
to compliance with the requirements of Section 10.5, the Borrower or
Subsidiary Guarantors in respect of Indebtedness of Restricted Subsidiaries
that are not Subsidiary Guarantors that is permitted to be incurred under this
Agreement, provided that there shall be no Guarantee (a) by a
Restricted Foreign Subsidiary of any Indebtedness of the Borrower or a
Subsidiary Guarantor and (b) in respect of Indebtedness that is
subordinated to the Obligations, unless such Guarantee is made by a Guarantor
and such Guarantee is unsecured and subordinated to the Obligations to the same
extent as the Indebtedness so Guaranteed;


 


(e)           Guarantee
Obligations incurred in the ordinary course of business in respect of
obligations of suppliers, customers, franchisees, lessors and licensees in an aggregate
amount not to exceed $2,000,000 at any time outstanding;


 


(f)            (i) 
Indebtedness (including Indebtedness arising under Capital Leases) (A) incurred
within 270 days of the acquisition, construction or improvement of fixed or
capital assets to finance the acquisition, construction or improvement of such
fixed or capital assets or otherwise incurred in respect of Capital
Expenditures and (B) arising under Capital Leases, other than Capital
Leases in effect on the date hereof and Capital Leases entered into pursuant to
subclause (ii) below, provided that the aggregate amount of
Indebtedness incurred pursuant to this subclause (i) (when aggregated with
the amount of refinancing Indebtedness in respect thereof outstanding pursuant
to subclause (iii) below) shall not exceed $75,000,000 at any time
outstanding, (ii) Indebtedness arising under Capital Leases entered into
in connection with Permitted Sale Leasebacks and (iii) any refinancing,
refunding, renewal or extension of any Indebtedness specified in subclause (i) or
(ii) above, provided that the principal amount thereof is not
increased 


 


82

















 


above
the principal amount thereof outstanding immediately prior to such refinancing,
refunding, renewal or extension;


 


(g)           Indebtedness
outstanding on the Effective Date (other than the Subordinated Notes) and
listed on Schedule 10.1 and any refinancing, refunding, renewal or extension
thereof, provided that (i) the principal amount thereof is not
increased above the principal amount thereof outstanding immediately prior to
such refinancing, refunding, renewal or extension, except to the extent
otherwise permitted hereunder and (ii) the direct and contingent obligors
with respect to such Indebtedness are not changed;


 


(h)           Indebtedness in
respect of Hedge Agreements entered into in the ordinary course of business
(and not for speculative purposes) in order to protect the Borrower or any of
the Restricted Subsidiaries against fluctuations in interest rates, currency
exchange rates or commodity prices;


 


(i)            Indebtedness in
respect of the Subordinated Notes and any Permitted Refinancing Indebtedness in
respect thereof;


 


(j)            (i) Indebtedness
of a Person or Indebtedness attaching to assets of a Person that, in either
case, becomes a Restricted Subsidiary or Indebtedness attaching to assets that
are acquired by the Borrower or any Restricted Subsidiary, in each case after
the Effective Date as the result of an Investment permitted by Section 10.5,
provided that (x) such Indebtedness existed at the time such Person
became a Restricted Subsidiary or at the time such assets were acquired and, in
each case, was not created in anticipation thereof and (y) such
Indebtedness is not guaranteed in any respect by the Borrower or any Restricted
Subsidiary (other than any such person that so becomes a Restricted Subsidiary)  and (ii) any refinancing, refunding,
renewal or extension of any Indebtedness specified in subclause (i) above,
provided that except to the extent otherwise permitted hereunder, (x) the
principal amount of any such Indebtedness is not increased above the principal
amount thereof outstanding immediately prior to such refinancing, refunding, renewal
or extension and (y) the direct and contingent obligors with respect to
such Indebtednesses are not changed in respect thereof in an aggregate
principal amount outstanding pursuant to this clause (j) not to exceed
$20,000,000 at any time;


 


(k)           (i) the Initial
Secured Notes, (ii) Permitted Additional Secured Notes, (iii) the
Initial PIK Convertible Notes, (iv) Permitted Additional PIK Convertible
Notes, (v) Permitted Junior Lien or Unsecured Notes and (vi) Permitted
Refinancing Indebtedness in respect of Indebtedness set forth in subclauses (i) through
(v) of this clause (k);


 


(l)            Indebtedness of
Restricted Foreign Subsidiaries in an aggregate amount at any time outstanding
not to exceed $75,000,000 (which amount shall include the aggregate outstanding
amount at any time of any Indebtedness of Restricted Foreign Subsidiaries
existing at the Effective Date); and


 


(m)          additional
Indebtedness, provided that the aggregate amount of Indebtedness outstanding
at any time pursuant to this clause (m) shall not exceed $100,000,000.


 


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(B)           Neither Parent nor Holdings will create, incur, assume or
suffer to exist any Indebtedness except (1) with respect to Parent,
Indebtedness in respect of cash collateral pursuant to the Forward Purchase
Contract, the Initial PIK Convertible Notes, Additional PIK Convertible Notes
and any Permitted Refinancing Indebtedness in respect thereof, Qualified PIK Securities
and Indebtedness representing deferred compensation to directors and employees
of Parent, Holdings, the Borrower or any of the Restricted Subsidiaries
incurred in the ordinary course of business or in connection with the
Transactions and (2) guarantee obligations of Indebtedness permitted by
clauses (a) and (k) of Section 10.1(A), the Subordinated Notes
and any Permitted Refinancing Indebtedness of the Subordinated Notes.


 


(C)           None of Parent, Holdings or the Borrower will, nor will
they permit any Subsidiary to, issue any preferred stock or other preferred
equity interests, other than, in the case of Parent, Qualified PIK Securities.


 


10.2.        Limitation
on Liens.


 


(A)          The Borrower will not, and will not permit any of the
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any Restricted Subsidiary, whether now owned or
hereafter acquired, except:


 


(a)           Liens arising under
the Credit Documents;


 


(b)           Permitted Liens;


 


(c)           Liens securing
Indebtedness permitted pursuant to Section 10.1(A)(f), provided
that such Liens attach at all times only to the assets so financed, and Liens
on the assets of Foreign Subsidiaries securing Indebtedness permitted pursuant
to Section 10.1(A)(l);


 


(d)           Liens existing on
the Effective Date and listed on Schedule 10.2;


 


(e)           (i) Liens
securing Permitted Refinancing Indebtedness and (ii) the replacement,
extension or renewal of any Lien permitted by clause (c), (d) or (f) of
this Section 10.2(A) upon or in the same assets theretofore subject
to such Lien or the replacement, extension or renewal (without any increase in
the amount of Indebtedness secured thereby);


 


(f)            Liens existing on
the assets of any Person that becomes a Restricted Subsidiary, or existing on
assets acquired, pursuant to an Investment permitted pursuant to Section 10.5
to the extent the Liens on such assets secure Indebtedness permitted by Section 10.1(A)(j),
provided that such Liens attach at all times only to the same assets
that such Liens attached to, and secure only the same Indebtedness that such
Liens secured, immediately prior to such Investment and were not created in
contemplation thereof;


 


(g)           additional Liens so
long as the aggregate principal amount of the obligations so secured does not
exceed $50,000,000 at any time outstanding less the 


 


84

















 


lesser
of (x) the principal amount of Permitted Additional Secured Notes
outstanding in reliance on subclause (e)(y) of the definition thereof and (y) $40,000,000;
and


 


(h)           Liens securing
Indebtedness permitted by Section 10.1(A)(k) and Guarantee Obligations
in respect thereof.


 


Notwithstanding the foregoing, none of the Liens
permitted pursuant to this Section 10.2(A) may at any time attach to
any Credit Party’s (1) Accounts, other than involuntary Permitted Liens
and those permitted under clauses (a) or (h) above or (2) Inventory,
other than those permitted under involuntary Permitted Liens and those
permitted under clauses (a) or (h) above.


 


(B)           Neither Parent nor Holdings will create, incur, assume or
suffer to exist any Lien on any property or asset now owned or hereafter
acquired by it, or assign or sell any income or revenues (including Accounts)
or rights in respect thereof, except (a) Liens of the nature set forth in
the definition of the term “Permitted Liens”, (b) Liens created under the
Pledge Agreement and (c) Liens on the Collateral pledged pursuant to the
Pledge Agreement securing Indebtedness permitted by Section 10.1(A)(k) and
Guarantee Obligations in respect thereof.


