Document:

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                                                                    EXHIBIT 10.1

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                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

                           DATED AS OF JUNE 29, 2005,

                                      AMONG

                           THE LAMSON & SESSIONS CO.,

                THE GUARANTORS FROM TIME TO TIME PARTIES HERETO,

                  THE LENDERS FROM TIME TO TIME PARTIES HERETO,

                             NATIONAL CITY BANK AND
                           JPMORGAN CHASE BANK, N.A.,
                            as Co-Syndication Agents,

                       LASALLE BANK NATIONAL ASSOCIATION,
                             as Documentation Agent,

                                       and

                                   HARRIS N.A,
                    as Administrative Agent and Lead Arranger

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<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION                                                        HEADING                                             PAGE
<S>                     <C>                                                                                        <C>
SECTION 1.              THE CREDIT FACILITIES.................................................................       1

       Section 1.1.     Revolving Credit Commitments..........................................................       1
       Section 1.2.     Letters of Credit.....................................................................       2
       Section 1.3.     Term Loan Commitments.................................................................       6
       Section 1.4.     Applicable Interest Rates.............................................................       6
       Section 1.5.     Minimum Borrowing Amounts.............................................................       8
       Section 1.6.     Manner of Borrowing Loans and Designating Applicable Interest Rates...................       8
       Section 1.7.     Swing Loans...........................................................................      10
       Section 1.8.     Interest Periods......................................................................      12
       Section 1.9.     Maturity of Loans.....................................................................      13
       Section 1.10.    Prepayments...........................................................................      13
       Section 1.11.    Default Rate..........................................................................      16
       Section 1.12.    The Notes.............................................................................      16
       Section 1.13.    Funding Indemnity.....................................................................      17
       Section 1.14.    Commitment Terminations...............................................................      18
       Section 1.15.    Substitution of Lenders...............................................................      18
       Section 1.16.    Increase in Commitments...............................................................      19

SECTION 2.              FEES..................................................................................      20

       Section 2.1.     Fees..................................................................................      20

SECTION 3.              PLACE AND APPLICATION OF PAYMENTS.....................................................      20

       Section 3.1.     Place and Application of Payments.....................................................      20

SECTION 4.              THE COLLATERAL AND GUARANTIES.........................................................      22

       Section 4.1.     Collateral............................................................................      22
       Section 4.2.     Deposit Account Agreements............................................................      23
       Section 4.3.     Liens on Real Property................................................................      23
       Section 4.4.     Guaranties............................................................................      23
       Section 4.5.     Further Assurances....................................................................      24

SECTION 5.              DEFINITIONS; INTERPRETATION...........................................................      24

       Section 5.1.     Definitions...........................................................................      24
       Section 5.2.     Interpretation........................................................................      39
       Section 5.3.     Change in Accounting Principles.......................................................      39
</TABLE>

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<TABLE>
<S>                     <C>                                                                                        <C>
SECTION 6.              REPRESENTATIONS AND WARRANTIES........................................................      40

       Section 6.1.     Organization and Qualification........................................................      40
       Section 6.2.     Subsidiaries..........................................................................      40
       Section 6.3.     Authority and Validity of Obligations.................................................      40
       Section 6.4.     Use of Proceeds; Margin Stock.........................................................      41
       Section 6.5.     Financial Reports.....................................................................      41
       Section 6.6.     No Material Adverse Change............................................................      41
       Section 6.7.     Full Disclosure.......................................................................      42
       Section 6.8.     Trademarks, Franchises, and Licenses..................................................      42
       Section 6.9.     Governmental Authority and Licensing..................................................      42
       Section 6.10.    Good Title............................................................................      42
       Section 6.11.    Litigation and Other Controversies....................................................      42
       Section 6.12.    Taxes.................................................................................      42
       Section 6.13.    Approvals.............................................................................      43
       Section 6.14.    Affiliate Transactions................................................................      43
       Section 6.15.    Investment Company; Public Utility Holding Company....................................      43
       Section 6.16.    ERISA.................................................................................      43
       Section 6.17.    Compliance with Laws..................................................................      43
       Section 6.18.    Other Agreements......................................................................      44
       Section 6.19.    Solvency..............................................................................      44
       Section 6.20.    No Default............................................................................      44

SECTION 7.              CONDITIONS PRECEDENT..................................................................      45

       Section 7.1.     All Credit Events.....................................................................      45
       Section 7.2.     Effective Date........................................................................      45

SECTION 8.              COVENANTS.............................................................................      47

       Section 8.1.     Maintenance of Business...............................................................      47
       Section 8.2.     Maintenance of Properties.............................................................      47
       Section 8.3.     Taxes and Assessments.................................................................      47
       Section 8.4.     Insurance.............................................................................      47
       Section 8.5.     Financial Reports.....................................................................      48
       Section 8.6.     Inspection............................................................................      49
       Section 8.7.     Borrowings and Guaranties.............................................................      50
       Section 8.8.     Liens.................................................................................      51
       Section 8.9.     Investments, Acquisitions, Loans, and Advances........................................      52
       Section 8.10.    Mergers, Consolidations and Sales.....................................................      53
       Section 8.11.    Maintenance of Subsidiaries...........................................................      54
       Section 8.12.    Dividends and Certain Other Restricted Payments.......................................      54
       Section 8.13.    ERISA.................................................................................      54
       Section 8.14.    Compliance with Laws..................................................................      55
       Section 8.15.    Burdensome Contracts With Affiliates..................................................      56
       Section 8.16.    No Changes in Fiscal Year.............................................................      56
       Section 8.17.    Formation of Subsidiaries.............................................................      56
</TABLE>

                                      -ii-

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<TABLE>
<S>                     <C>                                                                                        <C>
       Section 8.18.    Change in the Nature of Business......................................................      56
       Section 8.19.    Use of Loan Proceeds..................................................................      56
       Section 8.20.    No Restrictions on Subsidiary Distributions...........................................      56
       Section 8.21.    Financial Covenants...................................................................      57

SECTION 9.              EVENTS OF DEFAULT AND REMEDIES........................................................      58

       Section 9.1.     Events of Default.....................................................................      58
       Section 9.2.     Non-Bankruptcy Defaults...............................................................      60
       Section 9.3.     Bankruptcy Defaults...................................................................      60
       Section 9.4.     Collateral Account for Undrawn Letters of Credit and other Obligations................      60
       Section 9.5.     Additional Remedies in Bond Documents.................................................      61
       Section 9.6.     Notice of Default.....................................................................      61
       Section 9.7.     Expenses..............................................................................      61

SECTION 10.             CHANGE IN CIRCUMSTANCES...............................................................      62

       Section 10.1.    Change of Law.........................................................................      62
       Section 10.2.    Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR.........      62
       Section 10.3.    Increased Cost and Reduced Return.....................................................      62
       Section 10.4.    Lending Offices.......................................................................      64
       Section 10.5.    Discretion of Lender as to Manner of Funding..........................................      64

SECTION 11.             THE ADMINISTRATIVE AGENT..............................................................      64

       Section 11.1.    Appointment and Administrative Authorization of Administration Agent..................      64
       Section 11.2.    Administrative Agent and its Affiliates...............................................      65
       Section 11.3.    Action by Administrative Agent........................................................      65
       Section 11.4.    Consultation with Experts.............................................................      65
       Section 11.5.    Liability of Administrative Agent; Credit Decision....................................      65
       Section 11.6.    Indemnity.............................................................................      66
       Section 11.7.    Resignation of Administrative Agent and Successor Agent...............................      66
       Section 11.8.    Hedging Liability and Funds Transfer and Deposit Account Liability Arrangements.......      67
       Section 11.9.    Designation of Additional Agents......................................................      67
       Section 11.10.   Authorization to Release or Subordinate or Limit Liens................................      68
       Section 11.11.   Authorization to Enter into, and Enforcement of, the Collateral Documents.............      68

SECTION 12.             THE GUARANTEES........................................................................      68

       Section 12.1.    The Guarantees........................................................................      68
       Section 12.2.    Guarantee Unconditional...............................................................      69
       Section 12.3.    Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances...........      70
</TABLE>

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<TABLE>
<S>                     <C>                                                                                        <C>
       Section 12.4.    Subrogation...........................................................................      70
       Section 12.5.    Waivers...............................................................................      70
       Section 12.6.    Limit on Recovery.....................................................................      70
       Section 12.7.    Stay of Acceleration..................................................................      71
       Section 12.8.    Benefit to Guarantors.................................................................      71
       Section 12.9.    Guarantor Covenants...................................................................      71

SECTION 13.             MISCELLANEOUS.........................................................................      71

       Section 13.1.    Withholding Taxes.....................................................................      71
       Section 13.2.    No Waiver, Cumulative Remedies........................................................      72
       Section 13.3.    Non-Business Days.....................................................................      73
       Section 13.4.    Documentary Taxes.....................................................................      73
       Section 13.5.    Survival of Representations...........................................................      73
       Section 13.6.    Survival of Indemnities...............................................................      73
       Section 13.7.    Sharing of Set-Off....................................................................      73
       Section 13.8.    Notices...............................................................................      73
       Section 13.9.    Counterparts..........................................................................      74
       Section 13.10.   Successors and Assigns................................................................      74
       Section 13.11.   Participants..........................................................................      74
       Section 13.12.   Assignments...........................................................................      75
       Section 13.13.   Confidential Information..............................................................      76
       Section 13.14.   Amendments............................................................................      76
       Section 13.15.   Headings..............................................................................      77
       Section 13.16.   Costs and Expenses; Indemnification...................................................      77
       Section 13.17.   Set-off...............................................................................      78
       Section 13.18.   Entire Agreement......................................................................      79
       Section 13.19.   Governing Law.........................................................................      79
       Section 13.20.   Severability of Provisions............................................................      79
       Section 13.21.   Excess Interest.......................................................................      79
       Section 13.22.   Construction..........................................................................      80
       Section 13.23.   Lender's Obligations Several..........................................................      80
       Section 13.24.   Submission to Jurisdiction; Waiver of Jury Trial......................................      80
       Section 13.25.   USA Patriot Act.......................................................................      80
       Section 13.26.   Equalization of Loans and Commitments.................................................      80
       Section 13.27.   Amendment and Restatement.............................................................      81
       Section 13.28.   Removal of Lenders and Assignment of Interests........................................      81
</TABLE>

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<PAGE>

EXHIBIT A         --   Notice of Payment Request
EXHIBIT B         --   Notice of Borrowing
EXHIBIT C         --   Notice of Continuation/Conversion
EXHIBIT D-1       --   Revolving Note
EXHIBIT D-2       --   Swing Note
EXHIBIT D-3       --   Term Note
EXHIBIT E         --   Compliance Certificate
EXHIBIT F         --   Additional Guarantor Supplement
EXHIBIT G         --   Commitment Amount Increase Request
EXHIBIT H         --   Assignment and Acceptance
SCHEDULE 1        --   Commitments
SCHEDULE 1.2      --   Existing Letters of Credit
SCHEDULE 6.2      --   Subsidiaries
SCHEDULE 6.8      --   Trademarks, Franchises, and Licenses
SCHEDULE 8.7/8.8  --   Permitted Indebtedness; Permitted Liens
SCHEDULE 8.9      --   Permitted Investments, Loans, and Advances in
                       Foreign Subsidiaries

                                      -v-

<PAGE>

                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

      This Second Amended and Restated Credit Agreement is entered into as of
June 29, 2005, by and among The Lamson & Sessions Co., an Ohio corporation (the
"Borrower"), the Subsidiaries from time to time party to this Agreement, as
Guarantors, the several financial institutions from time to time party to this
Agreement, as Lenders, National City Bank and JP Morgan Chase Bank, N.A., as
Co-Syndication Agents, LaSalle Bank National Association, as Documentation
Agent, and Harris N.A., as successor by merger with Harris Trust and Savings
Bank, as Administrative Agent, as provided herein. All capitalized terms used
herein without definition shall have the same meanings herein as such terms are
defined in Section 5.1 hereof.

                              PRELIMINARY STATEMENT

      The Borrower and certain other parties set forth above previously entered
into a certain Amended and Restated Credit Agreement dated as of December 15,
2000, as amended (the "Prior Credit Agreement"). The Borrower has requested that
the aggregate commitments under the Prior Credit Agreement be extended and
amended, and certain other amendments be made to the Prior Credit Agreement and,
for the sake of clarity and convenience, that the Prior Credit Agreement be
restated in its entirety as so amended, and the Lenders have agreed to such
requests on the terms and conditions of this Agreement.

      On the date hereof, KeyBank National Association and Bank of America, N.A.
(herein, the "Departing Lenders") will assign all of their loans and commitments
to certain other Lenders hereunder, and HSBC Bank USA, National Association will
join the Credit Agreement as a Lender.

      NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. THE CREDIT FACILITIES.

      Section 1.1. Revolving Credit Commitments. Subject to the terms and
conditions hereof, each Lender, by its acceptance hereof, severally agrees to
make a loan or loans (individually a "Revolving Loan" and collectively the
"Revolving Loans") in U.S. Dollars to the Borrower from time to time on a
revolving basis up to such Lender's Revolving Credit Commitment, subject to any
reductions thereof pursuant to the terms hereof, before the Revolving Credit
Termination Date. The sum of the aggregate principal amount of Revolving Loans,
Swing Loans, and L/C Obligations at any time outstanding shall not exceed the
Revolving Credit Commitments in effect at such time. Each Borrowing of Revolving
Loans shall be made ratably from the Lenders in proportion to their respective
Revolver Percentages. As provided in Section 1.6(a) hereof, the Borrower may
elect that each Borrowing of Revolving Loans be either Base Rate Loans or
Eurodollar Loans. Revolving Loans may be repaid and the principal amount thereof
reborrowed before the Revolving Credit Termination Date, subject to the terms
and conditions hereof.

<PAGE>

      Section 1.2. Letters of Credit. (a) General Terms. Subject to the terms
and conditions hereof, as part of the Revolving Credit, the Administrative Agent
shall issue commercial or standby letters of credit (each a "Letter of Credit")
for the account of the Borrower or any of its Subsidiaries in an aggregate
undrawn face amount up to the amount of the L/C Sublimit, provided that the
aggregate L/C Obligations at any time outstanding shall not exceed the
difference between (i) the Revolving Credit Commitments in effect at such time
and (ii) the aggregate principal amount of Revolving Loans and Swing Loans then
outstanding. Each Letter of Credit shall be issued in U.S. Dollars and shall be
issued by the Administrative Agent, but each Lender shall be obligated to
reimburse the Administrative Agent for such Lender's Revolver Percentage of the
amount of each drawing thereunder and, accordingly, each Letter of Credit shall
constitute usage of the Revolving Credit Commitment of each Lender pro rata in
an amount equal to its Revolver Percentage of the L/C Obligations then
outstanding. For purposes of this Agreement and the other Loan Documents, the
letters of credit listed on Schedule 1.2 hereof issued by Harris Trust and
Saving Bank (herein, the "Existing Letters of Credit") shall from and after the
date of this Agreement be deemed Letters of Credit issued under and subject to
the terms of this Agreement. Harris Trust and Savings Bank and the Borrower
agree that from and after the date of this Agreement the Borrower's obligations
with respect to such letters of credit, including all reimbursement obligations
arising under or relating to the relevant application therefor (which
applications shall each be deemed an Application as hereafter defined for all
purposes of this Agreement and the other Loan Documents) shall be deemed
Obligations arising under this Agreement.

         (b) Applications. At any time before the Revolving Credit Termination
Date, the Administrative Agent shall, at the request of the Borrower, issue one
or more Letters of Credit in U.S. Dollars, in a form satisfactory to the
Administrative Agent, with expiration dates no later than the earlier of (i) 12
months from the date of issuance (or be cancelable not later than 12 months from
the date of issuance and each renewal) (or such later date agreed to by the
Administrative Agent) or, in the case of any Letter of Credit that is not a Bond
Letter of Credit, (ii) the Revolving Credit Termination Date, in an aggregate
face amount as set forth above, upon the receipt of an application duly executed
by the Borrower and, in the case of any Letter of Credit being issued for the
account of a Subsidiary, such Subsidiary for the relevant Letter of Credit in
the form then customarily prescribed by the Administrative Agent for the Letter
of Credit requested (each an "Application," it being agreed that the
Reimbursement Agreements entered into with respect to the issuance of the Bond
Letters of Credit shall each be deemed an Application for purposes hereof). On
the Revolving Credit Termination Date, the Borrower shall pay to the
Administrative Agent an amount equal to 105% of the aggregate undrawn amounts on
all Letters of Credit then outstanding to be held as cash collateral in the
Collateral Account. Notwithstanding anything contained in any Application to the
contrary: (i) the Borrower shall pay fees in connection with each Letter of
Credit as set forth in Section 2.1 hereof, (ii) except as otherwise provided in
Section 1.10 hereof or in the relevant Reimbursement Agreement for a Bond Letter
of Credit, before the occurrence of an Event of Default, the Administrative
Agent will not call for the funding by the Borrower of any amount under a Letter
of Credit before being presented with a drawing thereunder, and (iii) if the
Administrative Agent is not timely reimbursed for the amount of any drawing
under a Letter of Credit on the date such drawing is paid, the obligation of the
Borrower to reimburse the Administrative Agent for the amount of such drawing
shall bear interest (which the Borrower hereby promises to pay) from and after
the

                                      -2-
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date such drawing is paid at a rate per annum equal to the sum of 2% plus
the Applicable Margin plus the Base Rate from time to time in effect (computed
on the basis of a year of 365 or 366 days, as the case may be, and the actual
number of days elapsed). If the Administrative Agent issues any Letter of Credit
with an expiration date that is automatically extended unless the Administrative
Agent gives notice that the expiration date will not so extend beyond its then
scheduled expiration date, the Administrative Agent will give such notice of
non-renewal before the time necessary to prevent such automatic extension if
before such required notice date: (i) the expiration date of such Letter of
Credit (other than the Bond Letters of Credit) if so extended would be after the
Revolving Credit Termination Date, (ii) the Revolving Credit Commitments have
been terminated, or (iii) a Default or an Event of Default exists and the
Required Lenders have given the Administrative Agent instructions not to so
permit the extension of the expiration date of such Letter of Credit. The
Administrative Agent agrees to issue amendments to the Letter(s) of Credit
increasing the amount, or extending the expiration date, thereof at the request
of the Borrower subject to the conditions of Section 7 hereof and the other
terms of this Section 1.2.

      (c) The Reimbursement Obligations. Subject to Section 1.2(b) hereof, the
obligation of the Borrower to reimburse the Administrative Agent for all
drawings under a Letter of Credit (a "Reimbursement Obligation") shall be
governed by the Application related to such Letter of Credit, except that
reimbursement shall be made by no later than 12:00 Noon (Chicago time) on the
date when each drawing is paid if the Borrower has been informed of such drawing
by the Administrative Agent on or before 11:30 a.m. (Chicago time) on the date
when such drawing is paid or, if notice of such drawing is given to the Borrower
after 11:30 a.m. (Chicago time) on the date when such drawing is paid, by the
end of such day, in immediately available funds at the Administrative Agent's
principal office in Chicago, Illinois or such other office as the Administrative
Agent may designate in writing to the Borrower. If the Borrower does not make
any such reimbursement payment on the date due and the Participating Lenders
fund their participations therein in the manner set forth in Section 1.2(d)
below, then all payments thereafter received by the Administrative Agent in
discharge of any of the relevant Reimbursement Obligations shall be distributed
in accordance with Section 1.2(d) below.

      (d) The Participating Interests. Each Lender (other than the Lender then
acting as Administrative Agent in issuing Letters of Credit), by its acceptance
hereof, severally agrees to purchase from the Administrative Agent, and the
Administrative Agent hereby agrees to sell to each such Lender (a "Participating
Lender"), an undivided percentage participating interest (a "Participating
Interest"), to the extent of its Revolver Percentage, in each Letter of Credit
issued by, and each Reimbursement Obligation owed to, the Administrative Agent.
Upon any failure by the Borrower to pay any Reimbursement Obligation at the time
required on the date the related drawing is paid, as set forth in Section 1.2(c)
above, or if the Administrative Agent is required at any time to return to the
Borrower or to a trustee, receiver, liquidator, custodian, or other Person any
portion of any payment of any Reimbursement Obligation, each Participating
Lender shall, not later than the Business Day it receives a certificate in the
form of Exhibit A hereto from the Administrative Agent to such effect, if such
certificate is received before 2:00 p.m. (Chicago time), or not later than 2:00
p.m. (Chicago time) the following Business Day, if such certificate is received
after such time, pay to the Administrative Agent an amount equal to such
Participating Lender's Revolver Percentage of such unpaid or recaptured
Reimbursement Obligation together

                                      -3-
<PAGE>

with interest on such amount accrued from the date the related payment was made
by the Administrative Agent to the date of such payment by such Participating
Lender at a rate per annum equal to: (i) from the date the related payment was
made by the Administrative Agent to the date 2 Business Days after payment by
such Participating Lender is due hereunder, the Federal Funds Rate for each such
day, and (ii) from the date 2 Business Days after the date such payment is due
from such Participating Lender to the date such payment is made by such
Participating Lender, the Base Rate in effect for each such day. Each such
Participating Lender shall thereafter be entitled to receive its Revolver
Percentage of each payment received in respect of the relevant Reimbursement
Obligation and of interest paid thereon, with the Administrative Agent retaining
its Revolver Percentage as a Lender hereunder.

      The several obligations of the Participating Lenders to the Administrative
Agent under this Section 1.2 shall be absolute, irrevocable, and unconditional
under any and all circumstances whatsoever and shall not be subject to any
set-off, counterclaim, or defense to payment which any Participating Lender may
have or have had against the Borrower, the Administrative Agent, any other
Lender, or any other Person whatsoever. Without limiting the generality of the
foregoing, such obligations shall not be affected by any Default or Event of
Default or by any reduction or termination of any Commitment of any Lender, and
each payment by a Participating Lender under this Section 1.2 shall be made
without any offset, abatement, withholding, or reduction whatsoever.

      (e) Indemnification. The Participating Lenders shall, to the extent of
their respective Revolver Percentages, indemnify the Administrative Agent (to
the extent not reimbursed by the Borrower) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action, loss, or
liability (except such as result from the Administrative Agent's gross
negligence or willful misconduct) that the Administrative Agent may suffer or
incur in connection with any Letter of Credit. The obligations of the
Participating Lenders under this Section 1.2(e) and all other parts of this
Section 1.2 shall survive termination of this Agreement and of all Applications,
Letters of Credit, and all drafts and other documents presented in connection
with drawings thereunder.

      (f) Special Provisions regarding Bond Letters of Credit. (i)
Notwithstanding anything to the contrary contained herein, the Bond Letters of
Credit have been issued under the Reimbursement Agreements and are subject to
the terms and conditions thereof.

      (ii) The Borrower and the Lenders acknowledge and agree that (a) each Bond
Letter of Credit provides for automatic reductions and reinstatements as set
forth in the provisions of such Bond Letter of Credit, and (b) each Bond Letter
of Credit provides for the beneficiary thereof to reduce from time to time the
amounts available to be drawn thereon. Each Lender acknowledges that, because
the interest component of each Bond Letter of Credit may be reinstated at a time
when the Borrower has not reimbursed the Lenders in full for an interest drawing
under the relevant Bond Letter of Credit, the total L/C Obligations may exceed
the L/C Sublimit and the total Revolving Loans, Swing Loans, and L/C Obligations
may exceed the Revolving Credit Commitments as a result thereof (which the
Borrower acknowledges is a default under this Agreement) and each Lender agrees
to pay the Administrative Agent its Revolver Percentage of any drawing under the
relevant Bond Letter of Credit notwithstanding that any such payment may

                                      -4-
<PAGE>

result in the aggregate principal amount owing such Lender hereunder exceeding
the Revolving Credit Commitment of such Lender.

      (iii) Harris N.A. ("Harris") shall not be deemed to have knowledge or
notice of the occurrence of any default under any Reimbursement Agreement or any
Bond Document unless it shall have received written notice stating that such
default exists from the Borrower or any other party to a Bond Document. Harris
shall take such action with respect to such default under a Reimbursement
Agreement or the relevant Bond Documents as shall be required pursuant to
Section 9 hereof; provided that unless and until Harris shall have received
direction under Section 9, Harris may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such default as it
shall deem advisable and in the best interest of the Lenders, except any action
resulting in the acceleration or redemption of any Bonds.

      (iv) None of Harris, together with its Affiliates, and the officers,
directors, employees, agents, and attorneys-in-fact of Harris and such
Affiliates (collectively, the "Harris Related-Persons") shall (a) be liable for
any action taken or omitted to be taken by any of them under or in connection
with any Reimbursement Agreement or any Bond Document (except for its own gross
negligence or willful misconduct), or (b) be responsible in any manner to any of
the Lenders for any recital, statement, representation or warranty made by the
Borrower or any other Person contained in any Reimbursement Agreement or any
Bond Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by Harris under or in connection
with, any Reimbursement Agreement or any Bond Document, or for the validity,
effectiveness, genuineness, enforceability or sufficiency of any Reimbursement
Agreement or any Bond Document, or for any failure of the Borrower or any other
party to any Bond Document to perform its obligations thereunder (other than for
the gross negligence or willful misconduct of Harris). No Harris-Related Person
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, any Reimbursement Agreement or any Bond Document, or to inspect the
properties, books or records of the Borrower, any guarantor or any of their
respective Affiliates.

      (v) The Lenders shall indemnify upon demand the Harris-Related Persons (to
the extent not reimbursed by or on behalf of the Borrower and without limiting
the obligation of the Borrower to do so), ratably according to their Revolver
Percentages from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, and
disbursements of any kind whatsoever which may at any time (including at any
time following the termination of any Bond Letter of Credit) be imposed on,
incurred by or asserted against any such Person and which are in any way
relating to or arising out of this Agreement, any Reimbursement Agreement, any
Bond Document or any document contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by any such Person under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment to the Harris-Related
Persons of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from such Person's gross negligence or willful misconduct. The obligation
of the Lenders in this Section shall survive the payment of all amounts owing by
the Borrower hereunder.

                                      -5-
<PAGE>

      (vi) Harris agrees to deliver to the Lenders promptly upon receipt thereof
copies of all documents and reports delivered to Harris pursuant to any
Reimbursement Agreement or any Bond Document (other than drawing requests made
for regularly scheduled payments of principal and interest on the Bonds).

      (vii) Harris may enter into any amendment or modification of, or may waive
compliance with the terms of any Bond Document (other than the relevant
indenture) without the consent of any other Lender; provided (a) that without
the consent of the Required Lenders, Harris shall not execute any instrument
agreeing to any amendment or modification of, or waiver of compliance with the
relevant Reimbursement Agreement or any Bond Document, which would waive any
"Event of Default" arising under such Reimbursement Agreement or Bond Document,
and (b) without the consent of all of the Lenders, Harris shall not execute any
instrument agreeing to any amendment or modification of, or waiver of compliance
with the relevant Reimbursement Agreement or any Bond Document, which would (A)
reduce the principal of, or interest on, any Reimbursement Obligation arising
thereunder, (B) postpone the due date for any payment of principal of, or
interest on, any Reimbursement Obligation arising thereunder, (C) extend the
stated expiration date of any Bond Letter of Credit beyond the Revolving Credit
Termination Date, (D) increase in any material manner (in the reasonable opinion
of Harris) the obligations of the Lenders, or (E) release or otherwise adversely
affect the interests of the Lenders in any collateral granted under the relevant
Reimbursement Agreement or any Bond Document.

      (viii) Harris shall be the L/C Issuer of each Bond Letter of Credit.

      Section 1.3. Term Loan Commitments. Subject to the terms and conditions
hereof, each Lender, by its acceptance hereof, severally agrees to make a loan
(individually a "Term Loan" and collectively for all the Lenders the "Term
Loans") in U.S. Dollars to the Borrower in the amount of such Lender's Term Loan
Commitment. The Term Loans shall be made, if at all, on the Effective Date, at
which time the Term Loan Commitments shall expire. The Term Loans shall be
advanced in a single Borrowing and shall be made ratably by the Lenders in
proportion to their respective Term Percentages. As provided in Section 1.6(a)
hereof, the Borrower may elect that the Term Loans be outstanding as Base Rate
Loans or Eurodollar Loans. No amount repaid or prepaid on any Term Loan may be
borrowed again.

      Section 1.4. Applicable Interest Rates. (a) Base Rate Loans. Each Base
Rate Loan made or maintained by a Lender shall bear interest during each
Interest Period it is outstanding (computed on the basis of a year of 365 or 366
days, as the case may be, and the actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is advanced, continued, or created by
conversion from a Eurodollar Loan until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the Applicable Margin plus
the Base Rate from time to time in effect, payable on the last day of its
Interest Period and at maturity (whether by acceleration or otherwise).

      "Base Rate" means for any day the greater of: (i) the rate of interest
announced or otherwise established by the Administrative Agent from time to time
as its prime commercial rate as in effect on such day, with any change in the
Base Rate resulting from a change in said prime commercial rate to be effective
as of the date of the relevant change in said prime

                                      -6-
<PAGE>

commercial rate (it being acknowledged and agreed that such rate may not be the
Administrative Agent's best or lowest rate); and (ii) the sum of (x) the rate
determined by the Administrative Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to the
Administrative Agent at approximately 10:00 a.m. (Chicago time) (or as soon
thereafter as is practicable) on such day (or, if such day is not a Business
Day, on the immediately preceding Business Day) by two or more Federal funds
brokers selected by the Administrative Agent for sale to the Administrative
Agent at face value of Federal funds in the secondary market in an amount equal
or comparable to the principal amount owed to the Administrative Agent for which
such rate is being determined, plus (y) 1/2 of 1%.

      (b) Eurodollar Loans. Each Eurodollar Loan made or maintained by a Lender
shall bear interest during each Interest Period it is outstanding (computed on
the basis of a year of 360 days and actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is advanced, continued, or created by
conversion from a Base Rate Loan until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the Applicable Margin plus
the Adjusted LIBOR applicable for such Interest Period, payable on the last day
of the Interest Period and at maturity (whether by acceleration or otherwise),
and, if the applicable Interest Period is longer than three months, on each day
occurring every three months after the commencement of such Interest Period.

      "Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a rate per
annum determined in accordance with the following formula:

      Adjusted LIBOR =                  LIBOR
                        ---------------------------------
                        1 - Eurodollar Reserve Percentage

      "Eurodollar Reserve Percentage" means, for any Borrowing of Eurodollar
Loans, the daily average for the applicable Interest Period of the maximum rate,
expressed as a decimal, at which reserves (including, without limitation, any
supplemental, marginal, and emergency reserves) are imposed during such Interest
Period by the Board of Governors of the Federal Reserve System (or any
successor) on "eurocurrency liabilities", as defined in such Board's Regulation
D (or in respect of any other category of liabilities that includes deposits by
reference to which the interest rate on Eurodollar Loans is determined or any
category of extensions of credit or other assets that include loans by
non-United States offices of any Lender to United States residents), subject to
any amendments of such reserve requirement by such Board or its successor,
taking into account any transitional adjustments thereto. For purposes of this
definition, the Eurodollar Loans shall be deemed to be "eurocurrency
liabilities" as defined in Regulation D without benefit or credit for any
prorations, exemptions, or offsets under Regulation D.

      "LIBOR" means, for an Interest Period for a Borrowing of Eurodollar Loans,
(a) the LIBOR Index Rate for such Interest Period, if such rate is available,
and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of
the rates of interest per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) at which deposits in U.S. Dollars in immediately available funds
are offered to the Administrative Agent at 11:00 a.m. (London, England time) 2
Business Days before the beginning of such Interest Period by 3 or more major

                                      -7-
<PAGE>

banks in the interbank eurodollar market selected by the Administrative Agent
for delivery on the first day of and for a period equal to such Interest Period
and in an amount equal or comparable to the principal amount of the Eurodollar
Loan scheduled to be made by the Administrative Agent as part of such Borrowing.

      "LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars for a period equal to such
Interest Period, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the day 2 Business Days before the commencement of
such Interest Period.

      "Telerate Page 3750" means the display designated as "Page 3750" on the
Telerate Service (or such other page as may replace Page 3750 on that service or
such other service as may be nominated by the British Bankers' Association as
the information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for U.S. Dollar deposits).

      (c) Swing Loans. Each Swing Loan shall bear interest as provided in
Section 1.7(b) hereof.

      (d) Rate Determinations. The Administrative Agent shall determine each
interest rate applicable to the Loans and the Reimbursement Obligations
hereunder, and its determination thereof shall be conclusive and binding except
in the case of manifest error.

      Section 1.5. Minimum Borrowing Amounts. Each Borrowing of Base Rate Loans
advanced under a Credit shall be in an amount not less than $1,000,000 or such
greater amount which is an integral multiple of $500,000. Each Borrowing of
Eurodollar Loans advanced, continued, or converted under a Credit shall be in an
amount equal to $2,000,000 or such greater amount which is an integral multiple
of $500,000. Without the Administration Agent's consent, there shall not be more
than 12 Borrowings of Eurodollar Loans outstanding under the Credits at any one
time.

      Section 1.6. Manner of Borrowing Loans and Designating Applicable Interest
Rates. (a) Notice to the Administrative Agent. The Borrower shall give notice to
the Administrative Agent by no later than 10:00 a.m. (Chicago time): (i) at
least 3 Business Days before the date on which the Borrower requests the Lenders
to advance a Borrowing of Eurodollar Loans and (ii) on the date the Borrower
requests the Lenders to advance a Borrowing of Base Rate Loans. The Loans
included in each Borrowing shall bear interest initially at the type of rate
specified in such notice of a new Borrowing. Thereafter, the Borrower may from
time to time elect to change or continue the type of interest rate borne by each
Borrowing or, subject to Section 1.5's minimum amount requirement for each
outstanding Borrowing, a portion thereof, as follows: (i) if such Borrowing is
of Eurodollar Loans, on the last day of the Interest Period applicable thereto,
the Borrower may continue part or all of such Borrowing as Eurodollar Loans or
convert part or all of such Borrowing into Base Rate Loans, or (ii) if such
Borrowing is of Base Rate Loans, on any Business Day, the Borrower may request
to convert all or part of such Borrowing into Eurodollar Loans for an Interest
Period or Interest Periods specified by the Borrower. The Borrower shall give
all such notices requesting the advance, continuation, or conversion of a
Borrowing to the

                                      -8-
<PAGE>

Administrative Agent by telephone or telecopy (which notice shall be irrevocable
once given and, if by telephone, shall be promptly confirmed in writing),
substantially in the form attached hereto as Exhibit B (Notice of Borrowing) or
Exhibit C (Notice of Continuation/Conversion), as applicable, or in such other
form acceptable to the Administrative Agent. Notices of the continuation of a
Borrowing of Eurodollar Loans for an additional Interest Period or of Base Rate
Loans into Eurodollar Loans must be given by no later than 10:00 a.m. (Chicago
time) at least 3 Business Days before the date of the requested continuation or
conversion. All such notices concerning the advance, continuation, or conversion
of a Borrowing shall specify the date of the requested advance, continuation, or
conversion of a Borrowing (which shall be a Business Day), the amount of the
requested Borrowing to be advanced, continued, or converted, the type of Loans
to comprise such new, continued, or converted Borrowing and, if such Borrowing
is to be comprised of Eurodollar Loans, the Interest Period applicable thereto.
The Borrower agrees that the Administrative Agent may rely on any such
telephonic or telecopy notice given by any person the Administrative Agent in
good faith believes is an Authorized Representative without the necessity of
independent investigation, and in the event any such notice by telephone
conflicts with any written confirmation, such telephonic notice shall govern if
the Administrative Agent has acted in reliance thereon.

      (b) Notice to the Lenders. The Administrative Agent shall give prompt
telephonic or telecopy notice to each Lender of any notice from the Borrower
received pursuant to Section 1.6(a) above and, if such notice requests the
Lenders to make Eurodollar Loans, the Administrative Agent shall give notice to
the Borrower and each Lender by like means of the interest rate applicable
thereto promptly after the Administrative Agent has made such determination.

      (c) Borrower's Failure to Notify; Automatic Continuations and Conversions.
Any outstanding Borrowing of Base Rate Loans shall automatically be continued
for an additional Interest Period on the last day of its then current Interest
Period unless the Borrower has notified the Administrative Agent within the
period required by Section 1.6(a) that the Borrower intends to convert such
Borrowing, subject to Section 7.1 hereof, into a Borrowing of Eurodollar Loans
or such Borrowing is prepaid in accordance with Section 1.10(a). If the Borrower
fails to give notice pursuant to Section 1.6(a) above of the continuation or
conversion of any outstanding principal amount of a Borrowing of Eurodollar
Loans before the last day of its then current Interest Period within the period
required by Section 1.6(a) or, whether or not such notice has been given, one or
more of the conditions set forth in Section 7.1 for the continuation or
conversion of a Borrowing of Eurodollar Loans would not be satisfied, and such
Borrowing is not prepaid in accordance with Section 1.10(a), such Borrowing
shall automatically be converted into a Borrowing of Base Rate Loans. In the
event the Borrower fails to give notice pursuant to Section 1.6(a) above of a
Borrowing equal to the amount of a Reimbursement Obligation and has not notified
the Administrative Agent by 11:00 a.m. (Chicago time) on the day such
Reimbursement Obligation becomes due that it intends to repay such Reimbursement
Obligation through funds not borrowed under this Agreement, the Borrower shall
be deemed to have requested a Borrowing of Base Rate Loans under the Revolving
Credit (or, at the option of the Administrative Agent, under the Swing Line) on
such day in the amount of the Reimbursement Obligation then due, which Borrowing
shall be applied to pay the Reimbursement Obligation then due.

                                      -9-
<PAGE>

      (d) Disbursement of Loans. Not later than 12:00 Noon (Chicago time) on the
date of any requested advance of a new Borrowing, subject to Section 7 hereof,
each Lender shall make available its Loan comprising part of such Borrowing in
funds immediately available at the principal office of the Administrative Agent
in Chicago, Illinois. The Administrative Agent shall make the proceeds of each
new Borrowing available to the Borrower at the Administrative Agent's principal
office in Chicago, Illinois (or by wire transfer of funds pursuant to the
Borrower's written instructions to the Administrative Agent).

      (e) Administrative Agent Reliance on Lender Funding. Unless the
Administrative Agent shall have been notified by a Lender prior to (or, in the
case of a Borrowing of Base Rate Loans, by 12:00 Noon Chicago time on) the date
on which such Lender is scheduled to make payment to the Administrative Agent of
the proceeds of a Loan (which notice shall be effective upon receipt) that such
Lender does not intend to make such payment, the Administrative Agent may assume
that such Lender has made such payment when due and the Administrative Agent may
in reliance upon such assumption (but shall not be required to) make available
to the Borrower the proceeds of the Loan to be made by such Lender and, if any
Lender has not in fact made such payment to the Administrative Agent, such
Lender shall, on demand, pay to the Administrative Agent the amount made
available to the Borrower attributable to such Lender together with interest
thereon in respect of each day during the period commencing on the date such
amount was made available to the Borrower and ending on (but excluding) the date
such Lender pays such amount to the Administrative Agent at a rate per annum
equal to (i) from the date the related advance was made by the Administrative
Agent to the date 2 Business Days after payment by such Lender is due hereunder,
the Federal Funds Rate for each such day, and (ii) from the date 2 Business Days
after the date such payment is due from such Lender to the date such payment is
made by such Lender, the Base Rate in effect for each such day. If such amount
is not received from such Lender by the Administrative Agent immediately upon
demand, the Borrower will, on demand, repay to the Administrative Agent the
proceeds of the Loan attributable to such Lender with interest thereon at a rate
per annum equal to the interest rate applicable to the relevant Loan, but
without such payment being considered a payment or prepayment of a Loan under
Section 1.13 hereof, so that the Borrower will have no liability under such
Section with respect to such payment.

