Document:

Exhibit 10.1

	
   

  

 

CREDIT AGREEMENT

 

Dated as of May 13, 2009

 

among

 

SEALY MATTRESS COMPANY,

as Borrower

 

SEALY MATTRESS CORPORATION,

as Holdings and a Guarantor

 

SEALY CORPORATION,

as Parent

 

The Several Lenders

from Time to Time Parties Hereto

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and Collateral Agent

 

J.P. MORGAN SECURITIES INC.,

as Joint Lead Arranger and Joint Bookrunner

 

GE CAPITAL MARKETS, INC.,

as Joint Lead Arranger and Joint Bookrunner

 

GENERAL ELECTRIC CAPITAL CORPORATION,

as Co-Collateral Agent,

 

CITIGROUP GLOBAL MARKETS INC., 

as Joint Lead Arranger and Joint Bookrunner

 

and

 

MIZUHO CORPORATE BANK, LTD., 

as Syndication Agent

	
   

  

 

 

TABLE CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
  DEFINITIONS

  	
   

  
	
  1.1.

  	
  Defined
  Terms

  	
  1

  
	
  1.2.

  	
  Exchange
  Rates

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  AMOUNT AND TERMS OF CREDIT

  	
   

  
	
  2.1.

  	
  Commitments

  	
  36

  
	
  2.2.

  	
  Minimum
  Amount of Each Borrowing; Maximum Number of Borrowings

  	
  38

  
	
  2.3.

  	
  Notice of
  Borrowing

  	
  39

  
	
  2.4.

  	
  Disbursement
  of Funds

  	
  39

  
	
  2.5.

  	
  Repayment
  of Loans; Evidence of Debt

  	
  40

  
	
  2.6.

  	
  Conversions
  and Continuations

  	
  41

  
	
  2.7.

  	
  Pro  rata Borrowings

  	
  42

  
	
  2.8.

  	
  Interest

  	
  42

  
	
  2.9.

  	
  Interest
  Periods

  	
  43

  
	
  2.10.

  	
  Increased
  Costs, Illegality, etc.

  	
  44

  
	
  2.11.

  	
  Compensation

  	
  46

  
	
  2.12.

  	
  Change of
  Lending Office

  	
  46

  
	
  2.13.

  	
  Notice of
  Certain Costs

  	
  46

  
	
  2.14.

  	
  Defaulting
  Lenders

  	
  46

  
	
  2.15.

  	
  Incremental
  Facilities

  	
  49

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  LETTERS OF CREDIT

  	
   

  
	
  3.1.

  	
  Letters
  of Credit

  	
  50

  
	
  3.2.

  	
  Letter of
  Credit Requests

  	
  51

  
	
  3.3.

  	
  Letter of
  Credit Participations

  	
  51

  
	
  3.4.

  	
  Agreement
  to Repay Letter of Credit Drawings

  	
  53

  
	
  3.5.

  	
  Increased
  Costs

  	
  54

  
	
  3.6.

  	
  Successor
  Letter of Credit Issuer

  	
  55

  
	
  3.7.

  	
  Existing
  Letters of Credit

  	
  55

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  FEES; COMMITMENTS

  	
   

  
	
  4.1.

  	
  Fees

  	
  55

  
	
  4.2.

  	
  Voluntary
  Reduction of Commitments

  	
  56

  
	
  4.3.

  	
  Mandatory
  Termination of Commitments

  	
  56

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  PAYMENTS

  	
   

  
	
  5.1.

  	
  Voluntary
  Prepayments

  	
  56

  
	
  5.2.

  	
  Mandatory
  Prepayments

  	
  57

  

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  5.3.

  	
  Payments
  Generally

  	
  58

  
	
  5.4.

  	
  Net
  Payments

  	
  60

  
	
  5.5.

  	
  Computations
  of Interest and Fees

  	
  63

  
	
  5.6.

  	
  Limit on
  Rate of Interest

  	
  63

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  CONDITIONS PRECEDENT TO INITIAL BORROWING

  	
   

  
	
  6.1.

  	
  Credit
  Documents

  	
  64

  
	
  6.2.

  	
  Collateral

  	
  64

  
	
  6.3.

  	
  Legal
  Opinions

  	
  64

  
	
  6.4.