 


10.3.        Limitation
on Fundamental Changes.


 


(A)          Each of Holdings and the Borrower will not, and will not
permit any of the Restricted Subsidiaries to, enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all its business units,
assets or other properties, except that:


 


(a)           any Subsidiary of
the Borrower or any other Person may be merged or consolidated with or into (i) Holdings,
provided that (A) Holdings shall be the continuing or surviving
corporation and (B) no Default would result from the consummation of such
merger or consolidation or (ii) the Borrower, provided that (i) the
Borrower shall be the continuing or surviving corporation or the Person formed
by or surviving any such merger or consolidation (if other than the Borrower)
shall be an entity organized or existing under the laws of the United States or
any of the forty-eight (48) continental states thereof (such Person other than
the Borrower being herein referred to as the “Successor  Credit Party”),
(ii) the Successor Credit Party shall expressly assume all of the obligations
of the Borrower under this Agreement and the other Credit Documents pursuant to
a supplement hereto or thereto in form reasonably satisfactory to the
Administrative Agent, (iii) no Default would result from the consummation
of such merger or consolidation; and (iv) the Borrower shall have
delivered to the Administrative Agent and the Security Agents an Officer’s
Certificate and an opinion of counsel, each stating that such merger or
consolidation and such supplement to this Agreement or any Security Document comply
with this Agreement; provided  further that if the foregoing are
satisfied, the Successor Credit Party will succeed to, and be substituted for,
the Borrower under this Agreement;


 


85

















 


(b)           any Subsidiary of
the Borrower or any other Person may be merged, amalgamated or consolidated
with or into any one or more Subsidiaries of the Borrower, provided that
(i) in the case of any merger or consolidation involving one or more Restricted
Subsidiaries, (A) a Restricted Subsidiary shall be the continuing or
surviving corporation or (B) the Borrower shall take all steps necessary
to cause the Person formed by or surviving any such merger or consolidation (if
other than a Restricted Subsidiary) to become a Restricted Subsidiary, (ii) in
the case of any merger, amalgamation or consolidation involving one or more Subsidiary
Guarantors, a Subsidiary Guarantor shall be the continuing or surviving
corporation or the Person formed by or surviving any such merger, amalgamation
or consolidation (if other than a Subsidiary Guarantor), (A) shall be an
entity organized or existing under the laws of the United States or any of the
forty-eight (48) continental states thereof and (B) shall execute a
supplement to the Guarantee Agreement, the Pledge Agreement and the Security
Agreement and any applicable Mortgage, in form and substance reasonably
satisfactory to the Security Agents in order to become a Subsidiary Guarantor
and pledgor, mortgagor and grantor of Collateral for the benefit of the Secured
Parties, (iii) no Default would result from the consummation of such
merger, amalgamation or consolidation and (iv) the Borrower shall have
delivered to the Administrative Agent and the Security Agents an Officers’
Certificate stating that such merger, amalgamation or consolidation and such
supplements to any Security Document comply with this Agreement;


 


(c)           any Restricted
Subsidiary that is not a Subsidiary Guarantor may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any other Restricted Subsidiary;


 


(d)           any Subsidiary
Guarantor may sell, lease, transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any Subsidiary
Guarantor;


 


(e)           any Restricted
Subsidiary may liquidate or dissolve if (x) the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders and (y) to
the extent such Restricted Subsidiary is a Credit Party, any assets or business
not otherwise disposed of or transferred in accordance with Section 10.4
or 10.5, or, in the case of any such business, discontinued without being
disposed of or transferred, shall be transferred to, or otherwise owned or
conducted by, another Credit Party after giving effect to such liquidation or
dissolution; and


 


(f)            any merger,
dissolution, liquidation, consolidation or disposition of a Restricted Subsidiary,
the purpose of which is to effect (i) a disposition permitted by Section 10.4
(other that Section 10.4(d)) shall be permitted or (ii) any
Investment permitted by Section 10.5 shall be permitted.


 


(B)           Holdings will not engage in any business or activity other
than (a) the ownership of all the outstanding shares of capital stock of
the Borrower, (b) maintaining its corporate existence (and consummating
any merger or consolidation permitted by Section 10.3(A)(a)), (c) participating
in tax, accounting and other administrative matters as a member of 


 


86

















 


the consolidated group of Parent and its
Subsidiaries, (d) the performance of the Credit Documents to which it is a
party, (e) making any Restricted Payment permitted by Section 10.6 or
holding any cash received in connection with Restricted Payments made by the
Borrower in accordance with Section 10.6 pending application thereof by
Holdings in the manner contemplated by Section 10.6, (f) adopting or
entering into employment or similar agreements with current or former
employees, directors and independent contractors of Parent or any of its
Subsidiaries and sponsoring or maintaining executive compensation and employee
benefit plans, programs, arrangements and policies for the benefit of current
and former directors and employees of Parent or any of its Subsidiaries and (g) activities
incidental to the businesses or activities described in clauses (a) to (f) of
this Section 10.3(B).  Holdings will
not own or acquire any assets (other than shares of capital stock of the
Borrower, cash and Permitted Investments) or incur any liabilities (other than
Indebtedness permitted by Section 10.1(B) and liabilities imposed by
law, including tax liabilities, and other liabilities incidental to its
existence and business and activities permitted by this Agreement).


 


(C)           Parent will not engage in any business or activity other
than (a) the ownership of all the outstanding shares of capital stock of
Holdings, (b) maintaining its corporate existence, (c) participating
in tax, accounting and other administrative matters as a member of the consolidated
group of Holdings and Borrower, (d) the performance of the Credit
Documents to which it is a party, the Forward Purchase Contract and the PIK
Convertible Note Indenture, (e) holding any cash received in connection
with dividends made by Holdings in accordance with Section 10.6 pending
application thereof by Parent in the manner contemplated by Section 10.6, (f) owning
the assets set forth on Schedule 10.3(c), (g) activities related to
Qualified PIK Securities and other permitted capital stock and (h) activities
incidental to the businesses or activities described in clauses (a) to (g) of
this Section 10.3(C) and Indebtedness and liabilities described in
the next sentence.  Parent will not own
or acquire any assets (other than shares of capital stock of Holdings, cash and
Permitted Investments) or incur any liabilities (other than Indebtedness permitted
by Section 10.1(B) or liabilities imposed by law, including tax
liabilities, and other liabilities incidental to its existence and business and
activities permitted by this Agreement).


 


10.4.        Limitation
on Sale of Assets.  The Borrower will
not, and will not permit any of the Restricted Subsidiaries to, (i) convey,
sell, lease, assign, transfer or otherwise dispose of any of its property,
business or assets (including receivables and leasehold interests), whether now
owned or hereafter acquired or (ii) sell to any Person any shares owned by
it of any Restricted Subsidiary’s capital stock, except that:


 


(a)           the Borrower and the Restricted Subsidiaries may sell,
transfer or otherwise dispose of used or surplus equipment, vehicles, inventory
and other assets in the ordinary course of business;


 


(b)           the Borrower and the Restricted Subsidiaries may sell,
transfer or otherwise dispose of other assets (other than accounts receivable)
for fair value, provided that (i) the aggregate amount of such
sales, transfers and disposals by the Borrower and the Restricted Subsidiaries,
taken as a whole, pursuant to this clause (b) shall not exceed in the
aggregate $150,000,000, (ii) any consideration in excess of $5,000,000
received by the Borrower or any Guarantor in connection with such sales,
transfers and other 


 


87

















 


dispositions
of assets pursuant to this clause (b) that is in the form of Indebtedness
shall be pledged to the Administrative Agent pursuant to Section 9.12, (iii) the
consideration received for any such sales, transfers and disposals shall
consist of not less than 75% cash consideration; provided that for the
purposes of this clause (iii) the following shall be deemed to be
cash:  (A) any liabilities (as shown
on the Borrower’s or such Restricted Subsidiary’s most recent balance sheet
provided hereunder or in the footnotes thereto) of the Borrower or such
Restricted Subsidiary assumed by the transferee with respect to the applicable
sale, transfer or disposal, as to which the Borrower and all of the Restricted
Subsidiaries shall have been released by all applicable creditors in writing,
other than liabilities that are by their terms (1) subordinated to the
payment in cash of the Obligations or (2) in the case of a sale by the
Borrower or a Subsidiary Guarantor, not secured by the assets that are the
subject of such sale, transfer or disposal and (B) any securities received
by the Person making such sale, transfer or disposal from the transferee that
are converted by such Person into cash (to the extent of the cash received)
within 180 days following the closing of the applicable sale, transfer or
disposal and (iv) after giving effect to any such sale, transfer or
disposition, no Default shall have occurred and be continuing;


 


(c)           the Borrower and the Restricted Subsidiaries may make
sales of assets to the Borrower or to any Restricted Subsidiary, provided
that no sale of any assets by the Borrower or any Subsidiary Guarantor to any
Restricted Subsidiary that is not a Subsidiary Guarantor shall be permitted
pursuant to this clause (c);


 


(d)           (i) mergers, liquidations and transfers of all or
substantially all assets permitted by Section 10.3, (ii) Investments
permitted by Section 10.5 and (iii) Restricted Payments permitted by Section 10.6,
in each case, shall be permitted;


 


(e)           the Borrower and the Restricted Subsidiaries may sell
without recourse Accounts arising in the ordinary course of business in
connection with the compromise, settlement, collection thereof or conversion of
Accounts to notes receivable;


 


(f)            sales, transfers, assignments or other dispositions
resulting from any casualty or condemnation of any assets of the Borrower or
any of its Subsidiaries; and


 


(g)           the Borrower and the Restricted Subsidiaries may effect
the unwinding of any Hedge Agreement.


