Exhibit
10.6


 


Execution
Version


 




 





$210,000,000


 


CREDIT
AGREEMENT


 


dated as of December 22,
2004,


 


by and among


 


TUESDAY
MORNING, INC.,


as Borrower,


 


TUESDAY
MORNING CORPORATION,


and


 


TMI
HOLDINGS, INC.,


as the Parental Entities,


 


the Lenders referred to herein,


 


and


 


WACHOVIA
BANK, NATIONAL ASSOCIATION,


as Administrative Agent,


Swingline Lender and Issuing
Lender,


 


WELLS
FARGO BANK, N.A., and LASALLE BANK NATIONAL ASSOCIATION,


as Co-Syndication Agents,


 


U.S. BANK
NATIONAL ASSOCIATION and SOVEREIGN BANK,


as Co-Documentation Agents,


 


WACHOVIA
CAPITAL MARKETS, LLC,


as Co-Lead Arranger and Sole
Book Manager,


 


WELLS
FARGO BANK, N.A.,


as Co-Lead Arranger




 





 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I DEFINITIONS

  	
   

  
	
  SECTION 1.1

  	
  Definitions

  	
   

  
	
  SECTION 1.2

  	
  Other Definitions and Provisions

  	
   

  
	
  SECTION 1.3

  	
  Accounting Terms

  	
   

  
	
  SECTION 1.4

  	
  UCC Terms

  	
   

  
	
  SECTION 1.5

  	
  Rounding

  	
   

  
	
  SECTION 1.6

  	
  References to Agreement and Laws

  	
   

  
	
  SECTION 1.7

  	
  Times of Day

  	
   

  
	
  SECTION 1.8

  	
  Letter of Credit Amounts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II REVOLVING CREDIT FACILITY

  	
   

  
	
  SECTION 2.1

  	
  Revolving Credit Loans

  	
   

  
	
  SECTION 2.2

  	
  Swingline Loans

  	
   

  
	
  SECTION 2.3

  	
  Procedure for Advances of Revolving Credit
  Loans and Swingline Loans

  	
   

  
	
  SECTION 2.4

  	
  Repayment of Loans

  	
   

  
	
  SECTION 2.5

  	
  Permanent Reduction of the Revolving Credit
  Commitment

  	
   

  
	
  SECTION 2.6

  	
  Termination of Revolving Credit Facility

  	
   

  
	
  SECTION 2.7

  	
  Optional Increase of Revolving Credit
  Commitment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III LETTER OF CREDIT FACILITY

  	
   

  
	
  SECTION 3.1

  	
  L/C Commitment

  	
   

  
	
  SECTION 3.2

  	
  Procedure for Issuance of Letters of Credit

  	
   

  
	
  SECTION 3.3

  	
  Commissions and Other Charges

  	
   

  
	
  SECTION 3.4

  	
  L/C Participations

  	
   

  
	
  SECTION 3.5

  	
  Reimbursement Obligation of the Borrower

  	
   

  
	
  SECTION 3.6

  	
  Obligations Absolute

  	
   

  
	
  SECTION 3.7

  	
  Effect of Letter of Credit Application

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV GENERAL LOAN PROVISIONS

  	
   

  
	
  SECTION 4.1

  	
  Interest

  	
   

  
	
  SECTION 4.2

  	
  Notice and Manner of Conversion or
  Continuation of Loans

  	
   

  
	
  SECTION 4.3

  	
  Fees

  	
   

  
	
  SECTION 4.4

  	
  Manner of Payment

  	
   

  
	
  SECTION 4.5

  	
  Evidence of Indebtedness

  	
   

  
	
  SECTION 4.6

  	
  Adjustments

  	
   

  
	
  SECTION 4.7

  	
  Nature of Obligations of Lenders Regarding Extensions of Credit;
  Assumption by the Administrative Agent

  	
   

  
	
  SECTION 4.8

  	
  Changed Circumstances

  	
   

  
	
  SECTION 4.9

  	
  Indemnity

  	
   

  
	
  SECTION 4.10

  	
  Increased Costs

  	
   

  
	
  SECTION 4.11

  	
  Taxes

  	
   

  
	
  SECTION 4.12

  	
  Mitigation Obligations; Replacement of Lenders

  	
   

  



 


i





















 


	
  SECTION 4.13

  	
  Security

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V CLOSING; CONDITIONS OF
  CLOSING AND BORROWING

  	
   

  
	
  SECTION 5.1

  	
  Closing

  	
   

  
	
  SECTION 5.2

  	
  Conditions to Closing and Initial
  Extensions of Credit

  	
   

  
	
  SECTION 5.3

  	
  Conditions to All Extensions of Credit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI REPRESENTATIONS AND
  WARRANTIES OF THE BORROWER

  	
   

  
	
  SECTION 6.1

  	
  Representations and Warranties

  	
   

  
	
  SECTION 6.2

  	
  Survival of Representations and Warranties,
  Etc

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII FINANCIAL INFORMATION AND
  NOTICES

  	
   

  
	
  SECTION 7.1

  	
  Financial Statements and Projections

  	
   

  
	
  SECTION 7.2

  	
  Officer’s Compliance Certificate

  	
   

  
	
  SECTION 7.3

  	
  Intentionally Omitted.

  	
   

  
	
  SECTION 7.4

  	
  Other Reports

  	
   

  
	
  SECTION 7.5

  	
  Notice of Litigation and Other Matters

  	
   

  
	
  SECTION 7.6

  	
  Accuracy of Information

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII AFFIRMATIVE COVENANTS

  	
   

  
	
  SECTION 8.1

  	
  Preservation of Corporate Existence and
  Related Matters

  	
   

  
	
  SECTION 8.2

  	
  Maintenance of Property

  	
   

  
	
  SECTION 8.3

  	
  Insurance

  	
   

  
	
  SECTION 8.4

  	
  Accounting Methods and Financial Records

  	
   

  
	
  SECTION 8.5

  	
  Payment and Performance of Obligations

  	
   

  
	
  SECTION 8.6

  	
  Compliance With Laws and Approvals

  	
   

  
	
  SECTION 8.7

  	
  Environmental Laws

  	
   

  
	
  SECTION 8.8

  	
  Compliance with ERISA

  	
   

  
	
  SECTION 8.9

  	
  Compliance With Agreements

  	
   

  
	
  SECTION 8.10

  	
  Visits and Inspections

  	
   

  
	
  SECTION 8.11

  	
  Additional Subsidiaries

  	
   

  
	
  SECTION 8.12

  	
  Use of Proceeds

  	
   

  
	
  SECTION 8.13

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX FINANCIAL COVENANTS

  	
   

  
	
  SECTION 9.1

  	
  Total Leverage Ratio

  	
   

  
	
  SECTION 9.2

  	
  Fixed Charge Coverage Ratio

  	
   

  
	
  SECTION 9.3

  	
  Interest Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X NEGATIVE COVENANTS

  	
   

  
	
  SECTION 10.1

  	
  Limitations on Indebtedness

  	
   

  
	
  SECTION 10.2

  	
  Limitations on Liens

  	
   

  



 


ii





















 


	
  SECTION 10.3

  	
  Limitations on Loans, Advances, Investments
  and Acquisitions

  	
   

  
	
  SECTION 10.4

  	
  Limitations on Mergers and Liquidation

  	
   

  
	
  SECTION 10.5

  	
  Limitations on Sale of Assets

  	
   

  
	
  SECTION 10.6

  	
  Limitations on Dividends and Distributions

  	
   

  
	
  SECTION 10.7

  	
  Limitations on Exchange and Issuance of
  Capital Stock

  	
   

  
	
  SECTION 10.8

  	
  Transactions with Affiliates.

  	
   

  
	
  SECTION 10.9

  	
  Certain Accounting Changes; Organizational Documents

  	
   

  
	
  SECTION 10.10

  	
  Amendments; Payments and Prepayments of
  Subordinated Indebtedness

  	
   

  
	
  SECTION 10.11

  	
  Restrictive Agreements

  	
   

  
	
  SECTION 10.12

  	
  Nature of Business.

  	
   

  
	
  SECTION 10.13

  	
  Impairment of Security Interests

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI DEFAULT AND REMEDIES

  	
   

  
	
  SECTION 11.1

  	
  Events of Default

  	
   

  
	
  SECTION 11.2

  	
  Remedies

  	
   

  
	
  SECTION 11.3

  	
  Rights and Remedies Cumulative; Non-Waiver;
  etc

  	
   

  
	
  SECTION 11.4

  	
  Crediting of Payments and Proceeds

  	
   

  
	
  SECTION 11.5

  	
  Administrative Agent May File Proofs of
  Claim

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII THE ADMINISTRATIVE AGENT

  	
   

  
	
  SECTION 12.1

  	
  Appointment and Authority

  	
   

  
	
  SECTION 12.2

  	
  Delegation of Duties

  	
   

  
	
  SECTION 12.3

  	
  Exculpatory Provisions

  	
   

  
	
  SECTION 12.4

  	
  Reliance by the Administrative Agent

  	
   

  
	
  SECTION 12.5

  	
  Notice of Default

  	
   

  
	
  SECTION 12.6

  	
  Non-Reliance on the Administrative Agent
  and Other Lenders

  	
   

  
	
  SECTION 12.7

  	
  Indemnification

  	
   

  
	
  SECTION 12.8

  	
  The Administrative Agent in Its Individual
  Capacity

  	
   

  
	
  SECTION 12.9

  	
  Resignation of the Administrative Agent;
  Successor Administrative Agent

  	
   

  
	
  SECTION 12.10

  	
  Collateral and Guaranty Matters

  	
   

  
	
  SECTION 12.11

  	
  Other Agents, Arrangers and Managers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII MISCELLANEOUS

  	
   

  
	
  SECTION 13.1

  	
  Notices

  	
   

  
	
  SECTION 13.2

  	
  Amendments, Waivers and Consents

  	
   

  
	
  SECTION 13.3

  	
  Expenses; Indemnity

  	
   

  
	
  SECTION 13.4

  	
  Set-off

  	
   

  
	
  SECTION 13.5

  	
  Governing Law

  	
   

  
	
  SECTION 13.6

  	
  Jurisdiction and Venue

  	
   

  
	
  SECTION 13.7

  	
  Waiver of Jury Trial

  	
   

  
	
  SECTION 13.8

  	
  Reversal of Payments

  	
   

  
	
  SECTION 13.9

  	
  Punitive Damages

  	
   

  
	
  SECTION 13.10

  	
  Accounting Matters

  	
   

  
	
  SECTION 13.11

  	
  Successors and Assigns; Participations

  	
   

  



 


iii





















 


	
  SECTION 13.12

  	
  Confidentiality

  	
   

  
	
  SECTION 13.13

  	
  Performance of Duties

  	
   

  
	
  SECTION 13.14

  	
  All Powers Coupled with Interest

  	
   

  
	
  SECTION 13.15

  	
  Survival of Indemnities

  	
   

  
	
  SECTION 13.16

  	
  Titles and Captions

  	
   

  
	
  SECTION 13.17

  	
  Severability of Provisions

  	
   

  
	
  SECTION 13.18

  	
  Counterparts

  	
   

  
	
  SECTION 13.19

  	
  Integration

  	
   

  
	
  SECTION 13.20

  	
  Term of Agreement

  	
   

  
	
  SECTION 13.21

  	
  Advice of Counsel, No Strict Construction.

  	
   

  
	
  SECTION 13.22

  	
  Inconsistencies with Other Documents; Independent Effect of Covenants

  	
   

  



 


iv





















 


EXHIBITS


 


	
  Exhibit A-1

  	
   

  	
  -

  	
   

  	
  Form of Revolving Credit Note

  
	
  Exhibit A-2

  	
   

  	
   

  	
   

  	
  Form of Swingline Note

  
	
  Exhibit B

  	
   

  	
  -

  	
   

  	
  Form of Notice of Borrowing

  
	
  Exhibit C

  	
   

  	
  -

  	
   

  	
  Form of Notice of Account Designation

  
	
  Exhibit D

  	
   

  	
  -

  	
   

  	
  Form of Notice of Prepayment

  
	
  Exhibit E

  	
   

  	
  -

  	
   

  	
  Form of Notice of Conversion/Continuation

  
	
  Exhibit F

  	
   

  	
  -

  	
   

  	
  Form of Officer’s Compliance Certificate

  
	
  Exhibit G

  	
   

  	
  -

  	
   

  	
  Form of Assignment and Assumption

  
	
  Exhibit H

  	
   

  	
  -

  	
   

  	
  Form of Parental Entity Guaranty Agreement

  
	
  Exhibit I

  	
   

  	
   

  	
   

  	
  Form of Subsidiary Guaranty Agreement

  
	
  Exhibit J

  	
   

  	
  -

  	
   

  	
  Form of Collateral Agreement

  



 


SCHEDULES


 


	
  Schedule 5.2(c)(iii)

  	
   

  	
  -

  	
   

  	
  Schedule of Additional Lien Search
  Jurisdictions

  
	
  Schedule 6.1(a)

  	
   

  	
  -

  	
   

  	
  Jurisdictions of Organization and
  Qualification

  
	
  Schedule 6.1(b)

  	
   

  	
  -

  	
   

  	
  Subsidiaries and Capitalization

  
	
  Schedule 6.1(i)

  	
   

  	
  -

  	
   

  	
  ERISA Plans

  
	
  Schedule 6.1(l)

  	
   

  	
  -

  	
   

  	
  Material Contracts

  
	
  Schedule 6.1(m)

  	
   

  	
  -

  	
   

  	
  Labor and Collective Bargaining Agreements

  
	
  Schedule 6.1(t)

  	
   

  	
  -

  	
   

  	
  Indebtedness and Guaranty Obligations

  
	
  Schedule 6.1(u)

  	
   

  	
  -

  	
   

  	
  Litigation

  
	
  Schedule 10.2

  	
   

  	
  -

  	
   

  	
  Existing Liens

  
	
  Schedule 10.3

  	
   

  	
  -

  	
   

  	
  Existing Loans, Advances and Investments

  
	
  Schedule 10.8

  	
   

  	
  -

  	
   

  	
  Transactions with Affiliates

  



 


v





















 


CREDIT AGREEMENT, dated as of December 22,
2004, by and among TUESDAY MORNING, INC., a Texas corporation (the “Borrower”),
TUESDAY MORNING CORPORATION, a Delaware corporation (the “Parent”), TMI
HOLDINGS, INC., a Delaware corporation (“Holdings”), the lenders who are
or may become a party to this Agreement (collectively, the “Lenders”),
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as the
administrative agent for the Lenders (the “Administrative Agent”), WELLS
FARGO BANK, N.A. and LASALLE BANK NATIONAL ASSOCIATION, as Co-Syndication
Agents, U.S. BANK NATIONAL ASSOCIATION and SOVEREIGN BANK, as Co-Documentation
Agents, WACHOVIA CAPITAL MARKETS, LLC as a Co-Lead Arranger and Sole Book
Manager, and WELLS FARGO BANK, N.A. as a Co-Lead Arranger.


 


STATEMENT OF
PURPOSE


 


The Borrower has requested, and the Lenders
have agreed, to extend certain credit facilities to the Borrower on the terms
and conditions of this Agreement.


 


NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, such parties hereby agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


SECTION 1.1                          Definitions.  The following terms when used in this
Agreement shall have the meanings assigned to them below:


 


“Administrative Agent” means Wachovia
in its capacity as Administrative Agent hereunder, and any successor thereto
appointed pursuant to Section 12.9.


 


“Administrative Agent’s Office” means
the office of the Administrative Agent specified in or determined in accordance
with the provisions of Section 13.1(c).


 


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


 


“Affiliate” means, with respect to any
Person, any other Person (other than with respect to the Borrower or any
Subsidiary thereof) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any Subsidiary thereof. 
The term “control” means (a) the power to vote ten percent (10%) or
more of the securities or other equity interests of a Person having ordinary
voting power, or (b) the possession, directly or indirectly, of any other
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.


 


“Agreement” means this Credit Agreement,
as amended, restated, supplemented or otherwise modified from time to time.


 





















 


“Applicable Law” means all applicable
provisions of constitutions, laws, statutes, ordinances, rules, treaties,
regulations, permits, licenses, approvals, interpretations and orders of courts
or Governmental Authorities and all orders and decrees of all courts and
arbitrators.


 


“Applicable Margin” means the
corresponding percentages per annum as set forth below:


 


	
  Pricing

  Level

  	
   

  	
  Average Total Leverage Ratio

  	
   

  	
  Commitment Fee

  	
   

  	
  Revolving Credit Loans

  
	
  LIBOR +

  	
   

  	
  Base Rate +

  
	
  I

  	
   

  	
  Greater than or equal to 2.50 to 1.00

  	
   

  	
  0.250%

  	
   

  	
  1.500%

  	
   

  	
  0.250%

  
	
  II

  	
   

  	
  Greater than or equal to 2.00 to 1.00, but
  less than 2.50 to 1.00

  	
   

  	
  0.225%

  	
   

  	
  1.250%

  	
   

  	
  0.000%

  
	
  III

  	
   

  	
  Greater than or equal to 1.50 to 1.00, but
  less than 2.00 to 1.00

  	
   

  	
  0.200%

  	
   

  	
  1.000%

  	
   

  	
  0.000%

  
	
  IV

  	
   

  	
  Greater than or equal to 1.00 to 1.00, but
  less than 1.50 to 1.00

  	
   

  	
  0.175%

  	
   

  	
  0.875%

  	
   

  	
  0.000%

  
	
  V

  	
   

  	
  Less than 1.00 to 1.00

  	
   

  	
  0.150%

  	
   

  	
  0.750%

  	
   

  	
  0.000%

  



 


The Applicable Margin shall be determined and adjusted quarterly on the
date (each a “Calculation Date”) five (5) Business Days after the date
by which the Borrower is required to provide an Officer’s Compliance
Certificate pursuant to Section 7.2 for the most recently ended
fiscal quarter of the Borrower; provided, however, that (a) the
Applicable Margin shall be based on Pricing Level V until the first Calculation
Date occurring after the Closing Date and, thereafter the Pricing Level shall
be determined by reference to the Average Total Leverage Ratio as of the last day of the most recently ended fiscal
quarter of the Borrower preceding the applicable Calculation Date, and (b) if
the Borrower fails to provide the Officer’s Compliance Certificate as required
by Section 7.2 (regardless of any applicable grace period that may
be provided in Section 11.1) for the most recently ended fiscal
quarter of the Borrower preceding the applicable Calculation Date, the
Applicable Margin from such Calculation Date shall be based on Pricing Level I
until such time as an appropriate Officer’s Compliance Certificate is provided,
at which time the Pricing Level shall be determined by reference to the Average
Total Leverage Ratio as of the last day of the most recently ended fiscal
quarter of the Borrower preceding such Calculation Date.  The Applicable Margin shall be effective from
one Calculation Date until the next Calculation Date.  Any adjustment in the Applicable Margin shall
be applicable to all Extensions of Credit then existing or subsequently made or
issued.


 


 “Assignment and Assumption” means an
assignment and assumption entered into by a Lender and an Eligible Assignee
(with the consent of any party whose consent is required by Section 13.11),
and accepted by the Administrative Agent, in substantially the form of Exhibit G or any other form approved
by the Administrative Agent.


 


2





















 


“Attributable Indebtedness” means, on
any date, (a) in respect of any Capital Lease of any Person, the capitalized
amount thereof that would appear on a balance sheet of such Person prepared as
of such date in accordance with GAAP, and (b) in respect of any Synthetic
Lease, the capitalized amount or principal amount of the remaining lease
payments under the relevant lease that would appear on a balance sheet of such
Person prepared as of such date in accordance with GAAP if such lease were
accounted for as a Capital Lease.


 


“Average Total Indebtedness” means,
for any period, as determined on a Consolidated basis, without duplication, for
the Parent and its Subsidiaries in accordance with GAAP, the Total Indebtedness
as of each calendar month end during such period divided by the number of
months in the applicable period.


 


“Average Total Leverage Ratio” means,
as of any fiscal quarter end, the ratio of (a) Average Total Indebtedness for
the period of twelve (12) consecutive months ending on or immediately prior to
such date to (b) EBITDA for the period of twelve (12) consecutive months ending
on or immediately prior to such date.


 


“Base Rate” means, at any time, the
higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1/2 of
1%; each change in the Base Rate shall take effect simultaneously with the
corresponding change or changes in the Prime Rate or the Federal Funds Rate.


 


“Base Rate Loan” means any Loan
bearing interest at a rate based upon the Base Rate as provided in Section 4.1(a).


 


“Borrower” has the meaning assigned
thereto in the preamble hereto.


 


“Business Day” means (a) for all
purposes other than as set forth in clause (b) below, any day other than a
Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina,
Dallas, Texas and New York, New York, are open for the conduct of their
commercial banking business, and (b) with respect to all notices and determinations
in connection with, and payments of principal and interest on, any LIBOR Rate
Loan, any day that is a Business Day described in clause (a) and that is also a
day for trading by and between banks in Dollar deposits in the London interbank
market.


 


“Calculation Date” has the meaning
assigned thereto in the definition of Applicable Margin.


 


“Capital Asset” means, with respect to
the Credit Parties and their Subsidiaries, any asset that should, in accordance
with GAAP, be classified and accounted for as a capital asset on a Consolidated
balance sheet of the Credit Parties and their Subsidiaries.


 


“Capital Expenditures” means with
respect to the Credit Parties and their Subsidiaries for any period, the
aggregate cost of all Capital Assets acquired by the Credit Parties and their
Subsidiaries during such period, as determined in accordance with GAAP but
shall not include the reinvestment of insurance proceeds received from any
casualty event with respect to any loss or damage to any Capital Asset in new
or replacement Capital Assets.


 


3





















 


“Capital Lease” means any lease of any
property by any Credit Party or any Subsidiary thereof, as lessee, that should,
in accordance with GAAP, be classified and accounted for as a capital lease on
a Consolidated balance sheet of the Credit Parties and their Subsidiaries.


 


“Capital Stock” means (a) in the case
of a corporation, capital stock, (b) in the case of an association or business
entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (c) in the case of a
partnership, partnership interests (whether general or limited), (d) in the
case of a limited liability company, membership interests and (e) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.


 


“Cash Interest Expense” means , with
respect to the Credit Parties and their Subsidiaries for any period, Interest
Expense less amortization of financing fees of the Credit Parties and
their Subsidiaries, all determined for such period on a Consolidated basis,
without duplication, in accordance with GAAP.


 


“Change in Control” means any event or
series of events in which (a) any person or group of persons (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934 as
amended) other than Madison Dearborn Capital Partners II, L.P., shall at any
time own or obtain ownership or control in one or more series of transactions
of more than twenty percent (20%) of the Capital Stock or twenty percent (20%)
of the voting power of the Parent entitled to vote in the election of members
of the board of directors of the Parent, (b) during any period of twelve (12)
consecutive months, a majority of the members of the board of directors of the
Parent cease to be composed of individuals (i) who were members of the board of
directors on the first day of such period, (ii) whose election or nomination to
the board of directors was approved by individuals who comprised a majority of
the board of directors on the first day of such period or (iii) whose election
or nomination to the board of directors was approved by (A) individuals who
were members of the board of directors on the first day of such period or (B)
individuals whose election or nomination to the board of directors was approved
by a majority of the board of directors on the first day of such period; provided
that in each case such individuals constituted a majority of the board of
directors at the time of such election or nomination, or (c) there shall have
occurred under any indenture or other instrument evidencing any Indebtedness in
excess of $5,000,000 any “change in control” (as defined in such indenture or
other evidence of Indebtedness) obligating the Parent to repurchase, redeem or
repay all or any part of the Indebtedness or Capital Stock provided for
therein.


 


“Change in
Law” means the occurrence, after the date of this Agreement (or in the case
of any assignment to an Eligible Assignee pursuant to Section 13.11, the
effective date of such assignment solely with respect to such new Eligible
Assignee), of any of the following: (a) the adoption or taking effect of any
law, rule, regulation or treaty, (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, guideline
or directive (whether or not having the force of law) by any Governmental
Authority.


 


4





















 


“Closing Date” means the date of this
Agreement or such later Business Day upon which each condition described in Section 5.2
shall be satisfied or waived in all respects in a manner acceptable to the
Administrative Agent, in its sole discretion.


 


“Code” means the Internal Revenue Code
of 1986, and the rules and regulations thereunder, each as amended or modified
from time to time.


 


“Collateral” means the collateral security
for the Obligations pledged or granted pursuant to the Security Documents.


 


“Collateral Agreement” means the
collateral agreement of even date executed by the Credit Parties in favor of
the Administrative Agent for the benefit of itself and the Lenders,
substantially in the form of Exhibit J,
as amended, restated, supplemented or otherwise modified from time to time.


 


“Commitment” means, as to any Lender,
the sum of such Lender’s Revolving Credit Commitment, as set forth in the
Register, as the same may be increased, reduced or modified at any time or from
time to time pursuant to the terms hereof.


 


“Consolidated” means, when used with
reference to financial statements or financial statement items of the Parent
and its Subsidiaries, such statements or items on a consolidated basis in
accordance with applicable principles of consolidation under GAAP.


 


“Credit Facility” means, collectively,
the Revolving Credit Facility, the Swingline Facility and the L/C Facility.


 


“Credit Parties” means, collectively,
the Borrower, the Parent, Holdings, and the Subsidiary Guarantors.


 


“Default” means any of the events
specified in Section 11.1 which with the passage of time, the
giving of notice or any other condition, would constitute an Event of Default.


 


“Defaulting Lender” means any Lender
that (a) has failed to fund any portion of the Revolving Credit Loans,
participations in L/C Obligations or participations in Swingline Loans required
to be funded by it hereunder within one Business Day of the date required to be
funded by it hereunder, (b) has otherwise failed to pay over to the
Administrative Agent or any other Lender any other amount required to be paid
by it hereunder within one Business Day of the date when due, unless such
amount is the subject of a good faith dispute, or (c) has been deemed insolvent
or become the subject of a bankruptcy or insolvency proceeding.


 


“Documentation Agent” has the meaning
assigned thereto in the preamble hereto.


 


“Dollars” or “$” means, unless
otherwise qualified, dollars in lawful currency of the United States.


 


5





















 


“EBITDA” means, for any period, the
sum of the following determined on a Consolidated basis, without duplication,
for the Credit Parties and their Subsidiaries in accordance with GAAP:  (a) Net Income for such period plus
(b) the sum of the following to the extent deducted in determining Net Income:
(i) income and franchise taxes, (ii) Interest Expense, and (iii) amortization,
depreciation and other non-cash charges less (c) interest income and any
extraordinary gains.


 


“EBITDAR” means, for any period, the
sum of the following determined on a Consolidated basis, without duplication,
for the Credit Parties and their Subsidiaries in accordance with GAAP:  (a) Net Income for such period plus
(b) the sum of the following to the extent deducted in determining Net Income:
(i) income and franchise taxes, (ii) Interest Expense, (iii) Rental Expense and
(iv) amortization, depreciation and other non-cash charges less (c)
interest income and any extraordinary gains.


 


“Eligible
Assignee” means (a) a Lender, (b) an Affiliate of a Lender or (c) any other
Person (other than a natural person) approved by (i) the Administrative Agent,
(ii) in the case of any assignment of a Revolving Credit Commitment, the
Swingline Lender and the Issuing Lender, and (iii) unless a Default or Event of
Default has occurred and is continuing, the Borrower (each such approval not to
be unreasonably withheld or delayed); provided that notwithstanding the
foregoing, “Eligible Assignee” shall not include the Parent, Holdings, the
Borrower, or any of the Parent’s Affiliates or Subsidiaries.


 


“Employee Benefit Plan” means any
employee benefit plan within the meaning of Section 3(3) of ERISA, other
than a Multiemployer Plan, which (a) is maintained for employees of the
Borrower or any ERISA Affiliate or (b) with respect to which the Borrower or
any ERISA Affiliate may have any liability, contingent or otherwise.


 


“Environmental Claims” means any and
all administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, written accusations delivered to any Credit Party or
any Subsidiary thereof, written allegations delivered to any Credit Party or
any Subsidiary thereof, notices of noncompliance or violation, investigations
(other than internal reports prepared by any Person in the ordinary course of
business and not in response to any third party action or request of any kind)
or proceedings relating in any way to any actual or alleged violation of or
liability under any Environmental Law or relating to any permit issued, or any
approval given, under any such Environmental Law, including any and all claims
by Governmental Authorities for enforcement, cleanup, removal, response,
remedial or other actions or damages, contribution, indemnification cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to human health or the
environment.


 


“Environmental Laws” means any and all
federal, foreign, state, provincial and local laws, statutes, ordinances,
codes, rules, standards and regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including requirements
pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of Hazardous Materials.


 


6





















 


“ERISA” means the Employee Retirement
Income Security Act of 1974, and the rules and regulations thereunder, each as
amended or modified from time to time.


 


“ERISA Affiliate” means any Person who
together with any Credit Party is treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)
of ERISA.


 


“Eurodollar Reserve Percentage” means,
for any day, the percentage (expressed as a decimal and rounded upwards, if
necessary, to the next higher 1/100th of 1%) which is in effect for such day as
prescribed by the Board of Governors of the Federal Reserve system (or any
successor) for determining the maximum reserve requirement (including any
basic, supplemental or emergency reserves) in respect of eurocurrency
liabilities or any similar category of liabilities for a member bank of the
Federal Reserve System in New York City.


 


“Event of Default” means any of the
events specified in Section 11.1; provided that any requirement
for passage of time, giving of notice, or any other condition, has been
satisfied.


 


“Excluded
Taxes” means, with respect to the Administrative Agent, any Lender, the
Issuing Lender or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder, (a) taxes imposed on or
measured by its overall net income (however denominated), and franchise taxes
imposed on it (in lieu of net income taxes), by the jurisdiction (or any
political subdivision thereof) under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable Lending Office is located, (b) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which the Borrower is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 4.12(b)), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party hereto (or designates a new Lending Office) or is attributable to such
Foreign Lender’s failure or inability (other than as a result of a Change in
Law) to comply with Section 4.11(e), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to Section 4.11(a).


 


“Existing Facility” means that certain
credit facility of the Parent established pursuant to the Credit Agreement
dated as of September 27, 2002 by and among the Parent, as borrower, the
guarantors party thereto, the Revolving Credit Lenders (as such term is defined
therein) and Fleet National Bank (now Bank of America, N.A. as successor in
interest), as administrative agent (as amended, restated, supplemented or
otherwise modified prior to the date hereof).


 


“Extensions of Credit” means, as to
any Lender at any time, (a) an amount equal to the sum of (i) the aggregate
principal amount of all Revolving Credit Loans made by such Lender then
outstanding, (ii) such Lender’s Revolving Credit Commitment Percentage of the
L/C Obligations then outstanding and (iii) such Lender’s Revolving Credit
Commitment Percentage


 


7





















 


of the Swingline Loans then outstanding, or (b) the making of any Loan
or participation in any Letter of Credit by such Lender, as the context
requires.


 


“FDIC” means the Federal Deposit
Insurance Corporation, or any successor thereto.


 


“Federal Funds Rate” means, the rate
per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%)
representing the daily effective federal funds rate as quoted by the
Administrative Agent and confirmed in Federal Reserve Board Statistical Release
H.15 (519) or any successor or substitute publication selected by the
Administrative Agent.  If, for any
reason, such rate is not available, then “Federal Funds Rate” shall mean a
daily rate which is determined, in the opinion of the Administrative Agent, to
be the rate at which federal funds are being offered for sale in the national
federal funds market at 9:00 a.m. (Charlotte time).  Rates for weekends or holidays shall be the
same as the rate for the most immediately preceding Business Day.


 


“Fee Letter” means the separate fee
letter agreement executed by the Parent, the Borrower and the Administrative
Agent and/or certain of its affiliates dated November 15, 2004.


 


“Fiscal Year” means the fiscal year of
the Credit Parties and their Subsidiaries ending on December 31, except as
otherwise permitted under Section 10.9(a).


 


“Fixed Charges” means, for any period,
the sum of the following determined on a Consolidated basis, without
duplication, for the Credit Parties and their Subsidiaries in accordance with
GAAP: (a) Cash Interest Expense, (b) scheduled principal payments with
respect to long-term Indebtedness, and (c) Rental Expense.


 


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


 


“GAAP” means generally accepted
accounting principles, as recognized by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board, consistently
applied and maintained on a consistent basis for the Credit Parties and their
Subsidiaries throughout the period indicated and (subject to Section 10.9(a)
and Section 13.10) consistent with the prior financial practice of
the Credit Parties and their Subsidiaries.


 


“Governmental Approvals” means all
authorizations, consents, approvals, permits, licenses and exemptions of,
registrations and filings with, and reports to, all Governmental Authorities.


 


“Governmental
Authority” means the government of the United States or any other nation,
or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).


 


8





















 


“Guarantors”
means the collective reference to the Parental Entities and the Subsidiary Guarantors.


 


“Guaranty Obligation” means, with
respect to the Credit Parties and their Subsidiaries, without duplication, any
obligation, contingent or otherwise, of any such Person pursuant to which such
Person has directly or indirectly guaranteed any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of any
such Person (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation (whether arising
by virtue of partnership arrangements, by agreement to keep well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement condition or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Guaranty
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.


 


“Hazardous Materials” means any
substances or materials (a) which are or become defined as hazardous wastes,
hazardous substances, pollutants, contaminants, chemical substances or mixtures
or toxic substances under any Environmental Law, (b) which are toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise harmful to human health or the environment and are or
become regulated by any Governmental Authority, (c) the presence of which
require investigation or remediation under any Environmental Law or common law,
(d) the discharge or emission or release of which requires a permit or license
under any Environmental Law or other Governmental Approval, (e) which are
deemed by any Governmental Authority or pursuant to any common law doctrine to
constitute a nuisance or a trespass which pose a health or safety hazard to
Persons or neighboring properties or (f) which contain asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel,
natural gas or synthetic gas.


 


“Hedging Agreement” means any
agreement with respect to any Interest Rate Contract, forward rate agreement,
forward foreign exchange agreement, currency swap agreement, cross-currency
rate swap agreement, currency option agreement or other agreement or
arrangement designed to alter the risks of any Person arising from fluctuations
in interest rates or currency values, all as amended, restated, supplemented or
otherwise modified from time to time.


 


“Hedging Obligations” means all
existing or future payment and other obligations owing by the Borrower under
any Hedging Agreement (which such Hedging Agreement is permitted hereunder)
with any Person that is a Lender or an Affiliate of a Lender at the time such
Hedging Agreement is executed.


 


“Holdings” has the meaning assigned
thereto in the preamble hereto.


 


“Indebtedness” means, with respect to
the Credit Parties and their Subsidiaries at any date and without duplication,
the sum of the following calculated in accordance with GAAP:


 


9





















 


(a)                                  all liabilities,
obligations and indebtedness for borrowed money including, but not limited to,
obligations evidenced by bonds, debentures, notes or other similar instruments
of any such Person;


 


(b)                                 all obligations to pay
the deferred purchase price of property or services of any such Person
(including all obligations under non-competition, earn-out or similar
agreements), except trade payables and accrued expenses arising in the ordinary
course of business not more than one hundred and eighty (180) days past due;


 


(c)                                  the Attributable
Indebtedness of such Person with respect to such Person’s obligations in
respect of Capital Leases and Synthetic Leases (regardless of whether accounted
for as indebtedness under GAAP);


 


(d)                                 all Indebtedness of
any other Person secured by a Lien on any asset owned or being purchased by a
Credit Party or Subsidiary thereof (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Credit Party or Subsidiary thereof
or is limited in recourse;


 


(e)                                  all Guaranty
Obligations of any such Person;


 


(f)                                    all obligations,
contingent or otherwise, of any such Person relative to the face amount of
letters of credit, whether or not drawn, including any Reimbursement Obligation,
and banker’s acceptances issued for the account of any such Person;


 


(g)                                 all obligations of any
such Person to redeem, repurchase, exchange, defease or otherwise make payments
in respect of Capital Stock of such Person;


 


(h)                                 all net obligations
incurred by any such Person pursuant to Hedging Agreements; and


 


(i)                                     the outstanding
attributed principal amount under any asset securitization program.


 


For all purposes hereof, the Indebtedness of
any Person shall include the Indebtedness of any partnership or joint venture
(other than a joint venture that is itself a corporation or limited liability
company) in which such Person is a general partner or a joint venturer, unless
such Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any
Hedging Agreement on any date shall be deemed to be the Termination Value
thereof as of such date.


 


“Indemnified
Taxes” means Taxes and Other Taxes other than Excluded Taxes.


 


“Interest Expense” means, with respect
to the Credit Parties and their Subsidiaries for any period, the gross interest
expense (including, without limitation, interest expense attributable to
Capital Leases,  amortization of
financing fees and all net payment obligations pursuant to Hedging Agreements
but excluding the effects of any changes in fair value with respect to any


 


10





















 


Hedging Agreements) of the Credit Parties and their Subsidiaries, all
determined for such period on a Consolidated basis, without duplication, in
accordance with GAAP.


 


“Interest Period” has the meaning
assigned thereto in Section 4.1(b).


 


“Interest Rate Contract” means any
interest rate swap agreement, interest rate cap agreement, interest rate floor
agreement, interest rate collar agreement, interest rate option or any other
agreement regarding the hedging of interest rate risk exposure executed in
connection with hedging the interest rate exposure of any Person and any
confirming letter executed pursuant to such agreement, all as amended,
restated, supplemented or otherwise modified from time to time.


 


“ISP98” means the International
Standby Practices (1998 Revision, effective January 1, 1999),
International Chamber of Commerce Publication No. 590.


 


“Issuing Lender” means Wachovia, in its
capacity as issuer of any Letter of Credit under this Agreement, or any
successor thereto.


 


“L/C Commitment” means the lesser of
(a) Twenty Five Million Dollars ($25,000,000) and (b) the Revolving Credit
Commitment.


 


“L/C Facility” means the letter of credit
facility established pursuant to Article III.


 


“L/C Obligations” means at any time,
an amount equal to the sum of (a) the aggregate undrawn and unexpired amount of
the then outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to Section 3.5.


 


“L/C Participants” means the
collective reference to all the Lenders other than the Issuing Lender.


 


“Lender” means each Person executing
this Agreement as a Lender (including the Issuing Lender and the Swingline
Lender unless the context otherwise requires) set forth on the signature pages
hereto and each Person that hereafter becomes a party to this Agreement as a
Lender pursuant to Section 13.11.


 


“Lending Office” means, with respect
to any Lender, the office of such Lender maintaining such Lender’s Revolving
Credit Commitment Percentage of the Extensions of Credit.


 


“Letter of Credit Application” means
an application, in the form specified by the Issuing Lender from time to time,
requesting the Issuing Lender to issue a Letter of Credit.


 


“Letters of Credit” means the
collective reference to the standby and commercial letters of credit issued
pursuant to Section 3.1.


 


11





















 


“LIBOR” means the rate of interest per
annum determined on the basis of the rate for deposits in Dollars in minimum
amounts of at least $5,000,000 for a period equal to the applicable Interest
Period which appears on the Telerate Page 3750 at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first day of the applicable
Interest Period (rounded upward, if necessary, to the nearest 1/100th
of 1%).  If, for any reason, such rate
does not appear on Telerate Page 3750, then “LIBOR” shall be determined by the
Administrative Agent to be the arithmetic average of the rate per annum at
which deposits in Dollars in minimum amounts of at least $5,000,000 would be
offered by first class banks in the London interbank market to the
Administrative Agent at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period for a period
equal to such Interest Period.  Each
calculation by the Administrative Agent of LIBOR shall be conclusive and
binding for all purposes, absent manifest error.


 


“LIBOR Rate” means a rate per annum
(rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by
the Administrative Agent pursuant to the following formula:


 


	
  LIBOR Rate =

  	
  LIBOR

  
	
   

  	
  1.00-Eurodollar
  Reserve Percentage

  



 


“LIBOR Rate Loan” means any Loan
bearing interest at a rate based upon the LIBOR Rate as provided in Section 4.1(a).


 


“Lien” means, with respect to any
asset, any mortgage, leasehold mortgage, lien, pledge, charge, security
interest, hypothecation or encumbrance of any kind in respect of such
asset.  For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention agreement
relating to such asset.


 


“Loan Documents” means, collectively,
this Agreement, each Note, the Letter of Credit Applications, the Parental
Entity Guaranty Agreement, the Subsidiary Guaranty Agreement,  the Security Documents, and each other
document, instrument, certificate and agreement executed and delivered by any
Credit Party or Subsidiary thereof in connection with this Agreement or
otherwise referred to herein or contemplated hereby (excluding any Hedging
Agreement and excluding Material Contracts), all as may be amended, restated,
supplemented or otherwise modified from time to time.


 


“Loans” means the collective reference
to the Revolving Credit Loans and the Swingline Loans and “Loan” means any of
such Loans.


 


“Material Adverse Effect” means, with
respect to the Credit Parties and their Subsidiaries, a material adverse effect
on (a) the properties, business, operations or condition (financial or
otherwise) of such entities, taken as a whole, (b) the ability of any such
Person to perform its obligations under the Loan Documents to which it is a
party or (c) the legality, validity, binding effect or enforceability against
any Credit Party or Subsidiary thereof of any Loan Document to which it is a
party.


 


12





















 


“Material Contract” means (a) any
contract or other agreement, written or oral, of the Credit Parties and their
Subsidiaries involving monetary liability of or to any such Person in an amount
in excess of $10,000,000 per annum, or (b) any other contract or
agreement, written or oral, of any Credit Party or any Subsidiary thereof the
failure to comply with which could reasonably be expected to have a Material
Adverse Effect.


 


“Multiemployer Plan” means a “multiemployer
plan” as defined in Section 4001(a)(3) of ERISA to which the Borrower or
any ERISA Affiliate contributes or with respect to which the Borrower or an
ERISA Affiliate may have any liability, contingent or otherwise.


 


“Net Income” means, with respect to
the Credit Parties and their Subsidiaries, for any period of determination, the
net income (or loss) of the Credit Parties and their Subsidiaries for such
period, determined on a Consolidated basis in accordance with GAAP; provided
that there shall be excluded from Net Income (a) the net income (or loss) of
any Person (other than a Subsidiary which shall be subject to clause (c)
below), in which any Credit Party or any Subsidiary thereof has a joint
interest with a third party, except to the extent such net income is actually
paid to a Credit Party or any Subsidiary thereof by dividend or other
distribution during such period, (b) the net income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary of such Person or is merged
into or consolidated with such Person or any of its Subsidiaries or that Person’s
assets are acquired by such Person or any of its Subsidiaries except to the
extent included pursuant to the foregoing clause (a), (c) the net income (if
positive) of any Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary to any Credit Party or
any Subsidiary thereof of such net income (i) is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute rule or governmental regulation applicable to such
Subsidiary or (ii) would be subject to any taxes payable on such dividends or
distributions.


 


“Note” means a Revolving Credit Note
or a Swingline Note.


 


“Notice of Account Designation” has
the meaning assigned thereto in Section 2.3(b).


 


“Notice of Borrowing” has the meaning
assigned thereto in Section 2.3(a).


 


“Notice of Conversion/Continuation”
has the meaning assigned thereto in Section 4.2.


 


“Notice of Prepayment” has the meaning
assigned thereto in Section 2.4(c).


 


“Obligations” means, in each case,
whether now in existence or hereafter arising: (a) the principal of and
interest on (including interest accruing after the filing of any bankruptcy or
similar petition) the Loans, (b) the L/C Obligations, (c) all Hedging
Obligations and (d) all other fees and commissions (including attorneys’ fees),
charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by any Credit Party or any Subsidiary
thereof to the Lenders or the Administrative Agent, in each case under any Loan
Document or otherwise, with respect to any Loan or Letter of Credit of every
kind, nature and description, direct or indirect, absolute or contingent, due
or to become due, contractual or tortious, liquidated or unliquidated, and
whether or not evidenced by any note.


 


13





















 


“Officer’s Compliance Certificate”
means a certificate of the chief financial officer, vice president-finance or
the treasurer of each of the Parent and the Borrower substantially in the form
of Exhibit F.


 


“Operating Lease” means, as to any
Person as determined in accordance with GAAP, any lease of property (whether
real, personal or mixed) by such Person as lessee which is not a Capital Lease.


 


“Other Taxes”
means all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made hereunder
or under any other Loan Document or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan
Document.  For avoidance of doubt, the
term “Other Taxes” does not include Excluded Taxes.


 


“Parent”
has the meaning assigned thereto in the preamble hereto.


 


“Parental
Entities” means the collective reference to the Parent and Holdings.


 


“Parental
Entity Guaranty Agreement” means the unconditional guaranty agreement of
even date executed by the Parental Entities in favor of the Administrative
Agent for the ratable benefit of itself and the Lenders, substantially in the
form of Exhibit H, as amended,
restated, supplemented or otherwise modified from time to time.


 


“Participant”
has the meaning assigned thereto in Section 13.11(d).


 


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


 


“Pension Plan” means any Employee
Benefit Plan, other than a Multiemployer Plan, which is subject to the
provisions of Title IV of ERISA or Section 412 of the Code and which (a)
is maintained for the employees of any Credit Party or any ERISA Affiliates or
(b) with respect to which the Borrower or any of its ERISA Affiliates may have
any liability, contingent or otherwise.


 


“Permitted Acquisition” has the meaning
assigned thereto in Section 10.3(c).


 


“Permitted Liens” means the Liens
permitted pursuant to Section 10.2.


 


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


 


“Prime Rate” means, at any time, the
rate of interest per annum publicly announced from time to time by Wachovia as
its prime rate.  Each change in the Prime
Rate shall be effective as of the opening of business on the day such change in
such prime rate occurs.  The parties
hereto acknowledge that the rate announced publicly by Wachovia as its prime
rate is an index or base rate and shall not necessarily be its lowest or best
rate charged to its customers or other banks.


 


14





















 


“Register” has the meaning assigned
thereto in Section 13.11(c).


 


“Reimbursement Obligation” means the
obligation of the Borrower to reimburse the Issuing Lender pursuant to Section 3.5
for amounts drawn under Letters of Credit.


 


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


 


“Rental
Expense” means, with respect to the Credit Parties and their Subsidiaries
for any period, the aggregate fixed amounts expensed with respect to Operating
Leases (excluding personal or mixed property), paid or to be incurred under all
leases of real property, net of sublease income, of the Credit Parties and
their Subsidiaries for such period, determined on a Consolidated basis in
accordance with GAAP.


 


“Required Lenders” means, at any date,
any combination of Lenders whose Commitments aggregate greater than fifty
percent (50%) of the Revolving Credit Commitment or, if the Credit Facility has
been terminated pursuant to Section 11.2(a), any combination of
Lenders holding greater than fifty percent (50%) of the aggregate Extensions of
Credit; provided that the Commitment of, and the portion of the
Extensions of Credit, as applicable, held or deemed held by, any Defaulting
Lender shall be excluded for purposes of making a determination of Required
Lenders.


 


“Responsible Officer” means the chief
executive officer, president, chief financial officer, vice president-finance,
treasurer or assistant treasurer of a Credit Party or any other officer of a
Credit Party reasonably acceptable to the Administrative Agent.  Any document delivered hereunder that is
signed by a Responsible Officer of a Credit Party shall be conclusively
presumed to have been authorized by all necessary corporate, partnership and/or
other action on the part of such Credit Party and such Responsible Officer
shall be conclusively presumed to have acted on behalf of such Credit Party.