  	
  No
  Default

  	
  64

  
	
  6.5.

  	
  Concurrent
  Financings

  	
  64

  
	
  6.6.

  	
  Existing
  Credit Agreement

  	
  64

  
	
  6.7.

  	
  Effective
  Date Certificates

  	
  64

  
	
  6.8.

  	
  Corporate
  Proceedings of Each Credit Party

  	
  64

  
	
  6.9.

  	
  Corporate
  Documents

  	
  65

  
	
  6.10.

  	
  Fees

  	
  65

  
	
  6.11.

  	
  Representations
  and Warranties

  	
  65

  
	
  6.12.

  	
  Borrowing
  Base Certificate

  	
  65

  
	
  6.13.

  	
  Closing
  Availability

  	
  65

  
	
  6.14.

  	
  Solvency

  	
  65

  
	
  6.15.

  	
  Pledged
  Stock; Stock Powers; Pledged Notes

  	
  65

  
	
  6.16.

  	
  Lien
  Searches

  	
  65

  
	
  6.17.

  	
  Insurance

  	
  65

  
	
  6.18.

  	
  Perfection
  Certificate

  	
  66

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  CONDITIONS PRECEDENT TO ALL CREDIT EVENTS

  	
   

  
	
  7.1.

  	
  No
  Default; Representations and Warranties

  	
  66

  
	
  7.2.

  	
  Notice of
  Borrowing; Letter of Credit Request

  	
  66

  
	
  7.3.

  	
  Availability

  	
  66

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  REPRESENTATIONS, WARRANTIES AND AGREEMENTS

  	
   

  
	
  8.1.

  	
  Corporate
  Status

  	
  66

  
	
  8.2.

  	
  Corporate
  Power and Authority

  	
  67

  
	
  8.3.

  	
  No
  Violation

  	
  67

  
	
  8.4.

  	
  Litigation

  	
  67

  
	
  8.5.

  	
  Margin
  Regulations

  	
  67

  
	
  8.6.

  	
  Governmental
  Approvals

  	
  67

  
	
  8.7.

  	
  Investment
  Company Act

  	
  68

  
	
  8.8.

  	
  True and
  Complete Disclosure

  	
  68

  
	
  8.9.

  	
  Financial
  Condition; Financial Statements

  	
  68

  
	
  8.10.

  	
  Tax
  Returns and Payments

  	
  68

  
	
  8.11.

  	
  Compliance
  with ERISA

  	
  68

  
	
  8.12.

  	
  Subsidiaries

  	
  69

  
	
  8.13.

  	
  Labor
  Matters

  	
  69

  
	
  8.14.

  	
  Patents,
  etc.

  	
  69

  
	
  8.15.

  	
  Environmental
  Laws

  	
  70

  

 

ii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  8.16.

  	
  Properties

  	
  70

  
	
  8.17.

  	
  Solvency

  	
  70

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
  9.1.

  	
  Information
  Covenants

  	
  70

  
	
  9.2.

  	
  Books,
  Records and Inspections

  	
  73

  
	
  9.3.

  	
  Maintenance
  of Insurance

  	
  74

  
	
  9.4.

  	
  Payment
  of Taxes

  	
  74

  
	
  9.5.

  	
  Consolidated
  Corporate Franchises

  	
  74

  
	
  9.6.

  	
  Compliance
  with Statutes, Obligations, etc.

  	
  74

  
	
  9.7.

  	
  ERISA

  	
  75

  
	
  9.8.

  	
  Good
  Repair

  	
  75

  
	
  9.9.

  	
  Transactions
  with Affiliates

  	
  75

  
	
  9.10.

  	
  End of
  Fiscal Years; Fiscal Quarters

  	
  76

  
	
  9.11.

  	
  Additional
  Subsidiary Guarantors and Grantors

  	
  76

  
	
  9.12.

  	
  Pledges
  of Additional Stock and Evidence of Indebtedness

  	
  76

  
	
  9.13.

  	
  Use of
  Proceeds

  	
  77

  
	
  9.14.

  	
  Changes
  in Business

  	
  77

  
	
  9.15.

  	
  Further
  Assurances

  	
  77

  
	
  9.16.

  	
  Appraisals

  	
  78

  
	
  9.17.

  	
  Field
  Examinations

  	
  78

  
	
  9.18.