 


10.5.        Limitation
on Investments.  Holdings and the
Borrower will not, and will not permit any of the Restricted Subsidiaries to,
make any advance, loan, extensions of credit or capital contribution to, or purchase
any stock, bonds, notes, debentures or other securities of or any assets of, or
make any other investment (including pursuant to any Guarantee Obligation with
respect to the obligations of another Person) (“Investments”)
in, any Person, except:


 


(a)           extensions of trade credit and asset purchases in the
ordinary course of business;


 


(b)           Permitted Investments;


 


88

















 


(c)           loans and advances to officers, directors and employees of
Parent or any of its Subsidiaries (i) to finance the purchase of capital
stock of Parent (provided that the amount of such loans and advances used to
acquire such capital stock shall be contributed by Parent to Holdings, which
shall in turn contribute it to the Borrower in cash as common equity) and (ii) for
additional purposes not contemplated by subclause (i) above in an
aggregate principal amount at any time outstanding with respect to this clause (ii) not
exceeding $10,000,000;


 


(d)           Investments existing on the date hereof and listed on
Schedule 10.5 and any extensions, renewals or reinvestments with respect to any
return therefrom (including through a repayment, return of capital, interest or
dividends) (but without any increase in the amount thereof and in the case of
any reinvestment, only if such reinvestment is made within 60 days after the
date of receipt of any such returned amount);


 


(e)           Hedge Agreements permitted by Section 10.1(A)(h);


 


(f)            Investments received in connection with the bankruptcy or
reorganization of suppliers or customers and in settlement of delinquent
obligations of, and other disputes with, customers arising in the ordinary
course of business;


 


(g)           Investments to the extent that payment for such
investments is made solely with capital stock of Parent;


 


(h)           Investments constituting non-cash proceeds of sales,
transfers and other dispositions of assets to the extent permitted by Section 10.4;


 


(i)            Investments (i) in the Borrower or any Subsidiary
Guarantor, (ii) Investments by any Restricted Subsidiary that is not a
Subsidiary Guarantor in any other Subsidiary that is not a Subsidiary Guarantor
and (iii) Investments by the Borrower or any Subsidiary Guarantor in any
Restricted Subsidiary that is not a Subsidiary Guarantor in an aggregate
principal amount not to exceed $1,000,000 at any time outstanding;


 


(j)            Permitted Acquisitions, provided that (i) no
Event of Default shall have occurred and is continuing after giving effect to
such Permitted Acquisition, (ii) on a Pro Forma Basis (x) the Fixed
Charge Coverage Ratio for the most recently ended Test Period for which Section 9.1
Financials have been delivered would be at least 1.1 to 1.0, (y) average
daily Availability for the period of sixty (60) consecutive days (or, if less,
the number of days from and including the Effective Date to and including the
date of determination) immediately preceding such Investment has been and for
the period of six consecutive months immediately following such Investment is
projected by the Borrower to be not less than the greater of (1) 20% of
the Total Commitment on the date of such Permitted Acquisition and (2) $20,000,000
and (z) the fair market value of any assets acquired in any transaction that
are not owned directly by the Borrower or a Subsidiary Guarantor (including a
Person who becomes a Subsidiary Guarantor as a result of such Permitted
Acquisition) shall be deemed to be an Investment not permitted by this clause
(j);


 


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(k)           other Investments, provided that, at the time each
such Investment is made or otherwise acquired and after giving effect thereto(i) no
Default shall have occurred and be continuing or would result therefrom, (ii) on
a Pro Forma Basis, (x) the Fixed Charge Coverage Ratio for the most
recently ended Test Period is at least 1.25 to 1.00, and (y) average daily
Availability for the period of sixty (60) consecutive days (or, if less, the
number of days from and including the Effective Date to and including the date
of determination) immediately preceding such Investment has been and for the
period of six consecutive months immediately following such Investment is
projected by the Borrower to be not less than the greater of (1) 25% of
the Total Commitment on the date of such Investment and (2) $25,000,000;


 


(l)            other Investments in an amount not to exceed $5,000,000;
and


 


(m)          Investments constituting Restricted Payments permitted by Section 10.6
and Guarantee Obligations permitted by Section 10.1(d)(ii).


 


10.6.        Limitation
on Restricted Payments.  None of
Holdings, the Borrower or any Restricted Subsidiary will make any Restricted
Payment, provided that, (a) so long as no Default or Event of
Default exists or would exist after giving effect thereto, Holdings or the Borrower
may redeem in whole or in part any of its capital stock for another class of
capital stock or rights to acquire its capital stock or with proceeds from
substantially concurrent equity contributions or issuances of new shares of its
capital stock (or pay dividends with such proceeds), provided that such
other class of capital stock contains terms and provisions at least as
advantageous to the Lenders in all respects material to their interests as
those contained in the capital stock redeemed thereby, (b) the Borrower
and Holdings may declare and pay dividends and/or make distributions on its capital
stock, as applicable the proceeds of which will be used by Parent or Holdings
solely to pay (i) taxes of Parent, Holdings, the Borrower and the
Subsidiaries as part of a consolidated tax filing group for U.S. federal, state
or local tax purposes in an amount not to exceed the income tax liabilities
that would have been payable by the Borrower and its Restricted Subsidiaries on
a stand-alone basis, reduced by any such income taxes paid or to be paid
directly by Borrower or its Restricted Subsidiaries, and (ii) franchise
taxes, administrative and similar expenses related to Parent’s and Holdings’
existence and ownership of the Borrower, as applicable, provided that
the amount of such dividends pursuant to this subclause (ii) does not
exceed in any fiscal year the amount of such taxes and expenses payable for
such fiscal year (it being understood that such expenses shall in no event exceed
$1,000,000 in the aggregate per fiscal year), (c) Holdings, the Borrower
and the Restricted Subsidiaries may make other Restricted Payments; provided
that (A) both immediately before and immediately after giving effect to
such Restricted Payment, no Event of Default shall have occurred and be
continuing, (B) at the time any Restricted Payment is made on a Pro Forma
Basis, (x) the Fixed Charge Coverage Ratio for the most recently ended
Test Period for which Section 9.1 Financials have been delivered shall not
be less than 1.25 to 1.00 and (y) average daily Availability for the
period of sixty (60) consecutive days (or, if less, the number of days from and
including the Effective Date to and including the date of determination)
immediately preceding such Restricted Payment has been and for the period of
six consecutive months immediately following such Restricted Payment is
projected to be not less than the greater of (1) 25% of the Total
Commitment and (2) $25,000,000 and (C) any amount received by
Holdings shall be promptly used by Holdings to make a Restricted Payment and (d) Holdings,
the 


 


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Borrower and its Restricted
Subsidiaries may make Restricted Payments to repurchase or settle shares of
capital stock of Parent (or options, warrants or stock appreciation rights with
respect to such capital stock or any other equity-based award) in an aggregate
amount not to exceed (x) $15,000,000 prior to the Final Date or (y) $5,000,000
in any twelve month period.


 


10.7.        Limitations
on Debt Payments and Certain Amendments.


 


(a)           The Borrower will not, and will not permit any of its
Restricted Subsidiaries to, make directly or indirectly, any payment or other
distribution (whether in cash, securities or other property) of or in respect
of principal of or interest on any Indebtedness for borrowed money, or any
payment or other distribution (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any
Indebtedness for borrowed money, except:


 


(A)          payments of
Indebtedness created under the Credit Documents;


 


(B)           payments of
regularly scheduled interest and principal payments as and when due in respect
of any Indebtedness, other than payments in respect of any Indebtedness that is
subordinated to the Obligations prohibited by the subordination provisions
thereof;


 


(C)           refinancings,
replacements and renewals of Indebtedness to the extent made with (or in
exchange for) Permitted Refinancing Indebtedness (or, in the case of Indebtedness
outstanding pursuant to clause (f), (g) or (j) of Section 10.1(A),
with the proceeds of refinancing Indebtedness incurred pursuant to such
clauses);


 


(D)          payments of secured
Indebtedness that becomes due as a result of the voluntary sale or transfer of
the property or assets securing such Indebtedness on a first lien basis;


 


(E)           payments with
respect to Indebtedness owed to the Borrower or any Subsidiary Guarantor;


 


(F)           payments by
Restricted Subsidiaries that are not Subsidiary Guarantors with respect to
Indebtedness of such Restricted Subsidiaries;


 


(G)           payments with
respect to the Initial Secured Notes and any Permitted Additional Secured Notes
made solely from the proceeds of Notes Priority Collateral to the extent required
by the Secured Notes Documents;


 


(H)          other payments with
respect to Indebtedness; provided that (A) both immediately before
and immediately after giving effect to such payment, no Event of Default shall
have occurred and be continuing and (B) at the time any payment is made on
a Pro Forma Basis, (x) the Fixed Charge Coverage Ratio for the most
recently ended Test Period for which Section 9.1 Financials have been
delivered shall not be less than 1.25 to 1.00 and (y) average daily
Availability for the period of sixty (60) consecutive days (or, if less, the
number of days from and including the Effective Date to and 


 


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including
the date of determination) immediately preceding such payment has been and for
the period of six consecutive months immediately following such payment is
projected by the Borrower to be not less than the greater of (1) 25% of
the Total Commitment and (2) $25,000,000; and


 


(I)            payments with
respect to Indebtedness made from the proceeds of a substantially concurrent
contribution to the equity of the Borrower (other than proceeds from an Equity
Cure).