      Section 1.7. Swing Loans. (a) Generally. Subject to all of the terms and
conditions hereof, the Administrative Agent agrees to make loans to the Borrower
under the Swing Line (individually a "Swing Loan" and collectively the "Swing
Loans") which shall not in the aggregate at any time outstanding exceed the
lesser of (i) $7,500,000 (as the same may be reduced pursuant hereto, the "Swing
Line Sublimit") or (ii) the difference between (x) the Revolving Credit
Commitments in effect at such time then in effect and (y) the aggregate amount
of all Revolving Loans and L/C Obligations outstanding at the time of
computation. Subject to the terms and conditions hereof, Swing Loans may be
repaid and the principal amount thereof reborrowed before the Revolving Credit
Termination Date; provided that each Swing Loan must be repaid on the last day
of the Interest Period applicable thereto. Each Swing Loan shall be in a minimum
amount of $250,000 or such greater amount which is an integral multiple of
$100,000.

      (b) Interest on Swing Loans. Each Swing Loan shall bear interest until
maturity (whether by acceleration or otherwise) at a rate per annum equal to (i)
the sum of the Base Rate

                                      -10-
<PAGE>

plus the Applicable Margin for Base Rate Loans under the Revolving Credit as
from time to time in effect (computed on the basis of a year of 365 or 366 days,
as the case may be, for the actual number of days elapsed) or (ii) if accepted
by the Borrower pursuant to Section 1.7(c) below, the Administrative Agent's
Quoted Rate (computed on the basis of a year of 360 days for the actual number
of days elapsed). Interest on each Swing Loan shall be due and payable on the
last day of each Interest Period applicable thereto.

      (c) Requests for Swing Loans. The Borrower shall give the Administrative
Agent prior notice (which may be written or oral) no later than 12:00 Noon
(Chicago time) on the date upon which a Borrower requests that any Swing Loan be
made, of the amount and date of such Swing Loan, and the Interest Period
requested therefor. Within 30 minutes after receiving such notice, the
Administrative Agent shall quote an interest rate to the Borrower at which the
Administrative Agent would be willing to make such Swing Loan available to the
Borrower for the Interest Period so requested (the rate so quoted for a given
Interest Period being herein referred to as "Administrative Agent's Quoted
Rate"). The Borrower acknowledges and agrees that the interest rate quote is
given for immediate and irrevocable acceptance, and if the Borrower does not so
immediately accept the Administrative Agent's Quoted Rate for the full amount
requested by the Borrower for such Swing Loan, the Administrative Agent's Quoted
Rate shall be deemed immediately withdrawn and such Swing Loan shall bear
interest as provided in Section 1.7(b)(i) above. Subject to all of the terms and
conditions hereof, the proceeds of such Swing Loan shall be made available to
the Borrower on the date so requested at the offices of the Administrative Agent
in Chicago, Illinois (or by wire transfer of funds pursuant to the written
instructions of the Borrower to the Administrative Agent). Anything contained in
the foregoing to the contrary notwithstanding (i) the obligation of the
Administrative Agent to make Swing Loans shall be subject to all of the terms
and conditions of this Agreement and (ii) the Administrative Agent shall not be
obligated to make more than one Swing Loan during any one day.

      (d) Refunding Loans. In its sole and absolute discretion, the
Administrative Agent may at any time, on behalf of the Borrower (which hereby
irrevocably authorizes the Administrative Agent to act on its behalf for such
purpose) and with notice to the Borrower, request each Lender to make a
Revolving Loan in the form of a Base Rate Loan in an amount equal to such
Lender's Revolver Percentage of the amount of the Swing Loans outstanding on the
date such notice is given, provided that the Borrower shall not be liable to the
Administrative Agent under Section 1.13 hereof as a result of any such required
refunding of Swing Loans that bear interest at the Administrative Agent's Quoted
Rate on a date other than the last day of the Interest Period relating thereto.
Unless any of the conditions of Section 7.1 are not fulfilled on such date, each
Lender shall make the proceeds of its requested Revolving Loan available to the
Administrative Agent, in immediately available funds, at the Administrative
Agent's principal office in Chicago, Illinois, before 12:00 Noon (Chicago time)
on the Business Day following the day such notice is given. The proceeds of such
Borrowing of Revolving Loans shall be immediately applied to repay the
outstanding Swing Loans.

      (e) Participations. If any Lender refuses or otherwise fails to make a
Revolving Loan when requested by the Administrative Agent pursuant to Section
1.7(d) above (because the conditions in Section 7.1 are not satisfied or
otherwise), such Lender will, by the time and in the manner such Revolving Loan
was to have been funded to the Administrative Agent, purchase

                                      -11-
<PAGE>

from the Administrative Agent an undivided participating interest in the
outstanding Swing Loans in an amount equal to its Revolver Percentage of the
aggregate principal amount of Swing Loans that were to have been repaid with
such Revolving Loans. Each Lender that so purchases a participation in a Swing
Loan shall thereafter be entitled to receive its Revolver Percentage of each
payment of principal received on the Swing Loan and of interest received thereon
accruing from the date such Lender funded to the Administrative Agent its
participation in such Loan. The several obligations of the Lenders under this
Section 1.7(e) shall be absolute, irrevocable and unconditional under any and
all circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment which any Lender may have or have had against
the Borrower, any other Lender or any other Person whatever. Without limiting
the generality of the foregoing, such obligations shall not be affected by any
Default or Event of Default or by any reduction or termination of the
Commitments of any Lender, and each payment made by a Lender under this Section
1.7(e) shall be made without any offset, abatement, withholding or reduction
whatsoever.

      Section 1.8. Interest Periods. As provided in Section 1.6(a) and 1.7(a)
hereof, at the time of each request to advance, continue, or create by
conversion a Borrowing of Eurodollar Loans or Swing Loans, the Borrower shall
select an Interest Period applicable to such Loans from among the available
options. The term "Interest Period" means the period commencing on the date a
Borrowing of Loans is advanced, continued, or created by conversion and ending:
(a) in the case of Base Rate Loans, on the last day of the calendar month in
which such Borrowing is advanced, continued, or created by conversion (or on the
last day of the following calendar month if such Loan is advanced, continued, or
created by conversion on the last day of a calendar month), (b) in the case of a
Eurodollar Loan, 1, 2, 3, or 6 months thereafter, and (c) in the case of a Swing
Loan, on the date 1 to 7 days thereafter as mutually agreed by the Borrower and
the Administrative Agent; provided, however, that:

            (a) any Interest Period for a Borrowing of Revolving Loans
      consisting of Base Rate Loans that otherwise would end after the Revolving
      Credit Termination Date shall end on the Revolving Credit Termination
      Date, and any Interest Period for a Borrowing of Term Loans consisting of
      Base Rate Loans that otherwise would end after the final maturity date of
      the Term Loans shall end on the final maturity date of the Term Loans;

            (b) no Interest Period with respect to any portion of the Term Loans
      shall extend beyond the final maturity date of the Term Loans, and no
      Interest Period with respect to any portion of the Revolving Loans or
      Swing Loans shall extend beyond the Revolving Credit Termination Date;

            (c) no Interest Period with respect to any portion of the Term Loans
      consisting of Eurodollar Loans shall extend beyond a date on which the
      Borrower is required to make a scheduled payment of principal on the Term
      Loans, unless the sum of (i) the aggregate principal amount of Term Loans
      that are Base Rate Loans, plus (ii) the aggregate principal amount of Term
      Loans that are Eurodollar Loans with Interest Periods expiring on or
      before such date equals or exceeds the principal amount to be paid on the
      Term Loans on such payment date;

                                      -12-
<PAGE>

            (d) whenever the last day of any Interest Period would otherwise be
      a day that is not a Business Day, the last day of such Interest Period
      shall be extended to the next succeeding Business Day, provided that, if
      such extension would cause the last day of an Interest Period for a
      Borrowing of Eurodollar Loans to occur in the following calendar month,
      the last day of such Interest Period shall be the immediately preceding
      Business Day; and

            (e) for purposes of determining an Interest Period for a Borrowing
      of Eurodollar Loans, a month means a period starting on one day in a
      calendar month and ending on the numerically corresponding day in the next
      calendar month; provided, however, that if there is no numerically
      corresponding day in the month in which such an Interest Period is to end
      or if such an Interest Period begins on the last Business Day of a
      calendar month, then such Interest Period shall end on the last Business
      Day of the calendar month in which such Interest Period is to end.

      Section 1.9. Maturity of Loans. (a) Revolving Loans. Each Revolving Loan
shall mature and become due and payable by the Borrower on the Revolving Credit
Termination Date.

      (b) Swing Loans. Each Swing Loan shall mature and become due and payable
by the Borrower on the last day of the Interest Period applicable thereto.

      (c) Scheduled Payments of Term Loans. The Borrower shall make principal
payments on the Term Loans in installments on the twenty-fifth (25th) day of
each March, June, September, and December in each year, commencing on September
25, 2005, with the amount of each such installment to equal $1,250,000, it being
agreed that the final payment of both principal and interest not sooner paid on
the Term Loans shall be due and payable on June 29, 2010, the final maturity
thereof. The Administrative Agent shall apply each such principal payment to the
Lenders holding the Term Loans pro rata based upon their Term Percentages.

      Section 1.10. Prepayments. (a) Optional. The Borrower shall have the
privilege of prepaying Loans in whole or in part (but, if in part, then: (i) in
an amount not less than $1,000,000, and (ii) in an amount such that the minimum
amount required for a Borrowing pursuant to Section 1.5 and 1.7 hereof remains
outstanding) any Borrowing upon notice delivered to the Administrative Agent by
the Borrower no later than 10:00 a.m. (Chicago time) on the date of prepayment,
such prepayment to be made by the payment of the principal amount to be prepaid
and, in the case of any Eurodollar Loan or any Swing Loans bearing interest at
the Administrative Agent's Quoted Rate, accrued interest thereon to the date of
prepayment plus any amounts due under Section 1.13 hereof.

      (b) Mandatory. (i) The Borrower shall, on each date the Revolving Credit
Commitments are reduced pursuant to Section 1.14 hereof, prepay the Revolving
Loans and Swing Loans and, if necessary, prefund the L/C Obligations by the
amount, if any, necessary to reduce the sum of the aggregate principal amount of
Revolving Loans, Swing Loans, and L/C Obligations then outstanding to the amount
to which the Revolving Credit Commitments have been so reduced with each such
prepayment first to be applied to the Swing Loans until payment in full thereof,

                                      -13-
<PAGE>

then to the Revolving Loans until payment in full thereof, with any remaining
balance to be held by the Administrative Agent as collateral security for the
L/C Obligations.

      (ii) If after the Effective Date the Borrower shall issue new equity
securities (whether common stock, preferred stock, or otherwise), the Borrower
shall promptly notify the Administrative Agent of the estimated Net Cash
Proceeds of such issuance to be received by or for the account of the Borrower
in respect thereof. Promptly upon, and in no event later than the Business Day
after, receipt by the Borrower of Net Cash Proceeds of such issuance, the
Borrower shall prepay the Obligations in an aggregate amount equal to 50% of the
amount of such Net Cash Proceeds. The amount of each such prepayment shall be
applied first to the outstanding Term Loans until paid in full and then to the
outstanding Revolving Credit (which, in the case of the Revolving Credit, may be
reborrowed or otherwise readvanced subject to the terms and conditions hereof).
Notwithstanding the foregoing, the Borrower shall not be required to make a
prepayment in connection with the issuance of new equity securities to the
corporate officers or the board of directors of the Borrower or any of its
Subsidiaries.

      (iii) If the Borrower or any Subsidiary shall at any time or from time to
time make or agree to make a Disposition or shall suffer an Event of Loss with
respect to any Property, then the Borrower shall promptly notify the
Administrative Agent of such proposed Disposition or Event of Loss (including
the amount of the estimated Net Cash Proceeds to be received by the Borrower or
such Subsidiary in respect thereof) and, promptly upon receipt by the Borrower
or such Subsidiary of the Net Cash Proceeds of such Disposition or Event of
Loss, the Borrower shall prepay the Obligations in an aggregate amount equal to
100% of the amount of all such Net Cash Proceeds; provided that (x) so long as
no Default or Event of Default then exists, this subsection shall not require
any such prepayment with respect to Net Cash Proceeds received on account of an
Event of Loss so long as such Net Cash Proceeds are applied to replace or
restore the relevant Property in accordance with the relevant Collateral
Documents, (y) this subsection shall not require any such prepayment with
respect to Net Cash Proceeds received on account of Dispositions during any
fiscal year of the Borrower not exceeding $1,000,000 in the aggregate so long as
no Default or Event of Default then exists, and (z) in the case of any
Disposition not covered by clause (y) above, so long as no Default or Event of
Default then exists, if the Borrower states in its notice of such event that the
Borrower or the relevant Subsidiary intends to reinvest, within 180 days of the
applicable Disposition, the Net Cash Proceeds thereof in assets of the kind then
used or useable in the business of the Borrower or any of its Subsidiaries, then
the Borrower shall not be required to make a mandatory prepayment under this
subsection in respect of such Net Cash Proceeds to the extent such Net Cash
Proceeds are actually reinvested in such replacement assets with such 180-day
period. Promptly after the end of such 180-day period, the Borrower shall notify
the Administrative Agent whether the Borrower or such Subsidiary has reinvested
such Net Cash Proceeds in such replacement assets and, to the extent such Net
Cash Proceeds have not been so reinvested, the Borrower shall promptly prepay
the Obligations in the amount of such Net Cash Proceeds not so reinvested. The
amount of each such prepayment shall be applied first to the outstanding Term
Loans until paid in full and then to the outstanding Revolving Credit (which, in
the case of the Revolving Credit, may be reborrowed or otherwise readvanced
subject to the terms and conditions hereof). If the Administrative Agent or the
Required Lenders so request, all proceeds of such Disposition or Event of Loss
shall be deposited with the Administrative Agent (or its agent) and held by it
in the

                                      -14-
<PAGE>

Collateral Account. So long as no Default or Event of Default exists, the
Administrative Agent is authorized to disburse amounts representing such
proceeds from the Collateral Account to or at the Borrower's direction for
application to or reimbursement for the costs of replacing, rebuilding or
restoring such Property.

      (iv) Within 90 days after the close of each fiscal year, beginning with
the fiscal year ending December 31, 2005, the Borrower shall prepay the
Obligations by an amount equal to 50% of Excess Cash Flow of Borrower and its
Subsidiaries for the most recently completed fiscal year of the Borrower;
provided, however, that if, as of the last day of two consecutive fiscal
quarters, the Total Funded Debt/Adjusted EBITDA Ratio for the four fiscal
quarters of the Borrower then ended is less than 2.0 to 1.0 and no Default or
Event of Default has occurred and is continuing, then no prepayment shall be
required hereunder at any time thereafter. The amount of each such prepayment
shall be applied first to the outstanding Term Loans until paid in full and then
to the outstanding Revolving Credit (which, in the case of the Revolving Credit,
may be reborrowed or otherwise readvanced subject to the terms and conditions
hereof).

      (v) If after the Effective Date the Borrower or any Subsidiary shall issue
any Indebtedness for Borrowed Money, other than Indebtedness for Borrowed Money
permitted by Section 8.7 hereof, the Borrower shall promptly notify the
Administrative Agent of the estimated Net Cash Proceeds of such issuance to be
received by or for the account of the Borrower or such Subsidiary in respect
thereof. Promptly upon receipt by the Borrower or such Subsidiary of Net Cash
Proceeds of such issuance, the Borrower shall prepay the Obligations in an
aggregate amount equal to 100% of the amount of such Net Cash Proceeds. The
amount of each such prepayment shall be applied first to the outstanding Term
Loans until paid in full and then to the outstanding Revolving Credit (which, in
the case of the Revolving Credit, may be reborrowed or otherwise readvanced
subject to the terms and conditions hereof). The Borrower acknowledges that its
performance hereunder shall not limit the rights and remedies of the Lenders for
any breach of Section 8.7 hereof or any other terms of the Loan Documents.

      (vi) Unless the Borrower otherwise directs, prepayments of Loans under
this Section 1.10(b) shall be applied first to Borrowings of Base Rate Loans
until payment in full thereof, then to Borrowings of Eurodollar Loans in the
order in which their Interest Periods expire. Each prepayment of Loans under
this Section 1.10(b) shall be made by the payment of the principal amount to be
prepaid and accrued interest thereon to the date of prepayment together with any
amounts due the Lenders under Section 1.13 hereof. Each prefunding of L/C
Obligations shall be made in accordance with Section 9.4 hereof.

      Notwithstanding the foregoing, unless an Event of Default has occurred and
is continuing in the event that the making of any prepayment required by this
Section 1.10 of any Eurodollar Loans would result in an obligation on the part
of the Borrower to make a breakage payment in respect thereof pursuant to
Section 1.13 hereof, the Borrower may, upon notice to the Administrative Agent,
pledge and deposit with the Administrative Agent, for the benefit of the
Administrative Agent and the Lenders, cash in the amount of the required
prepayment pursuant to documentation satisfactory to Administrative Agent. The
cash shall be maintained in the Collateral Account maintained by the
Administrative Agent referred to in Section 9.4 hereof. Such cash shall be
applied to the outstanding Eurodollar Loans in the order in which their

                                      -15-
<PAGE>

Interest Periods expire. The Borrower hereby grants to the Administrative Agent
for the benefit of the Administrative Agent and the Lenders a security interest
in all such cash balances.

      (c) The Administrative Agent will promptly advise each Lender of any
notice of prepayment it receives from the Borrower. Any amount of Revolving
Loans and Swing Loans paid or prepaid before the Revolving Credit Termination
Date may, subject to the terms and conditions of this Agreement, be borrowed,
repaid, and borrowed again. No amount of the Term Loans paid or prepaid may be
reborrowed and each such prepayment shall be applied to the Term Loans in the
reverse order of maturity.

      Section 1.11. Default Rate. Notwithstanding anything to the contrary
contained in Section 1.4 hereof, while any Event of Default exists or after
acceleration, the Borrower shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal amount of all
Loans and Reimbursement Obligations, and letter of credit fees at a rate per
annum equal to:

            (a) for any Base Rate Loan or any Swing Loan bearing interest based
      on the Base Rate, the sum of 2% plus the Applicable Margin plus the Base
      Rate from time to time in effect (computed on the basis of a year of 365
      or 366 days, as the case may be, for the actual number of days elapsed);

            (b) for any Eurodollar Loan or any Swing Loan bearing interest at
      the Administrative Agent's Quoted Rate, the sum of 2% plus the rate of
      interest in effect thereon at the time of such default until the end of
      the Interest Period applicable thereto (computed on the basis of a year of
      360 days for the actual number of days elapsed) and, thereafter, at a rate
      per annum equal to the sum of 2% plus the Applicable Margin for Base Rate
      Loans plus the Base Rate from time to time in effect (computed on the
      basis of a year of 365 or 366 days, as the case may be, for the actual
      number of days elapsed);

            (c) for any Reimbursement Obligation, the sum of 2% plus the amounts
      due under Section 1.2 with respect to such Reimbursement Obligation; and

            (d) for any Letter of Credit, the sum of 2% plus the letter of
      credit fee due under Section 2.1 with respect to such Letter of Credit;

provided, however, that in the absence of acceleration, any adjustments pursuant
to this Section shall be made at the election of the Administrative Agent,
acting at the request or with the consent of the Required Lenders, with written
notice to the Borrower. While any Event of Default exists or after acceleration,
interest and fees shall continue to be due and payable as otherwise provided in
this Agreement and, in addition, such interest and fees shall also be paid on
demand of the Administrative Agent acting at the request or with the consent of
the Required Lenders.

      Section 1.12. The Notes. (a) The Revolving Loans made to the Borrower by a
Lender shall be evidenced by a single promissory note of the Borrower issued to
such Lender in the form

                                      -16-
<PAGE>

of Exhibit D-1 hereto. Each such promissory note is hereinafter referred to as a
"Revolving Note" and collectively such promissory notes are referred to as the
"Revolving Notes."

      (b) The Swing Loans made to the Borrower by the Administrative Agent shall
be evidenced by a single promissory note of the Borrower issued to the
Administrative Agent in the form of Exhibit D-2 hereto. Such promissory note is
hereinafter referred to as the "Swing Note."

      (c) The Term Loan made to the Borrower by a Lender shall be evidenced by a
single promissory note of the Borrower issued to such Lender in the form of
Exhibit D-3 hereto. Each such promissory note is hereinafter referred to as a
"Term Note" and collectively such promissory notes are referred to as the "Term
Notes."

      (d) The Administrative Agent and each Lender shall record on its books and
records or on a schedule to its appropriate Note the amount of each Loan
advanced, continued, or converted by it, all payments of principal and interest
and the principal balance from time to time outstanding thereon, the type of
such Loan, and, for any Eurodollar Loan or Swing Loan, the Interest Period and
the interest rate applicable thereto. The record thereof, whether shown on such
books and records of the Administrative Agent or a Lender or on a schedule to
the relevant Note, shall be prima facie evidence as to all such matters;
provided, however, that the failure of the Administrative Agent or any Lender to
record any of the foregoing or any error in any such record shall not limit or
otherwise affect the obligation of the Borrower to repay all Loans made to it
hereunder together with accrued interest thereon. At the request of the
Administrative Agent or any Lender and upon the Administrative Agent or such
Lender tendering to the Borrower the appropriate Note to be replaced, the
Borrower shall furnish a new Note to such Lender to replace any outstanding
Note, and at such time the first notation appearing on a schedule on the reverse
side of, or attached to, such Note shall set forth the aggregate unpaid
principal amount of all Loans, if any, then outstanding thereon.

      Section 1.13. Funding Indemnity. If any Lender shall incur any loss, cost,
or expense (including, without limitation, any loss of profit, and any loss,
cost, or expense incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Lender to fund or maintain any
Eurodollar Loan or Swing Loan bearing interest at the Administrative Agent's
Quoted Rate or the relending or reinvesting of such deposits or amounts paid or
prepaid to such Lender) as a result of:

            (a) any payment, prepayment or conversion of a Eurodollar Loan or
      Swing Loan on a date other than the last day of its Interest Period,

            (b) any failure (because of a failure to meet the conditions of
      Section 7 or otherwise) by the Borrower to borrow or continue a Eurodollar
      Loan or Swing Loan, or to convert a Base Rate Loan into a Eurodollar Loan
      or Swing Loan, on the date specified in a notice given pursuant to Section
      1.6(a) or 1.7(c),

            (c) any failure by the Borrower to make any payment of principal on
      any Eurodollar Loan or Swing Loan when due (whether by acceleration or
      otherwise), or

                                      -17-
<PAGE>

            (d) any acceleration of the maturity of a Eurodollar Loan or Swing
      Loan as a result of the occurrence of any Event of Default hereunder,

then, upon the demand of such Lender, the Borrower shall pay to such Lender
within 15 days after demand by such Lender (which demand shall be accompanied by
the certificate referred to below) such amount as will reimburse such Lender for
such loss, cost, or expense. If any Lender makes such a claim for compensation,
it shall provide to the Borrower, with a copy to the Administrative Agent, a
certificate setting forth the amount of such loss, cost, or expense in
reasonable detail and the amounts shown on such certificate shall be conclusive
if reasonably determined.

      Section 1.14. Commitment Terminations. (a) Optional Revolving Credit
Terminations. The Borrower shall have the right at any time and from time to
time, upon 5 Business Days' prior written notice to the Administrative Agent (or
such shorter period of time agreed to by the Administrative Agent), to terminate
the Revolving Credit Commitments without premium or penalty and in whole or in
part, any partial termination to be (i) in an amount not less than $5,000,000,
and (ii) allocated ratably among the Lenders in proportion to their respective
Revolver Percentages. Any termination of the Revolving Credit Commitments below
the L/C Sublimit or the Swing Line Sublimit shall reduce the L/C Sublimit and
the Swing Line Sublimit, as applicable, by a like amount. The Administrative
Agent shall give prompt notice to each Lender of any such reduction or
termination of the Revolving Credit Commitments.

      (b) Mandatory Terminations. After the occurrence of a Change of Control,
the Required Lenders may, by written notice to the Borrower at any time on or
before the date occurring 90 days after the date the Borrower notifies the
Lenders of such Change of Control, terminate the remaining Commitments and all
other obligations of the Lenders hereunder on the date stated in such notice
(which may be any date that is not less than 30 days following the date of such
notice). On the date the Commitments are so terminated, all outstanding
Obligations (including, without limitation, all principal of and accrued
interest on the Notes) shall forthwith be due and payable without further
demand, presentment, protest, or notice of any kind and the Borrower shall
immediately pay to the Lenders the full amount then available for drawing under
each Letter of Credit, such amount to be held in the Collateral Account (the
Borrower agreeing to immediately make such payment on the date the Commitments
are so terminated and acknowledging and agreeing that the Lenders would not have
an adequate remedy at law for the failure by the Borrower to honor any such
demand and that the Lenders, and the Administrative Agent on their behalf, shall
have the right to require the Borrower to specifically perform such undertaking
whether or not any drawings or other demands for payment have been made under
any of the Letters of Credit).

      (c) Any termination of the Commitments pursuant to this Section 1.14 may
not be reinstated.

      Section 1.15. Substitution of Lenders. Upon the receipt by the Borrower of
(a) a claim from any Lender for compensation under Section 10.3 or 13.1 hereof,
(b) notice by any Lender to the Borrower of any illegality pursuant to Section
10.1 hereof, or (c) in the event any Lender is in default in any material
respect (including, without limitation, such Lender's failure to fund when

                                      -18-
<PAGE>

required to do so hereunder) with respect to its obligations under the Loan
Documents (any such Lender referred to in clause (a), (b), or (c) above being
hereinafter referred to as an "Affected Lender"), the Borrower may, in addition
to any other rights the Borrower may have hereunder or under applicable law,
require, at its expense, any such Affected Lender to assign, at par plus accrued
interest and fees, without recourse, all of its interest, rights and obligations
hereunder (including all of its Commitments and the Loans and participation
interests in Letters of Credit and other amounts at any time owing to it
hereunder and the other Loan Documents) to a bank or other institutional lender
specified by the Borrower, provided that (i) such assignment shall not conflict
with or violate any law, rule, or regulation or order of any court or other
governmental authority, (ii) the Borrower shall have received the written
consent of the Administrative Agent, which consent shall not be unreasonably
withheld, to such assignment, (iii) the Borrower shall have paid to the Affected
Lender all monies (together with amounts due such Affected Lender under Section
1.13 hereof as if the Loans owing to it were prepaid rather than assigned) other
than such principal owing to it hereunder, and (iv) the assignment is entered
into in accordance with the other requirements of Section 13.12 hereof (provided
any assignment fees and reimbursable expenses due thereunder shall be paid by
the Borrower).

      Section 1.16. Increase in Commitments. The Borrower may, on any Business
Day prior to the Revolving Credit Termination Date and with the prior written
consent of the Administrative Agent, increase the aggregate amount of the
Revolving Credit Commitments by delivering a Commitment Amount Increase Request
in the form attached hereto as Exhibit G at least five (5) Business Days prior
to the desired effective date of such increase (the "Commitment Amount
Increase") identifying an additional Lender (or additional Commitments for
existing Lender(s)) and the amount of its Commitment (or additional amount of
its Commitment(s)); provided, however, that (i) any increase of the aggregate
amount of the Revolving Credit Commitments to an amount in excess of
$110,000,000 shall require the prior written consent of the Lenders, and (ii)
any increase of the aggregate amount of the Commitments shall be in an amount
not less than $5,000,000. The effective date of the Commitment Amount Increase
shall be agreed upon by the Borrower and the Administrative Agent. Upon the
effectiveness thereof, Schedule 1 shall be deemed amended to reflect the
Commitment Amount Increase and the new Lender(s) (or, if applicable, existing
Lender(s)) shall advance Revolving Loans in an amount sufficient such that after
giving effect to its Revolving Loans each Lender shall have outstanding its pro
rata share of all Revolving Loans based on its Revolver Percentage. It shall be
a condition to such effectiveness that (i) if there are any Eurodollar Loans
outstanding under the Revolving Credit on the date of such effectiveness, unless
otherwise agreed to by the Administrative Agent, such Eurodollar Loans shall be
prepaid and the Borrower shall have paid all amounts required to be paid under
Section 1.13 hereof and (ii) the Borrower shall not have terminated any portion
of the Revolving Credit Commitments pursuant of Section 1.14(a) hereof. The
Borrower agrees to pay any reasonable expenses of the Administrative Agent
relating to any Commitment Amount Increase. Notwithstanding anything herein to
the contrary, no Lender shall have any obligation to increase its Revolving
Credit Commitment and no Lender's Revolving Credit Commitment shall be increased
without its consent thereto, and each Lender may at its option, unconditionally
and without cause, decline to increase its Revolving Credit Commitment.

                                      -19-
<PAGE>

SECTION 2. FEES.

      Section 2.1. Fees. (a) Revolving Credit Commitment Fee. The Borrower shall
pay to the Administrative Agent for the ratable account of the Lenders in
accordance with their Revolver Percentages a commitment fee at the rate per
annum equal to the Applicable Margin (computed on the basis of a year of 365 or
366 days, as the case may be, and the actual number of days elapsed) on the
average daily Unused Revolving Credit Commitments. Such commitment fee shall be
payable quarterly in arrears on the last day of each March, June, September, and
December in each year (commencing on the first such date occurring after the
date hereof) and on the Revolving Credit Termination Date, unless the Revolving
Credit Commitments are terminated in whole on an earlier date, in which event
the commitment fee for the period to the date of such termination in whole shall
be paid on the date of such termination.

      (b) Letter of Credit Fees. On the date of issuance or extension, or
increase in the amount, of any standby Letter of Credit pursuant to Section 1.2
hereof, the Borrower shall pay to the Administrative Agent for its own account a
fronting fee equal to .125% per annum of the face amount of (or of the increase
in the face amount of) such Letter of Credit. Quarterly in arrears, on the last
day of each March, June, September, and December in each year (commencing on the
first such date occurring after the date hereof), the Borrower shall pay to the
Administrative Agent, for the ratable benefit of the Lenders in accordance with
their Revolver Percentages, a letter of credit fee at a rate per annum equal to
the Applicable Margin (computed on the basis of a year of 360 days and the
actual number of days elapsed) in effect during each day of such quarter applied
to the daily average face amount of the Letters of Credit outstanding during
such quarter. In addition, the Borrower shall pay to the Administrative Agent
for its own account the Administrative Agent's standard issuance, drawing,
negotiation, amendment, and other administrative fees for each Letter of Credit.
Such standard fees referred to in the preceding sentence may be established by
the Administrative Agent from time to time.

      (c) Administrative Agent Fees and Upfront Fees. The Borrower shall pay to
the Administrative Agent for its own use and benefit, the fees agreed to between
the Administrative Agent and the Borrower in a fee letter dated of even date
herewith, or as otherwise thereafter agreed to in writing between them.

SECTION 3. PLACE AND APPLICATION OF PAYMENTS.

      Section 3.1. Place and Application of Payments. All payments of principal
of and interest on the Loans and the Reimbursement Obligations, and of all other
Obligations payable by the Borrower under this Agreement and the other Loan
Documents, shall be made by the Borrower to the Administrative Agent by no later
than 12:00 Noon (Chicago time) on the due date thereof at the office of the
Administrative Agent in Chicago, Illinois (or such other location as the
Administrative Agent may designate to the Borrower) for the benefit of the
Lender or Lenders entitled thereto. Any payments received after such time shall
be deemed to have been received by the Administrative Agent on the next Business
Day. All such payments shall be made in U.S. Dollars, in immediately available
funds at the place of payment, in each case without set-off or counterclaim. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest on Loans and on

                                      -20-
<PAGE>

Reimbursement Obligations in which the Lenders have purchased Participating
Interests ratably to the Lenders and like funds relating to the payment of any
other amount payable to any Lender to such Lender, in each case to be applied in
accordance with the terms of this Agreement. If the Administrative Agent causes
amounts to be distributed to the Lenders in reliance upon the assumption that
the Borrower will make a scheduled payment and such scheduled payment is not so
made, each Lender shall, on demand, repay to the Administrative Agent the amount
distributed to such Lender together with interest thereon in respect of each day
during the period commencing on the date such amount was distributed to such
Lender and ending on (but excluding) the date such Lender repays such amount to
the Administrative Agent, at a rate per annum equal to: (i) from the date the
distribution was made to the date two Business Days after payment by such Lender
is due hereunder, the Federal Funds Rate for each such day and (ii) from the
date two Business Days after the date such payment is due from such Lender to
the date such payment is made by such Lender, the Base Rate in effect for each
such day.

      Anything contained herein to the contrary notwithstanding (including,
without limitation, Section 1.10(b) hereof), after the occurrence and during the
continuation of an Event of Default all payments and collections received in
respect of the Obligations and all proceeds of the Collateral received, in each
instance, by the Administrative Agent or any of the Lenders shall be remitted to
the Administrative Agent and, unless the Administrative Agent and the Required
Lenders shall determine otherwise, be distributed as follows:

            (a) first, to the payment of any outstanding costs and expenses
      incurred by the Administrative Agent, and any security trustee therefor,
      in monitoring, verifying, protecting, preserving or enforcing the Liens on
      the Collateral, in protecting, preserving or enforcing rights under the
      Loan Documents, and in any event including all costs and expenses of a
      character which the Borrower has agreed to pay the Administrative Agent
      under Section 13.16 hereof (such funds to be retained by the
      Administrative Agent for its own account unless it has previously been
      reimbursed for such costs and expenses by the Lenders, in which event such
      amounts shall be remitted to the Lenders to reimburse them for payments
      theretofore made to the Administrative Agent);

            (b) second, to the payment of principal and interest on the Swing
      Note;

            (c) third, to the payment of any outstanding interest and fees due
      under the Loan Documents to be allocated pro rata in accordance with the
      aggregate unpaid amounts owing to each holder thereof;

            (d) fourth, to the payment of principal on the Notes, unpaid
      Reimbursement Obligations, together with amounts to be held by the
      Administrative Agent as collateral security for any outstanding L/C
      Obligations pursuant to Section 9.4 hereof (until the Administrative Agent
      is holding an amount of cash equal to the then outstanding amount of all
      such L/C Obligations), and Hedging Liability, the aggregate amount paid
      to, or held as collateral security for, the Lenders and, in the case of
      Hedging Liability, their Affiliates to be allocated pro rata in accordance
      with the aggregate unpaid amounts owing to each holder thereof;

                                      -21-
<PAGE>

            (e) fifth, to the payment of all other unpaid Obligations and all
      other indebtedness, obligations, and liabilities of the Borrower and its
      Subsidiaries secured by the Loan Documents (including, without limitation,
      Funds Transfer and Deposit Account Liability) to be allocated pro rata in
      accordance with the aggregate unpaid amounts owing to each holder thereof;
      and

            (f) finally, to the Borrower or whoever else may be lawfully
      entitled thereto.

SECTION 4. THE COLLATERAL AND GUARANTIES.

      Section 4.1. Collateral. The Obligations shall be secured by (a) valid,
perfected and enforceable Liens on all right, title, and interest of the
Borrower and each Subsidiary in all capital stock and other equity interests
held by the Borrower or such Subsidiary in each of its Subsidiaries whether now
owned or hereafter formed or acquired, and all proceeds thereof, and (b) valid,
perfected (subject to the proviso appearing at the end of this sentence) and
enforceable Liens on all right, title and interest of the Borrower and each
Subsidiary in all accounts and accounts receivable, notes and notes receivable,
contract rights, instruments, documents, chattel paper, general intangibles
(including, without limitation, patents, trademarks, tradenames, copyrights, and
other intellectual property rights), investment property, inventory, machinery,
equipment, deposit accounts, and real estate, and all other personal property
and real property, whether now owned or hereafter acquired or arising, and all
proceeds thereof; provided, however, that: (i) the Lien of the Administrative
Agent on Property subject to a Capital Lease or conditional sale agreement or
subject to a purchase money lien in each instance permitted hereby shall be
subject to the rights of the lessor or lender thereunder, (ii) until otherwise
required by the Administrative Agent (acting at the request or with the consent
of the Required Lenders), Liens on deposit accounts maintained by the Borrower
or any Subsidiary in proximity to its operations need not be perfected provided
that the total amount on deposit at any one time not so perfected shall not
exceed $250,000 in the aggregate, (iii) until otherwise required by the
Administrative Agent (acting at the request or with the consent of the Required
Lenders), Liens on titled vehicles need not be perfected provided that the total
value of such property at any one time not so perfected shall not exceed
$250,000 in the aggregate, (iv) unless otherwise required by the Administrative
Agent (acting at the request or with the consent of the Required Lenders) during
the existence of any Event of Default, Liens on the capital stock or other
equity interests of a Foreign Subsidiary which, if granted, would cause an
adverse effect on the Borrower's present or future federal income tax liability
shall be limited to 65% of the total outstanding Voting Stock of such Foreign
Subsidiary, (v) unless otherwise required by the Administrative Agent (acting at
the request or with the consent of the Required Lenders) during the existence of
any Event of Default, Liens need not be granted on the assets of a Foreign
Subsidiary which, if granted, would cause an adverse effect on the Borrower's
present or future federal income tax liability and (vi) unless otherwise
required by the Administrative Agent (acting at the request or with the consent
of the Required Lenders) during the existence of any Event of Default, the Deed
to Secure Debt securing the real property in Tennille, Georgia shall secure only
the Term Notes. The Borrower acknowledges and agrees that the Liens on the
Collateral shall be granted to the Administrative Agent for the benefit of
itself and the Lenders and shall be valid and perfected first priority Liens
subject, however, to the proviso appearing at the end of the immediately
preceding sentence and Liens permitted by Section 8.8 hereof, in each case
pursuant to one or more Collateral

                                      -22-
<PAGE>

Documents from such Persons, each in form and substance reasonably satisfactory
to the Administrative Agent.

      Section 4.2. Deposit Account Agreements. Except as otherwise permitted by
clause (ii) of Section 4.1 above, and subject to the limitations described in
clause (v) of Section 4.1 above, the Borrower shall cause each financial
institution maintaining one or more deposit accounts for the Borrower or any
Subsidiary to enter into an agreement with the Administrative Agent pursuant to
which such financial institution acknowledges and agrees to the Administrative
Agent's Lien on such deposit accounts and all funds therein, to waive any right
of offset or bankers' lien with respect to such deposit accounts (other than
charges for account maintenance fees and returned items), and, during the
existence of any Event of Default, to remit all collected balances in such
deposit accounts to the Administrative Agent. The Borrower and, by becoming a
Guarantor hereto, each Subsidiary hereby acknowledge and agree that the
Administrative Agent has (and is hereby granted) a Lien on all such deposit
accounts and all funds contained therein to secure the Obligations. The Lenders
agree with the Borrower that if and so long as no Event of Default has occurred
and is continuing, amounts on deposit in the deposit accounts maintained with
the Administrative Agent or any Lender will (subject to the rules and
regulations of the Administrative Agent or the relevant Lender as from time to
time in effect applicable to demand deposit accounts) be made available to the
Borrower or the relevant Subsidiary for use in the conduct of its business. Upon
the occurrence and during the continuation of any Event of Default, the
Administrative Agent may apply the funds on deposit in all such deposit accounts
to the Obligations. The Borrower has heretofore disclosed to the Administrative
Agent in writing all of the deposit accounts which require an agreement pursuant
to this Section and the Borrower shall advise the Administrative Agent of any
such deposit accounts which are hereafter opened or closed.