  	
  Asset
  Sales; Casualty and Condemnation

  	
  78

  
	
  9.19.

  	
  Post-Closing
  Covenant

  	
  79

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  NEGATIVE COVENANTS

  	
   

  
	
  10.1.

  	
  Limitation
  on Indebtedness

  	
  81

  
	
  10.2.

  	
  Limitation
  on Liens

  	
  83

  
	
  10.3.

  	
  Limitation
  on Fundamental Changes

  	
  84

  
	
  10.4.

  	
  Limitation
  on Sale of Assets

  	
  87

  
	
  10.5.

  	
  Limitation
  on Investments

  	
  88

  
	
  10.6.

  	
  Limitation
  on Restricted Payments

  	
  89

  
	
  10.7.

  	
  Limitations
  on Debt Payments and Certain Amendments

  	
  90

  
	
  10.8.

  	
  Limitations
  on Sale Leasebacks

  	
  91

  
	
  10.9.

  	
  Fixed
  Charge Coverage Ratio

  	
  91

  
	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
  EVENTS OF DEFAULT

  	
   

  
	
  11.1.

  	
  Payments

  	
  92

  
	
  11.2.

  	
  Representations,
  etc.

  	
  92

  
	
  11.3.

  	
  Covenants

  	
  92

  
	
  11.4.

  	
  Default
  Under Other Agreements

  	
  92

  
	
  11.5.

  	
  Bankruptcy,
  etc.

  	
  93

  
	
  11.6.

  	
  ERISA

  	
  93

  
	
  11.7.

  	
  Guarantee

  	
  94

  
	
  11.8.

  	
  Pledge
  Agreement

  	
  94

  
	
  11.9.

  	
  Security
  Agreement

  	
  94

  
	
  11.10.

  	
  Mortgages

  	
  94

  

 

iii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  11.11.

  	
  Subordination

  	
  94

  
	
  11.12.

  	
  Judgments

  	
  94

  
	
  11.13.

  	
  Change of
  Control

  	
  94

  
	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
  THE AGENTS

  	
   

  
	
  12.1.

  	
  Appointment

  	
  95

  
	
  12.2.

  	
  Delegation
  of Duties

  	
  95

  
	
  12.3.

  	
  Exculpatory
  Provisions

  	
  95

  
	
  12.4.

  	
  Reliance
  by Administrative Agent and Security Agents

  	
  96

  
	
  12.5.

  	
  Notice of
  Default

  	
  96

  
	
  12.6.

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

  	
  96

  
	
  12.7.

  	
  Indemnification

  	
  97

  
	
  12.8.

  	
  Administrative
  Agent and Security Agents in Their Individual Capacities

  	
  97

  
	
  12.9.

  	
  Successor
  Agent

  	
  97

  
	
  12.10.

  	
  Withholding
  Tax

  	
  98

  
	
  12.11.

  	
  Reports

  	
  98

  
	
  12.12.

  	
  Security  Agents

  	
  99

  
	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
  [RESERVED]

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
  MISCELLANEOUS

  	
   

  
	
  14.1.

  	
  Amendments
  and Waivers

  	
  99

  
	
  14.2.

  	
  Notices

  	
  100

  
	
  14.3.

  	
  No
  Waiver; Cumulative Remedies

  	
  102

  
	
  14.4.

  	
  Survival
  of Representations and Warranties

  	
  102

  
	
  14.5.

  	
  Payment
  of Expenses and Taxes

  	
  102

  
	
  14.6.

  	
  Successors
  and Assigns; Participations and Assignments

  	
  103

  
	
  14.7.

  	
  Replacements
  of Lenders under Certain Circumstances

  	
  107

  
	
  14.8.

  	
  Adjustments;
  Set-off

  	
  108

  
	
  14.9.

  	
  Counterparts

  	
  108

  
	
  14.10.

  	
  Severability

  	
  108

  
	
  14.11.

  	
  Integration

  	
  108

  
	
  14.12.

  	
  GOVERNING
  LAW

  	
  109

  
	
  14.13.

  	
  Submission
  to Jurisdiction; Waivers

  	
  109

  
	
  14.14.

  	
  Acknowledgments

  	
  109

  
	
  14.15.