 


(b)           Holdings and the Borrower will not, and will not permit
any Restricted Subsidiary, to amend, modify or waive any of its rights under
any agreement governing or relating to the Subordinated Notes, the Initial PIK
Convertible Notes, any Permitted Additional PIK Convertible Notes, the Forward
Purchase Contract or any other Indebtedness which is subordinated to the
Obligations to the extent any such amendment, modification or waiver would be materially
adverse to the Lenders.  The Borrower
will not amend the terms of the Initial Secured Notes, any Permitted Additional
Secured Notes or any Permitted Junior Lien or Unsecured Notes in a manner that
would accelerate the date on which the Borrower is required to make any payment
of principal or interest or any other amount thereon.


 


10.8.        Limitations
on Sale Leasebacks.  Holdings and the
Borrower will not, and will not permit any of the Restricted Subsidiaries to,
enter into or effect any Sale Leasebacks, other than Permitted Sale Leasebacks.


 


10.9.        Fixed
Charge Coverage Ratio.  During any
Minimum Availability Period, the Borrower will not permit the Fixed Charge Coverage
Ratio for the most recently ended Test Period prior to the commencement of such
Minimum Availability Period or for any Test Period ending during such Minimum
Availability Period to be less than 1.1 to 1.0.


 


For purposes of determining compliance with this Section 10.9
only, any cash common equity contribution (an “Equity Cure”) to the
Borrower by Holdings after the date on which financial statements are required
to be delivered for a Test Period in accordance with Section 9.1 and on or
prior to the day that is 10 days after such date, shall at the request of the
Borrower, be included in the calculation of Consolidated EBITDA solely for the
purposes of determining compliance with this Section 10.9 for such Test Period
and applicable subsequent Test Periods, provided that (a) in each
four fiscal quarter period, there shall be at least two fiscal quarters in
respect of which no Equity Cure is made and (b) the amount of any such
Equity Cure shall be no greater than the amount required to cause the Borrower
to be in compliance with this Section 10.9.


 


SECTION 11.         Events of Default


 


Upon the occurrence of any of the following
specified events (each an “Event of  Default”):


 


11.1.        Payments. 
The Borrower shall (a) default in the payment when due of any
principal of the Loans or (b) default, and such default shall continue for
five or more days, in the payment when due of any interest on the Loans or any
Fees or any Unpaid Drawings or of any other amounts owing hereunder or under
any other Credit Document; or


 


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11.2.        Representations,
etc.  Any representation, warranty or
statement made or deemed made by any Credit Party herein or in any Credit
Document or any certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or


 


11.3.        Covenants. 
Any Credit Party shall (a) (x) default in the due performance
or observance by it of any term, covenant or agreement contained in Section 9.1(f)(i) or
Section 10 or (y) default in the due performance or observance by it
of any term, covenant or agreement contained in Section 9.1(e), Section 9.16
and Section 9.17 of this Agreement or Section 4.5(b) of the
Security Agreement and such default shall continue unremedied for a period of
at least 5 Business Days after receipt of written notice by the Borrower from
the Administrative Agent, the Security Agents or the Required Lenders or (b) default
in the due performance or observance by it of any term, covenant or agreement
(other than those referred to in Section 11.1 or 11.2 or clause (a) of
this Section 11.3) contained in this Agreement or any Credit Document and
such default shall continue unremedied for a period of at least 30 days after
receipt of written notice by the Borrower from the Administrative Agent or the
Required Lenders; or


 


11.4.        Default
Under Other Agreements.  (a) Any
of Holdings, the Borrower or any of the Restricted Subsidiaries shall (i) default
in any payment with respect to any Indebtedness (other than the Obligations) in
excess of $20,000,000 in the aggregate, for Holdings, the Borrower and such
Subsidiaries, beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created or (ii) default in
the observance or performance of any agreement or condition relating to any
such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, any such Indebtedness to become due
(or to cause Holdings, the Borrower or any of its Restricted Subsidiaries to
purchase any such Indebtedness) prior to its stated maturity; or (b) without
limiting the provisions of clause (a) above, any such Indebtedness shall
be declared to be due and payable, or required to be prepaid other than by a
regularly scheduled required prepayment or as a mandatory prepayment, prior to
the stated maturity thereof or (c) the Forward Purchase Contract is
terminated prior to the settlement date or one or more conditions precedent to
the purchase of the Initial PIK Convertible Notes by Sealy Holding LLC pursuant
to the Forward Purchase Contract has not been satisfied or becomes impossible
to satisfy and such condition or conditions has not been waived by Sealy
Holding LLC; or


 


11.5.        Bankruptcy,
etc.  Holdings, the Borrower or any
Specified Subsidiary shall commence a voluntary case, proceeding or action
concerning itself under (a) Title 11 of the United States Code entitled “Bankruptcy”,
or (b) in the case of any Foreign Subsidiary that is a Specified
Subsidiary, any domestic or foreign law relating to bankruptcy, insolvency
reorganization or relief of debtors legislation of its jurisdiction of
incorporation, in each case as now or hereafter in effect, or any successor
thereto (collectively, the “Bankruptcy Code”); or an involuntary case,
proceeding or action is commenced against any of Holdings, the Borrower or any
Specified Subsidiary and the petition is not controverted within 10 days after
commencement of the case, proceeding or action; or an involuntary case,
proceeding or action is commenced against any of Holdings, the Borrower or any
Specified Subsidiary and the petition is not dismissed within 60 days after
commencement of the case, proceeding or action; or a 


 


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custodian (as defined in the Bankruptcy Code)
receiver, receiver manager, trustee or similar person is appointed for, or
takes charge of, all or substantially all of the property of any of Holdings,
the Borrower or any Specified Subsidiary; or any of Holdings, the Borrower or
any Specified Subsidiary commences any other proceeding or action under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to any of Holdings, the Borrower or
any Specified Subsidiary; or there is commenced against any of Holdings, the
Borrower,  or any Specified Subsidiary
any such proceeding or action that remains undismissed for a period of 60 days;
or any of Holdings, the Borrower or any Specified Subsidiary is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding or action is entered; or any of Holdings, the Borrower or
any Specified Subsidiary suffers any appointment of any custodian receiver,
receiver manager, trustee or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or any
of Holdings, the Borrower or any Specified Subsidiary makes a general
assignment for the benefit of creditors; or any corporate action is taken by
any of Holdings, the Borrower or any Specified Subsidiary for the purpose of
effecting any of the foregoing; or


 


11.6.        ERISA.  (a) Any
Plan shall fail to satisfy the minimum funding standard required for any plan
year or part thereof or a waiver of such standard or extension of any amortization
period is sought or granted under Section 412 of the Code; any Plan is or
shall have been terminated or is the subject of termination proceedings under
ERISA (including the giving of written notice thereof); an event shall have
occurred or a condition shall exist in either case entitling the PBGC to
terminate any Plan or to appoint a trustee to administer any Plan (including
the giving of written notice thereof); any Plan shall have an accumulated
funding deficiency (whether or not waived); any of Holdings, the Borrower or
any Subsidiary or any ERISA Affiliate has incurred or is likely to incur a
liability to or on account of a Plan under Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975
of the Code (including the giving of written notice thereof); (b) there
could result from any event or events set forth in clause (a) of this Section 11.6
the imposition of a lien, the granting of a security interest, or a liability,
or the reasonable likelihood of incurring a lien, security interest or liability;
and (c) such lien, security interest or liability will or would be
reasonably likely to have a Material Adverse Effect; or


 


11.7.        Guarantee. 
The Guarantees or any material provision thereof shall cease to be in
full force or effect or any Guarantor thereunder or any Credit Party shall deny
or disaffirm in writing any Guarantor’s obligations under the Guarantee; or


 


11.8.        Pledge
Agreement.  The Pledge Agreements or
any material provision thereof shall cease to be in full force or effect (other
than pursuant to the terms hereof or thereof or as a result of acts or
omissions of the Administrative Agent or any Lender) or any pledgor thereunder
or any Credit Party shall deny or disaffirm in writing any pledgor’s
obligations under the Pledge Agreement; or


 


11.9.        Security
Agreement.  The Security Agreements
or any material provision thereof shall cease to be in full force or effect
(other than pursuant to the terms hereof or thereof or as a result of acts or
omissions of the Administrative Agent or any Lender) or any grantor 


 


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thereunder or any Credit Party shall deny or
disaffirm in writing any grantor’s obligations under the Security Agreement; or


 


11.10.      Mortgages. 
Any Mortgage or any material provision of any Mortgage relating to any
material portion of the Collateral shall cease to be in full force or effect
(other than pursuant to the terms hereof or thereof or as a result of acts or
omissions of the Administrative Agent or any Lender) or any mortgagor
thereunder or any Credit Party shall deny or disaffirm in writing any mortgagor’s
obligations under any Mortgage; or


 


11.11.      Subordination. 
The Obligations of the Borrower, or the obligations of Holdings or any
Subsidiaries pursuant to the Guarantee, shall cease to constitute senior
indebtedness under the subordination provisions of any document or instrument
evidencing the Subordinated Notes or any other permitted subordinated
Indebtedness or such subordination provisions shall be invalidated or otherwise
cease to be legal, valid and binding obligations of the parties thereto, enforceable
in accordance with their terms; or


 


11.12.      Judgments. 
One or more judgments or decrees shall be entered against the Borrower
or any of the Restricted Subsidiaries involving a liability of $20,000,000 or
more in the aggregate for all such judgments and decrees for the Borrower and
the Restricted Subsidiaries (to the extent not paid or fully covered by
insurance provided by a carrier not disputing coverage) and any such judgments
or decrees shall not have been satisfied, vacated, discharged or stayed or bonded
pending appeal within 60 days from the entry thereof; or