 


“Revolving Credit Commitment” means
(a) as to any Lender, the obligation of such Lender to make Revolving Credit
Loans to the account of the Borrower hereunder in an aggregate principal amount
at any time outstanding not to exceed the amount set forth opposite such Lender’s
name on the Register, as such amount may be reduced or modified at any time or
from time to time pursuant to the terms hereof and (b) as to all Lenders, the
aggregate commitment of all Lenders to make Revolving Credit Loans, as such
amount may be reduced at any time or from time to time pursuant to the terms
hereof.  The Revolving Credit Commitment
of all Lenders on the Closing Date shall be Two Hundred Ten Million Dollars
($210,000,000).


 


“Revolving Credit Commitment Percentage”
means, as to any Lender at any time, the ratio of (a) the amount of the
Revolving Credit Commitment of such Lender to (b) the Revolving Credit
Commitments of all Lenders.


 


“Revolving Credit Facility” means the
revolving credit facility established pursuant to Article II.


 


15





















 


“Revolving Credit Loans” means any
revolving loan made to the Borrower pursuant to Section 2.1, and
all such revolving loans collectively as the context requires.


 


“Revolving Credit Maturity Date” means
the earliest to occur of (a)  December 22,
2009 (b) the date of termination by the Borrower pursuant to Section 2.5,
or (c) the date of termination by the Administrative Agent on behalf of the
Lenders pursuant to Section 11.2(a).


 


“Revolving Credit Note” means a
promissory note made by the Borrower in favor of a Lender evidencing the
Revolving Credit Loans made by such Lender, substantially in the form of Exhibit A-1 hereto, and any
amendments, supplements and modifications thereto, any substitutes therefor,
and any replacements, restatements, renewals or extension thereof, in whole or
in part.


 


“Security Documents” means the
collective reference to the Collateral Agreement and each other written
agreement or other writing required pursuant to this Agreement or any other
Loan Document pursuant to which any Credit Party purports to pledge or grant a
security interest in any property or assets securing the Obligations or any
such Person purports to guaranty the payment and/or performance of the Obligations,
in each case, as amended, restated, supplemented or otherwise modified from
time to time.


 


“Solvent” means, as to the Credit
Parties and their Subsidiaries on a particular date, that any such Person (a)
has capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage and is able to pay its
debts as they mature, (b) has assets having a value, both at fair
valuation and at present fair saleable value, greater than the amount required
to pay its probable liabilities (including contingencies), and (c) does not
believe that it will incur debts or liabilities beyond its ability to pay such
debts or liabilities as they mature.


 


“Subordinated Indebtedness” means the
collective reference to any Indebtedness of any Credit Party or any Subsidiary
thereof subordinated in right and time of payment to the Obligations and
containing such other terms and conditions, in each case as are satisfactory to
the Required Lenders.


 


“Subsidiary” means as to any Person,
any corporation, partnership, limited liability company or other entity of
which more than fifty percent (50%) of the outstanding Capital Stock having
ordinary voting power to elect a majority of the board of directors or other
managers of such corporation, partnership, limited liability company or other
entity is at the time owned by or the management is otherwise controlled,
directly or indirectly, by such Person (irrespective of whether, at the time,
Capital Stock of any other class or classes of such corporation, partnership,
limited liability company or other entity shall have or might have voting power
by reason of the happening of any contingency). 
Unless otherwise qualified references to “Subsidiary” or “Subsidiaries”
herein shall refer to those of the Parent.


 


“Subsidiary Guarantors” means each
Subsidiary of the Parent in existence on the Closing Date or which becomes a
party to a Subsidiary Guaranty Agreement pursuant to Section 8.11.


 


16





















 


“Subsidiary Guaranty Agreement” means
the unconditional guaranty agreement of even date executed by the Subsidiary
Guarantors in favor of the Administrative Agent for the ratable benefit of
itself and the Lenders, substantially in the form of Exhibit
I, as amended, restated, supplemented or otherwise modified from
time to time.


 


“Swingline Commitment” means the
lesser of (a) Ten Million Dollars ($10,000,000) and
(b) the Revolving Credit Commitment.


 


“Swingline Facility” means the
swingline facility established pursuant to Section 2.2.


 


“Swingline Lender” means Wachovia in
its capacity as swingline lender hereunder.


 


“Swingline Loan” means any swingline
loan made by the Swingline Lender to the Borrower pursuant to Section 2.2,
and all such swingline loans collectively as the context requires.


 


“Swingline Note” means a promissory
note made by the Borrower in favor of the Swingline Lender, substantially in
the form of Exhibit A-2 hereto, and any amendments, supplements and
modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part.


 


“Swingline Termination Date” means the
first to occur of (a) the resignation of Wachovia as Administrative Agent in
accordance with Section 12.9 and (b) the Revolving Credit Maturity
Date.


 


“Syndication Agent” has the meaning
assigned thereto in the preamble hereto.


 


“Synthetic Lease” means any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product where such transaction is considered
borrowed money indebtedness for tax purposes but is classified as an Operating
Lease in accordance with GAAP.


 


“Taxes”
means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, whether calculated on a separate or consolidated, unitary or
combined basis or otherwise, including any interest, additions to tax or
penalties applicable thereto.


 


“Termination Event” means except for
any such event or condition that could not reasonably be expected to have a
Material Adverse Effect: (a) a “Reportable Event” described in Section 4043(c)
of ERISA for which the notice requirement has not been waived by the PBGC, or
(b) the withdrawal of any Credit Party or any ERISA Affiliate from a
Pension Plan during a plan year in which it was a “substantial employer” as
defined in Section 4001(a)(2) of ERISA, or (c) the termination of a
Pension Plan in a distress termination under Section 4041(c) of ERISA, the
filing of a notice of intent to terminate a Pension Plan in a distress
termination under Section 4041(c) of ERISA or the treatment of a Pension
Plan amendment as a termination, under Section 4041 of ERISA, if the plan
assets are not sufficient to pay all plan liabilities, or (d) the institution
of proceedings to terminate, or the appointment of a trustee with respect to,
any Pension Plan by


 


17





















 


the PBGC, or (e) any other event or condition which would constitute
grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or (f) the imposition
of a Lien pursuant to Section 412 of the Code or Section 302 of
ERISA, or (g) the partial or complete withdrawal of any Credit Party of
any ERISA Affiliate from a Multiemployer Plan if withdrawal liability is
asserted by such plan, or (h) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections 4241 or
4245 of ERISA, or (i) any event or condition which results in the termination
of a Multiemployer Plan under Section 4041A of ERISA or the institution by
PBGC of proceedings to terminate a Multiemployer Plan under Section 4042
of ERISA.


 


“Termination Value” means, in respect
of any one or more Hedging Agreements, after taking into account the effect of
any legally enforceable netting agreement relating to such Hedging Agreements,
(a) for any date on or after the date such Hedging Agreements have been closed
out and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced in
clause (a), the amount(s) determined as the mark-to-market value(s) for such
Hedging Agreements, as determined based upon one or more mid-market or other
readily available quotations provided by any recognized dealer in such Hedging
Agreements (which may include a Lender or any Affiliate of a Lender).


 


“Total Indebtedness” means, as of any
date of determination with respect to the Credit Parties and their Subsidiaries
on a Consolidated basis without duplication, the sum of all Indebtedness of the
Credit Parties and their Subsidiaries.


 


“Uniform Customs” means the Uniform
Customs and Practice for Documentary Credits (1993 Revision), effective
January, 1994 International Chamber of Commerce Publication No. 500.


 


“UCC” means the Uniform Commercial
Code as in effect in the State of New York, as amended or modified from time to
time.


 


“United States” means the United
States of America.


 


“Wachovia” means Wachovia Bank,
National Association, a national banking association, and its successors.


 


“Wholly-Owned” means, with respect to
a Subsidiary, that all of the shares of Capital Stock of such Subsidiary are,
directly or indirectly, owned or controlled by the Parent and/or one or more of
its Wholly-Owned Subsidiaries (except for directors’ qualifying shares or other
shares required by Applicable Law to be owned by a Person other than the
Parent).


 


SECTION 1.2                          Other Definitions and
Provisions.  With reference to this
Agreement and each other Loan Document, unless otherwise specified herein or in
such other Loan Document:  (a) the definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined, (b) whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms, (c) the words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”, (d) the word


 


18





















 


“will” shall be construed to have the same
meaning and effect as the word “shall”, (e) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (f) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (g) the words “herein”, “hereof” and “hereunder”,
and words of similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision hereof, (h) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement, (i)
the words “asset” and “property” shall be construed to have the same meaning
and effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights, (j) the term “documents”
includes any and all instruments, documents, agreements, certificates, notices,
reports, financial statements and other writings, however evidenced, whether in
physical or electronic form, (k) in the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including;” the words “to” and “until” each
mean “to but excluding;” and the word “through” means “to and including”, and (l) Section headings herein and in the
other Loan Documents are included for convenience of reference only and shall
not affect the interpretation of this Agreement or any other Loan Document.


 


SECTION 1.3                          Accounting
Terms.  All accounting terms not
specifically or completely defined herein shall be construed in conformity
with, and all financial data (including financial ratios and other financial
calculations) required to be submitted pursuant to this Agreement shall be
prepared in conformity with, GAAP applied on a consistent basis, as in effect
from time to time, applied in a manner consistent with that used in preparing
the audited financial statements required by Section 7.1(b), except
as otherwise specifically prescribed herein.


 


SECTION 1.4                          UCC Terms.  Terms defined in the UCC in effect on the
Closing Date and not otherwise defined herein shall, unless the context
otherwise indicates, have the meanings provided by those definitions.  Subject to the foregoing, the term “UCC”
refers, as of any date of determination, to the UCC then in effect.


 


SECTION 1.5                          Rounding.  Any financial ratios required to be
maintained by the Credit Parties pursuant to this Agreement shall be calculated
by dividing the appropriate component by the other component, carrying the
result to one place more than the number of places by which such ratio is
expressed herein and rounding the result up or down to the nearest number (with
a rounding-up if there is no nearest number).


 


SECTION 1.6                          References to Agreement
and Laws.  Unless otherwise expressly
provided herein, (a) references to formation documents, governing documents,
agreements (including the Loan Documents) and other contractual instruments
shall be deemed to include all subsequent amendments, restatements, extensions,
supplements and other modifications thereto, but only to the extent that such
amendments, restatements, extensions, supplements and other modifications are
not prohibited by any Loan Document; and (b) references to any Applicable


 


19





















 


Law shall include all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting such
Applicable Law.


 


SECTION 1.7                          Times of Day.  Unless otherwise specified, all references
herein to times of day shall be references to Eastern time (daylight or
standard, as applicable).


 


SECTION 1.8                          Letter of Credit
Amounts.  Unless otherwise specified,
all references herein to the amount of a Letter of Credit at any time shall be
deemed to mean the maximum face amount of such Letter of Credit after giving
effect to all increases thereof contemplated by such Letter of Credit or the
Letter of Credit Application therefor, whether or not such maximum face amount
is in effect at such time.


 


ARTICLE II


 


REVOLVING CREDIT FACILITY


 


SECTION 2.1                          Revolving Credit Loans.  Subject to the terms and conditions of this
Agreement, and in reliance upon the representations and warranties set forth
herein, each Lender severally agrees to make Revolving Credit Loans to the
Borrower from time to time from the Closing Date through, but not including,
the Revolving Credit Maturity Date as requested by the Borrower in accordance
with the terms of Section 2.3; provided, that (a) the
aggregate principal amount of all outstanding Revolving Credit Loans (after giving
effect to any amount requested) shall not exceed the Revolving Credit
Commitment less the sum of all outstanding Swingline Loans and L/C
Obligations and (b) the principal amount of outstanding Revolving Credit Loans
from any Lender to the Borrower shall not at any time exceed such Lender’s
Revolving Credit Commitment less such Lender’s Revolving Credit
Commitment Percentage of outstanding L/C Obligations and outstanding Swingline
Loans.  Each Revolving Credit Loan by a
Lender shall be in a principal amount equal to such Lender’s Revolving Credit
Commitment Percentage of the aggregate principal amount of Revolving Credit
Loans requested on such occasion. 
Subject to the terms and conditions hereof, the Borrower may borrow,
repay and reborrow Revolving Credit Loans hereunder until the Revolving Credit
Maturity Date.


 


SECTION 2.2                          Swingline Loans.


 


(a)                                  Availability.  Subject to the terms and conditions of this
Agreement, the Swingline Lender agrees to make Swingline Loans to the Borrower
from time to time from the Closing Date through, but not including, the
Swingline Termination Date; provided, that the aggregate principal
amount of all outstanding Swingline Loans (after giving effect to any amount
requested), shall not exceed the lesser of (i) the Revolving Credit Commitment
less the sum of all outstanding Revolving Credit Loans and the L/C Obligations
and (ii) the Swingline Commitment.


 


(b)                                 Refunding.


 


(i)                                     Swingline
Loans shall be refunded by the Lenders on demand by the Swingline Lender.  Such refundings shall be made by the Lenders
in accordance with their


 


20





















 


respective Revolving Credit Commitment Percentages and shall thereafter
be reflected as Revolving Credit Loans of the Lenders on the books and records
of the Administrative Agent.  Each Lender
shall fund its respective Revolving Credit Commitment Percentage of Revolving
Credit Loans as required to repay Swingline Loans outstanding to the Swingline
Lender upon demand by the Swingline Lender but in no event later than 1:00 p.m.
on the next succeeding Business Day after such demand is made.  No Lender’s obligation to fund its respective
Revolving Credit Commitment Percentage of a Swingline Loan shall be affected by
any other Lender’s failure to fund its Revolving Credit Commitment Percentage
of a Swingline Loan, nor shall any Lender’s Revolving Credit Commitment
Percentage be increased as a result of any such failure of any other Lender to
fund its Revolving Credit Commitment Percentage of a Swingline Loan.


 


(ii)                                  The
Borrower shall pay to the Swingline Lender within two (2) Business Days of a
demand therefor the amount of such Swingline Loans to the extent amounts
received from the Lenders are not sufficient to repay in full the outstanding Swingline
Loans requested or required to be refunded. 
In addition, the Borrower hereby authorizes the Administrative Agent to
charge any account maintained by the Borrower with the Swingline Lender (up to
the amount available therein) in order to immediately pay the Swingline Lender
the amount of such Swingline Loans to the extent amounts received from the
Lenders are not sufficient to repay in full the outstanding Swingline Loans
requested or required to be refunded.  If
any portion of any such amount paid to the Swingline Lender shall be recovered
by or on behalf of the Borrower from the Swingline Lender in bankruptcy or
otherwise, the loss of the amount so recovered shall be ratably shared among
all the Lenders in accordance with their respective Revolving Credit Commitment
Percentages.


 


(iii)                               Each
Lender acknowledges and agrees that its obligation to refund Swingline Loans in
accordance with the terms of this Section is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including non-satisfaction
of the conditions set forth in Article V.  Further, each Lender agrees and acknowledges
that if prior to the refunding of any outstanding Swingline Loans pursuant to
this Section, one of the events described in Section 11.1(j) or (k)
shall have occurred, each Lender will, on the date the applicable Revolving
Credit Loan would have been made, purchase an undivided participating interest
in the Swingline Loan to be refunded in an amount equal to its Revolving Credit
Commitment Percentage of the aggregate amount of such Swingline Loan.  Each Lender will immediately transfer to the
Swingline Lender, in immediately available funds, the amount of its
participation and upon receipt thereof the Swingline Lender will deliver to
such Lender a certificate evidencing such participation dated the date of
receipt of such funds and for such amount. 
Whenever, at any time after the Swingline Lender has received from any
Lender such Lender’s participating interest in a Swingline Loan, the Swingline
Lender receives any payment on account thereof, the Swingline Lender will
distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender’s participating interest was
outstanding and funded).


 


21





















 


SECTION 2.3                          Procedure
for Advances of Revolving Credit Loans and Swingline Loans.


 


(a)                                  Requests for
Borrowing.  The Borrower shall give
the Administrative Agent irrevocable prior written notice substantially in the
form attached hereto as Exhibit B
(a “Notice of Borrowing”) not later than 1:00 p.m. (i) on the same
Business Day as each Base Rate Loan and each Swingline Loan and (ii) at least
three (3) Business Days before each LIBOR Rate Loan, of its intention to
borrow, specifying (A) the date of such borrowing, which shall be a Business
Day, (B) the amount of such borrowing, which shall be, (x) with respect to Base
Rate Loans (other than Swingline Loans) in an aggregate principal amount of
$1,000,000 or a whole multiple of $500,000 in excess thereof, (y) with respect
to LIBOR Rate Loans in an aggregate principal amount of $3,000,000 or a whole
multiple of $500,000 in excess thereof and (z) with respect to Swingline Loans
in an aggregate principal amount of $100,000 or a whole multiple of $100,000 in
excess thereof, (C) whether such Loan is to be a Revolving Credit Loan or
Swingline Loan, (D) in the case of a Revolving Credit Loan whether the Loans
are to be LIBOR Rate Loans or Base Rate Loans, and (E) in the case of a LIBOR
Rate Loan, the duration of the Interest Period applicable thereto.  A Notice of Borrowing received after 1:00
p.m. shall be deemed received on the next Business Day.  The Administrative Agent shall promptly
notify the Lenders of each Notice of Borrowing.


 


(b)                                 Disbursement of
Revolving Credit and Swingline Loans. 
Not later than 1:00 p.m. on the proposed borrowing date, (i) each Lender
will make available to the Administrative Agent, for the account of the
Borrower, at the office of the Administrative Agent in funds immediately
available to the Administrative Agent, such Lender’s Revolving Credit
Commitment Percentage of the Revolving Credit Loans to be made on such
borrowing date and (ii) the Swingline Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative
Agent, the Swingline Loans to be made on such borrowing date.  The Borrower hereby irrevocably authorizes
the Administrative Agent to disburse the proceeds of each borrowing requested
pursuant to this Section in immediately available funds by crediting or
wiring such proceeds to the deposit account of the Borrower identified in the
most recent notice substantially in the form of Exhibit
C hereto (a “Notice of Account Designation”) delivered by
the Borrower to the Administrative Agent or as may be otherwise agreed upon by
the Borrower and the Administrative Agent from time to time.  Subject to Section 4.7 hereof,
the Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Revolving Credit Loan requested pursuant to this Section to
the extent that any Lender has not made available to the Administrative Agent
its Revolving Credit Commitment Percentage of such Loan.  Revolving Credit Loans to be made for the
purpose of refunding Swingline Loans shall be made by the Lenders as provided
in Section 2.2(b).


 


SECTION 2.4                          Repayment
of Loans.


 


(a)                                  Repayment on
Maturity Date.  The Borrower hereby
agrees to repay the outstanding principal amount of (i) all Revolving Credit
Loans in full on the Revolving Credit Maturity Date, and (ii) all Swingline
Loans in accordance with Section 2.2(b), together, in each case,
with all accrued but unpaid interest thereon.


 


22





















 


(b)                                 Mandatory Repayment
of Revolving Credit Loans.  If at any
time the outstanding principal amount of all Revolving Credit Loans plus
the sum of all outstanding Swingline Loans and L/C Obligations exceeds the
Revolving Credit Commitment, the Borrower agrees to repay immediately upon
notice from the Administrative Agent, by payment to the Administrative Agent
for the account of the Lenders, Extensions of Credit in an amount equal to such
excess with each such repayment applied first to the principal amount of
outstanding Swingline Loans, second to the principal amount of
outstanding Revolving Credit Loans and third, with respect to any
Letters of Credit then outstanding, a payment of cash collateral into a cash
collateral account opened by the Administrative Agent, for the benefit of the
Lenders in an amount equal to the aggregate then undrawn and unexpired amount
of such Letters of Credit (such cash collateral to be applied in accordance
with Section 11.2(b)).


 


(c)                                  Optional
Prepayments.  The Borrower may at any
time and from time to time prepay Revolving Credit Loans and Swingline Loans,
in whole or in part, with irrevocable prior written notice to the Administrative
Agent substantially in the form attached hereto as Exhibit D
(a “Notice of Prepayment”) given not later than 1:00 p.m. (i) on
the same Business Day as each Base Rate Loan and each Swingline Loan and
(ii) at least three (3) Business Days before each LIBOR Rate Loan,
specifying the date and amount of prepayment and whether the prepayment is of
LIBOR Rate Loans, Base Rate Loans, Swingline Loans or a combination thereof,
and, if of a combination thereof, the amount allocable to each.  Upon receipt of such notice, the
Administrative Agent shall promptly notify each Lender.  If any such notice is given, the amount
specified in such notice shall be due and payable on the date set forth in such
notice.  Partial prepayments shall be in
an aggregate amount of $1,000,000 or a whole multiple of $500,000 in excess
thereof with respect to Base Rate Loans (other than Swingline Loans),
$3,000,000 or a whole multiple of $500,000 in excess thereof with respect to
LIBOR Rate Loans and $100,000 or a whole multiple of $100,000 in excess thereof
with respect to Swingline Loans.  A
Notice of Prepayment received after 1:00 p.m. shall be deemed received on the
next Business Day.  Each such repayment
shall be accompanied by any amount required to be paid pursuant to Section 4.9
hereof.


 


(d)                                 Limitation on
Prepayment of LIBOR Rate Loans.  The
Borrower may not prepay any LIBOR Rate Loan on any day other than on the last
day of the Interest Period applicable thereto unless such prepayment is
accompanied by any amount required to be paid pursuant to Section 4.9
hereof.


 


(f)                                    Hedging
Agreements.  No repayment or
prepayment pursuant to this Section shall affect any of the Borrower’s
obligations under any Hedging Agreement.


 


SECTION 2.5                          Permanent Reduction
of the Revolving Credit Commitment.


 


(a)                                  Voluntary
Reduction.  The Borrower shall have
the right at any time and from time to time, upon at least five (5) Business
Days prior written notice to the Administrative Agent, to permanently reduce,
without premium or penalty, (i) the entire Revolving Credit Commitment at any
time or (ii) portions of the Revolving Credit Commitment, from time to time, in
an aggregate principal amount not less than $5,000,000 or any whole multiple of


 


23





















 


$1,000,000 in excess thereof. 
Any reduction of the Revolving Credit Commitments shall be applied to
the Revolving Credit Commitment of each Lender according to its Revolving
Credit Commitment Percentage.  All
commitment fees accrued until the effective date of any termination of the
Revolving Credit Commitments shall be paid on the effective date of such
termination.


 


(b)                                 Corresponding
Payment.  Each permanent reduction
permitted pursuant to this Section shall be accompanied by a payment of
principal sufficient to reduce the aggregate outstanding Revolving Credit
Loans, Swingline Loans and L/C Obligations, as applicable, after such reduction
to the Revolving Credit Commitment as so reduced and if the Revolving Credit
Commitment as so reduced is less than the aggregate amount of all outstanding
Letters of Credit, the Borrower shall be required to deposit cash collateral in
a cash collateral account opened by the Administrative Agent in an amount equal
to the aggregate then undrawn and unexpired amount of such Letters of
Credit.  Such cash collateral shall be
applied in accordance with Section 11.2(b).  Any reduction of the Revolving Credit
Commitment to zero shall be accompanied by payment of all outstanding Revolving
Credit Loans and Swingline Loans (and furnishing of cash collateral
satisfactory to the Administrative Agent for all L/C Obligations) and shall
result in the termination of the Revolving Credit Commitment and the Swingline
Commitment and the Revolving Credit Facility. 
Such cash collateral shall be applied in accordance with Section 11.2(b).  If the reduction of the Revolving Credit
Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall
be accompanied by any amount required to be paid pursuant to Section 4.9
hereof.


 


SECTION 2.6                          Termination of Revolving
Credit Facility.  The Revolving
Credit Facility shall terminate on the Revolving Credit Maturity Date.


 


SECTION 2.7                          Optional Increase
of Revolving Credit Commitment.   The
Borrower shall have the right upon not less than thirty (30) days prior written
notice to the Administrative Agent to increase the Revolving Credit Commitment
by an aggregate amount of $90,000,000; provided that:


 


(a)                                  the Borrower shall
not make more than two (2) increases prior to the Revolving Credit Maturity Date
and the amount of any such requested increase shall not (i) be less than
45,000,000 (or the remaining amount of increases available under this Section after
giving effect to any prior increases) and (ii) together with all other
increases in the Revolving Credit Commitment pursuant to this Section 2.7
since the date of this Agreement, cause the Revolving Credit Commitment to
exceed $300,000,000;


 


(b)                                 no Default or Event of
Default shall have occurred and be continuing or would result from such
proposed increase and any borrowings thereunder;


 


(c)                                  the Credit Parties
shall deliver an Officer’s Compliance Certificate to the Administrative Agent
demonstrating pro  forma compliance with the covenants set forth
in Article IX hereof; using the financial statements delivered pursuant to
Section 7.1(a) for the most recently ended fiscal quarter of the
Credit Parties.


 


24





















 


(d)                                 (i) Each existing Lender shall have the right, but not the obligation,
to commit to all or a portion of the proposed increase, (ii) the failure
by any existing Lender to respond to a request for such increase shall be
deemed to be a refusal of such request by such existing Lender and (iii) if the Administrative Agent does not receive sufficient commitments
from the existing Lenders to fund the entire amount of the proposed increase,
the Borrower may then solicit commitments from other banks, financial
institutions or investment funds reasonably acceptable to the Administrative
Agent;


 


(e)                                  Any
increase in the Revolving Credit Commitment which is accomplished by increasing
the Commitment of any Lender or Lenders who are at the time of such increase
party to this Agreement (which Lender or Lenders shall consent to such increase
in their sole and absolute discretion) shall be accomplished as follows:  (i) this Agreement will be amended by the
Credit Parties, the Administrative Agent and those Lender(s) whose
Commitment(s) is or are being increased (but without any requirement that the
consent of any other Lender be obtained) to reflect the revised Commitment of
each of the Lenders, (ii) entries in the Register will be revised to reflect
the revised Commitment and Commitment Percentage of each of the Lenders, (iii)
the outstanding Revolving Credit Loans and Commitment Percentages of Swingline
Loans and L/C Obligations will be reallocated on the effective date of such
increase among the Lenders in accordance with their revised Commitment
Percentages (and the Lenders agree to make all payments and adjustments necessary
to effect the reallocation and the Borrower shall pay any and all costs
required pursuant to Section 4.9 in connection with such
reallocation as if such reallocation were a repayment) and (iv) if requested by
such Lender or Lenders, the Borrower will deliver new Revolving Credit Note(s)
to the Lender or Lenders whose Commitment(s) is or are being increased
reflecting the revised Commitment of such Lender(s);


 


(f)                                    Any increase in the
Revolving Credit Commitment which is accomplished by addition of a new Lender
or Lenders under the Agreement shall be accomplished as follows: (i) each new
Lender shall be an Eligible Assignee and shall be subject to the consent of the
Administrative Agent and the Borrower which consents shall not be unreasonably
withheld, (ii) this Agreement will be amended by the Credit Parties, the
Administrative Agent and each new Lender (but without any requirement that the
consent of the any other Lender be obtained) to reflect the addition of each
new Lender as a Lender hereunder, (iii) entries in the Register will be revised
to reflect the revised Commitment and Commitment Percentages of each of the
Lenders (including each new Lender), (iv) the outstanding Revolving Credit
Loans and Commitment Percentages of Swingline Loans and L/C Obligations will be
reallocated on the effective date of such increase among the Lenders (including
each new Lender) in accordance with their revised Commitment Percentages (and
the Lenders (including each new Lender) agree to make all payments and adjustments
necessary to effect the reallocation and the Borrower shall pay any and all
costs required pursuant to Section 4.9 in connection with such
reallocation as if such reallocation were a repayment) and (v) at the request
of each new Lender, the Borrower will deliver a Revolving Credit Note to each
new Lender; and


 


(g)                                 Each increase to the
Revolving Credit Commitment pursuant to this Section 2.7 (i) shall
rank pari  passu in right of payment and security with the
Revolving Credit Facility and (ii) will have the same pricing and tenor as the
Revolving Credit Facility.


 


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ARTICLE III


 


LETTER OF CREDIT FACILITY


 


SECTION 3.1                          L/C Commitment.  Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Lenders set
forth in Section 3.4(a), agrees to issue standby and commercial
Letters of Credit for the account of the Borrower on any Business Day from the
Closing Date through but not including the Revolving Credit Maturity Date in
such form as may be approved from time to time by the Issuing Lender; provided,
that the Issuing Lender shall have no obligation to issue any Letter of Credit
if, after giving effect to such issuance, (a) the L/C Obligations would exceed
the L/C Commitment or (b) the aggregate principal amount of outstanding
Revolving Credit Loans, plus the aggregate principal amount of
outstanding Swingline Loans, plus the aggregate amount of L/C
Obligations would exceed the Revolving Credit Commitment.  Each Letter of Credit shall (i) be
denominated in Dollars in a minimum amount of $100,000, (ii) be a standby or
commercial letter of credit issued to support obligations of the Credit Parties
and their Subsidiaries, contingent or otherwise, incurred in the ordinary
course of business, (iii) expire on a date no later than the earlier of (A)
five (5) Business Days prior to the Revolving Credit Maturity Date and (B) one
year after its date of issuance and (iv) be subject to the Uniform Customs
and/or ISP98, as set forth in the Letter of Credit Application or as determined
by the Issuing Lender and, to the extent not inconsistent therewith, the laws
of the State of New York.  The Issuing
Lender shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Issuing Lender or
any L/C Participant to exceed any limits imposed by, any Applicable Law.  References herein to “issue” and derivations
thereof with respect to Letters of Credit shall also include extensions or
modifications of any existing Letters of Credit, unless the context otherwise
requires.


 


SECTION 3.2                          Procedure for
Issuance of Letters of Credit.  The
Borrower may from time to time request that the Issuing Lender issue a Letter
of Credit by delivering to the Issuing Lender at the Administrative Agent’s
Office a Letter of Credit Application therefor, completed to the satisfaction
of the Issuing Lender, and such other certificates, documents and other papers
and information as the Issuing Lender may request.  Upon receipt of any Letter of Credit
Application, the Issuing Lender shall process such Letter of Credit Application
and the certificates, documents and other papers and information delivered to
it in connection therewith in accordance with its customary procedures and
shall, subject to Section 3.1 and Article V, promptly
issue the Letter of Credit requested thereby (but in no event shall the Issuing
Lender be required to issue any Letter of Credit earlier than three (3)
Business Days after its receipt of the Letter of Credit Application therefor
and all such other certificates, documents and other papers and information
relating thereto) by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the
Borrower.  The Issuing Lender shall
promptly furnish to the Borrower a copy of such Letter of Credit and promptly
notify each Lender of the issuance and upon request by any Lender, furnish to such
Lender a copy of such Letter of Credit and the amount of such Lender’s
participation therein.


 


SECTION 3.3                          Commissions
and Other Charges.


(a)                                  Letter of Credit
Commissions.  The Borrower shall pay
to the Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, a letter of credit


 


26





















 


commission with respect to each Letter of Credit in an amount equal to
the face amount of such Letter of Credit multiplied by the Applicable
Margin with respect to Revolving Credit Loans that are LIBOR Rate Loans
(determined on a per annum basis).  Such
commission shall be payable quarterly in arrears on the last Business Day of
each calendar quarter, on the Revolving Credit Maturity Date and thereafter on
demand of the Administrative Agent.  The
Administrative Agent shall, promptly following its receipt thereof, distribute
to the Issuing Lender and the L/C Participants all commissions received
pursuant to this Section in accordance with their respective Revolving
Credit Commitment Percentages.


 


(b)                                 Issuance Fee.  In addition to the foregoing commission, the
Borrower shall pay to the Administrative Agent, for the account of the Issuing
Lender, an issuance fee with respect to each Letter of Credit in an amount
equal to the face amount of such Letter of Credit multiplied by one-eighth of
one percent (0.125%) per annum.  Such
issuance fee shall be payable quarterly in arrears on the last Business Day of
each calendar quarter commencing with the first such date to occur after the
issuance of such Letter of Credit, on the Revolving Credit Maturity Date and
thereafter on demand of the Issuing Lender (through the Administrative Agent).


 


(c)                                  Other Costs.  In addition to the foregoing fees and
commissions, the Borrower shall pay or reimburse the Issuing Lender for such
normal and customary costs and expenses as are incurred or charged by the
Issuing Lender in issuing, effecting payment under, amending or otherwise
administering any Letter of Credit.


 


SECTION 3.4                          L/C Participations.


 


(a)                                  The Issuing Lender
irrevocably agrees to grant and hereby grants to each L/C Participant, and, to
induce the Issuing Lender to issue Letters of Credit hereunder, each L/C
Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from the Issuing Lender, on the terms and conditions hereinafter
stated, for such L/C Participant’s own account and risk an undivided interest
equal to such L/C Participant’s Revolving Credit Commitment Percentage in the
Issuing Lender’s obligations and rights under and in respect of each Letter of
Credit issued hereunder and the amount of each draft paid by the Issuing Lender
thereunder.  Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise
in accordance with the terms of this Agreement, such L/C Participant shall pay
to the Issuing Lender upon demand at the Issuing Lender’s address for notices
specified herein an amount equal to such L/C Participant’s Revolving Credit
Commitment Percentage of the amount of such draft, or any part thereof, which
is not so reimbursed.


 


(b)                                 Upon becoming aware of
any amount required to be paid by any L/C Participant to the Issuing Lender
pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit, the
Issuing Lender shall notify each L/C Participant of the amount and due date of
such required payment and such L/C Participant shall pay to the Issuing Lender
the amount specified on the applicable due date.  If any such amount is paid to the Issuing
Lender after the date such payment is due, such L/C Participant shall pay to the
Issuing Lender on demand, in addition to such amount, the product of 


 


27





















 


(i) such amount, times (ii) the daily average Federal Funds Rate
as determined by the Administrative Agent during the period from and including
the date such payment is due to the date on which such payment is immediately
available to the Issuing Lender, times (iii) a fraction the numerator of
which is the number of days that elapse during such period and the denominator
of which is 360.  A certificate of the
Issuing Lender with respect to any amounts owing under this Section shall
be conclusive in the absence of manifest error. 
With respect to payment to the Issuing Lender of the unreimbursed
amounts described in this Section, if the L/C Participants receive notice that
any such payment is due (A) prior to 1:00 p.m. on any Business Day, such
payment shall be due that Business Day, and (B) after 1:00 p.m. on any Business
Day, such payment shall be due on the following Business Day.


 


(c)                                  Whenever, at any time
after the Issuing Lender has made payment under any Letter of Credit and has
received from any L/C Participant its Revolving Credit Commitment Percentage of
such payment in accordance with this Section, the Issuing Lender receives any
payment related to such Letter of Credit (whether directly from the Borrower or
otherwise), or any payment of interest on account thereof, the Issuing Lender
will distribute to such L/C Participant its pro  rata share
thereof; provided, that in the event that any such payment received by
the Issuing Lender shall be required to be returned by the Issuing Lender, such
L/C Participant shall return to the Issuing Lender the portion thereof
previously distributed by the Issuing Lender to it.


 


SECTION 3.5                          Reimbursement
Obligation of the Borrower.  In the
event of any drawing under any Letter of Credit, the Borrower agrees to
reimburse (either with the proceeds of a Revolving Credit Loan as provided for
in this Section or with funds from other sources), in same day funds, the
Issuing Lender on each date on which the Issuing Lender notifies the Borrower
of the date and amount of a draft paid under any Letter of Credit for the
amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c)
incurred by the Issuing Lender in connection with such payment.  Unless the Borrower shall immediately notify
the Issuing Lender that the Borrower intends to reimburse the Issuing Lender
for such drawing from other sources or funds, the Borrower shall be deemed to
have timely given a Notice of Borrowing to the Administrative Agent requesting
that the Lenders make a Revolving Credit Loan bearing interest at the Base Rate
on such date in the amount of (a) such draft so paid and (b) any amounts
referred to in Section 3.3(c) incurred by the Issuing Lender in
connection with such payment, and the Lenders shall make a Revolving Credit
Loan bearing interest at the Base Rate in such amount, the proceeds of which
shall be applied to reimburse the Issuing Lender for the amount of the related
drawing and costs and expenses. Each Lender acknowledges and agrees that its
obligation to fund a Revolving Credit Loan in accordance with this Section to
reimburse the Issuing Lender for any draft paid under a Letter of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including non-satisfaction of the conditions set forth in Section 2.3(a)
or Article V.  If the
Borrower has elected to pay the amount of such drawing with funds from other
sources and shall fail to reimburse the Issuing Lender as provided above, the
unreimbursed amount of such drawing shall bear interest at the rate which would
be payable on any outstanding Base Rate Loans which were then overdue from the
date such amounts become payable (whether at stated maturity, by acceleration
or otherwise) until payment in full.


 


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SECTION 3.6                          Obligations
Absolute.  The Borrower’s obligations
under this Article III (including the Reimbursement Obligation)
shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender or any beneficiary of
a Letter of Credit or any other Person. 
The Borrower also agrees that the Issuing Lender and the L/C
Participants shall not be responsible for, and the Borrower’s Reimbursement
Obligation under Section 3.5 shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrower against any
beneficiary of such Letter of Credit or any such transferee.  The Issuing Lender shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions caused by the Issuing Lender’s
gross negligence or willful misconduct. 
The Borrower agrees that any action taken or omitted by the Issuing
Lender under or in connection with any Letter of Credit or the related drafts
or documents, if done in the absence of gross negligence or willful misconduct,
shall be binding on the Borrower and shall not result in any liability of the
Issuing Lender or any L/C Participant to the Borrower.  The responsibility of the Issuing Lender to
the Borrower in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.


 


SECTION 3.7                          Effect of Letter
of Credit Application.  To the extent
that any provision of any Letter of Credit Application related to any Letter of
Credit is inconsistent with the provisions of this Article III, the
provisions of this Article III shall apply.


 


ARTICLE IV


 


GENERAL LOAN PROVISIONS


 


SECTION 4.1                          Interest.


 


(a)                                  Interest Rate
Options.  Subject to the provisions
of this Section, at the election of the Borrower, (i) Revolving Credit Loans
shall bear interest at (A) the Base Rate plus the Applicable Margin or
(B) the LIBOR Rate plus the Applicable Margin (provided that the
LIBOR Rate shall not be available until three (3) Business Days after the
Closing Date) and (ii) any Swingline Loan shall bear interest at the Base Rate plus
the Applicable Margin.  The Borrower
shall select the rate of interest and Interest Period, if any, applicable to
any Loan at the time a Notice of Borrowing is given or at the time a Notice of
Conversion/Continuation is given pursuant to Section 4.2.  Any Loan or any portion thereof as to which
the Borrower has not duly specified an interest rate as provided herein shall
be deemed a Base Rate Loan.


 


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(b)                                 Interest Periods.  In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 2.3 or
Section 4.2, as applicable, shall elect an interest period (each,
an “Interest Period”) to be applicable to such Loan, which Interest
Period shall be a period of one (1), two (2), three (3), or six (6) months; provided
that:


 


(i)                                                        the
Interest Period shall commence on the date of advance of or conversion to any
LIBOR Rate Loan and, in the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the date on which the
immediately preceding Interest Period expires;


 


(ii)                                                     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 with respect to a LIBOR Rate Loan would otherwise
expire on a day that is not a Business Day but is a day of the month after
which no further Business Day occurs in such month, such Interest Period shall
expire on the immediately preceding Business Day;


 


(iii)                                                  any
Interest Period with respect to a LIBOR Rate Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the relevant calendar month at the end of
such Interest Period;


 


(iv)                                                 no
Interest Period shall extend beyond the Revolving Credit Maturity Date; and


 


(v)                                                    there
shall be no more than ten (10) Interest Periods in effect at any time.


 


(c)                                  Default Rate.  (i) Automatically upon the occurrence and
during the continuance of an Event of Default under Section 11.1(a),
Section 11.1(b), Section 11.1(j) or Section 11.1(k)
and (ii) subject to Section 11.3, at the election of the Required
Lenders upon the occurrence and during the continuance of any other Event of
Default, (A) the Borrower shall no longer have the option to request LIBOR Rate
Loans, Swingline Loans or Letters of Credit, (B) all outstanding LIBOR Rate
Loans shall bear interest at a rate per annum of two percent (2%) in excess of
the rate then applicable to LIBOR Rate Loans until the end of the applicable
Interest Period and thereafter at a rate equal to two percent (2%) in excess of
the rate then applicable to Base Rate Loans, and (C) all outstanding Base Rate
Loans and other Obligations arising hereunder or under any other Loan Document
shall bear interest at a rate per annum equal to two percent (2%) in excess of
the rate then applicable to Base Rate Loans or such other Obligations arising
hereunder or under any other Loan Document. 
Interest shall continue to accrue on the Obligations after the filing by
or against the Borrower of any petition seeking any relief in bankruptcy or
under any act or law pertaining to insolvency or debtor relief, whether state,
federal or foreign.


 


(d)                                 Interest Payment
and Computation.  Interest on each
Base Rate Loan shall be due and payable in arrears on the last Business Day of
each calendar quarter commencing March 31, 2005; and interest on each
LIBOR Rate Loan shall be due and payable on the last day of each Interest
Period applicable thereto, and if such Interest Period extends over three (3)
months, at


 


30





















 


the end of each three (3) month interval during such Interest
Period.  Interest on LIBOR Rate Loans and
all fees payable hereunder shall be computed on the basis of a 360-day year and
assessed for the actual number of days elapsed and interest on Base Rate Loans
shall be computed on the basis of a 365/66-day year and assessed for the actual
number of days elapsed.


 


(e)                                  Maximum Rate.  In no contingency or event whatsoever shall
the aggregate of all amounts deemed interest under this Agreement charged or
collected pursuant to the terms of this Agreement exceed the highest rate
permissible under any Applicable Law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto.  In the event that such a court determines
that the Lenders have charged or received interest hereunder in excess of the
highest applicable rate, the rate in effect hereunder shall automatically be
reduced to the maximum rate permitted by Applicable Law and the Lenders shall
at the Administrative Agent’s option (i) promptly refund to the Borrower any
interest received by the Lenders in excess of the maximum lawful rate or (ii)
apply such excess to the principal balance of the Obligations on a pro rata basis.  It is the intent hereof that the Borrower not
pay or contract to pay, and that neither the Administrative Agent nor any
Lender receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by the Borrower under
Applicable Law.


 


SECTION 4.2                          Notice and Manner of
Conversion or Continuation of Loans. 
Provided that no Event of Default has occurred and is then continuing,
the Borrower shall have the option to (a) convert at any time following the
third Business Day after the Closing Date all or any portion of any outstanding
Base Rate Loans (other than Swingline Loans) in a principal amount equal to
$3,000,000 or any whole multiple of $500,000 in excess thereof into one or more
LIBOR Rate Loans and (b) upon the expiration of any Interest Period, (i)
convert all or any part of its outstanding LIBOR Rate Loans in a principal
amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof
into Base Rate Loans (other than Swingline Loans) or (ii) continue such LIBOR
Rate Loans as LIBOR Rate Loans.  Whenever
the Borrower desires to convert or continue Loans as provided above, the
Borrower shall give the Administrative Agent irrevocable prior written notice
in the form attached as Exhibit E
(a “Notice of Conversion/Continuation”) not later than 1:00 p.m. three
(3) Business Days before the day on which a proposed conversion or continuation
of such Loan is to be effective specifying (A) the Loans to be converted or
continued, and, in the case of any LIBOR Rate Loan to be converted or
continued, the last day of the Interest Period therefor, (B) the effective date
of such conversion or continuation (which shall be a Business Day), (C) the
principal amount of such Loans to be converted or continued, and (D) the
Interest Period to be applicable to such converted or continued LIBOR Rate
Loan.  The Administrative Agent shall
promptly notify the Lenders of such Notice of Conversion/Continuation.


 


SECTION 4.3                          Fees.


 


(a)                                  Commitment Fee.  Commencing on the Closing Date, the Borrower
shall pay to the Administrative Agent, for the account of the Lenders, a
non-refundable commitment fee at a rate per annum based upon the table set
forth in the definition of Applicable Margin (the “Commitment Fee Rate”)
on the average daily unused portion of the Revolving Credit Commitment; provided,
that the amount of outstanding Swingline Loans shall not be considered


 


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usage of the Revolving Credit Commitment for the purpose of calculating
such commitment fee except when calculating the commitment fee of the
Swingline Lender.  The commitment fee
shall be payable in arrears on the last Business Day of each calendar quarter
during the term of this Agreement commencing March, 2005, and on the Revolving
Credit Maturity Date.  Such commitment
fee shall be distributed by the Administrative Agent to the Lenders pro  rata
in accordance with the Lenders’ respective Revolving Credit Commitment
Percentages.


 


(b)                                 Administrative
Agent’s and Other Fees.  In order to
compensate the Administrative Agent for structuring and syndicating the Loans
and for its obligations hereunder, the Borrower agrees to pay to the
Administrative Agent and its Affiliates, for their own account, the fees set
forth in the Fee Letter.


 


SECTION 4.4                          Manner of
Payment.  Each payment by the
Borrower on account of the principal of or interest on the Loans or of any fee,
commission or other amounts (including the Reimbursement Obligation) payable to
the Lenders under this Agreement shall be made not later than 1:00 p.m. on the
date specified for payment under this Agreement to the Administrative Agent at
the Administrative Agent’s Office for the account of the Lenders (other than as
set forth below) pro  rata in accordance with their respective
Revolving Credit Commitment Percentages (except as specified below), in
Dollars, in immediately available funds and shall be made without any set-off,
counterclaim or deduction whatsoever. 
Any payment received after such time but before 2:00 p.m. on such day
shall be deemed a payment on such date for the purposes of Section 11.1,
but for all other purposes shall be deemed to have been made on the next
succeeding Business Day.  Any payment
received after 2:00 p.m. shall be deemed to have been made on the next
succeeding Business Day for all purposes. 
Upon receipt by the Administrative Agent of each such payment, the
Administrative Agent shall distribute to each Lender at its address for notices
set forth herein its pro  rata share of such payment in accordance
with such Lender’s Revolving Credit Commitment Percentage (except as specified
below) and shall wire advice of the amount of such credit to each Lender.  Each payment to the Administrative Agent of
the Issuing Lender’s fees or L/C Participants’ commissions shall be made in
like manner, but for the account of the Issuing Lender or the L/C Participants,
as the case may be.  Each payment to the
Administrative Agent of Administrative Agent’s fees or expenses shall be made
for the account of the Administrative Agent and any amount payable to any
Lender under Section 4.9, Section 4.10, Section 4.11
or Section 13.3 shall be paid to the Administrative Agent for the
account of the applicable Lender. 
Subject to Section 4.1(b)(ii) if any payment under this
Agreement shall be specified to be made upon a day which is not a Business Day,
it shall be made on the next succeeding day which is a Business Day and such
extension of time shall in such case be included in computing any interest if
payable along with such payment.


 


SECTION 4.5                          Evidence of
Indebtedness.