  	
  WAIVERS
  OF JURY TRIAL

  	
  110

  
	
  14.16.

  	
  Confidentiality

  	
  110

  
	
  14.17.

  	
  USA
  PATRIOT Act

  	
  110

  

 

iv

 

	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule
  1.1(a)

  	
  Mortgaged
  Properties

  	
   

  
	
  Schedule
  1.1(b)

  	
  Commitments
  of Lenders

  	
   

  
	
  Schedule
  1.1(c)

  	
  Immaterial
  Subsidiaries

  	
   

  
	
  Schedule
  1.1(d)

  	
  Existing
  Letters of Credit

  	
   

  
	
  Schedule
  8.12

  	
  Subsidiaries

  	
   

  
	
  Schedule
  10.1

  	
  Effective
  Date Indebtedness

  	
   

  
	
  Schedule
  10.2

  	
  Effective
  Date Liens

  	
   

  
	
  Schedule
  10.3

  	
  Effective
  Date Parent Assets

  	
   

  
	
  Schedule 10.5

  	
  Effective Date Investments

  	
   

  

 

v

 

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

 

The parties hereto hereby agree as follows:

 

SECTION 1.           Definitions

 

1.1.          Defined Terms.

 

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

 

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

 

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

 

“ABR Margin” shall mean 3.00% per annum.

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

	
  Status

  	
   

  	
  Commitment

  Fee Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Level I Status

  	
   

  	
  1.00

  	
  %

  
	
  Level II Status

  	
   

  	
  0.75

  	
  %

  

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)            which
is owed by an Account Debtor which has (i) applied for, suffered, or
consented to the appointment of any receiver, custodian, trustee, or liquidator
of its

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(r)            which
is owed by an Account Debtor located in any jurisdiction which requires filing
of a “Notice of Business Activities Report” or other similar report in order to

 

11

 

permit the Borrower to seek
judicial enforcement in such jurisdiction of payment of such Account, unless
the Borrower has filed such report or qualified to do business in such jurisdiction;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Environmental Claims” shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigations (other
than internal reports prepared by the Borrower or any of the Subsidiaries (a) in
the ordinary course of such Person’s business or (b) as required in
connection with a financing transaction or an acquisition or disposition of
Real Estate) or proceedings relating in any way to any Environmental Law or any
permit issued, or any approval given, under any such Environmental Law
(hereinafter, “Claims”), including (i) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law and (ii) any and all Claims by any third

 

14

 

party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials or arising from alleged injury or threat of
injury to health, safety or the environment.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Eurodollar Margin” shall mean 4.00% per
annum.

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

“GAAP” shall mean generally accepted
accounting principles in the United States of America as in effect from time to
time; provided, however, that if there occurs after the date
hereof any change in GAAP that affects in any respect the calculation of any
covenant contained in Section 10, the Lenders and the Borrower shall
negotiate in good faith amendments to the provisions of this Agreement that
relate to the calculation of such covenant with the intent of having the
respective positions of the Lenders and the Borrower after such change in GAAP
conform as nearly as possible to their respective positions as of the date of
this Agreement and, until any such amendments have been agreed upon, the
covenants in Section 10 shall be calculated as if no such change in GAAP
has occurred.  Notwithstanding any other
provision contained herein, all terms of an accounting or financial nature used
herein shall be construed, and all computations

 

17

 

of amounts and ratios
referred to herein shall be made, without giving effect to any election under
Statement of Financial Accounting Standards 159 (or any other Financial
Accounting Standard having a similar result or effect) to value any
Indebtedness or other liabilities of Parent, Holdings, the Borrower or any
Restricted Subsidiary at “fair value”, as defined therein.

 

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

 

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

 

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

 

“Guarantors” shall mean Holdings and the
Subsidiary Guarantors.