      Section 4.3. Liens on Real Property. Subject to the limitation imposed by
clause (v) of Section 4.1 hereof, in the event that the Borrower or any
Subsidiary owns or hereafter acquires any owned real property with a fair market
value greater than or equal to $1,000,000 (or, during the existence of any Event
of Default, any owned real property, regardless of its value), the Borrower
shall execute and deliver, and shall cause the relevant Subsidiary to execute
and deliver, to the Administrative Agent (or a security trustee therefor) a
mortgage or deed of trust reasonably acceptable in form and substance to the
Administrative Agent for the purpose of granting to the Administrative Agent for
the benefit of itself and the Lenders a Lien on such real property to secure the
Obligations, shall pay all taxes and all reasonable costs and expenses incurred
by the Administrative Agent in obtaining any real estate appraisal required by
the Administrative Agent in connection therewith and in recording such mortgage
or deed of trust, and shall at its expense supply to the Administrative Agent a
survey, environmental report, hazard insurance policy, and a mortgagee's policy
of title insurance from a title insurer reasonably acceptable to the
Administrative Agent insuring the validity of such mortgage or deed of trust and
its status as a first Lien (subject to Liens permitted by this Agreement) on the
real property encumbered thereby and such other instrument, documents,
certificates, and opinions reasonably required by the Administrative Agent in
connection therewith.

      Section 4.4. Guaranties. The payment and performance of the Obligations
shall at all times be guaranteed by each direct and indirect Subsidiary of the
Borrower (individually a

                                      -23-
<PAGE>

"Guarantor" and collectively the "Guarantors") pursuant to Section 12 of this
Agreement; provided, however, that unless otherwise required by the
Administrative Agent (acting at the request or with the consent of the Required
Lenders) during the existence of any Event of Default, Foreign Subsidiaries
shall not be required to be Guarantors hereunder if providing such guaranty
would cause an adverse effect on the Borrower's present or future federal income
tax liability.

      Section 4.5. Further Assurances. The Borrower agrees that it shall, and
shall cause each Subsidiary to, from time to time at the request of the
Administrative Agent, execute and deliver such documents and do such acts and
things as the Administrative Agent may reasonably request in order to provide
for or perfect or protect such Liens on the Collateral.

SECTION 5. DEFINITIONS; INTERPRETATION.

      Section 5.1. Definitions. The following terms when used herein shall have
the following meanings:

      "Acquired Business" means the entity or assets acquired by the Borrower or
a Subsidiary in an Acquisition, whether before or after the date hereof.

      "Acquisition" means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person
(other than a Person that is a Subsidiary), or otherwise causing any Person to
become a Subsidiary, or (c) a merger or consolidation or any other combination
with another Person (other than a Person that is a Subsidiary) provided that the
Borrower or the Subsidiary is the surviving entity.

      "Act" is defined in Section 13.25 hereof.

      "Adjusted EBITDA" means, with reference to any period, EBITDA for such
period calculated on a pro forma basis in good faith by the Borrower and
established to the reasonable satisfaction of the Administrative Agent as if
each Acquisition which occurred during such period had taken place on the first
day of such period (including adjustments for non-recurring expenses and income
reasonably determined by the Borrower in good faith and established to the
reasonable satisfaction of the Administrative Agent).

      "Adjusted LIBOR" is defined in Section 1.4(b) hereof.

      "Administrative Agent" means Harris N.A. and any successor pursuant to
Section 11.7 hereof.

      "Administrative Agent's Quoted Rate" is defined in Section 1.7(c) hereof.

      "Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control

                                      -24-
<PAGE>

another Person for the purposes of this definition if such Person possesses,
directly or indirectly, the power to direct, or cause the direction of, the
management and policies of the other Person, whether through the ownership of
voting securities, common directors, trustees or officers, by contract or
otherwise; provided that, in any event for purposes of this definition, any
Person that owns, directly or indirectly, 15% or more of the securities having
the ordinary voting power for the election of directors or governing body of a
corporation or 15% or more of the partnership or other ownership interest of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person.

      "Agreement" means this Second Amended and Restated Credit Agreement, as
the same may be amended, modified, restated or supplemented from time to time
pursuant to the terms hereof.

      "Applicable Margin" means, with respect to Loans, Reimbursement
Obligations, and the commitment fees and letter of credit fees payable under
Section 2.1 hereof, until the first Pricing Date, the rates per annum shown
opposite Level V below, and thereafter from one Pricing Date to the next the
Applicable Margin means the rates per annum determined in accordance with the
following schedule:

<TABLE>
<CAPTION>
              TOTAL FUNDED                              APPLICABLE MARGIN      APPLICABLE
             DEBT/ADJUSTED         APPLICABLE MARGIN     FOR EURODOLLAR        MARGIN FOR
              EBITDA RATIO        FOR BASE RATE LOANS   LOANS AND LETTER    REVOLVING CREDIT
           FOR SUCH PRICING        AND REIMBURSEMENT      OF CREDIT FEE      COMMITMENT FEE
LEVEL            DATE            OBLIGATIONS SHALL BE       SHALL BE:           SHALL BE:
<S>      <C>                     <C>                    <C>                 <C>
VI       Greater than or equal
         to 3.0 to 1.0                          1.375%               2.00%              .375%

V        Greater than or equal
         to 2.5 to 1.0, but
         less than 3.0 to 1.0                    1.00%               1.75%               .35%

IV       Greater than or equal
         to 2.0 to 1.0, but
         less than 2.5 to 1.0                    .625%               1.50%               .30%

III      Greater than or equal
         to 1.5 to 1.0, but
         less than 2.0 to 1.0                     .25%               1.25%               .25%

II       Greater than or equal
         to 1.0 to 1.0, but
         less than 1.5 to 1.0                       0%               1.00%               .225%

I        Less than 1.0 to 1.0                       0%               .875%               .20%
</TABLE>

For purposes hereof, the term "Pricing Date" means, for any fiscal quarter of
the Borrower ending on or after September 30, 2005, the date on which the
Administrative Agent is in receipt of the Borrower's most recent financial
statements for the fiscal quarter then ended (and in the

                                      -25-
<PAGE>

case of the year-end financial statements, audit report), pursuant to Section
8.5 hereof. The Applicable Margin shall be established based on the Total Funded
Debt/Adjusted EBITDA Ratio for the most recently completed fiscal quarter and
the Applicable Margin established on a Pricing Date shall remain in effect until
the next Pricing Date. If the Borrower has not delivered its financial
statements (and, in the case of the year-end financial statements, audit report)
by the date such financial statements are required to be delivered under Section
8.5 hereof, until such financial statements are delivered, the Applicable Margin
shall be the highest Applicable Margin (i.e., Level VI shall apply). If the
Borrower subsequently delivers such financial statements before the next Pricing
Date, the Applicable Margin established by such late delivered financial
statements shall take effect from the date of delivery until the next Pricing
Date. In all other circumstances, the Applicable Margin established by such
financial statements shall be in effect from the Pricing Date that occurs
immediately after the end of the fiscal quarter covered by such financial
statements until the next Pricing Date. Each determination of the Applicable
Margin made by the Administrative Agent in accordance with the foregoing shall
be conclusive and binding on the Borrower and the Lenders if reasonably
determined.

      "Application" is defined in Section 1.2(b) hereof.

      "Authorized Representative" means those persons shown on the list of
officers provided by the Borrower pursuant to Section 7.2(i) hereof or on any
update of any such list provided by the Borrower to the Administrative Agent, or
any further or different officers of the Borrower so named by any Authorized
Representative of the Borrower in a written notice to the Administrative Agent.

      "Base Rate" is defined in Section 1.4(a) hereof.

      "Base Rate Loan" means a Loan bearing interest at a rate specified in
Section 1.4(a) hereof.

      "Bond Documents" means any of the documents or instruments executed and
delivered in connection with the issuance of the Bonds and any amendment,
modification or supplement thereto.

      "Bond Letters of Credit" means the irrevocable transferable letters of
credit issued by Harris N.A., as successor by merger with Harris Trust and
Savings Bank to secure the payment of the Bonds.

      "Bonds" means, collectively, (a) $2,800,000 City of Janesville, Wisconsin
Adjustable Rate Industrial Development Revenue Refunding Bonds Dated 3/1/96 Due
9/1/2007 (The Lamson & Sessions Co. Project), (b) $2,780,000 City of Bowling
Green, Ohio Adjustable Rate Industrial Development Revenue Refunding Bonds Dated
6/28/95 Due 8/1/2009 (The Lamson & Session Co. Project), (c) $1,820,000 City of
Bowling Green, Ohio Adjustable Rate Industrial Development Revenue Refunding
Bonds Dated 3/1/94 Due 3/1/2023, (d) $1,650,000 City of Pasadena, Texas
Corporation Adjustable Rate Industrial Development Revenue Refunding Bonds Dated
2/28/95 Due 4/1/2017 (The Lamson & Sessions Co. Project), and (e) $3,800,000

                                      -26-
<PAGE>

City of Cabool, Missouri Industrial Development Revenue Bonds Dated 4/20/00 Due
5/1/10 (City of Cabool, IRB).

      "Borrower" means The Lamson & Sessions Co., an Ohio corporation.

      "Borrowing" means the total of Loans of a single type advanced, continued
for an additional Interest Period, or converted from a different type into such
type by the Lenders under a Credit on a single date and, in the case of
Eurodollar Loans, for a single Interest Period. Borrowings of Loans are made and
maintained ratably from each of the Lenders under a Credit in accordance with
their Percentages of such Credit. A Borrowing is "advanced" on the day Lenders
advance funds comprising such Borrowing to the relevant Borrower, is "continued"
on the date a new Interest Period for the same type of Loans commences for such
Borrowing, and is "converted" when such Borrowing is changed from one type of
Loans to the other, all as requested by the Borrower pursuant to Section 1.6(a).
Borrowings of Swing Loans are made by the Administrative Agent in accordance
with the procedures set forth in Section 1.7 hereof.

      "Business Day" means any day (other than a Saturday or Sunday) on which
banks are not authorized or required to close in Chicago, Illinois and, if the
applicable Business Day relates to the advance or continuation of, or conversion
into, or payment of a Eurodollar Loan, on which banks are dealing in U.S. Dollar
deposits in the interbank eurodollar market in London, England and Nassau,
Bahamas.

      "Capital Expenditures" means, with respect to any Person for any period,
the aggregate amount of all expenditures (whether paid in cash or accrued as a
liability) by such Person during that period for the acquisition or leasing
(pursuant to a Capital Lease) of fixed or capital assets or additions to
property, plant, or equipment (including replacements, capitalized repairs, and
improvements) which should be capitalized on the balance sheet of such Person in
accordance with GAAP.

      "Capital Lease" means any lease of Property which in accordance with GAAP
is required to be capitalized on the balance sheet of the lessee.

      "Capitalized Lease Obligation" means, for any Person, the amount of the
liability shown on the balance sheet of such Person in respect of a Capital
Lease determined in accordance with GAAP.

      "Change of Control" means any of (a) the acquisition by any "person" or
"group" (as such terms are used in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) at any time of beneficial ownership of more
than 30% of the outstanding Voting Stock of the Borrower on a fully-diluted
basis, or (b) the failure of individuals who are members of the board of
directors of the Borrower on the date hereof (together with any new or
replacement directors whose initial nomination for election was approved by a
majority of the directors who were either directors on the date hereof or
previously so approved) to constitute a majority of the board of directors of
the Borrower.

                                      -27-
<PAGE>

      "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.

      "Collateral" means all properties, rights, interests and privileges from
time to time subject to the Liens granted to the Administrative Agent, or any
security trustee therefor, by the Collateral Documents.

      "Collateral Account" is defined in Section 9.4 hereof.

      "Collateral Documents" means the Pledge Agreement, the Security Agreement,
the Mortgages, and all other mortgages, deeds of trust, security agreements,
pledge agreements, assignments, financing statements and other documents as
shall from time to time secure or relate to the Obligations or any part thereof.

      "Commitments" means the Revolving Credit Commitments and the Term Loan
Commitments.

      "Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.

      "Credit" means either the Revolving Credit, Term Credit or the Swing Line.

      "Credit Event" means the advancing of any Loan, the continuation of or
conversion into a Eurodollar Loan, or the issuance of, or extension of the
expiration date or increase in the amount of, any Letter of Credit.

      "Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.

      "Disposition" means the sale, lease, conveyance, or other disposition of
Property, other than sales or other dispositions expressly permitted under
Section 8.10(a) or 8.10(b) hereof.

      "Domestic Subsidiary" means any subsidiary other than a Foreign
Subsidiary.

      "EBITDA" means, with respect to any period, Net Income for such period
plus (A) all amounts deducted in arriving at such Net Income in respect of (a)
Interest Expense, plus (b) federal, state, local, and foreign income taxes for
such period, plus (c) amounts properly charged for depreciation of fixed assets
and amortization of intangible assets during such period, plus (d) any charges
to Net Income during such period which are non-cash, non-recurring expenses
arising from the rationalization of the Borrower's facilities, product lines or
personnel, up to a maximum amount equal to 10% of Net Worth at the end of such
period, plus (e) any charges to Net Income during such period (up to $1,828,000
in the aggregate during the term of this Agreement, including any such charges
accrued prior to the Effective Date) associated with the Intermatic Litigation,
plus (f) any non-cash expenses incurred with respect to its Plans during

                                      -28-
<PAGE>

such period, plus (g) non-cash expenses incurred with respect to its retiree
medical plans during such period up to a maximum amount of $500,000. In the
event that any non-cash charge is excluded from the computation of EBITDA for a
given period pursuant to clause (d) above but the circumstances giving rise to
such charge have a cash impact in a subsequent period which would have reduced
EBITDA but for the charge in the prior period, such impact shall be taken into
account in computing EBITDA in the period when such impact occurs.

      "Effective Date" is defined in Section 7.2 hereof.

      "Eligible Line of Business" means any business engaged in as of the date
of this Agreement by the Borrower or any of its Subsidiaries or any business
reasonably related thereto.

      "Environmental Claim" means any investigation, notice, violation, demand,
allegation, action, suit, injunction, judgment, order, consent decree, penalty,
fine, lien, proceeding or claim (whether administrative, judicial or private in
nature) arising (a) pursuant to, or in connection with an actual or alleged
violation of, any Environmental Law, (b) in connection with any Hazardous
Material, (c) from any abatement, removal, remedial, corrective or response
action in connection with a Hazardous Material, Environmental Law or order of a
governmental authority, or (d) from any actual or alleged damage, injury, threat
or harm to health, safety, natural resources or the environment.

      "Environmental Law" means any current or future Legal Requirement
pertaining to (a) the protection of health, safety and the indoor or outdoor
environment, (b) the conservation, management or use of natural resources and
wildlife, (c) the protection or use of surface water or groundwater, (d) the
management, manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, Release, threatened Release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Material, or (e)
pollution (including any Release to air, land, surface water or groundwater),
and any amendment, rule, regulation, order or directive issued thereunder.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.

      "Eurodollar Loan" means a Loan bearing interest at the rate specified in
Section 1.4(b) hereof.

      "Eurodollar Reserve Percentage" is defined in Section 1.4(b) hereof.

      "Event of Default" means any event or condition identified as such in
Section 9.1 hereof.

      "Event of Loss" means, with respect to any Property, any of the following:
(a) any loss, destruction or damage of such Property, or (b) any condemnation,
seizure, or taking, by exercise of the power of eminent domain or otherwise, of
such Property, or confiscation of such Property or the requisition of the use of
such Property.

                                      -29-
<PAGE>

      "Excess Cash Flow" means, with respect to any period, the amount (if any)
by which (a) EBITDA (but determined for such purposes without giving effect to
any extraordinary or non-cash gains or losses) during such period minus (plus)
additions (reductions) to non-cash working capital of the Borrower and its
Subsidiaries for such period (i.e., the increase or decrease in consolidated
non-cash current assets of the Borrower and Subsidiaries minus the consolidated
current liabilities (excluding the current maturities of long-term debt) of the
Borrower and its Subsidiaries from the beginning to the end of such period),
exceeds (b) the sum of (i) Interest Expense payable in cash during such period,
plus (ii) federal, state and local income taxes payable in cash during such
period, plus (iii) the aggregate amount of payments of principal on all
Indebtedness of Borrowed Money (whether at maturity, as a result of mandatory
sinking fund redemption, mandatory prepayment, acceleration or otherwise, but
excluding payments made under the Revolving Credit other than those payments
resulting in a permanent reduction of the Revolving Credit Commitments and
excluding mandatory prepayments of the Term Loans required to be made in respect
of Excess Cash Flow under Section 1.10(b)(iv) hereof), plus (iv) the aggregate
amount of Capital Expenditures made by the Borrower and its Subsidiaries during
such period to the extent permitted by this Agreement and not financed with
proceeds of Indebtedness for Borrowed Money, plus (v) cash expenses incurred
with respect to its Plans and its retiree medical plans during such period, plus
(vi) cash payments associated with the settlement of the Intermatic Litigation
(up to $1,828,000 in the aggregate during the term of this Agreement); provided
that in determining Excess Cash Flow for the Borrower's fiscal year ending on or
about December 31, 2005, the aggregate amount of payments made on the Term Loans
included therein shall include the amount of such payments made on or about
September 25 and December 25, multiplied by two.

      "Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate appearing in
Section 1.4(a) hereof.

      "Fixed Charges" means, with reference to any period, the sum of (a) the
aggregate amount of payments scheduled to be made by the Borrower and its
Subsidiaries during such period in respect of principal on all Indebtedness for
Borrowed Money (whether at maturity or as a result of mandatory sinking fund
redemption, plus (b) federal, state, local, and foreign income taxes payable in
cash for such period, plus (c) Interest Expense payable in cash for such period.

      "Foreign Subsidiary" means each Subsidiary which (a) is organized under
the laws of a jurisdiction other than the United States of America or any state
thereof, (b) conducts substantially all of its business outside of the United
States of America, and (c) has substantially all of its assets outside of the
United States of America.

      "Funds Transfer and Deposit Account Liability" means the liability of the
Borrower or any Guarantor owing to any of the Lenders, or any Affiliates of such
Lenders, arising out of (a) the execution or processing of electronic transfers
of funds by automatic clearing house transfer, wire transfer or otherwise to or
from deposit accounts of the Borrower and/or any Guarantor now or hereafter
maintained with any of the Lenders or their Affiliates, (b) the acceptance for
deposit or the honoring for payment of any check, draft or other item with
respect to any such deposit accounts, (c) any other deposit, disbursement, and
cash management services

                                      -30-
<PAGE>

afforded to the Borrower or any Guarantor by any of such Lenders or their
Affiliates, and (d) the use of any corporate credit cards or purchasing cards
issued by any Lender or their Affiliates.

      "GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.

      "Guarantor" and "Guarantors" each is defined in Section 4.4 hereof.

      "Harris" is defined in Section 1.2(f)(iii) hereof.

      "Hazardous Material" means any substance, chemical, compound, product,
solid, gas, liquid, waste, byproduct, pollutant, contaminant or material which
is hazardous or toxic, and includes, without limitation, (a) asbestos,
polychlorinated biphenyls and petroleum (including crude oil or any fraction
thereof) and (b) any material classified or regulated as "hazardous" or "toxic"
or words of like import pursuant to an Environmental Law.

      "Hazardous Material Activity" means any activity, event or occurrence
involving a Hazardous Material, including, without limitation, the manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, Release, threatened Release, abatement, removal, remediation, handling
of or corrective or response action to any Hazardous Material.

      "Hedging Liability" means the liability of the Borrower or any Guarantor
to any of the Lenders, or any Affiliates of such Lenders, in respect of any
interest rate, foreign currency, and/or commodity swap, exchange, cap, collar,
floor, forward, future or option agreement, or any other similar interest rate,
currency or commodity hedging arrangement, as the Borrower or such Guarantor, as
the case may be, may from time to time enter into with any one or more of the
Lenders party to this Agreement or their Affiliates, with prior written notice
to the Administrative Agent.

      "Hostile Acquisition" means the acquisition of the capital stock or other
equity interests of a Person through a tender offer or similar solicitation of
the owners of such capital stock or other equity interests which has not been
approved (prior to such acquisition) by resolutions of the Board of Directors of
such Person or by similar action if such Person is not a corporation, and as to
which such approval has not been withdrawn.

      "Indebtedness for Borrowed Money" means for any Person (without
duplication): (a) all indebtedness of such Person for borrowed money, whether
current or funded, or secured or unsecured, (b) all indebtedness for the
deferred purchase price of Property or services, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of a default are
limited to repossession or sale of such Property), (d) all indebtedness secured
by a purchase money mortgage or other Lien to secure all

                                      -31-
<PAGE>

or part of the purchase price of Property subject to such mortgage or Lien, (e)
the principal portion of all obligations under Capital Leases in respect of
which such Person is liable as lessee, (f) any liability in respect of banker's
acceptances or letters of credit, (g) any indebtedness, whether or not assumed,
secured by Liens on Property acquired by such Person at the time of acquisition
thereof, and (h) all indebtedness referred to in clause (a), (b), (c), (d), (e),
(f) or (g) above which is directly or indirectly guaranteed by such Person or
which such Person has agreed (contingently or otherwise) to purchase or
otherwise acquire or in respect of which any of them have otherwise assured a
creditor against loss, it being understood that the term "Indebtedness for
Borrowed Money" shall not include trade payables arising in the ordinary course
of business.

      "Interest Expense" means, with reference to any period, the sum of all
interest charges (including imputed interest charges with respect to Capitalized
Lease Obligations) of the Borrower and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.

      "Interest Period" is defined in Section 1.8 hereof.

      "Intermatic Litigation" means the lawsuit captioned Intermatic Inc. v.
Lamson & Sessions Co., et. al. (N.D.ILL. Docket No. 94C 50295), which has been
settled pursuant to the Confidential Settlement and Release Agreement dated
September 13, 2004, the Stipulated Order of Dismissal under Fed. R. App. P.
42(b) in the United States Court of Appeals for the Federal Circuit (01-1378),
and the Stipulated Order of Dismissal under Fed. R. Civ. P. 41(a)(2) in the U.S.
District Court for the N.D. of Illinois, Western Division (Civil Action No.
94-C-50295 and 99-CV-50410).

      "L/C Sublimit" means $25,000,000, as reduced pursuant to the terms hereof.

      "L/C Obligations" means the aggregate undrawn face amounts of all
outstanding Letters of Credit and all unpaid Reimbursement Obligations.

      "Legal Requirement" means any treaty, convention, statute, law,
regulation, ordinance, license, permit, governmental approval, injunction,
judgment, order, consent decree or other requirement of any governmental
authority, whether federal, state, or local.

      "Lenders" means and includes Harris N.A. and the other financial
institutions from time to time party to this Agreement, including each assignee
Lender pursuant to Section 13.12 hereof.

      "Lending Office" is defined in Section 10.4 hereof.

      "Letter of Credit" is defined in Section 1.2(a) hereof.

      "LIBOR" is defined in Section 1.4(b) hereof.

      "Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.

                                      -32-
<PAGE>

      "Loan" means any Swing Loan, any Revolving Loan, or any Term Loan
outstanding as a Base Rate Loan or Eurodollar Loan, each of which is a "type" of
Loan hereunder.

      "Loan Documents" means this Agreement, the Notes, the Applications
(including the Reimbursement Agreements with respect to the Bond Letters of
Credit), the Collateral Documents, all agreements evidencing or setting forth
the terms and conditions applicable to Hedging Liability, all agreements
evidencing or setting forth the terms and conditions applicable to Funds
Transfer and Deposit Account Liability, and each other instrument or document to
be delivered hereunder or thereunder or otherwise in connection therewith.

      "Material Adverse Effect" means (a) a material adverse change in, or
material adverse effect upon, the business, Property, financial condition, or
results of operations of the Borrower and its Subsidiaries taken as a whole, (b)
a material adverse effect upon the ability of the Borrower and its Subsidiaries
to perform their obligations under the Loan Documents, or (c) a material adverse
effect upon the validity or enforceability of any of the Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders thereunder.

      "Moody's" means Moody's Investors Service, Inc.

      "Mortgages" means, collectively, each Mortgage and Security Agreement with
Assignment of Rents and each Deed of Trust and Security Agreement with
Assignment of Rents between the Borrower or the relevant Subsidiary and the
Administrative Agent relating to such Person's real property owned as of the
date hereof and located in the states of California, Florida, Iowa, Ohio,
Oklahoma, and Pennsylvania (except for the real property of the Borrower owned
as of the date hereof and located in Kent, Ohio, for which no Mortgage is
currently being required) and any other mortgages or deeds of trust delivered to
the Administrative Agent pursuant to Section 4.3 hereof, as the same may be
amended, modified, supplemented or restated from time to time.

      "Net Cash Proceeds" means, as applicable, (a) with respect to any
Disposition by a Person, cash and cash equivalent proceeds received by or for
such Person's account, net of (i) reasonable direct costs relating to such
Disposition, (ii) income, sale, use, or other transactional taxes paid or
payable by such Person as a direct result of such Disposition, and (iii) amounts
required to be applied to repay principal of, and premium, if any, and interest
on, any Indebtedness for Borrowed Money secured by a Lien on the Property which
is the subject of such Disposition, (b) with respect to any Event of Loss of a
Person, cash and cash equivalent proceeds received by or for such Person's
account (whether as a result of payments made under any applicable insurance
policy therefor or in connection with condemnation proceedings or otherwise),
net of (i) any taxes paid or payable with respect thereto, (ii) the reasonable
direct costs incurred in connection with the collection of such proceeds,
awards, or other payments, and (iii) amounts required to be applied to repay
principal of, and premium, if any, and interest on, any Indebtedness for
Borrowed Money secured by a Lien on the Property which is the subject of such
Event of Loss and (c) with respect to any offering of equity securities of a
Person, cash and cash equivalent proceeds received by or for such Person's
account, net of reasonable legal, underwriting, and other fees and expenses
incurred as a direct result thereof.

                                      -33-
<PAGE>

      "Net Income" means, with reference to any period, the net income (or net
loss) of the Borrower and its Subsidiaries for such period computed on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from Net Income (a) the net income (or net loss) of any Person accrued
prior to the date it becomes a Subsidiary of, or has merged into or consolidated
with, the Borrower or another Subsidiary, and (b) the net income (or net loss)
of any Person (other than a Subsidiary) in which the Borrower or any of its
Subsidiaries has a equity interest in, except to the extent of the amount of
dividends or other distributions actually paid to the Borrower or any of its
Subsidiaries during such period.

      "Net Worth" means, at any time the same is to be determined, the total
shareholders' equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) which would appear on the
balance sheet of the Borrower and its Subsidiaries determined in accordance with
GAAP.

      "Notes" means and includes the Term , the Revolving Notes, and the Swing
Note, all of which are issued in replacement of the promissory notes issued
under the Prior Credit Agreement, and such promissory notes issued under the
Prior Credit Agreement shall be deemed to be cancelled upon the delivery of the
Notes as contemplated by this Agreement.

      "Obligations" means all obligations of the Borrower to pay principal and
interest on the Loans, all Reimbursement Obligations owing under the
Applications (including the Reimbursement Agreements with respect to the Bond
Letters of Credit), all fees and charges payable hereunder, all Hedging
Liability, all Funds Transfer and Deposit Account Liability and all other
payment obligations of the Borrower or any Guarantor arising under or in
relation to any Loan Document, in each case whether now existing or hereafter
arising, due or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired.

      "Participating Lender" is defined in Section 1.2(d) hereof.

      "Participating Interest" is defined in Section 1.2(d) hereof.

      "PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.

      "Percentage" means for any Lender its Revolver Percentage or Term
Percentage, as applicable; and where the term "Percentage" is applied on an
aggregate basis (including, without limitation, Section 11.6 hereof), such
aggregate percentage shall be calculated by aggregating the separate components
of the Revolver Percentage and Term Percentage, and expressing such components
on a single percentage basis.

      "Permitted Acquisition" means (a) any Acquisition consented to in writing
by the Required Lenders, and (b) any other Acquisition with respect to which all
of the following conditions shall have been satisfied:

            (i) the Acquired Business is in an Eligible Line of Business and has
      its primary operations within the United States;

                                      -34-
<PAGE>

            (ii) the Acquisition shall not be a Hostile Acquisition;

            (iii) the financial statements of the Acquired Business shall have
      been audited by one of the "Big Four" accounting firms or by another
      independent accounting firm of national or regional repute or otherwise
      reasonably satisfactory to the Administrative Agent, or if such financial
      statements have not been audited by such an accounting firm, (x) such
      financial statements shall have been approved by the Administrative Agent
      and (y) the Acquired Business has undergone a successful so-called
      businessman's review by an accounting firm reasonably satisfactory to the
      Administrative Agent as part of the Borrowers' due diligence on the
      Acquisition;

            (iv) the Total Consideration for the Acquired Business, when taken
      together with the Total Consideration for all Acquired Businesses acquired
      after the Effective Date, does not exceed $10,000,000;

            (v) the Borrower shall have notified the Administrative Agent and
      Lenders not less than 20 days prior to any such Acquisition and furnished
      to the Administrative Agent and Lenders at such time reasonable details as
      to such Acquisition (including sources and uses of funds therefor), and
      3-year historical financial information and 3-year pro forma financial
      forecasts of the Acquired Business on a stand alone basis as well as of
      the Borrower on a consolidated basis after giving effect to the
      Acquisition and covenant compliance calculations reasonably satisfactory
      to the Administrative Agent;

            (vi) if a new Subsidiary is formed or acquired as a result of or in
      connection with the Acquisition, the Borrower will have complied with the
      requirements of Sections 4 and 8.17 hereof in connection therewith; and

            (vii) after giving effect to the Acquisition, no Default or Event of
      Default shall exist, including with respect to the covenants contained in
      Section 8.21 on a pro forma basis.

      "Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof.

      "Plan" means any employee pension benefit plan covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
that either (a) is maintained by a member of the Controlled Group for employees
of a member of the Controlled Group or (b) is maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.

      "Pledge Agreement" means that certain Amended and Restated Pledge
Agreement dated as of June 29, 2005, among the Borrower, its Subsidiaries party
thereto, and the Administrative Agent, as the same may be amended, modified,
supplemented, or restated from time to time.

                                      -35-
<PAGE>

      "Premises" means the real property owned or leased by the Borrower or any
Subsidiary, including without limitation the real property and improvements
thereon owned by the Borrower or any Subsidiary subject to the Lien of the
Mortgages or any other Collateral Documents.

      "Prior Credit Agreement" is defined in the Preliminary Statement hereof.

      "Property" means, as to any Person, all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent balance sheet of such Person and its subsidiaries under GAAP.

      "RCRA" means the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. Sections 6901 et seq., and any future amendments.

      "Reimbursement Agreement" means any application or reimbursement agreement
entered into by the Borrower in favor of Harris relating to the issuance of any
Bond Letter of Credit.

      "Reimbursement Obligation" is defined in Section 1.2(c) hereof.

      "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, migration, dumping, or
disposing into the indoor or outdoor environment, including, without limitation,
the abandonment or discarding of barrels, drums, containers, tanks or other
receptacles containing or previously containing any Hazardous Material.

      "Required Lenders" means, as of the date of determination thereof, Lenders
whose outstanding Loans and interests in Letters of Credit and Unused Revolving
Credit Commitments constitute more than 50% of the sum of the total outstanding
Loans, interests in Letters of Credit, and Unused Revolving Credit Commitments.

      "Restricted Payments" is defined in Section 8.12 hereof.

      "Revolver Percentage" means, for each Lender, the percentage of the
Revolving Credit Commitments represented by such Lender's Revolving Credit
Commitment or, if the Revolving Credit Commitments have been terminated, the
percentage held by such Lender (including through participation interests in
Reimbursement Obligations) of the aggregate principal amount of all Revolving
Loans and L/C Obligations then outstanding.

      "Revolving Credit" means the credit facility for making Revolving Loans
and issuing Letters of Credit described in Sections 1.1 and 1.2 hereof.

      "Revolving Credit Commitment" means, as to any Lender, the obligation of
such Lender to make Revolving Loans and to participate in Swing Loans and
Letters of Credit issued for the account of the Borrower hereunder in an
aggregate principal or face amount at any one time outstanding not to exceed the
amount set forth opposite such Lender's name on Schedule 1 attached hereto and
made a part hereof, as the same may be reduced or modified at any time or

                                      -36-
<PAGE>

from time to time pursuant to the terms hereof. The Borrower and the Lenders
acknowledge and agree that the Revolving Credit Commitments of the Lenders
aggregate $85,000,000 on the Effective Date.

      "Revolving Credit Termination Date" means June 29, 2010, or such earlier
date on which the Revolving Credit Commitments are terminated in whole pursuant
to Section 1.14, 9.2, or 9.3 hereof.

      "Revolving Loan" and "Revolving Loans" each is defined in Section 1.1
hereof and, as so defined, includes a Base Rate Loan or a Eurodollar Loan, each
of which is a "type" of Revolving Loan hereunder.

      "Revolving Note" and "Revolving Notes" each is defined in Section 1.12(a)
hereof.

      "S&P" means Standard & Poor's Ratings Services Group, a division of The
McGraw-Hill Companies, Inc.

      "Security Agreement" means that certain Amended and Restated Security
Agreement dated as of June 29, 2005 among the Borrower, its Subsidiaries party
thereto, and the Administrative Agent, as the same may be amended, modified,
supplemented, or restated from time to time.

      "Subsidiary" means, as to any particular parent corporation or
organization, any other corporation or organization more than 50% of the
outstanding Voting Stock of which is at the time directly or indirectly owned by
such parent corporation or organization or by any one or more other entities
which are themselves subsidiaries of such parent corporation or organization.
Unless otherwise noted herein, the term "Subsidiary" means a Subsidiary of the
Borrower or of any of its direct or indirect Subsidiaries.

      "Swing Line" means the credit facility for making one or more Swing Loans
described in Section 1.7 hereof.

      "Swing Loan" and "Swing Loans" each is defined in Section 1.7 hereof.

      "Swing Line Sublimit" is defined in Section 1.7 hereof.

      "Swing Note" is defined in Section 1.12(b) hereof.

      "Term Credit" means the credit facility for the Term Loans described in
Section 1.3 hereof.

      "Term Loan" and "Term Loans" each is defined in Section 1.3 hereof and, as
so defined, includes a Base Rate Loan or a Eurodollar Loan, each of which is a
"type" of Term Loan hereunder.

                                      -37-
<PAGE>

      "Term Loan Commitment" means, as to any Lender, the obligation of such
Lender to make its Term Loan upon satisfaction of the conditions set forth in
Section 7.3 hereof in the principal amount not to exceed the amount set forth
opposite such Lender's name on Schedule 1 attached hereto and made a part
hereof. The Borrower and the Lenders acknowledge and agree that the aggregate
Term Loan Commitments of the Lenders are $40,000,000 on the Effective Date.

      "Term Note" and "Term Notes" each is defined in Section 1.12(c) hereof.

      "Term Percentage" means, for each Lender, the percentage of the Term Loan
Commitments represented by such Lender's Term Loan Commitment or, if the Term
Loan Commitments have been terminated or have expired, the percentage held by
such Lender of the aggregate principal amount of all Term Loans then
outstanding.

      "Total Assets" means, for any Person at any time the same is to be
determined, total net assets which would appear on the balance sheet of such
Person in accordance with GAAP.

      "Total Consideration" means, with respect to an Acquisition, the total
amount (but without duplication) of (a) cash paid in connection with any
Acquisition, plus (b) indebtedness payable to the seller in connection with such
Acquisition, plus (c) the fair market value of any equity securities, including
any warrants or options therefor, delivered in connection with any Acquisition,
plus (d) the present value of covenants not to compete entered into in
connection with such Acquisition or other future payments which are required to
be made over a period of time and are not contingent upon the Borrower or its
Subsidiary meeting financial performance objectives (exclusive of salaries paid
in the ordinary course of business) (discounted at the Base Rate), but only to
the extent not included in clause (a), (b) or (c) above, plus (e) the amount of
indebtedness assumed in connection with such Acquisition.

      "Total Funded Debt" means, at any time the same is to be determined, the
aggregate of all Indebtedness for Borrowed Money of the Borrower and its
Subsidiaries at such time.

      "Total Funded Debt/Adjusted EBITDA Ratio" means, as of the last day of any
fiscal quarter of the Borrower, the ratio of Total Funded Debt as of the last
day of such fiscal quarter to Adjusted EBITDA of the Borrower and its
Subsidiaries for the period of four fiscal quarters then ended.

      "Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.

      "Unused Revolving Credit Commitments" means, at any time, the difference
between the Revolving Credit Commitments then in effect and the aggregate
outstanding principal amount of Revolving Loans and L/C Obligations, provided
that Swing Loans outstanding from time to time

                                      -38-
<PAGE>

shall be deemed to reduce the Unused Revolving Credit Commitment of the
Administrative Agent for purposes of computing the commitment fee under Section
2.1(a) hereof.

      "U.S. Dollars" and "$" each means the lawful currency of the United States
of America.

      "Voting Stock" of any Person means (a) capital stock or other equity
interests of any class or classes (however designated) having ordinary power for
the election of directors or other similar governing body of such Person, other
than stock or other equity interests having such power only by reason of the
happening of a contingency and (b) stock not described in clause (a) above that
is nonetheless treated as voting stock for purposes of the Code.

      "Welfare Plan" means a "welfare plan" as defined in Section 3(1) of ERISA.

      "Wholly-owned Subsidiary" means a Subsidiary of which all of the issued
and outstanding shares of capital stock (other than directors' qualifying shares
as required by law) or other equity interests are owned by the Borrower and/or
one or more Wholly-owned Subsidiaries within the meaning of this definition.

      Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The words
"hereof," "herein," and "hereunder" and words of like import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All references to time of day herein are references
to Chicago, Illinois time unless otherwise specifically provided. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP except where such principles are inconsistent with the
specific provisions of this Agreement.

      Section 5.3. Change in Accounting Principles. If, after the date of this
Agreement, there shall occur any change in GAAP from those used in the
preparation of the financial statements referred to in Section 6.5 hereof and
such change shall result in a change in the method of calculation of any
financial covenant, standard or term found in this Agreement, the Borrower or
the Required Lenders may by notice to the Lenders and the Borrower,
respectively, require that the Lenders and the Borrower negotiate in good faith
to amend such covenants, standards, and terms so as equitably to reflect such
change in accounting principles, with the desired result being that the criteria
for evaluating the financial condition of the Borrower and its Subsidiaries
shall be the same as if such change had not been made. No delay by the Borrower
or the Required Lenders in requiring such negotiation shall limit their right to
so require such a negotiation at any time after such a change in accounting
principles. Until any such covenant, standard, or term is amended in accordance
with this Section 5.3, financial covenants shall be computed and determined in
accordance with GAAP in effect prior to such change in accounting principles.
Without limiting the generality of the foregoing, the Borrower shall neither be
deemed to be in compliance with any financial covenant hereunder nor out of
compliance with any financial covenant hereunder if such state of compliance or
noncompliance, as the case may be, would not exist but for the occurrence of a
change in accounting principles after the date hereof.

                                      -39-
<PAGE>

SECTION 6. REPRESENTATIONS AND WARRANTIES.