 


(a)                                  Extensions of
Credit.  The Extensions of Credit
made by each Lender shall be evidenced by one or more accounts or records
maintained by such Lender and by the Administrative Agent in the ordinary
course of business.  The accounts or
records maintained by the Administrative Agent and each Lender shall be
conclusive absent manifest error of the amount of the Extensions of Credit made
by the Lenders to the Borrower and the interest and


 


32





















 


payments thereon.  Any failure to
so record or any error in doing so shall not, however, limit or otherwise
affect the obligation of the Borrower hereunder to pay any amount owing with
respect to the Obligations.  In the event
of any conflict between the accounts and records maintained by any Lender and
the accounts and records of the Administrative Agent in respect of such
matters, the accounts and records of the Administrative Agent shall control in
the absence of manifest error.  Upon the
request of any Lender made through the Administrative Agent, the Borrower shall
execute and deliver to such Lender (through the Administrative Agent) a
Revolving Credit Note and/or Swingline Note, as applicable, which shall
evidence such Lender’s Revolving Credit Loans in addition to such accounts or
records.  Each Lender may attach
schedules to its Notes and endorse thereon the date, amount and maturity of its
Loans and payments with respect thereto.


 


(b)                                 Participations.  In addition to the accounts and records
referred to in subsection (a), each Lender and the Administrative Agent
shall maintain in accordance with its usual practice accounts or records
evidencing the purchases and sales by such Lender of participations in Letters
of Credit and Swingline Loans.  In the
event of any conflict between the accounts and records maintained by the
Administrative Agent and the accounts and records of any Lender in respect of
such matters, the accounts and records of the Administrative Agent shall
control in the absence of manifest error.


 


SECTION 4.6                          Adjustments.  If any
Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Loans
or other obligations hereunder resulting in such Lender’s receiving payment of
a proportion of the aggregate amount of its Loans and accrued interest thereon
or other such obligations (other than pursuant to Section 4.9,
Section 4.10, Section 4.11 or Section 13.3
hereof) greater than its pro  rata
share thereof as provided herein, then the Lender receiving such greater
proportion shall (a) notify the Administrative Agent of such fact, and (b)
purchase (for cash at face value) participations in the Loans and such other
obligations of the other Lenders, or make such other adjustments as shall be
equitable, so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and other amounts owing them; provided
that


 


(i)                                     if any such participations are purchased and all
or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and


 


(ii)                                  the provisions of this paragraph shall not be
construed to apply to (x) any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement or (y) any payment obtained
by a Lender as consideration for the assignment of or sale of a participation
in any of its Loans or participations in Swingline Loans and Letters of Credit
to any assignee or Participant, other than to the Borrower or any Subsidiary
thereof (as to which the provisions of this paragraph shall apply).


 


Each Credit Party consents to the foregoing
and agrees, to the extent it may effectively do so under applicable law, that
any Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against each Credit Party rights of setoff and counterclaim with


 


33





















 


respect to such participation as fully as if
such Lender were a direct creditor of each Credit Party in the amount of such
participation.


 


SECTION 4.7                          Nature of
Obligations of Lenders Regarding Extensions of Credit; Assumption by the
Administrative Agent.  The
obligations of the Lenders under this Agreement to make the Loans and issue or
participate in Letters of Credit are several and are not joint or joint and
several.  Unless the Administrative Agent
shall have received notice from a Lender prior to a proposed borrowing date that
such Lender will not make available to the Administrative Agent such Lender’s
ratable portion of the amount to be borrowed on such date (which notice shall
not release such Lender of its obligations hereunder), the Administrative Agent
may assume that such Lender has made such portion available to the
Administrative Agent on the proposed borrowing date in accordance with Sections
2.3(b), and the Administrative Agent may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount.  If such amount is made available to the
Administrative Agent on a date after such borrowing date, such Lender shall pay
to the Administrative Agent on demand an amount, until paid, equal to the product
of (a) the amount not made available by such Lender in accordance with the
terms hereof, times (b) the daily average Federal Funds Rate during such
period as determined by the Administrative Agent, times (c) a fraction
the numerator of which is the number of days that elapse from and including
such borrowing date to the date on which such amount not made available by such
Lender in accordance with the terms hereof shall have become immediately
available to the Administrative Agent and the denominator of which is 360.  A certificate of the Administrative Agent
with respect to any amounts owing under this Section shall be conclusive,
absent manifest error.  If such Lender’s
Revolving Credit Commitment Percentage of such borrowing is not made available
to the Administrative Agent by such Lender within three (3) Business Days after
such borrowing date, the Administrative Agent shall be entitled to recover such
amount made available by the Administrative Agent with interest thereon at the
rate per annum applicable to Base Rate Loans hereunder, on demand, from the
Borrower.  The failure of any Lender to
make available its Revolving Credit Commitment Percentage of any Loan requested
by the Borrower shall not relieve it or any other Lender of its obligation, if
any, hereunder to make its Revolving Credit Commitment Percentage of such Loan
available on the borrowing date, but no Lender shall be responsible for the
failure of any other Lender to make its Revolving Credit Commitment Percentage
of such Loan available on the borrowing date. 
Notwithstanding anything set forth herein to the contrary and without
limiting any rights which the Borrower may have against such Lender as a result
of such failure, any Lender that fails to make available its Revolving Credit
Commitment Percentage of any Loan shall not (a) have any voting or consent
rights under or with respect to any Loan Document or (b) constitute a “Lender”
(or be included in the calculation of Required Lenders hereunder) for any
voting or consent rights under or with respect to any Loan Document.


 


SECTION 4.8                          Changed
Circumstances.


 


(a)                                  Circumstances
Affecting LIBOR Rate Availability. 
If with respect to any Interest Period the Administrative Agent or any
Lender (after consultation with the Administrative Agent) shall determine that,
by reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in eurodollars, in the applicable amounts are not being
quoted via the Telerate Page 3750 or offered to the Administrative Agent or
such Lender for


 


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such Interest Period, then the Administrative Agent shall forthwith
give notice thereof to the Borrower. 
Thereafter, until the Administrative Agent notifies the Borrower that
such circumstances no longer exist, the obligation of the Lenders to make LIBOR
Rate Loans and the right of the Borrower to convert any Loan to or continue any
Loan as a LIBOR Rate Loan shall be suspended, and the Borrower shall repay in
full (or cause to be repaid in full) the then outstanding principal amount of
each such LIBOR Rate Loan together with accrued interest thereon, on the last
day of the then current Interest Period applicable to such LIBOR Rate Loan or
convert the then outstanding principal amount of each such LIBOR Rate Loan to a
Base Rate Loan as of the last day of such Interest Period.


 


(b)                                 Laws Affecting
LIBOR Rate Availability.  If, after
the date hereof, the introduction of, or any change in, any Applicable Law 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 compliance by any of the Lenders (or any of their
respective Lending Offices) with any request or directive (whether or not
having the force of law) of any such Governmental Authority, central bank or
comparable agency, shall make it unlawful or impossible for any of the Lenders
(or any of their respective Lending Offices) to honor its obligations hereunder
to make or maintain any LIBOR Rate Loan, such Lender shall promptly give notice
thereof to the Administrative Agent and the Administrative Agent shall promptly
give notice to the Borrower and the other Lenders.  Thereafter, until the Administrative Agent notifies
the Borrower that such circumstances no longer exist, (i) the obligations of
the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert
any Loan or continue any Loan as a LIBOR Rate Loan shall be suspended and
thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if
any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to
the end of the then current Interest Period applicable thereto as a LIBOR Rate
Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base Rate
Loan for the remainder of such Interest Period.


 


SECTION 4.9                          Indemnity.  The Borrower hereby indemnifies each of the
Lenders against any loss or expense (other than lost profits) which may arise
or be attributable to each Lender’s obtaining, liquidating or employing
deposits or other funds acquired to effect, fund or maintain any Loan (a) as a
consequence of any failure by the Borrower to make any payment when due of any
amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any
failure of the Borrower to borrow, continue or convert on a date specified
therefor in a Notice of Borrowing or Notice of Conversion/Continuation,
(c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on
a date other than the last day of the Interest Period therefor or (d) due
to an assignment required pursuant to Section 4.12(b).  The amount of such loss or expense shall be
determined, in the applicable Lender’s sole discretion, based upon the
assumption that such Lender funded its Revolving Credit Commitment Percentage
of the LIBOR Rate Loans in the London interbank market and using any reasonable
attribution or averaging methods which such Lender deems appropriate and
practical.  A certificate of such Lender
setting forth the basis for determining such amount or amounts necessary to
compensate such Lender shall be forwarded to the Borrower through the
Administrative Agent and shall be conclusively presumed to be correct save for
manifest error.


 


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SECTION 4.10                    Increased Costs.


 


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


 


(i)                                     impose, modify or deem applicable any reserve,
special deposit, compulsory loan, insurance charge or similar requirement
against assets of, deposits with or for the account of, or advances, loans or
other credit extended or participated in by, any Lender (except any reserve
requirement reflected in the LIBOR Rate) or the Issuing Lender;


 


(ii)                                  subject any Lender or the Issuing Lender to any
tax of any kind whatsoever with respect to this Agreement, any Letter of
Credit, any participation in a Letter of Credit or any LIBOR Rate Loan made by
it, or change the basis of taxation of payments to such Lender or the Issuing
Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered
by Section 4.11 and the imposition of, or any change in the rate of
any Excluded Tax payable by such Lender or the Issuing Lender); or


 


(iii)                               impose on any Lender or the Issuing Lender or the
London interbank market any other condition, cost or expense affecting this
Agreement or LIBOR Rate Loans made by such Lender or any Letter of Credit or
participation therein;


 


and the result of any of the foregoing shall
be to increase the cost to such Lender of making, converting into or
maintaining any LIBOR Rate Loan (or of maintaining its obligation to make any
such Loan), or to increase the cost to such Lender or the Issuing Lender of
participating in, issuing or maintaining any Letter of Credit (or of
maintaining its obligation to participate in or to issue any Letter of Credit),
or to reduce the amount of any sum received or receivable by such Lender or the
Issuing Lender hereunder (whether of principal, interest or any other amount)
then, upon request of such Lender or the Issuing Lender, the Borrower shall
promptly pay to any such Lender or the Issuing Lender, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Lender, as the case may be, for such additional costs incurred or reduction
suffered.


 


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


 


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


 


(d)                                 Delay in Requests.  Failure
or delay on the part of any Lender or the Issuing Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or
the Issuing Lender’s right to demand such compensation; provided that
the Borrower shall not be required to compensate a Lender or the Issuing Lender
pursuant to this Section for any increased costs incurred or reductions
suffered more than one hundred eighty (180) days prior to the date that such
Lender or the Issuing Lender, as the case may be, notifies the Borrower of the
Change in Law giving rise to such increased costs or reductions and of such
Lender’s or the Issuing Lender’s intention to claim compensation therefor
(except that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the one hundred eighty (180) day period
referred to above shall be extended to include the period of retroactive effect
thereof).


 


SECTION 4.11                    Taxes.


 


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


 


(b)                                 Payment of Other Taxes by the Borrower. Without limiting the provisions of paragraph
(a) above, the Borrower shall timely pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.


 


(c)                                  Indemnification by the Borrower. The Borrower shall indemnify the Administrative
Agent, each Lender and the Issuing Lender, within ten (10) Business Days after
demand therefore (accompanied by reasonable evidence thereof), for the full amount
of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
paid by the Administrative Agent, such Lender or the Issuing Lender, as the
case may be, and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority.  A certificate as
to the amount of such payment or liability delivered to the Borrower by a
Lender or the Issuing Lender (with a copy to the Administrative Agent), or by 


 


37





















 


the Administrative Agent on its own behalf or
on behalf of a Lender or the Issuing Lender, shall be presumed correct absent
manifest error.


 


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


 


(e)                                  Status of Lenders. Any Foreign Lender that is entitled to an exemption
from or reduction of withholding tax under the law of the jurisdiction in which
the Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any other
Loan Document shall deliver to the Borrower (with a copy to the Administrative
Agent), at the time or times prescribed by Applicable Law or reasonably
requested by the Borrower or the Administrative Agent, such properly completed
and executed documentation prescribed by Applicable Law as will permit such
payments to be made without withholding or at a reduced rate of
withholding.  In addition, any Lender at
the time or times prescribed by Applicable Law or if reasonably requested by the
Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by Applicable Law or reasonably requested by the Borrower or the
Administrative Agent as will enable the Borrower or the Administrative Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements. 
Without limiting the generality of the foregoing, in the event that the
Borrower is a resident for tax purposes in the United States, any Foreign
Lender shall deliver to the Borrower and the Administrative Agent (in such
number of copies as shall be requested by the recipient) on or prior to the
date on which such Foreign Lender becomes a Lender under this Agreement (and
from time to time thereafter upon the request of the Borrower or the
Administrative Agent, but only if such Foreign Lender is legally entitled to do
so), whichever of the following is applicable:


 


(i)                                     duly completed copies of Internal Revenue Service
Form W-8BEN claiming the benefits of the portfolio interest exemption pursuant
to subsection (iii) below or eligibility for benefits of an income tax
treaty to which the United States is a party,


 


(ii)                                  duly completed copies of Internal Revenue Service
Form W-8ECI,


 


(iii)                               in the case of a Foreign Lender claiming the
benefits of the exemption for portfolio interest under section 881(c) of
the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a
“bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10
percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B)
of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C)
of the Code and (y) duly completed copies of Internal Revenue Service Form
W-8BEN, or


 


(iv)                              any other form prescribed by Applicable Law as a
basis for claiming exemption from or a reduction in United States Federal
withholding tax duly completed together with such supplementary documentation
as may be prescribed by applicable law to permit the Borrower to determine the
withholding or deduction required to be made.


 


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(f)                                    Treatment of Certain Refunds. If the Administrative Agent, a Lender or the
Issuing Lender determines, in its reasonable discretion, that it has received a
refund of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section, it shall pay to the Borrower an amount equal to such
refund (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrower under this Section with respect to the Taxes
or Other Taxes giving rise to such refund), net of all out-of-pocket expenses
of the Administrative Agent, such Lender or the Issuing Lender, as the case may
be, and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund); provided that the
Borrower, upon the request of the Administrative Agent, such Lender or the
Issuing 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, such Lender or the Issuing Lender in
the event the Administrative Agent, such Lender or the Issuing Lender is
required to repay such refund to such Governmental Authority.  This paragraph shall not be construed to
require the Administrative Agent, any Lender or the Issuing Lender to make
available its tax returns (or any other information relating to its taxes which
it deems confidential) to the Borrower or any other Person.


 


(g)                                 Survival.  Without prejudice to the survival of any
other agreement of the Borrower hereunder, the agreements and obligations of
the Borrower contained in this Section shall survive the payment in full
of the Obligations and the termination of the Commitments.


 


SECTION 4.12                    Mitigation
Obligations; Replacement of Lenders.


 


(a)                                  Designation of a Different Lending Office. If any Lender requests compensation under Section 4.10,
or requires the Borrower to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 4.11,
then such Lender shall use reasonable efforts to designate a different Lending
Office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 4.10 or Section 4.11,
as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.


 


(b)                                 Replacement of Lenders.  If any
Lender requests compensation under Section 4.10, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental Authority
for the account of any Lender pursuant to Section 4.11, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrower
may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 13.11), all of its interests, rights
and obligations under this Agreement and the related Loan Documents to an
assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that


 


39





















 


(i)                                     the Borrower shall have paid to the
Administrative Agent the assignment fee specified in Section 13.11(b)(iv),


 


(ii)                                  such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in
Letters of Credit, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any
amounts under Section 4.9) from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts),


 


(iii)                               in the case of any such assignment resulting from
a claim for compensation under Section 4.10 or payments required to
be made pursuant to Section 4.11, such assignment will result in a
reduction in such compensation or payments thereafter, and


 


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


 


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


 


SECTION 4.13                    Security.  The Obligations of the
Borrower shall be secured as provided in the Security Documents.


 


ARTICLE V


 


CLOSING; CONDITIONS OF CLOSING AND BORROWING


 


SECTION 5.1                          Closing.  The closing shall take place at the offices
of Kennedy Covington Lobdell & Hickman, L.L.P. at 10:00 a.m. on December 22,
2004, or on such other place, date and time as the parties hereto shall
mutually agree.


 


SECTION 5.2                          Conditions to Closing
and Initial Extensions of Credit.  The
obligation of the Lenders to close this Agreement and to make the initial Loan
or issue or participate in the initial Letter of Credit, if any, is subject to
the satisfaction of each of the following conditions:


 


(a)                                  Executed Loan
Documents.  This Agreement, a
Revolving Credit Note in favor of each Lender requesting a Revolving Credit
Note, a Swingline Note in favor of the Swingline Lender (if requested thereby),
the Parental Entity Guaranty Agreement, the Subsidiary Guaranty Agreement, the
Security Documents, together with any other applicable Loan Documents, shall
have been duly authorized, executed and delivered to the Administrative Agent
by the parties thereto, shall be in full force and effect and no Default or
Event of Default shall exist hereunder or thereunder.


 


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(b)                                 Closing
Certificates; Etc.  The
Administrative Agent shall have received each of the following in form and
substance reasonably satisfactory to the Administrative Agent:


 


(i)                                     Officer’s
Certificate of the Borrower and Parent. 
A certificate from a Responsible Officer of each of the Borrower and the
Parent to the effect that all representations and warranties of the Credit
Parties contained in this Agreement and the other Loan Documents are true,
correct and complete; that none of the Credit Parties is in violation of any of
the covenants contained in this Agreement and the other Loan Documents; that,
after giving effect to the transactions contemplated by this Agreement, no
Default or Event of Default has occurred and is continuing; and that each of
the Credit Parties, as applicable, has satisfied each of the conditions set
forth in Section 5.2 and Section 5.3.


 


(ii)                                  Certificate of
Responsible Officer of each Credit Party. 
A certificate of a Responsible Officer of each Credit Party certifying
as to the incumbency and genuineness of the signature of each officer of such
Credit Party executing Loan Documents to which it is a party and certifying
that attached thereto is a true, correct and complete copy of (A) the articles
or certificate of incorporation or formation of such Credit Party and all
amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of incorporation or formation, (B) the
bylaws or other governing document of such Credit Party as in effect on the
Closing Date, (C) resolutions duly adopted by the board of directors or other
governing body of such Credit Party authorizing the transactions contemplated
hereunder and the execution, delivery and performance of this Agreement and the
other Loan Documents to which it is a party, and (D) each certificate required
to be delivered pursuant to Section 5.2(b)(iii).


 


(iii)                               Certificates of Good
Standing.  Certificates as of a
recent date of the good standing or status of each Credit Party under the laws
of its jurisdiction of organization and, to the extent requested by the
Administrative Agent, each other jurisdiction where such Credit Party is
qualified to do business and, to the extent available, a certificate of the
relevant taxing authorities of such jurisdictions certifying that such Credit
Party has filed required tax returns and owes no delinquent taxes.


 


(iv)                              Opinions of Counsel.  Favorable opinions of counsel to the Credit
Parties addressed to the Administrative Agent and the Lenders with respect to
the Credit Parties, the Loan Documents and such other matters as the Lenders
shall request, each in form and substance satisfactory to the Administrative
Agent.


 


(v)                                 Tax Forms.  Copies of the United States Internal Revenue
Service forms required by Section 4.11(e).


 


(c)                                  Personal
Property Collateral.


 


(i)                                     Filings
and Recordings.  The Administrative
Agent shall have received all filings and recordations that are necessary to
perfect the security interests of the Administrative Agent, on behalf of itself
and the Lenders, in the Collateral shall have been received by the
Administrative Agent and the Administrative Agent shall have received evidence


 


41





















 


and evidence reasonably satisfactory to the Administrative Agent that
upon such filings and recordations such security interests constitute valid and
perfected first priority Liens thereon.


 


(ii)                                  Pledged
Collateral.  The Administrative Agent
shall have received original stock certificates or other certificates
evidencing the Capital Stock pledged pursuant to the Security Documents,
together with an undated stock power for each such certificate duly executed in
blank by the registered owner thereof.


 


(iii)                               Lien
Search. The Administrative Agent shall have received (A) the results
of a Lien search (including a search as to judgments, pending litigation and
tax matters), in form and substance reasonably satisfactory thereto, made
against the Credit Parties under the Uniform Commercial Code (or applicable
judicial docket) as in effect in Delaware and Texas, indicating among other
things that its assets are free and clear of any Lien except for Permitted
Liens and (B) the results of a Lien search (but not including a search as
to judgments, pending litigation and tax matters), in form and substance
reasonably satisfactory to the Administrative Agent, made against the Credit
Parties under the Uniform Commercial Code as in effect in the states listed on Schedule 5.2(c)(iii),
indicating among other things that its assets are free and clear of any Lien
except for Permitted Liens.


 


(iv)                              Hazard
and Liability Insurance.  The
Administrative Agent shall have received certificates of property hazard,
business interruption and liability insurance, evidence of payment of all
insurance premiums for the current policy year of each (naming the
Administrative Agent as loss payee on all certificates for property hazard
insurance as to inventory only and as additional insured on all certificates
for liability insurance), and, if requested by the Administrative Agent, copies
(certified by a Responsible Officer) of insurance policies otherwise in form
and substance reasonably satisfactory to the Administrative Agent.


 


(d)                                 Consents;
Defaults.


 


(i)                                     Governmental
and Third Party Approvals.  The
Credit Parties shall have received all material governmental, shareholder and
third party consents and approvals necessary (or any other material consents as
determined in the reasonable discretion of the Administrative Agent) in
connection with the transactions contemplated by this Agreement and the other
Loan Documents and the other transactions contemplated hereby and all
applicable waiting periods shall have expired without any action being taken by
any Person that could reasonably be expected to restrain, prevent or impose any
material adverse conditions on any of the Credit Parties or such other
transactions or that could seek or threaten any of the foregoing, and no law or
regulation shall be applicable which in the reasonable judgment of the
Administrative Agent could reasonably be expected to have such effect.


 


(ii)                                  No Injunction,
Etc.  No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any Governmental Authority to enjoin, restrain, or prohibit,
or to obtain substantial damages in respect of, or which is related to or
arises out of this Agreement or the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby, or which, in the
Administrative Agent’s sole discretion, would make it inadvisable to consummate
the


 


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transactions contemplated by this Agreement or the other Loan Documents
or the consummation of the transactions contemplated hereby or thereby.


 


(e)                                  Financial Matters.


 


(i)                                     Financial
Statements.  The Administrative Agent
shall have received the most recent audited Consolidated financial statements
of the Parent and its Subsidiaries, all in form and substance satisfactory to
the Administrative Agent and prepared in accordance with GAAP.


 


(ii)                                  Financial
Condition Certificate.  The Parent
and the Borrower shall have delivered to the Administrative Agent a
certificate, in form and substance satisfactory to the Administrative Agent,
and certified as accurate by a Responsible Officer of each entity, that
(A) each Credit Party and each Subsidiary thereof is Solvent, (B) the
payables of each Credit Party and each Subsidiary thereof are current and not
past due (except to the extent consistent with its customary past practice),
(C) attached thereto are calculations evidencing compliance with the covenants
contained in Article IX hereof (utilizing the financial statements
of the Credit Parties and their Subsidiaries for the quarter under September 30,
2004), (D) the financial projections previously delivered to the
Administrative Agent represent the good faith estimates (utilizing reasonable
assumptions) of the financial condition and operations of the Credit Parties
and their Subsidiaries and (E) attached thereto is a calculation of the
Applicable Margin.


 


(iii)                               Financial Projections.  The Administrative Agent shall have received
financial projections with respect to the Credit Parties and their Subsidiaries
for the five (5) years following the Closing Date prepared by a Responsible
Officer of the Parent, in form reasonably satisfactory to the Administrative
Agent, of balance sheets, income statements and cash flow statements.


 


(iv)                              Payment at Closing;
Fee Letters. The Borrower shall have paid to the Administrative Agent and
the Lenders the fees set forth or referenced in Section 4.3 and any
other accrued and unpaid fees or commissions due hereunder (including legal
fees and expenses) and to any other Person such amount as may be due thereto in
connection with the transactions contemplated hereby, including all taxes, fees
and other charges in connection with the execution, delivery, recording, filing
and registration of any of the Loan Documents.


 


(f)                                    Miscellaneous.


 


(i)                                     Notice of
Borrowing.  The Administrative Agent
shall have received a Notice of Borrowing from the Borrower in accordance with Section 2.3(a)
and a Notice of Account Designation specifying the account or accounts to which
the proceeds of any Loans made after the Closing Date are to be disbursed.


 


(ii)                                  Due Diligence.  The Administrative Agent shall have
completed, to its satisfaction, all legal due diligence with respect to the
Credit Parties and their Subsidiaries in scope and determination satisfactory
to the Administrative Agent in its sole discretion.


 


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(iii)                               Existing Facility.  The Existing Facility shall be repaid in full
and terminated and all collateral security therefor shall be released, and the
Administrative Agent shall have received a pay-off letter in form and substance
satisfactory to it evidencing such repayment, termination, reconveyance and
release.


 


(iv)                              Other Documents.  All opinions, certificates and other instruments
and all proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the Administrative
Agent.  The Administrative Agent shall
have received copies of all other documents, certificates and instruments
reasonably requested thereby, with respect to the transactions contemplated by
this Agreement.


 


SECTION 5.3                          Conditions to All
Extensions of Credit.  The
obligations of the Lenders to make any Extensions of Credit (including the
initial Extension of Credit), convert or continue any Loan pursuant to Section 4.2,
and/or the Issuing Lender to issue or extend any Letter of Credit are subject
to the satisfaction of the following conditions precedent on the relevant
borrowing, continuation, conversion, issuance or extension date:


 


(a)                                  Continuation of
Representations and Warranties.  The
representations and warranties contained in Article VI shall be
true and correct on and as of such borrowing, continuation, conversion,
issuance or extension date with the same effect as if made on and as of such
date, except for any representation and warranty made as of an earlier date,
which representation and warranty shall remain true and correct as of such
earlier date.


 


(b)                                 No Existing Default.  No Default or Event of Default shall have
occurred and be continuing (i) on the borrowing, continuation or conversion
date with respect to such Loan or after giving effect to the Loans to be made,
continued or converted on such date or (ii) on the issuance or extension date
with respect to such Letter of Credit or after giving effect to the issuance or
extension of such Letter of Credit on such date.


 


(c)                                  Notices.  The Administrative Agent shall have received
a Notice of Borrowing or Notice of Conversion/Continuation, as applicable, from
the Borrower in accordance with Section 2.3(a) or Section 4.2,
as applicable.


 


ARTICLE VI


 


REPRESENTATIONS AND WARRANTIES OF THE
BORROWER


 


SECTION 6.1                          Representations
and Warranties.  To induce the
Administrative Agent and Lenders to enter into this Agreement and to induce the
Lenders to make Extensions of Credit, each of the Borrower, the Parent and
Holdings hereby represents and warrants to the Administrative Agent and Lenders
as of the Closing Date and as of each date that representations and warranties
are required to be brought down pursuant to this Agreement and the other Loan
Documents that:


 


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(a)                                  Organization;
Power; Qualification.  Each Credit
Party and each Subsidiary thereof is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation, has the power and authority to own its properties and to carry on
its business as now being conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization except
where the failure to be qualified or authorized, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.  The jurisdictions in which each
Credit Party and each Subsidiary thereof are organized and qualified to do
business as of the Closing Date are described on Schedule 6.1(a).


 


(b)                                 Ownership.  Each Subsidiary of the Parent as of the
Closing Date is listed on Schedule 6.1(b).  As of the Closing Date, the capitalization of
the Parent and each Subsidiary thereof consists of the number of shares (or
other ownership interests), authorized, issued and outstanding, of such classes
and series, with or without par value, described on Schedule 6.1(b).  All outstanding shares (or other ownership
interests) have been duly authorized and validly issued and are fully paid and
nonassessable, with no personal liability attaching to the ownership thereof,
and not subject to any preemptive or similar rights.  The equityholders of the Subsidiaries of the
Parent and the number of shares (or other ownership interests) owned by each as
of the Closing Date are described on Schedule 6.1(b).  As of the Closing Date, there are no
outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are
convertible into, exchangeable for or otherwise provide for or permit the
issuance of Capital Stock of any Credit Party or its Subsidiaries, except as
described on Schedule 6.1(b).


 


(c)                                  Authorization of
Agreement, Loan Documents and Borrowing. Each Credit Party and each
Subsidiary thereof has the right, power and authority and has taken all
necessary corporate or other entity action to authorize the execution, delivery
and performance of this Agreement and each of the other Loan Documents to which
it is a party.  This Agreement and each
of the other Loan Documents have been duly executed and delivered by the duly
authorized officers of each Credit Party and each Subsidiary thereof that is a
party thereto, and each such document constitutes the legal, valid and binding
obligation of each Credit Party and each Subsidiary thereof that is a party
thereto, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors’ rights in general and the
availability of equitable remedies.


 


(d)                                 Compliance of
Agreement, Loan Documents and Borrowing with Laws, Etc.


 


(i) The execution,
delivery and performance by each Credit Party and each Subsidiary thereof of
the Loan Documents to which each such Person is a party, in accordance with
their respective terms, the Extensions of Credit hereunder and the transactions
contemplated hereby do not and will not, by the passage of time, the giving of
notice or otherwise, (i) require any Governmental Approval or violate any
Applicable Law relating to any Credit Party or any Subsidiary thereof, (ii)
conflict with, result in a breach of or constitute a default under the articles
of incorporation, bylaws or other organizational documents of any Credit Party
or any Subsidiary thereof or any indenture, agreement or other instrument to
which such Person is a party or by


 


45





















 


which any of its properties may be bound or any Governmental Approval
relating to such Person, (iii) result in or require the creation or imposition
of any Lien upon or with respect to any property now owned or hereafter
acquired by such Person other than Liens arising under the Loan Documents or
(iv) require any consent or authorization of, filing with, or other act in
respect of, an arbitrator or Governmental Authority and no consent of any other
Person is required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.


 


(ii)                                  None
of the Borrower, Subsidiary of a Borrower, or any Affiliate of the Borrower or
any Guarantor:  (i) is a person named on
the list of Specially Designated Nationals or Blocked Persons maintained by the
U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”)
available at http://www.treas.gov/offices/eotffc/ofac/sdn/index.html. or as otherwise published from time to time; or (ii) is (A) an
agency of the government of a country, (B) an organization controlled by a
country, or (C) a person resident in a country that is subject to a sanctions
program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html.
or as otherwise published from time to time, as such program
may be applicable to such agency, organization or person; or (iii) does
business in such country or with any such agency, organization or person, in
violation of the economic sanctions of the United States administered by OFAC.


 


(e)                                  Compliance with
Law; Governmental Approvals.  Each
Credit Party and each Subsidiary thereof (i) has all Governmental Approvals
required by any Applicable Law for it to conduct its business, each of which is
in full force and effect, is final and not subject to review on appeal and is
not the subject of any pending or, to the best of its knowledge, threatened
attack by direct or collateral proceeding except where the failure to so comply
with the foregoing, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect (ii) is in compliance with each
Governmental Approval applicable to it and in compliance with all other Applicable
Laws relating to it or any of its respective properties except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect and (iii) has timely filed all
material reports, documents and other materials required to be filed by it
under all Applicable Laws with any Governmental Authority and has retained all
material records and documents required to be retained by it under Applicable
Law, except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.


 


(f)                                    Tax Returns and
Payments.  Each Credit Party and each
Subsidiary thereof has duly filed or caused to be filed all federal, state,
local and other tax returns required by Applicable Law to be filed, and has
paid, or made adequate provision for the payment of, all federal, state, local
and other taxes, assessments and governmental charges or levies upon it and its
property, income, profits and assets which are due and payable.  Such returns accurately reflect in all
material respects all liability for Taxes of each Credit Party and each
Subsidiary thereof for the periods covered thereby.  There is no ongoing audit or examination or,
to the knowledge of the Parent, Holdings and the Borrower, other investigation
by any Governmental Authority of the tax liability of any Credit Party or any
Subsidiary thereof in each case, except as could not reasonably be expected to
have a liability in excess of $5,000,000. 
No Governmental Authority has asserted any Lien or other claim against
any Credit Party or any Subsidiary thereof


 


46





















 


with respect to unpaid taxes which has not been discharged or resolved
except to the extent contemplated in Section 10.2(a).  The charges, accruals and reserves on the
books of each Credit Party and each Subsidiary thereof in respect of federal,
state, local and other Taxes for all Fiscal Years and portions thereof since
the organization of such Person are in the judgment of the Parent, Holdings and
the Borrower adequate, and the Parent, Holdings and the Borrower do not
anticipate any additional material Taxes or assessments for any of such years.


 


(g)                                 Intellectual
Property Matters.  Each Credit Party
and each Subsidiary thereof owns or possesses rights to use all franchises,
licenses, copyrights, copyright applications, patents, patent rights or
licenses, patent applications, trademarks, trademark rights, service mark,
service mark rights, trade names, trade name rights, copyrights and rights with
respect to the foregoing which are required to conduct its business, except as
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.  No event has
occurred which permits, or after notice or lapse of time or both would permit,
the revocation or termination of any such rights, and no Credit Party or any
Subsidiary thereof is liable to any Person for infringement under Applicable
Law with respect to any such rights as a result of its business operations
except any such revocation, termination or liability as could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.


 


(h)                                 Environmental
Matters.


 


(i)                                     The properties
owned, leased or operated by each Credit Party and each Subsidiary thereof now
or in the past do not contain, and to their knowledge have not previously
contained, any Hazardous Materials in amounts or concentrations which (A)
constitute or constituted a violation of applicable Environmental Laws or (B)
could give rise to liability under applicable Environmental Laws, except where
such violation or liability could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect;


 


(ii)                                  Each Credit Party,
each Subsidiary thereof and such properties and all operations conducted in
connection therewith are in compliance, and have been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under or about
such properties or such operations which could interfere with the continued
operation of such properties or impair the fair saleable value thereof, except
for any such noncompliance or contamination, that could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;


 


(iii)                               No Credit Party or any
Subsidiary thereof has received any notice of violation, alleged violation,
non-compliance, liability or potential liability under any Environmental Laws
or regarding or relating to Hazardous Materials, nor does any Credit Party or
any Subsidiary thereof have knowledge or reason to believe that any such notice
is being threatened, except where such violation, alleged violation,
noncompliance, liability or potential liability which is the subject of such
notice could not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect;


 


(iv)                              Hazardous Materials have
not been transported or disposed of to or from the properties owned, leased or
operated by any Credit Party or any Subsidiary thereof in


 


47





















 


violation of, or in a manner or to a location which could give rise to
liability under, Environmental Laws, nor have any Hazardous Materials been
generated, treated, stored or disposed of at, on or under any of such
properties in violation of, or in a manner that could give rise to liability
under, any applicable Environmental Laws, except where such violation or
liability could not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect;


 


(v)                                 No judicial
proceedings or governmental or administrative action is pending, or, to the
knowledge of the Parent, Holdings and the Borrower, threatened, under any
Environmental Law to which any Credit Party or any Subsidiary thereof is or
will be named as a potentially responsible party with respect to such
properties or operations conducted in connection therewith, nor are there any
consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding
under any Environmental Law with respect to any Credit Party, any Subsidiary
thereof or such properties or such operations, except where such proceeding,
action, degree, order or other requirement could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect; and


 


(vi)                              There has been no
release, or to the knowledge of the Parent, Holdings and the Borrower, threat
of release, of Hazardous Materials at or from properties owned, leased or
operated by any Credit Party or any Subsidiary thereof, now or in the past, in
violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws, except where such violation or liability could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.


 


(i)                                     ERISA.


 


(i)                                     As of the Closing
Date, no Credit Party or any ERISA Affiliate maintains or contributes to, or
has any obligation under, any Pension Plans or Multiemployer Plans that are
subject to Title IV of ERISA other than those identified on Schedule 6.1(i);


 


(ii)                                  Each Credit Party and
each ERISA Affiliate is in material compliance with all applicable provisions
of ERISA and the regulations and published interpretations thereunder with
respect to all Employee Benefit Plans except for any required amendments for
which the remedial amendment period as defined in Section 401(b) of the
Code has not yet expired and except where a failure to so comply could not
reasonably be expected to have a Material Adverse Effect.  Each Employee Benefit Plan that is intended
to be qualified under Section 401(a) of the Code has been determined by
the Internal Revenue Service to be so qualified, and each trust related to such
plan has been determined to be exempt under Section 501(a) of the Code
except for such plans that have not yet received determination letters but for
which the remedial amendment period for submitting a determination letter has not
yet expired.  No liability has been
incurred by any Credit Party or any ERISA Affiliate which remains unsatisfied
for any taxes or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan except for a liability that could not reasonably be expected
to have a Material Adverse Effect;


 


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(iii)                               As of the Closing Date,
no Pension Plan has been terminated, in a distress termination under Section 4041(c)
of ERISA, no accumulated funding deficiency (as defined in Section 412 of
the Code) has been incurred by a Pension Plan as of the close of the most
recently completed fiscal year of the Pension Plan (without regard to any
waiver granted under Section 412 of the Code), no funding waiver from the
Internal Revenue Service has been received or requested with respect to any
Pension Plan, nor has any Credit Party or any ERISA Affiliate failed to make
any contributions or to pay any amounts due and owing as required by Section 412
of the Code, Section 302 of ERISA or the terms of any Pension Plan prior
to the due dates of such contributions under Section 412 of the Code or Section 302
of ERISA, nor has there been any event requiring any disclosure under Section 4041(c)(3)(C)
or 4063(a) of ERISA with respect to any Pension Plan;


 


(iv)                              Except as could not
reasonably be expected to have a Material Adverse Effect, no Credit Party or
any ERISA Affiliate has:  (A) engaged in
a nonexempt prohibited transaction described in Section 406 of the ERISA
or Section 4975 of the Code, (B) incurred any liability to the PBGC which
remains outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid, (C) failed to make a required contribution
or payment to a Multiemployer Plan, or (D) failed to make a required
installment or other required payment under Section 412 of the Code;


 


(v)                                 No Termination Event
has occurred or is reasonably expected to occur; and


 


(vi)                              Except as could not
reasonably be expected to have a Material Adverse Effect, no proceeding, claim
(other than a benefits claim in the ordinary course of business), lawsuit
and/or investigation is existing or, to the best knowledge of the Parent,
Holdings and the Borrower after due inquiry, threatened concerning or involving
any (A) employee welfare benefit plan (as defined in Section 3(1) of
ERISA) currently maintained or contributed to by any Credit Party or any ERISA
Affiliate, (B) Pension Plan or (C) Multiemployer Plan.


 


(j)                                     Margin Stock.  No Credit Party or any Subsidiary thereof is
engaged principally or as one of its activities in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” (as
each such term is defined or used, directly or indirectly, in Regulation U of
the Board of Governors of the Federal Reserve System).  No part of the proceeds of any of the Loans
or Letters of Credit will be used for purchasing or carrying margin stock or
for any purpose which violates, or which would be inconsistent with, the
provisions of Regulation T, U or X of such Board of Governors.


 


(k)                                  Government
Regulation.  No Credit Party or any
Subsidiary thereof is an “investment company” or a company “controlled” by an “investment
company” (as each such term is defined or used in the Investment Company Act of
1940, as amended) and no Credit Party or any Subsidiary thereof is, or after
giving effect to any Extension of Credit will be, subject to regulation under
the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act,
each as amended, or any other Applicable Law which limits its ability to incur
or consummate the transactions contemplated hereby.


 


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(l)                                     Material
Contracts.  Schedule 6.1(l)
sets forth a complete and accurate list of all Material Contracts of the Credit
Parties and the Subsidiaries thereof in effect as of the Closing Date not
listed on any other Schedule hereto; other than as set forth in Schedule 6.1(l),
each such Material Contract is, and after giving effect to the consummation of
the transactions contemplated by the Loan Documents will be, in full force and
effect in accordance with the terms thereof. 
The Credit Parties and their Subsidiaries have delivered to the Administrative
Agent a true and complete copy of each Material Contract required to be listed
on Schedule 6.1(l) or any other Schedule hereto.  No Credit Party or any Subsidiary thereof
(nor, to the knowledge of the Parent, Holdings and the Borrower, any other
party thereto) is in breach of or in default under any Material Contract in any
material respect.


 


(m)                               Employee Relations.
Except as could not reasonably be expected to have a Material Adverse Effect,
each Credit Party and its Subsidiaries has a stable work force in place and is
not, as of the Closing Date, party to any collective bargaining agreement nor
has any labor union been recognized as the representative of its employees
except as set forth on Schedule 6.1(m).  None of the Parent, Holdings and the Borrower
knows of any pending, threatened or contemplated strikes, work stoppage or
other collective labor disputes involving its employees or those of its
Subsidiaries.


 


(n)                                 Burdensome
Provisions.  No Credit Party or any
Subsidiary thereof is a party to any indenture, agreement, lease or other instrument,
or subject to any corporate or partnership restriction, Governmental Approval
or Applicable Law which is so unusual or burdensome as in the foreseeable
future could be reasonably expected to have a Material Adverse Effect.  The Credit Parties and their Subsidiaries do
not presently anticipate that future expenditures needed to meet the provisions
of any statutes, orders, rules or regulations of a Governmental Authority will
be so burdensome as to have a Material Adverse Effect.  No Subsidiary of the Borrower is party to any
agreement or instrument or otherwise subject to any restriction or encumbrance
that restricts or limits its ability to make dividend payments or other
distributions in respect of its Capital Stock to the Borrower or any Subsidiary
thereof or to transfer any of its assets or properties to the Borrower or any
other Subsidiary thereof in each case other than existing under or by reason of
the Loan Documents or Applicable Law.


 


(o)                                 Financial
Statements.  The (i) audited
Consolidated balance sheet of the Parent and its Subsidiaries as of December 31,
2003 and the related audited statements of income, shareholder’s equity and
cash flows for the Fiscal Year then ended and (ii) unaudited Consolidated
balance sheet of the Parent and its Subsidiaries as of September 30, 2004
and related unaudited interim statements of income and cash flows, copies of
which have been furnished to the Administrative Agent and each Lender, are
complete and correct and fairly present in all material respects on a
Consolidated basis the assets, liabilities and financial position of the Parent
and its Subsidiaries as at such dates, and the results of the operations and
changes of financial position for the periods then ended (other than customary
year-end adjustments for unaudited financial statements).  All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with
GAAP.  The Credit Parties and their
Subsidiaries have no Indebtedness, obligation or other unusual forward or long-term


 


50





















 


commitment which is not fairly reflected in the foregoing financial
statements or in the notes thereto.


 


(p)                                 No Material Adverse
Change.  Since September 30,
2004, there has been no material adverse change in the properties, business,
operations or financial condition of the Credit Parties and their Subsidiaries
and no event has occurred or condition arisen that could reasonably be expected
to have a Material Adverse Effect.


 


(q)                                 Solvency.  As of the Closing Date and after giving
effect to each Extension of Credit made hereunder, each Credit Party and each
Subsidiary thereof will be Solvent.


 


(r)                                    Titles to
Properties.  Each Credit Party and
each Subsidiary thereof has such title to or a valid leasehold in such real
property as is necessary or desirable to the conduct of its business and has
valid and legal title to all of its personal property and assets, including
those reflected on the balance sheets of the Parent and its Subsidiaries
delivered pursuant to Section 6.1(o), except such property that has
been disposed of by a Credit Party subsequent to such date which dispositions
have been in the ordinary course of business or as otherwise expressly
permitted hereunder.


 


(s)                                  Liens.  None of the properties and assets of any
Credit Party or any Subsidiary thereof is subject to any Lien, except Permitted
Liens.  No financing statement under the
Uniform Commercial Code of any state which names any Credit Party or any
Subsidiary thereof or any of their respective trade names or divisions as
debtor and which has not been terminated, has been filed in any state or other
jurisdiction and no Credit Party or any Subsidiary thereof has signed any such
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except to perfect those
Permitted Liens.


 


(t)                                    Indebtedness and
Guaranty Obligations.  Schedule 6.1(t)
is a complete and correct listing of all Indebtedness and Guaranty Obligations
of the Credit Parties and their Subsidiaries to any Person as of the Closing
Date in excess of $5,000,000.  The Credit
Parties and their Subsidiaries have performed and are in compliance with all of
the terms of such Indebtedness and Guaranty Obligations and all instruments and
agreements relating thereto, and no default or event of default, or event or
condition which with notice or lapse of time or both would constitute such a
default or event of default on the part of any Credit Party or any of its Subsidiaries
exists with respect to any such Indebtedness or Guaranty Obligation.


 


(u)                                 Litigation.
Except for matters existing on the Closing Date and set forth on Schedule 6.1(u),
there are no actions, suits or proceedings pending nor, to the knowledge of the
Parent, Holdings and the Borrower, threatened against or in any other way
relating adversely to or affecting any Credit Party or any Subsidiary thereof
or any of their respective properties in any court or before any arbitrator of
any kind or before or by any Governmental Authority that (a) purport to
affect or pertain to this Agreement or any other Loan Document, or any of the
transactions provided for herein or therein, or (b) either individually or
in the aggregate could reasonably be expected to have a Material Adverse
Effect.


 


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(v)                                 Absence of Defaults.  No event has occurred and is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a
default or event of default by any Credit Party or any Subsidiary thereof under
any Material Contract or judgment, decree or order to which any Credit Party or
its Subsidiaries is a party or by which any Credit Party or its Subsidiaries or
any of their respective properties may be bound or which would require any
Credit Party or its Subsidiaries to make any payment thereunder prior to the
scheduled maturity date therefor.


 


(w)                               Senior Indebtedness
Status.  The Obligations of each
Credit Party and each Subsidiary thereof under this Agreement and each of the
other Loan Documents ranks and shall continue to rank at least senior in
priority of payment to all Subordinated Indebtedness of each such Person and is
designated as “Senior Indebtedness” under all instruments and documents, now or
in the future, relating to all Subordinated Indebtedness and all senior
unsecured Indebtedness of such Person.


 


(x)                                   Accuracy and
Completeness of Information.  All
written information, reports and other papers and data produced by or on behalf
of any Credit Party or any Subsidiary thereof (other than financial
projections, which shall be subject to the standard set forth in Section 7.1(c))
and furnished to the Lenders were, at the time the same were so furnished,
complete and correct in all material respects to the extent necessary to give
the recipient a true and accurate knowledge of the subject matter.


 


(y)                                 Disclosure.  The Parent, Holdings and the Borrower have
disclosed to the Administrative Agent and the Lenders all agreements,
instruments and corporate or other restrictions to which any of the Credit
Parties and their Subsidiaries are subject, and all other matters known to it
that could reasonably be expected to result in a Material Adverse Effect; provided
that for purposes of compliance with this sentence after the Closing Date, such
disclosures may be made by the Parent, Holdings and the Borrower by delivery to
the Administrative Agent and the Lenders of the Parent’s appropriate SEC
filings containing such disclosures, or the availability of such filings on
EDGAR Online with notice thereof to the Administrative Agent.  No financial statement, material report,
material certificate or other material information furnished (whether in
writing or orally) by or on behalf of any of the Credit Parties and their
Subsidiaries to the Administrative Agent or any Lender in connection with the
transactions contemplated hereby and the negotiation of this Agreement or
delivered hereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, pro forma financial
information, estimated financial information and other projected or estimated
information, the Parent, Holdings and the Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.