 

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

 

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

 

18

 

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

 

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

 

	
  Ratings
  Agency

  	
   

  	
  Minimum Rating

  
	
   

  	
   

  	
   

  
	
  S&P

  	
   

  	
  A- (stable)

  
	
   

  	
   

  	
   

  
	
  Moody’s

  	
   

  	
  A3 (stable)

  
	
   

  	
   

  	
   

  
	
  Fitch

  	
   

  	
  A- (stable)

  

 

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

 

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

 

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

 

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

 

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

 

“Initial PIK Convertible Notes” shall mean an
initial aggregate principal amount of 8.0% convertible senior secured third
lien notes due 2016 of Parent and the Borrower, as co-issuers that, when
aggregated with the aggregate principal amount of the Initial Secured Notes,
does not exceed $555,000,000 and shall include any increase in such convertible
senior secured 

 

19

 

third lien notes as a result
of the payment of in kind interest thereon, provided that the covenants
and other material terms in the Convertible Notes are consistent with the
description of notes delivered to the Initial Lenders on the Effective Date
pursuant to the Forward Purchase Contract.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

20

 

	
  Ratings
  Agency

  	
   

  	
  Minimum Rating

  
	
   

  	
   

  	
   

  
	
  S&P

  	
   

  	
  BBB- (stable)

  
	
   

  	
   

  	
   

  
	
  Moody’s

  	
   

  	
  Baa3 (stable)

  
	
   

  	
   

  	
   

  
	
  Fitch

  	
   

  	
  BBB- (stable)

  

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Material Subsidiary” shall mean any
Restricted Subsidiary other than (i) a Restricted Subsidiary set forth on Schedule
1.1(c) or (ii) any other Restricted Subsidiary of the Borrower (a) whose
total assets at the last day of the Test Period ending on the last day of the
most recent fiscal period for which Section 9.1 Financials have been
delivered were less than or equal 5% of the consolidated total assets of
Parent, Holdings, the Borrower and the Restricted Subsidiaries at such date or (b) whose
gross revenues for such Test Period were less than or equal to 5% of the
consolidated gross revenues of Parent, Holdings, the Borrower and the Restricted
Subsidiaries for such period, in each case determined in accordance with
GAAP;  provided that, notwithstanding
subclauses (i) and (ii) above, “Material Subsidiary” shall also
include any of the Borrower’s Subsidiaries selected by the Borrower which is
required to ensure that all Material Subsidiaries have in the aggregate (x) total
assets at the last day of the Test Period ending on the last day of the most
recent fiscal period for which Section 9.1 Financials have been delivered
equal to or greater than 95% of the total assets of Parent, Holdings, the
Borrower and the Restricted Subsidiaries at such date and (y) gross
revenues for such Test Period that were equal to 

 

22

 

or greater than 95% of the
consolidated gross revenues of Parent, Holdings, the Borrower and the Restricted
Subsidiaries for such period, in each case determined in accordance with GAAP.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

23

 

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

 

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

 

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

 

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

 

“Permitted Additional Secured Notes” shall
mean any Indebtedness of the Borrower (other than the Initial Secured Notes)
that is secured by a Lien ranking pari passu with the Lien
of the Initial Secured Notes pursuant to the terms of the Intercreditor Agreement;
provided that (a) the terms of such Indebtedness do not provide for
any scheduled repayment, mandatory redemption or sinking fund obligation prior
to the Maturity Date (other than customary offers to purchase upon a change of
control, asset sale or event of loss and customary acceleration rights after an
event of default), (b) no Subsidiary of the Borrower other than a Subsidiary
Guarantor is a guarantor or obligor with respect to such Indebtedness, (c) the
holders of such Permitted Additional Secured Notes (or a trustee or agent
authorized to act on behalf of such holders) shall have executed a supplement
to the Intercreditor Agreement agreeing to be bound thereby on the same terms
applicable to the holders of Initial Secured Notes, (d) no Event of
Default shall have occurred and is continuing immediately after giving effect
to the issuance thereof and the application of proceeds therefrom and (e) either
(x) on a Pro Forma Basis immediately after giving effect to the issuance
of any Permitted Additional Secured Notes (i) the Consolidated Senior Secured
Debt to Consolidated EBITDA Ratio as of the last day of the most recent Test
Period for which Section 9.1 Financials have been delivered is less than
2.75 to 1.0 and (ii) the Fixed Charge Coverage Ratio for the most recent
Test Period for which Section 9.1 Financials have been delivered would be
at least 1.1 to 1.0 (or, in the case of Permitted Additional Secured Notes
issued as Permitted Refinancing Indebtedness, the Fixed Charge Coverage Ratio
for such Test Period is higher than immediately prior to such refinancing
transaction) or (y) the aggregate amount of Permitted Additional Secured
Notes outstanding at the time of issuance thereof does not exceed $50,000,000.