      The Borrower represents and warrants to the Administrative Agent and the
Lenders as follows:

      Section 6.1. Organization and Qualification. The Borrower is duly
organized, validly existing, and in good standing as a corporation under the
laws of the state of its incorporation, has full and adequate corporate power to
own its Property and conduct its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to do so would
not have a Material Adverse Effect.

      Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing, and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to do so would
not have a Material Adverse Effect. Schedule 6.2 hereto identifies, as of the
date hereof, each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Borrower and the other Subsidiaries and, if such percentage is not 100%
(excluding directors' qualifying shares as required by law), a description of
each class of its authorized capital stock and other equity interests and the
number of shares of each class issued and outstanding. All of the outstanding
shares of capital stock and other equity interests of each Subsidiary are
validly issued and outstanding and fully paid and nonassessable and all such
shares and other equity interests indicated on Schedule 6.2 as owned by the
Borrower or another Subsidiary are owned, beneficially and of record, by the
Borrower or such Subsidiary free and clear of all Liens other than the Liens
granted in favor of the Administrative Agent pursuant to the Collateral
Documents and other Liens to the extent permitted by Section 8.8 hereof. As of
the date hereof, there are no outstanding commitments or other obligations of
any Subsidiary to issue, and no options, warrants, or other rights of any Person
to acquire, any shares of any class of capital stock or other equity interests
of any Subsidiary.

      Section 6.3. Authority and Validity of Obligations. The Borrower has full
power and authority to enter into this Agreement and the other Loan Documents
executed by it, to make the borrowings herein provided for, to issue its Notes
in evidence thereof, to grant to the Administrative Agent the Liens described in
the Collateral Documents executed by the Borrower, and to perform all of its
obligations hereunder and under the other Loan Documents executed by it. Each
Subsidiary has full power and authority to enter into the Loan Documents
executed by it, to guarantee the Obligations, to grant to the Administrative
Agent the Liens described in the Collateral Documents executed by such Person,
and to perform all of its obligations under the Loan Documents executed by it.
The Loan Documents delivered by the Borrower and by each Subsidiary have been
duly authorized, executed, and delivered by such Person and constitute valid and
binding obligations of such Person enforceable in accordance with their terms,
except

                                      -40-
<PAGE>

as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, or similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law); and this Agreement and the
other Loan Documents do not, nor does the performance or observance by the
Borrower or any Subsidiary of any of the matters and things herein or therein
provided for, (a) contravene or constitute a default in any material respect
under any provision of law or any judgment, injunction, order, or decree binding
upon the Borrower or any Subsidiary or any provision of the charter, articles of
incorporation, by-laws, articles of association, operating agreement,
partnership agreement, or any similar organization agreement of the Borrower or
any Subsidiary, (b) contravene or constitute a default under any covenant,
indenture, or agreement of or affecting the Borrower or any Subsidiary or any of
its Property, in each case where such contravention or default is reasonably
likely to have a Material Adverse Effect, or (c) result in the creation or
imposition of any Lien on any Property of the Borrower or any Subsidiary other
than the Liens granted in favor of the Administrative Agent pursuant to the
Collateral Documents and other Liens permitted by Section 8.8 hereof.

      Section 6.4. Use of Proceeds; Margin Stock. The Borrower shall use the
proceeds of the Loans and the Letters of Credit to refinance existing
indebtedness outstanding on the Effective Date and for its general working
capital purposes (including, without limitation, to finance Permitted
Acquisitions) and such other legal and proper purposes as are consistent with
all applicable laws. Neither the Borrower nor any Subsidiary is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any extension of credit
made hereunder will be used to purchase or carry any such margin stock or to
extend credit to others for the purpose of purchasing or carrying any such
margin stock.

      Section 6.5. Financial Reports. The consolidated balance sheet of the
Borrower and its Subsidiaries as at January 1, 2005, and the related
consolidated statements of income, retained earnings, and cash flows of the
Borrower and its Subsidiaries for the 12 months then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit report of
Ernst & Young LLP, independent public accountants, and the interim consolidated
balance sheet of the Borrower and its Subsidiaries as at March 31, 2005, and the
related consolidated statements of income, retained earnings, and cash flows of
the Borrower and its Subsidiaries for the three (3) months then ended, each
heretofore furnished to the Administrative Agent and the Lenders, fairly present
in all material respects the consolidated financial condition of the Borrower
and its Subsidiaries as at said dates and the consolidated results of their
operations and cash flows for the periods then ended in conformity with GAAP
applied on a consistent basis. Neither the Borrower nor any Subsidiary has
contingent liabilities which are material to it other than as indicated on the
financial statements referred to above or, with respect to future periods, on
the financial statements furnished pursuant to Section 8.5 hereof.

      Section 6.6. No Material Adverse Change. Since January 1, 2005, there has
been no Material Adverse Effect.

                                      -41-
<PAGE>

      Section 6.7. Full Disclosure. As of the date hereof, none of the reports,
financial statements or certificates furnished in writing by or on behalf of the
Borrower to the Administrative Agent and the Lenders in connection with the
negotiation of this Agreement or delivered to the Administrative Agent and the
Lenders hereunder (as modified or supplemented by other information so
furnished), taken together with any information contained in the public filings
made by the Borrower with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended, contains any material misstatement
of fact or omits to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading; provided that the Administrative Agent and the Lenders
acknowledge that as to any projections furnished to the Administrative Agent and
the Lenders, the Borrower only represents that the same were prepared on the
basis of information and estimates the Borrower believed to be reasonable at the
time made.

      Section 6.8. Trademarks, Franchises, and Licenses. Except as set forth on
Schedule 6.8 hereof, the Borrower and its Subsidiaries own, possess, or have the
right to use all necessary patents, licenses, franchises, trademarks, trade
names, trade styles, copyrights, trade secrets, know how, and confidential
commercial and proprietary information to conduct their businesses as now
conducted, without known conflict with any patent, license, franchise,
trademark, trade name, trade style, copyright, or other proprietary right of any
other Person.

      Section 6.9. Governmental Authority and Licensing. The Borrower and its
Subsidiaries have received all licenses, permits, and approvals of all Federal,
state, local, and foreign governmental authorities, if any, necessary to conduct
their business, in each case where the failure to obtain or maintain the same is
reasonably likely to have a Material Adverse Effect. No investigation or
proceeding which, if adversely determined, is reasonably likely to result in
revocation or denial of any material license, permit, or approval is, to the
knowledge of the Borrower, pending or threatened.

      Section 6.10. Good Title. The Borrower and its Subsidiaries have good and
defensible title (or valid leasehold interests) to their assets as reflected on
the most recent consolidated balance sheet of the Borrower and its Subsidiaries
furnished to the Administrative Agent and the Lenders (except for sales of
assets in the ordinary course of business), subject to no Liens other than such
thereof as are permitted by Section 8.8 hereof.

      Section 6.11. Litigation and Other Controversies. There is no litigation
or governmental proceeding or labor controversy pending, nor to the knowledge of
the Borrower threatened, against the Borrower or any Subsidiaries which if
adversely determined is reasonably likely to have a Material Adverse Effect.

      Section 6.12. Taxes. All tax returns required to be filed by the Borrower
or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees, and other governmental charges upon any of the Borrower or
any Subsidiary or upon any of their respective Properties, income, or
franchises, which are shown to be due and payable in such returns, have been
paid, except such taxes, assessments, fees, and governmental charges, if any, as
are being contested in good faith and by appropriate proceedings which prevent
enforcement of the matter

                                      -42-
<PAGE>

under contest and as to which adequate reserves established in accordance with
GAAP have been provided. The Borrower does not know of any proposed additional
tax assessment against the Borrower or against any of its Subsidiaries for which
adequate provisions in accordance with GAAP have not been made on their
accounts. Adequate provisions in accordance with GAAP for taxes on the books of
the Borrower and each Subsidiary have been made for all open years, and for its
current fiscal period.

      Section 6.13. Approvals. No authorization, consent, license, or exemption
from, or filing or registration with, any court or governmental department,
agency, or instrumentality, nor any approval or consent of the stockholders of
the Borrower or any Subsidiary, or any other Person, is or will be necessary to
the valid execution, delivery, or performance by the Borrower or any Subsidiary
of this Agreement or any other Loan Document, except for such approvals which
have been obtained prior to the date of this Agreement and which remain in full
force and effect.

      Section 6.14. Affiliate Transactions. Neither the Borrower nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
(other than with Wholly-Owned Subsidiaries) on terms and conditions which are
less favorable to the Borrower or such Subsidiary than would be usual and
customary in similar contracts or agreements between Persons not affiliated with
each other.

      Section 6.15. Investment Company; Public Utility Holding Company. Neither
the Borrower nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.

      Section 6.16. ERISA. The Borrower and each other member of its Controlled
Group has fulfilled its obligations under the minimum funding standards of and
is in compliance in all material respects with ERISA and the Code to the extent
applicable to it and has not incurred any liability to the PBGC or a Plan under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA. Neither the Borrower nor any Subsidiary has any contingent
liabilities with respect to any post-retirement benefits under a Welfare Plan,
other than retiree medical liability disclosed to the Lenders on the Borrower's
financial statements referred to in Section 6.5 hereof and other than liability
for continuation coverage described in Part 6 of Subtitle B of Title I of ERISA.

      Section 6.17. Compliance with Laws. (a) The Borrower and its Subsidiaries
are in compliance in all material respects with the requirements of all federal,
state, and local laws, rules, and regulations applicable to or pertaining to
their Properties or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
of 1990, and laws and regulations establishing quality criteria and standards
for air, water, land and toxic or hazardous wastes and substances), except where
any non-compliance with such requirements, individually or in the aggregate, is
not reasonably likely to have a Material Adverse Effect.

                                      -43-
<PAGE>

      (b) Without limiting the representations and warranties set forth in
Section 6.17(a) above, except for such matters which could not reasonably be
expected to result in a Material Adverse Effect, the Borrower represents and
warrants that: (i) the Borrower and its Subsidiaries, and each of the Premises,
comply in all material respects with all applicable Environmental Laws; (ii) the
Borrower and its Subsidiaries have obtained all governmental approvals required
for their operations and each of the Premises by any applicable Environmental
Law; (iii) the Borrower has no knowledge of any Release, threatened Release or
disposal of any Hazardous Material at, on, or about, any of the Premises in any
material quantity and, to the knowledge of the Borrower, none of the Premises
are materially adversely affected by any Release, threatened Release or disposal
of a Hazardous Material originating or emanating from any other property; (iv)
to the knowledge of the Borrower, none of the Premises contain and have
contained any: (1) material amounts of asbestos containing building material in
material non-compliance with any Environmental Law, (2) landfills or dumps, (3)
hazardous waste treatment, storage or disposal facility as defined pursuant to
RCRA or any comparable state law, or (4) site on or nominated for the National
Priority List promulgated pursuant to CERCLA or any state remedial priority list
promulgated or published pursuant to any comparable state law; (v) the Borrower
and its Subsidiaries have not used a material quantity of any Hazardous Material
and have conducted no Hazardous Material Activity at any of the Premises except
in material compliance with applicable Environmental Laws; (vi) the Borrower has
no knowledge of any material liability for response or corrective action,
natural resource damage or other harm pursuant to CERCLA, RCRA or any comparable
state law; (vii) the Borrower and its Subsidiaries have no notice or knowledge
of and are not required to give any notice of any Environmental Claim involving
the Borrower or any Subsidiary or any of the Premises, and the Borrower has no
knowledge of any conditions or occurrences at any of the Premises which could
reasonably be anticipated to form the basis for an Environmental Claim against
the Borrower or any Subsidiary or such Premises; (viii) none of the Premises are
subject to any, and the Borrower has no knowledge of any imminent, restriction
on the ownership, occupancy, use or transferability of the Premises in
connection with any (1) Environmental Law or (2) Release, threatened Release or
disposal of a Hazardous Material; and (ix) the Borrower has no knowledge of any
conditions or circumstances at any of the Premises which pose an unreasonable
risk to the environment or the health or safety of Persons.

      Section 6.18. Other Agreements. Neither the Borrower nor any Subsidiary is
in default under the terms of any covenant, indenture, or agreement of or
affecting such Person or any of its Property, which default if uncured,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect.

      Section 6.19. Solvency. The Borrower and its Subsidiaries, taken as a
whole, are solvent, able to pay their debts as they become due, and have
sufficient capital to carry on their business and all businesses in which they
are about to engage.

      Section 6.20. No Default. No Default or Event of Default has occurred and
is continuing.

                                      -44-
<PAGE>

SECTION 7. CONDITIONS PRECEDENT.

      The obligation of each Lender to advance, continue, or convert any Loan
(other than the continuation of, or conversion into, a Base Rate Loan) or of the
Administrative Agent to issue, extend the expiration date (including by not
giving notice of non-renewal) of or increase the amount of any Letter of Credit
under this Agreement, shall be subject to the following conditions precedent:

      Section 7.1. All Credit Events. At the time of each Credit Event
hereunder:

            (a) each of the representations and warranties set forth herein and
      in the other Loan Documents shall be and remain true and correct in all
      material respects as of said time, except to the extent the same expressly
      relate to an earlier date;

            (b) the Borrower and each Subsidiary shall be in compliance in all
      material respects with all of the terms and conditions hereof and of the
      other Loan Documents, and no Default or Event of Default shall have
      occurred and be continuing;

            (c) in the case of a Borrowing the Administrative Agent shall have
      received the notice required by Section 1.6 or 1.7 hereof, as the case may
      be, in the case of the issuance of any Letter of Credit the Administrative
      Agent shall have received a duly completed Application for such Letter of
      Credit together with any fees called for by Section 2.1 hereof and, in the
      case of an extension or increase in the amount of a Letter of Credit, a
      written request therefor in a form acceptable to the Administrative Agent
      together with fees called for by Section 2.1 hereof; and

            (d) such extension of credit shall not violate any order, judgment,
      or decree of any court or other authority or any provision of law or
      regulation applicable to the Administrative Agent or any Lender
      (including, without limitation, Regulation U of the Board of Governors of
      the Federal Reserve System) as then in effect.

Each request for a Borrowing hereunder and each request for the issuance of,
increase in the amount of, or extension of the expiration date of, a Letter of
Credit shall be deemed to be a representation and warranty by the Borrower on
the date on such Credit Event as to the facts specified in subsections (a)
through (c), both inclusive, of this Section 7.1.

      Section 7.2. Effective Date. This Agreement will become effective on the
date (the "Effective Date") the following conditions have been satisfied:

            (a) the Administrative Agent shall have received for each Lender
      this Agreement duly executed by the Borrower, its Subsidiaries party
      hereto, and the Lenders;

            (b) the Administrative Agent shall have received for each Lender
      such Lender's duly executed Notes of the Borrower dated the date hereof
      and otherwise in compliance with the provisions of Section 1.12 hereof;

                                      -45-
<PAGE>

            (c) the Administrative Agent shall have received the Pledge
      Agreement, the Security Agreement, and supplements to the existing
      Mortgages duly executed by the Borrower or the relevant Subsidiaries;

            (d) the Administrative Agent shall have received evidence of
      insurance required to be maintained under the Loan Documents, naming the
      Administrative Agent as lender's loss payee, mortgagee, and additional
      insured;

            (e) the Administrative Agent shall have received copies of the
      articles of incorporation (or comparable constituent documents) and any
      amendments thereto for the Borrower and each of its Subsidiaries party
      hereto, certified in each instance by the appropriate governmental office
      of the state of its organization;

            (f) the Administrative Agent shall have received a copy of by-laws
      (or comparable constituent documents) and any amendments thereto for the
      Borrower and each of its Subsidiaries party hereto, certified in each
      instance by its Secretary or Assistant Secretary;

            (g) the Administrative Agent shall have received copies of
      resolutions of the Board of Directors for the Borrower and each of its
      Subsidiaries party hereto authorizing the execution, delivery, and
      performance of this Agreement and the other Loan Documents to which it is
      a party and the consummation of the transactions contemplated hereby and
      thereby, together with specimen signatures of the persons authorized to
      execute such documents on the Borrower's or such Subsidiary's behalf, all
      certified in each instance by its Secretary or Assistant Secretary;

            (h) the Administrative Agent shall have received copies of the
      certificates of good standing for the Borrower and each of its
      Subsidiaries party hereto (dated no earlier than 30 days prior to the date
      hereof) from the office of the secretary of the state of its incorporation
      and of each state in which it is qualified to do business as a foreign
      corporation;

            (i) the Administrative Agent shall have received a list of the
      Borrower's Authorized Representatives;

            (j) the Administrative Agent shall have received the fee letter
      described in Section 2.1(c) hereof together with payment of the initial
      fees called for thereby;

            (k) each Lender shall have received such evaluations and
      certifications as it may reasonably require (including (i) financial
      statements of the Borrower and its Subsidiaries for the fiscal quarter
      ended March 31, 2005, (ii) updated five-year pro forma financial
      statements of the Borrower and its Subsidiaries, each in form and
      substance reasonably acceptable to the Administrative Agent, and (iii)
      satisfactory evidence that, for the twelve (12) consecutive month period
      ended immediately prior to the Effective Date, the Borrower's EBITDA was
      greater than or equal to $32,000,000 and the Total Funded Debt/Adjusted
      EBITDA Ratio was less than 3.15 to 1.0) in order to satisfy itself as to
      the

                                      -46-
<PAGE>

      value of the Collateral, the financial condition of the Borrower and its
      Subsidiaries, and the lack of material contingent liabilities of the
      Borrower and its Subsidiaries;

            (l) the Administrative Agent shall have received for each Lender the
      favorable written opinions of counsel to the Borrower and its Subsidiaries
      party hereto, in form and substance reasonably satisfactory to the
      Administrative Agent; and

            (m) the Administrative Agent shall have received for the account of
      the Lenders such other agreements, instruments, documents, certificates,
      and opinions as the Administrative Agent may reasonably request.

SECTION 8. COVENANTS.

      The Borrower agrees that, so long as any credit is available to or in use
by the Borrower hereunder, except to the extent compliance in any case or cases
is waived in writing pursuant to the terms of Section 13.14 hereof:

      Section 8.1. Maintenance of Business. The Borrower shall, and shall cause
each Subsidiary to, preserve, and maintain its existence, except as otherwise
provided in Section 8.10(c) hereof. The Borrower shall, and shall cause each
Subsidiary to, preserve and keep in force and effect all licenses, permits,
franchises, approvals, patents, trademarks, trade names, trade styles,
copyrights, and other proprietary rights necessary to the proper conduct of its
business where the failure to do so is reasonably likely to have a Material
Adverse Effect.

      Section 8.2. Maintenance of Properties. The Borrower shall, and shall
cause each Subsidiary to, maintain, preserve, and keep its property, plant, and
equipment in good repair, working order, and condition (ordinary wear and tear
excepted) and shall from time to time make all needful and proper repairs,
renewals, replacements, additions, and betterments thereto so that at all times
the efficiency thereof shall be preserved and maintained, except to the extent
that, in the reasonable business judgment of such Person, any such Property is
no longer necessary for the proper conduct of the business of such Person.

      Section 8.3. Taxes and Assessments. The Borrower shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, all taxes,
rates, assessments, fees, and governmental charges upon or against it or its
Property, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves are provided therefor.

      Section 8.4. Insurance. The Borrower shall insure and keep insured, and
shall cause each Subsidiary to insure and keep insured, with good and
responsible insurance companies, all insurable Property owned by it which is of
a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Borrower shall insure, and shall cause each Subsidiary to
insure, such other hazards and risks (including employers' and public liability
risks) with good and responsible insurance companies

                                      -47-
<PAGE>

as and to the extent usually insured by Persons similarly situated and
conducting similar businesses. The Borrower shall in any event maintain, and
cause each Subsidiary to maintain, insurance on the Collateral to the extent
required by the Collateral Documents. The Borrower shall, upon the request of
the Administrative Agent, furnish to the Administrative Agent and the Lenders a
certificate setting forth in summary form the nature and extent of the insurance
maintained pursuant to this Section.

      Section 8.5. Financial Reports. The Borrower shall, and shall cause each
Subsidiary to, maintain a standard system of accounting in accordance with GAAP
and shall furnish to the Administrative Agent, each Lender, and each of their
duly authorized representatives such information respecting the business and
financial condition of the Borrower and of each Subsidiary as the Administrative
Agent or such Lender may reasonably request; and without any request, the
Borrower shall furnish to the Administrative Agent and the Lenders:

            (a) as soon as available, and in any event within 45 days after the
      close of each of the first three fiscal quarters of each fiscal year, a
      copy of the consolidated balance sheet of the Borrower and its
      Subsidiaries as of the last day of such period and the consolidated
      statements of income, retained earnings, and cash flows of the Borrower
      and its Subsidiaries for the fiscal quarter and for the fiscal
      year-to-date period then ended, each in reasonable detail and showing in
      comparative form the figures for the corresponding date and period in the
      previous fiscal year, prepared by the Borrower in accordance with GAAP
      (subject to the absence of footnote disclosures and year-end audit
      adjustments) and certified to by its chief financial officer or another
      officer of the Borrower acceptable to the Administrative Agent;

            (b) as soon as available, and in any event within 90 days after the
      close of each fiscal year of the Borrower, a copy of the consolidated and
      consolidating balance sheet of the Borrower and its Subsidiaries as of the
      last day of the period then ended and the consolidated statements of
      income, retained earnings, and cash flows of the Borrower and its
      Subsidiaries for the period then ended, and accompanying notes thereto,
      each in reasonable detail showing in comparative form the figures for the
      previous fiscal year, accompanied in the case of the consolidated
      financial statements by an unqualified opinion of Ernst & Young LLP or
      another firm of independent registered public accountants of recognized
      standing, selected by the Borrower and reasonably satisfactory to the
      Administrative Agent, to the effect that the consolidated financial
      statements have been prepared in accordance with GAAP and present fairly
      in all material respects in accordance with GAAP the consolidated
      financial condition of the Borrower and its Subsidiaries as of the close
      of such fiscal year and the results of their operations and cash flows for
      the fiscal year then ended and that an examination of such accounts in
      connection with such financial statements has been made in accordance with
      generally accepted auditing standards and, accordingly, such examination
      included such tests of the accounting records and such other auditing
      procedures as were considered necessary in the circumstances;

            (c) promptly after receipt thereof, any additional written reports,
      management letters or other detailed information contained in writing
      concerning significant aspects of

                                      -48-
<PAGE>

      the Borrower's or any Subsidiary's operations and financial affairs given
      to it by its independent registered public accounting firms;

            (d) promptly after the sending or filing thereof, copies of each
      financial statement, report, notice or proxy statement sent by the
      Borrower, or any Subsidiary, to its stockholders, and copies of each
      regular, periodic or special report, registration statement or prospectus
      filed by the Borrower, or any Subsidiary, with any securities exchange or
      the Securities and Exchange Commission or any successor agency;

            (e) as soon as available, and in any event no later than 30 days
      after the end of each fiscal year of the Borrower, a copy of the
      Borrower's consolidated and consolidating operating budget for the current
      fiscal year, such operating budget to show the Borrower's projected
      consolidated and consolidating revenues, expenses, and balance sheet on
      quarter-by-quarter basis, such operating budget to be in reasonable detail
      prepared by the Borrower and in form satisfactory to the Administrative
      Agent (which shall include a summary of all material assumptions made in
      preparing such operating budget);

            (f) notice of any Change in Control;

            (g) promptly after knowledge thereof shall have come to the
      attention of any responsible officer of the Borrower, written notice of
      any threatened or pending litigation or governmental proceeding or labor
      controversy against the Borrower or any Subsidiary which, if adversely
      determined, is reasonably likely to have a Material Adverse Effect or of
      the occurrence of any Default or Event of Default hereunder;

            (h) promptly after knowledge thereof shall have come to the
      attention of any responsible officer of the Borrower or any Subsidiary,
      written notice of any default under any Reimbursement Agreement or any
      Bond Document; and

            (i) as soon as available, and in any event within 45 days after the
      last day of each fiscal quarter of the Borrower, a written certificate in
      the form attached hereto as Exhibit E signed by the chief financial
      officer of the Borrower, or such other officer of the Borrower acceptable
      to the Administrative Agent, to the effect that to the best of such
      officer's knowledge and belief no Default or Event of Default has occurred
      during the period covered by the most recent financial statements
      furnished pursuant to Section 8.5(a) or Section 8.5(b) above or, if any
      such Default or Event of Default has occurred during such period, setting
      forth a description of such Default or Event of Default and specifying the
      action, if any, taken by the Borrower to remedy the same together with
      calculations supporting such statements in respect of Section 8.21 of this
      Agreement.

      Section 8.6. Inspection. The Borrower shall, and shall cause each
Subsidiary to, permit the Administrative Agent, each Lender, and each of their
duly authorized representatives and agents to visit and inspect any of its
Properties, corporate books, and financial records, to examine and make copies
of its books of accounts and other financial records, and to discuss its
affairs, finances, and accounts with, and to be advised as to the same by, its
officers, employees,

                                      -49-
<PAGE>

and independent public accountants (and by this provision the Borrower hereby
authorizes such accountants to discuss with the Administrative Agent and such
Lenders the finances and affairs of the Borrower and each of its Subsidiaries)
at such reasonable times and intervals as the Administrative Agent or any such
Lender may designate. So long as no Event of Default has occurred and is
continuing, the Borrower shall not be obligated to reimburse the Administrative
Agent for its expenses incurred in connection with more than one such inspection
per calendar year. Any Lender may, upon reasonable prior notice to the Borrower,
accompany the Administrative Agent on such inspections at that Lender's own
expense.

      Section 8.7. Borrowings and Guaranties. The Borrower shall not, nor shall
it permit any of its Subsidiaries to, issue, incur, assume, create, or have
outstanding any Indebtedness for Borrowed Money, or be or become liable as
endorser, guarantor, surety, or otherwise for any debt, obligation, or
undertaking of any other Person, or otherwise agree to provide funds for payment
of the obligations of another, or supply funds thereto or invest therein or
otherwise assure a creditor of another against loss, or apply for or become
liable to the issuer of a letter of credit which supports an obligation of
another, or subordinate any claim or demand it may have to the claim or demand
of any other Person; provided, however, that the foregoing shall not restrict
nor operate to prevent:

            (a) the Obligations of the Borrower and its Subsidiaries owing to
      the Administrative Agent and the Lenders under the Loan Documents;

            (b) obligations of the Borrower arising out of interest rate hedging
      agreements entered into with financial institutions in the ordinary course
      of business (including, without limitation, the Hedging Liability owed to
      the Lenders and their Affiliates);

            (c) endorsement of items for deposit or collection of commercial
      paper received in the ordinary course of business;

            (d) indebtedness from time to time owing by any Domestic Subsidiary
      to the Borrower or to any other Domestic Subsidiary or by the Borrower to
      any Domestic Subsidiary;

            (e) indebtedness from time to time owing by any Foreign Subsidiary
      to the Borrower or to any other Subsidiary to the extent permitted by
      Section 8.9(h) hereof;

            (f) indebtedness identified and described on Schedule 8.7/8.8
      hereof, as reduced by payments of principal and interest thereon (and any
      refinancing, extension, renewal or refunding of the then outstanding
      principal balance thereof);

            (g) other indebtedness of the Borrower and its Subsidiaries
      (including, without limitation, purchase money indebtedness and
      Capitalized Lease Obligations) in an aggregate amount at any one time
      outstanding not to exceed 10% of Net Worth of the Borrower and its
      Subsidiaries as reflected on their most recent year-end audited financial
      statements; and

                                      -50-
<PAGE>

            (h) indebtedness relating to the Bonds.

      Section 8.8. Liens. The Borrower shall not, nor shall it permit any of its
Subsidiaries to, create, incur, or permit to exist any Lien of any kind on any
Property owned by any such Person; provided, however, that the foregoing shall
not apply to nor operate to prevent:

            (a) Liens arising by statute in connection with worker's
      compensation, unemployment insurance, old age benefits, social security
      obligations, taxes, assessments, statutory obligations or other similar
      charges (other than Liens arising under ERISA), good faith cash deposits
      in connection with tenders, contracts, or leases to which the Borrower or
      any Subsidiary is a party or other cash deposits required to be made in
      the ordinary course of business, provided in each case that the obligation
      is not for borrowed money and that the obligation secured is not overdue
      or, if overdue, is being contested in good faith by appropriate
      proceedings which prevent enforcement of the matter under contest and
      adequate reserves have been established therefor;

            (b) mechanics', workmen's, materialmen's, landlords', carriers', or
      other similar Liens arising in the ordinary course of business with
      respect to obligations which are not due or which are being contested in
      good faith by appropriate proceedings which prevent enforcement of the
      matter under contest;

            (c) judgment liens and judicial attachment liens not constituting an
      Event of Default under Section 9.1(g) hereof and the pledge of assets for
      the purpose of securing an appeal, stay or discharge in the course of any
      legal proceeding, provided that the aggregate amount (but without
      duplication) of such judgment liens and liabilities of the Borrower and
      its Subsidiaries secured by a pledge of assets permitted under this
      subsection, including interest and penalties thereon, if any, shall not be
      in excess of $500,000 at any one time outstanding;

            (d) the Liens granted in favor of the Administrative Agent pursuant
      to the Collateral Documents;

            (e) Liens identified and described on Schedule 8.7/8.8 hereof
      securing indebtedness permitted by Section 8.7(f) hereof;

            (f) Liens on property of the Borrower or any Subsidiary created
      solely for the purpose of securing indebtedness permitted by Section
      8.7(g) hereof, representing or incurred to finance, refinance, or refund
      the purchase price of Property, provided that (i) no such Lien shall
      extend to or cover other Property of the Borrower or such Subsidiary other
      than the respective Property so acquired, (ii) the principal amount of
      indebtedness secured by any such Lien shall at no time exceed the original
      purchase price of such Property, as reduced by repayments of principal
      thereon, and (iii) the aggregate principal amount of all such indebtedness
      secured by such Liens shall not at any one time exceed 5% of Total Assets
      of the Borrower and its Subsidiaries as reflected on their most recent
      year-end audited financial statements;

                                      -51-
<PAGE>

            (g) any interest or title of a lessor or sublessor under any
      operating lease; and

            (h) easements, rights-of-way, restrictions, and other similar
      encumbrances incurred in the ordinary course of business which, in the
      aggregate, are not substantial in amount and which do not materially
      detract from the value of the Property subject thereto or materially
      interfere with the ordinary conduct of the business of the Borrower or any
      Subsidiary.

      Section 8.9. Investments, Acquisitions, Loans, and Advances. The Borrower
shall not, nor shall it permit any of its Subsidiaries to, directly or
indirectly, make, retain, or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or advances (other
than for travel advances and other similar cash advances made to employees in
the ordinary course of business) to, any other Person, or acquire all or any
substantial part of the assets or business of any other Person or division
thereof; provided, however, that the foregoing shall not apply to nor operate to
prevent:

            (a) investments in direct obligations of the United States of
      America or of any agency or instrumentality thereof whose obligations
      constitute full faith and credit obligations of the United States of
      America, provided that any such obligations shall mature within one year
      of the date of issuance thereof;

            (b) investments in commercial paper rated at least P-1 by Moody's
      and at least A-1 by S&P maturing within one year of the date of issuance
      thereof;

            (c) investments in certificates of deposit issued by any Lender or
      by any United States commercial bank having capital and surplus of not
      less than $100,000,000 which have a maturity of one year or less;

            (d) investments in repurchase obligations with a term of not more
      than 7 days for underlying securities of the types described in subsection
      (a) above entered into with any bank meeting the qualifications specified
      in subsection (c) above, provided all such agreements require physical
      delivery of the securities securing such repurchase agreement, except
      those delivered through the Federal Reserve Book Entry System;

            (e) investments in money market funds that invest solely, and which
      are restricted by their respective charters to invest solely, in
      investments of the type described in the immediately preceding subsections
      (a), (b), (c), and (d) above;

            (f) the Borrower's and each Domestic Subsidiary's investments made
      from time to time in its Domestic Subsidiaries;

            (g) intercompany advances made from time to time from the Borrower
      or any Domestic Subsidiary to any one or more other Domestic Subsidiaries
      in the ordinary course of business;

                                      -52-
<PAGE>

            (h) investments, loans, and advances made by the Borrower and its
      Subsidiaries in Foreign Subsidiaries existing on the date hereof and
      identified and described on Schedule 8.9 hereof, and additional
      investments, loans, and advances made after the date hereof by the
      Borrower and its Subsidiaries in Foreign Subsidiaries in an aggregate
      amount not to exceed $5,000,000 at any one time outstanding;

            (i) investments received in connection with or as a result of a
      bankruptcy, insolvency or similar reorganization of a customer;

            (j) Permitted Acquisitions; and

            (k) other investments, loans, and advances in addition to those
      otherwise permitted by this Section, including investments in joint
      ventures entered into in the ordinary course of business, in an aggregate
      amount not to exceed $2,500,000 at any one time outstanding.

In determining the amount of investments, acquisitions, loans, and advances
permitted under this Section, investments and acquisitions shall always be taken
at the original cost thereof (regardless of any subsequent appreciation or
depreciation therein), and loans and advances shall be taken at the principal
amount thereof then remaining unpaid.

      Section 8.10. Mergers, Consolidations and Sales. The Borrower shall not,
nor shall it permit any of its Subsidiaries to, be a party to any merger or
consolidation or amalgamation, or sell, transfer, lease, or otherwise dispose of
all or any part of its Property, including any disposition of Property as part
of a sale and leaseback transaction, or in any event sell or discount (with or
without recourse) any of its notes or accounts receivable; provided, however,
that so long as no Default or Event of Default exists (except as otherwise
permitted by the Security Agreement) this Section shall not apply to nor operate
to prevent:

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

            (b) the sale, transfer, lease, or other disposition of Property of
      the Borrower or any Domestic Subsidiary to one another in the ordinary
      course of its business;

            (c) the merger of any Subsidiary with and into the Borrower or any
      other Domestic Subsidiary, provided that, in the case of any merger
      involving the Borrower, the Borrower is the corporation surviving the
      merger;

            (d) the sale of delinquent notes or accounts receivable in the
      ordinary course of business for purposes of collection only (and not for
      the purpose of any bulk sale or securitization transaction);

            (e) the sale, transfer, or other disposition of any tangible
      personal property that, in the reasonable business judgment of the
      Borrower or its Subsidiary has become uneconomical, obsolete, or worn out,
      and which is disposed of in the ordinary course of business;

                                      -53-
<PAGE>

            (f) any disposition of Property as part of a sale and leaseback
      transaction aggregating not more that $20,000,000 during the term of this
      Agreement; provided that (i) at the time of such sale and leaseback
      transaction, and after giving effect thereto, no Default or Event of
      Default exists, (ii) the consideration for the sale and leaseback
      transaction is payable in cash and in an amount not less than the fair
      market value of such Property, (iii) the sale and leaseback transaction is
      with a third party not affiliated with the Borrower, and (iv)
      notwithstanding Section 1.10(b)(iii) hereof to the contrary, 100% of the
      Net Cash Proceeds thereof are applied as a prepayment of the Obligations
      (applied first to the outstanding Term Loans until paid in full and then
      to the outstanding Revolving Credit (which, in the case of the Revolving
      Credit, may be reborrowed or otherwise readvanced subject to the terms and
      conditions hereof)); and

            (g) the sale, transfer, lease, or other disposition of Property of
      the Borrower or any Subsidiary aggregating for the Borrower and its
      Subsidiaries during the 12-month period ending on and including the date
      of such disposition not more than 5% of Total Assets of the Borrower and
      its Subsidiaries as reflected on their most recent year-end audited
      financial statements.

      Section 8.11. Maintenance of Subsidiaries. The Borrower shall not assign,
sell, or transfer, nor shall it permit any of its Subsidiaries to issue, assign,
sell, or transfer, any shares of capital stock of a Subsidiary (or any direct or
indirect interest therein, whether by options, warrants, or otherwise);
provided, however, that the foregoing shall not operate to prevent (a) Liens on
the capital stock of Subsidiaries granted to the Administrative Agent pursuant
to the Collateral Documents, (b) the issuance, sale, and transfer to any person
of any shares of capital stock of a Subsidiary solely for the purpose of
qualifying, and to the extent legally necessary to qualify, such person as a
director of such Subsidiary, and (c) any transaction permitted by Section
8.10(c) above.

      Section 8.12. Dividends and Certain Other Restricted Payments. The
Borrower shall not, nor shall it permit any of its Subsidiaries to, declare or
pay any dividends on or make any other distributions in respect of any class or
series of its capital stock, or directly or indirectly purchase, redeem or
otherwise acquire or retire any of its capital stock (collectively, "Restricted
Payments"); provided, however, that the foregoing shall not operate to prevent:
(a) the making of dividends or distributions to the Borrower by any of its
Subsidiaries, and (b) Restricted Payments consisting of the purchase by the
Borrower of shares of its common stock for the sole purpose of the funding of
the Borrower's deferred compensation plan in accordance with its terms in a
maximum amount of $250,000 per fiscal year.

      Section 8.13. ERISA. The Borrower shall, and shall cause each of its
Subsidiaries to, promptly pay and discharge all obligations and liabilities
arising under ERISA of a character which if unpaid or unperformed is reasonably
likely to result in the imposition of a Lien against any of its Property. The
Borrower shall, and shall cause each of its Subsidiaries to, promptly notify the
Administrative Agent and each Lender of (a) the occurrence of any reportable
event (as defined in ERISA and the regulations thereunder) with respect to a
Plan, other than those events as to which the notice requirement is waived under
the PBGC's regulations, (b) receipt of any notice from the PBGC of its intention
to seek termination of any Plan or appointment of a trustee

                                      -54-
<PAGE>

therefor, (c) its intention to terminate or withdraw from any Plan, and (d) the
occurrence of any event with respect to any Plan which would result in the
incurrence by the Borrower or any Subsidiary of any material liability, fine, or
penalty, or any material increase in the contingent liability of the Borrower or
any Subsidiary with respect to any post-retirement Welfare Plan benefit.

      Section 8.14. Compliance with Laws. (a) The Borrower shall, and shall
cause each of its Subsidiaries to, comply in all material respects with the
requirements of all federal, state, and local laws, rules, regulations,
ordinances, and orders applicable to or pertaining to its Property or business
operations, except where any non-compliance with such requirements, individually
or in the aggregate, is not reasonably likely to have a Material Adverse Effect
or could result in a Lien upon any of their Property.