 


SECTION 6.2                          Survival
of Representations and Warranties, Etc.  All representations and warranties set forth
in this Article VI and all representations and warranties contained
in any certificate, or any of the Loan Documents (including, but not limited
to, any such representation or warranty made in or in connection with any
amendment thereto) shall


 


52





















 


constitute representations and warranties made under this
Agreement.  All representations and
warranties made under this Agreement shall be made or deemed to be made at and
as of the Closing Date (except those that are expressly made as of a specific
date), shall survive the Closing Date and shall not be waived by the execution
and delivery of this Agreement, any investigation made by or on behalf of the
Lenders or any borrowing hereunder.


 


ARTICLE VII


 


FINANCIAL INFORMATION AND NOTICES


 


Until all the Obligations have been paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 13.2, the Parent, on
behalf of the Parent, Holdings and the Borrower, will furnish or cause to be
furnished to the Administrative Agent at the Administrative Agent’s Office at
the address set forth in Section 13.1(b) and to the Lenders at
their respective addresses as set forth on the Register, or such other office
as may be designated by the Administrative Agent and Lenders from time to time:


 


SECTION 7.1                          Financial Statements and
Projections.


 


(a)                                  Quarterly
Financial Statements.  As soon as
practicable and in any event within forty-five (45) days (or, if earlier, on
the date of any required public filing thereof) after the end of each fiscal
quarter of each Fiscal Year, an unaudited Consolidated balance sheet of the
Parent and its Subsidiaries as of the close of such fiscal quarter and
unaudited Consolidated statements of income and cash flows for the fiscal
quarter then ended and that portion of the Fiscal Year then ended, including
the notes thereto, all in reasonable detail setting forth in comparative form
the corresponding figures as of the end of and for the corresponding period in
the preceding Fiscal Year and prepared by the Parent in accordance with GAAP
and, if applicable, containing disclosure of the effect on the financial
position or results of operations of any change in the application of
accounting principles and practices during the period, and certified by the
chief financial officer of the Parent to present fairly in all material
respects the financial condition of the Parent and its Subsidiaries on a
Consolidated basis as of their respective dates and the results of operations
of the Parent and its Subsidiaries for the respective periods then ended,
subject to normal year end adjustments. 
Delivery by the Parent to the Administrative Agent and the Lenders of
the Parent’s quarterly report to the SEC on Form 10-Q with respect to any
fiscal quarter, or the availability of such report on EDGAR Online, within the
period specified above shall be deemed to be compliance with this Section 7.1(a).


 


(b)                                 Annual Financial
Statements.  As soon as practicable
and in any event within ninety (90) days (or, if earlier, on the date of any required
public filing thereof) after the end of each Fiscal Year, an audited
Consolidated balance sheet of the Parent and its Subsidiaries as of the close
of such Fiscal Year and audited Consolidated statements of income, shareholder’s
equity, and cash flows for the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures as of the end of and for the preceding Fiscal Year and
prepared in accordance with GAAP and, if applicable, containing disclosure of
the effect on the financial position or results of operations of any change in
the application of accounting principles and practices during the year.  Such annual financial


 


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statements shall be audited by an independent certified public
accounting firm acceptable to the Administrative Agent, and accompanied by a
report thereon by such certified public accountants that is not qualified with
respect to scope limitations imposed by the Parent or any of its Subsidiaries
or with respect to accounting principles followed by the Parent or any of its
Subsidiaries not in accordance with GAAP. 
Delivery by the Parent to the Administrative Agent and the Lenders of
the Parent’s annual report to the SEC on Form 10-K with respect to any Fiscal
Year, or the availability of such report on EDGAR Online, within the period
specified above shall be deemed to be compliance with this Section 7.1(b).


 


(c)                                  Annual Business
Plan and Financial Projections.  As
soon as practicable and in any event within sixty (60) days after the beginning
of each Fiscal Year, a business plan of the Parent and its Subsidiaries for the
ensuing four (4) fiscal quarters, such plan to be prepared in accordance with
GAAP and to include, on a quarterly basis, the following:  a quarterly operating and capital budget, a
projected income statement, statement of cash flows and balance sheet.


 


SECTION 7.2                          Officer’s Compliance Certificate.  At each time financial statements are
delivered pursuant to Sections 7.1(a) or (b) and at such other
times as the Administrative Agent shall reasonably request, an Officer’s
Compliance Certificate.


 


SECTION 7.3                          Intentionally Omitted.


 


SECTION 7.4                          Other Reports.


 


(a)                                  Promptly after
becoming available, copies of each annual report, proxy or financial statement
or other report or communication sent to the stockholders of the Parent
generally, and copies of all annual, regular, periodic and special reports and
registration statements which the Parent may file or be required to file with
the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934,
and not otherwise required to be delivered to the Administrative Agent pursuant
hereto; provided that, delivery of the foregoing shall be deemed to have
been made if made available on Edgar Online or the website of the Parent and
the Parent shall have given notice thereof to Administrative Agent;


 


(b)                                 Promptly upon receipt
thereof, copies of all reports, if any, submitted to any Credit Party, any
Subsidiary thereof or any of their respective boards of directors by its
independent public accountants in connection with their auditing function,
including, without limitation, any management report and any management
responses thereto, if the matters stated in any such reports could reasonably
be expected to have a Material Adverse Effect; and


 


(c)                                  such other
information regarding the operations, business affairs and financial condition
of any Credit Party or any Subsidiary thereof as the Administrative Agent or any
Lender may reasonably request.


 


SECTION 7.5                          Notice of Litigation
and Other Matters.  Prompt (but in no
event later than ten (10) days after an officer of the Parent, Holdings or the
Borrower obtains knowledge thereof) telephonic and written notice of:


 


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(a)                                  the commencement of
all proceedings and investigations by or before any Governmental Authority and
all actions and proceedings in any court or before any arbitrator against or
involving any Credit Party, or any Subsidiary thereof or any of their
respective properties, assets or businesses which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect;


 


(b)                                 any notice of any
violation received by any Credit Party or any Subsidiary thereof from any
Governmental Authority including any notice of violation of Environmental Laws
which in any such case could reasonably be expected to have a Material Adverse
Effect;


 


(c)                                  any labor controversy
that has resulted in, or is reasonably expected to result in, a strike or other
work action against any Credit Party or any Subsidiary thereof which could
reasonably be expected to, individually or in the aggregate with any other
labor controversy, work stoppage or slow down, have a Material Adverse Effect;


 


(d)                                 any attachment,
judgment, lien, levy or order exceeding $10,000,000 (to the extent not covered
by independent third-party insurance as to which the insurer does not dispute
coverage) that may be assessed against or threatened against any Credit Party
or any Subsidiary thereof;


 


(e)                                  any Default or Event
of Default; and


 


(f)                                    (i) any unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of an Employee Benefit Plan under Section 401(a) of the Code
(along with a copy thereof), (ii) all notices received by any Credit Party or
any ERISA Affiliate of the PBGC’s intent to terminate any Pension Plan or to
have a trustee appointed to administer any Pension Plan, (iii) all notices
received by any Credit Party or any ERISA Affiliate from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA and (iv) the Parent, Holdings or the Borrower
obtaining knowledge or reason to know that any Credit Party or any ERISA
Affiliate has filed or intends to file a notice of intent to terminate any
Pension Plan under a distress termination within the meaning of Section 4041(c)
of ERISA.


 


Each notice pursuant to this Section 7.5 shall be
accompanied by a statement of a Responsible Officer of the Parent setting forth
details of the occurrence referred to therein and stating what action the
Parent or any Subsidiary thereof, as applicable, has taken and proposes to take
with respect thereto.  Each notice pursuant
to Section 7.5(e) shall describe with particularity any and all
provisions of this Agreement and any other Loan Document that have been
breached; provided that, delivery of the foregoing notices shall be
deemed to have been made if made available on Edgar Online or the website of
the Parent and the Parent shall have given notice thereof to Administrative
Agent.


 


SECTION 7.6                          Accuracy of Information.  All written information, reports, statements
and other papers and data furnished by or on behalf of the Credit Parties and
their Subsidiaries to the Administrative Agent or any Lender whether pursuant
to this Article VII or


 


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any other provision of this Agreement, or any of the Security
Documents, shall, at the time the same is so furnished, comply with the
representations and warranties set forth in Section 6.1(y).


 


ARTICLE VIII


 


AFFIRMATIVE COVENANTS


 


Until all of the Obligations have been paid
and satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner provided for in Section 13.2, each of the
Parent, Holdings and the Borrower will, and will cause each of its Subsidiaries
to:


 


SECTION 8.1                          Preservation of Corporate
Existence and Related Matters. 
Except as permitted by Section 10.4, preserve and maintain
its separate corporate existence and all rights, franchises, licenses and
privileges necessary to the conduct of its business, and qualify and remain
qualified as a foreign corporation and authorized to do business in each
jurisdiction in which the failure to so qualify could reasonably be expected to
have a Material Adverse Effect.


 


SECTION 8.2                          Maintenance of Property.  In addition to the requirements of any of the
Security Documents, and except as permitted by Section 10.5,
protect and preserve all properties material to its business, including
copyrights, patents, trade names, service marks and trademarks; maintain in
good working order and condition, ordinary wear and tear excepted, all
buildings, equipment and other tangible real and personal property; and from
time to time make or cause to be made all repairs, renewals and replacements
thereof and additions to such property necessary for the conduct of its
business, so that the business carried on in connection therewith may be
conducted in a commercially reasonable manner.


 


SECTION 8.3                          Insurance.  Maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts and with
such deductibles as are customarily maintained by similar businesses (including
hazard and business interruption insurance) and as may be required by
Applicable Law and as are required by any Security Documents, all in form and
substance reasonably satisfactory to the Administrative Agent and the Lenders,
and on the Closing Date and from time to time thereafter deliver to the
Administrative Agent upon its request a detailed list of the insurance then in
effect, stating the names of the insurance companies, the amounts and rates of
the insurance, the dates of the expiration thereof and the properties and risks
covered thereby.


 


SECTION 8.4                          Accounting
Methods and Financial Records. 
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete in all material respects) as may be
required or as may be necessary to permit the preparation of financial
statements in accordance with GAAP and in compliance with the regulations of
any Governmental Authority having jurisdiction over it or any of its
properties.


 


SECTION 8.5                          Payment and
Performance of Obligations.  Pay and
perform all Obligations under this Agreement and the other Loan Documents, and
pay or perform (a) all


 


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taxes, assessments and other governmental charges that may be levied or
assessed upon it or any of its property, and (b) all other indebtedness,
obligations and liabilities in accordance with customary trade practices; provided,
that the relevant Credit Party or Subsidiary may contest any item described in
clauses (a) or (b) of this Section in good faith so long as adequate
reserves are maintained with respect thereto in accordance with GAAP.


 


SECTION 8.6                          Compliance With
Laws and Approvals.  Observe and
remain in compliance in all material respects with all Applicable Laws and
maintain in full force and effect all Governmental Approvals, in each case
applicable to the conduct of its business, except where the failure to so
comply or maintain such Governmental Approval could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.


 


SECTION 8.7                          Environmental
Laws.  In addition to and without
limiting the generality of Section 8.6, (a) comply with, and
ensure such compliance by all tenants and subtenants with all applicable
Environmental Laws and obtain and comply with and maintain, and ensure that all
tenants and subtenants, if any, obtain and comply with and maintain, any and
all licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws, except where the failure to do so could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, (b) conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws, and promptly comply with all lawful orders and directives
of any Governmental Authority regarding Environmental Laws, except where the
failure to conduct or complete such actions, or comply with such orders or
directions, could not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect, and (c) defend, indemnify and hold harmless
the Administrative Agent and the Lenders, and their respective parents,
Subsidiaries, Affiliates, employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the presence
of Hazardous Materials, or the violation of, noncompliance with or liability
under any Environmental Laws applicable to the operations any Credit Party or
any such Subsidiary, or any orders, requirements or demands of Governmental
Authorities related thereto, including reasonable attorney’s and consultant’s
fees, investigation and laboratory fees, response costs, court costs and
litigation expenses, except to the extent that any of the foregoing directly
result from the gross negligence or willful misconduct of the party seeking
indemnification therefor.


 


SECTION 8.8                          Compliance
with ERISA. In addition to and without limiting the generality of Section 8.6,
(a) except where the failure to so comply could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, (i) comply
with all material applicable provisions of ERISA with respect to all Employee
Benefit Plans, (ii) not take any action or fail to take action the result of
which could be a liability to the PBGC or to a Multiemployer Plan, (iii) not
participate in any prohibited transaction that could result in any civil
penalty under ERISA or tax under the Code and (iv) operate each Employee
Benefit Plan in such a manner that will not incur any tax liability under Section 4980B
of the Code or any liability to any qualified beneficiary as defined in Section 4980B
of the Code and (b) furnish to the Administrative Agent upon the Administrative
Agent’s request such additional information


 


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about any Employee Benefit Plan or Multiemployer Plan as may be
reasonably requested by the Administrative Agent.


 


SECTION 8.9                          Compliance
With Agreements.  Comply in all
material respects with each term, condition and provision of all leases,
agreements and other instruments entered into in the conduct of its business
including any Material Contract; provided, that any Credit Party or any
such Subsidiary may contest any such lease, agreement or other instrument in good
faith through applicable proceedings so long as adequate reserves are
maintained in accordance with GAAP.


 


SECTION 8.10                    Visits and Inspections.  Permit, at Lender’s expense (other than upon
the occurrence and during the continuance of an Event of Default),
representatives of the Administrative Agent or any Lender, from time to time,
to visit and inspect its properties; inspect, audit and make extracts from its
books, records and files, including, but not limited to, management letters
prepared by independent accountants; and discuss with its principal officers,
and its independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects; provided that
so long as no Default or Event of Default has occurred and is continuing, the
Administrative Agent or applicable Lender shall give reasonable prior notice to
the applicable Credit Party of its intention to visit and inspect the
properties and records pursuant to this Section .


 


SECTION 8.11                    Additional Subsidiaries.  Within thirty (30) days after any newly
created or acquired Subsidiary of any Credit Party (including as a result of
any Permitted Acquisition) conducts business operations or has assets in excess
of $3,000,000 the Credit Parties shall cause
such Person to (a) become a Guarantor by delivering to the Administrative
Agent a duly executed supplement to the Subsidiary Guaranty Agreement, Parental
Entity Guaranty Agreement or such other document as the Administrative Agent
shall deem appropriate for such purpose, (b) pledge a security interest in
all Collateral owned by such Subsidiary by delivering to the Administrative
Agent a duly executed supplement to each Security Document or such other
document as the Administrative Agent shall deem appropriate for such purpose
and comply with the terms of each Security Document, (c) deliver to the
Administrative Agent such documents and certificates referred to in Section 5.2
as may be reasonably requested by the Administrative Agent, (d) deliver to the
Administrative Agent such original Capital Stock or other certificates and
stock or other transfer powers evidencing the Capital Stock of such Person, (e)
deliver to the Administrative Agent such updated Schedules to the Loan
Documents as requested by the Administrative Agent with respect to such Person,
and (f) deliver to the Administrative Agent such other documents as may be
reasonably requested by the Administrative Agent in furtherance of the
foregoing, all in form, content and scope reasonably satisfactory to the
Administrative Agent.


 


SECTION 8.12                    Use of Proceeds.  The Borrower shall use the proceeds of the
Extensions of Credit (a) to finance the acquisition of Capital Assets,
(b) to finance Permitted Acquisitions, (c) to refinance the Existing
Facility and (d) for working capital and general corporate requirements of
the Credit Parties and their Subsidiaries, including the payment of certain
fees and expenses incurred in connection with the transactions and restricted
payments permitted hereunder.


 


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SECTION 8.13                    Further Assurances.  Make, execute and deliver all such additional
and further acts, things, deeds and instruments as the Administrative Agent or
the Required Lenders (through the Administrative Agent) may reasonably require
to document and consummate the transactions contemplated hereby and to vest
completely in and insure the Administrative Agent and the Lenders their
respective rights under this Agreement, the Letters of Credit and the other Loan
Documents.


 


ARTICLE IX


 


FINANCIAL COVENANTS


 


Until all of the Obligations have been paid
and satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 13.2, the Credit
Parties and their Subsidiaries on a Consolidated basis will not:


 


SECTION 9.1                          Total Leverage
Ratio.  As of any fiscal quarter end,
permit the ratio of (a) Total Indebtedness on such date to (b) EBITDA for the period of four (4) consecutive fiscal quarters
ending on or immediately prior to such date to be greater than 3.00 to 1.0.


 


SECTION 9.2                          Fixed Charge Coverage
Ratio.  As of any fiscal quarter end,
permit the ratio of (a) EBITDAR for the period of four (4) consecutive fiscal
quarters ending on or immediately prior to such date minus Capital
Expenditures made during such period to (b) Fixed Charges for the period of
four (4) consecutive fiscal quarters ending on or immediately prior to such
date to be less than 1.25 to 1.0.


 


SECTION 9.3                          Interest Coverage
Ratio.  As of any fiscal quarter end,
permit the ratio of (a) EBITDA for the period of four (4) consecutive fiscal
quarters ending on or immediately prior to such date to (b) Cash Interest
Expense, net of interest income, for the period of four (4) consecutive fiscal
quarters ending on or immediately prior to such date to be less than 4.00 to
1.0.


 


ARTICLE X


 


NEGATIVE COVENANTS


 


Until all of the Obligations have been paid
and satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 13.2, the Credit
Parties have not and will not and will not permit any of its Subsidiaries to:


 


SECTION 10.1                    Limitations on Indebtedness.  Create, incur, assume or suffer to exist any
Indebtedness except:


 


(a)                                  the Obligations
(excluding Hedging Obligations permitted pursuant to Section 10.1(b));


 


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(b)                                 Indebtedness incurred
in connection with a Hedging Agreement (which are non-speculative) with a
counterparty and upon terms and conditions (including interest rate) reasonably
satisfactory to the Administrative Agent; provided, that any
counterparty that is a Lender or an Affiliate of a Lender shall be deemed
satisfactory to the Administrative Agent;


 


(c)                                  Indebtedness existing
on the Closing Date and not otherwise permitted under this Section, as set
forth on Schedule 6.1(t), and the renewal, refinancing, extension
and replacement (but not the increase in the aggregate principal amount)
thereof;


 


(d)                                 Indebtedness of the
Credit Parties and their Subsidiaries incurred in connection with Capital
Leases plus purchase money Indebtedness of the Credit Parties and their
Subsidiaries in an aggregate amount not to exceed $20,000,000 on any date of
determination;


 


(e)                                  Guaranty
Obligations in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;


 


(f)                                    Guaranty
Obligations with respect to Indebtedness permitted pursuant to subsections (a)
through (e) of this Section;


 


(g)                                 Indebtedness
owed by any Subsidiary to the Borrower, by the Borrower to any Guarantor, by
any Guarantor to the Borrower, or by any Subsidiary to any Guarantor;


 


(h)                                 Subordinated
Indebtedness; provided that in the case of each issuance of Subordinated
Indebtedness, (i) no Default or Event of Default shall have occurred and be
continuing or would be caused by the issuance of such Subordinated Indebtedness
and (ii) the Administrative Agent shall have received satisfactory written
evidence that the Borrower would be in compliance with all covenants contained
in this Agreement on a pro  forma basis after giving effect to the
issuance of any such Subordinated Indebtedness; and


 


(i)                                     unsecured
Indebtedness not otherwise permitted pursuant to this Section; provided
that in the case of each issuance of unsecured Indebtedness, (i) no Default or
Event of Default shall have occurred and be continuing or would be caused by
the issuance of such unsecured Indebtedness, (ii) the Administrative Agent
shall have received satisfactory written evidence that the Credit Parties would
be in compliance with Section 9.1 on a pro  forma
basis after giving effect to the issuance of any such unsecured Indebtedness
and (iii) the terms and conditions of any such unsecured indebtedness shall be
no more restrictive than the terms and conditions hereof and shall otherwise be
reasonably satisfactory to the Administrative Agent; and


 


provided, that no
agreement or instrument with respect to Indebtedness permitted to be incurred
by this Section shall restrict, limit or otherwise encumber (by covenant
or otherwise) the ability of any Credit Party or Subsidiary thereof to make any
payment to the Borrower (in the form of dividends, intercompany advances or
otherwise) for the purpose of enabling the Borrower to pay the Obligations.


 


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SECTION 10.2                    Limitations on Liens.  Create, incur, assume or suffer to exist, any
Lien on or with respect to any of its assets or properties (including, without
limitation, shares of Capital Stock), real or personal, whether now owned or
hereafter acquired, except:


 


(a)                                  Liens for taxes,
assessments and other governmental charges or levies (excluding any Lien
imposed pursuant to any of the provisions of ERISA or Environmental Laws) not
yet due or as to which the period of grace (not to exceed thirty (30) days), if
any, related thereto has not expired or which are being contested in good faith
and by appropriate proceedings if adequate reserves are maintained to the
extent required by GAAP;


 


(b)                                 the claims of
materialmen, mechanics, carriers, warehousemen, processors or landlords for
labor, materials, supplies or rentals incurred in the ordinary course of
business, (i) which are not overdue for a period of more than sixty (60) days
or (ii) which are being contested in good faith and by appropriate proceedings;


 


(c)                                  Liens consisting of
deposits or pledges made in the ordinary course of business in connection with,
or to secure payment of, obligations under workers’ compensation, unemployment
insurance or similar legislation;


 


(d)                                 Liens constituting
encumbrances in the nature of zoning restrictions, easements and rights or
restrictions of record on the use of real property, which in the aggregate are
not substantial in amount and which do not, in any case, detract from the value
of such property or impair the use thereof in the ordinary conduct of business;


 


(e)                                  Liens of the
Administrative Agent for the benefit of the Administrative Agent and the
Lenders;


 


(f)                                    Liens not otherwise
permitted hereunder securing obligations not at any time exceeding in the
aggregate $5,000,000;


 


(g)                                 Liens not otherwise
permitted by this Section and in existence on the Closing Date and
described on Schedule 10.2; and


 


(h)                                 Liens securing
Indebtedness permitted under Section 10.1(d); provided that
(i) such Liens shall be created substantially simultaneously with the
acquisition or lease of the related asset, (ii) such Liens do not at any time
encumber any property other than the property financed by such Indebtedness,
(iii) the amount of Indebtedness secured thereby is not increased and (iv) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed one hundred percent (100%) of the original purchase price or lease
payment amount of such property at the time it was acquired.


 


SECTION 10.3                    Limitations on Loans,
Advances, Investments and Acquisitions. 
Purchase, own, invest in or otherwise acquire, directly or indirectly,
any Capital Stock, interests in any partnership or joint venture (including,
without limitation, the creation or capitalization of any Subsidiary), evidence
of Indebtedness or other obligation or security, substantially all or a portion
of the business or assets of any other Person or any other investment or
interest


 


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whatsoever in any other Person, or make or permit to exist, directly or
indirectly, any loans, advances or extensions of credit to, or any investment
in cash or by delivery of property in, any Person except:


 


(a)                                  investments (i)
existing on the Closing Date in Subsidiaries, (ii) in Subsidiaries formed
or acquired after the Closing Date so long as the applicable Credit Party and
its Subsidiaries comply with the provisions of Section 8.11 and
(iii) the other loans, advances and investments described on Schedule 10.3
existing on the Closing Date;


 


(b)                                 investments in
(i) marketable direct obligations issued or unconditionally guaranteed by
the United States or any agency thereof maturing within one hundred twenty
(120) days from the date of acquisition thereof, (ii) commercial paper
maturing no more than one hundred twenty (120) days from the date of creation
thereof and currently having the highest rating obtainable from either
Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. or Moody’s Investors Service, Inc., (iii) certificates of
deposit maturing no more than one hundred twenty (120) days from the date of
creation thereof issued by commercial banks incorporated under the laws of the
United States, each having combined capital, surplus and undivided profits of
not less than $500,000,000 and having a rating of “A” or better by a nationally
recognized rating agency; provided, that the aggregate amount invested
in such certificates of deposit shall not at any time exceed $5,000,000 for any
one such certificate of deposit and $10,000,000 for any one such bank, or
(iv) time deposits maturing no more than thirty (30) days from the date of
creation thereof with commercial banks or savings banks or savings and loan
associations each having membership either in the FDIC or the deposits of which
are insured by the FDIC and in amounts not exceeding the maximum amounts of
insurance thereunder;


 


(c)                                  investments by the
Credit Parties or any Subsidiaries thereof in the form of acquisitions of all
or substantially all of the business or a line of business (whether by the
acquisition of Capital Stock, assets or any combination thereof) of any other
Person up to an aggregate cash amount of $50,000,000 over the term of this
Agreement and provided that each acquisition hereunder meets all of the
following requirements (such acquisition being referred to herein as a “Permitted
Acquisition”):


 


(i)                                     the Person to be
acquired shall be organized under the laws of the United States, shall be a
going concern and such Person shall be engaged in a business, or the assets
acquired shall be used in a business, which is substantially similar to that of
the Credit Parties and their Subsidiaries;


 


(ii)                                  a Credit Party or
Subsidiary thereof (including any entity being acquired that becomes a
Subsidiary) shall be the surviving Person and no Change of Control shall have
been effected thereby;


 


(iii)                               the Credit Parties shall
have delivered to the Administrative Agent such documents reasonably requested
by the Administrative Agent pursuant to Section 8.11 to be
delivered at the time required by Section 8.11 and shall confirm
that any such Person


 


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acquired or created in connection with the
Permitted Acquisition is a Guarantor hereunder;


 


(iv)                              the Person to be acquired
shall not be subject to any material pending litigation which could reasonably
be expected to have a Material Adverse Effect;


 


(v)                                 prior to the closing
of such acquisition, the acquisition is approved by the board of directors (or
a majority of the holders of the Capital Stock of such Person) of the Person
whose assets or Capital Stock are being acquired pursuant to such acquisition;


 


(vi)                              no Default or Event of
Default shall have occurred and be continuing both before and after giving
effect to such proposed acquisition;


 


(vii)                           the Credit Parties shall
have (A) demonstrated to the Administrative Agent pro  forma
compliance (as of the date of the proposed acquisition and after giving effect
thereto and any Extensions of Credit made or to be made in connection
therewith) with each covenant contained herein (as evidenced by an Officer’s
Compliance Certificate), (B) delivered to the Administrative Agent evidence of
the approval referred to in clause (v) above for each acquisition where the
aggregate consideration exceeds $20,000,000, and (C) delivered written notice
of such proposed acquisition to the Administrative Agent and the Lenders, which
notice shall include the proposed closing date of such proposed acquisition and
a description of the acquisition in the form customarily prepared by the Credit
Parties, not less than five (5) Business Days prior to such proposed closing
date; and


 


(viii)                        the Credit Parties shall have
delivered to the Administrative Agent such documents reasonably requested by
the Administrative Agent or the Required Lenders (through the Administrative
Agent) pursuant to Section 8.11 to be delivered at the time
required pursuant to Section 8.11.


 


(d)                                 Hedging Agreements
permitted pursuant to Section 10.1(b);


 


(e)                                  purchases of assets
in the ordinary course of business;


 


(f)                                    investments in the
form of loans and advances to employees in the ordinary course of business,
which, in the aggregate, do not exceed at any time $500,000;


 


(g)                                 intercompany
Indebtedness permitted pursuant to Section 10.1(g); and


 


(h)                                 other additional
investments, advances or other extensions of credit not otherwise permitted
pursuant to this Section in an aggregate amount not to exceed $5,000,000
over the term of this Agreement; provided that no Default or Event of
Default shall have occurred and be continuing or would be occasioned by any
such investment.


 


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SECTION 10.4                    Limitations on Mergers
and Liquidation.  Merge, consolidate
or enter into any similar combination with any other Person or liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution) except:


 


(a)                                  any
Wholly-Owned Subsidiary of the Parent may be merged or consolidated (i) with or
into the Borrower (provided that the Borrower shall be the continuing or
surviving Person) or (ii) with or into any Guarantor (provided that the
Guarantor shall be the continuing or surviving Person);


 


(b)                                 any
Wholly-Owned Subsidiary of the Parent 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 Wholly-Owned Subsidiary; provided that if
the transferor in such a transaction is a Guarantor, then the transferee must
either be the Borrower or a Guarantor;


 


(c)                                  any Wholly-Owned
Subsidiary of the Parent may merge into the Person such Wholly-Owned Subsidiary
was formed to acquire in connection with a Permitted Acquisition; and


 


(d)                                 any Subsidiary of the
Borrower may wind-up into the Borrower or any Subsidiary Guarantor.


 


SECTION 10.5                    Limitations on Sale
of Assets.  Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or
assets (including the sale of any receivables and leasehold interests but
excluding sale-leaseback transactions), whether now owned or hereafter acquired
except:


 


(a)                                  the sale of inventory
in the ordinary course of business;


 


(b)                                 the sale of obsolete
assets no longer used or usable in the business of the Credit Parties or any of
their Subsidiaries;


 


(c)                                  the transfer of
assets to the Borrower or any Guarantor pursuant to Section 10.4 (d);


 


(d)                                 the sale or discount
without recourse of accounts receivable arising in the ordinary course of
business in connection with the compromise or collection thereof;


 


(e)                                  the disposition of
any Hedging Agreement;


 


(f)                                    additional
dispositions of assets not otherwise permitted pursuant to this Section the
fair market value with respect to which does not exceed an aggregate amount of
$5,000,000 in any Fiscal Year; and


 


(g)                                 entering into
non-exclusive licenses.


 


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SECTION 10.6                    Limitations on Dividends
and Distributions.  Declare or pay
any dividends upon any of its Capital Stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its Capital Stock, or
make any distribution of cash, property or assets among the holders of shares
of its Capital Stock, or make any change in its capital structure which such
change in its capital structure could reasonably be expected to have a Material
Adverse Effect; provided that:


 


(a)                                  the Borrower or any
Subsidiary may pay dividends in shares of its own Capital Stock;


 


(b)                                 any Subsidiary of the
Borrower may pay cash dividends or make distributions to its shareholders or
other equity owners;


 


(c)                                  so long as no Default
or Event of Default has occurred and is continuing or would result therefrom,
(i) the Borrower may declare and pay dividends to Holdings, (ii) Holdings may
declare and pay dividends to Parent and (iii) Parent may declare and pay
dividends to its shareholders; and


 


(d)                                 so long as no Default
or Event of Default has occurred and is continuing or would result therefrom,
the Parent may repurchase the Capital Stock of the Parent.


 


SECTION 10.7                    Limitations on Exchange
and Issuance of Capital Stock. 
Issue, sell or otherwise dispose of any class or series of Capital Stock
that, by its terms or by the terms of any security into which it is convertible
or exchangeable, is, or upon the happening of an event or passage of time would
be, (a) convertible or exchangeable into Indebtedness or (b) required to be
redeemed or repurchased, including at the option of the holder, in whole or in
part, or has, or upon the happening of an event or passage of time would have,
a redemption or similar payment due.


 


SECTION 10.8                    Transactions with
Affiliates.  Except for transactions
permitted by Sections 10.3, 10.6 and 10.7, and those
transactions existing on the Closing Date and identified on Schedule 10.8,
directly or indirectly (a) make any loan or advance to, or purchase or assume
any note or other obligation to or from, any of its officers, directors or
other Affiliates, or to or from any member of the immediate family of any of
its officers, directors or other Affiliates, or subcontract any operations to
any of its Affiliates or (b) enter into, or be a party to, any other
transaction not described in clause (a) above with any of its Affiliates,
except pursuant to the reasonable requirements of its business and upon fair and
reasonable terms that are no less favorable to it than it would obtain in a
comparable arm’s length transaction with a Person not its Affiliate.


 


SECTION 10.9                    Certain Accounting
Changes; Organizational Documents. 
(a) Change its Fiscal Year end, or make any change in its accounting
treatment and reporting practices except as required by GAAP; provided
that upon reasonable prior notice to the Administrative Agent, the Credit
Parties and their Subsidiaries may all change their fiscal year-ends from December 31
to the fourth (4th) Saturday in January for fiscal year 2006
and thereafter, or (b) amend, modify or change its articles of incorporation
(or corporate charter or


 


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other similar organizational documents) or amend, modify or change its
bylaws (or other similar documents) in any manner adverse in any respect to the
rights or interests of the Lenders.


 


SECTION 10.10              Amendments; Payments and Prepayments
of Subordinated Indebtedness.


 


(a)                                  Amend or modify (or
permit the modification or amendment of) any of the terms or provisions of any
Subordinated Indebtedness incurred pursuant to Section 10.1(i)
hereof in any respect which would materially adversely affect the rights or
interests of the Administrative Agent and Lenders hereunder.


 


(b)                                 Make any payment or
prepayment on, or redeem or acquire for value (including (i) by way of
depositing with any trustee with respect thereto money or securities before due
for the purpose of paying when due and (ii) at the maturity thereof) any
Subordinated Indebtedness incurred pursuant to Section 10.1(h).


 


SECTION 10.11              Restrictive Agreements.


 


(a)                                  Enter into any
Indebtedness which contains any negative pledge on assets or any covenants more
restrictive than the provisions of Articles VIII, IX and X
hereof, or which restricts, limits or otherwise encumbers its ability to incur
Liens on or with respect to any of its assets or properties other than the
assets or properties securing such Indebtedness.


 


(b)                                 Enter into or permit
to exist any agreement (other than this Agreement or the other Loan Documents)
which impairs or limits the ability of any Subsidiary of the Borrower to pay
dividends to the Borrower.


 


SECTION 10.12              Nature of Business.  Alter in any material respect the character
or conduct of the business conducted by the Credit Parties and their
Subsidiaries as of the Closing Date.


 


SECTION 10.13              Impairment of Security
Interests. Take or omit to take any action, which might or would have the
result of materially impairing the security interests in favor of the
Administrative Agent with respect to the Collateral or grant to any Person
(other than the Administrative Agent for the benefit of itself and the Lenders
pursuant to the Security Documents) any interest whatsoever in the Collateral,
except for Permitted Liens and asset sales permitted under Section 10.5.


 


ARTICLE XI


 


DEFAULT AND REMEDIES


 


SECTION 11.1                    Events of Default.  Each of the following shall constitute an
Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or


 


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be effected by operation of law or pursuant to any judgment or order of
any court or any order, rule or regulation of any Governmental Authority or
otherwise:


 


(a)                                  Default in Payment
of Principal of Loans and Reimbursement Obligations.  The Borrower shall default in any payment of
principal of any Loan or Reimbursement Obligation when and as due (whether at
maturity, by reason of acceleration or otherwise).


 


(b)                                 Other Payment
Default.  The Borrower or any other
Credit Party shall default in the payment when and as due (whether at maturity,
by reason of acceleration or otherwise) of interest on any Loan or
Reimbursement Obligation or the payment of any other Obligation, and such
default shall continue for a period of five (5) Business Days.


 


(c)                                  Misrepresentation.  Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of the Borrower or any
other Credit Party herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith that is subject to materiality or
Material Adverse Effect qualifications, shall be incorrect or misleading in any
respect when made or deemed made or any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of the Borrower or any
other Credit Party herein, any other Loan Document, or in any document
delivered in connection herewith or therewith that is not subject to materiality
or Material Adverse Effect qualifications, shall be incorrect or misleading in
any material respect when made or deemed made


 


(d)                                 Default in
Performance of Certain Covenants. 
The Borrower or any other Credit Party shall default in the performance
or observance of any covenant or agreement contained in Section 7.5(e)
or Articles IX or X of this Agreement.


 


(e)                                  Default in
Performance of Other Covenants and Conditions.  The Borrower or any other Credit Party shall
default in the performance or observance of any term, covenant, condition or
agreement contained in this Agreement (other than as specifically provided for
otherwise in this Section) or any other Loan Document and such default shall
continue for a period of thirty (30) days after written notice thereof has been
given to the Borrower by the Administrative Agent; provided, that with
respect to a default under Section 7.1 or Section 7.2,
such default shall continue for a period of thirty (30) days whether or not any
notice, written or otherwise, has been provided.


 


(f)                                    Hedging
Agreement.  The Borrower or any other
Credit Party shall default in the performance or observance of any terms,
covenant, condition or agreement (after giving effect to any applicable grace
or cure period) under any Hedging Agreement and such default causes the
termination of such Hedging Agreement and the Termination Value owned by such
Credit Party as a result thereof exceeds $5,000,000.


 


(g)                                 Indebtedness
Cross-Default.  The Borrower or any
other Credit Party shall (i) default in the payment of any Indebtedness (other
than the Loans or any Reimbursement Obligation) the aggregate outstanding
amount of which Indebtedness is in excess of $10,000,000 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 other


 


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agreement or condition relating to any Indebtedness (other than the
Loans or any Reimbursement Obligation) the aggregate outstanding amount of
which Indebtedness is in excess of $10,000,000 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, with the
giving of notice if required, any such Indebtedness to become due prior to its
stated maturity (any applicable grace period having expired).


 


(h)                                 Other
Cross-Defaults.  The Borrower or any
other Credit Party shall default in the payment when due, or in the performance
or observance, of any material obligation or material condition of any Material
Contract unless, but only as long as, the existence of any such default is
being contested by the Borrower or any such Subsidiary in good faith by
appropriate proceedings and adequate reserves in respect thereof have been
established on the books of the Borrower or such Credit Party to the extent
required by GAAP.


 


(i)                                     Change in
Control.  A Change in Control shall
occur.


 


(j)                                     Voluntary
Bankruptcy Proceeding.  Any Credit
Party or a Subsidiary thereof shall (i) commence a voluntary case under the
federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition
seeking to take advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or composition for
adjustment of debts, (iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary case under
such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the taking
of possession by, a receiver, custodian, trustee, or liquidator of itself or of
a substantial part of its property, domestic or foreign, (v) admit in writing
its inability to pay its debts as they become due, (vi) make a general
assignment for the benefit of creditors, or (vii) take any corporate action for
the purpose of authorizing any of the foregoing.


 


(k)                                  Involuntary
Bankruptcy Proceeding.  A case or
other proceeding shall be commenced against any Credit Party or a Subsidiary
thereof in any court of competent jurisdiction seeking (i) relief under the
federal bankruptcy laws (as now or hereafter in effect) or under any other
laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or adjustment of debts, or (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like for any Credit Party or Subsidiary
thereof or for all or any substantial part of their respective assets, domestic
or foreign, and such case or proceeding shall continue without dismissal or
stay for a period of sixty (60) consecutive days, or an order granting the
relief requested in such case or proceeding (including, but not limited to, an
order for relief under such federal bankruptcy laws) shall be entered.


 


(l)                                     Failure of
Agreements.  Any provision of this
Agreement or any provision of any other Loan Document shall for any reason
cease to be valid and binding on the Borrower or any other Credit Party party
thereto or any such Person shall so state in writing, or any Security Document
shall for any reason cease to create a valid and perfected first priority Lien
on, or security interest in, any of the Collateral purported to be covered
thereby, in each case other than in accordance with the express terms hereof or
thereof.


 


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(m)                               Termination Event.  The occurrence of any of the following
events:  (i) any Credit Party or any
ERISA Affiliate fails to make full payment when due of all material amounts
which, under the provisions of any Pension Plan or Section 412 of the
Code, such Credit Party or ERISA Affiliate is required to pay as contributions
thereto, (ii) an accumulated funding deficiency in excess of $5,000,000 occurs
or exists, whether or not waived, with respect to any Pension Plan as of the
close of the most recently completed fiscal year of the Pension Plan, or (iii)
a Termination Event.


 


(n)                                 Judgment.  A judgment or order for the payment of money
which causes the aggregate amount of all such judgments to exceed $5,000,000 in
any Fiscal Year (to the extent not covered by independent third-party insurance
as to which the insurer does not dispute coverage) shall be entered against the
Borrower or any Credit Party by any court and such judgment or order shall
continue without having been discharged, vacated, stayed or stayed pending
appeal for a period of (i) sixty (60) days after the entry thereof or (ii) such
longer period as may be granted within any such judgment or order provided
that the Borrower or the applicable Credit Party complies with the terms
thereof.


 


(o)                                 Environmental.  Any one or more Environmental Claims shall
have been asserted against the Borrower or any Credit Party; the Borrower and
any Credit Party would be reasonable likely to incur liability as a result
thereof; and such liability would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect.


 


SECTION 11.2                    Remedies.  Upon the occurrence of an Event of Default
and during the continuance thereof, with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower:


 


(a)                                  Acceleration;
Termination of Facilities.  Terminate
the Commitments and declare the principal of and interest on the Loans and the
Reimbursement Obligations at the time outstanding, and all other amounts owed
to the Lenders and to the Administrative Agent under this Agreement or any of
the other Loan Documents (including, without limitation, all L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit
shall have presented or shall be entitled to present the documents required
thereunder) and all other Obligations (other than Hedging Obligations), to be
forthwith due and payable, whereupon the same shall immediately become due and
payable without presentment, demand, protest or other notice of any kind, all
of which are expressly waived by each Credit Party, anything in this Agreement
or the other Loan Documents to the contrary notwithstanding, and terminate the
Credit Facility and any right of the Borrower to request borrowings or Letters
of Credit thereunder; provided, that upon the occurrence of an Event of
Default specified in Section 11.1(j) or (k), the Credit
Facility shall be automatically terminated and all Obligations (other than
Hedging Obligations) shall automatically become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived by each Credit Party, anything in this Agreement or in any
other Loan Document to the contrary notwithstanding.


 


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(b)                                 Letters
of Credit.  With respect to all
Letters of Credit with respect to which presentment for honor shall not have
occurred at the time of an acceleration pursuant to the preceding subsection,
the Borrower shall at such time deposit in a cash collateral account opened by
the Administrative Agent an amount equal to one hundred and five percent (105%)
of the aggregate then undrawn and unexpired amount of such Letters of
Credit.  Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon,
if any, shall be applied to repay the other Obligations on a pro rata basis.  After all such Letters of Credit shall have
expired or been fully drawn upon, the Reimbursement Obligation shall have been
satisfied and all other Obligations shall have been paid in full, the balance,
if any, in such cash collateral account shall be returned to the Borrower.


 


(c)                                  Rights
of Collection.  Exercise on behalf of
the Lenders all of its other rights and remedies under this Agreement, the
other Loan Documents and Applicable Law, in order to satisfy all of the
Borrower’s Obligations.


 


SECTION 11.3                    Rights and
Remedies Cumulative; Non-Waiver; etc.  The enumeration of the rights and remedies of
the Administrative Agent and the Lenders set forth in this Agreement is not
intended to be exhaustive and the exercise by the Administrative Agent and the
Lenders of any right or remedy shall not preclude the exercise of any other
rights or remedies, all of which shall be cumulative, and shall be in addition
to any other right or remedy given hereunder or under the other Loan Documents
or that may now or hereafter exist at law or in equity or by suit or
otherwise.  No delay or failure to take
action on the part of the Administrative Agent or any Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default.  No course of dealing between any Credit
Party, the Administrative Agent and the Lenders or their respective agents or
employees shall be effective to change, modify or discharge any provision of
this Agreement or any of the other Loan Documents or to constitute a waiver of
any Event of Default.


 


SECTION 11.4                    Crediting
of Payments and Proceeds. 
In the event that the Borrower shall fail to pay any of the Obligations
when due and the Obligations have been accelerated pursuant to Section 11.2(a),
all payments received by the Lenders upon the Obligations and all net proceeds
from the enforcement of the Obligations shall be applied:


 


First,
to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts, including reasonable attorney fees, payable to the
Administrative Agent in its capacity as such and the Issuing Lender in its
capacity as such (ratably among the Administrative Agent and the Issuing Lender
in proportion to the respective amounts described in this clause First
payable to them);


 


Second,
to payment of that portion of the Obligations constituting fees, indemnities
and other amounts (other than principal and interest) payable to the Lenders,
including reasonable


 


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attorney fees (ratably
among the Lenders in proportion to the respective amounts described in this
clause Second payable to them);


 


Third,
to payment of that portion of the Obligations constituting accrued and unpaid
interest on the Loans and Reimbursement Obligations (ratably among the Lenders
in proportion to the respective amounts described in this clause Third
payable to them);


 


Fourth,
to payment of that portion of the Obligations constituting unpaid principal of
the Loans, Reimbursement Obligations, and any Hedging Obligations (including
any termination payments and any accrued and unpaid interest thereon) (ratably
among the Lenders in proportion to the respective amounts described in this
clause Fourth held by them);


 


Fifth,
to the Administrative Agent for the account of the Issuing Lender, to cash
collateralize any L/C Obligations then outstanding; and


 


Last,
the balance, if any, after all of the Obligations have been indefeasibly paid
in full, to the Borrower or as otherwise required by Law.


 


SECTION 11.5                    Administrative
Agent May File Proofs of Claim.  In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Credit Party, the
Administrative Agent (irrespective of whether the principal of any Loan or L/C
Obligation shall then be due and payable as herein expressed or by declaration
or otherwise and irrespective of whether the Administrative Agent shall have
made any demand on the Borrower) shall be entitled and empowered, by
intervention in such proceeding or otherwise:


 


(a)                                  to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans, L/C Obligations and all other Obligations
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and
their respective agents and counsel and all other amounts due the Lenders and
the Administrative Agent under Section 3.3, Section 4.3
and Section 13.3) allowed in such judicial proceeding; and


 


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


 


and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such
payments to the Administrative Agent and, in the event that the Administrative
Agent shall consent to the making of such payments directly to the Lenders, to
pay to the Administrative Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of the Administrative Agent and its agents
and counsel, and any other amounts due the Administrative Agent under Section 4.3
and Section 13.3.


 


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


 


ARTICLE XII


 


THE
ADMINISTRATIVE AGENT


 


SECTION 12.1                    Appointment
and Authority.  Each of
the Lenders hereby irrevocably designates and appoints Wachovia to act on its behalf
as the Administrative Agent of such Lender under this Agreement and the other
Loan Documents for the term hereof and each such Lender irrevocably authorizes
Wachovia, as Administrative Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly delegated to
the Administrative Agent by the terms of this Agreement and such other Loan
Documents, together with such other powers as are reasonably incidental
thereto.  Notwithstanding any provision
to the contrary elsewhere in this Agreement or such other Loan Documents, the
Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein and therein, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or the other Loan
Documents or otherwise exist against the Administrative Agent.  Any reference to the Administrative Agent in
this Article XII shall be deemed to refer to the Administrative
Agent solely in its capacity as Administrative Agent and not in its capacity as
a Lender.


 


SECTION 12.2                    Delegation
of Duties.  The Administrative
Agent may execute any of its respective duties under this Agreement and the
other Loan 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 shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by the Administrative Agent with reasonable care.


 


SECTION 12.3                    Exculpatory
Provisions.  Neither
the Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries 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 the other Loan Documents (except for actions
occasioned solely by 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
of the Credit Parties or any officer thereof contained in this Agreement or the
other Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under
or in connection with, this Agreement or the other Loan Documents or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or the other Loan Documents or for any failure of the Borrower
or any of the Credit Parties to perform their respective obligations hereunder
or thereunder.  The Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained


 


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in, or conditions of,
this Agreement, or to inspect the properties, books or records of the Borrower
or any of the Credit Parties.


 


SECTION 12.4                    Reliance by
the Administrative Agent.


 


(a)                                  The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, 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
Persons and upon advice and statements of legal counsel (including counsel to
the Credit Parties), independent accountants and other experts selected by the
Administrative Agent.  The Administrative
Agent shall be fully justified in failing or refusing to take any action under
this Agreement and the other Loan Documents unless it shall first receive such
advice or concurrence of the Required Lenders (or, when expressly required hereby
or by the relevant other Loan Documents, all the Lenders) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action except for its own gross
negligence or willful misconduct.  The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of
the Required Lenders (or, when expressly required hereby, all the Lenders), and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders.