 

24

 

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

 

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

 

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

 

“Permitted Junior Lien or Unsecured Notes”
shall mean any Indebtedness of the Borrower (other than the Initial PIK
Convertible Notes and any Permitted Additional PIK Convertible Notes) that is
either unsecured or secured by a Lien ranking junior to the Lien securing the
Permitted Additional Secured Notes and the Obligations pursuant to the terms of
the Intercreditor Agreement; provided that (a) the terms of such
Indebtedness do not provide for any scheduled repayment, mandatory redemption
or sinking fund obligation prior to the Maturity Date (other than customary
offers to purchase upon a change of control, asset sale or event of loss and
customary acceleration rights after an event of default), (b) no
Subsidiary of the Borrower other than a Subsidiary Guarantor is a guarantor or
obligor with respect to such Indebtedness, (c) if such Permitted Junior
Lien or Unsecured Notes are secured by any Liens, the holders of such Permitted
Junior Lien or Unsecured Notes (or a trustee or agent authorized to act on behalf
of such holders) shall have executed a supplement to the Intercreditor
Agreement agreeing 

 

25

 

to be bound thereby on the
same terms applicable to the holders of Initial PIK Convertible Notes giving
effect to the priority of the Lien securing such Indebtedness and (d) on a
Pro Forma Basis after giving effect to the issuance of such Permitted Junior
Lien or Unsecured Notes and the application of proceeds therefrom, (i) no
Event of Default shall have occurred and is continuing and (ii) the Fixed
Charge Coverage Ratio for the most recent Test Period for which Section 9.1
Financials have been delivered would be at least 1.1 to 1.0 (or, in the case of
Permitted Junior Lien or Unsecured Notes issued as Permitted Refinancing
Indebtedness, the Fixed Charge Coverage Ratio for such Test Period is higher
than immediately prior to such refinancing transaction).

 

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

 

“Permitted Refinancing Indebtedness” shall
mean any Indebtedness (“Refinancing Indebtedness”) incurred to
refinance, refund, renew or extend (including, without limitation, pursuant to
any exchange offer) any Indebtedness (the “Initial Indebtedness”)
specified in clause (i) or (k) of Section 10.1(A), provided
that (a) the principal amount of any Refinancing Indebtedness is not
increased above the principal amount of the Initial Indebtedness refinanced
thereby (except by the amount of any accrued and unpaid interest thereon and by
the amount of any fees and expenses payable in connection with such refinancing),
(b) Initial Indebtedness of the Borrower

 

26

 

or a Subsidiary Guarantor
may not be refinanced with Refinancing Indebtedness incurred or guaranteed by
any Restricted Subsidiary that is not a Guarantor, (c) except in the case
of a refinancing of the Subordinated Notes, if the Initial Indebtedness is
subordinated to the Obligations, then such Refinancing Indebtedness shall be
subordinated to the Obligations to at least the same extent, (d) such
Refinancing Indebtedness (x) does not have a final maturity prior to the
final maturity of the Initial Indebtedness refinanced thereby and (y) does
not have a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Initial Indebtedness and (e) except in the
case of Refinancing Indebtedness constituting Permitted Additional Secured
Notes or Permitted Junior Lien or Unsecured Notes, the Refinancing Indebtedness
is not secured by a Lien on any assets of the Borrower or any of the Restricted
Subsidiaries other than any assets subject to a Lien securing the Initial
Indebtedness, provided further that no Permitted Refinancing
Indebtedness in respect of the Initial PIK Convertible Notes or any Permitted
Additional PIK Convertible Notes (or any Permitted Refinancing Indebtedness in
respect thereof) shall provide (a) for any cash interest payments or other
cash distributions in respect thereof on or prior to the Maturity Date, (b) by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable or exercisable) or upon the happening of any event
that such Indebtedness (i)(x) matures or becomes mandatorily redeemable
pursuant to a sinking fund obligation or otherwise (other than for equity
interests of Parent), (y) that such Indebtedness becomes convertible or
exchangeable at the option of the holder thereof for Indebtedness or other
securities that do not meet the requirements of this proviso or (z) become
redeemable at the option of the holder thereof (other than as a result of a
change of control event or in exchange for equity interests of Parent), in
whole or in part, in each case on or prior to the first anniversary of the
Maturity Date or (c) provide holders thereunder with any rights to require
redemption or repayment (other than in equity interests of Parent) upon the
occurrence of a “change of control” event prior to the Final Date.