      (b) Without limiting the agreements set forth in Section 8.14(a) above,
the Borrower shall at all times, and shall cause each Subsidiary to at all
times, do the following to the extent the failure to do so could reasonably be
expected to have a Material Adverse Effect: (i) comply in all material respects
with, and maintain each of the Premises in compliance in all material respects
with, all applicable Environmental Laws; (ii) require that each tenant and
subtenant, if any, of any of the Premises or any part thereof comply in all
material respects with all applicable Environmental Laws; (iii) obtain and
maintain in full force and effect all material governmental approvals required
by any applicable Environmental Law for operations at each of the Premises; (iv)
cure any material violation by it or at any of the Premises of applicable
Environmental Laws; (v) not allow the operation at any of the Premises of any
(1) landfill or dump or (2) hazardous waste treatment, storage, or disposal
facility or solid waste disposal facility as defined pursuant to RCRA or any
comparable state law; (vi) not manufacture, use, generate, transport, treat,
store, release, dispose or handle any Hazardous Material at any of the Premises
except in the ordinary course of its business and in material compliance with
Environmental Law; (vii) within 10 Business Days notify the Administrative Agent
in writing of and provide any reasonably requested documents upon learning of
any of the following in connection with the Borrower or any Subsidiary or any of
the Premises: (1) any material liability for response or corrective action,
natural resource damage or other harm pursuant to CERCLA, RCRA or any comparable
state law; (2) any material Environmental Claim; (3) any material violation of
an Environmental Law or material Release, threatened Release or disposal of a
Hazardous Material; (4) any restriction on the ownership, occupancy, use or
transferability arising pursuant to any (x) Release, threatened Release or
disposal of a Hazardous Substance or (y) Environmental Law; or (5) any
environmental, natural resource, health or safety condition, which could
reasonably be expected to have a Material Adverse Effect; (viii) conduct at its
expense any investigation, study, sampling, testing, abatement, cleanup,
removal, remediation or other response action necessary to remove, remediate,
clean up or abate any material Release, threatened Release or disposal of a
Hazardous Material as required by any applicable Environmental Law, (ix) abide
by and observe any restrictions on the use of the Premises imposed by any
governmental authority as set forth in a deed or other instrument affecting the
Borrower's or any Subsidiary's interest therein; (x) promptly provide or
otherwise make available to the Administrative Agent any reasonably requested
non-privileged environmental record concerning the Premises which the Borrower
or any Subsidiary possesses or can reasonably obtain; and (xi) perform, satisfy,
and implement any operation or maintenance actions required by any Environmental
Law, or included in any no

                                      -55-
<PAGE>

further action letter or covenant not to sue issued by any governmental
authority under any Environmental Law.

      Section 8.15. Burdensome Contracts With Affiliates. The Borrower shall
not, nor shall it permit any of its Subsidiaries to, enter into any contract,
agreement, or business arrangement with any of its Affiliates (other than with
Wholly-Owned Subsidiaries that are Guarantors) on terms and conditions which are
less favorable to the Borrower or such Subsidiary than would be usual and
customary in similar contracts, agreements, or business arrangements between
Persons not affiliated with each other.

      Section 8.16. No Changes in Fiscal Year. The fiscal year of the Borrower
and its Subsidiaries ends on the Saturday that is closest to December 31st of
each year, and the Borrower shall not, nor shall it permit any of its
Subsidiaries to, change its fiscal year from its present basis.

      Section 8.17. Formation of Subsidiaries. Prior to the formation or
acquisition of any Subsidiary, the Borrower shall provide the Administrative
Agent prior written notice thereof. In the event the Borrower forms or acquires
any Subsidiary, the Borrower shall at its expense cause the capital stock and
other equity interest of such Subsidiary owned by the Borrower or another
Subsidiary to be pledged to the Administrative Agent pursuant to Section 4
hereof (and, in the case of a Foreign Subsidiary, only to the extent required by
Section 4.1 hereof) and cause such Subsidiary to the extent required by Section
4.4 hereof to guarantee the Obligations pursuant to Section 12 hereof (and, in
that regard, the Borrower shall cause such Subsidiary to execute an Additional
Guarantor Supplement in the form attached hereto as Exhibit F or in such other
form acceptable to the Administrative Agent) and to pledge to the Administrative
Agent a Lien on such Subsidiary's real and personal property pursuant to such
Collateral Documents as the Administrative Agent may request together with such
other instruments, documents, certificates, and opinions as the Administrative
Agent may require.

      Section 8.18. Change in the Nature of Business. The Borrower shall not,
nor shall it permit any of its Subsidiaries to, engage in any business or
activity if as a result the general nature of the business of the Borrower or
any Subsidiary would be changed in any material respect from the general nature
of the business engaged in by it as of the date of this Agreement.

      Section 8.19. Use of Loan Proceeds. The Borrower shall use the credit
extended under this Agreement solely for the purposes set forth in, or otherwise
permitted by, Section 6.4 hereof.

      Section 8.20. No Restrictions on Subsidiary Distributions. Except as
provided herein, the Borrower shall not, nor shall it permit any of its
Subsidiaries to, directly or indirectly create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of the Borrower or any Subsidiary to: (a) guarantee the
Obligations and grant Liens on its assets to the Administrative Agent for the
benefit of the Lenders as required by Sections 4 and 12 hereof, or (b) in the
case of any Subsidiary, pay dividends or make any other distribution on any of
such Subsidiary's capital stock or other equity interests owned by the Borrower
or any Subsidiary.

                                      -56-
<PAGE>

      Section 8.21. Financial Covenants. (a) Net Worth. The Borrower shall at
all times maintain Net Worth in an amount not less than the sum of (a)
$45,000,000, plus (b) 50% of Net Income for each fiscal quarter of the Borrower
ending on or after June 30, 2005 (i.e., commencing with the fiscal quarter
beginning March 31, 2005), for which such Net Income is a positive amount (i.e.,
there shall be no reduction to the minimum amount of Net Worth required to be
maintained hereunder for any fiscal quarter in which Net Income is less than
zero).

      (b) Total Funded Debt/Adjusted EBITDA Ratio. As of the last day of each
fiscal quarter of the Borrower ending during each of the periods specified
below, the Borrower shall not permit the Total Funded Debt/Adjusted EBITDA Ratio
for the four fiscal quarters of the Borrower then ended to be greater than:

<TABLE>
<CAPTION>
                                                          TOTAL FUNDED
FROM AND INCLUDING         TO AND INCLUDING          DEBT/ADJUSTED EBITDA
THE FISCAL QUARTER        THE FISCAL QUARTER      RATIO SHALL NOT BE GREATER
ENDING ON OR ABOUT        ENDING ON OR ABOUT                THAN:
<S>                    <C>                        <C>
   June 30, 2005          September 30, 2005             3.50 to 1.0

 December 31, 2005          June 30, 2006                3.0 to 1.0

September 30, 2006     at all times thereafter           2.75 to 1.0
</TABLE>

      (c) Fixed Charge Coverage Ratio. As of the last day of each fiscal quarter
of the Borrower, the Borrower shall not permit the ratio of (a) EBITDA for the
four fiscal quarters of the Borrower then ended (provided if EBITDA for such
period is less than $1, then for purposes of this covenant EBITDA shall be
deemed to be $1) less Capital Expenditures for such period to (b) Fixed Charges
for the same four fiscal quarters then ended to be less than 1.15 to 1.0.

      (d) Capital Expenditures. The Borrower shall not, nor shall it permit any
Subsidiary to, incur Capital Expenditures in an aggregate amount in excess of
$12,500,000 during any fiscal year, provided that the Borrower and the
Subsidiaries may carry over into the immediately succeeding fiscal year that
portion of such permitted amount not actually incurred during such fiscal year.

      (e) Operating Leases. The Borrower shall not, nor shall it permit any
Subsidiary to, acquire the use or possession of any Property under a lease or
similar arrangement, whether or not the Borrower or any Subsidiary has the
express or implied right to acquire title to or purchase such Property, at any
time if, after giving effect thereto, the aggregate amount of fixed rentals and
other consideration payable by the Borrower and its Subsidiaries under all such
leases and similar arrangements would exceed $10,000,000 (excluding any amounts
attributable to a sale and leaseback transaction permitted by this Agreement)
during any fiscal year of the Borrower. Capital Leases shall not be included in
computing compliance with this Section to the extent the Borrower's and its
Subsidiaries' liability in respect of the same is permitted by Section 8.7(g)
hereof.

      Section 8.22. Post-Closing. Within sixty (60) days of the date hereof, the
Borrower shall cause to be delivered to the Administrative Agent date down
endorsements to the mortgagee's

                                      -57-
<PAGE>

title insurance policies insuring the Liens of the Mortgages as supplemented to
be valid first priority Liens subject to no defects or objections which are
unacceptable in the reasonable judgment of the Administrative Agent, together
with such endorsements as the Administrative Agent may reasonably require.

SECTION 9. EVENTS OF DEFAULT AND REMEDIES.

      Section 9.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:

            (a) (i) default in the payment when due of all or any part of the
      principal of any Note (whether at the stated maturity thereof or at any
      other time provided for in this Agreement) or (ii) default for a period of
      5 days in the payment when due of all or any part of the interest on any
      Note or of any Reimbursement Obligation or of any fee or other Obligation
      payable hereunder or under any other Loan Document;

            (b) default in the observance or performance of any covenant set
      forth in Sections 8.1, 8.5(a), 8.5(b), 8.5(e), 8.5(f), 8.5(g), 8.5(h),
      8.5(i), 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.16, 8.18, or 8.21 hereof or of
      any provision in any Loan Document dealing with the use, disposition or
      remittance of the proceeds of Collateral or requiring the maintenance of
      insurance thereon;

            (c) default in the observance or performance of any other provision
      hereof or of any other Loan Document which is not remedied within 30 days
      after the earlier of (i) the date on which such default shall first become
      known to any senior officer of the Borrower or (ii) written notice thereof
      is given to the Borrower by the Administrative Agent;

            (d) any representation or warranty made herein or in any other Loan
      Document or in any certificate furnished to the Administrative Agent or
      the Lenders pursuant hereto or thereto or in connection with any
      transaction contemplated hereby or thereby proves untrue in any material
      respect as of the date of the issuance or making or deemed making thereof;

            (e) any event occurs or condition exists (other than those described
      in subsections (a) through (d) above) which is specified as an event of
      default under any of the other Loan Documents, or any of the Loan
      Documents shall for any reason not be or shall cease to be in full force
      and effect or is declared to be null and void, or any of the Collateral
      Documents shall for any reason fail to create a valid and perfected first
      priority Lien in favor of the Administrative Agent in any Collateral
      purported to be covered thereby except as expressly permitted by the terms
      thereof, or any Subsidiary takes any action for the purpose of
      terminating, repudiating, or rescinding any Loan Document executed by it
      or any of its obligations thereunder;

            (f) default shall occur under any Indebtedness for Borrowed Money
      issued, assumed or guaranteed by the Borrower or any Subsidiary
      aggregating in excess of

                                      -58-
<PAGE>

      $500,000, or under any indenture, agreement, or other instrument under
      which such Indebtedness for Borrowed Money may be issued, and such default
      shall continue for a period of time sufficient to permit the acceleration
      of the maturity of any such Indebtedness for Borrowed Money (whether or
      not such maturity is in fact accelerated), or any such Indebtedness for
      Borrowed Money shall not be paid when due after giving effect to any
      applicable grace periods provided therein (whether by demand, lapse of
      time, acceleration or otherwise);

            (g) any judgment or judgments, writ or writs, or warrant or warrants
      of attachment, or any similar process or processes shall be entered or
      filed against the Parent, the Borrower or any Subsidiary, or against any
      of their Property, in an aggregate amount in excess of $500,000 (except to
      the extent fully covered by insurance pursuant to which the insurer has
      accepted liability therefor in writing), and which remains undischarged,
      unvacated, unbonded, or unstayed for a period of 30 days;

            (h) the Borrower or any Subsidiary, or any member of its Controlled
      Group, shall fail to pay when due an amount or amounts aggregating in
      excess of $250,000 which it shall have become liable to pay to the PBGC or
      to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan
      or Plans having aggregate Unfunded Vested Liabilities in excess of
      $250,000 (collectively, a "Material Plan") shall be filed under Title IV
      of ERISA by the Parent, the Borrower or any Subsidiary, or any other
      member of its Controlled Group, any plan administrator or any combination
      of the foregoing; or the PBGC shall institute proceedings under Title IV
      of ERISA to terminate or to cause a trustee to be appointed to administer
      any Material Plan or a proceeding shall be instituted by a fiduciary of
      any Material Plan against the Borrower or any Subsidiary, or any member of
      its Controlled Group, to enforce Section 515 or 4219(c)(5) of ERISA and
      such proceeding shall not have been dismissed within 30 days thereafter;
      or a condition shall exist by reason of which the PBGC would be entitled
      to obtain a decree adjudicating that any Material Plan must be terminated;

            (i) the Borrower or any Subsidiary shall (i) have entered
      involuntarily against it an order for relief under the United States
      Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
      inability to pay, its debts generally as they become due, (iii) make an
      assignment for the benefit of creditors, (iv) apply for, seek, consent to,
      or acquiesce in, the appointment of a receiver, custodian, trustee,
      examiner, liquidator, or similar official for it or any substantial part
      of its Property, (v) institute any proceeding seeking to have entered
      against it an order for relief under the United States Bankruptcy Code, as
      amended, to adjudicate it insolvent, or seeking dissolution, winding up,
      liquidation, reorganization, arrangement, adjustment, or composition of it
      or its debts under any law relating to bankruptcy, insolvency, or
      reorganization or relief of debtors or fail to file an answer or other
      pleading denying the material allegations of any such proceeding filed
      against it, (vi) take any corporate action in furtherance of any matter
      described in parts (i) through (v) above, or (vii) fail to contest in good
      faith any appointment or proceeding described in Section 9.1(j) hereof;

                                      -59-
<PAGE>

            (j) a custodian, receiver, trustee, examiner, liquidator, or similar
      official shall be appointed for the Borrower or any Subsidiary, or any
      substantial part of any of its Property, or a proceeding described in
      Section 9.1(i)(v) shall be instituted against the Borrower or any
      Subsidiary, and such appointment continues undischarged or such proceeding
      continues undismissed or unstayed for a period of 60 days; or

            (k) any event occurs or conditions exists which is specified as an
      event of default under any Reimbursement Agreement or any Bond Document.

      Section 9.2. Non-Bankruptcy Defaults. When any Event of Default other than
those described in subsection (i) or (j) of Section 9.1 hereof has occurred and
is continuing, the Administrative Agent shall, by written notice to the
Borrower: (a) if so directed by the Required Lenders, terminate the remaining
Commitments and all other obligations of the Lenders hereunder on the date
stated in such notice (which may be the date thereof); (b) if so directed by the
Required Lenders, declare the principal of and the accrued interest on all
outstanding Notes to be forthwith due and payable and thereupon all outstanding
Notes, including both principal and interest thereon, shall be and become
immediately due and payable together with all other amounts payable under the
Loan Documents without further demand, presentment, protest, or notice of any
kind; and (c) if so directed by the Required Lenders, demand that the Borrower
immediately pay to the Administrative Agent the full amount then available for
drawing under each or any Letter of Credit, and the Borrower agrees to
immediately make such payment and acknowledges and agrees that the Lenders would
not have an adequate remedy at law for failure by the Borrower to honor any such
demand and that the Administrative Agent, for the benefit of the Lenders, shall
have the right to require the Borrower to specifically perform such undertaking
whether or not any drawings or other demands for payment have been made under
any Letter of Credit. The Administrative Agent, after giving notice to the
Borrower pursuant to Section 9.1(c) or this Section 9.2, shall also promptly
send a copy of such notice to the other Lenders, but the failure to do so shall
not impair or annul the effect of such notice.

      Section 9.3. Bankruptcy Defaults. When any Event of Default described in
subsections (i) or (j) of Section 9.1 hereof has occurred and is continuing,
then all outstanding Notes shall immediately become due and payable together
with all other amounts payable under the Loan Documents without presentment,
demand, protest, or notice of any kind, the obligation of the Lenders to extend
further credit pursuant to any of the terms hereof shall immediately terminate
and the Borrower shall immediately pay to the Administrative Agent the full
amount then available for drawing under all outstanding Letters of Credit, the
Borrower acknowledging and agreeing that the Lenders would not have an adequate
remedy at law for failure by the Borrower to honor any such demand and that the
Lenders, and the Administrative Agent on their behalf, shall have the right to
require the Borrower to specifically perform such undertaking whether or not any
draws or other demands for payment have been made under any of the Letters of
Credit.

      Section 9.4. Collateral Account for Undrawn Letters of Credit and other
Obligations. (a) If the prepayment of the amount available for drawing under any
or all outstanding Letters of Credit is required under Section 1.2, Section
1.10(b), Section 9.2 or Section 9.3 above, the

                                      -60-
<PAGE>

Borrower shall forthwith pay the amount required to be so prepaid, to be held by
the Administrative Agent as provided in subsection (b) below.

      (b) All amounts prepaid pursuant to subsection (a) above shall be held by
the Administrative Agent in one or more separate collateral accounts (each such
account, and the credit balances, properties, and any investments from time to
time held therein, and any substitutions for such account, any certificate of
deposit or other instrument evidencing any of the foregoing and all proceeds of
and earnings on any of the foregoing being collectively called the "Collateral
Account") as security for, and for application by the Administrative Agent (to
the extent available) to, the reimbursement of any payment under any Letter of
Credit then or thereafter made by the Administrative Agent, and to the payment
of the unpaid balance of any Loans and all other Obligations. The Collateral
Account shall be held in the name of and subject to the exclusive dominion and
control of the Administrative Agent for the benefit of the Administrative Agent
and the Lenders. If and when requested by the Borrower, the Administrative Agent
shall invest funds held in the Collateral Account from time to time in direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America with a remaining
maturity of one year or less, provided that the Administrative Agent is
irrevocably authorized to sell investments held in the Collateral Account when
and as required to make payments out of the Collateral Account for application
to amounts due and owing from the Borrower to the Administrative Agent or
Lenders; provided, however, that (i) if the Borrower shall have made payment of
all obligations referred to in subsection (a) above required under Section
1.10(b) hereof, at the request of the Borrower the Administrative Agent shall
release to the Borrower amounts held in the Collateral Account so long as at the
time of the release and after giving effect thereto no Default or Event of
Default exists, and (ii) if the Borrower shall have made payment of all
obligations referred to in subsection (a) above required under Section 9.2 or
9.3 hereof, so long as no Letters of Credit, Commitments, Loans or other
Obligations remain outstanding, at the request of the Borrower the
Administrative Agent shall release to the Borrower any remaining amounts held in
the Collateral Account.

      Section 9.5. Additional Remedies in Bond Documents. In addition to the
remedies otherwise described in this Section or in any Reimbursement Agreement
or Bond Document, upon the occurrence of an Event of Default hereunder, Harris,
acting at the direction of the Required Lenders, may exercise one or more of the
following rights and remedies: (a) give notice of the occurrence of an Event of
Default to the trustee under the relevant indenture for any of the Bonds
directing an acceleration of such Bonds, thereby causing the relevant Bond
Letter of Credit to terminate the number of days thereafter specified in such
Bond Letter of Credit, or (b) pursue any rights and remedies provided to Harris
under the relevant Bond Documents.

      Section 9.6. Notice of Default. The Administrative Agent shall give notice
to the Borrower under Section 9.1(c) hereof promptly upon being requested to do
so by any Lender and shall thereupon notify all the Lenders thereof.

      Section 9.7. Expenses. The Borrower agrees to pay to the Administrative
Agent and each Lender, and any other holder of any Obligations outstanding
hereunder, all expenses reasonably incurred or paid by the Administrative Agent
and such Lender or any such holder,

                                      -61-
<PAGE>

including reasonable attorneys' fees (including allocated costs of in-house
counsel) and court costs, in connection with any Default or Event of Default by
the Borrower hereunder or in connection with the enforcement of any of the Loan
Documents (including all such costs and expenses arising in connection with a
proceeding under the United States Bankruptcy Code affecting the Borrower or any
Subsidiary).

SECTION 10. CHANGE IN CIRCUMSTANCES.

      Section 10.1. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time any change in applicable law or regulation
or in the interpretation thereof makes it unlawful for any Lender to make or
continue to maintain any Eurodollar Loans or to perform its obligations as
contemplated hereby, such Lender shall promptly give notice thereof to the
Borrower (with a copy to the Administrative Agent) and such Lender's obligations
to make or maintain Eurodollar Loans under this Agreement shall be suspended
until it is no longer unlawful for such Lender to make or maintain Eurodollar
Loans. The Borrower shall prepay on demand the outstanding principal amount of
any such affected Eurodollar Loans to the extent the continued maintenance
thereof is unlawful, together with all interest accrued thereon and all other
amounts then due and payable to such Lender under this Agreement; provided,
however, subject to all of the terms and conditions of this Agreement, the
Borrower may then elect to borrow the principal amount of the affected
Eurodollar Loans from such Lender by means of Base Rate Loans from such Lender,
which Base Rate Loans shall not be made ratably by the Lenders but only from
such affected Lender.

      Section 10.2. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of Eurodollar Loans:

            (a) the Administrative Agent determines that deposits in U.S.
      Dollars (in the applicable amounts) are not being offered to it in the
      interbank eurodollar market for such Interest Period, or that by reason of
      circumstances affecting the interbank eurodollar market adequate and
      reasonable means do not exist for ascertaining the applicable LIBOR, or

            (b) the Required Lenders advise the Administrative Agent that (i)
      LIBOR as determined by the Administrative Agent will not adequately and
      fairly reflect the cost to such Lenders of funding their Eurodollar Loans
      for such Interest Period, or (ii) that the making or funding of Eurodollar
      Loans become impracticable,

then the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Lenders, whereupon until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist,
the obligations of the Lenders to make Eurodollar Loans shall be suspended.

      Section 10.3. Increased Cost and Reduced Return. (a) If, on or after the
date hereof, the adoption of any applicable law, rule, or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank, or

                                      -62-
<PAGE>

comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank, or
comparable agency:

            (i) shall subject any Lender (or its Lending Office) to any tax,
      duty, or other charge with respect to its Eurodollar Loans, its Notes, its
      Letter(s) of Credit, or its participation in any thereof, any
      Reimbursement Obligations owed to it or its obligation to make Eurodollar
      Loans, issue a Letter of Credit, or to participate therein, or shall
      change the basis of taxation of payments to any Lender (or its Lending
      Office) of the principal of or interest on its Eurodollar Loans, Letter(s)
      of Credit, or participations therein or any other amounts due under this
      Agreement or any other Loan Document in respect of its Eurodollar Loans,
      Letter(s) of Credit, any participation therein, any Reimbursement
      Obligations owed to it, or its obligation to make Eurodollar Loans, or
      issue a Letter of Credit, or acquire participations therein (except for
      changes in the rate of tax on the overall net income of such Lender or its
      Lending Office imposed by the jurisdiction in which such Lender's
      principal executive office or Lending Office is located); or

            (ii) shall impose, modify, or deem applicable any reserve, special
      deposit, or similar requirement (including, without limitation, any such
      requirement imposed by the Board of Governors of the Federal Reserve
      System, but excluding with respect to any Eurodollar Loans any such
      requirement included in an applicable Eurodollar Reserve Percentage)
      against assets of, deposits with or for the account of, or credit extended
      by, any Lender (or its Lending Office) or shall impose on any Lender (or
      its Lending Office) or on the interbank market any other condition
      affecting its Eurodollar Loans, its Notes, its Letter(s) of Credit, or its
      participation in any thereof, any Reimbursement Obligation owed to it, or
      its obligation to make Eurodollar Loans, or to issue a Letter of Credit,
      or to participate therein;

and the result of any of the foregoing is to increase the cost to such Lender
(or its Lending Office) of making or maintaining any Eurodollar Loan, issuing or
maintaining a Letter of Credit, or participating therein, or to reduce the
amount of any sum received or receivable by such Lender (or its Lending Office)
under this Agreement or under any other Loan Document with respect thereto, by
an amount deemed by such Lender to be material, then, within 20 days after
demand by such Lender (with a copy to the Administrative Agent), the Borrower
shall be obligated to pay to such Lender such additional amount or amounts as
will compensate such Lender for such increased cost or reduction, provided that
the Borrower shall not be required to indemnify such Lender for any such costs
incurred more than 90 days before such notice is given.

      (b) If, after the date hereof, any Lender or the Administrative Agent
shall have determined that the adoption of any applicable law, rule, or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Lending Office) or
any corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank, or comparable agency, has had the

                                      -63-
<PAGE>

effect of reducing the rate of return on such Lender's or such corporation's
capital, as the case may be, as a consequence of its obligations hereunder to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change, or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, within 20
days after demand by such Lender (with a copy to the Administrative Agent), the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction, provided that the Borrower shall not
be required to indemnify such Lender for any such costs incurred more than 90
days before such notice is given.

      (c) A certificate of a Lender claiming compensation under this Section
10.3 and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive if reasonably determined absent manifest error. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.

      Section 10.4. Lending Offices. Each Lender may, at its option, elect to
make its Loans hereunder at the branch, office, or affiliate specified on the
appropriate signature page hereof (each a "Lending Office") for each type of
Loan available hereunder or at such other of its branches, offices, or
affiliates as it may from time to time elect and designate in a written notice
to the Borrower and the Administrative Agent. To the extent reasonably possible,
a Lender shall designate an alternative branch or funding office with respect to
its Eurodollar Loans to reduce any liability of the Borrower to such Lender
under Section 10.3 hereof or to avoid the unavailability of Eurodollar Loans
under Section 10.2 hereof, so long as such designation is not otherwise
disadvantageous to the Lender.

      Section 10.5. Discretion of Lender as to Manner of Funding.
Notwithstanding any other provision of this Agreement, each Lender shall be
entitled to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations hereunder with respect to Eurodollar Loans shall be
made as if each Lender had actually funded and maintained each Eurodollar Loan
through the purchase of deposits in the interbank eurodollar market having a
maturity corresponding to such Loan's Interest Period and bearing an interest
rate equal to LIBOR for such Interest Period.

SECTION 11. THE ADMINISTRATIVE AGENT.

      Section 11.1. Appointment and Authorization of Administrative Agent. Each
Lender hereby appoints Harris N.A. as the Administrative Agent under the Loan
Documents and hereby authorizes the Administrative Agent to take such action as
Administrative Agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are reasonably incidental thereto. The Lenders
expressly agree that the Administrative Agent is not acting as a fiduciary of
the Lenders in respect of the Loan Documents, the Borrower or otherwise, and
nothing herein or in any of the other Loan Documents shall result in any duties
or obligations on the Administrative Agent or any of the Lenders except as
expressly set forth herein.

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<PAGE>

      Section 11.2. Administrative Agent and its Affiliates. The Administrative
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any other Lender and may exercise or refrain from exercising
such rights and power as though it were not the Administrative Agent, and the
Administrative Agent and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with the Borrower or any Affiliate
of the Borrower as if it were not the Administrative Agent under the Loan
Documents. The term "Lender" as used herein and in all other Loan Documents,
unless the context otherwise clearly requires, includes the Administrative Agent
in its individual capacity as a Lender. References in Section 1 hereof to the
Administrative Agent's Loans, or to the amount owing to the Administrative Agent
for which an interest rate is being determined, refer to the Administrative
Agent in its individual capacity as a Lender.

      Section 11.3. Action by Administrative Agent. The obligations of the
Administrative Agent under the Loan Documents are only those expressly set forth
therein. Without limiting the generality of the foregoing, the Administrative
Agent shall not be required to take any action hereunder with respect to any
Default or Event of Default, except as expressly provided in Sections 9.2 and
9.5. Upon the occurrence of an Event of Default, the Administrative Agent shall
take such action to enforce its Lien on the Collateral and to preserve and
protect the Collateral as may be directed by the Required Lenders. Unless and
until the Required Lenders give such direction, the Administrative Agent may
(but shall not be obligated to) take or refrain from taking such actions as it
deems appropriate and in the best interest of all the Lenders. In no event,
however, shall the Administrative Agent be required to take any action in
violation of applicable law or of any provision of any Loan Document, and the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or under any other Loan Document unless it first
receives any further assurances of its indemnification from the Lenders that it
may require, including prepayment of any related expenses and any other
protection it requires against any and all costs, expense, and liability which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall be entitled to assume that no Default or Event of
Default exists unless notified in writing to the contrary by a Lender or the
Borrower. If the Administrative Agent receives from the Borrower a written
notice of an Event of Default pursuant to Section 8.5 hereof, the Administrative
Agent shall promptly give each of the Lenders written notice thereof. In all
cases in which the Loan Documents do not require the Administrative Agent to
take specific action, the Administrative Agent shall be fully justified in using
its discretion in failing to take or in taking any action thereunder. Any
instructions of the Required Lenders, or of any other group of Lenders called
for under the specific provisions of the Loan Documents, shall be binding upon
all the Lenders and the holders of the Obligations.

      Section 11.4. Consultation with Experts. The Administrative Agent may
consult with legal counsel, independent public accountants, and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants, or experts.

      Section 11.5. Liability of Administrative Agent; Credit Decision. Neither
the Administrative Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or not taken by it in connection
with the Loan Documents: (a) with the consent

                                      -65-
<PAGE>

or at the request of the Required Lenders, or (b) in the absence of its own
gross negligence or willful misconduct. Neither the Administrative Agent nor any
of its directors, officers, agents, or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify: (i) any statement,
warranty, or representation made in connection with this Agreement, any other
Loan Document, or any Credit Event; (ii) the performance or observance of any of
the covenants or agreements of the Borrower or any Subsidiary contained herein
or in any other Loan Document; (iii) the satisfaction of any condition specified
in Section 7 hereof, except receipt of items required to be delivered to the
Administrative Agent; or (iv) the validity, effectiveness, genuineness,
enforceability, perfection, value, worth, or collectibility hereof or of any
other Loan Document or of any other documents or writing furnished in connection
with any Loan Document or of any Collateral; and the Administrative Agent makes
no representation of any kind or character with respect to any such matter
mentioned in this sentence. The Administrative Agent may execute any of its
duties under any of the Loan Documents by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Lenders, the Borrower, or
any other Person for the default or misconduct of any such agents or
attorneys-in-fact selected with reasonable care. The Administrative Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, other document or statement (whether written or oral) believed by
it to be genuine or to be sent by the proper party or parties. In particular and
without limiting any of the foregoing, the Administrative Agent shall have no
responsibility for confirming the accuracy of any compliance certificate or
other document or instrument received by it under the Loan Documents. The
Administrative Agent may treat the payee of any Note as the holder thereof until
written notice of transfer shall have been filed with the Administrative Agent
signed by such payee in form satisfactory to the Administrative Agent. Each
Lender acknowledges that it has independently and without reliance on the
Administrative Agent or any other Lender, and based upon such information,
investigations, and inquiries as it deems appropriate, made its own credit
analysis and decision to extend credit to the Borrower in the manner set forth
in the Loan Documents. It shall be the responsibility of each Lender to keep
itself informed as to the creditworthiness of the Borrower and its Subsidiaries,
and the Administrative Agent shall have no liability to any Lender with respect
thereto.

      Section 11.6. Indemnity. The Lenders shall ratably, in accordance with
their respective Percentages, indemnify and hold the Administrative Agent, and
its directors, officers, employees, agents, and representatives harmless from
and against any liabilities, losses, costs, or expenses suffered or incurred by
it under any Loan Document or in connection with the transactions contemplated
thereby, regardless of when asserted or arising, except to the extent they are
promptly reimbursed for the same by the Borrower and except to the extent that
any event giving rise to a claim was caused by the gross negligence or willful
misconduct of the party seeking to be indemnified. The obligations of the
Lenders under this Section shall survive termination of this Agreement. The
Administrative Agent shall be entitled to offset amounts received for the
account of a Lender under this Agreement against unpaid amounts due from such
Lender to the Administrative Agent hereunder (whether as fundings of
participations, indemnities or otherwise), but shall not be entitled to offset
against amounts owed to the Administrative Agent by any Lender arising outside
of this Agreement and the other Loan Documents.

      Section 11.7. Resignation of Administrative Agent and Successor Agent. The
Administrative Agent may resign at any time by giving written notice thereof to
the Lenders and

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<PAGE>

the Borrower. Upon any such resignation of the Administrative Agent, the
Required Lenders shall have the right to appoint a successor Administrative
Agent to serve in the same capacity as such resigning Administrative Agent,
provided that, unless an Event of Default has occurred and is continuing, such
successor Administrative Agent is reasonably acceptable to the Borrower. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving of notice of resignation then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be any Lender hereunder or any commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $200,000,000. Upon the
acceptance of its appointment as the Administrative Agent hereunder, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring Administrative Agent under the Loan
Documents, and the retiring Administrative Agent shall be discharged from its
duties and obligations thereunder. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Section 11
and all protective provisions of the other Loan Documents shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent, but no successor Administrative Agent shall in any event
be liable or responsible for any actions of its predecessor. If any
Administrative Agent resigns and no successor is appointed, the rights and
obligations of such Administrative Agent shall be automatically assumed by the
Required Lenders and (i) the Borrower shall be directed to make all payments due
each Lender hereunder directly to such Lender, and (ii) the Administrative
Agent's rights in the Collateral Documents shall be assigned without
representation, recourse, or warranty to the Lenders as their interests may
appear.

      Section 11.8. Hedging Liability and Funds Transfer and Deposit Account
Liability Arrangements. By virtue of a Lender's execution of this Agreement or
an assignment agreement pursuant to Section 13.12 hereof, as the case may be,
any Affiliate of such Lender with whom the Borrower or any Guarantor has entered
into an agreement creating Hedging Liability or Funds Transfer and Deposit
Account Liability shall be deemed a Lender party hereto for purposes of any
reference in a Loan Document to the parties for whom the Administrative Agent is
acting, it being understood and agreed that the rights and benefits of such
Affiliate under the Loan Documents consist exclusively of such Affiliate's right
to share in payments and collections out of the Collateral and the Guaranties as
more fully set forth in Section 3 hereof. In connection with any such
distribution of payments and collections, the Administrative Agent shall be
entitled to assume no amounts are due to any Lender or its Affiliate with
respect to Hedging Liability or Funds Transfer and Deposit Account Liability
unless such Lender has notified the Administrative Agent in writing of the
amount of any such liability owed to it or its Affiliate prior to such
distribution.

      Section 11.9. Designation of Additional Agents. The Administrative Agent
shall have the continuing right, for purposes hereof, at any time and from time
to time to designate one or more of the Lenders (and/or its or their Affiliates)
as "syndication agents," "documentation agents," "arrangers," or other
designations for purposes hereto, but such designation shall have no substantive
effect, and such Lenders and their Affiliates shall have no additional powers,
duties, or responsibilities as a result thereof.

                                      -67-
<PAGE>

      Section 11.10. Authorization to Release or Subordinate or Limit Liens. The
Administrative Agent is hereby irrevocably authorized by each of the Lenders to
(a) release any Lien covering any Collateral that is sold, transferred, or
otherwise disposed of in accordance with the terms and conditions of this
Agreement and the relevant Collateral Documents (including a sale, transfer, or
disposition permitted by the terms of Section 8.10 hereof or which has otherwise
been consented to in accordance with Section 13.14 hereof), (b) release or
subordinate any Lien on Collateral consisting of goods financed with purchase
money indebtedness or under a Capital Lease to the extent such purchase money
indebtedness or Capitalized Lease Obligation, and the Lien securing the same,
are permitted by Sections 8.7 and 8.8 hereof, and (c) reduce or limit the amount
of the indebtedness secured by any particular item of Collateral to an amount
not less than the estimated value thereof to the extent necessary to reduce
mortgage registry, filing and similar tax.

      Section 11.11. Authorization to Enter into, and Enforcement of, the
Collateral Documents. The Administrative Agent is hereby irrevocably authorized
by each of the Lenders to execute and deliver the Collateral Documents on behalf
of each of the Lenders and their Affiliates and to take such action and exercise
such powers under the Collateral Documents as the Administrative Agent considers
appropriate, provided the Administrative Agent shall not amend the Collateral
Documents unless such amendment is agreed to in writing by the Required Lenders.
Each Lender acknowledges and agrees that it will be bound by the terms and
conditions of the Collateral Documents upon the execution and delivery thereof
by the Administrative Agent. Except as otherwise specifically provided for
herein, no Lender (or its Affiliates) other than the Administrative Agent shall
have the right to institute any suit, action or proceeding in equity or at law
for the foreclosure or other realization upon any Collateral or for the
execution of any trust or power in respect of the Collateral or for the
appointment of a receiver or for the enforcement of any other remedy under the
Collateral Documents; it being understood and intended that no one or more of
the Lenders (or their Affiliates) shall have any right in any manner whatsoever
to affect, disturb or prejudice the Lien of the Administrative Agent (or any
security trustee therefor) under the Collateral Documents by its or their action
or to enforce any right thereunder, and that all proceedings at law or in equity
shall be instituted, had, and maintained by the Administrative Agent (or its
security trustee) in the manner provided for in the relevant Collateral
Documents for the benefit of the Lenders and their Affiliates.

SECTION 12. THE GUARANTEES.

      Section 12.1. The Guarantees. To induce the Lenders to provide the credits
described herein and in consideration of benefits expected to accrue to the
Borrower by reason of the Commitments and for other good and valuable
consideration, receipt of which is hereby acknowledged, each Subsidiary party
hereto (including any Subsidiary formed or acquired after the Effective Date
executing an Additional Guarantor Supplement in the form attached hereto as
Exhibit F or such other form acceptable to the Administrative Agent) hereby
unconditionally and irrevocably guarantees jointly and severally to the
Administrative Agent, the Lenders, and their Affiliates, the due and punctual
payment of all present and future Obligations, Hedging Liability, and Funds
Transfer and Deposit Account Liability, including, but not limited to, the due
and punctual payment of principal of and interest on the Notes, the
Reimbursement Obligations, and the due and punctual payment of all other
Obligations now or hereafter owed by the Borrower

                                      -68-
<PAGE>

under the Loan Documents and the due and punctual payment of all Hedging
Liability and Funds Transfer and Deposit Account Liability, in each case as and
when the same shall become due and payable, whether at stated maturity, by
acceleration, or otherwise, according to the terms hereof and thereof (including
interest which, but for the filing of a petition in bankruptcy, would otherwise
accrue on any such indebtedness, obligation, or liability). In case of failure
by the Borrower or other obligor punctually to pay any Obligations, Hedging
Liability, or Funds Transfer and Deposit Account Liability guaranteed hereby,
each Guarantor hereby unconditionally agrees to make such payment or to cause
such payment to be made punctually as and when the same shall become due and
payable, whether at stated maturity, by acceleration, or otherwise, and as if
such payment were made by the Borrower or such obligor.

      Section 12.2. Guarantee Unconditional. The obligations of each Guarantor
under this Section 12 shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged, or otherwise
affected by:

            (a) any extension, renewal, settlement, compromise, waiver, or
      release in respect of any obligation of the Borrower or other obligor or
      of any other guarantor under this Agreement or any other Loan Document or
      by operation of law or otherwise;

            (b) any modification or amendment of or supplement to this Agreement
      or any other Loan Document or any agreement relating to Hedging Liability
      or Funds Transfer and Deposit Account Liability;

            (c) any change in the corporate existence, structure, or ownership
      of, or any insolvency, bankruptcy, reorganization, or other similar
      proceeding affecting, the Borrower or other obligor, any other guarantor,
      or any of their respective assets, or any resulting release or discharge
      of any obligation of the Borrower or other obligor or of any other
      guarantor contained in any Loan Document;

            (d) the existence of any claim, set-off, or other rights which the
      Borrower or other obligor or any other guarantor may have at any time
      against the Administrative Agent, any Lender, or any other Person, whether
      or not arising in connection herewith;

            (e) any failure to assert, or any assertion of, any claim or demand
      or any exercise of, or failure to exercise, any rights or remedies against
      the Borrower or other obligor, any other guarantor, or any other Person or
      Property;

            (f) any application of any sums by whomsoever paid or howsoever
      realized to any obligation of the Borrower or other obligor, regardless of
      what obligations of the Borrower or other obligor remain unpaid;

            (g) any invalidity or unenforceability relating to or against the
      Borrower or other obligor or any other guarantor for any reason of this
      Agreement or of any other Loan Document or any agreement relating to
      Hedging Liability or Funds Transfer and Deposit Account Liability or any
      provision of applicable law or regulation purporting to prohibit the
      payment by the Borrower or other obligor or any other guarantor of the

                                      -69-
<PAGE>

      principal of or interest on any Note or any Reimbursement Obligation or
      any other amount payable under the Loan Documents or any agreement
      relating to Hedging Liability or Funds Transfer and Deposit Account
      Liability; or

            (h) any other act or omission to act or delay of any kind by the
      Administrative Agent, any Lender, or any other Person or any other
      circumstance whatsoever that might, but for the provisions of this
      paragraph, constitute a legal or equitable discharge of the obligations of
      any Guarantor under this Section 12.