 


(b)                                 For
purposes of determining compliance with the conditions specified in Section 5.2,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.


 


SECTION 12.5                    Notice of
Default.  The Administrative
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default unless it has received notice from a Lender or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default”.  In the event that the Administrative Agent
receives such a notice, it shall promptly give notice thereof to the
Lenders.  The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, when expressly required
hereby, all the Lenders); provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders, except to the
extent that other provisions of this Agreement expressly require that any such
action be taken or not be taken only with the consent and authorization or the
request of the Lenders or Required Lenders, as applicable.


 


SECTION 12.6                    Non-Reliance
on the Administrative Agent and Other Lenders.  Each Lender expressly acknowledges that
neither the Administrative Agent nor any of its


 


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respective officers,
directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of
the Borrower or any Credit Party, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender.  Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower, the other Credit Parties and their
Subsidiaries and made its own decision to make its Loans and issue or
participate in Letters of Credit hereunder and enter into this Agreement.  Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall 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
Loan 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 Borrower or any Credit Party.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or by the other Loan Documents, the Administrative
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of the Borrower or any of the
Credit Parties which may come into the possession of the Administrative Agent
or any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates.


 


SECTION 12.7                    Indemnification.  The Lenders agree to indemnify the
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to the respective amounts of their Revolving Credit
Commitment Percentages from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including at any
time following the payment of the Loans or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or
any documents, reports or other information provided to the Administrative
Agent or any Lender or 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 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 solely from the Administrative Agent’s bad
faith, gross negligence or willful misconduct. 
The agreements in this Section shall survive the payment of the
Obligations and the termination of this Agreement.


 


SECTION 12.8                    The
Administrative Agent in Its Individual Capacity.  The Administrative Agent and its respective
Subsidiaries and Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower as though the Administrative
Agent were not the Administrative Agent hereunder.  With respect to any Loans made or renewed by
it and with respect to any Letter of Credit issued by it or participated in by


 


74





















 


it, the Administrative
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not
the Administrative Agent, and the terms “Lender” and “Lenders” shall include
the Administrative Agent in its individual capacity.


 


SECTION 12.9                    Resignation
of the Administrative Agent; Successor Administrative Agent.


 


(a)                                  Subject
to the appointment and acceptance of a successor as provided below, Wachovia
may resign as the Administrative Agent at any time by giving notice thereof to
the Lenders and the Borrower.  Upon any
such resignation, the Required Lenders shall appoint from among the Lenders a
successor administrative agent for the Lenders, which successor administrative
agent shall be consented to by the Borrower at all times other than during the
existence of an Event of Default (which consent of the Borrower shall not be
unreasonably withheld or delayed).  If no
successor administrative agent shall have been so appointed by the Required
Lenders and shall have accepted such appointment within thirty (30) days after
the Administrative Agent’s giving of notice of resignation, then the
Administrative Agent may, on behalf of the Lenders, appoint a successor
administrative agent.  Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
administrative agent, such successor administrative agent shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Administrative Agent and the retiring Administrative Agent shall
be discharged from its duties and obligations hereunder without any other or
further act or deed on the part of such retiring Administrative Agent or any
other Lender.  After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of this Article XII and Section 13.3 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement.  If no successor administrative agent has
accepted appointment as Administrative Agent by the date which is thirty (30)
days following a retiring Administrative Agent’s notice of resignation, the
retiring Administrative Agent’s resignation shall nevertheless thereupon become
effective and the Lenders shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above.


 


(b)                                 Notwithstanding
anything to the contrary contained herein, Wachovia may, (i) upon thirty (30)
days’ notice to the Borrower and the Lenders, resign as Issuing Lender and/or
(ii) upon thirty (30) days’ notice to the Borrower, resign as Swingline
Lender.  In the event of any such
resignation as Issuing Lender or Swingline Lender, the Borrower shall be
entitled to appoint from among the Lenders a successor Issuing Lender or
Swingline Lender hereunder; provided that no failure by the Borrower to appoint
any such successor shall affect the resignation of Wachovia as Issuing Lender
or Swingline Lender, as the case may be. 
If Wachovia resigns as Issuing Lender, it shall retain all the rights
and obligations of the Issuing Lender hereunder with respect to all Letters of
Credit outstanding as of the effective date of its resignation as Issuing
Lender and all L/C Obligations with respect thereto, including the right to
require the Lenders to make Revolving Credit Loans or fund risk participations
for unreimbursed amounts of Letters of Credit pursuant to Section 3.4.  If Wachovia resigns as Swingline Lender, it
shall retain all the rights of the Swingline Lender provided for hereunder with
respect to Swingline Loans made by it and outstanding as of the effective date
of such resignation,


 


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including the right to
require the Lenders to make Revolving Credit Loans or fund risk participations
in outstanding Swingline Loans pursuant to Section 2.2(b).


 


SECTION 12.10              Collateral and Guaranty
Matters.  The Lenders irrevocably
authorize the Administrative Agent, at its option and in its discretion,


 


(a)                                  to
release any Lien on any Collateral granted to or held by the Administrative
Agent, for the ratable benefit of itself and the Lenders, under any Loan
Document (i) upon repayment of the outstanding principal of and all accrued
interest on the Loans, payment of all outstanding fees and expenses hereunder,
the termination of the Lenders’ Commitments and the expiration or termination
of all Letters of Credit, (ii) that is sold or to be sold as part of or in
connection with any sale permitted hereunder or under any other Loan Document,
or (iii) if approved, authorized or ratified in writing by the necessary
Lenders in accordance with Section 13.2;


 


(b)                                 to
subordinate any Lien on any Collateral granted to or held by the Administrative
Agent under any Loan Document to the holder of any Lien on such Collateral that
is permitted by Section 10.2(g); and


 


(c)                                  to
release any Subsidiary Guarantor from its obligations under the Guaranty
Agreement if such Person ceases to be a Subsidiary as a result of a transaction
permitted hereunder.


 


Upon request by the
Administrative Agent at any time, the Required Lenders will confirm in writing
the Administrative Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under the Guaranty Agreement pursuant to this Section.


 


SECTION 12.11              Other Agents, Arrangers
and Managers.  None of the Lenders or
other Persons identified on the facing page or signature pages of this
Agreement as a “syndication agent,” “documentation agent,” “co-agent,” “book
manager,” “lead manager,” “arranger,” “lead arranger” or “co-arranger” shall
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than, in the case of such Lenders, those applicable to all
Lenders as such.  Without limiting the
foregoing, none of the Lenders or other Persons so identified shall have or be
deemed to have any fiduciary relationship with any Lender.  Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders or other Persons so identified
in deciding to enter into this Agreement or in taking or not taking action
hereunder.


 


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ARTICLE XIII


 


MISCELLANEOUS


 


SECTION 13.1                    Notices.


 


(a)                                  Method
of Communication.  Except as
otherwise provided in this Agreement, all notices and communications hereunder
shall be in writing (for purposes hereof, the term “writing” shall include
information in electronic format such as electronic mail and internet web
pages), or by telephone subsequently confirmed in writing.  Any notice shall be effective if delivered by
hand delivery or sent via electronic mail, posting on an internet web page,
telecopy, recognized overnight courier service or certified mail, return
receipt requested, and shall be presumed to be received by a party hereto (i)
on the date of delivery if delivered by hand or sent by electronic mail,
posting on an internet web page, telecopy, (ii) on the next Business Day if
sent by recognized overnight courier service and (iii) on the third Business
Day following the date sent by certified mail, return receipt requested.  A telephonic notice to the Administrative
Agent as understood by the Administrative Agent will be deemed to be the
controlling and proper notice in the event of a discrepancy with or failure to
receive a confirming written notice.


 


(b)                                 Addresses
for Notices.  Notices to any party
shall be sent to it at the following addresses, or any other address as to
which all the other parties are notified in writing.


 


	
  If to the
  Borrower:

  	
   

  	
  Tuesday Morning,
  Inc.

  
	
   

  	
   

  	
  6250 LBJ Freeway

  
	
   

  	
   

  	
  Dallas, Texas
  75240

  
	
   

  	
   

  	
  Attention:

  	
  Loren K. Jensen,
  Executive Vice President

  
	
   

  	
   

  	
   

  	
  and Chief
  Financial Officer

  
	
   

  	
   

  	
  Telephone No.:
  (972) 934-7251

  
	
   

  	
   

  	
  Telecopy No.:
  (469) 374-0493

  
	
   

  	
   

  	
   

  
	
  With copies to:

  	
   

  	
  Tuesday Morning
  Corporation

  
	
   

  	
   

  	
  6250 LBJ Freeway

  
	
   

  	
   

  	
  Dallas, Texas
  75240

  
	
   

  	
   

  	
  Attention:

  	
  Loren K. Jensen,
  Executive Vice President

  
	
   

  	
   

  	
   

  	
  and Chief
  Financial Officer

  
	
   

  	
   

  	
  Telephone No.:
  (972) 934-7251

  
	
   

  	
   

  	
  Telecopy No.:
  (469) 374-0493

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fulbright &
  Jaworski L.L.P.

  
	
   

  	
   

  	
  2200 Ross
  Avenue, Suite 2800

  
	
   

  	
   

  	
  Dallas, Texas
  75201

  
	
   

  	
   

  	
  Attention:

  	
  Harva R.
  Dockery, Esq.

  
	
   

  	
   

  	
  Telephone No.:
  (214) 855-8369

  
	
   

  	
   

  	
  Telecopy No.:
  (214) 855-8200

  
					



 


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  If to Wachovia as

  	
   

  	
  Wachovia Bank,
  National Association

  
	
  Administrative
  Agent:

  	
   

  	
  Charlotte Plaza,
  CP-8

  
	
   

  	
   

  	
  201 South College
  Street

  
	
   

  	
   

  	
  Charlotte, North
  Carolina 28288-0680

  
	
   

  	
   

  	
  Attention:
  Syndication Agency Services

  
	
   

  	
   

  	
  Telephone No.:
  (704) 374-2698

  
	
   

  	
   

  	
  Telecopy No.:
  (704) 383-0288

  
	
   

  	
   

  	
   

  
	
  If to any
  Lender:

  	
   

  	
  To the address
  set forth on the Register

  



 


(c)                                  Administrative
Agent’s Office.  The Administrative
Agent hereby designates its office located at the address set forth above, or
any subsequent office which shall have been specified for such purpose by
written notice to the Borrower and Lenders, as the Administrative Agent’s Office
referred to herein, to which payments due are to be made and at which Loans
will be disbursed and Letters of Credit requested.


 


SECTION 13.2                    Amendments,
Waivers and Consents.  Except as set
forth below or as specifically provided in any Loan Document, any term,
covenant, agreement or condition of this Agreement or any of the other Loan
Documents may be amended or waived by the Lenders, and any consent given by the
Lenders, if, but only if, such amendment, waiver or consent is in writing
signed by the Required Lenders (or by the Administrative Agent with the consent
of the Required Lenders) and delivered to the Administrative Agent and, in the
case of an amendment, signed by the Borrower; provided, that no
amendment, waiver or consent shall:


 


(a)                                  waive
any condition set forth in Section 5.2 without the written consent
of each Lender;


 


(b)                                 extend
or increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 11.2(a)) or the amount of Loans of
any Lender without the written consent of each Lender directly affected
thereby;


 


(c)                                  postpone
any date fixed by this Agreement or any other Loan Document for any payment of
principal, interest, fees or other amounts due to the Lenders (or any of them)
hereunder or under any other Loan Document without the written consent of each
Lender directly affected thereby;


 


(d)                                 reduce
the principal of, or the rate of interest specified herein on, any Loan or
Reimbursement Obligation, or (subject to clause (iv) of the second proviso to
this Section) any fees or other amounts payable hereunder or under any other
Loan Document without the written consent of each Lender directly affected
thereby; provided that only the consent of the Required Lenders shall be
necessary (i) to waive any obligation of the Borrower to pay interest at the
rate set forth in Section 4.1(c) during the continuance of an Event
of Default, or (ii) to amend any financial covenant hereunder (or any defined
term used therein) even if the effect of such amendment would be to reduce the
rate of interest on any Loan or L/C Borrowing or to reduce any fee payable
hereunder;


 


78





















 


(e)                                  change
Section 4.4 or Section 11.4 in a manner that would
alter the pro  rata sharing of payments required thereby without
the written consent of each Lender directly affected thereby;


 


(f)                                    change
any provision of this Section or the definition of “Required Lenders” or
any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender;


 


(g)                                 release
the Parent or Holdings from the Parental Entity Guaranty Agreement or release
all of the Subsidiary Guarantors or release Subsidiary Guarantors comprising
substantially all of the credit support for the Credit Party Obligations, in
either case, from the Subsidiary Guaranty Agreement (other than as authorized
in Section 12.10), without the written consent of each Lender; or


 


(h)                                 release
all or a material portion of the Collateral or release any Security Document
(other than as authorized in Section 12.10 or as otherwise
specifically permitted or contemplated in this Agreement or the applicable
Security Document) without the written consent of each Lender;


 


provided
further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Lender in addition to the Lenders required
above, affect the rights or duties of the Issuing Lender under this Agreement
or any Letter of Credit Application relating to any Letter of Credit issued or
to be issued by it; (ii) no amendment, waiver or consent shall, unless in
writing and signed by the Swingline Lender in addition to the Lenders required
above, affect the rights or duties of the Swingline Lender under this
Agreement; (iii) no amendment, waiver or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Lenders required above,
affect the rights or duties of the Administrative Agent under this Agreement or
any other Loan Document; and (iv) the Fee Letter may be amended, or rights or
privileges thereunder waived, in a writing executed only by the parties
thereto.  Notwithstanding anything to the
contrary herein, no Defaulting Lender shall have any right to approve or
disapprove any amendment, waiver or consent hereunder, except that the
Commitment of such Lender may not be increased or extended without the consent
of such Lender.


 


SECTION 13.3                    Expenses;
Indemnity.  The Borrower will (a) pay
all out-of-pocket expenses (including all costs of electronic or internet
distribution of any information hereunder) of the Administrative Agent in
connection with (i) the preparation, execution and delivery of this Agreement
and each other Loan Document, whenever the same shall be executed and
delivered, including all out-of-pocket syndication and due diligence expenses
and reasonable fees and disbursements of counsel for the Administrative Agent
and (ii) the preparation, execution and delivery of any waiver, amendment or
consent by the Administrative Agent or the Lenders relating to this Agreement
or any other Loan Document, including reasonable fees, disbursements and other
charges of counsel for the Administrative Agent, (b) pay all reasonable
out-of-pocket expenses of the Administrative Agent and each Lender actually
incurred in connection with the administration and enforcement of any rights
and remedies of the Administrative Agent and Lenders under the Credit Facility,
including in connection with any


 


79





















 


workout, restructuring,
bankruptcy or other similar proceeding, creating and perfecting Liens in favor
of the Administrative Agent on behalf of the Lenders pursuant to any Security
Document, enforcing any Obligations of, or collecting any payments due from,
the Borrower or any Guarantor by reason of an Event of Default (including by
reason of an Event of Default, in connection with the sale of, collection from,
or other realization upon any of the Collateral or the enforcement of the
Subsidiary Guaranty Agreement; consulting with appraisers, accountants,
engineers, attorneys and other Persons concerning the nature, scope or value of
any right or remedy of the Administrative Agent or any Lender hereunder or
under any other Loan Document or any factual matters in connection therewith,
which expenses shall include the reasonable fees and disbursements of such
Persons, (c) any civil penalty or fine assessed by the U.S. Department of the
Treasury’s Office of Foreign Assets Control against, and all reasonable costs
and expenses (including counsel fees and disbursements) incurred in connection
with defense thereof by the Administrative Agent or any Lender as a result of
the funding of Loans, the issuance of Letters of Credit, the acceptance of
payment or of collateral due under the Loan Documents and (d) defend, indemnify
and hold harmless the Administrative Agent and the Lenders, and their
respective parents, Subsidiaries, Affiliates, partners, employees, agents,
officers, advisors and directors, from and against any losses, penalties,
fines, liabilities, settlements, damages, costs and expenses, suffered by any
such Person in connection with any claim (including any Environmental Claims),
investigation, litigation or other proceeding (whether or not the
Administrative Agent or any Lender is a party thereto) and the prosecution and
defense thereof, arising out of or in any way connected with the Extensions of
Credit, this Agreement, any other Loan Document, or any documents, reports or
other information provided to the Administrative Agent or any Lender or
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby, including reasonable attorney’s and consultant’s
fees, except to the extent that any of the foregoing (a) are determined by a
court of competent jurisdiction by a final and nonappealable judgment to have
resulted directly from the gross negligence or willful misconduct of the party
seeking indemnification therefor or (b) result from a claim brought by any
Credit Party against an indemnitee for breach in bad faith of the obligations
under this Agreement or the other Loan Documents of the party seeking
indemnification if such Credit Party has obtained a final and nonappealable
judgment in its favor on such claim as determined by a court of competent
jurisdiction.


 


SECTION 13.4                    Set-off.  If an
Event of Default shall have occurred and be continuing, each Lender, the
Issuing Lender, the Swingline Lender and each of their respective Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by Applicable Law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final, in whatever currency) at any
time held and other obligations (in whatever currency) at any time owing by
such Lender, the Issuing Lender, the Swingline Lender or any such Affiliate to
or for the credit or the account of the Borrower or any other Credit Party
against any and all of the obligations of the Borrower or such Credit Party now
or hereafter existing under this Agreement or any other Loan Document to such
Lender, the Issuing Lender or the Swingline Lender, irrespective of whether or
not such Lender, the Issuing Lender or the Swingline Lender shall have made any
demand under this Agreement or any other Loan Document and although such
obligations of the Borrower or such Credit Party may be contingent or unmatured
or are owed to a branch or office of such Lender, the Issuing Lender or the
Swingline Lender different from the branch or office holding such deposit or
obligated on such


 


80





















 


indebtedness.  The rights of each Lender, the Issuing Lender,
the Swingline Lender and their respective Affiliates under this Section are
in addition to other rights and remedies (including other rights of setoff)
that such Lender, the Issuing Lender, the Swingline Lender or their respective
Affiliates may have.  Each Lender, the
Issuing Lender and the Swingline Lender agrees to notify the Borrower and the
Administrative Agent promptly after any such setoff and application; provided
that the failure to give such notice shall not affect the validity of such
setoff and application.


 


SECTION 13.5                    Governing
Law.  This Agreement and the other
Loan Documents, unless otherwise expressly set forth therein, shall be governed
by, construed and enforced in accordance with the laws of the State of New
York, including Section 5-1401 and Section 5-1402 of the General
Obligations Law of the State of New York, without reference to any other
conflicts of law principles thereof.


 


SECTION 13.6                    Jurisdiction
and Venue.


 


(a)                                  Jurisdiction.  Each Credit Party party hereto hereby
irrevocably consents to the personal jurisdiction of the state and federal
courts located in New York, New York (and any courts from which an appeal from
any of such courts must or may be taken), in any action, claim or other
proceeding arising out of any dispute in connection with this Agreement and the
other Loan Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations. 
Each Credit Party party hereto hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by the Administrative Agent or any Lender in connection with
this Agreement or the other Loan Documents, any rights or obligations hereunder
or thereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner specified in Section 13.1.  Nothing in this Section shall affect the
right of the Administrative Agent or any Lender to serve legal process in any
other manner permitted by Applicable Law or affect the right of the
Administrative Agent or any Lender to bring any action or proceeding against
any Credit Party or their respective properties in the courts of any other
jurisdictions.


 


(b)                                 Venue.  Each Credit Party party hereto hereby irrevocably
waives any objection it may have now or in the future to the laying of venue in
the aforesaid jurisdiction in any action, claim or other proceeding arising out
of or in connection with this Agreement, any other Loan Document or the rights
and obligations of the parties hereunder or thereunder.  Each Credit Party party hereto irrevocably
waives, in connection with such action, claim or proceeding, any plea or claim
that the action, claim or other proceeding has been brought in an inconvenient
forum.


 


SECTION 13.7                    Waiver
of Jury Trial.


THE
ADMINISTRATIVE AGENT, EACH LENDER, THE PARENT, HOLDINGS AND THE BORROWER HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY
ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.


 


81





















 


(a)                                  Preservation
of Certain Remedies.  The parties
hereto and the other Loan Documents preserve, without diminution, certain
remedies that such Persons may employ or exercise freely, either alone, in
conjunction with or during a dispute, claim or controversy in connection with,
or relating to this Agreement, the Notes or the other Loan Documents .  Each such Person shall have and hereby
reserves the right to proceed in any court of proper jurisdiction or by self
help to exercise or prosecute the following remedies, as applicable:  (i) all rights to foreclose against any real
or personal property or other security granted under a Loan Document by
exercising a power of sale granted in the Loan Documents or under Applicable
Law or by judicial foreclosure and sale, including a proceeding to confirm the
sale, (ii) all rights of self help including peaceful occupation of property
and collection of rents, set off, and peaceful possession of property, (iii)
obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and in filing
an involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by
confession of judgment.  Preservation of
these remedies does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute.


 


SECTION 13.8                    Reversal
of Payments.  To the extent the
Borrower makes a payment or payments to the Administrative Agent for the
ratable benefit of the Lenders or the Administrative Agent receives any payment
or proceeds of the Collateral which payments or proceeds or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds repaid, the Obligations or part
thereof intended to be satisfied shall be revived and continued in full force
and effect as if such payment or proceeds had not been received by the
Administrative Agent.


 


SECTION 13.9                    Punitive
Damages.The Administrative Agent, the Lenders, the Parent, Holdings and the
Borrower (on behalf of itself and the other Credit Parties) hereby agree that
no such Person shall have a remedy of punitive or exemplary damages against any
other party to a Loan Document and each such Person hereby waives any right or
claim to punitive or exemplary damages that they may now have or may arise in
the future in connection with any Dispute, whether such Dispute is resolved
through arbitration or judicially.


 


SECTION 13.10              Accounting
Matters.  If at any time any change
in GAAP would affect the computation of any financial ratio or requirement set
forth in any Loan Document, and either the Borrower or the Required Lenders
shall so request, the Administrative Agent, the Lenders and the Borrower shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the approval
of the Required Lenders); provided that, until so amended, (i) such
ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and (ii) the Borrower shall provide to the
Administrative Agent and the Lenders financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting
forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.


 


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SECTION 13.11              Successors and
Assigns; Participations.


 


(a)                                  Successors and Assigns Generally.  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted
hereby, except that neither the Borrower nor any other Credit Party may assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of the Administrative Agent and each Lender and no Lender
may assign or otherwise transfer any of its rights or obligations hereunder
except (i) to an Eligible Assignee in accordance with the provisions of subsection (b)
of this Section, (ii) by way of participation in accordance with the provisions
of subsection (d) of this Section or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of subsection (f)
of this Section (and any other attempted assignment or transfer by any
party hereto shall be null and void). 
Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in
subsection (d) of this Section and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent
and the Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.


 


(b)                                 Assignments by Lenders.  Any
Lender may at any time assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided
that


 


(i)                                     except in the case of an assignment of the entire
remaining amount of the assigning Lender’s Commitment and the Loans at the time
owing to it or in the case of an assignment to a Lender or an Affiliate of a
Lender with respect to a Lender, the aggregate amount of the Commitment (which
for this purpose includes Loans outstanding thereunder) or, if the applicable
Commitment is not then in effect, the principal outstanding balance of the
Loans of the assigning Lender subject to each such assignment (determined as of
the date the Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent or, if “Trade Date” is specified in the
Assignment and Assumption, as of the Trade Date) shall not be less than
$5,000,000, in the case of any assignment in respect of the Revolving Credit
Facility, unless such assignment is made to an existing Lender or to an
Affiliate thereof, in which case no minimum amount shall apply, unless each of the Administrative Agent and, so
long as no Default or Event of Default has occurred and is continuing, the
Borrower otherwise consent (each such consent not to be unreasonably withheld
or delayed); provided that the Borrower shall be deemed to have
given its consent five (5) Business Days after the date written notice thereof
has been delivered by the assigning Lender (through the Administrative Agent)
unless such consent is expressly refused by the Borrower prior to such fifth (5th)
Business Day;


 


(ii)                                  each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loan or the Commitment
assigned;


 


(iii)                               any assignment of a Revolving Credit Commitment must be approved by the
Administrative Agent, the Swingline Lender and the Issuing Lender unless the
Person that is the proposed assignee is itself a Lender with a Revolving Credit
Commitment (whether or not the proposed assignee would otherwise qualify as an
Eligible Assignee); and


 


83





















 


(iv)                              the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500, and the
Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire.


 


Subject
to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c)
of this Section, from and after the effective date specified in each Assignment
and Assumption, the Eligible Assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to
the benefits of Section 4.8, Section 4.9,
Section 4.10, Section 4.11 and Section 13.3 with respect to facts and circumstances occurring prior to the effective
date of such assignment.  Any assignment
or transfer by a Lender of rights or obligations under this Agreement that does
not comply with this subsection 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 subsection (d) of this Section.


 


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


 


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


 


Any agreement or instrument pursuant to which a Lender
sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or
waiver of any provision of this Agreement; provided that such agreement
or instrument may provide that such Lender will not, without the consent of the


 


84





















 


Participant,
agree to any amendment, modification or waiver or modification described in the
Section 13.2 that directly affects such Participant.  Subject to subsection (e) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Section 4.8, Section 4.9,
Section 4.10 and Section 4.11 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 13.4
as though it were a Lender, provided such Participant agrees to be subject to Section 4.6
as though it were a Lender.


 


(e)                                  Limitations upon Participant Rights.  A
Participant shall not be entitled to receive any greater payment under Section 4.10
and Section 4.11 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 4.11
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with Section 4.11(e)
as though it were a Lender.


 


(f)                                    Certain Pledges.  Any Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that
no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.


 


SECTION 13.12              Confidentiality.  Each of the Administrative Agent and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) in
accordance with the Administrative Agent’s regulatory compliance policy, to the
extent requested by, or required to be disclosed to, any rating agency, or
regulatory or similar authority (including any self-regulatory authority, such
as the National Association of Insurance Commissioners), (c) to the extent
required by applicable laws or regulations or by any subpoena or similar legal
process, (d) to any other party hereto, (e) in connection with the exercise of
any remedies under this Agreement or under any other Loan Document (or any
Hedging Agreement with a Lender or the Administrative Agent) or any action or
proceeding relating to this Agreement or any other Loan Document (or any
Hedging Agreement with a Lender or the Administrative Agent) or the enforcement
of rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any
purchasing lender, proposed purchasing lender, Participant or proposed
Participant or (ii) any actual or prospective counterparty (or its advisors) to
any swap or derivative transaction relating to the Borrower and its
obligations, (g) with the consent of the Borrower, (h) to Gold Sheets
and other similar bank trade publications, such information to consist of deal
terms and other information customarily found in such publications, or (i) to
the extent such Information (x) becomes publicly available other than as a
result of a breach of this Section or (y) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Borrower.  For purposes of
this Section, “Information” means all information received from any
Credit Party relating to any Credit Party or any of their respective
businesses, other than any such information that is


 


85





















 


available to the
Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by any Credit Party; provided that, in the case of
information received from a Credit Party after the date hereof, such
information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.


 


SECTION 13.13              Performance of
Duties.  Each of the Credit Party’s
obligations under this Agreement and each of the other Loan Documents shall be
performed by such Credit Party at its sole cost and expense.


 


SECTION 13.14              All Powers Coupled
with Interest.  All powers of
attorney and other authorizations granted to the Lenders, the Administrative
Agent and any Persons designated by the Administrative Agent or any Lender
pursuant to any provisions of this Agreement or any of the other Loan Documents
shall be deemed coupled with an interest and shall be irrevocable so long as
any of the Obligations remain unpaid or unsatisfied, any of the Commitments
remain in effect or the Credit Facility has not been terminated.


 


SECTION 13.15              Survival of Indemnities.  Notwithstanding any termination of this
Agreement, the indemnities to which the Administrative Agent and the Lenders
are entitled under the provisions of this Article XIII and any
other provision of this Agreement and the other Loan Documents shall continue
in full force and effect and shall protect the Administrative Agent and the
Lenders against events arising after such termination as well as before.


 


SECTION 13.16              Titles and Captions.  Titles and captions of Articles, Sections and
subsections in, and the table of contents of, this Agreement are for
convenience only, and neither limit nor amplify the provisions of this
Agreement.


 


SECTION 13.17              Severability of
Provisions.  Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.


 


SECTION 13.18              Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.


 


SECTION 13.19              Integration.  This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and thereof and supersedes all prior agreements,
written or oral, on such subject matter. 
In the event of any conflict between the provisions of this Agreement
and those of any other Loan Document, the provisions of this Agreement shall
control; provided that the inclusion of supplemental rights or remedies
in favor of the Administrative Agent or the Lenders in any other


 


86





















 


Loan Document shall not
be deemed a conflict with this Agreement. 
Each Loan Document was drafted with the joint participation of the
respective parties thereto and shall be construed neither against nor in favor
of any party, but rather in accordance with the fair meaning thereof.


 


SECTION 13.20              Term of Agreement.  This Agreement shall remain in effect from
the Closing Date through and including the date upon which all Obligations
arising hereunder or under any other Loan Document shall have been indefeasibly
and irrevocably paid and satisfied in full and all Commitments have been
terminated.  No termination of this
Agreement shall affect the rights and obligations of the parties hereto arising
prior to such termination or in respect of any provision of this Agreement
which survives such termination.


 


SECTION 13.21              Advice of Counsel, No Strict Construction. Each of the parties represents
to each other party hereto that it has discussed this Agreement with its
counsel.  The parties hereto have
participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.


 


SECTION 13.22              Inconsistencies
with Other Documents; Independent Effect of Covenants.


 


(a)                                  In the event there is
a conflict or inconsistency between this Agreement and any other Loan Document,
the terms of this Agreement shall control; provided that any provision
of the Security Documents which imposes additional burdens on the Credit
Parties or their Subsidiaries or further restricts the rights of the Credit
Parties or their Subsidiaries or gives the Administrative Agent or Lenders
additional rights shall not be deemed to be in conflict or inconsistent with
this Agreement and shall be given full force and effect.


 


(b)                                 Each of the Parent,
Holdings and the Borrower expressly acknowledges and agrees that each covenant
contained in Articles VIII, IX, or X hereof shall be given
independent effect.  Accordingly, the
Parent, Holdings and the Borrower shall not engage in any transaction or other
act otherwise permitted under any covenant contained in Articles VIII, IX,
or X if, before or after giving effect to such transaction or act, such
Person shall or would be in breach of any other covenant contained in Articles
VIII, IX, or X.


 


[Signature pages to follow]


 


87





















 


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


 


	
   

  	
  TUESDAY
  MORNING, INC., as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  TUESDAY
  MORNING CORPORATION, as

  Parent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TMI
  HOLDINGS, INC., as Holdings

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 





















 


	
   

  	
  AGENTS
  AND LENDERS:

  
	
   

  	
   

  
	
   

  	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION,

  
	
   

  	
  as
  Administrative Agent, Swingline Lender, Issuing

  Lender and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 





















 


	
   

  	
  WELLS
  FARGO BANK, N.A., as

  Co-Syndication Agent, Co-Lead Arranger

  and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 





















 


	
   

  	
  LASALLE
  BANK NATIONAL ASSOCIATION,

  as Co-Syndication Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 





















 


	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION,

  as Co-Documentation Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 





















 


	
   

  	
  SOVEREIGN
  BANK,

  as Co-Documentation Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 





















 


	
   

  	
  THE
  ROYAL BANK OF SCOTLAND plc,

  as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 





















 


	
   

  	
  HIBERNIA
  NATIONAL BANK, as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 























 


EXHIBIT A-1


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF REVOLVING CREDIT NOTE


 





















 


REVOLVING CREDIT NOTE


 


	
  $                  

  	
               
       , 200  

  



 


FOR
VALUE RECEIVED, the undersigned, TUESDAY MORNING, INC., a corporation organized
under the laws of the State of Texas (the “Borrower”), promises to pay
to the order of                                      ,
(the “Lender”), at the place and times provided in the Credit Agreement
referred to below, the principal sum of                                    
DOLLARS ($                      )
or, if less, the principal amount of all Revolving Credit Loans made by the
Lender from time to time pursuant to that certain Credit Agreement, dated as of
December 22, 2004 (as amended, restated, supplemented or otherwise modified, the
“Credit Agreement”), by and among the Borrower, Tuesday Morning
Corporation, a Delaware corporation (the “Parent”), TMI Holdings, Inc.,
a Delaware corporation (“Holdings”), the lenders who are or may become a
party thereto (collectively, the “Lenders”) and Wachovia Bank, National
Association, a national banking association, as the administrative agent for
the Lenders (the “Administrative Agent”).  Capitalized terms used herein and not defined
herein shall have the meanings assigned thereto in the Credit Agreement.


 


The
unpaid principal amount of this Revolving Credit Note from time to time
outstanding is subject to mandatory repayment from time to time as provided in
the Credit Agreement and shall bear interest as provided in Section 4.1 of the
Credit Agreement.  All payments of
principal and interest on this Revolving Credit Note shall be payable in lawful
currency of the United States of America in immediately available funds to the
account designated in the Credit Agreement.


 


This
Revolving Credit Note is entitled to the benefits of, and evidences Obligations
incurred under, the Credit Agreement, to which reference is made for a
description of the security for this Revolving Credit Note and for a statement
of the terms and conditions on which the Borrower is permitted and required to
make prepayments and repayments of principal of the Obligations evidenced by
this Revolving Credit Note and on which such Obligations may be declared to be
immediately due and payable.


 


THIS
REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND
SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),
WITHOUT REFERENCE TO ANY OTHER CONFLICTS OF LAW PRINCIPLES THEREOF.


 


The
Indebtedness evidenced by this Revolving Credit Note is senior in right of
payment to all Subordinated Indebtedness referred to in the Credit Agreement.


 





















 


The
Borrower hereby waives all requirements as to diligence, presentment, demand of
payment, protest and (except as required by the Credit Agreement) notice of any
kind with respect to this Revolving Credit Note.


 


 


[Signature Page Follows]


 





















 


IN WITNESS WHEREOF, the undersigned has executed this
Revolving Credit Note under seal as of the day and year first above written.


 


 


	
   

  	
  TUESDAY MORNING,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 





















 


EXHIBIT A-2


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF SWINGLINE NOTE


 





















 


SWINGLINE NOTE


 


	
  $                  

  	
               
       , 200  

  



 


FOR
VALUE RECEIVED, the undersigned, TUESDAY MORNING, INC., a corporation organized
under the laws of the State of Texas (the “Borrower”), promises to pay
to the order of                       
(the “Lender”), at the place and times provided in the Credit Agreement
referred to below, the principal sum of                                  
DOLLARS ($                     )
or, if less, the principal amount of all Swingline Loans made by the Lender
from time to time pursuant to that certain Credit Agreement, dated as of
December 22, 2004 (as amended, restated, supplemented or otherwise modified,
the “Credit Agreement”), by and among the Borrower, Tuesday Morning
Corporation, a Delaware corporation (the “Parent”), TMI Holdings, Inc.,
a Delaware corporation (“Holdings”), the lenders who are or may become a
party thereto (collectively, the “Lenders”) and Wachovia Bank, National
Association, a national banking association, as the administrative agent for
the Lenders (the “Administrative Agent”).  Capitalized terms used herein and not defined
herein shall have the meanings assigned thereto in the Credit Agreement.


 


The
unpaid principal amount of this Swingline Note from time to time outstanding is
subject to mandatory repayment from time to time as provided in the Credit
Agreement and shall bear interest as provided in Section 4.1 of the Credit
Agreement.  Swingline Loans refunded as
Revolving Credit Loans in accordance with Section 2.2(b) of the Credit
Agreement shall be payable by the Borrower as Revolving Credit Loans pursuant
to the Revolving Credit Notes, and shall not be payable under this Swingline
Note as Swingline Loans.  All payments of
principal and interest on this Swingline Note shall be payable in lawful
currency of the United States of America in immediately available funds to the
account designated in the Credit Agreement.


 


This
Swingline Note is entitled to the benefits of, and evidences Obligations
incurred under, the Credit Agreement, to which reference is made for a
description of the security for this Swingline Note and for a statement of the
terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Obligations evidenced by this
Swingline Note and on which such Obligations may be declared to be immediately
due and payable.


 


THIS
SWINGLINE NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND SECTION 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REFERENCE TO ANY
OTHER CONFLICTS OF LAW PRINCIPLES THEREOF.


 


The
Indebtedness evidenced by this Swingline Note is senior in right of payment to
all Subordinated Indebtedness referred to in the Credit Agreement.


 


The
Borrower hereby waives all requirements as to diligence, presentment, demand of
payment, protest and (except as required by the Credit Agreement) notice of any
kind with respect to this Swingline Note.


 





















 


IN
WITNESS WHEREOF, the undersigned has executed this Swingline Note under seal as
of the day and year first above written.


 


 


	
   

  	
  TUESDAY MORNING,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


2





















 


EXHIBIT B


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF NOTICE OF BORROWING


 





















 


NOTICE OF BORROWING


 


Dated as of:                 


 


Wachovia Bank, National Association,
  as Administrative Agent


Charlotte Plaza, CP-8


201 South College Street


Charlotte, North Carolina
28288-0680


Attention:  Syndication Agency Services


 


Ladies and Gentlemen:


 


This
irrevocable Notice of Borrowing is delivered to you pursuant to Section 2.3 of
the Credit Agreement dated as of December 22, 2004 (as amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), by and
among TUESDAY MORNING, INC., a Texas corporation (the “Borrower”),
TUESDAY MORNING CORPORATION, a Delaware corporation (the “Parent”), TMI
HOLDINGS, INC., a Delaware corporation (“Holdings”), the lenders who are
or may become party thereto (collectively, the “Lenders”) and WACHOVIA BANK, NATIONAL ASSOCIATION, a
national banking association, as the administrative agent for the Lenders (the “Administrative
Agent”).


 


1.             The Borrower hereby requests that
the Lenders make a [Revolving
Credit Loan]  [Swingline
Loan] to the Borrower in the aggregate
principal amount of $                 .  (Complete with an amount in accordance with
Section 2.3(a) of the Credit Agreement.)


 


2.             The Borrower hereby requests that
such Loan be made on the following Business Day:                           .  (Complete with a Business Day in accordance
with Section 2.3(a) of the Credit Agreement).


 


3.             The Borrower hereby requests that
the Revolving Credit Loan bear interest at the following interest rate, plus
the Applicable Margin, as set forth below:


 


	
  Component

  of Loan

  	
   

  	
  Interest Rate

  	
   

  	
  Interest Period

  (LIBOR

  Rate only)

  	
   

  	
  Termination Date for

  Interest Period

  (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Base
  Rate or LIBOR Rate](1)

  	
   

  	
   

  	
   

  	
   

  



 










(1)           Complete with (i) the Base Rate or
LIBOR Rate for Revolving Credit Loans and (ii) the Base Rate for Swingline
Loans.


 





















 


4.             The principal amount of all Loans
and L/C Obligations outstanding as of the date hereof (including the Loan
requested herein) does not exceed the maximum amount permitted to be
outstanding pursuant to the terms of the Credit Agreement.


 


5.             All of the conditions applicable to
the Loan requested herein as set forth in the Credit Agreement have been
satisfied as of the date hereof and will remain satisfied to the date of such
Loan.


 


6.             Capitalized terms used herein and
not defined herein shall have the meanings assigned thereto in the Credit
Agreement.


 


[Signature Page Follows]


 


2





















 


IN
WITNESS WHEREOF, the undersigned has executed this Notice of Borrowing as of
the             
day of         , 200  .


 


 


	
   

  	
  TUESDAY MORNING,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


3





















 


EXHIBIT C


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF NOTICE OF ACCOUNT DESIGNATION


 





















 


NOTICE OF ACCOUNT DESIGNATION


 


Dated as of:                


 


Wachovia Bank, National
Association,
  as Administrative Agent


Charlotte Plaza, CP-8


201 South College Street


Charlotte, North Carolina
28288-0680


Attention:  Syndication Agency Services


 


Ladies and Gentlemen:


 


This
Notice of Account Designation is delivered to you pursuant to Section 2.3(b) of
the Credit Agreement, dated as of December 22, 2004 (as amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), by and
among TUESDAY MORNING, INC., a Texas corporation (the “Borrower”),
TUESDAY MORNING CORPORATION, a Delaware corporation (the “Parent”), TMI
HOLDINGS, INC., a Delaware corporation (“Holdings”), the lenders who are
or may become party thereto (collectively, the “Lenders”) and WACHOVIA BANK, NATIONAL ASSOCIATION, a
national banking association, as the administrative agent for the Lenders (the “Administrative
Agent”).


 


1.             The Administrative Agent is hereby
authorized to disburse all Loan proceeds into the following account(s):


 


 


ABA Routing Number:           


Account Number:                   


 


2.             This authorization shall remain in
effect until revoked or until a subsequent Notice of Account Designation is
provided to the Administrative Agent.


 


3.             Capitalized terms used herein and
not defined herein shall have the meanings assigned thereto in the Credit
Agreement.


 


[Signature Page Follows]


 





















 


IN WITNESS WHEREOF, the undersigned has executed this
Notice of Account Designation as of the       
day of          , 200  .


 


 


	
   

  	
  TUESDAY MORNING,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 





















 


EXHIBIT D


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF NOTICE OF PREPAYMENT


 





















 


NOTICE OF PREPAYMENT


 


Dated as of:              


 


Wachovia Bank, National
Association,
  as Administrative Agent


Charlotte Plaza, CP-8


201 South College Street


Charlotte, North Carolina
28288-0680


Attention:  Syndication Agency Services


 


Ladies and Gentlemen:


 


This
irrevocable Notice of Prepayment is delivered to you pursuant to Section 2.4(c)
of the Credit Agreement, dated as of December 22, 2004 (as amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), by and
among TUESDAY MORNING, INC., a Texas corporation (the “Borrower”),
TUESDAY MORNING CORPORATION, a Delaware corporation (the “Parent”), TMI
HOLDINGS, INC., a Delaware corporation (“Holdings”), the lenders who are
or may become a party thereto (collectively, the “Lenders”) and WACHOVIA BANK, NATIONAL ASSOCIATION, a
national banking association, as the administrative agent for the Lenders (the “Administrative
Agent”).


 


1.             The Borrower hereby provides notice
to the Administrative Agent that it shall prepay the following [Base Rate Loans] and/or [LIBOR Rate Loans]:                        .


(Complete with the amount of prepayment allocable to each type of loan
in accordance with Section 2.4 of the Credit Agreement.)


 


2.            The
Loan to be prepaid is a [check each applicable box]


 


•              Swingline
Loan


 


•              Revolving
Credit Loan


 


3.             The Borrower shall repay the
above-referenced Loans on the following Business Day:                        .
(Complete with the same Business Day as the date of this Notice of Prepayment
or any Business Day thereafter with respect to any Swingline Loan or any Base
Rate Loan, and a date which is at least three (3) Business Days subsequent to
date of this Notice of Prepayment with respect to any LIBOR Rate Loan.)


 


4.             Capitalized terms used herein and
not defined herein shall have the meanings assigned thereto in the Credit
Agreement.


 


[Signature Page Follows]


 





















 


IN WITNESS WHEREOF, the undersigned has executed this
Notice of Prepayment as of the       day of      ,
200  .


 


 


	
   

  	
  TUESDAY MORNING,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


2





















 


EXHIBIT E


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF NOTICE OF CONVERSION/CONTINUATION


 





















 


NOTICE OF CONVERSION/CONTINUATION


 


Dated as of:               


 


Wachovia Bank, National
Association,
  as Administrative Agent


Charlotte Plaza, CP-8


201 South College Street


Charlotte, North Carolina
28288-0680


Attention:  Syndication Agency Services


 


Ladies and Gentlemen:


 


This
irrevocable Notice of Conversion/Continuation (this “Notice”) is
delivered to you pursuant to Section 4.2 of the Credit Agreement, dated as of
December 22, 2004 (as amended, restated, supplemented or otherwise modified,
the “Credit Agreement”), by and among TUESDAY MORNING, INC., a Texas
corporation (the “Borrower”), TUESDAY MORNING CORPORATION, a Delaware
corporation (the “Parent”), TMI HOLDINGS, INC., a Delaware corporation (“Holdings”),
the lenders who are or may become a party thereto (collectively, the “Lenders”)
and WACHOVIA BANK,
NATIONAL ASSOCIATION, a national banking association, as the
administrative agent for the Lenders.


 


1.             This Notice is submitted for the purpose of:  (Check one and complete applicable
information in accordance with the Credit Agreement.)


 


•  Converting all or a portion of a
Base Rate Loan into a LIBOR Rate Loan


 


(a)           The aggregate outstanding principal
balance of such Loan is $                      .


 


(b)           The principal amount of such Loan to
be converted is $                      .


 


(c)           The requested effective date of the
conversion of such Loan is                       .


 


(d)           The requested Interest Period
applicable to the converted Loan is                       .


 


•  Converting all or a portion of a
LIBOR Rate Loan into a Base Rate Loan


 


(a)           The aggregate outstanding principal
balance of such Loan is $                      .


 





















 


(b)                                 The
last day of the current Interest Period for such Loan is                       .


 


(c)                                  The
principal amount of such Loan to be converted is $                      .


 


(d)                                 The
requested effective date of the conversion of such Loan is                       .


 


•  Continuing all or a portion of a
LIBOR Rate Loan as a LIBOR Rate Loan


 


(a)                                  The
aggregate outstanding principal balance of such Loan is $                      .


 


(b)                                 The
last day of the current Interest Period for such Loan is                       .


 


(c)                                  The
principal amount of such Loan to be continued is $                      .


 


(d)                                 The
requested effective date of the continuation of such Loan is                       .


 


(e)                                  The
requested Interest Period applicable to the continued Loan is                       .


 


2.                                       The
principal amount of all Loans and L/C Obligations outstanding as of the date
hereof does not exceed the maximum amount permitted to be outstanding pursuant
to the terms of the Credit Agreement.


 


3.                                       All
of the conditions applicable to the conversion or continuation of the Loan
requested herein as set forth in the Credit Agreement have been satisfied or
waived as of the date hereof and will remain satisfied or waived to the date of
such Loan.


 


4.                                       Capitalized
terms used herein and not defined herein shall have the meanings assigned
thereto in the Credit Agreement.


 


[Signature Page Follows]


 


2





















 


IN
WITNESS WHEREOF, the undersigned has executed this Notice of
Conversion/Continuation as of the       day of             ,
200  .


 


 


	
   

  	
  TUESDAY MORNING,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


3





















 


EXHIBIT F


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF OFFICER’S COMPLIANCE CERTIFICATE


 





















 


OFFICER’S COMPLIANCE CERTIFICATE


 


The
undersigned, on behalf of TUESDAY MORNING, INC., a Texas corporation (the “Borrower”),
and TUESDAY MORNING CORPORATION, a Delaware corporation (the “Parent”),
hereby certify (solely in their capacities as Responsible Officers of the
Borrower and Parent, as applicable, and not in their individual capacities) to
the Administrative Agent and the Lenders each as defined in the Credit
Agreement referred to below, as follows:


 


1.                                       This
Certificate is delivered to you pursuant to Section 7.2 of the Credit
Agreement, dated as of December 22, 2004 (as amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), by and
among the Borrower, the Parent, TMI Holdings, Inc., a Delaware corporation (“Holdings”),
the lenders who are or may become a party thereto (collectively, the “Lenders”)
and Wachovia Bank, National Association, a national banking association, as
administrative agent for the Lenders (the “Administrative Agent”).  Capitalized terms used herein and not defined
herein shall have the meanings assigned thereto in the Credit Agreement.