 

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

 

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

 

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

 

“Plan” shall mean any multiemployer or
single-employer plan, as defined in Section 4001 of ERISA and subject to
Title IV of ERISA, that is or was within any of the preceding 

 

27

 

five plan years maintained
or contributed to by (or to which there is or was an obligation to contribute
or to make payments to) the Borrower, a Subsidiary or an ERISA Affiliate.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

28

 

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

 

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

 

(E)           any
applicable Pro Forma Adjustment.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

29

 

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

 

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

 

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

 

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

 

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

 

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

 

“Reserves” shall mean any and all reserves
(other than Account Reserves and Inventory Reserves) which the Security Agents
deem necessary, in their Permitted Discretion, to maintain (including, without
limitation, reserves for accrued and unpaid interest on the Obligations,
reserves for rent at locations leased by any Credit Party and for consignee’s,
warehousemen’s and bailee’s charges (unless a Collateral Access Agreement shall
be in effect with respect to the subject property), reserves for Secured Hedge
Agreements (but in the case of such Secured Hedge Agreements, only with the
consent of the Borrower), reserves for contingent liabilities of any Credit
Party, reserves for uninsured losses of any Credit Party, reserves for
uninsured, underinsured, un-indemnified or under-indemnified liabilities or
potential liabilities with respect to any litigation and reserves for taxes,
fees, assessments and other governmental charges) with respect to the
Collateral or any Credit Party.  The
Security Agents may, from time to time, in their Permitted Discretion, adjust
Reserves upon not less than one Business Day’s prior written notice to the
Borrower.

 

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

 

30

 

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

 

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

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Solvent” shall mean, with respect to the
Borrower, that as of the Effective Date, both (i) (a) the sum of the
Borrower’s debts (including contingent liabilities) does not exceed the present
fair saleable value of the Borrower’s present assets; (b) the Borrower’s
capital is not unreasonably

 

32

 

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

 

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

 

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

 

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

 

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

 

“Statutory Reserve Rate” shall mean for any
day as applied to any Eurodollar Loan, a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages that are in effect
on that day (including any marginal, special, emergency or supplemental reserves),
expressed as a decimal, as prescribed by the Board and to which the
Administrative Agent is subject, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D. 
Eurodollar Loans shall be deemed to constitute eurocurrency funding and
to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

 

33

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Transaction Expenses” shall mean any fees or
expenses incurred or paid by Holdings or any of its Subsidiaries in connection
with the Transactions, including, without limitation,

 

34

 

early
termination payments under the Borrower’s interest rate hedging agreements with
respect to the Existing Credit Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Weighted Average Life to Maturity”
when applied to any Indebtedness at any date, means the number of years
obtained by dividing (1) the sum of the products obtained by 

 

35

 

multiplying (a) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final maturity, in
respect thereof by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment
by (2) the then outstanding principal amount of such Indebtedness.

 

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

 

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

 

SECTION 2.                    Amount and
Terms of Credit

 

2.1.          Commitments.

 

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

 

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

 

36

 

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

 

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

 

(d)           Subject to the
limitations set forth below, the Administrative Agent is authorized by the
Borrower and the Lenders, from time to time in the Administrative Agent’s sole
discretion (but shall have absolutely no obligation to), to make Loans to the
Borrower, on behalf of all Lenders, which the Administrative Agent, in its
reasonable discretion, deems necessary or 

 