 


11.13.      Change
of Control.  A Change of Control
shall occur;


 


then, and in any such event, and at any time
thereafter, if any Event of Default shall then be continuing, the
Administrative Agent shall, upon the written request of the Required Lenders,
by written notice to the Borrower, take any or all of the following actions,
without prejudice to the rights of the Administrative Agent or any Lender to
enforce its claims against the Borrower, except as otherwise specifically
provided for in this Agreement (provided that, if an Event of Default
specified in Section 11.5 shall occur with respect to the Borrower, the
result that would occur upon the giving of written notice by the Administrative
Agent as specified in clauses (i), (ii) and (iv) below shall occur
automatically without the giving of any such notice):  (i) declare the Total Commitment
terminated, whereupon the Commitments and Swingline Commitment, if any, of each
Lender or the Swingline Lender, as the case may be, shall forthwith terminate immediately
and any Fees theretofore accrued shall forthwith become due and payable without
any other notice of any kind; (ii) declare the principal of and any accrued
interest and fees in respect of all Loans and all Obligations owing hereunder
and thereunder to be, whereupon the same shall become, forthwith due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower; (iii) terminate any Letter of
Credit that may be terminated in accordance with its terms; (iv) exercise
rights and remedies under the Credit Documents, at law or in equity; and/or (v) direct
the Borrower to pay (and the Borrower agrees that upon receipt of such notice,
or upon the occurrence of an Event of Default specified in Section 11.5
with respect to the Borrower, it will pay) to the Administrative Agent, at its
Administrative Agent’s Office, such additional amounts of cash, to be held as
security for the Borrower’s reimbursement obligations for Drawings that may
subsequently occur thereunder, equal to the aggregate Stated Amount of all
Letters of Credit issued and then outstanding.


 


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SECTION 12.         The Agents


 


12.1.        Appointment. 
Each Lender hereby irrevocably designates and appoints the
Administrative Agent, Collateral Agent and Co-Collateral Agent as the agents of
such Lender under this Agreement and the other Credit Documents, and each such
Lender irrevocably authorizes the Administrative Agent and the Security Agents,
in their respective capacities, to take such action on its behalf under the
provisions of this Agreement and the other Credit Documents and to exercise
such powers and perform such duties as are expressly delegated to such Agents
by the terms of this Agreement and the other Credit Documents, together with
such other powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary
elsewhere in this Agreement, no Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Credit Document or otherwise exist against any Agent.  Neither the Joint Lead Arrangers nor the
Syndication Agent, in their respective capacities as such, shall have any
obligations, duties or responsibilities under this Agreement but shall be
entitled to all benefits of this Section 12.


 


12.2.        Delegation
of Duties.  The Administrative Agent
and each Security Agent may execute any of their respective duties under this
Agreement and the other Credit Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties.  The
Administrative Agent and the Security Agents shall not be responsible for the
negligence or misconduct of any of their respective agents or attorneys-in-fact
selected by it with reasonable care.


 


12.3.        Exculpatory
Provisions.  Neither the
Administrative Agent nor any Security Agent, nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall
be (a) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Credit
Document (except for its or such Person’s own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
Guarantor or any officer thereof contained in this Agreement or any other
Credit Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent or any
Security Agent under or in connection with, this Agreement or any other Credit
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Credit Document or for any
failure of the Borrower or any Guarantor to perform its obligations hereunder
or thereunder.  Neither the
Administrative Agent nor any Security Agent shall be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Credit Document, or to inspect the properties, books or records of the Borrower.


 


12.4.        Reliance
by Administrative Agent and Security Agents.  The Administrative Agent and each Security
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or 


 


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Persons and upon advice and statements of
legal counsel (including counsel to the Borrower), independent accountants and
other experts selected by the Administrative Agent or such Security Agent, as
the case may be.  The Administrative
Agent and each Security Agent may deem and treat the Lender specified in the
Register with respect to any amount owing hereunder as the owner thereof for
all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative Agent.  Neither the Administrative Agent nor any Security
Agent shall be deemed to have knowledge of any Secured Cash Management Agreement
or Secured Hedge Agreement unless and until it has received written notice
thereof from the applicable Hedge Bank or Cash Management Bank.


 


12.5.        Notice
of Default.  Neither the
Administrative Agent nor any Security Agent shall be deemed to have knowledge
or notice of the occurrence of any Default hereunder unless the Administrative
Agent or such Security Agent, as the case may be, has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default and
stating that such notice is a “notice of default”.  In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders.


 


12.6.        Non-Reliance
on Administrative Agent, Security Agents and Other Lenders.  Each Lender expressly acknowledges that
neither the Administrative Agent nor any Security Agent, nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent or any Security Agent hereinafter taken, including any
review of the affairs of the Borrower or any Guarantor, shall be deemed to
constitute any representation or warranty by the Administrative Agent or any
Security Agent to any Lender.  Each
Lender represents to the Administrative Agent and each Security Agent that it
has, independently and without reliance upon the Administrative Agent, any Security
Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Credit Parties and made its own decision to make its
Loans hereunder and enter into this Agreement. 
Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent, any Security Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Credit
Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Credit Parties. 
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent and the Security Agents shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, assets, operations, properties, financial condition,
prospects or creditworthiness of the Credit Parties that may come into the
possession of the Administrative Agent or any Security Agent or any of their
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates.


 


12.7.        Indemnification.  The Lenders agree to indemnify the
Administrative Agent and the Security Agents, each in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation
of the Borrower to do so), ratably according to their Applicable Percentage in
effect on the date on which indemnification is sought (or, if 


 


97

















 


indemnification is sought after the date upon
which the Commitments shall have terminated and the Total Credit Exposure shall
have been paid in full, ratably in accordance with their respective portions of
the Total Credit Exposure in effect immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever
that may at any time (including at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent or any
Security Agent in any way relating to or arising out of, the Commitments, this
Agreement, any of the other Credit Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Administrative Agent or any
Security Agent under or in connection with any of the foregoing, provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Administrative Agent’s
or such Security Agent’s, as the case may be, gross negligence or willful
misconduct.  The agreements in this Section 12.7
shall survive the payment of the Loans and all other amounts payable hereunder.


 


12.8.        Administrative
Agent and Security Agents in Their Individual Capacities.  The Administrative Agent, the Security Agents
and their respective Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with Parent and its Subsidiaries as
though the Administrative Agent and the Security Agents were not the Administrative
Agents and the Security Agents hereunder and under the other Credit
Documents.  With respect to the Loans
made by it, the Administrative Agent and each Security Agent shall have the
same rights and powers under this Agreement and the other Credit Documents as
any Lender and may exercise the same as though it were not the Administrative
Agent or a Security Agent, and the terms “Lender” and “Lenders” shall include
the Administrative Agent and the Security Agents in their respective individual
capacities.


 


12.9.        Successor
Agent.  The Administrative or any
Security Agent may resign as Administrative Agent or Security Agent, as the
case may be, upon 20 days’ prior written notice to the Lenders and the
Borrower.  If the Administrative Agent or
any Security Agent shall resign as Administrative Agent or Security Agent, as
the case may be, under this Agreement and the other Credit Documents, then the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent shall be approved by the Borrower (which
approval shall not be unreasonably withheld) unless an Event of Default has
occurred and is continuing under Section 11.1 or Section 11.5,
whereupon such successor agent shall succeed to the rights, powers and duties
of the Administrative Agent or a Security Agent, as the case may be, and the
term “Administrative Agent,” “Collateral Agent” or “Co-Collateral Agent,” as
the case may be, shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent’s or Security
Agents’ rights, powers and duties as Administrative Agent, Collateral Agent or
Co-Collateral Agent, as the case may be, shall be terminated, without any other
or further act or deed on the part of such former Administrative Agent or Security
Agent or any of the parties to this Agreement or any holders of the Loans.  After any retiring Administrative Agent’s or
Security Agent’s resignation as Administrative Agent or Security Agent, as the
case may be, the provisions of this Section 12 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was
Administrative Agent or a Security Agent under this Agreement and the other
Credit Documents.


 


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12.10.      Withholding
Tax.  To the extent required by any
applicable law, the Administrative Agent may withhold from any interest payment
to any Lender an amount equivalent to any applicable withholding tax.  If the Internal Revenue Service or any
authority of the United States or other jurisdiction asserts a claim that the
Administrative Agent did not properly withhold tax from amounts paid to or for
the account of any Lender (because the appropriate form was not delivered, was
not properly executed, or because such Lender failed to notify the Administrative
Agent of a change in circumstances which rendered the exemption from, or reduction
of, withholding tax ineffective, or for any other reason other than the gross
negligence or willful misconduct of the Administrative Agent), such Lender
shall indemnify the Administrative Agent fully for all amounts paid, directly
or indirectly, by the Administrative Agent as tax or otherwise, including
penalties and interest, together with all expenses incurred, including legal
expenses, allocated staff costs and any out of pocket expenses.