 


2.                                       We
have reviewed the financial statements of the Parent and its Subsidiaries dated
as of September 30, 2004 and for the three (3) period[s] then ended and
such statements fairly present in all material respects, in accordance with
GAAP, the financial condition of the Parent and its Subsidiaries on a
Consolidated basis, subject to changes resulting from audit and normal year-end
adjustments, as of the dates indicated and the results of their operations and
cash flows for the period[s] indicated.


 


3.                                       We
have reviewed the terms of the Credit Agreement, and the related Loan Documents
and have made, or caused to be made under our supervision, a review in
reasonable detail of the transactions and the condition of the Parent and its
Subsidiaries during the accounting period covered by the financial statements
referred to in Paragraph 2 above.  Such
review has not disclosed the existence of any condition or event that
constitutes a Default or an Event of Default, nor do we have any knowledge of
the existence of any such condition or event as of the date of this
Certificate.


 


4.                                       The
Applicable Margin and calculations determining the Average Total Leverage Ratio
and the Applicable Margin are set forth on the attached Schedule 1.  The Parent and its Subsidiaries are in
compliance with the financial covenants contained in Article IX of the
Credit Agreement as shown on such Schedule 1.  The Parent and its Subsidiaries are in
compliance with the other covenants and restrictions contained in the Credit
Agreement.


 


[Signature Page Follows]


 





















 


IN
WITNESS WHEREOF the undersigned have executed this Officer’s Compliance
Certificate as of the            
day of         , 200  .


 


 


	
   

  	
  TUESDAY MORNING,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


 


	
   

  	
  TUESDAY MORNING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


2





















 


Schedule 1


to


Officer’s Compliance Certificate


 


[To be provided by Borrower and Parent in form
acceptable to Administrative Agent]


 





















 


EXHIBIT G


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF ASSIGNMENT AND ASSUMPTION


 





















 


ASSIGNMENT AND ASSUMPTION


 


Dated as of:       


 


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


 


For an
agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to and in accordance with the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto to the extent related
to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below (including any letters of credit, guarantees, and
swingline loans included in such facilities) and (ii) to the extent permitted
to be assigned under applicable law, all claims, suits, causes of action and
any other right of the Assignor (in its capacity as a Lender) against any
Person, whether known or unknown, arising under or in connection with the
Credit Agreement, any other documents or instruments delivered pursuant thereto
or the loan transactions governed thereby or in any way based on or related to
any of the foregoing, including, but not limited to, contract claims, tort
claims, malpractice claims, statutory claims and all other claims at law or in
equity related to the rights and obligations sold and assigned pursuant to
clause (i) above (the rights and obligations sold and assigned pursuant to
clauses (i) and (ii) above being referred to herein collectively as, the “Assigned
Interest”).  Such sale and assignment
is without recourse to the Assignor and, except as expressly provided in this
Assignment and Assumption, without representation or warranty by the Assignor.


 


	
  1.

  	
  Assignor:

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Assignee:

  	
   

  
	
   

  	
   

  	
  [and is an
  Affiliate of [identify Lender](2)]

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Borrower:

  	
  Tuesday Morning,
  Inc.

  



 










(2)                                  Select
as applicable.


 





















 


	
  4.

  	
  Administrative
  Agent:

  	
  Wachovia Bank,
  National Association, as Administrative Agent under the Credit Agreement

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Credit
  Agreement:

  	
  Credit Agreement
  dated as of December 22, 2004 by and among Tuesday Morning, Inc., a
  Texas corporation (the “Borrower”), Tuesday Morning Corporation, a
  Delaware corporation (the “Parent”), TMI Holdings, Inc., a Delaware
  corporation (“Holdings”), the lenders who are or may become a party
  thereto (collectively, the “Lenders”), and Wachovia Bank, National
  Association, a national banking association, as administrative agent for the
  Lenders (the “Administrative Agent”) (as amended, restated,
  supplemented or otherwise modified, the “Credit Agreement”)

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Assigned
  Interest:

  	
   

  



 


 


	
  Facility

  Assigned(3)

  	
   

  	
  Aggregate Amount of

  Commitment/Loans

  for all Lenders

  	
   

  	
  Amount of 

  Commitment/Loans

  Assigned(4)

  	
   

  	
  Percentage Assigned

  of

  Commitment/Loans(5)

  	
   

  	
  CUSIP

  Number

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  %

  	
   

  	
   

  



 


	
  [7.

  	
  Trade Date:

  	
                                   ](6)

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Effective Date:

  	
                                         [TO
  BE INSERTED BY THE ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE
  OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

  



 










(3)                                  Fill
in the appropriate terminology for the types of facilities under the Credit
Agreement that are being assigned under this Assignment (e.g. “Revolving Credit
Commitment”)


(4)                                  Amount
to be adjusted by the counterparties to take into account any payments or
prepayments made between the Trade Date and the Effective Date.


(5)                                  Set
forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all
Lenders thereunder.


(6)                                  To
be completed if the Assignor and the Assignee intend that the minimum
assignment amount is to be determined as of the Trade Date.


 


2





















 


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


 


	
   

  	
  ASSIGNOR

  
	
   

  	
  [NAME OF
  ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


3





















 


	
   

  	
  ASSIGNEE

  
	
   

  	
    [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


4





















 


	
  [Consented
  to:](7)

  	
   

  
	
   

  	
   

  
	
  [NAME OF
  RELEVANT PARTY]

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 










(7)                                  To
be added only if the consent of the Borrower and/or other parties (e.g.
Swingline Lender, L/C Issuer) is required by the terms of the Credit Agreement.


 





















 


Consented to and Accepted
by:


 


WACHOVIA BANK, NATIONAL
ASSOCIATION,


as Administrative Agent


 


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					



 





















 


ANNEX 1 to Assignment and Assumption


 


CREDIT AGREEMENT DATED AS OF DECEMBER 22, 2004 BY AND AMONG


TUESDAY MORNING, INC. (THE “BORROWER”), TUESDAY MORNING
CORPORATION

(THE “PARENT”), TMI HOLDINGS, INC. (“HOLDINGS”),


THE LENDERS WHO ARE OR MAY BECOME A PARTY THERETO, AS LENDERS,


AND WACHOVIA BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT


 


 


STANDARD TERMS AND CONDITIONS FOR


ASSIGNMENT AND ASSUMPTION


 


1.                                       Representations
and Warranties.


 


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


 


1.2.                              Assignee.  The Assignee (a) represents and warrants that
(i) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) it meets all requirements of an Eligible Assignee under the
Credit Agreement (subject to receipt of such consents as may be required under
the Credit Agreement), (iii) from and after the Effective Date, it shall be
bound by the provisions of the Credit Agreement as a Lender thereunder and, to
the extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iv) it has received a copy of the Credit Agreement, together with
copies of the most recent financial statements delivered pursuant to Section 7.1
thereof, as applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Assumption and to purchase the Assigned Interest on the
basis of which it has made such analysis and decision independently and without
reliance on the Administrative Agent or any other Lender, and (v) if it is a
foreign lender, attached to the Assignment and Assumption is any documentation
required to be delivered by it pursuant to the terms of the Credit Agreement,
duly completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and


 





















 


information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents, and (ii) it will perform
in accordance with their terms all of the obligations that by the terms of the
Loan Documents are required to be performed by it as a Lender.


 


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


 


3.                                       General
Provisions.  This Assignment and
Assumption shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and assigns.  This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument.  Delivery of an executed
counterpart of a signature page of this Assignment and Assumption by telecopy
shall be effective as delivery of a manually executed counterpart of this
Assignment and Assumption.  This
Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of New York.


 


3





















 


EXHIBIT H


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF PARENTAL ENTITY GUARANTY AGREEMENT


 





















 


EXHIBIT I


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF SUBSIDIARY GUARANTY AGREEMENT


 





















 


EXHIBIT J


to


Credit Agreement


dated as of December 22, 2004


by and among


TUESDAY MORNING, INC., as Borrower,


TUESDAY MORNING CORPORATION, as Parent,


TMI HOLDINGS, INC., as Holdings,


the lenders party thereto, as Lenders,


and


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 


 


FORM OF COLLATERAL AGREEMENT


 





















 


Execution Version


 




 





PARENTAL ENTITY GUARANTY AGREEMENT


 


dated as of December 22, 2004


 


 


by and among


 


 


TUESDAY MORNING CORPORATION


and


TMI HOLDINGS, INC.,


as Guarantors


in favor of


 


WACHOVIA BANK, NATIONAL ASSOCIATION


as Administrative Agent




 





 





















 


Table of Contents


 


	
  ARTICLE I DEFINED
  TERMS

  	
   

  
	
  SECTION 1.1

  	
  Definitions

  	
   

  
	
  SECTION 1.2

  	
  Other Definitional Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II GUARANTY

  	
   

  
	
  SECTION 2.1

  	
  Guaranty

  	
   

  
	
  SECTION 2.2

  	
  Bankruptcy Limitations on each
  Guarantor

  	
   

  
	
  SECTION 2.3

  	
  Agreement Regarding Subrogation

  	
   

  
	
  SECTION 2.4

  	
  Agreements for Reimbursement

  	
   

  
	
  SECTION 2.5

  	
  Nature of Guaranty.

  	
   

  
	
  SECTION 2.6

  	
  Waivers

  	
   

  
	
  SECTION 2.7

  	
  Modification of Loan Documents, etc

  	
   

  
	
  SECTION 2.8

  	
  Demand by the Administrative Agent

  	
   

  
	
  SECTION 2.9

  	
  Remedies

  	
   

  
	
  SECTION 2.10

  	
  Benefits of Guaranty

  	
   

  
	
  SECTION 2.11

  	
  Termination; Reinstatement

  	
   

  
	
  SECTION 2.12

  	
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
  SECTION 3.1

  	
  Organization; Power; Qualification

  	
   

  
	
  SECTION 3.2

  	
  Authorization of Agreement;
  Enforceability

  	
   

  
	
  SECTION 3.3

  	
  Compliance of Guaranty with Laws, etc

  	
   

  
	
  SECTION 3.4

  	
  Title to Properties

  	
   

  
	
  SECTION 3.5

  	
  Litigation

  	
   

  
	
  SECTION 3.6

  	
  Solvency

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV MISCELLANEOUS

  	
   

  
	
  SECTION 4.1

  	
  Amendments, Waivers and Consents

  	
   

  
	
  SECTION 4.2

  	
  Notices

  	
   

  
	
  SECTION 4.3

  	
  Enforcement Expenses, Indemnification

  	
   

  
	
  SECTION 4.4

  	
  Governing Law

  	
   

  
	
  SECTION 4.5

  	
  Jurisdiction and Venue

  	
   

  
	
  SECTION 4.6

  	
  Waiver of Jury Trial

  	
   

  
	
  SECTION 4.7

  	
  Punitive Damages

  	
   

  
	
  SECTION 4.8

  	
  No Waiver by Course of Conduct,
  Cumulative Remedies

  	
   

  
	
  SECTION 4.9

  	
  Successors and Assigns

  	
   

  
	
  SECTION 4.10

  	
  Severability

  	
   

  
	
  SECTION 4.11

  	
  Headings

  	
   

  
	
  SECTION 4.12

  	
  Counterparts

  	
   

  
	
  SECTION 4.13

  	
  Set-Off

  	
   

  
	
  SECTION 4.14

  	
  Integration

  	
   

  
	
  SECTION 4.15

  	
  Acknowledgements

  	
   

  
	
  SECTION 4.16

  	
  Releases

  	
   

  
	
  SECTION 4.17

  	
  Joint and Several Liability

  	
   

  



 


i





















 


Execution Version


 


PARENTAL ENTITY GUARANTY AGREEMENT


 


PARENTAL ENTITY GUARANTY AGREEMENT (as
amended, restated, supplemented or otherwise modified, this “Guaranty”),
dated as of December 22, 2004, made by TUESDAY MORNING CORPORATION, a
Delaware corporation (the “Parent”) and TMI HOLDINGS, INC., a Delaware
corporation (“Holdings” and, together with the Parent, the “Guarantors”,
and individually the “Guarantor”) in favor of WACHOVIA BANK, NATIONAL
ASSOCIATION, a national banking association, as administrative agent (in such
capacity, the “Administrative Agent”) for the ratable benefit of itself
and the financial institutions (the “Lenders”) from time to time parties
to the Credit Agreement, dated of even date herewith (as amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), by and
among Tuesday Morning, Inc., a Texas corporation (the “Borrower”),
the Guarantors, the Lenders, and the
Administrative Agent.


 


STATEMENT OF PURPOSE


 


Pursuant to the terms of the Credit
Agreement, the Lenders have agreed to make Extensions of Credit to the Borrower
upon the terms and subject to the conditions set forth therein.


 


The Borrower and the Guarantors, though
separate legal entities, comprise one integrated financial enterprise, and all
Extensions of Credit to the Borrower will inure, directly or indirectly to the
benefit of each of the Guarantors.


 


It is a condition precedent to the obligation
of the Lenders to make their respective Extensions of Credit to the Borrower
under the Credit Agreement that the Guarantors shall have executed and
delivered this Guaranty to the Administrative Agent, for the ratable benefit of
itself and the Lenders.


 


NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, and to induce the Administrative Agent and the Lenders to
enter into the Credit Agreement and to induce the Lenders to make their
respective Extensions of Credit to the Borrower thereunder, each Guarantor
hereby agrees with the Administrative Agent, for the ratable benefit of itself
and the Lenders, as follows:


 


ARTICLE I




DEFINED TERMS


 


SECTION 1.1                          Definitions.  The following terms when used in this
Guaranty shall have the meanings assigned to them below:


 


“Applicable Insolvency Laws” means all
Applicable Laws governing bankruptcy, reorganization, arrangement, adjustment
of debts, relief of debtors, dissolution, insolvency, fraudulent transfers or
conveyances or other similar laws (including, without limitation, 11 U.S.C.
Sections 544, 547, 548 and 550 and other “avoidance” provisions of Title
11 of the United States Code, as amended or supplemented).


 


“Guaranteed Obligations” has the
meaning set forth in Section 2.1.


 





















 


“Guaranty” means this Parental Entity Guaranty
Agreement, as amended, restated, supplemented or otherwise modified.


 


“Subsidiary Guarantor” means each
Subsidiary party to the Subsidiary Guaranty Agreement.


 


“Subsidiary Guaranty Agreement” means
the Guaranty Agreement dated as of the date hereof, and made by each of the
Subsidiaries of the Parent in favor of the Administrative Agent for the benefit
of itself and the other Lenders, as amended, restated, supplemented or
otherwise modified.


 


SECTION 1.2                          Other Definitional Provisions.  Capitalized terms used and not otherwise
defined in this Guaranty including the preambles and recitals hereof shall have
the meanings ascribed to them in the Credit Agreement.  The words “hereof,” “herein”, “hereto” and “hereunder”
and words of similar import when used in this Guaranty shall refer to this
Guaranty as a whole and not to any particular provision of this Guaranty, and Section references
in this Guaranty are to Sections of this Guaranty unless otherwise
specified.  The meanings given to terms
defined herein shall be equally applicable to both the singular and plural
forms of such terms.  Where the context
requires, terms relating to the Collateral or any part thereof, when used in
relation to a Guarantor, shall refer to such Guarantor’s Collateral or the
relevant part thereof.


 


ARTICLE II 




GUARANTY 


 


SECTION 2.1                          Guaranty.  Each Guarantor, jointly and severally with the
other Guarantors, unconditionally guarantees to the Administrative Agent for
the ratable benefit of itself and the Lenders, and their respective permitted
successors, endorsees, transferees and assigns, the prompt payment and
performance of all Obligations, whether primary or secondary (whether by way of
endorsement or otherwise), whether now existing or hereafter arising, whether
or not from time to time reduced or extinguished (except by payment and
performance thereof) or hereafter increased or incurred, whether or not
recovery may be or hereafter becomes barred by the statute of limitations,
whether enforceable or unenforceable as against the Credit Parties, whether or
not discharged, stayed or otherwise affected by any Applicable Insolvency Law
or proceeding thereunder, whether created directly with the Administrative
Agent or any Lender or acquired by the Administrative Agent or any Lender
through assignment, endorsement or otherwise, whether matured or unmatured,
whether joint or several, as and when the same become due and payable (whether
at maturity or earlier, by reason of acceleration, mandatory repayment or
otherwise), in accordance with the terms of any such instruments evidencing any
such Obligations, including all renewals, extensions or modifications thereof
(all Obligations, including all of the foregoing being hereafter collectively
referred to as the “Guaranteed Obligations”).


 


SECTION 2.2                          Bankruptcy Limitations on
each Guarantor.  Notwithstanding
anything to the contrary contained in Section 2.1, it is the
intention of each Guarantor, the Administrative Agent and the Lenders that, in
any proceeding involving the bankruptcy, reorganization, arrangement,
adjustment of debts, relief of debtors, dissolution or insolvency or any
similar proceeding with respect to any Guarantor or its assets, the amount of
such


 


2





















 


Guarantor’s obligations
with respect to the Guaranteed Obligations shall be equal to, but not in excess
of, the maximum amount thereof not subject to avoidance or recovery by
operation of Applicable Insolvency Laws. 
To that end, but only in the event and to the extent that such Guarantor’s
obligations with respect to the Guaranteed Obligations or any payment made
pursuant to such Guaranteed Obligations would, but for the operation of the
first sentence of this Section 2.2, be subject to avoidance or
recovery in any such proceeding under Applicable Insolvency Laws, the amount of
each Guarantor’s obligations with respect to the Guaranteed Obligations shall
be limited to the largest amount which, after giving effect thereto, would not,
under Applicable Insolvency Laws, render such Guarantor’s obligations with
respect to the Guaranteed Obligations unenforceable or avoidable or otherwise
subject to recovery under Applicable Insolvency Laws.  To the extent any payment actually made
pursuant to the Guaranteed Obligations exceeds the limitation of the first
sentence of this Section 2.2 and is otherwise subject to avoidance
and recovery in any such proceeding under Applicable Insolvency Laws, the
amount subject to avoidance shall in all events be limited to the amount by
which such actual payment exceeds such limitation and the Guaranteed
Obligations as limited by the first sentence of this Section 2.2
shall in all events remain in full force and effect and be fully enforceable
against each Guarantor.  The first
sentence of this Section 2.2 is intended solely to preserve the
rights of the Administrative Agent hereunder against each Guarantor in such
proceeding to the maximum extent permitted by Applicable Insolvency Laws and
neither such Guarantor, the Borrower, any other Guarantor nor any other Person
shall have any right or claim under such sentence that would not otherwise be
available under Applicable Insolvency Laws in such proceeding.


 


SECTION 2.3                          Agreement Regarding
Subrogation.  Notwithstanding
any payment or payments by any of the Guarantors hereunder, or any set-off or
application of funds of any of the Guarantors by the Administrative Agent or
any Lender, or the receipt of any amounts by the Administrative Agent or any
Lender with respect to any of the Guaranteed Obligations, none of the
Guarantors shall be entitled to be subrogated to any of the rights of the
Administrative Agent or any Lender against the Borrower or the other Guarantor,
the Subsidiary Guarantors or against any collateral security held by the
Administrative Agent or any Lender for the payment of the Guaranteed
Obligations nor shall any of the Guarantors seek any reimbursement from the
Borrower, the Subsidiary Guarantors or any of the other Guarantors in respect
of payments made by such Guarantor in connection with the Guaranteed
Obligations, until all amounts owing to the Administrative Agent and the
Lenders on account of the Guaranteed Obligations are paid in full and the
Commitments are terminated.  If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Guaranteed Obligations shall not have been paid in
full, such amount shall be held by such Guarantor in trust for the
Administrative Agent, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Administrative
Agent in the exact form received by such Guarantor (duly endorsed by such
Guarantor to the Administrative Agent, if required) to be applied against the
Guaranteed Obligations, whether matured or unmatured, in such order as set
forth in the Credit Agreement.


 


SECTION 2.4                          Agreements for
Reimbursement.  Notwithstanding
anything to the contrary contained herein, the parties hereto acknowledge and
agree that, as the Borrower is a Wholly-Owned Subsidiary of the Guarantors and part
of an integrated financial enterprise to which the Guarantors are a party, each
Subsidiary Guarantor shall have a right of reimbursement


 


3





















 


and indemnity from the
Guarantors for any amount paid by such Subsidiary Guarantor in lieu of a right
of contribution between the Subsidiary Guarantors and the Guarantors.


 


SECTION 2.5                          Nature of Guaranty.


 


(a)                                  Each
Guarantor agrees that this Guaranty is a continuing, unconditional guaranty of
payment and performance and not of collection, and that its obligations under
this Guaranty shall be primary, absolute and unconditional, irrespective of,
and unaffected by:


 


(i)                                     the
genuineness, validity, enforceability or any future amendment of, or change in,
the Credit Agreement or any other Loan Document or any other agreement,
document or instrument to which the Borrower, any Guarantor, any Subsidiary
Guarantor or any of their respective Subsidiaries or Affiliates is or may
become a party;


 


(ii)                                  the
absence of any action to enforce this Guaranty, the Credit Agreement or any
other Loan Document or the waiver or consent by the Administrative Agent or any
Lender with respect to any of the provisions of this Guaranty, the Credit
Agreement or any other Loan Document;


 


(iii)                               the existence, value or
condition of, or failure to perfect the Administrative Agent’s Lien against,
any security for or other guaranty of, the Guaranteed Obligations or any
action, or the absence of any action, by the Administrative Agent or any Lender
in respect of such security or guaranty (including, without limitation, the
release of any such security or guaranty);


 


(iv)                              any
structural change in, restructuring of or other similar change of the Borrower,
any Guarantor, any Subsidiary Guarantor or any of their respective
Subsidiaries;


 


(v)                                 any
other action or circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor;


 


it being agreed by each Guarantor that,
subject to the first sentence of Section 2.2, its obligations under
this Guaranty shall not be discharged until the final indefeasible payment and
performance, in full, of the Guaranteed Obligations and the termination of the
Commitments; provided that notwithstanding anything to the contrary in
this Section 2.5, a Guarantor may be released from the Guaranteed
Obligations and any other obligations hereunder pursuant to Section 4.16
of this Guaranty.


 


(b)                                 Each
Guarantor hereby represents and warrants that the Guaranteed Obligations and
any other obligations hereunder are not, and agrees that its obligations under
this Guaranty shall not be, subject to any counterclaims, offsets or defenses (other
than a defense of payment) of any kind against the Administrative Agent, the
Lenders or the Borrower whether now existing or which may arise in the future.


 


(c)                                  Each
Guarantor hereby agrees and acknowledges that the Guaranteed Obligations, and any other obligations hereunder, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon this


 


4





















 


Guaranty, and all dealings
between the Borrower and any of the Guarantors, on the one hand, and the
Administrative Agent and the Lenders, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon this
Guaranty.  


 


SECTION 2.6                          Waivers.  To the extent permitted by Applicable Laws,
each Guarantor expressly waives all of the following rights and defenses (and
agrees not to take advantage of or assert any such right or defense):


 


(a)                                  any
rights it may now or in the future have under any statute, or at law or in
equity, or otherwise, to compel the Administrative Agent or any Lender to
proceed in respect of the Obligations against the Borrower or any other Person
or against any security for or other guaranty of the payment and performance of
the Guaranteed Obligations before proceeding against, or as a condition to
proceeding against, such Guarantor;


 


(b)                                 any
defense based upon the failure of the Administrative Agent or any Lender to
commence an action in respect of the Guaranteed Obligations against the
Borrower, any Guarantor, any other Subsidiary Guarantor or any other Person or
any security for the payment and performance of the Guaranteed Obligations;


 


(c)                                  any
right to insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any appraisal, valuation, stay, extension, marshalling
of assets or redemption laws, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the
performance by such Guarantor of its obligations under, or the enforcement by
the Administrative Agent or the Lenders of this Guaranty;


 


(d)                                 any
right of diligence, presentment, demand, protest and notice (except as
specifically required herein or in the Credit Agreement) of whatever kind or
nature with respect to any of the Guaranteed Obligations and waives, to the
extent permitted by Applicable Laws, the benefit of all provisions of law which
are or might be in conflict with the terms of this Guaranty; and


 


(e)                                  any and all right to notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by the Administrative Agent or any Lender upon, or acceptance of,
this Guaranty.


 


Each Guarantor agrees that any notice or directive given at any time to
the Administrative Agent or any Lender which is inconsistent with any of the
foregoing waivers shall be null and void and may be ignored by the
Administrative Agent or such Lender and, in
addition, may not be pleaded or introduced as evidence in any litigation
relating to this Guaranty for the reason that such pleading or introduction
would be at variance with the written terms of this Guaranty, unless the
Administrative Agent and the Required Lenders have specifically agreed
otherwise in writing.  The
foregoing waivers are of the essence of the transaction contemplated by the
Credit Agreement and the other Loan Documents and, but for this Guaranty and
such waivers, the Administrative Agent and Lenders would decline to enter into
the Credit Agreement and the other Loan Documents.


 


SECTION 2.7                          Modification of Loan
Documents, etc.  None of the
following shall impair or release this Guaranty or any of the obligations of
any Guarantor under this Guaranty:


 


5





















 


(a)                                  any
change or extension of the manner, place or terms of payment of, or renewal or
alteration of all or any portion of, the Guaranteed Obligations;


 


(b)                                 any
action under or in respect of the Credit Agreement or the other Loan Documents
in the exercise of any remedy, power or privilege contained therein or
available to any of them at law, in equity or otherwise, or waiver or refrain
from exercising any such remedies, powers or privileges;


 


(c)                                  any
amendment or modification, in any manner whatsoever, of the Credit Agreement or
any other Loan Document;


 


(d)                                 any
extension or waiver of the time for performance by the Borrower, any Guarantor,
any Subsidiary Guarantor or any other Person of, or compliance with, any term,
covenant or agreement on its part to be performed or observed under the Credit Agreement
or any other Loan Document, or waiver of such performance or compliance or
consent to a failure of, or departure from, such performance or compliance;


 


(e)                                  any
taking and holding of security or collateral for the payment of the Obligations
or the sale, exchange, release, disposal of, or other dealing with, any
property pledged, mortgaged or conveyed, or in which the Administrative Agent
or the Lenders have been granted a Lien, to secure any Indebtedness of the
Borrower, any Guarantor, any Subsidiary Guarantor or any other Person to the
Administrative Agent or the Lenders;


 


(f)                                    any
release of anyone who may be liable in any manner for the payment of any amounts
owed by the Borrower, any Guarantor, any Subsidiary Guarantor,  any other Person to the Administrative Agent
or any Lender other than pursuant to Section 4.16, it being
understood that the release of a Guarantor pursuant to Section 4.16
shall not release any other Guarantor from its obligations hereunder;


 


(g)                                 any
modification or termination of the terms of any intercreditor or subordination
agreement pursuant to which claims of other creditors of the Borrower, any
Guarantor, any Subsidiary Guarantor or any other Person are subordinated to the
claims of the Administrative Agent or any Lender; or


 


(h)                                 any
application of any sums by whomever paid or however realized to any obligations
owing by the Borrower, any Guarantor, any Subsidiary Guarantor or any other
Person to the Administrative Agent or any Lender in accordance with the terms
of the Credit Agreement.


 


SECTION 2.8                          Demand by the
Administrative Agent.  In addition to
the terms set forth in this Article II and in no manner imposing
any limitation on such terms, if all or any portion of the then outstanding
Guaranteed Obligations under the Credit Agreement are declared to be
immediately due and payable, then the Guarantors shall, upon demand in writing
therefor by the Administrative Agent to the Guarantors, pay all or such portion
of the outstanding Guaranteed Obligations due hereunder then declared due and
payable. 


 


6





















 


SECTION 2.9                          Remedies.


 


(a)                                  Upon
the occurrence and during the continuance of any Event of Default, with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, enforce
against the Guarantors their respective obligations and liabilities hereunder
and exercise such other rights and remedies as may be available to the
Administrative Agent hereunder, under the Credit Agreement or the other Loan
Documents or otherwise.


 


(b)                                 Additionally,
and without limiting any other remedy of the Administrative Agent hereunder or
under the Credit Agreement or other Loan Documents, each Guarantor hereby
acknowledges that this Guaranty constitutes an instrument for the payment of
money, and consents and agrees that the Administrative Agent, at its sole
option, in the event of a dispute by such Guarantor in the payment of any
moneys due hereunder, shall have the right to bring motion-action under New
York CPLR Section 3213.


 


SECTION 2.10                    Benefits of Guaranty. 
The provisions of this Guaranty are for the benefit of the Administrative
Agent and the Lenders and their respective permitted successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
the Credit Parties, the Administrative Agent and the Lenders, the obligations
of the Credit Parties under the Credit Agreement and the other Loan
Documents.  In the event all or any part
of the Obligations are transferred, endorsed or assigned by the Administrative
Agent or any Lender to any Person or Persons as permitted under the Credit
Agreement, any reference to an “Administrative Agent”, or “Lender” herein shall
be deemed to refer equally to such Person or Persons.


 


SECTION 2.11                    Termination; Reinstatement.  


 


(a)                                  Subject to subsection (c) below, this
Guaranty shall remain in full force and effect until all the Guaranteed
Obligations and all the obligations of the Guarantors shall have been paid in
full and the Commitments terminated.


 


(b)                                 No payment made by the Borrower, any Guarantor,
or any other Person received or collected by the Administrative Agent or any
Lender from the Borrower, any Guarantor, or any other Person by virtue of any
action or proceeding or any set-off or appropriation or application at any time
or from time to time in reduction of or in payment of the Guaranteed
Obligations shall be deemed to modify, reduce, release or otherwise affect the
liability of any Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by such Guarantor in respect of the
obligations of the Guarantors or any payment received or collected from such
Guarantor in respect of the obligations of the Guarantors), remain liable for
the obligations of the Guarantor up to the
maximum liability of such Guarantor hereunder until the Guaranteed Obligations
and all the obligations of the Guarantors shall have
been paid in full and the Commitments terminated.


 


(c)                                  Each
Guarantor agrees that, if any payment made by the Borrower or any other Person
applied to the Obligations is at any time annulled, set aside, rescinded,
invalidated, declared to be fraudulent or preferential or otherwise required to
be refunded or repaid or the proceeds of any Collateral are required to be
refunded by the Administrative Agent or any Lender to the Borrower, its estate,
trustee, receiver or any other Person, including, without limitation, any Guarantor, under any Applicable Law or equitable cause,
then, to the extent of


 


7





















 


such payment or repayment, each Guarantor’s liability
hereunder (and any Lien or Collateral securing such liability) shall be and
remain in full force and effect, as fully as if such payment had never been
made, and, if prior thereto, this Guaranty shall have been canceled or
surrendered (and if any Lien or Collateral securing such Guarantor’s liability
hereunder shall have been released or terminated by virtue of such cancellation
or surrender), this Guaranty shall be reinstated in full force and effect, (and
each Guarantor shall take such action as is necessary to reinstate such Lien or
Collateral) and such prior cancellation or surrender shall not diminish,
release, discharge, impair or otherwise affect the obligations of such
Guarantor in respect of the amount of such payment (or the obligation of such
Guarantor to provide such Lien or Collateral securing such obligation).


 


SECTION 2.12                    Payments.  Payments by the Guarantors shall be made to
the Administrative Agent, to be credited and applied to the Guaranteed
Obligations in accordance with Sections  4.4 and 11.4 of
the Credit Agreement, in immediately available Dollars to an account designated
by the Administrative Agent or at the Administrative Agent’s Office or at any
other address that may be specified in writing from time to time by the
Administrative Agent.


 


ARTICLE III




REPRESENTATIONS AND WARRANTIES


 


To induce the Administrative Agent and the
Lenders to make any Extensions of Credit each Guarantor hereby represents and
warrants that:


 


SECTION 3.1                          Organization; Power; Qualification.  Each of the representations and warranties
set forth in Section 6.1(a) of the Credit Agreement is true and
correct as of the date hereof with respect to such Guarantor.


 


SECTION 3.2                          Authorization of Agreement; Enforceability.  Each of the representations and warranties
set forth in Section 6.1(c) of the Credit Agreement is true and
correct as of the date hereof with respect to such Guarantor.


 


SECTION 3.3                          Compliance of Guaranty with Laws, etc.  Each of the representations and warranties
set forth in Section 6.1(e) of the Credit Agreement is true and
correct as of the date hereof with respect to such Guarantor.


 


SECTION 3.4                          Title to Properties.  Each of the representations and warranties
set forth in Section 6.1(r) of the Credit Agreement is true and
correct as of the date hereof with respect to such Guarantor.


 


SECTION 3.5                          Litigation.  Each of the representations and warranties
set forth in Section 6.1(u) of the Credit Agreement is true and
correct as of the date hereof with respect to such Guarantor.


 


SECTION 3.6                          Solvency.  As of the Closing Date (or such later date
upon which such Guarantor became a party hereto), after giving effect to the
Extensions of Credit to be made under the Credit Agreement, such Guarantor (a)
has capital sufficient to carry on its business and


 


8





















 


transactions and all
business and transactions in which it engages and is able to pay its debts as
they mature, (b) owns property having a value, both at fair valuation on a
going concern basis and at present fair saleable value on a going concern
basis, greater than the amount required to pay its probable liabilities
(including contingencies) and (c) does not believe that it will incur debts or
liabilities beyond its ability to pay such debts or liabilities as they mature,
subject in each case to the first sentence of Section 2.2.


 


ARTICLE IV


 


MISCELLANEOUS


 


SECTION 4.1                          Amendments, Waivers and Consents.  None of the terms, covenants, agreements or
conditions of this Guaranty may be amended, supplemented or otherwise modified,
nor may they be waived, nor may any consent be given, except in accordance with
Section 13.2 of the Credit Agreement.


 


SECTION 4.2                          Notices.  All notices, requests and demands to or upon
the Administrative Agent or any Guarantor hereunder shall be effected in the
manner provided for in Section 13.1 of the Credit Agreement; provided
that notices and communications to the Guarantors shall be directed to the
Guarantors at the address of the Borrower set forth in Section 13.1(b) of the Credit Agreement.


 


SECTION 4.3                          Enforcement Expenses, Indemnification.


 


(a)                                  Each
Guarantor will (i) pay all out-of-pocket expenses (including, without
limitation,  all costs of electronic or
internet distribution of any information hereunder) of the Administrative Agent
in connection with (A) the preparation, execution and delivery of this Guaranty
and each other Loan Document, whenever the same shall be executed and
delivered, including, without limitation, all out-of-pocket syndication and due
diligence expenses and reasonable fees and disbursements of counsel for the
Administrative Agent and (B) the preparation, execution and delivery of any
waiver, amendment or consent by the Administrative Agent or the Lenders
relating to this Guaranty or any other Loan Document, including, without
limitation, reasonable fees, disbursements and other charges of counsel for the
Administrative Agent, (ii) pay all reasonable out-of-pocket expenses of the
Administrative Agent and each Lender actually incurred in connection with the
administration and enforcement of any rights and remedies of the Administrative
Agent and Lenders under this Guaranty, including, without limitation, in
connection with any workout, restructuring, bankruptcy or other similar
proceeding, creating and perfecting Liens in favor of the Administrative Agent
on behalf of the Lenders pursuant to any Security Document, enforcing any
Obligations of, or collecting any payments due from, the Borrower or any
Guarantor by reason of an Event of Default (including by reason of an Event of
Default, in connection with the sale of, collection from, or other realization
upon any of the Collateral or the enforcement of this Guaranty or the
Subsidiary Guaranty Agreement); consulting with appraisers, accountants,
engineers, attorneys and other Persons concerning the nature, scope or value of
any right or remedy of the Administrative Agent or any Lender hereunder or
under any other Loan Document or any factual matters in connection therewith,
which expenses shall include the reasonable fees and disbursements of such Persons,
(iii) any civil penalty or fine assessed by the U.S. Department of the Treasury’s


 


9





















 


Office of Foreign Assets Control against, and all
reasonable costs and expenses (including counsel fees and disbursements)
incurred in connection with defense thereof by the Administrative Agent or any
Lender as a result of the funding of Loans, the issuance of Letters of Credit,
the acceptance of payment or of collateral due under the Loan Documents and
(iv) defend, indemnify and hold harmless the Administrative Agent and the
Lenders, and their respective parents, Subsidiaries, Affiliates, partners,
employees, agents, officers, advisors and directors, from and against any
losses, penalties, fines, liabilities, settlements, damages, costs and
expenses, suffered by any such Person in connection with any claim (including,
without limitation, any Environmental Claims), investigation, litigation or
other proceeding (whether or not the Administrative Agent or any Lender is a
party thereto) and the prosecution and defense thereof, arising out of or in
any way connected with the Loans, this Guaranty, any other Loan Document, or
any documents, reports or other information provided to the Administrative
Agent or any Lender or contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby, including, without limitation,
reasonable attorney’s and consultant’s fees, except to the extent that any of
the foregoing (A) are determined by a court of competent jurisdiction by a
final and nonappealable judgment to have resulted directly from the gross
negligence or willful misconduct of the party seeking indemnification therefor
or (B) result from a claim brought by any Credit Party against an indemnitee for
breach in bad faith of the obligations under this Guaranty or the other Loan
Documents of the party seeking indemnification if such Credit Party has
obtained a final and nonappealable judgment in its favor on such claim as
determined by a court of competent jurisdiction.  


 


(b)                                 The agreements in this Section 4.3
shall survive termination of the Commitments and repayment of the Obligations
and all other amounts payable under the Credit Agreement and the other Loan
Documents.


 


SECTION 4.4                          Governing Law.  This Guaranty, unless otherwise expressly set
forth herein, shall be governed by, construed and enforced in accordance with
the laws of the State of New York, including Section 5-1401 and Section 5-1402
of the General Obligations Laws of the State of New York, without reference to
any other conflicts of law principles thereof.


 


SECTION 4.5                          Jurisdiction and Venue.


 


(a)                                  Jurisdiction.  Each Guarantor party
hereto hereby irrevocably consents to the personal jurisdiction of the state
and federal courts located in New York, New York (and any courts from which an
appeal from any of such courts must or may be taken) in any action, claim or
other proceeding arising out of any dispute in connection with this Guaranty,
any rights or obligations hereunder, or the performance of such rights and
obligations.  Each Guarantor hereby
irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative Agent
or any Lender in connection with this Guaranty, any rights or obligations
hereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner specified in Section 4.2.  Nothing in this Section shall affect the
right of the Administrative Agent or any Lender to serve legal process in any
other manner permitted by Applicable Law or affect the right of the
Administrative Agent or any Lender to bring any action or proceeding against
any Guarantor or its properties in the courts of any other jurisdictions.


 


10





















 


(b)                                 Venue.  Each Guarantor party hereto hereby
irrevocably waives any objection it may have now or in the future to the laying
of venue in the aforesaid jurisdiction in any action, claim or other proceeding
arising out of or in connection with this Guaranty or the rights and
obligations of the parties hereunder. 
Each Guarantor party hereto irrevocably waives, in connection with such
action, claim or proceeding, any plea or claim that the action, claim or proceeding
has been brought in an inconvenient forum.


 


SECTION 4.6                          Waiver of Jury Trial.  THE ADMINISTRATIVE AGENT AND EACH GUARANTOR
HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT
TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF OR IN CONNECTION WITH
THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS.


 


SECTION 4.7                          Punitive Damages.  The Administrative Agent, the Lenders, and
each Guarantor hereby agree that no such Person shall have a remedy of punitive
or exemplary damages against any other party to this Guaranty or other Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any dispute, claim or controversy arising out of, connected
with or relating to this Guaranty or any other Loan Document.


 


SECTION 4.8                          No Waiver by Course of Conduct, Cumulative
Remedies.  Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 4.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. 
No failure to exercise, nor any delay in exercising on the part of the
Administrative Agent or any Lender, any right, power or privilege hereunder
shall operate as a waiver thereof.  No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  A waiver by
the Administrative Agent or any Lender of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent or such Lender would otherwise have on any future
occasion.  The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.


 


SECTION 4.9                          Successors and Assigns.  This Guaranty shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns permitted hereby; provided that, except for any merger,
consolidation or similar combination or liquidation permitted by the Credit
Agreement, no Guarantor may assign, transfer or delegate any of its rights or
obligations under this Guaranty without the prior written consent of the
Administrative Agent and the Lenders (given in accordance with Section 4.1).


 


SECTION 4.10                    Severability.  Any provision of this Guaranty or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective only to the extent of such prohibition
or unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


 


11





















 


SECTION 4.11                    Headings.  The various headings used in this Guaranty
are for convenience only, and neither limit nor amplify the provisions of this
Guaranty.


 


SECTION 4.12                    Counterparts.  This Guaranty may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.


 


SECTION 4.13                    Set-Off.  Each Guarantor hereby irrevocably authorizes
the Administrative Agent and each Lender at any time and from time to time
pursuant to Section 13.4 of the Credit Agreement, without notice to
such Guarantor or any other Guarantor, any such notice being expressly waived
by each Guarantor, and provided that an Event of Default shall have occurred
and be continuing, to set-off and appropriate and apply 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 the Administrative Agent or such Lender to or for the
credit or the account of such Guarantor, or any part thereof in such amounts as
the Administrative Agent or such Lender may elect, against and on account of
the obligations and liabilities of such Guarantor to the Administrative Agent
or such Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Guarantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured.  The Administrative Agent and
each Lender shall notify such Guarantor promptly of any such set-off and the
application made by the Administrative Agent or such Lender of the proceeds
thereof; provided that the failure to give such notice shall not affect
the validity of such set-off and application. 
The rights of the Administrative Agent and each Lender under this Section 4.13
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Administrative Agent or such Lender may
have.


 


SECTION 4.14                    Integration.  This Guaranty and the other Loan Documents
represent the agreement of the Guarantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.


 


SECTION 4.15                    Acknowledgements.  Each Guarantor hereby acknowledges that:


 


(a)                                  it has been advised by counsel in the
negotiation, execution and delivery of this Guaranty and the other Loan
Documents to which it is a party;


 


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


 


12





















 


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


 


SECTION 4.16                    Releases.  At such time as the Guaranteed Obligations
shall have been paid in full and the Commitments have been terminated, this
Guaranty and all obligations hereunder (other than those expressly stated to
survive such termination) of the Administrative Agent and each Guarantor
hereunder shall terminate, all without delivery of any instrument or
performance of any act by any party.  At
the request and sole expense of any Guarantor following any such termination,
the Administrative Agent shall execute and deliver to such Guarantor such
documents as such Guarantor shall reasonably request to evidence such
termination.


 


SECTION 4.17                    Joint and Several Liability.  The liability of the Guarantors hereunder
shall be joint and several with the liability of the Subsidiary Guarantors
under the Subsidiary Guaranty Agreement.


 


 


[Signature Pages to Follow]


 


13





















 


IN WITNESS WHEREOF, each of the Guarantors
has executed and delivered this Guaranty under seal by their duly authorized
officers, all as of the day and year first above written.


 


	
   

  	
  TUESDAY MORNING CORPORATION, as

  
	
   

  	
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TMI HOLDINGS, INC., as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


[Signature Pages Continue]


 





















 


	
   

  	
  WACHOVIA BANK,
  NATIONAL
  ASSOCIATION, as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						



 





















 


Execution
Version


 




 





SUBSIDIARY GUARANTY AGREEMENT


 


dated as of December 22, 2004


 


 


by and among


 


 


certain Subsidiaries of TUESDAY MORNING,
INC.,


as Guarantors


 


in favor of


 


WACHOVIA BANK, NATIONAL ASSOCIATION


as Administrative Agent




 





 





















 


 


TABLE OF CONTENTS


 


	
  ARTICLE I DEFINED TERMS

  	
   

  
	
  SECTION 1.1

  	
  Definitions

  	
   

  
	
  SECTION 1.2

  	
  Other Definitional Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II GUARANTY

  	
   

  
	
  SECTION 2.1

  	
  Guaranty

  	
   

  
	
  SECTION 2.2

  	
  Bankruptcy Limitations on each Guarantor

  	
   

  
	
  SECTION 2.3

  	
  Agreements for Contribution

  	
   

  
	
  SECTION 2.4

  	
  Agreements for Reimbursement

  	
   

  
	
  SECTION 2.5

  	
  Nature of Guaranty

  	
   

  
	
  SECTION 2.6

  	
  Waivers

  	
   

  
	
  SECTION 2.7

  	
  Modification of Loan Documents, etc

  	
   

  
	
  SECTION 2.8

  	
  Demand by the Administrative Agent

  	
   

  
	
  SECTION 2.9

  	
  Remedies

  	
   

  
	
  SECTION 2.10

  	
  Benefits of Guaranty

  	
   

  
	
  SECTION 2.11

  	
  Termination; Reinstatement

  	
   

  
	
  SECTION 2.12

  	
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
  SECTION 3.1

  	
  Organization; Power; Qualification

  	
   

  
	
  SECTION 3.2

  	
  Authorization of Agreement; Enforceability

  	
   

  
	
  SECTION 3.3

  	
  Compliance of Guaranty with Laws, etc

  	
   

  
	
  SECTION 3.4

  	
  Title to Properties

  	
   

  
	
  SECTION 3.5

  	
  Litigation

  	
   

  
	
  SECTION 3.6

  	
  Solvency

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV MISCELLANEOUS

  	
   

  
	
  SECTION 4.1

  	
  Amendments, Waivers and Consents

  	
   

  
	
  SECTION 4.2

  	
  Notices

  	
   

  
	
  SECTION 4.3

  	
  Enforcement Expenses, Indemnification

  	
   

  
	
  SECTION 4.4

  	
  Governing Law

  	
   

  
	
  SECTION 4.5

  	
  Jurisdiction and Venue

  	
   

  
	
  SECTION 4.6

  	
  Waiver of Jury Trial

  	
   

  
	
  SECTION 4.7

  	
  Punitive Damages

  	
   

  
	
  SECTION 4.8

  	
  No Waiver by Course of Conduct, Cumulative
  Remedies

  	
   

  
	
  SECTION 4.9

  	
  Successors and Assigns

  	
   

  
	
  SECTION 4.10

  	
  Severability

  	
   

  
	
  SECTION 4.11

  	
  Headings

  	
   

  
	
  SECTION 4.12

  	
  Counterparts

  	
   

  
	
  SECTION 4.13

  	
  Set-Off

  	
   

  
	
  SECTION 4.14

  	
  Integration

  	
   

  



 


i





















 


	
  SECTION 4.15

  	
  Acknowledgements

  	
   

  
	
  SECTION 4.16

  	
  Releases

  	
   

  
	
  SECTION 4.17

  	
  Additional Guarantors

  	
   

  
	
  SECTION 4.18

  	
  Joint and Several Liability

  	
   

  



 


ii





















 


SUBSIDIARY
GUARANTY AGREEMENT


 


SUBSIDIARY GUARANTY AGREEMENT (as amended, restated, supplemented or
otherwise modified, this “Guaranty”), dated as of December 22,
2004, made by certain Subsidiaries (collectively, the “Guarantors”, each,
a “Guarantor”) of TUESDAY MORNING, INC., a Texas corporation (the “Borrower”),
in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking
association, as administrative agent (in such capacity, the “Administrative
Agent”) for the ratable benefit of itself and the financial institutions
(the “Lenders”) from time to time parties to the Credit Agreement, dated
of even date herewith (as amended, restated, supplemented or otherwise
modified, the “Credit Agreement”), by and among the Borrower, Tuesday
Morning Corporation, a Delaware corporation (the “Parent”), TMI
Holdings, Inc., a Delaware corporation (“Holdings”), the Lenders and the
Administrative Agent.