      Section 12.3. Discharge Only upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations under this Section 12 shall
remain in full force and effect until the Commitments are terminated, all
Letters of Credit have expired, and the principal of and interest on the Notes
and all other amounts payable by the Borrower and the Guarantors under this
Agreement and all other Loan Documents and, if then outstanding and unpaid, all
Hedging Liability and Funds Transfer and Deposit Account Liability shall have
been paid in full. If at any time any payment of the principal of or interest on
any Note or any Reimbursement Obligation or any other amount payable by the
Borrower or other obligor or any Guarantor under the Loan Documents or any
agreement relating to Hedging Liability or Funds Transfer and Deposit Account
Liability is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy, or reorganization of the Borrower or other obligor or of
any guarantor, or otherwise, each Guarantor's obligations under this Section 12
with respect to such payment shall be reinstated at such time as though such
payment had become due but had not been made at such time.

      Section 12.4. Subrogation. Each Guarantor agrees it will not exercise any
rights which it may acquire by way of subrogation by any payment made hereunder,
or otherwise, until all the Obligations, Hedging Liability, and Funds Transfer
and Deposit Account Liability shall have been paid in full subsequent to the
termination of all the Commitments and expiration of all Letters of Credit. If
any amount shall be paid to a Guarantor on account of such subrogation rights at
any time prior to the later of (x) the payment in full of the Obligations,
Hedging Liability, and Funds Transfer and Deposit Account Liability and all
other amounts payable by the Borrower hereunder and the other Loan Documents and
(y) the termination of the Commitments and expiration of all Letters of Credit,
such amount shall be held in trust for the benefit of the Administrative Agent
and the Lenders (and their Affiliates) and shall forthwith be paid to the
Administrative Agent for the benefit of the Lenders (and their Affiliates) or be
credited and applied upon the Obligations, Hedging Liability, and Funds Transfer
and Deposit Account Liability, whether matured or unmatured, in accordance with
the terms of this Agreement.

      Section 12.5. Waivers. Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest, and any notice not provided for herein, as
well as any requirement that at any time any action be taken by the
Administrative Agent, any Lender, or any other Person against the Borrower or
other obligor, another guarantor, or any other Person.

      Section 12.6. Limit on Recovery. Notwithstanding any other provision
hereof, the right of recovery against each Guarantor under this Section 12 shall
not exceed $1.00 less than the lowest

                                      -70-
<PAGE>

amount which would render such Guarantor's obligations under this Section 12
void or voidable under applicable law, including, without limitation, fraudulent
conveyance law.

      Section 12.7. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower or other obligor under this
Agreement or any other Loan Document, or under any agreement relating to Hedging
Liability or Funds Transfer and Deposit Account Liability, is stayed upon the
insolvency, bankruptcy or reorganization of the Borrower or such obligor, all
such amounts otherwise subject to acceleration under the terms of this Agreement
or the other Loan Documents, or under any agreement relating to Hedging
Liability or Funds Transfer and Deposit Account Liability, shall nonetheless be
payable by the Guarantors hereunder forthwith on demand by the Administrative
Agent made at the request of the Required Lenders.

      Section 12.8. Benefit to Guarantors. The Borrower and the Guarantors are
engaged in related businesses and integrated to such an extent that the
financial strength and flexibility of the Borrower has a direct impact on the
success of each Guarantor. Each Guarantor will derive substantial direct and
indirect benefit from the extensions of credit hereunder.

      Section 12.9. Guarantor Covenants. Each Guarantor shall take such action
as the Borrower is required by this Agreement to cause such Guarantor to take,
and shall refrain from taking such action as the Borrower is required by this
Agreement to prohibit such Guarantor from taking.

SECTION 13. MISCELLANEOUS.

      Section 13.1. Withholding Taxes. (a) Payments Free of Withholding. Except
as otherwise required by law and subject to Section 13.1(b) hereof, each payment
by the Borrower or any Guarantor under this Agreement or the other Loan
Documents shall be made without withholding for or on account of any present or
future taxes (other than overall net income taxes on the recipient) imposed by
or within the jurisdiction in which the Borrower or such Guarantor is domiciled,
any jurisdiction from which the Borrower or such Guarantor makes any payment, or
(in each case) any political subdivision or taxing authority thereof or therein.
If any such withholding is so required, the Borrower or the relevant Guarantor
shall make the withholding, pay the amount withheld to the appropriate
governmental authority before penalties attach thereto or interest accrues
thereon and forthwith pay such additional amount as may be necessary to ensure
that the net amount actually received by each Lender and the Administrative
Agent free and clear of such taxes (including such taxes on such additional
amount) is equal to the amount which that Lender or the Administrative Agent (as
the case may be) would have received had such withholding not been made. If the
Administrative Agent or any Lender pays any amount in respect of any such taxes,
penalties, or interest, the Borrower or the relevant Guarantor shall reimburse
the Administrative Agent or such Lender for that payment within 20 days after
demand therefor in the currency in which such payment was made. If the Borrower
or a Guarantor pays any such taxes, penalties, or interest, it shall deliver
official tax receipts evidencing that payment or certified copies thereof to the
Lender or the Administrative Agent on whose account such withholding was made
(with a copy to the Administrative Agent if not the recipient of the original)
on or before the thirtieth day after payment.

                                      -71-
<PAGE>

      (b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Administrative Agent on or before the date the
initial Credit Event is made hereunder or, if later, the date such financial
institution becomes a Lender hereunder, two duly completed and signed copies of
(i) either Form W-8 BEN (relating to such Lender and entitling it to a complete
exemption from withholding under the Code on all amounts to be received by such
Lender, including fees, pursuant to the Loan Documents and the Obligations) or
Form W-8 ECI (relating to all amounts to be received by such Lender, including
fees, pursuant to the Loan Documents and the Obligations) of the United States
Internal Revenue Service, or (ii) solely if such Lender is claiming exemption
from United States withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8 BEN, or any
successor form prescribed by the Internal Revenue Service, and a certificate
representing that such Lender is not a bank for purposes of Section 881(c) of
the Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower, and is not a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code). Thereafter and from time to time, each Lender shall submit to the
Borrower and the Administrative Agent such additional duly completed and signed
copies of one or the other of such Forms (or such successor forms as shall be
adopted from time to time by the relevant United States taxing authorities) and
such other certificates as may be (i) requested by the Borrower in a written
notice, directly or through the Administrative Agent, to such Lender, and (ii)
required under then-current United States law or regulations to avoid or reduce
United States withholding taxes on payments in respect of all amounts to be
received by such Lender, including fees, pursuant to the Loan Documents or the
Obligations. Upon the request of the Borrower or the Administrative Agent, each
Lender that is a United States person (as such term is defined in Section
7701(a)(30) of the Code) shall submit to the Borrower and the Administrative
Agent a certificate to the effect that it is such a United States person.

      (c) Inability of Lender to Submit Forms. If any Lender determines, as a
result of any change in applicable law, regulation, or treaty, or in any
official application or interpretation thereof, that it is unable to submit to
the Borrower or the Administrative Agent any form or certificate that such
Lender is obligated to submit pursuant to subsection (b) of this Section 13.1 or
that such Lender is required to withdraw or cancel any such form or certificate
previously submitted or any such form or certificate otherwise becomes
ineffective or inaccurate, such Lender shall promptly notify the Borrower and
Administrative Agent of such fact and the Lender shall to that extent not be
obligated to provide any such form or certificate and will be entitled to
withdraw or cancel any affected form or certificate, as applicable.

      Section 13.2. No Waiver, Cumulative Remedies. No delay or failure on the
part of the Administrative Agent or any Lender or on the part of the holder or
holders of any of the Obligations in the exercise of any power or right under
any Loan Document shall operate as a waiver thereof or as an acquiescence in any
default, nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. The rights and remedies hereunder of the Administrative Agent, the
Lenders, and of the holder or holders of any of the Obligations are cumulative
to, and not exclusive of, any rights or remedies which any of them would
otherwise have.

                                      -72-
<PAGE>

      Section 13.3. Non-Business Days. Subject to Section 1.8(d), if any payment
hereunder becomes due and payable on a day which is not a Business Day, the due
date of such payment shall be extended to the next succeeding Business Day on
which date such payment shall be due and payable. In the case of any payment of
principal falling due on a day which is not a Business Day, interest on such
principal amount shall continue to accrue during such extension at the rate per
annum then in effect, which accrued amount shall be due and payable on the next
scheduled date for the payment of interest.

      Section 13.4. Documentary Taxes. The Borrower agrees to pay on demand any
documentary, stamp, or similar taxes payable in respect of this Agreement or any
other Loan Document, including interest and penalties, in the event any such
taxes are assessed, irrespective of when such assessment is made and whether or
not any credit is then in use or available hereunder.

      Section 13.5. Survival of Representations. All representations and
warranties made herein or in any other Loan Document or in certificates given
pursuant hereto or thereto shall survive the execution and delivery of this
Agreement and the other Loan Documents, and shall continue in full force and
effect with respect to the date as of which they were made as long as any credit
is in use or available hereunder.

      Section 13.6. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Lenders of amounts sufficient to
protect the yield of the Lenders with respect to the Loans and Letters of
Credit, including, but not limited to, Sections 1.13, 10.3, and 13.16 hereof,
shall survive the termination of this Agreement and the other Loan Documents and
the payment of the Obligations.

      Section 13.7. Sharing of Set-Off. Each Lender agrees with each other
Lender a party hereto that if such Lender shall receive and retain any payment,
whether by set-off or application of deposit balances or otherwise, on any of
the Loans or Reimbursement Obligations in excess of its ratable share of
payments on all such Obligations then outstanding to the Lenders, then such
Lender shall purchase for cash at face value, but without recourse, ratably from
each of the other Lenders such amount of the Loans or Reimbursement Obligations,
or participations therein, held by each such other Lenders (or interest therein)
as shall be necessary to cause such Lender to share such excess payment ratably
with all the other Lenders; provided, however, that if any such purchase is made
by any Lender, and if such excess payment or part thereof is thereafter
recovered from such purchasing Lender, the related purchases from the other
Lenders shall be rescinded ratably and the purchase price restored as to the
portion of such excess payment so recovered, but without interest. For purposes
of this Section, amounts owed to or recovered by the Administrative Agent in
connection with Reimbursement Obligations in which Lenders have been required to
fund their participation shall be treated as amounts owed to or recovered by the
Administrative Agent as a Lender hereunder.

      Section 13.8. Notices. Except as otherwise specified herein, all notices
hereunder and under the other Loan Documents shall be in writing (including,
without limitation, notice by telecopy) and shall be given to the relevant party
at its address or telecopier number set forth below, or such other address or
telecopier number as such party may hereafter specify by notice

                                      -73-
<PAGE>

to the Administrative Agent and the Borrower given by courier, by United States
certified or registered mail, by telecopy or by other telecommunication device
capable of creating a written record of such notice and its receipt. Notices
under the Loan Documents to the Lenders and the Administrative Agent shall be
addressed to their respective addresses or telecopier numbers set forth on the
signature pages hereof, and to the Borrower to:

            The Lamson & Sessions Co.
            25701 Science Park Drive
            Cleveland, Ohio  44122-7313
            Attention: James J. Abel
            Telephone: (216) 766-6557
            Telecopy:  (216) 514-6925

Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section or on the signature pages hereof and a confirmation of
such telecopy has been received by the sender, (ii) if given by mail, 5 days
after such communication is deposited in the mail, certified or registered with
return receipt requested, addressed as aforesaid or (iii) if given by any other
means, when delivered at the addresses specified in this Section or on the
signature pages hereof; provided that any notice given pursuant to Section 1
hereof shall be effective only upon receipt.

      Section 13.9. Counterparts. This Agreement may be executed in any number
of counterparts, and by the different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.

      Section 13.10. Successors and Assigns. This Agreement shall be binding
upon the Borrower and the Guarantors and their successors and assigns, and shall
inure to the benefit of the Administrative Agent and each of the Lenders and the
benefit of their respective successors and assigns, including any subsequent
holder of any of the Obligations. The Borrower may not assign any of its rights
or obligations under any Loan Document without the written consent of all of the
Lenders.

      Section 13.11. Participants. Each Lender shall have the right at its own
cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made and Reimbursement Obligations
and/or Commitments held by such Lender at any time and from time to time to one
or more other Persons; provided that no such participation shall relieve any
Lender of any of its obligations under this Agreement, and, provided further
that no such participant shall have any rights under this Agreement except as
provided in this Section, and the Administrative Agent shall have no obligation
or responsibility to such participant. Any agreement pursuant to which such
participation is granted shall provide that the granting Lender shall retain the
sole right and responsibility to enforce the obligations of the Borrower under
this Agreement and the other Loan Documents, including, without limitation, the
right to approve any amendment, modification, or waiver of any provision of the
Loan Documents, except that such agreement may provide that such Lender will not
agree to any modification, amendment, or waiver of the Loan Documents with
respect to any items in Sections 13.14(i) and 13.14(ii). Any party to which such
a participation has been granted shall have the benefits of Section 1.13,

                                      -74-
<PAGE>

Section 10.3, and Section 13.16 hereof, provided that the Borrower shall not be
obligated to pay any amount in excess of the amount it would have been liable
for had such participation not been made. The Borrower authorizes each Lender to
disclose to any participant or prospective participant under this Section any
financial or other information pertaining to the Borrower or any Subsidiary,
provided such participant or prospective participant agrees to abide by Section
13.13 hereof.

      Section 13.12. Assignments. (a) Each Lender shall have the right at any
time, with the prior consent of the Administrative Agent (which consent shall
not be unreasonably withheld) and, so long as no Event of Default then exists,
the Borrower (which consent of the Borrower shall not be unreasonably withheld,
provided no consent of the Borrower shall be required as to assignments between
a Lender and its Affiliates, whether or not an Event of Default exists), to
sell, assign, transfer, or negotiate all or any part of its rights and
obligations under the Loan Documents (including, without limitation, the
indebtedness evidenced by the Notes then held by such assigning Lender, together
with an equivalent percentage of its obligation to make loans and advances and
participate in L/Cs) to one or more commercial banks or other financial
institutions, provided that, unless otherwise agreed to by the Administrative
Agent, such assignment shall be of a fixed percentage (and not by its terms of
varying percentage) of the assigning Lender's rights and obligations under the
Loan Documents; provided, however, that in order to make any such assignment (i)
unless the assigning Lender is assigning all of its Commitments, outstanding
Loans, and Reimbursement Obligations, the assigning Lender shall retain at least
$5,000,000 in Commitments, outstanding Loans, and Reimbursement Obligations,
(ii) the assignee Lender shall have Commitments, outstanding Loans, and
Reimbursement Obligations of at least $5,000,000, (iii) each such assignment
shall be evidenced by a written agreement (substantially in the form attached
hereto as Exhibit H or in such other form acceptable to the Administrative
Agent) executed by such assigning Lender, such assignee Lender or Lenders, the
Administrative Agent and, if required as provided above, the Borrower, which
agreement shall specify in each instance the portion of the Obligations which
are to be assigned to the assignee Lender and the portion of the Commitments of
the assigning Lender to be assumed by the assignee Lender or Lenders, and (iv)
the assigning Lender shall pay to the Administrative Agent a processing fee of
$3,500 and any out-of-pocket attorneys' fees and expenses incurred by the
Administrative Agent in connection with any such assignment agreement. Any such
assignee shall become a Lender for all purposes hereunder to the extent of the
rights and obligations under the Loan Documents it assumes and the assigning
Lender shall be released from its obligations, and will have released its
rights, under the Loan Documents to the extent of such assignment. The address
for notices to such assignee Lender shall be as specified in the assignment
agreement executed by it. Concurrently with the execution and delivery of such
assignment agreement, the Borrower shall execute and deliver Notes to the
assignee Lender and the assigning Lender in the respective amounts of their
Commitments (or assigned principal amounts, as applicable) after giving effect
to the reduction occasioned by such assignment (all such Notes to constitute
"Notes" for all purposes of the Loan Documents), and the assignee Lender shall
thereafter surrender to the Borrower its old Notes. The Borrower authorizes each
Lender to disclose to any purchaser or prospective purchaser of an interest in
the Loans and Reimbursement Obligations owed to it or its Commitments under this
Section any financial or other information pertaining to the Borrower or any
Subsidiary, provided such purchaser or prospective purchaser agrees to abide by
Section 13.13 hereof.

                                      -75-
<PAGE>

      (b) Any Lender may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including any such pledge or grant to a Federal Reserve Bank, and this
Section shall not apply to any such pledge or grant of a security interest;
provided that no such pledge or grant of a security interest shall release a
Lender from any of its obligations hereunder or substitute any such pledgee or
secured party for such Lender as a party hereto; provided further, however, the
right of any such pledgee or grantee (other than any Federal Reserve Bank) to
further transfer all or any portion of the rights pledged or granted to it,
whether by means of foreclosure or otherwise, shall be at all times subject to
the terms of this Agreement.

      Section 13.13. Confidential Information. The Administrative Agent and the
Lenders each agree to use their commercially reasonable best efforts to keep
confidential any nonpublic information of the type that is ordinarily considered
confidential or is otherwise designated by the Borrower as confidential that is
delivered to them by the Borrower (herein, the "Information"), except that
Information may be disclosed (a) to its and its Affiliates' directors, officers,
employees and agents, including accountants, legal counsel and other advisors to
the extent any such Person has a need to know such Information (it being
understood that the Persons to whom such disclosure is made will first be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
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
hereunder or under any other Loan Document or any suit, action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (A) any assignee
of or participant in, or any prospective assignee of or participant in, any of
its rights or obligations under this Agreement or (B) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower or any Subsidiary and its obligations, (g) with the prior written
consent of the Borrower, (h) to the extent such Information (A) becomes publicly
available other than as a result of a breach of this Section or (B) becomes
available to the Administrative Agent or any Lender on a non-confidential basis
from a source other than the Borrower or any Subsidiary or any of their
directors, officers, employees or agents, including accountants, legal counsel
and other advisors, (i) to rating agencies if requested or required by such
agencies in connection with a rating relating to the Loans or Commitments
hereunder, or (j) to entities which compile and publish information about the
syndicated loan market, provided that only basic information about the pricing
and structure of the transaction evidenced hereby may be disclosed pursuant to
this subsection (j).

      Section 13.14. Amendments. (a) Any provision of this Agreement or the
other Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by (x) the Borrower, (y) the Required
Lenders, and (z) if the rights or duties of the Administrative Agent are
affected thereby, the Administrative Agent; provided that:

            (i) no amendment or waiver pursuant to this Section 13.14 shall (A)
      increase any Commitment of any Lender without the consent of such Lender,
      or (B) reduce the amount of or postpone the date for payment of any
      scheduled principal (except for

                                      -76-
<PAGE>

      mandatory prepayments due under Section 1.10(b) hereof) of or interest on
      any existing or future Loan or of any Reimbursement Obligation or of any
      fee payable hereunder without the consent of the Lender to which such
      payment is owing or which has committed to make such Loan or Letter of
      Credit (or participate therein) hereunder; and

            (ii) no amendment or waiver pursuant to this Section 13.14 shall,
      unless signed by each Lender, change the definitions of Revolving Credit
      Termination Date or Required Lenders, change the provisions of this
      Section 13.14, release any material guarantor or all or substantially all
      of the Collateral (except as otherwise provided for in the Loan
      Documents), or affect the number of Lenders required to take any action
      hereunder or under any other Loan Document or change the pro rata
      treatment of the Lenders as provided in the Loan Documents.

      (b) If, in connection with any proposed change, waiver, discharge or
termination of any of the provisions of this Agreement which requires the
consent of all the Lenders, and the consent of the Required Lenders is obtained
but the consent of one or more of such other Lenders whose consent is sought is
not obtained, then the Borrower shall have the right, subject to the approval of
the Administrative Agent and so long as all non-consenting Lenders whose
individual consent is sought are treated as described in either clauses (A) or
(B) below, to either (A) replace each such non-consenting Lender or Lenders with
one or more replacement Lenders in accordance with the provisions of Section
1.15 so long as the time of such replacement, each such replacement Lender
consents to the proposed change, waiver, discharge or termination or (B)
terminate each such non-consenting Lender's Commitments and repay the
outstanding Obligations of each such non-consenting Lender in accordance with
Section 1.15, provided that, unless the Commitments that are terminated and the
Obligations that are repaid pursuant to preceding clause (B) are immediately
replaced in full at such time through the addition of new Lenders or the
increase of the Commitments and/or outstanding Loans and interests in
outstanding Letters of Credit of existing Lenders (who in each case must
specifically consent thereto), then in the case of any action pursuant to
preceding clause (B) each Lender (determined after giving effect to the proposed
action) shall specifically consent thereto, provided further, that in any event
the Borrower shall not have the right to replace a Lender if, immediately after
the termination of such Lender's Commitment and the repayment of such Lender's
Obligations, if immediately thereafter the sum of (i) the aggregate outstanding
principal amount of Revolving Loans plus (ii) the aggregate amount of Swing Line
Loans plus (iii) the aggregate amount of L/C Obligations, exceeds the aggregate
Revolving Credit Commitments as then in effect.

      Section 13.15. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.

      Section 13.16. Costs and Expenses; Indemnification. (a) The Borrower
agrees to pay all reasonable costs and out-of-pocket expenses of the
Administrative Agent in connection with the preparation, negotiation,
syndication, and administration of the Loan Documents, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent, in connection with the preparation and execution of the
Loan Documents, and any amendment, waiver or consent related thereto, whether or
not the transactions contemplated herein are consummated, together with any fees
and charges suffered or incurred by the

                                      -77-
<PAGE>

Administrative Agent in connection with periodic environmental audits, fixed
asset appraisals, title insurance policies, collateral filing fees and lien
searches. The Borrower further agrees to indemnify the Administrative Agent,
each Lender, and their respective directors, officers and employees, against all
losses, claims, damages, penalties, judgments, liabilities, and reasonable
expenses (including, without limitation, all reasonable expenses of litigation
or preparation therefor, whether or not the indemnified Person is a party
thereto, or any settlement arrangement arising from or relating to any such
litigation) which any of them may pay or incur arising out of or relating to any
Loan Document or any of the transactions contemplated thereby or the direct or
indirect application or proposed application of the proceeds of any Loan or
Letter of Credit, other than those which arise from the gross negligence or
willful misconduct of the party claiming indemnification or such party's
material breach of this Agreement. The Borrower, upon demand by the
Administrative Agent or a Lender at any time, shall reimburse the Administrative
Agent or such Lender for any reasonable legal or other expenses incurred in
connection with investigating or defending against any of the foregoing
(including any settlement costs relating to the foregoing) except if the same is
directly due to the gross negligence or willful misconduct of the party to be
indemnified. The obligations of the Borrower under this Section shall survive
the termination of this Agreement.

      (b) The Borrower unconditionally agrees to forever indemnify, defend, and
hold harmless, and covenants not to sue for any claim for contribution against,
the Administrative Agent and the Lenders for any damages, costs, loss, or
expense, including, without limitation, response, remedial, or removal costs,
arising out of any of the following: (i) any presence, release, threatened
release, or disposal of any hazardous or toxic substance or petroleum by the
Borrower or any Subsidiary or otherwise occurring on or with respect to its
Property (whether owned or leased), (ii) the operation or violation of any
environmental law, whether federal, state, or local, and any regulations
promulgated thereunder, by the Borrower or any Subsidiary or otherwise occurring
on or with respect to its Property (whether owned or leased), (iii) any claim
for personal injury or property damage in connection with the Borrower or any
Subsidiary or otherwise occurring on or with respect to its Property (whether
owned or leased), and (iv) the inaccuracy or breach of any environmental
representation, warranty, or covenant by the Borrower or any Subsidiary made
herein or in any other Loan Document evidencing or securing any Obligations or
setting forth terms and conditions applicable thereto or otherwise relating
thereto, except for damages arising from the willful misconduct or gross
negligence of the party claiming indemnification or such party's material breach
of this Agreement. This indemnification shall survive the payment and
satisfaction of all Obligations and the termination of this Agreement. This
indemnification shall be binding upon the successors and assigns of the Borrower
and shall inure to the benefit of the Administrative Agent and the Lenders and
their directors, officers, employees, agents, and collateral trustees, and their
successors and assigns.

      Section 13.17. Set-off. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, each Lender and each subsequent holder of
any Obligation is hereby authorized by the Borrower and each Guarantor at any
time or from time to time, without notice to the Borrower, any Guarantor, or any
other Person, any such notice being hereby expressly waived, to set-off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not

                                      -78-
<PAGE>

including trust accounts, and in whatever currency denominated) and any other
indebtedness at any time held or owing by that Lender or that subsequent holder
to or for the credit or the account of the Borrower or any Guarantor, whether or
not matured, against and on account of the Obligations of the Borrower and the
Guarantors to that Lender or that subsequent holder under the Loan Documents,
including, but not limited to, all claims of any nature or description arising
out of or connected with the Loan Documents, irrespective of whether or not (a)
that Lender or that subsequent holder shall have made any demand hereunder, or
(b) the principal of or the interest on the Loans or Notes and other amounts due
hereunder shall have become due and payable pursuant to Section 9 and although
said obligations and liabilities, or any of them, may be contingent or
unmatured.

      Section 13.18. Entire Agreement. The Loan Documents constitute the entire
understanding of the parties thereto with respect to the subject matter thereof
and any prior agreements, whether written or oral, with respect thereto are
superseded hereby.

      Section 13.19. Governing Law. This Agreement and the other Loan Documents,
and the rights and duties of the parties hereto, shall be construed and
determined in accordance with the internal laws of the State of Illinois.

      Section 13.20. Severability of Provisions. Any provision of any Loan
Document which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. All rights, remedies
and powers provided in this Agreement and the other Loan Documents may be
exercised only to the extent that the exercise thereof does not violate any
applicable mandatory provisions of law, and all the provisions of this Agreement
and other Loan Documents are intended to be subject to all applicable mandatory
provisions of law which may be controlling and to be limited to the extent
necessary so that they will not render this Agreement or the other Loan
Documents invalid or unenforceable.

      Section 13.21. Excess Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Document, no such provision shall
require the payment or permit the collection of any amount in excess of the
maximum amount of interest permitted by applicable law to be charged for the use
or detention, or the forbearance in the collection, of all or any portion of the
Loans or other obligations outstanding under this Agreement or any other Loan
Document ("Excess Interest"). If any Excess Interest is provided for, or is
adjudicated to be provided for, herein or in any other Loan Document, then in
such event (a) the provisions of this Section shall govern and control; (b)
neither of the Borrower nor any guarantor or endorser shall be obligated to pay
any Excess Interest; (c) any Excess Interest that the Administrative Agent or
any Lender may have received hereunder shall, at the option of the
Administrative Agent, be (i) applied as a credit against the then outstanding
principal amount of Loans hereunder, accrued and unpaid interest thereon (not to
exceed the maximum amount permitted by applicable law) and any other
Obligations, or all of the foregoing; (ii) refunded to the Borrower, or (iii)
any combination of the foregoing; (d) the interest rate payable hereunder or
under any other Loan Document shall be automatically subject to reduction to the
maximum lawful contract rate allowed under applicable usury laws, and this
Agreement and the other Loan Documents shall be

                                      -79-
<PAGE>

deemed to have been, and shall be, reformed and modified to reflect such
reduction in the relevant interest rate; and (e) neither of the Borrower nor any
guarantor or endorser shall have any action against the Administrative Agent or
any Lender for any damages whatsoever arising out of the payment or collection
of any Excess Interest.

      Section 13.22. Construction. Nothing contained herein shall be deemed or
construed to permit any act or omission which is prohibited by the terms of any
Collateral Document, the covenants and agreements contained herein being in
addition to and not in substitution for the covenants and agreements contained
in the Collateral Documents.

      Section 13.23. Lender's Obligations Several. The obligations of the
Lenders hereunder are several and not joint. Nothing contained in this Agreement
and no action taken by the Lenders pursuant hereto shall be deemed to constitute
the Lenders a partnership, association, joint venture or other entity.

      Section 13.24. Submission to Jurisdiction; Waiver of Jury Trial. The
Borrower and the Guarantors hereby submit to the nonexclusive jurisdiction of
the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. The Borrower and
the Guarantors irrevocably waive, to the fullest extent permitted by law, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. THE BORROWER,
THE GUARANTORS, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY
WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.

      Section 13.25. USA Patriot Act. Each Lender that is subject to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the "Act") hereby notifies the Borrower that pursuant to
the requirements of the Act, it is required to obtain, verify, and record
information that identifies the Borrower, which information includes the name
and address of the Borrower and other information that will allow such Lender to
identify the Borrower in accordance with the Act.

      Section 13.26. Equalization of Loans and Commitments. Upon the
satisfaction of the conditions precedent set forth in Section 7.2 hereof, all
loans and letters of credit outstanding under the Prior Credit Agreement shall
remain outstanding as the initial Borrowing of Loans and Letters of Credit under
this Agreement and, in connection therewith, the Borrower shall be deemed to
have prepaid all outstanding Eurodollar Loans on the Effective Date and shall
pay to each Lender who is currently a party to the Prior Credit Agreement any
compensation due such Lender under Section 1.12 of the Prior Credit Agreement as
a result thereof. On the Effective Date, the Lenders each agree to make such
purchases and sales of interests in the outstanding Loans and interests in
outstanding Letters of Credit between themselves so that each Lender is then
holding its relevant Percentage of outstanding Loans and L/C Obligations. Such
purchases and sales shall be arranged through the Administrative Agent and each
Lender hereby agrees to

                                      -80-
<PAGE>

execute such further instruments and documents, if any, as the Administrative
Agent may reasonably request in connection therewith.

      Section 13.27. Amendment and Restatement. This Agreement shall become
effective on the Effective Date and shall supersede all provisions of the Prior
Credit Agreement as of such date. From and after the Effective Date all
references made to the Prior Credit Agreement in any Loan Document or in any
other instrument or document shall, without more, be deemed to refer to this
Agreement. The Borrower and the Guarantors heretofore executed and delivered to
the Administrative Agent the Pledge Agreement, the Security Agreement, the
Mortgages and certain other Collateral Documents. The Borrower and the
Guarantors hereby acknowledge and agree that the Liens created and provided for
by the Collateral Documents continue to secure, among other things, the
Obligations arising under this Agreement; and the Collateral Documents and the
rights and remedies of the Administrative Agent thereunder, the obligations of
the Borrower and the Guarantors thereunder, and the Liens created and provided
for thereunder remain in full force and effect and shall not be affected,
impaired or discharged hereby. Nothing herein contained shall in any manner
affect or impair the priority of the liens and security interests created and
provided for by the Collateral Documents as to the indebtedness which would be
secured thereby prior to giving effect to this Agreement. Without limiting the
foregoing, the parties to this Agreement hereby acknowledge and agree that the
"Credit Agreement" and "Notes" referred to in the Pledge Agreement, Security
Agreement, Mortgages and any other Collateral Documents shall from and after the
date hereof be deemed a reference to this Agreement and the Notes issued
hereunder.

      Section 13.28. Removal of Lenders and Assignment of Interests. Each
Departing Lender hereby severally agrees to sell and assign without
representation, recourse, or warranty (except each Departing Lender represents
it has authority to execute and deliver this Agreement and sell its Obligations
contemplated hereby, which Obligations are owned by the relevant Departing
Lender free and clear of all Liens), and upon the satisfaction of the conditions
precedent set forth in Section 7.2 hereof the Lenders hereby agree to purchase,
100% of each such Departing Lender's outstanding Obligations under the Prior
Credit Agreement and the Loan Documents (including, without limitation, all of
the indebtedness evidenced by the Notes held by the Departing Lenders, together
with all of its interests in outstanding Letters of Credit) for a purchase price
equal to the outstanding principal balance of Loans and accrued but unpaid
interest and fees owed to the relevant Departing Lender under the Prior Credit
Agreement as of the Effective Date, which purchase price shall be paid in
immediately available funds on the Effective Date. Such purchases and sales
shall be arranged through the Administrative Agent and the Departing Lenders
hereby agree to execute such further instruments and documents, if any, as the
Administrative Agent may reasonably request in connection therewith. Upon the
execution and deliver of this Agreement by each of the Departing Lenders, the
Lenders, and the Borrower and the payment of the Obligations owing to the
Departing Lenders, the Departing Lenders shall cease to be Lenders under the
Credit Agreement and the other Loan Documents and (i) the Lenders shall have the
rights of the Departing Lenders thereunder subject to the terms and conditions
hereof and (ii) the Departing Lenders shall have relinquished their rights
(other than rights to indemnification and reimbursements referred to in the
Prior Credit Agreement which survive the repayment of the Obligations owed to
the Departing Lenders in accordance with its terms, including Section 13.6 and
13.16 thereof) and be released from their obligations

                                      -81-
<PAGE>

under the Prior Credit Agreement. The parties hereto agree that, except as
provided for in the preceding sentence, all references in the Loan Documents to
the Lenders or any Lender shall from and after the date hereof no longer include
the Departing Lenders.

                           [SIGNATURE PAGES TO FOLLOW]

                                      -82-
<PAGE>

      This Second Amended and Restated Credit Agreement is entered into between
us for the uses and purposes hereinabove set forth as of the date first above
written.

                                   "BORROWER"

                                   THE LAMSON & SESSIONS CO.

                                   By      /s/ James J. Abel
                                           ------------------------------------
                                     Name  James J. Abel
                                     Title Executive Vice President,
                                           Secretary, Treasurer & CFO

                                   "GUARANTORS"

                                   CARLON CHIMES CO.

                                   By      /s/ James J. Abel
                                           ------------------------------------
                                     Name  James J. Abel
                                     Title Vice President, Secretary and
                                           Treasurer

                                   DIMANGO PRODUCTS CORPORATION

                                   By      /s/ James J. Abel
                                           ------------------------------------
                                     Name  James J. Abel
                                     Title Secretary

                                   PYRAMID INDUSTRIES II, INC.

                                   By      /s/ James J. Abel
                                           ------------------------------------
                                     Name  James J. Abel
                                     Title Vice President and Treasurer

<PAGE>

                                   "LENDERS"

                                   HARRIS N.A., in its individual capacity as a
                                     Lender and as Administrative Agent

                                   By      /s/ David L. Mistic
                                           ------------------------------------
                                     Name  David L. Mistic
                                     Title Vice President

                                     Address:

                                     111 West Monroe Street
                                     Chicago, Illinois  60603
                                   Attention: David Mistic
                                   Telecopy:  (312) 293-5068
                                   Telephone: (312) 461-1402

                                      -2-
<PAGE>

                                   JPMORGAN CHASE BANK, N.A., in its
                                     individual capacity as a Lender and as
                                     Co-Syndication Agent

                                   By      /s/ Phillip R. Duryea
                                           ------------------------------------
                                     Name  Phillip R. Duryea
                                     Title First Vice President

                                   Address:

                                     1300 East Ninth Street, 13th Floor
                                     Cleveland, Ohio 44114
                                   Attention: Phil Duryea
                                   Telecopy:  (216)  781-4567
                                   Telephone: (216)  781-2196

                                      -3-
<PAGE>

                                   NATIONAL CITY BANK, in its individual
                                     capacity as a Lender and as
                                     Co-Syndication Agent

                                   By      /s/ Carrie G. Tate
                                           ------------------------------------
                                     Name  Carrie G. Tate
                                     Title Senior Vice President

                                   Address:

                                     1900 East Ninth Street
                                     Cleveland, Ohio 44114
                                   Attention:
                                              --------------------------------
                                   Telecopy:  (216)  222-9396
                                   Telephone: (216)  222-2116

                                      -4-
<PAGE>

                                   LASALLE BANK NATIONAL ASSOCIATION, in its
                                     individual capacity as a Lender
                                     and as Documentation Agent

                                   By      /s/ Robert M. Walker
                                           ------------------------------------
                                     Name  Robert M. Walker
                                     Title First Vice President

                                   Address:

                                     1300 East 9th St., Suite 1000
                                     Cleveland, Ohio  44114
                                   Attention: Robert M. Walker
                                   Telecopy:  (216) 802-2212
                                   Telephone: (216) 802-2204

                                      -5-
<PAGE>

                                   HSBC BANK USA, NATIONAL ASSOCIATION

                                   By      /s/ Michael J. Green
                                           ------------------------------------
                                     Name  Michael J. Green
                                     Title Vice President

                                   Address:

                                     One HSBC Center, Lobby Level
                                     Buffalo, New York  14203
                                   Attention: Michael J. Green
                                   Telecopy:  (716) 855-0384
                                   Telephone: (716) 841-7410

                                      -6-
<PAGE>

                                   FIFTH THIRD BANK

                                   By      /s/ Roy C. Lanctot
                                           ------------------------------------
                                     Name  Roy C. Lanctot
                                     Title Vice President

                                   Address:
                                     600 Superior Avenue East
                                     Cleveland, Ohio 44114
                                   Attention: Roy C. Lanctot
                                   Telecopy:  (216) 274-5145
                                   Telephone: (216) 274-5473

                                      -7-
<PAGE>

                                   THE HUNTINGTON NATIONAL BANK

                                   By      /s/ Don W. Lambacker
                                           ------------------------------------
                                     Name  Don W. Lambacker
                                     Title Senior Vice President

                                   Address:

                                     917 Euclid Avenue, CM62
                                     Cleveland, Ohio 44115
                                   Attention: Commercial Banking
                                   Telecopy:  (216) 575-6082
                                   Telephone: (216) 575-6832

                                      -8-
<PAGE>

      The undersigned Departing Lenders hereby execute and deliver this
Agreement solely for the purposes set forth in Section 13.28 above.

                                   "DEPARTING LENDERS"

                                   KEY BANK NATIONAL ASSOCIATION

                                   By      /s/ Leslie A. Jones
                                           ------------------------------------
                                     Name  Leslie A. Jones
                                     Title Vice President

                                   BANK OF AMERICA, N.A.

                                   By      /s/ Michael Hammond
                                           ------------------------------------
                                     Name  Michael Hammond
                                     Title Senior Vice President

                                      -9-Exhibit 10.1

 

Exhibit 10.1

EXECUTION COPY

14,062,500 Shares

DSW Inc.

Class A Common Shares

UNDERWRITING AGREEMENT

June 28, 2005

Lehman Brothers Inc . 

Goldman, Sachs & Co.

CIBC World Markets Corp.

Johnson Rice & Company, L.L.C.

As Representatives of the several

Underwriters named in Schedule 1,

c/o Lehman Brothers Inc.

745 Seventh Avenue

New York, New York 10019

Dear Sirs:

     DSW Inc., an Ohio corporation (formerly known as Shonac Corporation) (the “Company”) and
Retail Ventures Inc., an Ohio corporation and the direct parent of the Company (“Retail Ventures”)
propose to enter into this Agreement, whereby the Company proposes to sell an aggregate of
14,062,500 shares (the “Firm Shares”) of the Company’s Class A Common Shares, without par value
(the “Common Shares.”)

     It is understood that, subject to the conditions hereinafter stated, 14,062,500 Firm Shares
will be sold to the several Underwriters named in Schedule 1 hereto (the “Underwriters”) in
connection with the offering and sale of such Firm Shares in the United States and Canada to United
States and Canadian persons. Lehman Brothers Inc., Goldman, Sachs & Co., CIBC World Markets Corp.
and Johnson Rice & Company, L.L.C. shall act as representatives (the “Representatives”) of the
several Underwriters.