 


12.11.      Reports. 
Each Lender hereby agrees that (a) it has requested a copy of each
Report prepared by or on behalf of the Administrative Agent or the Security
Agents; (b) the Administrative Agent and the Security Agents (i) make
no representation or warranty, express or implied, as to the completeness or
accuracy of any Report or any of the information contained therein or any
inaccuracy or omission contained in or relating to a Report and (ii) shall
not be liable for any information contained in any Report; (c) the Reports
are not comprehensive audits or examinations, and that any Person performing
any field examination will inspect only specific information regarding the
Credit Parties and will rely significantly upon the Credit Parties’ books and
records, as well as on representations of the Credit Parties’ personnel and
that the Administrative Agent and the Security Agents undertake no obligation
to update, correct or supplement the Reports; (d) it will keep all Reports
confidential and strictly for its internal use, not share the Report with any
other Person except as otherwise permitted pursuant to this Agreement; and (e) without
limiting the generality of any other indemnification provision contained in
this Agreement, it will pay and protect, and indemnify, defend, and hold the
Administrative Agent, the Security Agents and any such other Person preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses, and other amounts (including reasonable attorney fees)
incurred by as the direct or indirect result of any third parties who might
obtain all or part of any Report through the indemnifying Lender.


 


12.12.      Security Agents.  All
determinations of the Security Agents under the Credit Documents shall be made
jointly by the Security Agents, provided that, in the event that the Security
Agents cannot agree on any matter to be determined by the Security Agents, the
determination shall be made by the individual Security Agent asserting the more
conservative credit judgment or declining to permit the requested action for
which consent is being sought by the Borrower, as applicable.  This provision shall be binding upon any
successor Security Agent pursuant to Section 12.9.


 


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SECTION 13.                  [Reserved]


 


SECTION 14.                  Miscellaneous


 


14.1.        Amendments and Waivers.


 


(a)           Neither this Agreement nor any other
Credit Document, nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this Section 14.1.  The Required Lenders may, or, with the
written consent of the Required Lenders, the Administrative Agent may, from
time to time, (a) enter into with the relevant Credit Party or Credit
Parties written amendments, supplements or modifications hereto and to the
other Credit Documents for the purpose of adding any provisions to this
Agreement or the other Credit Documents or changing in any manner the rights of
the Lenders or of the Credit Parties hereunder or thereunder or (b) waive,
on such terms and conditions as the Required Lenders or the Administrative
Agent, as the case may be, may specify in such instrument, any of the requirements
of this Agreement or the other Credit Documents or any Default and its consequences;
provided, however, that no such waiver and no such amendment,
supplement or modification shall directly (i) forgive any portion of any
Loan or waive any required prepayment or cash collateralization pursuant to Section 5.2(a) or
extend the final scheduled maturity date of any Loan or reduce the stated rate,
or forgive any portion, or extend the date for the payment, of any interest or
Fee payable hereunder (other than as a result of waiving the applicability of Section 2.8(c)),
or extend the final expiration date of any Lender’s Commitment or extend the
final expiration date of any Letter of Credit beyond the L/C Maturity Date (provided
that the Administrative Agent may make Protective Advances as set forth in Section 2.1),
or increase the aggregate amount of the Commitments of any Lender, or amend or
modify any provisions of Section 14.8(a), in each case without the written
consent of each Lender directly and adversely affected thereby, or (ii) amend,
modify or waive any provision of this Section 14.1 or reduce the percentages
specified in the definitions of the terms “Required Lenders”, “Required
Supermajority Lenders” or “Applicable Percentage” or consent to the assignment
or transfer by the Borrower of its rights and obligations under any Credit Document
to which it is a party (except as permitted pursuant to Section 10.3), in
each case without the written consent of each Lender directly and adversely
affected thereby, or (iii) amend, modify or waive any provision of Section 12
as it relates to the Administrative Agent without the written consent of the
then-current Administrative Agent or as it relates to the Security Agents
without the written consent of both of the then-current Security Agents, or (iv) amend,
modify or waive any provision of Section 2.3 relating to Letters of
Credit, Section 2.14 or Section 3 without the written consent of the
Letter of Credit Issuer, or (v) amend, modify or waive any provisions
hereof relating to Swingline Loans (including the applicable provisions of Section 2.14)
without the written consent of the Swingline Lender, or (vi) increase the
advance rates set forth in the definition of Borrowing Base or add new
categories of eligible assets, without the written consent of both of the
Security Agents and the Required Supermajority Lenders, or (vii) release
all or substantially all of the Guarantors under the Guarantee (except as
expressly permitted by the Guarantee) or, except as permitted in Section 14.1(b),
release all or substantially all of the Collateral under the Pledge Agreement,
the Security Agreement and the Mortgages, in each case without the prior
written consent of each Lender, or (viii) amend Section 2.9 so as to
permit Interest Period intervals greater than six months without regard to the
consent of each Lender, without the written consent of each Lender directly and
adversely affected thereby, or (ix) amend, modify or 


 


100

















 


waive the application of proceeds provisions
of Section 2.5(b), Section 5.2(a) or Section 5.3(c),
without the written consent of each Lender directly and adversely affected
thereby, or (x) decrease the amount or allocation of any optional or
mandatory prepayment to be received by any Lender holding any Loans without the
written consent of such Lender, or (xi) waive any condition set forth in Section 6
without the written consent of each Initial Lender.  Any such waiver and any such amendment, supplement
or modification shall apply equally to each of the affected Lenders and shall
be binding upon the Borrower, such Lenders, the Administrative Agent, the
Collateral Agent and all future holders of the affected Loans.  In the case of any waiver, the Borrower, the
Lenders, the Collateral Agent and the Administrative Agent shall be restored to
their former positions and rights hereunder and under the other Credit
Documents, and any Default waived shall be deemed to be cured and not
continuing, it being understood that no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.


 


(b)           Any Liens granted to the
Administrative Agent by the Credit Parties on any Collateral for the benefit of
the Secured Parties shall automatically be released (i) upon the Final
Date, (ii) constituting property being sold or disposed of (or property of
a Subsidiary Guarantor whose capital stock is being sold in a transaction that
will result in such Subsidiary Guarantor being released from the Guarantee in
accordance with the terms thereof) to the extent such sale or disposition is in
compliance with the terms of this Agreement and (iii) as required by the
Intercreditor Agreement. Additionally, the Administrative Agent is hereby
authorized in its sole discretion to release any Liens as required to effect
any sale or other disposition of such Collateral in connection with any
exercise of remedies of the Administrative Agent and the Lenders pursuant to Section 11.  Except as provided in the preceding sentence,
the Administrative Agent will not release any Liens on Collateral without the
prior written authorization of the Lenders as Section 14.1(a); provided
that the Administrative Agent may in its discretion, release its Liens on
Collateral valued in the aggregate not in excess of $2,000,000 during any
calendar year without the prior written authorization of any Lenders.  Any such release shall not in any manner discharge,
affect, or impair the Obligations or any Liens (other than those expressly
being released) upon (or obligations of the Credit Parties in respect of) all
interests retained by the Credit Parties, including the proceeds of any sale,
all of which shall continue to constitute part of the Collateral.  In connection with any release of Liens under
the Security Documents, the Administrative Agent shall be protected in relying
on a certificate of an Authorized Officer to the effect that such release is
permitted by this Section 14.1(b).


 


14.2.        Notices.  All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered, or three days after
being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case of the Borrower and the
Administrative Agent, and in the case of the other parties hereto to such other
address as may be hereafter notified by the respective parties hereto:


 


The Borrower:                                                                                                                                                                 Sealy
Mattress Company

One Office Parkway

Trinity, NC  27370

Attention:  Kenneth L. Walker

Fax:  336-861-3786


 


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with a copy to


 


Kohlberg
Kravis Roberts & Co., L.P.

9 West 57th Street

Suite 4200

New York, NY  10019

Attention:  Brian Carroll

Fax:  212-750-0003


 


The
Administrative Agent or


Collateral
Agent:                                                                                                                                                                                                   JPMorgan
Chase Bank, N.A.


1111 Fannin St., Floor 10


Houston, TX  77002


Attention:  Siraz Maknojia


Fax: (713) 750-2782


 


with a copy to


 


JPMorgan Chase
Bank, N.A.,


270 Park
Avenue, Floor 4


New York, New
York 10017


Attention:  Tony Yung


Fax:  (212) 270-6637


 


The
Co-Collateral Agent                                                                                                           General
Electric Capital Corporation

299 Park Avenue

New York, New York 10171

Attention:  Sealy Account Manager

Fax: (646) 428-7094


 


with a copy
to:


 


General
Electric Capital Corporation

299 Park Avenue

New York, New York 10171

Attention:  Counsel GE Global Sponsor
Finance

Fax:  646-428-7295


 


and


 


Winston &
Strawn LLP

200 Park Avenue

New York, New York 10166

Attention:  William D. Brewer

Fax:  212-294-4700


 


102

















 


provided that any notice, request or demand to
or upon the Administrative Agent, the Security Agents or the Lenders pursuant
to Sections 2.3, 2.6, 2.9, 4.2 and 5.1 shall not be effective until received.


 


14.3.        No Waiver; Cumulative Remedies.  No failure to exercise and no delay in
exercising, on the part of the Administrative Agent, Collateral Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other
Credit Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.  The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.