 


STATEMENT OF
PURPOSE


 


Pursuant to the terms of the Credit Agreement, the Lenders have agreed
to make Extensions of Credit to the Borrower upon the terms and subject to the
conditions set forth therein.


 


The Borrower and the Guarantors, though separate legal entities,
comprise one integrated financial enterprise, and all Extensions of Credit to
the Borrower will inure, directly or indirectly, to the benefit of each of the
Guarantors.


 


It is a condition precedent to the obligation of the Lenders to make
their respective Extensions of Credit to the Borrower under the Credit
Agreement that the Guarantors shall have executed and delivered this Guaranty
to the Administrative Agent, for the ratable benefit of itself and the Lenders.


 


NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, and to
induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective Extensions of
Credit to the Borrower thereunder, each Guarantor hereby agrees with the
Administrative Agent, for the ratable benefit of itself and the Lenders, as
follows:


 


ARTICLE I


 


DEFINED TERMS


 


SECTION 1.1                          Definitions.  The following terms when used in this
Guaranty shall have the meanings assigned to them below:


 


 “Applicable Insolvency Laws”
means all Applicable Laws governing bankruptcy, reorganization, arrangement,
adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent
transfers or conveyances or other similar laws (including, without limitation,
11 U.S.C. Sections 544, 547, 548 and 550 and other “avoidance” provisions
of Title 11 of the United States Code, as amended or supplemented).


 


“Guaranteed Obligations” has the meaning set forth in Section 2.1.


 





















 


“Guaranty” means this Subsidiary Guaranty Agreement, as amended,
restated, supplemented or otherwise modified.


 


“Parental Entity Guarantors” means, collectively, the Parent and
Holdings as guarantors under the Parental Entity Guaranty Agreement.


 


“Parental Entity Guaranty Agreement” means the Guaranty
Agreement dated as of the date hereof made by the Parental Entity Guarantors in
favor of the Administrative Agent for the benefit of itself and the Lenders.


 


SECTION 1.2                          Other
Definitional Provisions. Capitalized terms used and not
otherwise defined in this Guaranty including the preambles and recitals hereof
shall have the meanings ascribed to them in the Credit Agreement.  The words “hereof,” “herein”, “hereto” and “hereunder”
and words of similar import when used in this Guaranty shall refer to this
Guaranty as a whole and not to any particular provision of this Guaranty, and Section references
in this Guaranty are to Sections of this Guaranty unless otherwise
specified.  The meanings given to terms
defined herein shall be equally applicable to both the singular and plural
forms of such terms.  Where the context
requires, terms relating to the Collateral or any part thereof, when used in
relation to a Guarantor, shall refer to such Guarantor’s Collateral or the
relevant part thereof.


 


ARTICLE II


 


GUARANTY 


 


SECTION 2.1                          Guaranty.  Each Guarantor hereby, jointly and severally
with the other Guarantors, unconditionally guarantees to the Administrative
Agent for the ratable benefit of itself and the Lenders, and their respective
permitted successors, endorsees, transferees and assigns, the prompt payment
and performance of all Obligations, whether primary or secondary (whether by
way of endorsement or otherwise), whether now existing or hereafter arising,
whether or not from time to time reduced or extinguished (except by payment and
performance thereof) or hereafter increased or incurred, whether or not
recovery may be or hereafter becomes barred by the statute of limitations,
whether enforceable or unenforceable as against the Credit Parties, whether or
not discharged, stayed or otherwise affected by any Applicable Insolvency Law
or proceeding thereunder, whether created directly with the Administrative
Agent or any Lender or acquired by the Administrative Agent or any Lender
through assignment, endorsement or otherwise, whether matured or unmatured,
whether joint or several, as and when the same become due and payable (whether
at maturity or earlier, by reason of acceleration, mandatory repayment or
otherwise), in accordance with the terms of any instruments evidencing any such
Obligations, including all renewals, extensions or modifications thereof (all
Obligations, including all of the foregoing being hereafter collectively
referred to as the “Guaranteed Obligations”).


 


SECTION 2.2                          Bankruptcy
Limitations on each Guarantor. 
Notwithstanding anything to the contrary contained in Section 2.1,
it is the intention of each Guarantor, the Administrative Agent and the Lenders
that, in any proceeding involving the bankruptcy, reorganization, arrangement,
adjustment of debts, relief of debtors, dissolution or insolvency or any
similar proceeding with respect to any Guarantor or its assets, the amount of
such Guarantor’s


 


2





















 


obligations with respect to the Guaranteed Obligations shall be equal
to, but not in excess of, the maximum amount thereof not subject to avoidance
or recovery by operation of Applicable Insolvency Laws.  To that end, but only in the event and to the
extent that such Guarantor’s obligations with respect to the Guaranteed
Obligations or any payment made pursuant to such Guaranteed Obligations would,
but for the operation of the first sentence of this Section 2.2, be
subject to avoidance or recovery in any such proceeding under Applicable
Insolvency Laws, the amount of each Guarantor’s obligations with respect to the
Guaranteed Obligations shall be limited to the largest amount which, after
giving effect thereto, would not, under Applicable Insolvency Laws, render such
Guarantor’s obligations with respect to the Guaranteed Obligations
unenforceable or avoidable or otherwise subject to recovery under Applicable
Insolvency Laws.  To the extent any
payment actually made pursuant to the Guaranteed Obligations exceeds the
limitation of the first sentence of this Section 2.2 and is
otherwise subject to avoidance and recovery in any such proceeding under
Applicable Insolvency Laws, the amount subject to avoidance shall in all events
be limited to the amount by which such actual payment exceeds such limitation
and the Guaranteed Obligations as limited by the first sentence of this Section 2.2
shall in all events remain in full force and effect and be fully enforceable
against each Guarantor.  The first
sentence of this Section 2.2 is intended solely to preserve the
rights of the Administrative Agent hereunder against each Guarantor in such
proceeding to the maximum extent permitted by Applicable Insolvency Laws and
neither such Guarantor, the Borrower, any other Guarantor nor any other Person
shall have any right or claim under such sentence that would not otherwise be
available under Applicable Insolvency Laws in such proceeding.


 


SECTION 2.3                          Agreements
for Contribution.


 


(a)                                  To
the extent any Guarantor is required, by reason of its obligations hereunder,
to pay to the Administrative Agent or any Lender an amount greater than the
amount of value (as determined in accordance with Applicable Insolvency Laws)
actually made available to or for the benefit of such Guarantor on account of
the Credit Agreement, this Guaranty or any other Loan Document, such Guarantor
shall have an enforceable right of contribution against the Borrower and the
remaining Guarantors, and the Borrower and the remaining Guarantors shall be
jointly and severally liable for repayment of the full amount of such excess
payment.  Subject only to the
subordination provided in Section 2.3(d), such Guarantor further
shall be subrogated to any and all rights of the Lenders against the Borrower
and the remaining Guarantors to the extent of such excess payment.


 


(b)                                 To
the extent that any Guarantor would, but for the operation of this Section 2.3
and by reason of its obligations hereunder or its obligations to other
Guarantors under this Section 2.3, be rendered insolvent for any
purpose under Applicable Insolvency Laws, each of the Guarantors hereby agrees
to indemnify such Guarantor and commits to make a contribution to such
Guarantor’s capital in an amount at least equal to the amount necessary to
prevent such Guarantor from having been rendered insolvent by reason of the
incurrence of any such obligations.


 


(c)                                  To
the extent that any Guarantor would, but for the operation of this Section 2.3,
be rendered insolvent under any Applicable Insolvency Law by reason of its
incurring of obligations to any other Guarantor under the foregoing Sections
2.3(a) and (b), such Guarantor


 


3





















 


shall, in turn, have rights of contribution and indemnity, to the full
extent provided in the foregoing Sections 2.3(a) and (b), against the
Borrower and the remaining Guarantors, such that all obligations of all of the
Guarantors hereunder and under this Section 2.3 shall be allocated
in a manner such that no Guarantor shall be rendered insolvent for any purpose
under Applicable Insolvency Law by reason of its incurrence of such
obligations.


 


(d)                                 Notwithstanding
any payment or payments by any of the Guarantors hereunder, or any set-off or
application of funds of any of the Guarantors by the Administrative Agent or
any Lender, or the receipt of any amounts by the Administrative Agent or any
Lender with respect to any of the Guaranteed Obligations, none of the
Guarantors shall be entitled to be subrogated to any of the rights of the
Administrative Agent or any Lender against the Borrower or the other Guarantors
or against any collateral security held by the Administrative Agent or any
Lender for the payment of the Guaranteed Obligations nor shall any of the
Guarantors seek any reimbursement from the Borrower or any of the other
Guarantors in respect of payments made by such Guarantor in connection with the
Guaranteed Obligations, until all amounts owing to the Administrative Agent and
the Lenders on account of the Guaranteed Obligations are paid in full and the
Commitments are terminated.  If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Guaranteed Obligations shall not have been paid in
full, such amount shall be held by such Guarantor in trust for the
Administrative Agent, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Administrative
Agent in the exact form received by such Guarantor (duly endorsed by such
Guarantor to the Administrative Agent, if required) to be applied against the
Guaranteed Obligations, whether matured or unmatured, in such order as set
forth in the Credit Agreement.


 


SECTION 2.4                          Agreements
for Reimbursement.  Notwithstanding
anything to the contrary contained herein, the parties hereto acknowledge and
agree that, as the Borrower is either a Wholly-Owned Subsidiary of the Parental
Entity Guarantors or part of an integrated financial enterprise to which the
Parental Entity Guarantors are a party, each Subsidiary Guarantor shall have a
right of reimbursement and indemnity from the Parental Entity Guarantors for
any amount paid by such Subsidiary Guarantor in lieu of a right of contribution
between the Subsidiary Guarantors and the Parental Entity Guarantors.


 


SECTION 2.5                          Nature
of Guaranty.


 


(a)                                  Each
Guarantor agrees that this Guaranty is a continuing, unconditional guaranty of
payment and performance and not of collection, and that its obligations under
this Guaranty shall be primary, absolute and unconditional, irrespective of,
and unaffected by:


 


(i)                                     the
genuineness, validity, enforceability or any future amendment of, or change in,
the Credit Agreement or any other Loan Document or any other agreement,
document or instrument to which the Borrower, any Parental Entity Guarantor,
any Guarantor or any of their respective Subsidiaries or Affiliates is or may
become a party;


 


(ii)                                  the
absence of any action to enforce this Guaranty, the Credit Agreement or any
other Loan Document or the waiver or consent by the Administrative Agent or any


 


4





















 


Lender with respect to any of
the provisions of this Guaranty, the Credit Agreement or any other Loan
Document;


 


(iii)                               the
existence, value or condition of, or failure to perfect the Administrative
Agent’s Lien against, any security for, or other guaranty of, the Guaranteed
Obligations or any action, or the absence of any action, by the Administrative
Agent or any Lender in respect of such security or guaranty (including, without
limitation, the release of any such security or guaranty);


 


(iv)                              any structural
change in, restructuring of or similar change of the Borrower, the Parental
Entity Guarantors, any Guarantor or any of their respective Subsidiaries; or


 


(v)                                 any
other action or circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor;


 


it being agreed by each Guarantor that, subject to the first sentence
of Section 2.2, its obligations under this Guaranty shall not be
discharged until the final indefeasible payment and performance, in full, of
the Guaranteed Obligations and the termination of the Commitments; provided
that notwithstanding anything to the contrary in this Section 2.5,
a Guarantor may be released from the Guaranteed Obligations and any other
obligations hereunder pursuant to Section 4.16 of this Guaranty.


 


(b)                                 Each
Guarantor hereby represents and warrants that its obligations under this
Guaranty are not, and agrees that the Guaranteed Obligations and any other
obligations hereunder shall not be, subject to any counterclaims, offsets or
defenses (other than a defense of payment) of any kind against the
Administrative Agent, the Lenders or the Borrower whether now existing or which
may arise in the future.


 


(c)                                  Each
Guarantor hereby agrees and acknowledges that the Guaranteed Obligations and
any other obligations hereunder, and any of them, shall conclusively be deemed
to have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Guaranty, and all dealings between the Borrower
and any of the Guarantors, on the one hand, and the Administrative Agent and
the Lenders, on the other hand, likewise shall be conclusively presumed to have
been had or consummated in reliance upon this Guaranty.


 


SECTION 2.6                          Waivers.  To the extent permitted by Applicable Laws,
each Guarantor expressly waives all of the following rights and defenses (and
agrees not to take advantage of or assert any such right or defense):


 


(a)                                  any
rights it may now or in the future have under any statute, or at law or in
equity, or otherwise, to compel the Administrative Agent or any Lender to
proceed in respect of the Obligations against the Borrower or any other Person
or against any security for or other guaranty of the payment and performance of
the Guaranteed Obligations before proceeding against, or as a condition to
proceeding against, such Guarantor;


 


(b)                                 any
defense based upon the failure of the Administrative Agent or any Lender to
commence an action in respect of the Guaranteed Obligations against the
Borrower, any Parental


 


5





















 


Entity Guarantor, any other Guarantor or any other Person or any
security for the payment and performance of the Guaranteed Obligations;


 


(c)                                  any
right to insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any appraisal, valuation, stay, extension, marshalling
of assets or redemption laws, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the
performance by such Guarantor of its obligations under, or the enforcement by
the Administrative Agent or the Lenders of this Guaranty;


 


(d)                                 any
right of diligence, presentment, demand, protest and notice (except as
specifically required herein or in the Credit Agreement) of whatever kind or
nature with respect to any of the Guaranteed Obligations and waives, to the
extent permitted by Applicable Laws, the benefit of all provisions of law which
are or might be in conflict with the terms of this Guaranty; and


 


(e)                                  any
and all right to notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon, or acceptance of, this Guaranty.


 


Each Guarantor agrees that any notice or directive given at any time to
the Administrative Agent or any Lender which is inconsistent with any of the
foregoing waivers shall be null and void and may be ignored by the
Administrative Agent or such Lender, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guaranty for the
reason that such pleading or introduction would be at variance with the written
terms of this Guaranty, unless the Administrative Agent and the Required
Lenders have specifically agreed otherwise in writing.  The foregoing waivers are of the essence of
the transaction contemplated by the Credit Agreement and the other Loan
Documents and, but for this Guaranty and such waivers, the Administrative Agent
and Lenders would decline to enter into the Credit Agreement and the other Loan
Documents.


 


SECTION 2.7                          Modification
of Loan Documents, etc.  None of the
following shall impair or release this Guaranty or any of the obligations of
any Guarantor under this Guaranty:


 


(a)                                  any
change or extension of the manner, place or terms of payment of, or renewal or
alteration of all or any portion of, the Guaranteed Obligations;


 


(b)                                 any
action under or in respect of the Credit Agreement or the other Loan Documents
in the exercise of any remedy, power or privilege contained therein or
available to any of them at law, in equity or otherwise, or waiver or refrain
from exercising any such remedies, powers or privileges;


 


(c)                                  any
amendment or modification, in any manner whatsoever, of the Credit Agreement or
any other Loan Document;


 


(d)                                 any
extension or waiver of the time for performance by the Borrower, any Parental
Entity Guarantor, any Guarantor or any other Person of, or compliance with, any
term, covenant or agreement on its part to be performed or observed under the
Credit Agreement or any other


 


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Loan Document, or waiver of such performance or compliance or consent
to a failure of, or departure from, such performance or compliance;


 


(e)                                  any
taking and holding of security or collateral for the payment of the Guaranteed
Obligations or any sale, exchange, release, disposal of, or other dealing with,
any property pledged, mortgaged or conveyed, or in which the Administrative
Agent or the Lenders have been granted a Lien, to secure any Indebtedness of
the Borrower, any Parental Entity Guarantor, any Guarantor or any other Person
to the Administrative Agent or the Lenders;


 


(f)                                    any
release of anyone who may be liable in any manner for the payment of any
amounts owed by the Borrower, any Parental Entity Guarantor, any Guarantor or
any other Person to the Administrative Agent or any Lender other than pursuant
to Section 4.16, it being understood that the release of a
Guarantor pursuant to Section 4.16 shall not release any other
Guarantor from its obligations hereunder;


 


(g)                                 any
modification or termination of the terms of any intercreditor or subordination
agreement pursuant to which claims of other creditors of the Borrower, any
Parental Entity Guarantor, any Guarantor or any other Person are subordinated
to the claims of the Administrative Agent or any Lender; or


 


(h)                                 any
application of any sums by whomever paid or however realized to any obligations
owing by the Borrower, any Parental Entity Guarantor, any Guarantor or any
other Person to the Administrative Agent or any Lender in accordance with the
terms of the Loan Documents.


 


SECTION 2.8                          Demand
by the Administrative Agent.  In
addition to the terms set forth in this Article II and in no manner
imposing any limitation on such terms, if all or any portion of the then
outstanding Guaranteed Obligations under the Credit Agreement are declared to
be immediately due and payable, then the Guarantors shall, upon demand in
writing therefor by the Administrative Agent to the Guarantors, pay all or such
portion of the outstanding Guaranteed Obligations due hereunder then declared
due and payable.


 


SECTION 2.9                          Remedies.


 


(a)                                  Upon
the occurrence and during the continuance of any Event of Default, with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, enforce
against the Guarantors their respective obligations and liabilities hereunder
and exercise such other rights and remedies as may be available to the
Administrative Agent hereunder, under the Credit Agreement or the other Loan
Documents or otherwise.


 


(b)                                 Additionally,
and without limiting any other remedy of the Administrative Agent hereunder or
under the Credit Agreement or other Loan Documents, each Guarantor hereby
acknowledges that this Guaranty constitutes an instrument for the payment of
money, and consents and agrees that the Administrative Agent, at its sole
option, in the event of a dispute by such Guarantor in the payment of any moneys
due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213.


 


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SECTION 2.10                    Benefits
of Guaranty.  The provisions of this
Guaranty are for the benefit of the Administrative Agent and the Lenders and
their respective permitted successors, transferees, endorsees and assigns, and
nothing herein contained shall impair, as between the Credit Parties, the
Administrative Agent and the Lenders, the obligations of the Credit Parties
under the Credit Agreement and the other Loan Documents.  In the event all or any part of the
Obligations are transferred, endorsed or assigned by the Administrative Agent
or any Lender to any Person or Persons as permitted under the Credit Agreement,
any reference to an “Administrative Agent”, or “Lender” herein shall be deemed
to refer equally to such Person or Persons.


 


SECTION 2.11                    Termination;
Reinstatement.


 


(a)                                  Subject
to subsection (c) below, this Guaranty shall remain in full force and
effect until all the Guaranteed Obligations and all the obligations of the
Guarantors shall have been paid in full and the Commitments terminated.


 


(b)                                 No
payment made by the Borrower, any Guarantor, or any other Person received or
collected by the Administrative Agent or any Lender from the Borrower, any
Guarantor, or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Guaranteed Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the obligations of the Guarantors or any
payment received or collected from such Guarantor in respect of the obligations
of the Guarantors), remain liable for the obligations of the Guarantors up to the maximum liability of such
Guarantor hereunder until the Guaranteed Obligations and all the obligations of
the Guarantors shall have been
paid in full and the Commitments terminated.


 


(c)                                  Each
Guarantor agrees that, if any payment made by the Borrower or any other Person
applied to the Obligations is at any time annulled, set aside, rescinded,
invalidated, declared to be fraudulent or preferential or otherwise required to
be refunded or repaid or the proceeds of any Collateral are required to be
refunded by the Administrative Agent or any Lender to the Borrower, its estate,
trustee, receiver or any other Person, including, without limitation, any Guarantor, under any Applicable Law or
equitable cause, then, to the extent of such payment or repayment, each
Guarantor’s liability hereunder (and any Lien or Collateral securing such
liability) shall be and remain in full force and effect, as fully as if such
payment had never been made, and, if prior thereto, this Guaranty shall have
been canceled or surrendered (and if any Lien or Collateral securing such
Guarantor’s liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender), this Guaranty shall be reinstated in
full force and effect, (and each Guarantor shall take such action as is
necessary to reinstate such Lien or Collateral) and such prior cancellation or
surrender shall not diminish, release, discharge, impair or otherwise affect
the obligations of such Guarantor in respect of the amount of such payment (or the
obligation of such Guarantor to provide such Lien or Collateral securing such
obligation).


 


SECTION 2.12                    Payments.  Payments by the Guarantors shall be made to
the Administrative Agent, to be credited and applied to the Guaranteed
Obligations in accordance


 


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with Sections 4.4 and 11.4 of
the Credit Agreement, in immediately available Dollars to an account designated
by the Administrative Agent or at the Administrative Agent’s Office or at any
other address that may be specified in writing from time to time by the
Administrative Agent.


 


ARTICLE III


 


REPRESENTATIONS AND WARRANTIES


 


To induce the Administrative Agent and the Lenders to make any
Extensions of Credit each Guarantor hereby represents and warrants that:


 


SECTION 3.1                          Organization;
Power; Qualification.  Each of the
representations and warranties set forth in Section 6.1(a) of the
Credit Agreement is true and correct as of the date hereof with respect to such
Guarantor.


 


SECTION 3.2                          Authorization
of Agreement; Enforceability.  Each
of the representations and warranties set forth in Section 6.1(c)
of the Credit Agreement is true and correct as of the date hereof with respect
to such Guarantor.


 


SECTION 3.3                          Compliance
of Guaranty with Laws, etc.  Each of
the representations and warranties set forth in Section 6.1(e) of
the Credit Agreement is true and correct as of the date hereof with respect to
such Guarantor.


 


SECTION 3.4                          Title
to Properties.  Each of
the representations and warranties set forth in Section 6.1(r) of
the Credit Agreement is true and correct as of the date hereof with respect to
such Guarantor.


 


SECTION 3.5                          Litigation.  Each of the representations and warranties
set forth in Section 6.1(u) of the Credit Agreement is true and
correct as of the date hereof with respect to such Guarantor.


 


SECTION 3.6                          Solvency.  As of the Closing Date (or such later date
upon which such Guarantor became a party hereto) after giving effect to the
Extensions of Credit to be made under the Credit Agreement, such Guarantor (i)
has capital sufficient to carry on its business and transactions and all
business and transactions in which it engages and is able to pay its debts as
they mature, (ii) owns property having a value, both at fair valuation on a
going concern basis and at present fair saleable value on a going concern
basis, greater than the amount required to pay its probable liabilities
(including contingencies) and (iii) does not believe that it will incur debts
or liabilities beyond its ability to pay such debts or liabilities as they
mature, subject in each case to the first sentence of Section 2.2.


 


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ARTICLE IV


 


MISCELLANEOUS


 


SECTION 4.1                          Amendments,
Waivers and Consents.  None of the
terms, covenants, agreements or conditions of this Guaranty may be amended,
supplemented or otherwise modified, nor may they be waived, nor may any consent
be given, except in accordance with Section 13.2 of the Credit
Agreement.


 


SECTION 4.2                          Notices.  All notices, requests and demands to or upon
the Administrative Agent or any Guarantor hereunder shall be effected in the
manner provided for in Section 13.1 of the Credit Agreement; provided
that notices and communications to the Guarantors shall be directed to the
Guarantors at the address of the Borrower set forth in Section 13.1(b) of the Credit Agreement.


 


SECTION 4.3                          Enforcement
Expenses, Indemnification.


 


(a)                                  Each
Guarantor will (i) pay all out-of-pocket expenses (including, without
limitation,  all costs of electronic or
internet distribution of any information hereunder) of the Administrative Agent
in connection with (A) the preparation, execution and delivery of this Guaranty
and each other Loan Document, whenever the same shall be executed and
delivered, including, without limitation, all out-of-pocket syndication and due
diligence expenses and reasonable fees and disbursements of counsel for the
Administrative Agent and (B) the preparation, execution and delivery of any
waiver, amendment or consent by the Administrative Agent or the Lenders
relating to this Guaranty or any other Loan Document, including, without
limitation, reasonable fees, disbursements and other charges of counsel for the
Administrative Agent, (ii) pay all reasonable out-of-pocket expenses of the
Administrative Agent and each Lender actually incurred in connection with the
administration and enforcement of any rights and remedies of the Administrative
Agent and Lenders under this Guaranty, including, without limitation, in
connection with any workout, restructuring, bankruptcy or other similar
proceeding, creating and perfecting Liens in favor of the Administrative Agent
on behalf of the Lenders pursuant to any Security Document, enforcing any
Obligations of, or collecting any payments due from, the Borrower or any
Guarantor by reason of an Event of Default (including by reason of an Event of
Default, in connection with the sale of, collection from, or other realization
upon any of the Collateral or the enforcement of this Guaranty or the Parental
Entity Guaranty Agreement); consulting with appraisers, accountants, engineers,
attorneys and other Persons concerning the nature, scope or value of any right
or remedy of the Administrative Agent or any Lender hereunder or under any
other Loan Document or any factual matters in connection therewith, which
expenses shall include the reasonable fees and disbursements of such Persons,
(iii) any civil penalty or fine assessed by the U.S. Department of the Treasury’s
Office of Foreign Assets Control against, and all reasonable costs and expenses
(including counsel fees and disbursements) incurred in connection with defense
thereof by the Administrative Agent or any Lender as a result of the funding of
Loans, the issuance of Letters of Credit, the acceptance of payment or of
collateral due under the Loan Documents and (iv) defend, indemnify and hold
harmless the Administrative Agent and the Lenders, and their respective
parents, Subsidiaries, Affiliates, partners, employees, agents, officers,
advisors and directors, from and against any losses, penalties, fines,
liabilities, settlements, damages, costs and expenses, suffered by any such
Person in connection with any claim (including, without limitation, any
Environmental Claims), investigation, litigation or other proceeding (whether
or not the Administrative Agent or any Lender is a party thereto) and the
prosecution and defense thereof, arising out of or in any way connected with
the Loans, this Guaranty, any other Loan


 


10





















 


Document, or any documents, reports or other information provided to
the Administrative Agent or any Lender or contemplated by or referred to herein
or therein or the transactions contemplated hereby or thereby, including,
without limitation, reasonable attorney’s and consultant’s fees, except to the
extent that any of the foregoing (A) are determined by a court of competent
jurisdiction by a final and nonappealable judgment to have resulted directly
from the gross negligence or willful misconduct of the party seeking
indemnification therefor or (B) result from a claim brought by any Credit Party
against an indemnitee for breach in bad faith of the obligations under this
Guaranty or the other Loan Documents of the party seeking indemnification if
such Credit Party has obtained a final and nonappealable judgment in its favor
on such claim as determined by a court of competent jurisdiction.


 


(b)                                 The
agreements in this Section 4.3 shall survive termination of the
Commitments and repayment of the Obligations and all other amounts payable
under the Credit Agreement and the other Loan Documents.


 


SECTION 4.4                          Governing
Law.  This Guaranty, unless otherwise
expressly set forth herein, shall be governed by, construed and enforced in
accordance with the laws of the State of New York, including Section 5-1401
and Section 5-1402 of the General Obligations Laws of the State of New
York, without reference to any other conflicts of law principles thereof.


 


SECTION 4.5                          Jurisdiction
and Venue.


 


(a)                                  Jurisdiction.  Each Guarantor party hereto hereby
irrevocably consents to the personal jurisdiction of the state and federal
courts located in New York, New York (and any courts from which an appeal from
any of such courts must or may be taken) in any action, claim or other
proceeding arising out of any dispute in connection with this Guaranty, any
rights or obligations hereunder, or the performance of such rights and
obligations.  Each Guarantor hereby
irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative Agent
or any Lender in connection with this Guaranty, any rights or obligations
hereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner specified in Section 4.2.  Nothing in this Section shall affect the
right of the Administrative Agent or any Lender to serve legal process in any
other manner permitted by Applicable Law or affect the right of the
Administrative Agent or any Lender to bring any action or proceeding against
any Guarantor or its properties in the courts of any other jurisdictions.


 


(b)                                 Venue.  Each Guarantor party hereto hereby
irrevocably waives any objection it may have now or in the future to the laying
of venue in the aforesaid jurisdiction in any action, claim or other proceeding
arising out of or in connection with this Guaranty or the rights and
obligations of the parties hereunder. 
Each Guarantor party hereto irrevocably waives, in connection with such
action, claim or proceeding, any plea or claim that the action, claim or
proceeding has been brought in an inconvenient forum.


 


SECTION 4.6                          Waiver
of Jury Trial.  THE ADMINISTRATIVE
AGENT AND EACH GUARANTOR HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF
OR IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR 


 


11





















 


OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS.


 


SECTION 4.7                          Punitive
Damages.  The Administrative Agent,
the Lenders, and each Guarantor hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to this
Guaranty or other Loan Document and each such Person hereby waives any right or
claim to punitive or exemplary damages that they may now have or may arise in
the future in connection with any dispute, claim or controversy arising out of,
connected with or relating to this Guaranty or any other Loan Document.


 


SECTION 4.8                          No
Waiver by Course of Conduct, Cumulative Remedies.  Neither the Administrative Agent nor any Lender
shall by any act (except by a written instrument pursuant to Section 4.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default.  No failure to exercise, nor any delay in
exercising on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  A waiver by the Administrative Agent or any
Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or
such Lender would otherwise have on any future occasion.  The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.


 


SECTION 4.9                          Successors
and Assigns.  This Guaranty shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby; provided that, except
for any merger, consolidation or similar combination or liquidation permitted
by the Credit Agreement, no Guarantor
may assign, transfer or delegate any of its rights or obligations under this
Guaranty without the prior written consent of the Administrative Agent and the
Lenders (given in accordance with Section 4.1).


 


SECTION 4.10                    Severability.  Any provision of this Guaranty or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective only to the extent of such prohibition
or unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


 


SECTION 4.11                    Headings.  The various headings used in this Guaranty
are for convenience only, and neither limit nor amplify the provisions of this
Guaranty.


 


SECTION 4.12                    Counterparts.  This Guaranty may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.


 


SECTION 4.13                    Set-Off.  Each Guarantor hereby irrevocably authorizes
the Administrative Agent and each Lender at any time and from time to time
pursuant to Section 13.4


 


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of the Credit Agreement, without notice to such Guarantor or any other
Guarantor, any such notice being expressly waived by each Guarantor, and
provided that an Event of Default shall have occurred and be continuing, to
set-off and appropriate and apply 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 the Administrative Agent or such Lender to or for the credit or the
account of such Guarantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Guarantor to the Administrative Agent or
such Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Guarantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured.  The Administrative Agent and
each Lender shall notify such Guarantor promptly of any such set-off and the
application made by the Administrative Agent or such Lender of the proceeds
thereof; provided that the failure to give such notice shall not affect
the validity of such set-off and application. 
The rights of the Administrative Agent and each Lender under this Section 4.13
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Administrative Agent or such Lender may
have.


 


SECTION 4.14                    Integration.  This Guaranty and the other Loan Documents
represent the agreement of the Guarantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.


 


SECTION 4.15                    Acknowledgements.  Each Guarantor hereby acknowledges that:


 


(a)                                  it
has been advised by counsel in the negotiation, execution and delivery of this
Guaranty and the other Loan Documents to which it is a party;


 


(b)                                 neither
the Administrative Agent nor any Lender has any fiduciary relationship with or
duty to any Guarantor arising out of or in connection with this Guaranty or any
of the other Loan Documents, and the relationship between the Guarantors, on
the one hand, and the Administrative Agent and Lenders, 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 Loan Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Lenders or
among the Guarantors and the Lenders.


 


SECTION 4.16                    Releases.  At such time as (a) the Guaranteed Obligations
shall have been paid in full and the Commitments have been terminated, this
Guaranty and all obligations hereunder (other than those expressly stated to
survive such termination) of the Administrative Agent and each Guarantor
hereunder shall terminate, all without delivery of any instrument or
performance of any act by any party, or (b) a Guarantor ceases to be a
Subsidiary of the


 


13





















 


Borrower in connection with a transaction expressly permitted under the
terms and conditions of the Credit Agreement, such Guarantor shall be released
from the Guaranteed Obligations and its obligations hereunder (other than
obligations expressly stated to survive the termination of this Guaranty).  At the request and sole expense of any
Guarantor following any such termination, the Administrative Agent shall
execute and deliver to such Guarantor such documents as such Guarantor shall
reasonably request to evidence such termination.


 


SECTION 4.17                    Additional
Guarantors.  Each Subsidiary of the
Parent that is required to become a party to this Guaranty pursuant to Section 8.11
of the Credit Agreement shall become a Guarantor for all purposes of this
Guaranty upon execution and delivery by such Subsidiary of a joinder agreement
in form and substance reasonably satisfactory to the Administrative Agent.


 


SECTION 4.18                    Joint
and Several Liability. 
The liability of each Guarantor hereunder shall be joint and several
with the liability of the Parental Entity Guarantors under the Parental Entity
Guaranty Agreement.


 


[Signature Pages to Follow]


 


14





















 


IN WITNESS WHEREOF, each of the Guarantors has executed and delivered
this Guaranty under seal by their duly authorized officers, all as of the day
and year first above written.


 


 


	
   

  	
  FRIDAY MORNING, INC., as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DAYS OF THE WEEK, INC., as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NIGHTS OF THE WEEK, INC., as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TUESDAY MORNING PARTNERS, LTD., as

  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


[Signature
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  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 





















Execution Version


 


 




 





 


COLLATERAL AGREEMENT,


 


dated as of December 22, 2004,


 


 


by and among


 


 


TUESDAY MORNING, INC.,


 


TUESDAY MORNING CORPORATION,


 


TMI HOLDINGS, INC.,


 


and certain of its Subsidiaries


as Grantors,


 


in favor of


 


WACHOVIA BANK, NATIONAL ASSOCIATION,


as Administrative Agent


 




 





 





















 


TABLE
OF CONTENTS


 


	
  ARTICLE I DEFINED TERMS

  	
   

  
	
  SECTION 1.1.
  Terms Defined in the Uniform Commercial Code.

  	
   

  
	
  SECTION 1.2.
  Definitions

  	
   

  
	
  SECTION 1.3.
  Other Definitional Provisions

  	
   

  
	
   

  	
   

  
	
  ARTICLE II SECURITY INTEREST

  	
   

  
	
  SECTION 2.1.
  Grant of Security Interest

  	
   

  
	
  SECTION 2.2.
  Grantors Remain Liable

  	
   

  
	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  SECTION 3.1.
  Existence

  	
   

  
	
  SECTION 3.2.
  Authorization of Agreement; No Conflict

  	
   

  
	
  SECTION 3.3.
  Consents

  	
   

  
	
  SECTION 3.4.
  Perfected First Priority Liens

  	
   

  
	
  SECTION 3.5.
  Title, No Other Liens

  	
   

  
	
  SECTION 3.6.
  State of Organization; Location of Inventory; Other Information

  	
   

  
	
  SECTION 3.7.
  Deposit Accounts

  	
   

  
	
  SECTION 3.8.
  Inventory

  	
   

  
	
  SECTION 3.9.
  Investment Property; Partnership/LLC Interests

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV COVENANTS

  	
   

  
	
  SECTION 4.1.
  Maintenance of Perfected Security Interest; Further Information

  	
   

  
	
  SECTION 4.2.
  Maintenance of Insurance

  	
   

  
	
  SECTION 4.3.
  Changes in Locations; Changes in Name or Structure

  	
   

  
	
  SECTION 4.4.
  Required Notifications

  	
   

  
	
  SECTION 4.5.
  Delivery Covenants

  	
   

  
	
  SECTION 4.6.
  Control Covenants

  	
   

  
	
  SECTION 4.7.
  Filing Covenants

  	
   

  
	
  SECTION 4.8.
  Pledged Investment Property; Partnership/LLC Interests

  	
   

  
	
  SECTION 4.9.
  Further Assurances

  	
   

  
	
   

  	
   

  
	
  ARTICLE V REMEDIAL PROVISIONS

  	
   

  
	
  SECTION 5.1.
  General Remedies

  	
   

  
	
  SECTION 5.2.
  Specific Remedies

  	
   

  
	
  SECTION
  5.3. Registration Rights

  	
   

  
	
  SECTION
  5.4. Application of Proceeds

  	
   

  
	
  SECTION
  5.5. Waiver, Deficiency

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI THE ADMINISTRATIVE AGENT

  	
   

  
	
  SECTION
  6.1. Administrative Agent’s Appointment as Attorney-In-Fact

  	
   

  
	
  SECTION
  6.2. Duty of Administrative Agent

  	
   

  
	
  SECTION
  6.3. Authority of Administrative Agent

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII MISCELLANEOUS

  	
   

  
	
  SECTION
  7.1. Amendments, Waivers and Consents. .

  	
   

  
	
  SECTION
  7.2. Notices

  	
   

  



 


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  SECTION
  7.3. No Waiver by Course of Conduct, Cumulative Remedies

  	
   

  
	
  SECTION
  7.4. Enforcement Expenses, Indemnification

  	
   

  
	
  SECTION
  7.5. Waiver of Jury Trial; Preservation of Remedies

  	
   

  
	
  SECTION
  7.6. Successors and Assigns

  	
   

  
	
  SECTION
  7.7. Counterparts

  	
   

  
	
  SECTION
  7.8. Severability

  	
   

  
	
  SECTION
  7.9. Section Heading

  	
   

  
	
  SECTION
  7.10. Integration

  	
   

  
	
  SECTION
  7.11. Governing Law

  	
   

  
	
  SECTION
  7.12. Jurisdiction and Venue.

  	
   

  
	
  SECTION
  7.13. Acknowledgements

  	
   

  
	
  SECTION
  7.14. Additional Grantors

  	
   

  
	
  SECTION
  7.15. Releases

  	
   

  



 


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SCHEDULES:


 


	
  Exhibit A

  	
   

  	
  Form of Perfection Certificate

  
	
   

  	
   

  	
   

  
	
  Schedule 3.6

  	
   

  	
  Exact Legal Name; Jurisdiction of
  Organization; Taxpayer Identification Number; Registered Organization Number;
  Mailing Address; Chief Executive Office and other Locations

  
	
  Schedule 3.7

  	
   

  	
  Deposit Accounts

  
	
  Schedule 3.9

  	
   

  	
  Investment Property and Partnership/LLC
  Interests

  



 


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Execution Version


 


 


COLLATERAL AGREEMENT (this “Agreement”), dated as of December 22,
2004, by and among TUESDAY MORNING, INC., a Texas corporation (the “Borrower”),
TUESDAY MORNING CORPORATION, a Delaware corporation (the “Parent”), TMI
HOLDINGS, INC., a Delaware corporation (“Holdings”), certain of the
Parent’s Subsidiaries as identified on the signature pages hereto and any
Additional Grantor (as defined below) who may become party to this Agreement
(such Subsidiaries and Additional Grantors, collectively, with the Borrower,
the Parent and Holdings, the “Grantors”), in favor of WACHOVIA BANK,
NATIONAL ASSOCIATION, a national banking association, as administrative agent
(in such capacity, the “Administrative Agent”) for the ratable benefit
of the banks and other financial institutions (the “Lenders”) from time
to time parties to the Credit Agreement, dated as of December 22, 2004 (as
amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), by and among the Borrower, the Parent, Holdings, the Lenders,
and the Administrative Agent.


 


STATEMENT OF PURPOSE


 


Pursuant to the Credit Agreement, the Lenders have agreed to make
Extensions of Credit to the Borrower upon the terms and subject to the
conditions set forth therein.


 


Pursuant to the terms of (i) a Subsidiary Guaranty Agreement of even
date herewith, and (ii) a Parental Entity Guaranty Agreement of even date
herewith, certain Subsidiaries of the Parent who are parties hereto, the Parent
and Holdings have guaranteed payment and performance of the Obligations of the
Borrower.


 


It is a condition precedent to the obligation of the Lenders to make
their respective Extensions of Credit to the Borrower under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent, for the ratable benefit of itself and the Lenders.


 


NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, and to
induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective Extensions of
Credit to the Borrower thereunder, each Grantor hereby agrees with the
Administrative Agent, for the ratable benefit of itself and the Lenders, as
follows:


 


ARTICLE I


 


DEFINED TERMS


 


SECTION 1.1.  Terms Defined in the Uniform Commercial
Code.


 


(a)           The following terms when used in this Agreement
shall have the meanings assigned to them in the UCC (as defined in Section
1.2 below) as in effect from time to time: 
“Authenticate”, “Certificated Security”, “Deposit
Account”, “Financial Assets”, “General Intangible”, “Instrument”,
“Inventory”, “Investment Company Security”, “Investment
Property”, “Proceeds”, “Record”, “Registered Organization”,
“Security”, “Securities Entitlement”,


 





















 


“Securities Intermediary”,
“Securities Account”, “Supporting Obligation”, and “Uncertificated
Security”.


 


(b)           Terms defined in the UCC and not otherwise
defined herein or in the Credit Agreement shall have the meaning assigned in
the UCC as in effect from time to time.


 


SECTION 1.2.  Definitions.  The following terms when used in this
Agreement shall have the meanings assigned to them below:


 


“Additional Grantor” means each Subsidiary of the Parent which
hereafter becomes a Grantor pursuant to Section 7.14 hereof and Section
8.11 of the Credit Agreement.


 


“Agreement” means this Collateral Agreement, as amended,
restated, supplemented or otherwise modified from time to time.


 


“Collateral” has the meaning assigned thereto in Section 2.1.


 


“Collateral Account” means any collateral account established by
the Administrative Agent as provided in Section 5.2.


 


“Control” means the manner in which “control” is achieved under
the UCC with respect, with respect to any Collateral for which the UCC
specifies a method of achieving “control”.


 


“Controlled Depositary” has the meaning assigned thereto in Section
4.6(a).


 


“Controlled Intermediary” has the meaning assigned thereto in Section
4.6(a).


 


“Effective Endorsement and Assignment”  means, with respect to any specific type of
Collateral, all such endorsements, assignments and other instruments of
transfer reasonably requested by the Administrative Agent with respect to the
Security Interest granted in such Collateral, and in each case, in form and
substance satisfactory to the Administrative Agent.


 


“Grantors” has the meaning set forth in the preamble of this
Agreement.


 


“Guarantor” means any Person executing a Guaranty Agreement.


 


“Guaranty Agreement” means the collective reference to the
Subsidiary Guaranty Agreement and the Parental Entity Guaranty Agreement.


 


“Investment Property Collateral” has the meaning assigned
thereto in Section 2.1(a)(v).


 


 “Issuer” means any issuer
of any Investment Property or Partnership/LLC Interests (including, without
limitation, any Issuer as defined in the UCC).


 


 “Material Contracts” has
the meaning assigned thereto in the Credit Agreement.


 


“Material Deposit Account” has the meaning assigned thereto in Section
4.4.


 


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“Obligations” means with respect to the Borrower, the meaning
assigned thereto in the Credit Agreement, and with respect to each Guarantor,
the obligations of such Guarantor under the Guaranty Agreement executed by such
Guarantor and with respect to all Grantors, all liabilities and obligations of
the Grantors hereunder.


 


“OFAC” shall mean the U.S. Department of the Treasury’s Office
of Foreign Assets Control.


 


“Parental Entity Guaranty Agreement” has the meaning assigned
thereto in the Credit Agreement.


 


“Partnership/LLC Interests” means, with respect to any Grantor,
the entire partnership, membership interest or limited liability company
interest, as applicable, of such Grantor in each partnership, limited
partnership or limited liability company owned thereby, including, without
limitation, such Grantor’s capital account, its interest as a partner or
member, as applicable, in the net cash flow, net profit and net loss, and items
of income, gain, loss, deduction and credit of any such partnership, limited
partnership or limited liability company, as applicable, such Grantor’s interest
in all distributions made or to be made by any such partnership, limited
partnership or limited liability company, as applicable, to such Grantor and
all of the other economic rights, titles and interests of such Grantor as a
partner or member, as applicable, of any such partnership, limited partnership
or limited liability company, as applicable, whether set forth in the
partnership agreement or membership agreement, as applicable, of such
partnership, limited partnership or limited liability company, as applicable,
by separate agreement or otherwise.


 


“Perfection Certificate” means the perfection certificate dated
as of even date herewith, substantially in the form of Exhibit A
attached hereto, and otherwise in form and substance satisfactory to the Administrative
Agent, and duly certified by an officer, partner or member, as applicable, of
each Grantor.


 


“Permitted Liens” means Liens permitted pursuant to Section 10.2
of the Credit Agreement.


 


“Pledged Investment Property” has the meaning assigned thereto
in Section 2.1(a)(iv).


 


“Proceeds Investment Property” has the meaning assigned thereto
in Section 2.1(a)(v).


 


“Restricted Securities Collateral” has the meaning assigned
thereto in Section 5.3(a).


 


“Sanctioned Country” shall mean a country subject to a sanctions
program identified on the list maintained by OFAC and available at
http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html, or as otherwise
published from time to time.


 


“Sanctioned Person” shall mean (i) a person named on the list of
Specially Designated Nationals or Blocked Persons maintained by OFAC available
at http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (B) an organization 


 


 


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controlled by a Sanctioned Country, or (C) a
person resident in a Sanctioned Country, to the extent subject to a sanctions
program administered by OFAC.


 


“Securities Act” means the Securities Act of 1933, including all
amendments thereto and regulations promulgated thereunder.


 


“Security Interests” means the security interests granted
pursuant to Article II, as well as all other security interests created
or assigned as additional security for the Obligations pursuant to the
provisions of the Credit Agreement.


 


“Subsidiary Guaranty Agreement” has the meaning assigned thereto
in the Credit Agreement.


 


“UCC” means the Uniform Commercial Code as in
effect in the State of New York, as amended or modified from time to time.


 


SECTION
1.3.  Other Definitional Provisions.  Terms defined in the Credit Agreement and not
otherwise defined herein shall have the meaning assigned thereto in the Credit
Agreement.  The words “hereof”, “herein”,
“hereto” 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 and Schedule references are to this
Agreement unless otherwise specified. 
The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.  Where the context requires, terms relating to
the Collateral or any part thereof, when used in relation to a Grantor, shall
refer to such Grantor’s Collateral or the relevant part thereof.


 


ARTICLE II


 


SECURITY INTEREST


 


SECTION
2.1.  Grant of Security Interest.