     In addition, the Company proposes to grant to the Underwriters an option to purchase up to an
additional 2,109,375 Common Shares on the terms and for the purposes set forth in Section 2 (the
“Option Shares”). The Firm Shares and the Option Shares, if purchased, are hereinafter
collectively called the “Shares.” This is to confirm the agreement concerning the purchase of the
Shares from the Company by the Underwriters.

     The Company understands that the Underwriters propose to consummate a public offering of the
Shares as soon as the Representatives deem advisable after the registration

 

statement on Form S-1 with respect to the Shares becomes effective and this Agreement has been
executed and delivered.

     It is understood by the parties hereto that, simultaneously with or prior to the consummation
of the sale of the Company’s Common Shares contemplated hereby, the Company and Retail Ventures
have entered into or expect to enter into a series of related transactions providing for the
separation of the Company’s business from that of Retail Ventures. These transactions include:
(i) the amendment and restatement by Value City Department Stores LLC, an Ohio corporation (“Value
City”) and the other parties thereto of the existing Value City revolving credit facility, the
amendment, restatement and repayment of a portion of the principal amount outstanding under the
existing Value City senior subordinated convertible loan facility, the amendment and repayment in
full of the existing Value City term loan facility and the release of the Company from its
obligations under each such facility, in each case as described in the Prospectus (as such term is
defined herein); (ii) the issuance by Retail Ventures of warrants to purchase common shares of
Retail Ventures or Class A Common Shares of the Company held or to be held by Retail Ventures to
certain of Value City’s lenders in connection with the amendment and restatement of the existing
Value City senior subordinated convertible loan facility and the amendment of the existing warrants
issued by Retail Ventures in connection with the Value City term loan facility to permit the
holders thereof to purchase common shares of Retail Ventures or Class A Common Shares of the
Company held or to be held by Retail Ventures, in each case as described in the Prospectus; (iii)
the entering into by the Company of a registration rights agreement relating to the Class A Common
Shares of the Company underlying the warrants described in clause (ii) above; (iv) the repayment by
the Company of certain intercompany indebtedness to Retail Ventures; (v) the change of the
Company’s existing common shares into Class B Common Shares (the “Recapitalization”); (vi) the
entering into by the Company of a new $150 million five-year senior secured credit facility; (vii)
the amendment by Retail Ventures, Schottenstein Stores Corporation and Schottenstein Management
Company of an existing Corporate Services Agreement and the entering into by the Company,
Schottenstein Stores Corporation and Schottenstein Management Company of a supplemental letter
agreement relating thereto; (viii) the entering into by the Company and Filene’s Basement Inc. of a
Supply Agreement whereby the Company will supply merchandise to Filene’s Basement stores; and (ix)
the entering into by the Company, Value City and Retail Ventures of the Intercompany Agreements, as
such term is defined herein (such transactions, collectively, the “Transactions.”)

     Section 1. Representations, Warranties and Agreements of the Company and Retail Ventures. The
Company and Retail Ventures, jointly and severally, represent, warrant and agree with the
Underwriters that:

     (a) A registration statement on Form S-1 with respect to the Shares has (i) been prepared by
the Company in conformity with the requirements of the Securities Act

2

 

of 1933, as amended (the “Securities Act”), and the rules and regulations (the “Rules and
Regulations”) of the Securities and Exchange Commission (the “Commission”) thereunder, (ii) been
filed with the Commission under the Securities Act and (iii) become effective under the Securities
Act. Copies of such registration statement and each of the amendments thereto have been delivered
by the Company to you. As used in this Agreement, “Effective Time” means the date and the time as
of which such registration statement, or the most recent post-effective amendment thereto, if any,
was declared effective by the Commission; “Effective Date” means the date of the Effective Time;
“Preliminary Prospectus” means each prospectus included in such registration statement, or
amendments thereof, before it became effective under the Securities Act and any prospectus filed
with the Commission by the Company with the consent of the Representatives pursuant to Rule 424(a)
of the Rules and Regulations; “Registration Statement” means such registration statement, as
amended at the Effective Time, including all information contained in the final prospectus filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations and deemed to be a part of
the registration statement as of the Effective Time pursuant to Rule 430A of the Rules and
Regulations; and “Prospectus” means the prospectus in the form first used to confirm sales of
Shares. If the Company has filed an abbreviated registration statement to register additional
Common Shares pursuant to Rule 462(b) under the Securities Act (the “Rule 462 Registration
Statement”), then any reference herein to the term “Registration Statement” shall be deemed to
include such Rule 462 Registration Statement. The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus.

     (b) The Registration Statement conforms, and the Prospectus and any further amendments or
supplements to the Registration Statement or the Prospectus will, when they become effective or are
filed with the Commission, as the case may be, conform in all material respects to the requirements
of the Securities Act and the Rules and Regulations and do not and will not, as of the applicable
effective date (as to the Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or supplement thereto) contain an
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and the statistical and market-related
data included in the Prospectus are based on or derived from sources which each of the Company and
Retail Ventures reasonably and in good faith believes are reliable and accurate; provided that no
representation or warranty is made as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in conformity with written information furnished
to the Company through the Representatives by or on behalf of any Underwriter specifically for
inclusion therein.

     (c) The Company and DSW Shoe Warehouse Inc., a Missouri corporation and wholly-owned
subsidiary of the Company (“DSW Shoe Warehouse”), (i) have been duly incorporated and are validly
existing as corporations in good standing under the

3

 

laws of their respective jurisdictions of incorporation, (ii) are duly qualified to do
business and are in good standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective businesses requires
such qualification, except where the failure to be so qualified or in good standing would not
reasonably be expected to have, individually or in the aggregate, a material adverse effect on the
general affairs, management, business, prospects, financial position, revenues or expenses,
properties, stockholders’ equity or results of operation of the Company and DSW Shoe Warehouse
taken as a whole (a “Material Adverse Effect”), and (iii) have all power and authority necessary to
own or hold their respective properties and to conduct the businesses in which they are engaged.
DSW Shoe Warehouse is the only subsidiary of the Company, and is a “significant subsidiary”, as
such term is defined in Rule 405 of the Rules and Regulations. Except as set forth in the
Prospectus, the Company does not have any direct or indirect ownership interest by stock ownership
or otherwise in any other corporation, limited liability company, partnership, joint venture, firm,
association or business enterprise.

     (d) The Company has an authorized capitalization as set forth in the Prospectus, and all the
issued shares of capital stock of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof contained in the Prospectus;
and all the issued shares of capital stock of DSW Shoe Warehouse have been duly and validly
authorized and issued and are fully paid and non-assessable and are owned directly by the Company,
free and clear of all liens, encumbrances, equities or claims, except as described in the
Prospectus under the caption “Description of Indebtedness”; and the issuance of such shares of
capital stock of the Company and each subsidiary of the Company has not been made in violation of
any preemptive or other similar rights of shareholders.

     (e) Except as described in the Prospectus, the shares of capital stock of the Company held by
Retail Ventures are owned directly by Retail Ventures, free and clear of all liens, encumbrances,
equities or claims.

     (f) The Shares to be issued and sold by the Company to the Underwriters hereunder have been
duly and validly authorized and, when issued and delivered against payment therefor in accordance
with this Agreement, will be duly and validly issued, fully paid and non-assessable; and the Shares
will conform to the descriptions thereof contained in the Prospectus under the caption “Description
of Capital Stock.”

     (g) Each of the Master Separation Agreement, to be dated as of the First Delivery Date (as
defined below), between the Company and Retail Ventures; the Shared Services Agreement, to be dated
as of the First Delivery Date, between the Company and Retail Ventures; and the Tax Separation
Agreement, to be dated as of the First Delivery Date, between the Company and Retail Ventures;
(such agreements, collectively, the “Intercompany Agreements”) has been duly authorized by each of
Retail Ventures, DSW Shoe Warehouse and the Company, as applicable, and, when duly executed and

4

 

delivered by each of Retail Ventures, DSW Shoe Warehouse and the Company, as applicable, will
constitute a valid and binding obligation of Retail Ventures, DSW Shoe Warehouse and/or the
Company, as applicable, enforceable in accordance with its terms, except to the extent that
enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors’ rights generally and (B)
general principles of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).

     (h) Except as described in the Prospectus under the caption “Description of Indebtedness”, DSW
Shoe Warehouse is not currently prohibited, directly or indirectly, from paying any dividends to
the Company, from making any other distribution on its capital stock to the Company, from repaying
to the Company any loans or advances to any such subsidiary from the Company or from transferring
title to any of its property or assets to the Company.

     (i) Each of the Company and Retail Ventures has all requisite power and authority to execute,
deliver and perform its respective obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered by each of the Company and Retail Ventures.

     (j) Except as disclosed in or specifically contemplated by the Prospectus, neither the Company
nor DSW Shoe Warehouse has any outstanding options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any shares of their capital stock or obligations
convertible into, or any contracts or commitments to issue or sell, shares of their capital stock
or any such options, rights convertible securities or obligations.

     (k) The execution, delivery and performance of this Agreement, each of the other documents
specified in Schedule 2 to be entered into in connection with the Transactions by the Company, DSW
Shoe Warehouse and Retail Ventures (such agreements, collectively, the “Applicable Contracts”) and
the Intercompany Agreements, and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which any of the Company, DSW Shoe Warehouse, Retail Ventures, or any of
their respective subsidiaries is a party or by which any of them or any of their respective
subsidiaries is bound or to which any of the property or assets of any of them or any of their
respective subsidiaries is subject (assuming that the consents required under the June 2002 credit
agreements, as amended, will be obtained upon the due execution and delivery of, and satisfaction
of the terms of, the (i) Loan and Security Agreement by and between the Company and DSW Shoe
Warehouse, as the Borrowers, and National City Business Credit, Inc., as Administrative Agent and
Collateral Agent for the Revolving Credit Lenders, (ii) Amended and Restated Loan and Security
Agreement by and between Value City, as Lead Borrower, the Borrowers party

5

 

thereto, and National City Business Credit, Inc., as Administrative Agent and Collateral Agent
for the Revolving Credit Lenders referenced therein and (iii) Second Amended and Restated Senior
Loan Agreement by and among Value City, as Borrower, the Guarantors party thereto, the Lenders from
time to time party thereto, and Cerberus Partners L.P., as agent), nor will such actions result in
any violation of the provisions of the charter or by-laws (or other equivalent organizational
document) of any of the Company, DSW Shoe Warehouse, Retail Ventures or any of their respective
subsidiaries, or any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over any of them or any of their respective subsidiaries, or any of
their respective properties or assets; and except for (i) the registration of the Shares under the
Securities Act and (ii) such consents, approvals, authorizations, registrations or qualifications
as may be required under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and
applicable state and foreign securities laws in connection with the purchase and distribution of
the Shares by the Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for the execution,
delivery and performance of this Agreement, any of the Applicable Contracts by any of the Company,
DSW Shoe Warehouse, Retail Ventures or any of their respective subsidiaries or the Intercompany
Agreements, and the consummation of the transactions contemplated hereby and thereby, except where
the failure to have such consents, approvals, authorizations, registrations or qualifications would
not reasonably be expected to have a Material Adverse Effect.

     (l) Except as described in the Prospectus, there are no contracts, agreements or
understandings between the Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with respect to any securities of
the Company owned or to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by the Company under the
Securities Act.

     (m) Except in connection with the Recapitalization, neither the Company nor DSW Shoe Warehouse
has sold or issued any Common Shares during the six-month period preceding the date of the
Prospectus, including any sales pursuant to Rule 144A under, or Regulations D or S of, the
Securities Act other than shares issued pursuant to employee benefit plans, qualified stock options
plans or other employee compensation plans or pursuant to outstanding options, rights or warrants.

     (n) Neither the Company nor DSW Shoe Warehouse has sustained, since the date of the latest
audited financial statements included in the Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since such date, there has not been any change in the
capital stock or long-term debt

6

 

of the Company or DSW Shoe Warehouse, other than in connection with the Transactions, nor any
Material Adverse Effect, nor any development that would reasonably be expected to have a Material
Adverse Effect, in each case, otherwise than as set forth or contemplated in the Prospectus.

     (o) The financial statements (including the related notes and supporting schedules) filed as
part of the Registration Statement or included in the Prospectus comply as to form in all material
respects with the requirements of Regulation S-X under the Securities Act and present fairly the
financial condition, results of operations and cash flows of the entities purported to be shown
thereby, at the dates and for the periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis throughout the periods
involved. The pro forma financial statements and the related notes thereto included in the
Registration Statement and the Prospectus present fairly the information shown therein, have been
prepared in accordance with the Commission’s rules and guidelines with respect to pro forma
financial statements and have been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to therein. The other
financial data, selected financial ratios and other pro forma financial information, operating data
and statistical information and data included in the Prospectus are presented fairly and have been
prepared on a basis consistent in all material respects (except for, with respect to the pro forma
financial information, the pro forma adjustments described in the Prospectus) with such financial
statements and the books and records of the Company and DSW Shoe Warehouse.

     (p) Deloitte & Touche LLP, who have certified certain financial statements of the Company,
whose report appears in the Prospectus and who have delivered the initial letter referred to in
Section 7(h) hereof, are an independent registered public accounting firm as required by the
Securities Act and the Rules and Regulations.

     (q) Each of the Company and DSW Shoe Warehouse has good and marketable title in fee simple to
(i) all real property and (ii) good and marketable title to all personal property owned by it that
is material to the business of the Company and DSW Shoe Warehouse taken as a whole, in each case
free and clear of all liens, charges, claims, encumbrances, pledges, security interests, defects or
other restrictions, except such as are described in the Prospectus or such as do not materially
affect the value of such property and do not materially interfere with the use made and proposed to
be made of such property by the Company and DSW Shoe Warehouse; and all assets held under lease by
the Company and DSW Shoe Warehouse are held by them under valid, subsisting and enforceable leases,
with such exceptions as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and DSW Shoe Warehouse, in each case, except as
described in or contemplated by the Prospectus.

7

 

     (r) The Company and DSW Shoe Warehouse carry, or are covered by, insurance from insurers of
recognized financial responsibility in such amounts and covering such risks as they reasonably
believe is adequate for the conduct of their respective businesses and the value of their
respective properties and as is reasonable and customary for companies engaged in similar
businesses in similar industries; and all policies of insurance of the Company and DSW Shoe
Warehouse or their respective businesses, assets, employees, officers and directors are in full
force and effect in all material respects.

     (s) The Company and DSW Shoe Warehouse subsidiaries own or possess adequate rights to use all
material patents, patent rights, patent applications, trademarks, service marks, service names,
trade names, trademark registrations, service mark registrations, copyrights and licenses necessary
for the conduct of their respective businesses as described in the Prospectus (the “Intellectual
Property”) and have no reason to believe that the conduct of their respective businesses will
conflict with, infringe or violate, and have not received any notice of any claim of conflict with,
infringement of or violation of, any such rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or DSW Shoe Warehouse therein. The Company knows
of no infringement by others of Intellectual Property owned by the Company or DSW Shoe Warehouse
that could reasonably be expected to have a Material Adverse Effect. The Company and DSW Shoe
Warehouse have taken reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property and other proprietary information in all material respects.

     (t) Except as described in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or DSW Shoe Warehouse is a party or of which any property or assets of
the Company or DSW Shoe Warehouse is the subject which, if determined adversely to the Company or
DSW Shoe Warehouse, could reasonably be expected to have a Material Adverse Effect; and to the best
of the Company’s knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.

     (u) There are no contracts or other documents which are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules
and Regulations which have not been described in the Prospectus or filed as exhibits to the
Registration Statement.

     (v) No relationship, direct or indirect, exists between or among the Company on the one hand,
and directors, officers, shareholders, other affiliates, customers or suppliers of the Company on
the other hand, which is required to be described in the Prospectus which is not so described.

8

 

     (w) No labor disturbance by the employees of the Company or DSW Shoe Warehouse exists or, to
the knowledge of the Company, is imminent, and, to the Company’s knowledge, no labor disturbance by
the employees of any of its or DSW Shoe Warehouse’s principal suppliers, manufacturers or
contractors exists or is imminent, which, in either case, might be expected to have a Material
Adverse Effect.

     (x) The Company has not taken, directly or indirectly, any action that has constituted or that
was designed to or might reasonably be expected to cause or result in, under the Exchange Act or
otherwise, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Common Shares.

     (y) The Company is in compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder (“ERISA”); no “reportable event” (as defined
in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the
Company would have any liability; the Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any
“pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the “Code”); and each “pension
plan” for which the Company would have any liability that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the Internal Revenue Service
with respect to the qualified status of such plan, and, to the knowledge of the Company, nothing
has occurred, whether by action or by failure to act, which would cause the loss of such
qualification.

     (z) The Company has filed all federal, state and local income and franchise tax returns
required to be filed through the date hereof (other than any tax returns not so required to be
filed through the date hereof as a result of the existence of any waiver or extension granted in
connection with any such tax returns) and has paid all taxes due thereon (other than tax
assessments being contested in good faith), and no tax deficiency has been determined adversely to
the Company or DSW Shoe Warehouse which has had (nor does the Company have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have) a Material Adverse Effect.

     (aa) Since the date as of which information is given in the Prospectus through the date
hereof, and except as may otherwise be disclosed in the Prospectus, the Company has not (i) issued
or granted any securities, (ii) incurred any liability or obligation, indirect, direct or
contingent, other than non-material liabilities and obligations which were incurred in the ordinary
course of business, (iii) entered into any transaction not in the ordinary course of business or
(iv) declared, paid or made any dividend or distribution of any kind on its capital stock.

9

 

     (bb) The Company (i) makes and keeps accurate books, records and accounts that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company, and (ii) maintains a system of internal accounting controls which provides reasonable
assurance that (A) transactions are executed in accordance with management’s general or specific
authorization, (B) transactions are recorded as necessary to permit preparation of its financial
statements in conformity with generally accepted accounting principles and to maintain
accountability for its assets, (C) access to its assets is permitted only in accordance with
management’s general or specific authorization and (D) the recorded accountability for its assets
is compared with the Company’s existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.

     (cc) The Company has established and maintains disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) under the Exchange Act), which (i) are designed to ensure that
information required to be disclosed by the Company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to management, including the principal executive
and principal financial officer of the Company, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure, and that such information is
recorded, processed, summarized and reported, within the time periods specified in the Rules and
Regulations; (ii) have been evaluated for effectiveness; and (iii) are effective in all material
respects to perform the functions for which they were established.

     (dd) Based on an evaluation of its disclosure controls and procedures, the Company is not
aware of (i) any significant deficiency or material weakness in the design or operation of internal
controls over financial reporting which are reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information; or (ii) any fraud, whether
or not material, that involves management or other employees who have a significant role in the
Company’s internal controls over financial reporting.

     (ee) Since the date of the end of the last fiscal year for which audited financial statements
are included in the Prospectus, there have been no significant changes in internal controls or in
other factors that could significantly affect internal controls, including any corrective actions
with regard to significant deficiencies and material weaknesses.

     (ff) To the best knowledge of the Company, no change in any laws or regulations is pending
which could reasonably be expected to be adopted and if adopted, could reasonably be expected to
have, individually or in the aggregate with all such changes, a Material Adverse Effect, except as
set forth in or contemplated in the Prospectus.

10

 

     (gg) Neither the Company nor DSW Shoe Warehouse (i) is in violation of its charter or by-laws
(or other equivalent organizational document), (ii) is in default in any material respect, and no
event has occurred which, with notice or lapse of time or both, would constitute such a default, in
the due performance or observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is
a party or by which it is bound or to which any of its properties or assets is subject (assuming
that the consents required under the June 2002 credit agreements, as amended, will be obtained upon
the due execution and delivery of, and satisfaction of the terms of, the (i) Loan and Security
Agreement by and between the Company and DSW Shoe Warehouse, as the Borrowers, and National City
Business Credit, Inc., as Administrative Agent and Collateral Agent for the Revolving Credit
Lenders, (ii) Amended and Restated Loan and Security Agreement by and between Value City, as Lead
Borrower, the Borrowers party thereto, and National City Business Credit, Inc., as Administrative
Agent and Collateral Agent for the Revolving Credit Lenders referenced therein and (iii) Second
Amended and Restated Senior Loan Agreement by and among Value City, as Borrower, the Guarantors
party thereto, the Lenders from time to time party thereto, and Cerberus Partners L.P., as agent)
or (iii) is in violation in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be subject or has failed to
obtain any consent, approval, authorization, registration, qualification, license, permit,
certificate, franchise or other governmental authorization or permit necessary to the ownership of
its property or to the conduct of its business (each, a “Consent”). No Consent contains a
materially burdensome restriction not adequately disclosed in the Registration Statement and the
Prospectus.

     (hh) The minute books of each of Retail Ventures, Value City (before the Company became a
subsidiary of Retail Ventures), the Company and DSW Shoe Warehouse have been made available to the
Underwriters and contain a complete summary of all meetings and other actions of the directors and
shareholders of each of Retail Ventures, Value City (before the Company became a subsidiary of
Retail Ventures), the Company and DSW Shoe Warehouse in all material respects for the last five
years, and reflect all transactions referred to in such minutes accurately in all material
respects.

     (ii) Neither the Company nor DSW Shoe Warehouse, nor any director, officer, agent, employee or
other person associated with or acting on behalf of the Company or DSW Shoe Warehouse, has,
directly or indirectly, used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expense relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee or to foreign or domestic
political parties or campaigns from corporate funds; violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.

11

 

     (jj) The operations of the Company and DSW Shoe Warehouse are and have been conducted at all
times in compliance in all material respects with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or enforced by any governmental
agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before
any court or governmental agency, authority or body or any arbitrator involving the Company or DSW
Shoe Warehouse with respect to the Money Laundering Laws is pending, or to the knowledge of the
Company, threatened.

     (kk) Neither the Company nor DSW Shoe Warehouse nor, to the knowledge of the Company, any
director, officer, agent, employee or affiliate of the Company or DSW Shoe Warehouse is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of
the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, which, to the Company’s knowledge, will use such
proceeds for the purpose of financing the activities of any person currently subject to any U.S.
sanctions administered by OFAC.

     (ll) There has been no storage, disposal, generation, manufacture, refinement, transportation,
handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by
the Company or DSW Shoe Warehouse (or, to the knowledge of the Company, any of their predecessors
in interest) at, upon or from any of the real property now or previously owned or leased by the
Company or DSW Shoe Warehouse (i) in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or (ii) which would require remedial action under any applicable
law, ordinance, rule, regulation, order, judgment, decree or permit, except, in the case of clauses
(i) and (ii), for any violation or remedial action which would not reasonably be expected to have,
individually or in the aggregate with all such violations and remedial actions, a Material Adverse
Effect; there has been no material spill, discharge, leak, emission, injection, escape, dumping or
release of any kind onto such real property or into the environment surrounding such real property
of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to
or caused by the Company or DSW Shoe Warehouse or with respect to which the Company or DSW Shoe
Warehouse have knowledge, except for any such spill, discharge, leak, emission, injection, escape,
dumping or release which would not reasonably be expected to have, individually or in the aggregate
with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a
Material Adverse Effect; and the terms “hazardous wastes”, “toxic wastes”, “hazardous substances”
and “medical wastes” shall have the meanings specified in any applicable local, state, federal and
foreign laws or regulations with respect to environmental protection.

12

 

     (mm) No supplier of merchandise to the Company or DSW Shoe Warehouse has ceased shipments of
merchandise to the Company or indicated, to the Company’s knowledge, an interest in decreasing or
ceasing its sales to the Company or otherwise modifying its relationship with the Company, other
than in the normal and ordinary course of business consistent with past practices in a manner which
would not, singly or in the aggregate, result in a Material Adverse Effect.

     (nn) Neither RVI nor the Company is, or, as of the applicable Delivery Date (as hereinafter
defined) after giving effect to the Transactions and the application of the net proceeds therefrom
as described in the Prospectus, will be, an “investment company” or an entity “controlled” by an
“investment company” as defined in the Investment Company Act of 1940, as amended.

     (oo) On or prior to the applicable Delivery Date (as hereinafter defined), each of the
Applicable Contracts and the Intercompany Agreements will have been duly authorized, executed and
delivered by each of the Company, DSW Shoe Warehouse and Retail Ventures, as applicable, in
substantially the form previously provided to the Underwriters and will conform to the descriptions
thereof in the Prospectus.

     (pp) The Registration Statement, the Prospectus and any Preliminary Prospectus comply, and any
further amendments or supplements thereto will comply, with any applicable laws or regulations of
foreign jurisdictions in which the Prospectus or any Preliminary Prospectus, as amended or
supplemented, if applicable, are distributed in connection with the Directed Share Program (as such
term is defined below). No consent, approval, authorization or order of, or filing or registration
with, any court or governmental agency or body, other than such as have been obtained, is required
under the securities laws and regulations of any foreign jurisdiction in which the Directed Shares
(as such term is defined below) are offered or sold outside the United States.

     (qq) Neither the Company nor Retail Ventures has distributed, nor, prior to the later to occur
of any Delivery Date and completion of the distribution of the Shares, will either of them
distribute any offering material in connection with the offering and sale of the Shares other than
the Preliminary Prospectus and the Prospectus, and, in connection with the Directed Share Program
described in Section 3, the enrollment materials provided by Lehman Brothers Inc..

     (rr) Neither the Company nor Retail Ventures has taken, nor will either of them take, directly
or indirectly, any action designed to or which has constituted or which might reasonably be
expected to cause or result in the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares.

     Section 2. Purchase of the Shares by the Underwriters. On the basis of the representations
and warranties contained in, and subject to the terms and conditions of, this Agreement, the
Company agrees to sell the Firm Shares to the several Underwriters,

13

 

and each of the Underwriters, severally and not jointly, agrees to purchase the number of the
Firm Shares set forth opposite that Underwriter’s name in Schedule 1 hereto. The respective
purchase obligations of the Underwriters with respect to the Firm Shares shall be rounded among the
Underwriters to avoid fractional shares, as the Representatives may determine.

     In addition, the Company grants to the Underwriters an option to purchase up to 2,109,375
Option Shares if the Underwriters sell more than the number of Firm Shares in the offering. Option
Shares shall be purchased severally for the account of the Underwriters in proportion to the number
of Firm Shares set forth opposite the name of such Underwriters in Schedule 1 hereto. The
respective purchase obligations of each Underwriter with respect to the Option Shares shall be
adjusted by the Representatives so that no Underwriter shall be obligated to purchase Option Shares
other than in 100 share amounts.

     The price of both the Firm Shares and any Option Shares shall be $17.67 per share.

     The Company shall not be obligated to deliver any of the Shares to be delivered by it on any
Delivery Date (as hereinafter defined), except upon payment for all the Shares to be purchased on
such Delivery Date as provided herein.

     Section 3. Offering of Shares by the Underwriters.

     Upon authorization by the Representatives of the release of the Firm Shares, the several
Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in
the Prospectus.

     It is understood that approximately 1,160,000 Firm Shares (the “Directed Shares”) will
initially be reserved by the several Underwriters for offer and sale upon the terms and conditions
set forth in the Prospectus and in accordance with the rules and regulations of the National
Association of Securities Dealers, Inc. (the “NASD”) to officers, directors, and employees of the
Company and certain persons having business relationships with the Company with Retail Ventures and
with Schottenstein Stores Corporation, a closely-held Delaware corporation, who have heretofore
delivered to Lehman Brothers Inc. offers or indications of interest to purchase Firm Shares in form
satisfactory to Lehman Brothers Inc. (such program, the “Directed Share Program”) and that any
allocation of such Firm Shares among such persons will be made in accordance with timely directions
received by Lehman Brothers Inc. from the Company; provided, that under no circumstances will
Lehman Brothers Inc. or any Underwriter be liable to the Company or to any such person for any
action taken or omitted in good faith in connection with such Directed Share Program, unless such
action or omission was taken by such Underwriter (including for the avoidance of doubt Lehman
Brothers Inc.) through its own gross negligence. It is further understood that any of such Firm
Shares

14

 

which are not purchased by such persons will be offered by the Underwriters to the public upon
the terms and conditions set forth in the Prospectus.

     The Company agrees to pay all fees and disbursements incurred by the Underwriters in
connection with the Directed Share Program and any stamp duties or other taxes incurred by the
Underwriters in connection with the Directed Share Program.

     Section 4. Delivery of and Payment for the Shares. Delivery of and payment for the Firm
Shares shall be made at the offices of Debevoise & Plimpton LLP, 919 Third Avenue, New York, New
York, at 10:00 A.M., New York City time, on the fourth full business day following the date of this
Agreement or at such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to as the “First
Delivery Date.” On the First Delivery Date, the Company shall deliver or cause to be delivered
certificates representing the Firm Shares to the Representatives for the account of each
Underwriter against payment to or upon the order of the Company of the purchase price by wire
transfer in immediately available funds. Time shall be of the essence, and delivery at the time
and place specified pursuant to this Agreement is a further condition of the obligation of each
Underwriter hereunder. Upon delivery, the Firm Shares shall be registered in such names and in
such denominations as the Representatives shall request in writing not less than two full business
days prior to the First Delivery Date. For the purpose of expediting the checking and packaging of
the certificates for the Firm Shares, the Company shall make the certificates representing the Firm
Shares available for inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the First Delivery Date.

     The option granted in Section 2 will expire 30 days after the date of this Agreement and may
be exercised in whole or in part from time to time by written notice being given to the Company by
the Representatives. Such notice shall set forth the aggregate number of Option Shares as to which
the option is being exercised, the names in which the Option Shares are to be registered, the
denominations in which the Option Shares are to be issued and the date and time, as determined by
the Representatives, when the Option Shares are to be delivered; provided, however, that this date
and time shall not be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the fifth business day
after the date on which the option shall have been exercised. The date and time the Option Shares
are delivered are sometimes referred to as a “Subsequent Delivery Date” and the First Delivery Date
and any Subsequent Delivery Date are sometimes each referred to as a “Delivery Date.”

     Delivery of and payment for the Option Shares shall be made at the place specified in the
first sentence of the first paragraph of this Section 4 (or at such other place as shall be
determined by agreement between the Representatives and the Company) at 10:00 A.M., New York City
time, on each such Subsequent Delivery Date.

15

 

On each such Subsequent Delivery Date, the Company shall deliver or cause to be delivered the
certificates representing the Option Shares to be purchased on such Subsequent Delivery Date to the
Representatives for the account of each Underwriter against payment to or upon the order of the
Company of the purchase price by wire transfer in immediately available funds. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each Underwriter hereunder. Upon delivery, the Option Shares shall
be registered in such names and in such denominations as the Representatives shall request in the
aforesaid written notice. For the purpose of expediting the checking and packaging of the
certificates for the Option Shares, the Company shall make the certificates representing the Option
Shares available for inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to each such Subsequent Delivery Date.

     Section 5. Further Agreements of the Company. The Company agrees:

     (a) To prepare the Prospectus in a form approved by the Representatives and to file such
Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission’s close
of business on the second business day following the execution and delivery of this Agreement or,
if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to
make no further amendment or any supplement to the Registration Statement or to the Prospectus
except as permitted herein; to advise the Representatives, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been filed and to
furnish the Representatives with copies thereof; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the Prospectus, of the suspension
of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;

     (b) To furnish promptly to each of the Representatives and to counsel for the Underwriters a
signed copy of the Registration Statement as originally filed with the Commission, and each
amendment thereto filed with the Commission, including all consents and exhibits filed therewith;

     (c) To deliver promptly to the Representatives such number of the following documents as the
Representatives shall reasonably request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment

16

 

thereto (in each case excluding exhibits) and (ii) each Preliminary Prospectus, the Prospectus
and any amended or supplemented Prospectus; and, if the delivery of a prospectus is required at any
time after the Effective Time in connection with the offering or sale of the Shares and if at such
time any events shall have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary to amend or supplement the Prospectus in order to comply with the Securities
Act (including, without limitation, by filing further exhibits thereto), to notify the
Representatives and, upon their request, to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as the Representatives may from time to time
reasonably request of an amended or supplemented Prospectus which will correct such statement or
omission or effect such compliance;

     (d) To file promptly with the Commission any amendment to the Registration Statement or the
Prospectus or any supplement to the Prospectus that may, in the judgment of the Company or the
Representatives, be required by the Securities Act or requested by the Commission;

     (e) Prior to filing with the Commission any amendment to the Registration Statement or
supplement to the Prospectus or any Prospectus pursuant to Rule 424 of the Rules and Regulations,
to furnish a copy thereof to the Representatives and counsel for the Underwriters and obtain the
consent of the Representatives to the filing;

     (f) As soon as practicable after the Effective Date, to make generally available to the
Company’s securityholders and to deliver to the Representatives an earnings statement of the
Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the
Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158),
it being understood that such delivery requirement shall be deemed to be met by the Company’s
timely compliance with its reporting obligations pursuant to the Exchange Act and the rules and
regulations promulgated thereunder;

     (g) For a period of three years following the Effective Date, other than information which is
publicly available on the Commission’s Electronic Data Gathering, Analysis and Retrieval System, to
furnish to the Representatives copies of all materials furnished by the Company to its shareholders
and all public reports and all reports and financial statements furnished by the Company to the
principal national securities exchange upon which the Common Shares may be listed pursuant to
requirements of or agreements with such exchange or to the Commission pursuant to the Exchange Act
or any rule or regulation of the Commission thereunder;

17

 

     (h) Promptly from time to time to take such action as the Representatives may reasonably
request to qualify the Shares for offering and sale under the securities laws of such jurisdictions
as the Representatives may request and to comply with such laws so as to permit the continuance of
sales and dealings therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Shares; provided that in connection therewith the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of process or subject
itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so
subject;

     (i) For a period of 180 days from the date of the Prospectus, not to, directly or indirectly,
(1) offer for sale, sell, pledge or otherwise dispose of, or enter into any transaction or device
(including, without limitation, through the filing of a registration statement) which is designed
to, or could be expected to, result in the disposition by any person at any time in the future of,
any Common Shares or other capital stock of the Company or securities convertible into or
exchangeable for Common Shares or other capital stock of the Company (other than (i) the issuance
and sale of the Shares; (ii) the issuance of shares pursuant to employee benefit plans, qualified
stock option plans or other employee compensation plans existing on the date hereof or (iii)
pursuant to currently outstanding options, warrants or rights granted by the Company), or sell or
grant options, rights or warrants with respect to any Common Shares or other capital stock of the
Company or securities convertible into or exchangeable for Common Shares or other capital stock of
the Company (other than the grant of options pursuant to option plans existing on the date hereof
), or announce any intention to do any of the foregoing, or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of such Common Shares or other capital stock of the Company, whether
any such transaction described in clause (1) or (2) above is to be settled by delivery of Common
Shares or other capital stock of the Company or other securities, in cash or otherwise, in each
case without the prior written consent of Lehman Brothers Inc. on behalf of the Underwriters.
Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period the
Company issues an earnings release or material news or a material event relating to the Company
occurs or (2) prior to the expiration of the 180-day restricted period, the Company announces that
it will release earnings results during the 16-day period beginning on the last day of the 180-day
period, then the restrictions imposed by this section shall continue to apply until the expiration
of the 18-day period beginning on the issuance of the earnings release or the occurrence of the
material news or material event; and to cause each shareholder, officer and director of the Company
and each of Schottenstein Stores Corporation, Cerberus Partners L.P. and Back Bay Capital Funding
L.L.C., as holders of the warrants issued by Retail Ventures as described in the Prospectus (the
“Warrants”) to furnish to the Representatives, prior to the First Delivery Date, a letter or
letters, substantially in the form of Exhibit A-1 hereto (in the case of all such persons other
than Cerberus Partners L.P.) or Exhibit A-2 hereto (in the case of Cerberus Partners L.P.),
pursuant to which each such person shall agree not to, directly or

18

 

indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result in the disposition by
any person at any time in the future of) any Common Shares or securities convertible into or
exchangeable for Common Shares, or announce any intention to do any of the foregoing, or (2) enter
into any swap or other derivatives transaction that transfers to another, in whole or in part, any
of the economic benefits or risks of ownership of such Common Shares, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common Shares or other
securities, in cash or otherwise, in each case for a period of 180 days (subject to the proviso
above) from the date of the Prospectus, without the prior written consent of Lehman Brothers Inc.
on behalf of the Underwriters;

     The Company hereby undertakes to notify in writing each person who delivers a letter agreement
in the form of Exhibit A-1 or Exhibit A-2 hereto if at any time the 180-day restricted period
described above is extended for any reason described in such agreement. In addition, the Company
will direct the transfer agent to place stop transfer restrictions upon any securities of the
Company that are bound by such “lock-up” agreements for the duration of the periods contemplated in
such agreements, including any extensions thereof.

     For the avoidance of doubt, neither the issuance by Retail Ventures of the Warrants nor the
exercise of such Warrants by the holders thereof for Common Shares of the Company currently held by
Retail Ventures during the restricted period described above shall constitute a violation of this
provision.

     (j) Prior to the Effective Date, to apply for the listing of the Shares on the New York Stock
Exchange, and to use its best efforts to complete that listing, subject only to official notice of
issuance, prior to the First Delivery Date;

     (k) To apply the net proceeds from the offering of the Shares and the Transactions as set
forth in the Prospectus;

     (l) In connection with the Directed Share Program, to ensure that the Directed Shares will be
restricted to the extent required by the NASD or the rules of such association from sale, transfer,
assignment, pledge or hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement, and Lehman Brothers Inc. will notify the Company as to
which Directed Share Participants will need to be so restricted. At the request of Lehman Brothers
Inc., the Company will direct the transfer agent to place stop transfer restrictions upon such
securities for such period of time;

     (m) To comply with all applicable securities and other applicable laws, rules and regulations
in each foreign jurisdiction in which the Directed Shares are offered in connection with the
Directed Share Program; and

19

 

     (n) To take such steps as shall be necessary to ensure that neither the Company nor any
subsidiary shall become an “investment company” as defined in the Investment Company Act of 1940,
as amended.

     Section 6. Expenses. The Company agrees to pay (a) the costs incident to the authorization,
issuance, sale and delivery of the Shares and any taxes payable in that connection; (b) the costs
incident to the preparation, printing and filing under the Securities Act of the Registration
Statement and any amendments and exhibits thereto; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective amendments thereof
(including, in each case, exhibits), any Preliminary Prospectus, the Prospectus and any amendment
or supplement to the Prospectus, all as provided in this Agreement; (d) the costs of producing and
distributing this Agreement, any Supplemental Agreement Among Underwriters and any other related
documents in connection with the offering, purchase, sale and delivery of the Shares; (e) the
filing fees incident to securing the review by the National Association of Securities Dealers, Inc.
of the terms of sale of the Shares; (f) any applicable listing or other fees; (g) the fees and
expenses (not in excess, in the aggregate, of $10,000) of qualifying the Shares under the
securities laws of the several jurisdictions as provided in Section 5(h) and of preparing, printing
and distributing a Blue Sky Memorandum (including related fees and expenses of counsel to the
Underwriters); (h) the costs and expenses of the Company relating to investor presentations on any
“road show” undertaken in connection with the marketing of the offering of the Shares, including,
without limitation, documented expenses associated with the production of road show slides and
graphics, documented fees and expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, documented travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and the documented cost of
any aircraft chartered in connection with the road show; (i) the costs and expenses related to the
offer and sale of Shares by the Underwriters in connection with the Directed Share Program,
including the documented fees and disbursements of counsel to the Underwriters related thereto, the
documented costs and expenses of preparation, printing and distribution of the Directed Share
Program material and all stamp duties or other taxes incurred by the Underwriters in connection
with the Directed Share Program; and (j) all other costs and expenses incident to the performance
of the obligations of the Company under this Agreement; provided that, except as provided in this
Section 6 and in Sections 8 and 11, the Underwriters shall pay their own costs and expenses,
including the costs and expenses of their counsel, any transfer taxes on the Shares which they may
sell and the expenses of advertising any offering of the Shares made by the Underwriters.