 


14.4.        Survival of Representations and Warranties.  All representations and warranties made
hereunder, in the other Credit Documents and in any document, certificate or
statement delivered pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the making of the Loans hereunder.


 


14.5.        Payment of Expenses and Taxes.  The Borrower agrees (a) to pay or reimburse
the Agents for all their reasonable out-of-pocket costs and expenses incurred
in connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Credit
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of this Agreement and the transactions
contemplated hereby and thereby, including the reasonable fees, disbursements
and other charges of counsel to the Agents, (b) to pay or reimburse each
Lender, each Security Agent and the Administrative Agent for all its reasonable
and documented costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, the other Credit Documents
and any such other documents, including the reasonable fees, disbursements and
other charges of counsel to each Lender, of counsel to the Security Agents and
of counsel to the Administrative Agent, (c) to pay, indemnify and hold
harmless each Lender, each Security Agent and the Administrative Agent from any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other similar taxes,
if any, that may be payable or determined to be payable in connection with the
execution, delivery or enforcement of, or consummation or administration of any
of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under, or otherwise in respect of,
this Agreement, the other Credit Documents and any such other documents, and (d) to
pay, indemnify, and hold harmless each Lender, each Security Agent, the
Administrative Agent, their respective Affiliates and their respective directors,
officers, employees, trustees, agents, attorneys-in-fact from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever, including reasonable and documented fees, disbursements and other
charges of counsel, with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Credit Documents
and any such other documents, including any of the foregoing relating to the
violation of, noncompliance with or liability under, any Environmental Law or
any actual or 


 


103

















 


alleged
presence of Hazardous Materials applicable to the operations of the Borrower,
any of its Subsidiaries or any of the Real Estate (all the foregoing in this
clause (d), collectively, the “indemnified liabilities”), provided
that the Borrower shall have no obligation hereunder to the Administrative
Agent, any Security Agent or any Lender nor any of their respective directors,
officers, employees and agents with respect to indemnified liabilities arising
from (i) the gross negligence or willful misconduct of the party to be
indemnified, (ii) a material breach of any Credit Document by the party to
be indemnified or (iii) disputes solely among Lenders (in their capacities
as such) and not involving any conduct of any Credit Party.  The agreements in this Section 14.5
shall survive repayment of the Loans and all other amounts payable
hereunder.  Expenses being reimbursed by
the Borrower under this Section include, without limiting the generality
of the foregoing, but in each case subject to the limitations of the foregoing,
reasonable out-of-pocket costs and expenses incurred in connection with:


 


(i)            subject
to Section 9.16, appraisals and insurance reviews;


 


(ii)           subject
to Section 9.17, field examinations and the preparation of Reports based
on the reasonable fees charged by a third party retained by the Security Agents
or the internally allocated reasonable fees for each Person employed by the
Security Agents with respect to each field examination;


 


(iii)          taxes,
fees and other charges for (A) lien and title searches and title insurance
and (B) recording the Security Documents, filing financing statements and
continuations, and other actions to perfect, protect, and continue the
Administrative Agent’s Liens;


 


(iv)          sums
paid or incurred to take any action required of any Credit Party under the
Credit Documents that such Credit Party fails to pay or take; and


 


(v)           forwarding
loan proceeds, collecting checks and other items of payment, and establishing
and maintaining the accounts and lock boxes, and reasonable costs and expenses
of preserving and protecting the Collateral.


 


All of the foregoing costs and
expenses may be charged to the Borrower as Revolving Credit Loans or to another
deposit account to the extent permitted by Section 5.3(d).


 


14.6.        Successors and Assigns; Participations and Assignments.


 


(a)           The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Letter of Credit Issuer that issues any Letter of Credit), except that (i) the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and
void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including any
Affiliate of the Letter of Credit Issuer that issues any Letter of Credit),
Participants (to the extent provided in paragraph (c) of this Section)
and, to the extent expressly contemplated 


 


104

















 


hereby, the Related Parties of each of the
Administrative Agent, the Letter of Credit Issuer and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.


 


(b)           (i) Subject to the conditions
set forth in paragraph (b)(ii) below, any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitments and the Loans at the time owing
to it) with the prior written consent (such consent not be unreasonably
withheld; it being understood that, without limitation, the Borrower shall have
the right to withhold its consent to any assignment if, in order for such
assignment to comply with applicable law, the Borrower would be required to
obtain the consent of, or make any filing or registration with, any
Governmental Authority) of:


 


(A)          the
Borrower, provided that no consent of the Borrower shall be required for
an assignment to a Lender, an Affiliate of a Lender (unless increased costs
would result therefrom except if an Event of Default under Section 11.1 or
Section 11.5 has occurred and is continuing), an Approved Fund or, if an
Event of Default under Section 11.1 or Section 11.5 has occurred and
is continuing, any other assignee;


 


(B)           the
Administrative Agent, the Swingline Lender and the Letter of Credit Issuer; and


 


(C)           provided; however,
that, notwithstanding the foregoing or any other provision of this Agreement,
in no event shall Parent, Holdings, Borrower or any of their Subsidiaries be
permitted to be a Lender or a Participant hereunder.


 


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


 


(A)          except
in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund or an assignment of the entire remaining amount of the assigning
Lender’s Commitment or Loans, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 and integral multiples
of $1,000,000 in excess thereof, or if less, all of such Lender’s remaining
Loans and Commitments unless each of the Borrower and the Administrative Agent
otherwise consents, provided that no such consent of the Borrower shall
be required if an Event of Default under Section 11.1 or Section 11.5
has occurred and is continuing; provided  further that
contemporaneous assignments to a single assignee made by Affiliate Lenders
shall be aggregated for purposes of meeting the minimum assignment amount
requirements stated above;


 


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


 


(C)           the
parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with a processing and recordation
fee of $3,500, provided that only one such fee shall be payable in the
event of simultaneous assignments to or from two or more Approved Funds; and


 


105

















 


(D)          the
assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire in a form approved by the Administrative
Agent (the “Administrative Questionnaire”);


 


For the purpose of this Section 14.6(b),
the term “Approved Fund” has the following meaning:


 


“Approved Fund” means any Person
(other than a natural person) that is engaged in making, purchasing, holding or
investing in bank loans and similar extensions of credit in the ordinary course
of its business and that is administered, advised or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate
of an entity that administers, advises or manages a Lender.


 


(iii)          Subject to acceptance and recording
thereof pursuant to paragraph (b)(v) of this Section, from and after the
effective date specified in each Assignment and Acceptance, the assignee thereunder
shall be a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.10, 2.11, 3.5, 5.4 and 14.5).  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this Section 14.6
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c) of
this Section.


 


(iv)          The Administrative Agent, acting
solely for this purpose as an agent of the Borrower, shall maintain at the
Administrative Agent’s Office a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Commitments of, and principal amount (and stated
interest) of the Loans and any payment made by the Letter of Credit Issuer
under any Letter of Credit owing to, each Lender pursuant to the terms hereof
from time to time (the “Register”).  The entries in the Register shall be conclusive
absent manifest error, and the Borrower, the Administrative Agent, the Letter
of Credit Issuer and the Lenders shall treat each Person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Borrower, the Letter of Credit Issuer and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.


 


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


 


106

















 


(c)           (i) Any Lender may, without the
consent of the Borrower, the Administrative Agent, the Letter of Credit Issuer
or the Swingline Lender, sell participations to one or more banks or other
entities (each, a “Participant”) in all or
a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitments and the Loans owing to it), provided
that (A) such Lender’s obligations under this Agreement shall remain unchanged,
(B) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (C) the Borrower, the
Administrative Agent, the Letter of Credit Issuer and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement or any other Credit
Document, provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section 14.1(a) that
affects such Participant.  Subject to
paragraph (c)(ii) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.10, 2.11, 3.5 and
5.4 (subject to the requirements of such Sections) to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to paragraph
(b) of this Section.  To the extent
permitted by law, each Participant also shall be entitled to the benefits of Section 
14.8(b) as though it were a Lender, provided such Participant
agrees to be subject to Section 14.8(a) as though it were a Lender.


 


(ii)           A Participant shall not be entitled
to receive any greater payment under Section 2.10 or 5.4 than the
applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to
such Participant is made with the Borrower’s prior written consent  (not to be unreasonably withheld or delayed;
it being understood that, without limitation, the Borrower shall have the right
to withhold its consent to any participation if the Participant would be
entitled, on the date of the sale of the participation, to receive any greater
payment under Section 2.10 or 5.4 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such Participant).


 


(iii)          Each Lender that sells a participation
shall, acting solely for this purpose as an agent of the Borrower, maintain a
register on which it enters the name and address of each Participant and the
principal amounts (and stated interest) of each Participant’s interest in the
Loans or other obligations under this Agreement (the “Participant Register”).  The entries in the Participant Register shall
be conclusive absent manifest error, and such Lender shall treat each person
whose name is recorded in the Participant Register as the owner of such
participation for all purposes of this Agreement notwithstanding any notice to
the contrary.  Any such Participant
Register shall be available for inspection by the Administrative Agent at any
reasonable time and from time to time upon reasonable prior notice.