 


(a)           Each Grantor hereby grants, pledges and
collaterally assigns to the Administrative Agent, for the ratable benefit of
the Administrative Agent and the Lenders, a security interest in, all of such
Grantor’s right, title and interest in the following property now owned or at
any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest, and
wherever located or deemed located (collectively, the “Collateral”), as
collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations:


 


(i)            all Deposit Accounts;


 


(ii)           all Documents covering or related to Inventory;


 


(iii)          all Inventory;


 


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(iv)          all Investment Property representing ownership
interests of any Grantor in the Subsidiaries of the Parent now existing or
hereafter created or acquired (the “Pledged Investment Property”);


 


(v)           all
Investment Property consisting of Proceeds of the sale of Inventory of any
Grantor which are Financial Assets or which are Financial Assets credited to a
Securities Account (the “Proceeds Investment Property”, and, together
with the Pledged Investment Property, the “Investment Property Collateral”);


 


(vi)          all General Intangibles (i) representing any
ownership interests in the Subsidiaries of the Parent now existing or hereafter
created or acquired or (ii) relating to any of the foregoing Collateral
described in clauses (i) through (v) above; and


 


(vii)         to the extent not otherwise included, all
Proceeds and products of any and all of the foregoing and all collateral
security and Supporting Obligations (as now or hereafter defined in the UCC)
given by any Person with respect to any of the foregoing.


 


(b)           Notwithstanding
clause (a) of this Section 2.1, the payment and performance of the Obligations
shall not be secured by any Hedging Agreement between any Grantor and the
Administrative Agent or any Lender or any Affiliate of the Administrative Agent
or any Lender.


 


(c)           Notwithstanding
the foregoing grants, no obligation or property of any kind due from, owed by,
or belonging to, a Sanctioned Person shall be Collateral.


 


SECTION
2.2.  Grantors Remain Liable.   Anything herein to the contrary
notwithstanding: (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Administrative
Agent of any of the rights hereunder shall not release any Grantor from any of
its duties or obligations under the contracts and agreements included in the
Collateral, (c) neither the Administrative Agent nor any Lender shall have any
obligation or liability under the contracts and agreements included in the Collateral
by reason of this Agreement, nor shall the Administrative Agent or any Lender
be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder, and (d) neither the Administrative Agent nor any Lender
shall have any liability in contract or tort for any Grantor’s acts or
omissions.


 


ARTICLE III


 


REPRESENTATIONS
AND WARRANTIES


 


To induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective Extensions of
Credit to the Borrower thereunder, each Grantor hereby represents and warrants
to the Administrative Agent and each Lender that:


 


SECTION
3.1.  Existence.  Each Grantor is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has the requisite 


 


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power and authority to own, lease and operate its
properties and to carry on its business as now being and hereafter proposed to
be conducted and is duly qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization other than in such
jurisdiction where failure to so qualify could not reasonably be expected to
have a Material Adverse Effect.


 


SECTION
3.2.  Authorization of Agreement; No Conflict.  Each Grantor has the right, power and
authority and has taken all necessary corporate and other action to authorize
the execution, delivery and performance of, this Agreement.  This Agreement has been duly executed and
delivered by the duly authorized officers of each Grantor and this Agreement
constitutes the legal, valid and binding obligation of the Grantors enforceable
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar state or federal
debtor relief laws from time to time in effect which affect the enforcement of
creditors’ rights in general and the availability of equitable remedies.  The execution, delivery and performance by
the Grantors of this Agreement will not, by the passage of time, the giving of
notice or otherwise, violate any material provision of any Applicable Law or
Material Contract and will not result in the creation or imposition of any
Lien, other than the Security Interests, upon or with respect to any property
or revenues of any Grantor.


 


SECTION
3.3.  Consents.  No approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement against
any Grantor or any Issuer of this Agreement, except (i) as may be required
by laws affecting the offering and sale of securities generally and (ii)
filings under the UCC.


 


SECTION
3.4.  Perfected First Priority Liens.  Each financing statement naming any Grantor
as a debtor is in appropriate form for filing in the appropriate filing offices
of the states specified on Schedule 3.6. 
The Security Interests granted pursuant to this Agreement
(a) constitute valid perfected security interests in all of the Collateral
in favor of the Administrative Agent, for the ratable benefit of itself and the
Lenders, as collateral security for the Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor and (b) are prior
to all other Liens on the Collateral in existence on the date hereof except for
Permitted Liens.


 


SECTION
3.5.  Title, No Other Liens.  Except for the Security Interests, each
Grantor owns each item of the Collateral free and clear of any and all Liens or
claims other than Permitted Liens.  Except
for the financing statements naming certain of the Grantors as “Debtor” and
Fleet National Bank as “Secured Party” filed in connection with the Existing
Facility relating to security interests in favor of Fleet National Bank which
will be terminated on the Closing Date (which financing statements will be
terminated within ten (10) days following the Closing Date), no financing
statement under the UCC of any state which names a Grantor as debtor or other
public notice with respect to all or any part of the Collateral is on file or
of record in any public office, except such as have been filed in favor of the
Administrative Agent, for the ratable benefit of itself and the Lenders,
pursuant to this Agreement or in connection with Permitted Liens.  No Collateral is in the possession or Control
of any Person asserting any claim thereto or security interest therein, except
that (a) the Administrative Agent or its designee may have possession or 


 


 


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Control of Collateral as contemplated hereby, (b) a
depositary bank may have Control of a Deposit Account owned by a Grantor at
such depositary bank and a Securities Intermediary may have Control over a
Securities Account owned by a Grantor at such Securities Intermediary, in each
case subject to the terms of any Deposit Account control agreement or
Securities Account control agreement, as applicable, and to the extent required
by Section 4, in favor of the Administrative Agent, and (c) a bailee,
consignee or other Person may have possession of the Collateral as contemplated
by, and so long as, the applicable Grantors have complied to the satisfaction
of the Administrative Agent with the applicable provisions of Section 4.


 


SECTION
3.6.  State of Organization; Location of
Inventory; Other Information.


 


(a)           The exact
legal name of each Grantor is set forth on Schedule 3.6.


 


(b)           Each Grantor is a Registered Organization organized
under the laws of the state identified on Schedule 3.6 under such
Grantor’s name.  The taxpayer identification number and
Registered Organization number of each Grantor is set forth on Schedule 3.6
under such Grantor’s name.


 


(c)           All Collateral consisting of Inventory (whether
now owned or hereafter acquired) is (or will be) located at the locations
specified on Schedule 3.6, except as otherwise permitted hereunder.


 


(d)           The
mailing address, chief place of business, chief executive office and office where
each Grantor keeps its books and records relating to Documents, General
Intangibles, and Investment Property Collateral in which it has any interest is
located at the locations specified on Schedule 3.6 under such Grantor’s
name.  As of the date hereof, no Grantor
has any other places of business except those separately set forth on Schedule
3.6 under such Grantor’s name.  No
Grantor does business nor has done business during the past five (5) years
under any trade name or fictitious business name except as disclosed on Schedule
3.6 under such Grantor’s name. 
Except as disclosed on Schedule 3.6 under such Grantor’s name, no
Grantor has acquired assets from any Person, other than assets acquired in the
ordinary course of such Grantor’s business, during the past five (5) years.


 


SECTION
3.7.  Deposit Accounts.  As of the date hereof, all Deposit Accounts
(including, without limitation, cash management accounts that are Deposit
Accounts) owned by any Grantor are listed on Schedule 3.7.


 


SECTION
3.8.  Inventory.  Collateral consisting of Inventory is of good
and merchantable quality, free from any defects.  To the knowledge of each Grantor, none of
such Inventory is subject to any licensing, Patent, Trademark, trade name or
Copyright with any Person that restricts any Grantor’s ability to sell such
Inventory.  The completion of the
manufacturing process of such Inventory by a Person other than the applicable
Grantor would be permitted under any contract to which such Grantor is a party
or to which the Inventory is subject.


 


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SECTION
3.9.  Investment Property; Partnership/LLC
Interests.


 


(a)           As of the date hereof, all Investment Property
Collateral (including, without limitation, Securities Accounts and cash management
accounts that are Investment Property Collateral) and all Partnership/LLC
Interests owned by any Grantor is listed on Schedule 3.9.


 


(b)           All Pledged Investment Property and all
Partnership/LLC Interests issued by any Issuer to any Grantor (i) have been
duly and validly issued and, if applicable, are fully paid and nonassessable, (ii)
are beneficially owned as of record by such Grantor and (iii) constitute all
the issued and outstanding shares of all classes of the capital stock of such
Issuer issued to such Grantor.


 


(c)           None
of the Partnership/LLC Interests (i) are traded on a Securities exchange or in
Securities markets, (ii) by their terms expressly provide that they are
Securities governed by Article 8 of the UCC, (iii) are Investment Company Securities
or (iv) are held in a Securities Account.


 


ARTICLE IV


 


COVENANTS


 


Until the Obligations shall have been paid in full and the Commitments
terminated, unless consent has been obtained in the manner provided for in Section
7.1, each Grantor covenants and agrees that:


 


SECTION
4.1.  Maintenance of Perfected Security
Interest; Further Information.


 


(a)           Each Grantor shall maintain the Security Interest
created by this Agreement as a perfected Security Interest having at least the
priority described in Section 3.4 and shall defend such Security
Interest against the claims and demands of all Persons whomsoever.


 


(b)           Upon the reasonable request of the Administrative
Agent, each Grantor will furnish to the Administrative Agent and the Lenders
statements and schedules further identifying and describing the assets and
property of such Grantor and such other reports in connection therewith as the
Administrative Agent may reasonably request, all in reasonable detail.


 


SECTION
4.2.  Maintenance of Insurance.


 


(a)           Each Grantor will maintain, with financially
sound and reputable companies, insurance policies (i) insuring the
Collateral against loss by fire, explosion, theft, fraud and such other
casualties in amounts and with deductibles at least as favorable as those generally
maintained by businesses of similar size engaged in similar activities and
(ii) insuring such Grantor and the Administrative Agent, for the ratable
benefit of the Administrative Agent and the Lenders,
against liability for hazards, risks and liability to persons and property
relating to the Collateral.


 


(b)           All such insurance shall (i) name the
Administrative Agent for the ratable benefit of itself and the Lenders as loss
payee (to the extent covering risk of loss or damage to tangible 


 


8





















 


property constituting Collateral)
and as an additional insured as its interests may appear (to the extent
covering any other risk), and (ii) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least thirty (30) days after receipt by the Administrative Agent of
written notice thereof.


 


(c)           Upon the request of the Administrative Agent,
each Grantor shall deliver to the Administrative Agent and the Lenders periodic
information from a reputable insurance broker with respect to the insurance
referred to in this Section 4.2.


 


SECTION
4.3.  Changes in Locations; Changes in Name or
Structure.  No Grantor will,
except upon thirty (30) days’ prior written notice to the Administrative Agent
and delivery to the Administrative Agent of (a) all additional financing
statements (executed if necessary for any particular filing jurisdiction) and
other instruments and documents reasonably requested by the Administrative
Agent to maintain the validity, perfection and priority of the Security
Interests and (b) if applicable, a written supplement to the Schedules
of this Agreement:


 


(i)            permit any Deposit Account subject to a control
agreement in favor of the Administrative Agent to be held by or at a depositary
bank other than the depositary bank identified in such control agreement;


 


(ii)           permit any of the Inventory, other than Inventory
in transit in the ordinary course of business, to be kept at a location other
than those listed on Schedule 3.6, except as otherwise permitted
hereunder (including as contemplated in Section 4.6(b)); provided, that
the Grantors may move Inventory to individual retail store locations that are
acquired, created or otherwise opened after the date hereof in accordance with
the Credit Agreement; provided, further that no less frequently
than on each anniversary of the Closing Date, the Grantors shall provide
the Administrative Agent with a list of all locations
of Inventory.


 


(iii)          permit any Investment Property Collateral (other
than Certificated Securities delivered to the Administrative Agent pursuant to Section
4.5) subject to a control agreement in favor of the Administrative Agent to
be held by or at a Securities Intermediary other than the Securities
Intermediary identified in such control agreement;


 


(iv)          change its jurisdiction of organization or the
location of its chief executive office from that identified on Schedule 3.6;
or


 


(v)           change its name, identity or corporate or
organizational structure to such an extent that any financing statement filed
by the Administrative Agent in connection with this Agreement would become
misleading.


 


SECTION
4.4.  Required Notifications.  (a) Each Grantor shall promptly notify the
Administrative Agent, in writing, of: (i) any Lien (other than the Security
Interests or Permitted Liens) on any of the Collateral which would adversely
affect the ability of the Administrative Agent to exercise any of its remedies
hereunder, (ii) the occurrence of any other event which could reasonably be
expected to have a Material Adverse Effect on the aggregate value of the
Collateral or on the Security Interests, and (iii) the acquisition, opening or
other ownership by such Grantor of any (A) concentration, sweep or other
material Deposit Account (each of the 


 


9





















 


foregoing a “Material Deposit Account”) or (B) Proceeds
Investment Property, in each case, after the date hereof.


 


(b)           No
less frequently than on each anniversary of the Closing Date, the Grantors
shall deliver to the Administrative Agent a current list of all Deposit
Accounts of the Grantors.


 


SECTION
4.5.  Delivery Covenants.  Each Grantor will deliver and pledge to the
Administrative Agent, for the ratable benefit of itself and the Lenders, all
Certificated Securities, and Partnership/LLC Interests evidenced by a
certificate, and, at the request of the Administrative Agent at any time
following the occurrence and during the continuance of a an Event of Default,
negotiable Documents owned or held by such Grantor, in each case, together with
an Effective Endorsement and Assignment and all Supporting Obligations, as
applicable, unless such delivery and pledge has been waived in writing by the
Administrative Agent.


 


SECTION
4.6.  Control Covenants.


 


(a)           Upon the request of the Administrative Agent (i)
at any time with respect to all Material Deposit Accounts and all Proceeds
Investment Property and (ii) at any time following the occurrence and during
the continuance of an Event of Default with respect to all other Deposit
Accounts of the Grantors, each Grantor shall instruct (and otherwise use its
reasonable efforts) to cause (A) each depositary bank (other than the
Administrative Agent) holding a Deposit Account owned by such Grantor and (B)
each Securities Intermediary holding any Proceeds Investment Property owned by
such Grantor, to execute and deliver a control agreement, sufficient to provide
the Administrative Agent with Control of such Deposit Account and otherwise in
form and substance reasonably satisfactory to the Administrative Agent (any
such depositary bank executing and delivering any such control agreement, a “Controlled
Depositary” and any such Securities Intermediary executing and delivering
any such control agreement, a “Controlled Intermediary”) within thirty (30)
Business Days of such request.  In the
event any such depositary bank or Securities Intermediary refuses to execute
and deliver such control agreement, the Administrative Agent, in its sole discretion,
may require the applicable Deposit Account and Proceeds Investment Property to
be transferred to the Administrative Agent or a Controlled Depositary or
Controlled Intermediary, as applicable. 
Following any such request, all Deposit Accounts and Proceeds Investment
Property will be maintained with the Administrative Agent or a Controlled
Depositary or Controlled Intermediary, as applicable.


 


(b)           If (i) any Collateral (other than Collateral
specifically subject to the provisions of Section 4.6(a)) exceeding in
value $10,000,000 in the aggregate (such Collateral exceeding such amount, the “Excess
Collateral”) is at any such time in the possession or control of any
consignee, warehouseman, bailee (other than a carrier transporting Inventory to
a purchaser in the ordinary course of business), processor, or any other third
party, or is stored at any location which is not owned by the Grantors or (ii)
if an Event of Default shall have occurred and be continuing, then (a) the
Administrative Agent may require that that such Grantor shall notify in writing
such Person of the Security Interests created hereby, shall use its reasonable
efforts to obtain such Person’s written agreement in writing to hold all such
Collateral for the Administrative Agent’s account subject to the Administrative
Agent’s instructions, and shall cause such Person to issue and deliver to the
Administrative Agent warehouse receipts, bills of lading or any similar
documents relating to such Collateral together with an Effective 


 


10





















 


Endorsement and Assignment
(which documents may include, without limitation, lien subordinations of such
third parties and, in the case of leased locations, landlord agreements, in
each case, in form and substance reasonably acceptable to the Administrative
Agent); provided that if such Grantor is not able to obtain such
agreement and cause the delivery of such items, the Administrative Agent, in
its sole discretion, may require such Excess Collateral to be moved to another
location specified thereby; and (b) the Administrative Agent may require that each
Grantor perfect and protect such Grantor’s ownership interests in all Inventory
stored with a consignee against creditors of the consignee by filing and
maintaining financing statements against the consignee reflecting the
consignment arrangement filed in all appropriate filing offices, providing any
written notices required to notify any prior creditors of the consignee of the
consignment arrangement, and taking such other actions as may be appropriate to
perfect and protect such Grantor’s interests in such inventory under Section
2-326, Section 9-103, Section 9-324 and Section 9-505 of the UCC or
otherwise.  All such financing statements
filed pursuant to this Section 4.6(b) shall be assigned, on the face
thereof, to the Administrative Agent, for the ratable benefit of itself and the
other Lenders.


 


SECTION
4.7.  Filing Covenants.  Pursuant to Section 9-509 of the UCC and any
other Applicable Law, each Grantor authorizes the Administrative Agent to file
or record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Administrative Agent determines
appropriate to perfect the Security Interests of the Administrative Agent under
this Agreement.  Such financing
statements may describe the Collateral in the same manner as described herein
or may contain an indication or description of Collateral that describes such
property in any other manner as the Administrative Agent may determine, in its
sole discretion, is necessary, advisable or prudent to ensure the perfection of
the Security Interest in the Collateral granted herein.  Further, a photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any
jurisdiction.  Grantor hereby authorizes,
ratifies and confirms all financing statements and other filing or recording
documents or instruments filed by Administrative Agent prior to the date of
this Agreement. 


 


SECTION
4.8.  Pledged Investment Property;
Partnership/LLC Interests.


 


(a)           Without the prior written consent of the Administrative
Agent, no Grantor will (i) vote to enable, or take any other action to
permit, any applicable Issuer to issue any Pledged Investment Property or
Partnership/LLC Interests, except for those additional Pledged Investment
Property or Partnership/LLC Interests that will be subject to the Security
Interest granted herein in favor of the Administrative Agent, or
(ii) enter into any agreement or undertaking restricting the right or
ability of such Grantor or the Administrative Agent to sell, assign or transfer
any Pledged Investment Property or Partnership/LLC Interests or Proceeds
thereof.  The Grantors will defend the
right, title and interest of the Administrative Agent in and to any Pledged Investment
Property and Partnership/LLC Interests against the claims and demands of all
Persons whomsoever.


 


(b)           If any Grantor shall become entitled to receive
or shall receive (i) any Certificated Securities (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any 


 


11





















 


certificate issued in connection
with any reorganization), option or rights in respect of the ownership
interests of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any Pledged Investment Property, or
otherwise in respect thereof, or (ii) any sums paid upon or in respect of any Pledged
Investment Property upon the liquidation or dissolution of any Issuer, such
Grantor shall accept the same as the agent of the Administrative Agent and the
Lenders, hold the same in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Grantor, and promptly deliver the same to
the Administrative Agent in accordance with the terms hereof.


 


(c)           Nothing
contained in this Agreement shall prohibit any Issuer from reorganizing as a
limited liability company or a corporation, provided that (i) such
reorganization is permitted by and undertaken in compliance with the provisions
of the Credit Agreement,  (ii) such
reorganization is undertaken in compliance with the provisions of this
Agreement, including, without limitation, Article IV hereof, and (iii) all of
the ownership interests in the converted entity shall be pledged to the
Administrative Agent as Collateral for the Obligations in accordance with the
terms of this Agreement.


 


SECTION
4.9.  Further Assurances.  Upon the request of the Administrative Agent
and at the sole expense of the Grantors, each Grantor will promptly and duly
execute and deliver, and have recorded, such further instruments and documents
and take such further actions as the Administrative Agent may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, all applications, certificates, instruments, registration
statements, and all other documents and papers the Administrative Agent may
reasonably request and as may be required by law in connection with the
obtaining of any consent, approval, registration, qualification, or
authorization of any Person deemed necessary or appropriate for the effective
exercise of any rights under this Agreement.


 


ARTICLE V


 


REMEDIAL
PROVISIONS


 


SECTION
5.1.  General Remedies.  If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted to them in this Agreement
and in any other instrument or agreement securing, evidencing or relating to
the Obligations, all rights and remedies of a secured party under the UCC or
any other Applicable Law.  Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker’s board or office of
the Administrative Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption 


 


12





















 


of any credit risk. 
The Administrative Agent may disclaim all warranties in connection with
any sale or other disposition of the Collateral, including, without limitation,
all warranties of title, possession, quiet enjoyment and the like.  The Administrative Agent or any Lender shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released.  Each Grantor further agrees, at the
Administrative Agent’s request, to assemble the Collateral and make it
available to the Administrative Agent at places which the Administrative Agent
shall reasonably select, whether at such Grantor’s premises or elsewhere.  To the extent permitted by Applicable Law,
each Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them of any
rights hereunder except to the extent any such claims, damages, or demands
result solely from the gross negligence or willful misconduct of the
Administrative Agent or any Lender, in each case against whom such claim is
asserted.  If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least ten (10) days before
such sale or other disposition.  The
Administrative Agent may reject or refuse to accept any Collateral for credit
toward payment of the Obligations that is an obligation or property of any kind
due from, owed by, or belonging to, a Sanctioned Person.


 


SECTION
5.2.  Specific Remedies.


 


(a)           Upon the occurrence and during the continuance of
an Event of Default:


 


(i)            each Grantor shall forward to the Administrative
Agent, on the last Business Day of each week, deposit slips related to all
cash, money, checks or any other similar items of payment received by the
Grantor during such week, and, if requested by the Administrative Agent, copies
of such checks or any other similar items of payment, together with a statement
showing the application of all payments on the Collateral during such week and
a collection report with regard thereto, in form and substance satisfactory to
the Administrative Agent;


 


(ii)           whenever any Grantor shall receive any cash,
money, checks or any other similar items of payment relating to any Collateral
(including any Proceeds of any Collateral), such Grantor agrees that it will,
within one (1) Business Day of such receipt, deposit all such items of payment
into the Collateral Account or in a Deposit Account at a Controlled Depositary,
until such Grantor shall deposit such cash, money, checks or any other similar
items of payment in the Collateral Account or in a Deposit Account at a
Controlled Depositary, such Grantor shall hold such cash, money, checks or any
other similar items of payment in trust for the Administrative Agent and
Lenders and as property of the Administrative Agent and Lenders, separate from
the other funds of such Grantor, and the Administrative Agent shall have the
right to transfer or direct the transfer of the balance of each Deposit Account
to the Collateral Account.  All such
Collateral and Proceeds of Collateral received by the Administrative Agent
hereunder shall be held by the Administrative Agent in the Collateral Account
as collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in Section 5.4.


 


13





















 


(iii)          the Administrative Agent shall have the right to
receive any and all cash dividends, payments or distributions made in respect
of any Pledged Investment Property, Partnership/LLC Interests or other Proceeds
paid in respect of any Pledged Investment Property or Partnership/LLC
Interests, and any or all of any Pledged Investment Property or Partnership/LLC
Interests shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise
(A) all voting, corporate and other rights pertaining to such Pledged Investment
Property or Partnership/LLC Interests at any meeting of shareholders, partners
or members of the relevant Issuers and (B) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Pledged Investment Property or Partnership/LLC
Interests as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged Investment
Property or Partnership/LLC Interests upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate,
partnership or company structure of any Issuer or upon the exercise by any Grantor
or the Administrative Agent of any right, privilege or option pertaining to
such Pledged Investment Property or Partnership/LLC Interests, and in
connection therewith, the right to deposit and deliver any and all of the Pledged
Investment Property or Partnership/LLC Interests with any committee,
depositary, transfer agent, registrar or other designated agency upon such
terms and conditions as the Administrative Agent may determine), all without
liability except to account for property actually received by it; but the
Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and the Administrative Agent and the Lenders shall
not be responsible for any failure to do so or delay in so doing.  In furtherance thereof, each Grantor hereby
authorizes and instructs each Issuer with respect to any Collateral consisting
of Pledged Investment Property and Partnership/LLC Interests to (i) comply
with any instruction received by it from the Administrative Agent in writing that
(A) states that an Event of Default has occurred and is continuing and (B) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each
Issuer shall be fully protected in so complying, and (ii) except as
otherwise expressly permitted hereby, pay any dividends, distributions or other
payments with respect to any Pledged Investment Property or Partnership/LLC
Interests directly to the Administrative Agent; and


 


(iv)          the
Administrative Agent shall be entitled to (but shall not be required to) do all
other acts which the Administrative Agent may deem necessary or proper to
protect its Security Interest granted hereunder, provided such acts are not
inconsistent with or in violation of the terms of any of the Credit Agreement,
of the other Loan Documents or Applicable Law.


 


(b)           Unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given notice to the
relevant Grantor of the Administrative Agent’s intent to exercise its
corresponding rights pursuant to Section 5.2(a), each Grantor shall
be permitted to receive all cash dividends, payments or other distributions
made in respect of any Pledged Investment Property and Partnership/LLC
Interests, in each case paid in the normal course of business of the relevant
Issuer and consistent with past practice, to the extent permitted 


 


14





















 


in the Credit Agreement, and to
exercise all voting and other corporate, company and partnership rights with
respect to any Pledged Investment Property and Partnership/LLC Interests.


 


SECTION
5.3.  Registration Rights.


 


(a)           If the Administrative Agent shall determine that
in order to exercise its right to sell any or all of the Collateral it is
necessary or advisable to have such Collateral registered under the provisions
of the Securities Act (any such Collateral, the “Restricted Securities
Collateral”), the relevant Grantor will cause each applicable Issuer (and
the officers and directors thereof) to (i) execute and deliver all such
instruments and documents, and do or cause to be done all such other acts as
may be, in the opinion of the Administrative Agent, necessary or advisable to
register such Restricted Securities Collateral, or that portion thereof to be
sold, under the provisions of the Securities Act, (ii) use its best efforts to
cause the registration statement relating thereto to become effective and to
remain effective for a period of one year from the date of the first public
offering of such Restricted Securities Collateral, or that portion thereof to
be sold, and (iii) make all amendments thereto and/or to the related prospectus
which, in the opinion of the Administrative Agent, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto.  Each Grantor agrees to cause each applicable
Issuer (and the officers and directors thereof) to comply with the provisions
of the securities or “Blue Sky” laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 2 (a) of the Securities
Act.


 


(b)           Each Grantor recognizes that the Administrative
Agent may be unable to effect a public sale of any or all the Restricted
Securities Collateral, by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obliged to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof.  Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.  The Administrative Agent shall be under no
obligation to delay a sale of any of the Restricted Securities Collateral for
the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.


 


(c)           Each Grantor agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such sale
or sales of all or any portion of the Restricted Securities Collateral valid
and binding and in compliance with any and all other Applicable Laws.  Each Grantor further agrees that a breach of
any of the covenants contained in this Section 5.3 will cause
irreparable injury to the Administrative Agent and the Lenders, that the
Administrative Agent and the Lenders have no adequate remedy at law in respect
of such breach and, as a consequence, that each and every covenant contained in
this Section 5.3 shall be specifically enforceable against such
Grantor, and such Grantor hereby waives and agrees not to 


 


15





















 


assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.


 


SECTION
5.4.  Application of Proceeds.  At such intervals as may be agreed upon by
the Borrower and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent’s
election, the Administrative Agent may apply all or any part of the Collateral
or any Proceeds of the Collateral in payment in whole or in part of the
Obligations (after deducting all reasonable costs and expenses of every kind
incurred in connection therewith or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral or the rights of
the Administrative Agent and the Lenders hereunder, including, without
limitation, reasonable attorneys’ fees and disbursements) in accordance with Section
11.4 of the Credit Agreement.  Any
balance of such Proceeds remaining after shall be paid over to the Borrower, on
behalf of the Grantors, or to whomsoever (if such Person is not a Grantor) may
be lawfully entitled to receive the same. Only after (i) the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-610 and Section 9-615 of the UCC and
(ii) the payment in full of the Obligations and the termination of the
Commitments, shall the Administrative Agent account for the surplus, if any, to
any Grantor, or to whomever may be lawfully entitled to receive the same (if
such Person is not a Grantor).


 


SECTION
5.5.  Waiver, Deficiency.  Each Grantor hereby waives, to the extent
permitted by Applicable Law, all rights of redemption, appraisement, valuation,
stay, extension or moratorium now or hereafter in force under any Applicable
Law in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof.  Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay its Obligations and the fees and disbursements of any
attorneys employed by the Administrative Agent or any Lender to collect such
deficiency.


 


ARTICLE VI


 


THE ADMINISTRATIVE AGENT


 


SECTION
6.1.  Administrative Agent’s Appointment as
Attorney-In-Fact.


 


(a)           Each Grantor hereby irrevocably constitutes and
appoints the Administrative Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor and in
the name of such Grantor or in its own name, for the purpose of carrying out
the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, each Grantor hereby gives the Administrative
Agent the power and right, on behalf of such Grantor, without notice to or
assent by such Grantor, to do any or all of the following upon the occurrence
and continuation of an Event of Default:


 


(i)            in the name of such Grantor or its own name, or
otherwise, take possession of and indorse and collect any checks, drafts,
notes, acceptances or other 


 


16





















 


instruments for the payment of moneys due with respect to any Collateral
and file any claim or take any other action or proceeding in any court of law
or equity or otherwise deemed appropriate by the Administrative Agent for the
purpose of collecting any and all such moneys due with respect to any
Collateral whenever payable;


 


(ii)           pay or discharge taxes and Liens levied or placed
on or threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;


 


(iii)          execute, in connection with any sale provided for
in this Agreement, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and


 


(iv)          (A) direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (B) ask or demand for, collect, and receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become due
at any time in respect of or arising out of any Collateral; (C) sign and
indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral; (D) commence and
prosecute any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral; (E) defend any suit,
action or proceeding brought against such Grantor with respect to any
Collateral; (F) settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, give such discharges or releases as
the Administrative Agent may deem appropriate; and (G) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent’s option and such Grantor’s expense, at any time, or from
time to time, all acts and things which the Administrative Agent deems
necessary to protect, preserve or realize upon the Collateral and the Administrative
Agent’s and the Lenders’ Security Interests therein and to effect the intent of
this Agreement, all as fully and effectively as such Grantor might do.


 


(b)           If any Grantor fails to perform or comply with
any of its agreements contained herein, the Administrative Agent, at its
option, but without any obligation so to do, may perform or comply, or
otherwise cause performance or compliance, with such agreement in accordance
with the provisions of Section 6.1(a).


 


(c)           The expenses of the Administrative Agent incurred
in connection with actions taken pursuant to the terms of this Agreement,
together with interest thereon at a rate per annum equal to the highest rate
per annum at which interest would then be payable on any category of past due
Base Rate Loans under the Credit Agreement, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative Agent on demand.


 


17





















 


(d)           Each Grantor hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof in accordance
with Section 6.1(a).  All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the
Security Interests created hereby are released.


 


SECTION
6.2.  Duty of Administrative Agent.  The Administrative Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the UCC or otherwise, shall be to
deal with it in the same manner as the Administrative Agent deals with similar
property for its own account.  Neither
the Administrative Agent, any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect
or realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Administrative
Agent and the Lenders hereunder are solely to protect the Administrative Agent’s
and the Lenders’ interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any Lender to exercise any such powers.  The Administrative Agent and the Lenders
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful misconduct.


 


SECTION
6.3.  Authority of Administrative Agent.  Each Grantor acknowledges that the rights and
responsibilities of the Administrative Agent under this Agreement with respect
to any action taken by the Administrative Agent or the exercise or non-exercise
by the Administrative Agent of any option, voting right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Administrative Agent and the Lenders, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement to make any inquiry respecting such authority.


 


ARTICLE VII


 


MISCELLANEOUS


 


SECTION 7.1.  Amendments, Waivers and Consents.  None of the
terms, covenants, agreements or conditions of this Agreement may be amended,
supplemented or otherwise modified, nor may they be waived, nor may any consent
be given, except in accordance with Section 13.2 of the Credit Agreement.


 


SECTION
7.2.  Notices.  All notices, requests and demands to or upon
the Administrative Agent or any Grantor hereunder shall be effected in the
manner provided for in Section 13.1 of the Credit Agreement; provided
that notices and communications to the Grantors shall be directed to the
Grantors at the address of the Borrower set forth in Section 13.1(b).


 


18





















 


SECTION
7.3.  No Waiver by Course of Conduct, Cumulative
Remedies.  Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 7.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. 
No failure to exercise, nor any delay in exercising on the part of the
Administrative Agent or any Lender, any right, power or privilege hereunder
shall operate as a waiver thereof.  No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  A waiver by
the Administrative Agent or any Lender of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the Administrative
Agent or such Lender would otherwise have on any future occasion.  The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.


 


SECTION
7.4.  Enforcement Expenses, Indemnification.


 


(a)           Each Grantor will (i) pay all
out-of-pocket expenses (including, without limitation,  all costs of electronic or internet
distribution of any information hereunder) of the Administrative Agent in
connection with (A) the preparation, execution and delivery of this Agreement
and each other Loan Document, whenever the same shall be executed and
delivered, including, without limitation, all out-of-pocket syndication and due
diligence expenses and reasonable fees and disbursements of counsel for the
Administrative Agent and (B) the preparation, execution and delivery of any
waiver, amendment or consent by the Administrative Agent or the Lenders
relating to this Agreement or any other Loan Document, including, without
limitation, reasonable fees, disbursements and other charges of counsel for the
Administrative Agent, (ii) pay all reasonable out-of-pocket expenses of the
Administrative Agent and each Lender actually incurred in connection with the
administration and enforcement of any rights and remedies of the Administrative
Agent and Lenders under this Agreement, including, without limitation, in
connection with any workout, restructuring, bankruptcy or other similar
proceeding, creating and perfecting Liens in favor of the Administrative Agent
on behalf of the Lenders pursuant to any Security Document, enforcing any
Obligations of, or collecting any payments due from, any Grantor by reason of
an Event of Default (including by reason of an Event of Default, in connection
with the sale of, collection from, or other realization upon any of the
Collateral or the enforcement of this Agreement); consulting with appraisers,
accountants, engineers, attorneys and other Persons concerning the nature,
scope or value of any right or remedy of the Administrative Agent or any Lender
hereunder or under any other Loan Document or any factual matters in connection
therewith, which expenses shall include, without limitation, the reasonable
fees and disbursements of such Persons, (iii) any civil penalty or fine
assessed by the U.S. Department of the Treasury’s Office of Foreign Assets
Control against, and all reasonable costs and expenses (including counsel fees
and disbursements) incurred in connection with defense thereof by the Administrative
Agent or any Lender as a result of the funding of Loans, the issuance of
Letters of Credit, the acceptance of payment or of collateral due under the
Loan Documents and (iv) defend, indemnify and hold harmless the Administrative
Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates,
partners, employees, agents, officers, advisors and directors, from and against
any losses, penalties, fines, liabilities, settlements, damages, costs and
expenses, suffered by any such Person in connection with any claim (including,
without limitation, any Environmental Claims), investigation, litigation or
other


 


19





















 


proceeding
(whether or not the Administrative Agent or any Lender is a party thereto) and
the prosecution and defense thereof, arising out of or in any way connected
with the Extensions of Credit, this Agreement, any other Loan Document, or any
documents, reports or other information provided to the Administrative Agent or
any Lender or contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby, including, without limitation,
reasonable attorney’s and consultant’s fees, except to the extent that any of
the foregoing (A) are determined by a court of competent jurisdiction by a
final and nonappealable judgment to have resulted directly from the gross
negligence or willful misconduct of the party seeking indemnification therefor
or (B) result from a claim brought by any Credit Party against an indemnitee
for breach in bad faith of the obligations under this Agreement or the other
Loan Documents of the party seeking indemnification if such Credit Party has
obtained a final and nonappealable judgment in its favor on such claim as
determined by a court of competent jurisdiction.


 


(b)           Each Grantor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all liabilities
with respect to, or resulting from any delay in paying, any and all Other
Taxes, subject to the terms of the Credit Agreement, including, without
limitation, Sections 4.11 and 4.12 thereof, which may be payable or determined
to be payable with respect to any of the Collateral.


 


(c)           The agreements in this Section 7.4 shall
survive termination of the Commitments and repayment of the Obligations and all
other amounts payable under the Credit Agreement and the other Loan Documents.


 


SECTION
7.5.  Waiver of Jury Trial; Preservation of
Remedies.


 


(a)           Waiver of Jury Trial.  THE ADMINISTRATIVE AGENT AND EACH GRANTOR HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH
RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.


 


(b)           Preservation of Certain Remedies.  The
parties hereto and the other Loan Documents preserve, without diminution,
certain remedies that such Persons may employ or exercise freely, either alone,
in conjunction with or during a dispute, claim or controversy arising out of,
connected with or relating to this Agreement or any other Loan Document (each a
“Dispute”).  Each such Person
shall have and hereby reserves the right to proceed in any court of proper
jurisdiction or by self help to exercise or prosecute the following remedies,
as applicable:  (i) all rights to
foreclose against any real or personal
property or other security granted under a Loan Document by exercising a power
of sale granted in the Loan Documents or under Applicable Law or by judicial
foreclosure and sale, including a proceeding to confirm the sale, (ii) all
rights of self help including peaceful occupation of property and collection of
rents, set off, and peaceful possession of property, (iii) obtaining
provisional or ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and in filing an involuntary
bankruptcy proceeding, and (iv) when applicable, a judgment by 


 


20





















 


confession of
judgment.  Preservation of these remedies
does not limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.


 


SECTION
7.6.  Successors and Assigns.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto (and shall bind all
Persons who become bound as a Grantor to this Collateral Agreement) and their respective
successors and assigns permitted hereby; provided that no Grantor may
assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Administrative Agent (given
in accordance with Section 7.1).


 


SECTION
7.7.  Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.


 


SECTION
7.8.  Severability.  Any provision of this Agreement or any other
Loan Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective only to the extent of such prohibition
or unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


 


SECTION
7.9.  Section Heading.  The Section headings used in this Agreement
are for convenience of reference only and neither limit nor amplify the
provisions of this Agreement.


 


SECTION 7.10.  Integration.  This Agreement comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on such subject matter.


 


SECTION 7.11.  Governing Law.  This Agreement and the other Loan Documents,
unless otherwise expressly set forth therein, shall be governed by, construed
and enforced in accordance with the laws of the State of New York, including
Section 5-1401 and Section 5-1402 of the General Obligations Law of the State
of New York, without reference to any other conflicts of law principles
thereof.


 


SECTION 7.12.  Jurisdiction
and Venue.


 


(a)           Jurisdiction.  Each Grantor party hereto hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located
in New York, New York (and any courts from which an appeal from any of such
courts must or may be taken), in any action, claim or other proceeding arising
out of any dispute in connection with this Agreement and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations. 
Each Grantor party hereto hereby irrevocably consents to the service of
a summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this
Agreement or the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner specified in Section 7.2.  Nothing in this Section shall affect the
right of the Administrative Agent or any Lender to serve 


 


21





















 


legal process in any
other manner permitted by Applicable Law or affect the right of the
Administrative Agent or any Lender to bring any action or proceeding against
any Grantor or its respective properties in the courts of any other
jurisdictions.


 


(b)           Venue.  Each Grantor party hereto hereby irrevocably
waives any objection it may have now or in the future to the laying of venue in
the aforesaid jurisdiction in any action, claim or other proceeding arising out
of or in connection with this Agreement, any other Loan Document or the rights
and obligations of the parties hereunder or thereunder.  Each Grantor party hereto irrevocably waives,
in connection with such action, claim or proceeding, any plea or claim that the
action, claim or other proceeding has been brought in an inconvenient forum.


 


SECTION 7.13.  Acknowledgements.


 


(a)           Each
Grantor hereby acknowledges that:  (i) it
has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents to which it is a party, (ii) neither the
Administrative Agent nor any Lender has any fiduciary relationship with or duty
to any Grantor arising out of or in connection with this Agreement or any of
the other Loan Documents, and the relationship between the Grantors, on the one
hand, and the Administrative Agent and Lenders, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor, and
(iii) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby or thereby
among the Lenders or among the Grantors and the Lenders.


 


(b)           Each
Issuer party to this Agreement acknowledges receipt of a copy of this Agreement
and agrees to be bound thereby and to comply with the terms thereof insofar as
such terms are applicable to it.  Each
Issuer agrees to provide such notices to the Administrative Agent as may be
necessary to give full effect to the provisions of this Agreement.


 


SECTION 7.14.  Additional Grantors.  Each Subsidiary of the Parent that is
required to become a party to this Agreement pursuant to Section 8.11 of
the Credit Agreement shall become a Grantor for all purposes of this Agreement
upon execution and delivery by such Subsidiary of a joinder agreement in form
and substance satisfactory to the Administrative Agent.


 


SECTION 7.15.  Releases.


 


(a)           At such time as the Obligations shall have been
paid in full and the Commitments have been terminated, the Collateral shall be
released from the Liens created hereby, and this Agreement and all obligations
(other than those expressly stated to survive such termination) of the
Administrative Agent and each Grantor hereunder shall terminate, all without
delivery of any instrument or performance of any act by any party, and all
rights to the Collateral shall revert to the Grantors.  At the request and sole expense of any
Grantor following any such termination, the Administrative Agent shall deliver to
such Grantor any Collateral held by the Administrative Agent hereunder, and
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.


 


(b)           If any of the Collateral shall be sold,
transferred or otherwise disposed of by any Grantor in a transaction permitted
by the Credit Agreement, then the Administrative Agent, at 


 


22





















 


the request and sole expense of
such Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens
created hereby on such Collateral.  In
the event that all the capital stock of any Grantor shall be sold, transferred
or otherwise disposed of in a transaction permitted by the Credit Agreement,
then, at the request of the Borrower and at the expense of the Grantors, such
Grantor shall be released from its obligations hereunder; provided that
the Borrower shall have delivered to the Administrative Agent, as soon as
practicable but in any event, at least ten (10) Business Days prior to the date
of the proposed release, a written request for release identifying the relevant
Grantor and the terms of the sale or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a certification by the Borrower stating that such transaction is in
compliance with the Credit Agreement and the other Loan Documents.


 


 


[Signature Pages to Follow]


 


23





















 


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


 


	
   

  	
  TUESDAY MORNING, INC., as Grantor and Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TUESDAY MORNING CORPORATION, as

  Grantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TMI HOLDINGS, INC., as Grantor and Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FRIDAY MORNING, INC., as Grantor and Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DAYS OF THE WEEK, INC., as Grantor and Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								



 


 


[Signature Pages
Continue]


 





















 


	
   

  	
  NIGHTS OF THE WEEK, INC., as Grantor and

  Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TUESDAY MORNING PARTNERS, LTD., as

  Grantor and Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								



 





















 


	
   

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 





















 


EXHIBIT A


to


Collateral Agreement


 


Form of Perfection Certificate


 


Dated as of                   ,
200    


 


TUESDAY MORNING, INC., a Texas corporation (the “Borrower”),
TUESDAY MORNING CORPORATION, a Delaware corporation (the “Parent”), TMI
HOLDINGS, INC., a Delaware corporation (“Holdings”), the Subsidiaries of
the Parent (the “Subsidiary Grantors”, and together with the Borrower,
the Parent and Holdings, the “Grantors”, each individually, a “Grantor”)
have entered into a Collateral Agreement dated as of the 22nd day of December
2004 (as amended, restated, supplemented or otherwise modified, the “Collateral
Agreement”) in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking association, as administrative agent (the “Administrative Agent”)
for the benefit of itself and the lenders (the “Lenders”) who are or may
become a party to the Credit Agreement. 
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Collateral Agreement.


 


Each Grantor hereby certifies to the Administrative Agent and each
Lender as follows:


 


SECTION 1.           Identification Information.


 


(a)           The jurisdiction of incorporation, organization
or formation of each Grantor and the date of such incorporation, organization
or formation is as follows:


 


(b)           The location of the chief executive office of
each Grantor is as follows:


 


(c)           The exact legal name of each Grantor as it
appears in its [Articles or Certificate of
Incorporation][Formation]
[or]  [other applicable document evidencing formation] is as follows:


 


(d)           Except as set forth herein, (i) no Grantor has
changed its identity or organizational structure in any way within the past
five years and (ii) no Person has merged or consolidated with or into any
Grantor and no Person has liquidated into or transferred all or substantially
all of its assets to any Grantor in any way within the past year.


 


(e)           The following is a list of all other names
(including trade names or similar appellations) used by any Grantor or any of
their respective divisions or other business units at any time during the past
five years:


 


The taxpayer identification number of each Grantor is as follows:


 


 


The registered organization identification number of each Grantor is as
follows:


 


A-1





















 


SECTION 2.           Current Locations.               The
following are all the locations where the Grantors maintain any Inventory:


 


	
  Grantor

  	
   

  	
  Mailing Address

  	
   

  	
  County and State

  



 


 


SECTION 3.           Deposit Accounts:  Each
Grantor maintains the following Deposit Accounts:


 


	
  Grantor

  	
   

  	
  Financial Institution

  	
   

  	
  Account Number

  	
   

  	
  Address of Financial

  Institution

  	
   

  	
  Account Purpose

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


SECTION 4.           Unusual Transactions.  Other
than as set forth below, all Inventory has been acquired by the Grantors in the
ordinary course of business from Persons in the business of selling goods of such
kind.


 


SECTION 5.           Reliance.  The undersigned acknowledges
that the Administrative Agent and the Lenders are entitled to rely and have, in
fact, relied on the information contained herein, and any successor or assign
of the Agent or the Lenders is entitled to rely on the information contained
herein.


 


 


[Signature Pages to Follow]


 


A-2





















 


IN WITNESS
WHEREOF, the undersigned have executed this Perfection Certificate as of the
date first above written.


 


	
   

  	
  TUESDAY MORNING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TUESDAY MORNING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TMI HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FRIDAY MORNING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DAYS OF THE WEEK, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


 


[Signature Pages
Continue]


 





















 


	
   

  	
  NIGHTS OF THE WEEK, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TUESDAY MORNING PARTNERS, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 





















 


SCHEDULE 3.6


to


Collateral Agreement


 


Exact Legal
Name; Jurisdiction of Organization; Taxpayer Identification Number; Registered
Organization Number; Mailing Address; Chief Executive Office and other
Locations


 


1





















 


SCHEDULE 3.7


to


Collateral Agreement


 


Deposit Accounts


 


 


	
  Grantor

  	
   

  	
  Financial Institution

  	
   

  	
  Account Number

  	
   

  	
  Address of Financial

  Institution

  	
   

  	
  Account Purpose

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


1





















 


SCHEDULE 3.9


to


Collateral Agreement


 


Investment Property Collateral and
Partnership/LLC Interests


 


Certificated
Securities:


Grantor:


 


	
  Name of
  Issuer

  	
   

  	
  Class and Series

  	
   

  	
  Par Value

  	
   

  	
  Certificate Number

  	
   

  	
  Percentage of

  Ownership Interests

  of such Class and Series

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


Securities Accounts (including cash management accounts that are Proceeds
Investment Property) and Uncertificated Securities:


Grantor:


 


	
  Financial
  Institution

  	
   

  	
  Account Number

  	
   

  	
  Address of Financial

  Institution

  	
   

  	
  Account Purpose

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


	
  Name of
  Issuer

  	
   

  	
  Class and Series

  	
   

  	
  Par Value

  	
   

  	
  Percentage of

  Ownership Interests

  of such Class and Series

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


Partnerships/LLC Interests:


Grantor:


 


	
  Name of Issuer

  (including identification of

  type of entity)

  	
   

  	
  Type of Ownership

  Interest

  	
   

  	
  Certificate Number

  (if any)

  	
   

  	
  Percentage of Ownership

  Interests of such Type