     Section 7. Conditions of Underwriters’ Obligations. The respective obligations of the
Underwriters hereunder are subject to the accuracy, when made and on each Delivery Date, of the
representations and warranties of each of the Company, DSW Shoe Warehouse and Retail Ventures
contained herein, to the performance by each of the

20

 

Company, DSW Shoe Warehouse and Retail Ventures of its respective obligations hereunder, and
to each of the following additional terms and conditions:

     (a) The Prospectus shall have been timely filed with the Commission in accordance with Section
5(a); no stop order suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have been initiated or threatened
by the Commission or any other governmental authority (domestic or foreign); and any request of the
Commission for inclusion of additional information in the Registration Statement or the Prospectus
or otherwise shall have been complied with.

     (b) All corporate proceedings and other legal matters incident to the authorization, form and
validity of this Agreement, the Shares, the Registration Statement and the Prospectus, and all
other legal matters relating to this Agreement, the transactions contemplated hereby and the
Transactions shall be reasonably satisfactory in all material respects to counsel for the
Underwriters, and each of the Company and Retail Ventures shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to pass upon such
matters.

     (c) Vorys, Sater, Seymour and Pease LLP shall have furnished to the Representatives their
written opinion, as counsel to the Company, addressed to the Underwriters and dated such Delivery
Date, in substantially the form attached hereto as Exhibit B.

     (d) Julia A. Davis, General Counsel to the Company and Retail Ventures, shall have furnished
to the Representatives her written opinion, addressed to the Underwriters and dated such Delivery
Date, in substantially the form attached hereto as Exhibit C.

     (e) Skadden, Arps, Slate, Meagher & Flom LLP shall have furnished to the Representatives their
written opinion, as special counsel to the Company, addressed to the Underwriters and dated such
Delivery Date, in substantially the form attached hereto as Exhibit D.

     (f) Sonnenschein, Nath & Rosenthal LLP shall have furnished to the Representatives their
written opinion, as Missouri counsel to DSW Shoe Warehouse, addressed to the Underwriters and dated
such Delivery Date, in substantially the form attached hereto as Exhibit E.

     (g) The Representatives shall have received from Debevoise & Plimpton LLP, counsel for the
Underwriters, such opinion or opinions, dated such Delivery Date, with respect to the issuance and
sale of the Shares, the Registration Statement, the Prospectus and other related matters as the
Representatives may reasonably require, and the

21

 

Company shall have furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.

     (h) At the time of execution of this Agreement, the Representatives shall have received from
Deloitte & Touche LLP a letter, in form and substance satisfactory to the Representatives,
addressed to the Underwriters and dated the date hereof (i) confirming that they are independent
public accountants within the meaning of the Securities Act and are in compliance with the
applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation
S-X of the Commission and (ii) stating, as of the date hereof (or, with respect to matters
involving changes or developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days prior to the date
hereof), the conclusions and findings of such firm with respect to the financial information and
other matters ordinarily covered by accountants’ “comfort letters” to underwriters in connection
with registered public offerings.

     (i) With respect to the letter of Deloitte & Touche LLP referred to in the preceding paragraph
and delivered to the Representatives concurrently with the execution of this Agreement (the
“initial letter”), the Company shall have furnished to the Representatives a letter (the
“bring-down letter”) of such accountants, addressed to the Underwriters and dated such Delivery
Date (i) confirming that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements relating to the qualification
of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of
the bring-down letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date of the bring-down letter), the conclusions and
findings of such firm with respect to the financial information and other matters covered by the
initial letters and (iii) confirming in all material respects the conclusions and findings set
forth in the initial letter.

     (j) The Company shall have furnished to the Representatives a certificate, dated such Delivery
Date, of its Chairman of the Board, its President or a Vice President and its chief financial
officer stating that:

The representations, warranties and agreements of the Company in Section 1 are true and correct as
of such Delivery Date; the Company has complied with all its agreements contained herein; and the
conditions set forth in Sections 7(a) and 7(l) have been fulfilled; and

They have carefully examined the Registration Statement and the Prospectus and, in their opinion
(A) as of the Effective Date, the Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,

22

 

and (B) since the Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Registration Statement or the Prospectus which has not been so set
forth.

     (k) Retail Ventures shall have furnished to the Representatives a certificate, dated such
Delivery Date, signed by an authorized officer, stating that the representations, warranties and
agreements of Retail Ventures contained herein are true and correct as of such Delivery Date and
that Retail Ventures have complied with all agreements contained herein to be performed by them at
or prior to such Delivery Date.

     (l) (A) Neither the Company nor DSW Shoe Warehouse shall have sustained since the date of the
latest audited financial statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus and (B) since such date there shall not have been any
change in the capital stock or long-term debt of the Company or DSW Shoe Warehouse or any adverse
change, or any development involving a prospective adverse change, in or affecting the general
affairs, management, financial position, shareholders’ equity or results of operations of the
Company or DSW Shoe Warehouse, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (A) or (B), is, in the judgment of the
Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.

     (m) Subsequent to the execution and delivery of this Agreement there shall not have occurred
any of the following: (i) trading in securities generally on the New York Stock Exchange or in the
over-the-counter market, or trading in any securities of the Company on any exchange or in the
over-the-counter market, shall have been suspended or the settlement of such trading generally
shall have been materially disrupted or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by
Federal or state authorities or there shall have occurred a material disruption in commercial
banking or securities settlement or clearance services in the United States, (iii) the United
States shall have become engaged in hostilities, there shall have been a material escalation in
hostilities involving the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions, including without limitation as a
result of terrorist activities after the date hereof, (or the effect of international conditions on
the financial markets in the United States shall be such) as to make it, in the judgment of the
Representatives, impracticable

23

 

or inadvisable to proceed with the public offering or delivery of the Shares being delivered
on such Delivery Date on the terms and in the manner contemplated in the Prospectus.

     (n) The New York Stock Exchange, Inc. shall have approved the Shares for listing, subject only
to official notice of issuance.

     (o) The (i) Loan and Security Agreement by and between the Company and DSW Shoe Warehouse, as
the Borrowers, and National City Business Credit, Inc., as Administrative Agent and Collateral
Agent for the Revolving Credit Lenders,
(ii) Amended and Restated Loan and Security Agreement by and between Value City, as Lead
Borrower, the Borrowers party thereto, and National City Business Credit, Inc., as Administrative
Agent and Collateral Agent for the Revolving Credit Lenders referenced therein and (iii) Second
Amended and Restated Senior Loan Agreement by and among Value City, as Borrower, the Guarantors
party thereto, the Lenders from time to time party thereto, and Cerberus Partners L.P., as agent,
shall have been duly executed and delivered.

     (p) All opinions, letters, evidence and certificates mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Underwriters.

     Section 8. Indemnification and Contribution.

     (a) Each of the Company and Retail Ventures, jointly and severally, shall indemnify and hold
harmless each Underwriter, its officers and employees and each person, if any, who controls any
Underwriter within the meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of Shares), to which that
Underwriter, officer, employee or controlling person may become subject, under the Securities Act
or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto, or (B) in any materials or information provided to investors by, or with the
approval of, the Company in connection with the marketing of the offering of the Shares (“Marketing
Materials”), including any road show or investor presentations made to investors by the Company
(whether in person or electronically), (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or in any Marketing Materials, any material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iii) any act or failure to act or
any alleged act or failure to act by any Underwriter in connection with, or relating in any manner
to, the

24

 

Shares or the offering contemplated hereby, and that is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based upon matters covered by clause
(i) or (ii) above (provided that neither the Company nor Retail Ventures shall be liable
under this clause (iii) to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or action resulted directly from
any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its
gross negligence or willful misconduct), and shall reimburse each Underwriter and each such
officer, employee or controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter, officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that neither the
Company nor Retail Ventures shall be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any such amendment or supplement or in any
Marketing Materials, in reliance upon and in conformity with written information concerning such
Underwriter furnished to the Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein which information consists solely of the information specified
in Section 8(e); and provided further, that the foregoing indemnity agreement with
respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter who it
shall be established failed to deliver the Prospectus to the person asserting any losses, claims,
damages, liabilities and judgments caused by any untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact required to be stated in
such Preliminary Prospectus or necessary to make the statements in such Preliminary Prospectus not
misleading, if (A) the Company shall have furnished copies of the Prospectus to the several
Underwriters in the requisite quantity and sufficiently in advance of the Effective Date to permit
proper delivery of the Prospectus to such person on or prior to the Effective Date; (B) such
misstatement or omission or alleged misstatement or omission was identified at such time to such
Underwriter or its counsel and cured in the Prospectus and the Prospectus was required by law to be
delivered to such person at or prior to the written confirmation of the sale of Shares to such
person and (C) the timely delivery of the Prospectus to such person would have constituted a
complete defense to the losses, claims, damages, liabilities and judgments asserted by such person.
The foregoing indemnity agreement is in addition to any liability that either of the Company or
Retail Ventures may otherwise have to any Underwriter or to any officer, employee or controlling
person of that Underwriter.

     (b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless each of the
Company, Retail Ventures, each officer of the Company who has signed the Registration Statement,
each director of the Company (including any person who, with his or her consent, is named in the
Registration Statement as about to become a

25

 

director of the Company), and each person, if any, who controls the Company within the meaning
of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which the Company or any such director, officer or controlling
person may become subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto, or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, any material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information concerning such Underwriter
furnished to the Company through the Representatives by or on behalf of that Underwriter
specifically for inclusion therein, and shall reimburse the Company, Retail Ventures, and any such
director, officer or controlling person for any legal or other expenses reasonably incurred by the
Company, Retail Ventures, or any such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to any of the Company, Retail Ventures or any
such director, officer, employee or controlling person.

     (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim
or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under subsection 8(a) or 8(b) hereof, notify the
indemnifying party in writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any liability which it
may have under subsection 8(a) or 8(b) hereof except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have to an indemnified party otherwise than
under subsection 8(a) or 8(b) hereof. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the indemnifying party shall
not be liable to the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that the Representatives shall have the right
to employ counsel to represent jointly the Representatives and those other Underwriters and their
respective

26

 

officers, employees and controlling persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Underwriters against any of the Company or
Retail Ventures under this Section 8 if, in the reasonable judgment of the Representatives, it is
advisable for the Representatives and those Underwriters, officers, employees and controlling
persons to be jointly represented by separate counsel, and in that event the fees and expenses of
such separate counsel shall be paid by the Company. Notwithstanding anything contained herein to
the contrary, if indemnity may be sought pursuant to Section 8(f) hereof in respect of a claim or
action referred to in Section 8(f), then in addition to such separate firm for the indemnified
parties, the indemnifying party shall be liable for the fees and expenses of not more than one
separate firm (in addition to any local counsel) for the Lehman Brothers Entities (as defined in
Section 8(f)) for the defense of any loss, claim, damage, liability or action arising out of the
Directed Share Program. No indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened claim, action, suit
or proceeding in respect of which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such claim or action) unless such
settlement, compromise or consent (a) includes an unconditional release of each indemnified party
from all liability arising out of such claim, action, suit or proceeding and (b) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any
indemnified party, or (ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if settled with the consent
of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.

     (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable
to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of
any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Company and Retail Ventures, on the one hand, and the
Underwriters, on the other hand, from the offering of the Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also the relative fault
of the Company, and/or Retail Ventures, on the one hand, and the Underwriters, on the other hand,
with respect to the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable considerations.
The relative benefits received by the Company and Retail Ventures, on the one hand, and the

27

 

Underwriters, on the other hand, with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company, on the one hand, and the total
underwriting discounts and commissions received by the Underwriters with respect to the Shares
purchased under this Agreement, on the other hand, bear to the total gross proceeds from the
offering of the Shares under this Agreement, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined by reference to whether the untrue
or alleged untrue statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company and/or Retail Ventures or the Underwriters, the
intent of the parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, Retail Ventures and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this Section 8 were to
be determined by pro rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified party as a result
of the loss, claim, damage or liability, or action in respect thereof, referred to above in this
Section 8 shall be deemed to include, for purposes of this Section 8(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no
Underwriter shall be required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public was offered to the
public exceeds the amount of any damages which such Underwriter has otherwise paid or become liable
to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters’ obligations to contribute as provided in this
Section 8(d) are several in proportion to their respective underwriting obligations and not joint.

     (e) The Underwriters severally confirm and each of the Company and Retail Ventures
acknowledges that the statements with respect to the following information contained under the
caption “Underwriting” in the Prospectus are correct and constitute the only information concerning
such Underwriters furnished in writing to the Company by or on behalf of the Underwriters
specifically for inclusion in the Registration Statement, the Prospectus and any Marketing
Materials: the second paragraph under the subheading “Commissions and Expenses”; all three of the
paragraphs under the subheading “Stabilization, Short Positions and Penalty Bids”; and the
paragraph under the subheading “Discretionary Sales”.

     (f) The Company shall indemnify and hold harmless Lehman Brothers Inc. (including its
directors, officers and employees) and each person, if any, who controls

28

 

Lehman Brothers Inc. within the meaning of Section 15 of the Securities Act (“Lehman Brothers
Entities”), from and against any loss, claim, damage or liability or any action in respect thereof
to which any of the Lehman Brothers Entities may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action (i) arises out of, or is based
upon, any untrue statement or alleged untrue statement of a material fact contained in any material
prepared by or with the approval of the Company for distribution to Directed Share Participants in
connection with the Directed Share Program or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein not
misleading, (ii) arises out of, or is based upon, the failure of the Directed Share Participant to
pay for and accept delivery of Directed Shares that the Directed Share Participant agreed to
purchase or (iii) is otherwise related to the Directed Share Program; provided that, with respect
to clause (ii), the Company or an affiliate of the Company has the option to pay for and accept
delivery of any and all Directed Shares for which a Directed Share Participant fails to pay and
accept delivery (provided that prior to such purchase, the Company or such affiliate shall have
received a written legal opinion from Skadden, Arps, Slate, Meagher & Flom LLP stating that such
purchase will not violate the Securities Act, the Rules and Regulations, the Exchange Act or the
rules and regulations of the Commission thereunder, including Regulation M); provided further that,
the Company shall not be liable under this clause (iii) for any loss, claim, damage, liability or
action that is determined in a final judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Lehman Brothers Entities. The Company shall
reimburse the Lehman Brothers Entities promptly upon demand for any legal or other expenses
reasonably incurred by them in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are incurred. Retail
Ventures or any of the Company’s other affiliates may satisfy the Company’s obligations under this
paragraph by making any required payments on behalf of the Company.

     Section 9. Defaulting Underwriters.

     If, on any Delivery Date, any Underwriter defaults in the performance of its obligations under
this Agreement, the remaining non-defaulting Underwriters shall be obligated to purchase the Shares
which the defaulting Underwriter agreed but failed to purchase on such Delivery Date in the
respective proportions which the number of Firm Shares set opposite the name of each remaining
non-defaulting Underwriter in Schedule 1 hereto bears to the total number of Firm Shares set
opposite the names of all the remaining non-defaulting Underwriters in Schedule 1 hereto; provided,
however, that the remaining non-defaulting Underwriters shall not be obligated to purchase any of
the Shares on such Delivery Date if the total number of Shares which the defaulting Underwriter or
Underwriters agreed but failed to purchase on such date exceeds 9.09% of the total number of Shares
to be purchased on such Delivery Date, and any remaining non-defaulting Underwriter shall not be
obligated to purchase more than 110% of the

29

 

number of Shares which it agreed to purchase on such Delivery Date pursuant to the terms of
Section 2. If the foregoing maximums are exceeded, the remaining non-defaulting Underwriters, or
those other underwriters satisfactory to the Representatives who so agree, shall have the right,
but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all
the Shares to be purchased on such Delivery Date. If the remaining Underwriters or other
underwriters satisfactory to the Representatives do not elect to purchase the shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase on such Delivery Date, this
Agreement (or, with respect to any Subsequent Delivery Date, the obligation of the Underwriters to
purchase, and of the Company to sell, the Option Shares) shall terminate without liability on the
part of any non-defaulting Underwriter or the Company, except that the Company will continue to be
liable for the payment of expenses to the extent set forth in Sections 6 and 11. As used in this
Agreement, the term “Underwriter” includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to this Section 9,
purchases Shares which a defaulting Underwriter agreed but failed to purchase.

     Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have
to the Company for damages caused by its default. If other underwriters are obligated or agree to
purchase the Shares of a defaulting or withdrawing Underwriter, either the Representatives or the
Company may postpone the Delivery Date for up to seven full business days in order to effect any
changes that, in the opinion of counsel for the Company or counsel for the Underwriters, may be
necessary in the Registration Statement, the Prospectus or in any other document or arrangement.

     Section 10. Termination. The obligations of the Underwriters hereunder may be terminated by
the Representatives by notice given to and received by the Company prior to delivery of and payment
for the Firm Shares if, prior to that time, any of the events described in Sections 7(l) or 7(m),
shall have occurred or if the Underwriters shall decline to purchase the Shares for any reason
permitted under this Agreement.

     Section 11. Reimbursement of Underwriters’ Expenses. If the Company shall fail to tender the
Shares for delivery to the Underwriters by reason of any failure, refusal or inability on the part
of the Company to perform any agreement on its part to be performed, or because any other condition
of the Underwriters’ obligations hereunder required to be fulfilled by the Company (including,
without limitation, with respect to the Transactions) is not fulfilled, the Company will reimburse
the Underwriters for all reasonable out-of-pocket expenses (including fees and disbursements of
counsel) incurred by the Underwriters in connection with this Agreement and the proposed purchase
of the Shares, and upon demand the Company shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 9 by reason of the default of
one or more Underwriters, the Company shall not be obligated to reimburse any defaulting
Underwriter on account of those expenses.

30

 

     Section 12. Notices, Etc. All statements, requests, notices and agreements hereunder shall be
in writing, and:

     (a) if to the Underwriters, shall be delivered or sent by mail, telex or facsimile
transmission to (i) Lehman Brothers Inc., 605 Third Avenue, New York, New York 10158,
Attention: Syndicate Department (Fax: 646-497-4815), with a copy, in the case of any
notice pursuant to Section 8(c), to the Director of Litigation, Office of the General
Counsel, Lehman Brothers Inc., 399 Park Avenue, 10th Floor, New York, NY 10022 (Fax:
212-520-0421), and (ii) with a copy, which shall not constitute notice, to Debevoise &
Plimpton LLP, 919 Third Avenue, New York, NY 10022, Attention: Steven J. Slutzky, Esq.
(Fax: 212-909-6836);

     (b) if to the Company or DSW Shoe Warehouse, (i) shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the Registration
Statement, Attention: Peter Z. Horvath, Chief Operating Officer (Fax: 614-238-4207), with
a copy to Julia A. Davis, Esq., General Counsel, 3241 Westerville Road, Columbus, OH 43223
(Fax: 614-337-4682), and (ii) with a copy, which shall not constitute notice, to Skadden,
Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, NY 10036, Attention: Robert
M. Chilstrom, Esq. (Fax: 212-735-2000);

     (c) if to Retail Ventures, shall be delivered or sent by mail, telex or facsimile
transmission to Julia A. Davis, Esq., General Counsel, 3241 Westerville Road, Columbus, OH
43223 (Fax: 614-337-4682);

     (d) provided, however, that any notice to an Underwriter pursuant to Section 8(c)
shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at
its address set forth in its acceptance telex to the Representatives, which address will be
supplied to any other party hereto by the Representatives upon request. Any such
statements, requests, notices or agreements shall take effect at the time of receipt
thereof. The Company, DSW Shoe Warehouse and Retail Ventures shall be entitled to act and
rely upon any request, consent, notice or agreement given or made on behalf of the
Underwriters by Lehman Brothers Inc. on behalf of the Representatives.

     Section 13. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the Underwriters, the Company, Retail Ventures and their respective
successors. This Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (A) the representations, warranties, indemnities and agreements of the
Company and Retail Ventures contained in this Agreement shall also be deemed to be for the benefit
of the person or persons, if any, who control any Underwriter within the meaning of Section 15 of
the Securities Act and (B) the indemnity agreement of the Underwriters contained in Section 8(b) of
this

31

 

Agreement shall be deemed to be for the benefit of directors of the Company, officers of the
Company who have signed the Registration Statement and any person controlling the Company within
the meaning of Section 13 of the Securities Act. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section 13, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any provision contained
herein.

     Section 14. No fiduciary duty. Notwithstanding any preexisting relationship, advisory or
otherwise, between the parties or any oral representations or assurances previously or subsequently
made by the underwriters, the Company and Retail Ventures acknowledge and agree that:

     (a) nothing herein shall create a fiduciary or agency relationship between the Company or
Retail Ventures, on the one hand, and the Underwriters, on the other;

     (b) the Underwriters are not acting as advisors, expert or otherwise, to either the Company or
Retail Ventures in connection with this offering, sale of the Shares or any other services the
Underwriters may be deemed to be providing hereunder, including, without limitation, with respect
to the public offering price of the Shares;

     (c) the relationship between the Company and Retail Ventures, on the one hand, and the
Underwriters, on the other, is entirely and solely commercial, based on arms-length negotiations;

     (d) any duties and obligations that the Underwriters may have to the Company or Retail
Ventures shall be limited to those duties and obligations specifically stated herein; and

     (e) notwithstanding anything in this Underwriting Agreement to the contrary, the Company and
Retail Ventures acknowledge that the Underwriters may have financial interest in the success of the
Offering that are not limited to the difference between the price to the public and the purchase
price paid to the Company by the Underwriters for the shares and the Underwriters have no
obligation to disclose, or account to the Company or Retail Ventures for, any of such additional
financial interests.

     The Company and Retail Ventures hereby waive and release, to the fullest extent permitted by
law, any claims that the Company or Retail Ventures may have against the Underwriters with respect
to any breach or alleged breach of fiduciary duty.

     Section 15. Survival. The respective indemnities, representations, warranties and agreements
of the Company, Retail Ventures and the Underwriters contained in this Agreement or made by or on
behalf on them, respectively, pursuant to this Agreement, shall survive the delivery of and payment
for the Shares and shall remain in full force and

32

 

effect, regardless of any investigation made by or on behalf of any of them or any person
controlling any of them.

     Section 16. Definition of the Terms “Business Day” and “Subsidiary”. For purposes of this
Agreement, (a) “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday which is
not a day on which banking institutions in New York are generally authorized or obligated by law or
executive order to close and (b) “subsidiary” has the meaning set forth in Rule 405 of the Rules
and Regulations.

     Section 17. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of New York.

     Section 18. Counterparts. This Agreement may be executed in one or more counterparts and, if
executed in more than one counterpart, the executed counterparts shall each be deemed to be an
original but all such counterparts shall together constitute one and the same instrument.

     Section 19. Headings. The headings herein are inserted for convenience of reference only and
are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

33

 

     If the foregoing correctly sets forth the agreement among the Company, Retail Ventures and the
Underwriters, please indicate your acceptance in the space provided for that purpose below.

	 	 	 	 	 
	 	Very truly yours,

DSW Inc.

 	 
	 	By  	/s/ Douglas
J. Probst	 
	 	 	Name:  	Douglas
J. Probst 	 
	 	 	Title:  	Senior Vice President, Chief Financial

Officer and Treasurer	 
	 

	 	 	 	 	 
	 	Retail Ventures, Inc.

 	 
	 	By  	/s/
James A. McGrady	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Executive Vice President, Chief Financial

Officer and Treasurer	 

 

	 	 	 	 	 

Accepted:

Lehman Brothers Inc.

Goldman, Sachs & Co.

CIBC World Markets Corp.

Johnson Rice & Company, L.L.C.

For themselves and as Representatives

of the several Underwriters named

in Schedule 1 hereto

By: Lehman Brothers Inc.

	 	 	 	 	 
	 	 	 
	By  	/s/
P. J. Moses 	 
	 	 	Authorized Representative 	 
	 	 	 	 
	 

 

SCHEDULE 1

	 	 	 	 	 
	 	 	Number of Firm	 
	 	 	Shares to be Purchased	 
	 
	Lehman Brothers Inc.
	 	 	7,541,870	 
	Goldman, Sachs & Co.
	 	 	2,399,690	 
	CIBC World Markets Corp.
	 	 	2,399,690	 
	Johnson Rice
& Company, L.L.C.
	 	 	1,371,250	 
	Fidelity Capital Markets, a division of
National Financial Services LLC
	 	 	50,000	 
	HSBC Securities (USA) Inc.
	 	 	50,000	 
	Loop Capital Markets, LLC
	 	 	50,000	 
	NatCity Investments, Inc.
	 	 	50,000	 
	Ryan, Beck & Co., LLC
	 	 	50,000	 
	Muriel Siebert & Co., Inc.
	 	 	50,000	 
	Stifel, Nicolaus & Company, Incorporated
	 	 	50,000	 
	 
	 	 	 
	 
	 	 	 	 
	Total
	 	 	14,062,500	 

 

 

SCHEDULE 2

	1.	 	Registration Rights Agreement, to be dated as of the First Delivery Date, by and among DSW
Inc., Schottenstein Stores Corporation, Cerberus Partners, L.P. and Back Bay Capital Funding
L.L.C.
	 
	2.	 	Loan and Security Agreement, to be dated as of the First Delivery Date, between DSW Inc. and
DSW Shoe Warehouse, Inc., as borrowers, and National City Business Credit Finance, Inc., as
Administrative Agent and Collateral Agent for the Revolving Credit Lenders.
	 
	3.	 	Amended and Restated Loan and Security Agreement, to be dated as of the First Delivery Date,
by and between Value City Department Stores LLC, as Lead Borrower, Gramex Retail Stores, Inc.,
Filene’s Basement, Inc., Value City of Michigan, Inc., GB Retailers, Inc., Retail Ventures
Jewelry, Inc., as Borrowers, and National City Business Credit, Inc., as Administrative Agent
and Collateral Agent for the Revolving Credit Lenders referenced therein.
	 
	4.	 	Fourth Amendment to Financing Agreement, to be dated as of the First Delivery Date, by and
among the Borrowers named therein, the Guarantors named therein, the Lenders named therein,
and Cerberus Partners, L.P.
	 
	5.	 	Second Amended and Restated Senior Loan Agreement, to be dated as of the First Delivery Date,
by and among Value City Department Stores, LLC as Borrower, Retail Ventures, Inc., Gramex
Retail Stores, Inc., Filene’s Basement, Inc., GB Retailers, Inc., Value City of Michigan, Inc.
J.S. Overland Delivery, Inc., Value City Department Stores Services, Inc. Retail Ventures
Jewelry, Inc., Retail Ventures Services, Inc. and Retail Ventures Import, Inc., as Guarantors,
the Lenders from time to time party thereto, and Cerberus Partners, L.P., as agent.
	 
	6.	 	Conversion Loan Warrants issued by Retail Ventures to Schottenstein Stores Corporation and
Cerberus Partners, L.P. on the First Delivery Date.
	 
	7.	 	Term Loan Warrants issued by Retail Ventures to Schottenstein Stores Corporation, Cerberus
Partners, L.P. and Back Bay Capital Funding, LLC on the First Delivery Date.
	 
	8.	 	Amendment, to be dated as of the First Delivery Date, to Corporate Services Agreement among
Retail Ventures, Schottenstein Stores Corporation and Schottenstein Management Company, and
the supplemental letter agreement among Schottenstein Stores Corporation, Schottenstein
Management Company and DSW Inc. related thereto.
	 
	9.	 	Supply Agreement, to be dated as of the First Delivery Date, between Filene’s Basement, Inc. and
DSW Inc.

 

 

Exhibit A-1

FORM OF LOCK-UP LETTER AGREEMENT

[To be delivered by all lock-up parties other than Cerberus Partners L.P.]

Lock-Up Letter Agreement

Lehman Brothers Inc. 

Goldman, Sachs & Co.

CIBC World Markets Corp.

Johnson Rice & Company, L.L.C.

As Representatives of the several
 Underwriters
named in Schedule 1
 to
the Underwriting Agreement

c/o Lehman Brothers Inc.

745 7th Avenue

New York, New York 10019

Dear Sirs:

     The undersigned understands that you and certain other firms propose to enter into an
Underwriting Agreement (the “Underwriting Agreement”) providing for the purchase by you and such
other firms (the “Underwriters”) of certain shares (the “Shares”) of the Class A Common Shares,
without par value (the “Common Shares”), of DSW Inc., an Ohio corporation (the “Company”), and that
the Underwriters propose to reoffer the Shares to the public (the “Offering”).

     In consideration of the execution of the Underwriting Agreement by the Underwriters, and for
other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the
prior written consent of Lehman Brothers Inc., on behalf of the Underwriters, the undersigned will
not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter
into any transaction or device that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any Common Shares (including, without
limitation, Common Shares that may be deemed to be beneficially owned by the undersigned in
accordance with the rules and regulations of the Securities and Exchange Commission and Common
Shares that may be issued or delivered upon exercise of any option or warrant) or securities
convertible into or exchangeable for Common Shares (other than the Shares in the Offering) owned by
the undersigned on the date of execution of this Lock-Up Letter Agreement or on the date of the
completion of the Offering or announce any intention to do any of the foregoing, or (2) enter into
any swap or other derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of

 

 

ownership of such Common Shares, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Shares or other securities, in cash or otherwise, for
a period of 180 days after the date of the final Prospectus relating to the Offering.

     Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period
the Company issues an earnings release or material news or a material event relating to the Company
occurs or (2) prior to the expiration of the 180-day restricted period, the Company announces that
it will release earnings results during the 16-day period beginning on the last day of the 180-day
period, then the restrictions imposed by this letter shall continue to apply until the expiration
of the 18-day period beginning on the issuance of the earnings release or the occurrence of the
material news or material event.

     In furtherance of the foregoing, the Company and its Transfer Agent are hereby authorized to
decline to make any transfer of securities if such transfer would constitute a violation or breach
of this Lock-Up Letter Agreement.

     It is understood that, if the Company notifies you that it does not intend to proceed with the
Offering, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement
(other than the provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Shares, we will be released from our obligations under
this Lock-Up Letter Agreement.

     The undersigned understands that the Company and the Underwriters will proceed with the
Offering in reliance on this Lock-Up Letter Agreement.

     Whether or not the Offering actually occurs depends on a number of factors, including market
conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of
which are subject to negotiation between the Company and the Underwriters.

 

 

     The undersigned hereby represents and warrants that the undersigned has full power and
authority to enter into this Lock-Up Letter Agreement and that, upon request, the undersigned will
execute any additional documents necessary in connection with the enforcement hereof. Any
obligations of the undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.

	 	 	 	 	 
	 	Very truly yours,

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

Dated:                                         

 

 

Exhibit A-2

[Form of Cerberus Partners L.P. Lock-up Letter Agreement]

LOCK-UP LETTER AGREEMENT

Lehman Brothers Inc.

Goldman, Sachs & Co.

CIBC World Markets Corp.

Johnson Rice & Company, L.L.C.

As Representatives of the several
 Underwriters
named in Schedule 1
 to
the Underwriting Agreement,

c/o Lehman Brothers Inc.

745 7th Avenue

New York, New York 10019

Dear Sirs:

     Cerberus Partners L.P. (together with its affiliates, “Cerberus”) understands that you and
certain other firms propose to enter into an Underwriting Agreement (the “Underwriting Agreement”)
providing for the purchase by you and such other firms (the “Underwriters”) of certain shares (the
“Shares”) of the Class A Common Shares, without par value (the “Common Shares”), of DSW Inc., an
Ohio corporation (the “Company”), and that the Underwriters propose to reoffer the Shares to the
public (the “Offering”).

     In consideration of the execution of the Underwriting Agreement by the Underwriters, and for
other good and valuable consideration, Cerberus hereby irrevocably agrees that, without the prior
written consent of Lehman Brothers Inc., on behalf of the Underwriters, Cerberus will not, directly
or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any
transaction or device that is designed to, or could be expected to, result in the disposition by
any person at any time in the future of) any Common Shares (including, without limitation, Common
Shares that may be deemed to be beneficially owned by Cerberus in accordance with the rules and
regulations of the Securities and Exchange Commission and Common Shares that may be issued or
delivered upon exercise of any option or warrant) or securities convertible into or exchangeable
for Common Shares (other than the Shares in the Offering) owned by Cerberus on the date of
execution of this Lock-Up Letter Agreement or on the date of the completion of the Offering or
announce any intention to do any of the foregoing, or (2) enter into any swap or other derivatives
transaction that transfers to another, in whole or

 

 

in part, any of the economic benefits or risks of ownership of such Common Shares, whether any
such transaction described in clause (1) or (2) above is to be settled by delivery of Common Shares
or other securities, in cash or otherwise, for a period of 180 days after the date of the final
Prospectus relating to the Offering (any transaction described in clause (1) or (2) above, a
“Transfer”).

     If (1) during the last 17 days of the 180-day restricted period the Company issues an earnings
release or material news or a material event relating to the Company occurs or (2) prior to the
expiration of the 180-day restricted period, the Company announces that it will release earnings
results during the 16-day period beginning on the last day of the 180-day period, then the
restrictions imposed by this letter shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release or the occurrence of the material news or
material event.

     For the avoidance of doubt, the foregoing restrictions are not intended to apply to Transfers
solely of Retail Ventures, Inc.’s common stock.

     Anything contained herein to the contrary notwithstanding, Cerberus may, prior to the
expiration of the 180-day restricted period (such period, as the same may be extended as provided
above, the “Restricted Period”), Transfer the warrants issued by Retail Ventures, Inc. and held by
Cerberus as of the effective date of the Offering (such warrants, as described in the prospectus
relating to the Offering, but excluding any Common Shares of the Company for which they may be
exercised, the “Warrants”) to up to four (4) transferees; provided, however, that it shall be a
condition to each such Transfer of Warrants that (1) each such Transfer is made to a single person
or group of persons that is under common control (any such group of persons, a “Group”); (2) any
such person or, in the case of a Group, each member of the Group acquiring any Warrants (whether
directly from Cerberus or indirectly from one or more transferees) during the Restricted Period
executes and delivers to Lehman Brothers Inc. prior to such Transfer an agreement stating that such
transferee is receiving and holding the Warrants subject to the provisions of this Lock-Up Letter
Agreement, and agreeing that any further Transfer of such Warrants during the Restricted Period
shall be made on the terms set forth in the following paragraph; (3) Cerberus (or any transferee)
proposing to make any such Transfer during the Restricted Period notifies Lehman Brothers Inc. at
least three business days prior to the proposed Transfer, and (4) no filings relating to beneficial
ownership of securities of the Company shall be required or voluntarily made by Cerberus or by any
transferee pursuant to the Securities Exchange Act of 1934, as amended, in connection with such
Transfer (including the acquisition of such Warrants by the transferee) of Warrants for the
duration of the Restricted Period, except that neither (i) any initial filing on Schedule 13G
relating to the acquisition by Cerberus of beneficial ownership of the Common Shares of the Company
underlying the Warrants nor (ii) any filing or amendment to a filing on Schedule 13G required by
law, if such filing is made on or after February 10, 2006, shall be deemed to violate this Lock-Up

2

 

Letter Agreement. For the avoidance of doubt, it is understood by the parties hereto that the
foregoing exceptions apply only to Transfers of Warrants during the Restricted Period, and not to
any Common Shares of the Company underlying any such Warrants. In addition, for the avoidance of
doubt, the foregoing restrictions are not intended to apply to Retail Ventures, Inc.’s common stock
underlying any such Warrants, or any filings under the Securities Exchange Act of 1934, as amended,
with respect thereto.

     With respect to further Transfers of Warrants by transferees of Cerberus, such transferees
may, during the Restricted Period, effect a Transfer of the Warrants acquired by such transferee
from Cerberus; provided, however, that it shall be a condition to such Transfer of Warrants by any
such transferee that: (1) the amount transferred represents not less than all of the unexercised
Warrants held by the such transferee as of the date of such transfer; (2) such Transfer is made to
a single person or a Group; (3) any such person or, in the case of a Group, each member of the
Group acquiring any Warrants (whether directly from Cerberus or indirectly from one or more
transferees) during the Restricted Period executes and delivers to Lehman Brothers Inc. prior to
such Transfer an agreement stating that such transferee is receiving and holding the Warrants
subject to the provisions of this Lock-Up Letter Agreement, and agreeing that any further Transfer
of such Warrants during the Restricted Period shall be made on the terms set forth in this
paragraph; (4) any such transferee proposing to make any such Transfer during the Restricted Period
notifies Lehman Brothers Inc. at least three business days prior to the proposed Transfer, and (5)
no filings relating to beneficial ownership of securities of the Company shall be required or
voluntarily made by the transferee or any person to whom the transferee proposes to make a Transfer
in accordance with this paragraph pursuant to the Securities Exchange Act of 1934, as amended, in
connection with such Transfer (including the acquisition of such Warrants by the party to whom the
transferee proposes to make such Transfer) of Warrants for the duration of the Restricted Period,
except that no filing or amendment to a filing on Schedule 13G required by law, if such filing is
made on or after February 10, 2006, shall be deemed to violate this Lock-Up Letter Agreement. For
the avoidance of doubt, it is understood by the parties hereto that the foregoing exceptions apply
only to Transfers of Warrants during the Restricted Period, and not to any Common Shares of the
Company underlying any such Warrants. In addition, for the avoidance of doubt, the foregoing
restrictions are not intended to apply to Retail Ventures, Inc.’s common stock underlying any such
Warrants, or any filings under the Securities Exchange Act of 1934, as amended, with respect
thereto.

     In furtherance of the foregoing, the Company and its Transfer Agent are hereby authorized to
decline to make any transfer of securities if such transfer would constitute a violation or breach
of this Lock-Up Letter Agreement.

     It is understood that, if the Company notifies you that it does not intend to proceed with the
Offering, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement
(other than the provisions thereof which survive

3

 

termination) shall terminate or be terminated prior to payment for and delivery of the Shares,
we will be released from our obligations under this Lock-Up Letter Agreement.

     Cerberus understands that the Company and the Underwriters will proceed with the Offering in
reliance on this Lock-Up Letter Agreement.

     Whether or not the Offering actually occurs depends on a number of factors, including market
conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of
which are subject to negotiation between the Company and the Underwriters.

4

 

     Cerberus hereby represents and warrants that Cerberus has full power and authority to enter
into this Lock-Up Letter Agreement and that, upon request, Cerberus will execute any additional
documents necessary in connection with the enforcement hereof. Any obligations of Cerberus shall
be binding upon the heirs, personal representatives, successors and assigns of Cerberus.

	 	 	 	 	 
	 	Very truly yours,

CERBERUS PARTNERS L.P.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

Dated:                                         

5

 

EXHIBIT B

FORM OF OPINION OF VORYS, SATER, SEYMOUR AND PEASE LLP

July 5, 2005

 

EXHIBIT C

FORM OF OPINION OF JULIA A. DAVIS, ESQ.

July 5, 2005

 

EXHIBIT D

FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

	 	 	 
	 

	 	July 5, 2005

 

EXHIBIT E

FORM OF OPINION OF SONNENSCHEIN, NATH & ROSENTHAL LLP

July 5, 2005

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