 


(d)           Any Lender may, without the consent
of the Borrower or the Administrative Agent, at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to
any such pledge or assignment of a security interest, provided that no
such pledge or assignment 


 


107

















 


of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto. 
In order to facilitate such pledge or assignment, the Borrower hereby
agrees that, upon request of any Lender at any time and from time to time after
the Borrower has made its initial Borrowing hereunder, the Borrower shall
provide to such Lender, at the Borrower’s own expense, a promissory note, in
form reasonably satisfactory to each Initial Lender, as the case may be,
evidencing the Revolving Credit Loans and Swingline Loans, respectively, owing
to such Lender.


 


(e)           Subject to compliance with Section 14.16,
the Borrower authorizes each Lender to disclose to any Participant, secured
creditor of such Lender or assignee (each, a “Transferee”)
and any prospective Transferee any and all Confidential Information (including
any and all financial information) in such Lender’s possession concerning the
Borrower and its Affiliates that has been delivered to such Lender by or on
behalf of the Borrower and its Affiliates pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower and its
Affiliates in connection with such Lender’s credit evaluation of the Borrower
and its Affiliates prior to becoming a party to this Agreement.


 


14.7.        Replacements of Lenders under Certain Circumstances.  The Borrower shall be permitted to replace
any Lender that (a) requests reimbursement for amounts owing pursuant to Section 2.10,
2.12, 3.5 or 5.4, (b) is affected in the manner described in Section 2.10(a)(iii) and
as a result thereof any of the actions described in such Section is required
to be taken, (c) becomes a Defaulting Lender, with a replacement bank or
other financial institution or (d) in connection with any proposed
amendment, waiver or consent requiring the consent of “each Lender” or “each
Lender affected thereby” pursuant to Section 14.1(a), does not consent
when the consent of the Required Lenders has been obtained, but the consent of
other remaining Lenders has not been obtained, provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event
of Default shall have occurred and be continuing at the time of such
replacement, (iii) the Borrower shall repay (or the replacement bank or
institution shall purchase, at par) all Loans and other amounts (other than any
disputed amounts) pursuant to Section 2.8, 2.10, 2.11, 2.13, 3.3, 3.5,
4.1, 5.4 or 14.5, as the case may be, owing to such replaced Lender prior to
the date of replacement, (iv) the replacement bank or institution, if not
already a Lender, and the terms and conditions of such replacement, shall be
reasonably satisfactory to the Administrative Agent, (v) the replaced
Lender shall be obligated to make such replacement in accordance with the
provisions of Section 14.6 (provided that the Borrower shall be
obligated to pay the registration and processing fee referred to therein) and (vi) any
such replacement shall not be deemed to be a waiver of any rights that the
Borrower, the Administrative Agent, the Collateral Agent or any other Lender
shall have against the replaced Lender.


 


14.8.        Adjustments; Set-off.


 


(a)           Except as otherwise provided herein,
if any Lender (a “benefited Lender”) shall at any time receive any
payment of all or part of its Loans, or interest thereon, or receive any collateral
in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant
to events or proceedings of the nature referred to in Section 11.5, or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender’s Loans,
or interest thereon, such benefited Lender shall purchase for cash 


 


108

















 


from the other Lenders a participating
interest in such portion of each such other Lender’s Loan, or shall provide
such other Lenders with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefited Lender to share the
excess payment or benefits of such collateral or proceeds ratably with each of
the Lenders; provided, however, that if all or any portion of
such excess payment or benefits is thereafter recovered from such benefited
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest.


 


(b)           After the occurrence and during the
continuance of an Event of Default, in addition to any rights and remedies of
the Lenders provided by law, each Lender shall have the right, without prior
notice to the Borrower, any such notice being expressly waived by the Borrower
to the extent permitted by applicable law, upon any amount becoming due and
payable by the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrower.  Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such set-off and application
made by such Lender, provided that the failure to give such notice shall
not affect the validity of such set-off and application.


 


14.9.        Counterparts.  This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts
(including by facsimile or other electronic transmission), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.  A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.


 


14.10.      Severability.  Any provision of any Credit Document that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.


 


14.11.      Integration.  This Agreement and the other Credit Documents
represent the agreement of the Borrower, the Administrative Agent, the
Collateral Agent and the Lenders with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Administrative Agent, the Collateral Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other
Credit Documents.


 


14.12.      GOVERNING LAW. 
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.


 


109
















 


14.13.                  Submission to Jurisdiction;
Waivers.  Each Credit Party hereby
irrevocably and unconditionally:


 


(a)                                  submits for
itself and its property in any legal action or proceeding relating to this
Agreement and the other Credit Documents to which it is a party, or for recognition
and enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the courts of the City of New York, County of New York,
State of New York, the courts of the United States of America for the Southern District
of New York and appellate courts from any thereof;


 


(b)                                 consents that
any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same;


 


(c)                                  agrees that
service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Borrower at its address set forth in Section 14.2
or at such other address of which the Administrative Agent shall have been
notified pursuant thereto;


 


(d)                                 agrees that
nothing herein shall affect the right to effect service of process in any other
manner permitted by law or shall limit the right to sue in any other jurisdiction;
and


 


(e)                                  waives, to the
maximum extent not prohibited by law, any right it may have to claim or recover
in any legal action or proceeding any special, exemplary, punitive or
consequential damages.


 


14.14.                  Acknowledgments.  The Borrower hereby acknowledges that:


 


(a)                                  it has been
advised by counsel in the negotiation, execution and delivery of this Agreement
and the other Credit Documents;


 


(b)                                 neither the
Administrative Agent, any Security Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection with
this Agreement or any of the other Credit Documents, and the relationship
between the Administrative Agent, the Security Agents and the Lenders, on one
hand, and the Borrower, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and


 


(c)                                  no joint
venture is created hereby or by the other Credit Documents or otherwise exists
by virtue of the transactions contemplated hereby among the Lenders or among
the Borrower and the Lenders.


 


14.15.                  WAIVERS OF JURY TRIAL.  THE BORROWER, THE ADMINISTRATIVE AGENT, THE
COLLATERAL AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN 


 


110

















 


ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.


 


14.16.                  Confidentiality.  The Administrative Agent, each Security Agent
and each Lender shall hold all non-public information furnished by or on behalf
of the Borrower in connection with such Lender’s evaluation of whether to
become a Lender hereunder or obtained by such Lender, such Security Agent or
the Administrative Agent pursuant to the requirements of this Agreement (“Confidential
Information”), confidential in accordance with its customary procedure for
handling confidential information of this nature and (in the case of a Lender
that is a bank) in accordance with safe and sound banking practices and in any
event may make disclosure as required or requested by any governmental agency
or representative thereof or pursuant to legal process or to such Lender’s,
Security Agent’s or the Administrative Agent’s attorneys, or to any direct or
indirect contractual counterparty in swap agreements or such contractual counterparty’s
professional advisor (so long as such contractual counterparty or professional advisor
to such contractual party agrees to be bound by the provisions of this Section 14.16.)
or independent auditors or Affiliates, provided that unless specifically
prohibited by applicable law or court order, each Lender, each Security Agent
and the Administrative Agent shall notify the Borrower of any request by any governmental
agency or representative thereof (other than any such request in connection
with an examination of the financial condition of such Lender by such
governmental agency) for disclosure of any such non-public information prior to
disclosure of such information, and provided  further that in no
event shall any Lender, Security Agent or the Administrative Agent be obligated
or required to return any materials furnished by the Borrower or any Subsidiary
of the Borrower.  Each Lender, each
Security Agent and the Administrative Agent agrees that it will not provide to
prospective Transferees or to prospective direct or indirect contractual
counterparties in swap agreements to be entered into in connection with Loans
made hereunder any of the Confidential Information unless such Person is
advises of and agrees to be bound by the provisions of this Section 14.16.


 


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


 


[Signature Pages Follow]


 


111

















 


IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Agreement to be duly executed and delivered as of
the date first above written.


 


	
   

  	
  SEALY MATTRESS COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kenneth L. Walker

  
	
   

  	
   

  	
  Name:

  	
  Kenneth L. Walker

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
  General Counsel &
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SEALY MATTRESS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kenneth L. Walker

  
	
   

  	
   

  	
  Name:

  	
  Kenneth L. Walker

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
  General Counsel &
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SEALY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kenneth L. Walker

  
	
   

  	
   

  	
  Name:

  	
  Kenneth L. Walker

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
  General Counsel &
  Secretary

  



 

















 


	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  as Administrative Agent, Collateral Agent,

  
	
   

  	
  Letter of Credit Issuer and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Tony Yung

  
	
   

  	
   

  	
  Name:

  	
  Tony Yung

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  



 

















 


	
   

  	
  GENERAL ELECTRIC CAPITAL CORPORATION

  
	
   

  	
  as Co-Collateral Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Philip F. Carfora

  
	
   

  	
   

  	
  Name:

  	
  Philip F. Carfora

  
	
   

  	
   

  	
  Title:

  	
  Duly Authorized Signatory

  



 

















 


	
   

  	
  CITICORP NORTH AMERICA, INC.

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Thomas M. Halsch

  
	
   

  	
   

  	
  Name:

  	
  Thomas M. Halsch

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  



 

















 


	
   

  	
  MIZUHO CORPORATE BANK, LTD.

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ William Getz

  
	
   

  	
   

  	
  Name:

  	
  William Getz

  
	
   

  	
   

  	
  Title:

  	
  Deputy General Manager