37

 

desirable (i) to preserve or protect the
Collateral, or any portion thereof, (ii) to enhance the likelihood of, or
maximize the amount of, repayment of the Loans and other Obligations or (iii) to
pay any other amount chargeable to or required to be paid by the Credit Parties
pursuant to the terms of this Agreement, including payments of reimbursable
expenses (including costs, fees, and expenses as described in Section 14.5)
and other sums payable under the Credit Documents (any of such Loans are herein
referred to as “Protective Advances”); provided that, the aggregate
amount of Protective Advances outstanding at any time shall not at any time
exceed the lesser of (x) $7,500,000 and (y) 7.5% of the Total
Commitment; provided further that the aggregate amount of
outstanding Protective Advances plus the aggregate amount of the other Total
Credit Exposure shall not exceed the Total Commitment.  Protective Advances may be made even if the
conditions precedent set forth in Section 7 have not been satisfied.  The Protective Advances shall be secured by
the Security Documents and shall constitute Obligations hereunder and under the
other Credit Documents.  All Protective
Advances shall be ABR Loans.  The Administrative
Agent’s authorization to make Protective Advances may be revoked at any time by
the Required Lenders.  Any such
revocation must be in writing and shall become effective prospectively upon the
Administrative Agent’s receipt thereof. 
At any time that there is sufficient Availability and the conditions
precedent set forth in Section 7 have been satisfied, the Administrative
Agent may request the Lenders to make a Revolving Credit Loan to repay a
Protective Advance.  At any other time
the Administrative Agent may require the Lenders to fund their risk
participations described in Section 2.1(e).

 

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

 

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

 

38

 

2.3.          Notice of Borrowing.

 

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

 

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

 

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

 

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

 

(e)           Without in any way
limiting the obligation of the Borrower to confirm in writing any notice it may
give hereunder by telephone, the Administrative Agent may act prior to receipt
of written confirmation without liability upon the basis of such telephonic
notice believed by the Administrative Agent in good faith to be from an
Authorized Officer of the Borrower.  In
each such case, the Borrower hereby waives the right to dispute the
Administrative Agent’s record of the terms of any such telephonic notice.

 

2.4.          Disbursement of Funds.

 

(a)           No later than 12:00
Noon (New York time) on the date specified in each Notice of Borrowing
(including Mandatory Borrowings) of Revolving Credit Loans, each Lender 

 

39

 

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

 

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

 

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

 

2.5.          Repayment of Loans;
Evidence of Debt.

 

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

 

40

 

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

 

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

 

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

 

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

 

2.6.          Conversions and
Continuations.

 

(a)           The Borrower shall have
the option on any Business Day to convert all or a portion equal to at least
$2,000,000 of the outstanding principal amount of Revolving Credit Loans made
to the Borrower from one Type into a Borrowing or Borrowings of another Type
and the Borrower shall have the option on any Business Day to continue the
outstanding principal amount of any Eurodollar Loans as Eurodollar Loans for an
additional Interest Period, provided that (i) no partial conversion
of Eurodollar Loans shall reduce the outstanding principal amount of Eurodollar
Loans made pursuant to a single Borrowing to less than $2,000,000, (ii) ABR
Loans may not be converted into Eurodollar Loans if a Default is in existence
on the date of the conversion and the Administrative Agent has or the Required
Lenders have determined in its or their sole discretion not to permit such
conversion, (iii) Eurodollar Loans may not be continued as Eurodollar Loans
for an additional Interest Period if a Default is in existence on the date of
the proposed continuation and the Administrative Agent has or the Required
Lenders have determined in its or their sole discretion not to permit such
continuation, (iv) no conversion or continuation of Eurodollar Loans may
be made on a day other than the last day of the Interest Period applicable
thereto and (v) Borrowings resulting from conversions pursuant to this Section 

 

41

 

2.6 shall be limited in number as provided in
Section 2.2.  Each such conversion
or continuation shall be effected by the Borrower by giving the Administrative
Agent at the Administrative Agent’s Office prior to 12:00 noon (New York time)
at least three Business Days’ (or one Business Day’s notice in the case of a
conversion into ABR Loans) prior written notice (or telephonic notice promptly
confirmed in writing) (each a “Notice of Conversion or Continuation”)
specifying the Revolving Credit Loans to be so converted or continued, the Type
of Revolving Credit Loans to be converted or continued into and, if such
Revolving Credit Loans are to be converted into or continued as Eurodollar
Loans, the Interest Period to be initially applicable thereto.  The Administrative Agent shall give each
Lender notice as promptly as practicable of any such proposed conversion or
continuation affecting any of its Revolving Credit Loans.

 

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

 

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

 

2.8.          Interest.

 

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

 

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

 

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

 

42

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

43

 

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

 

2.10.        Increased Costs,
Illegality, etc.

 

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

 

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

 

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

 

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

 

then, and in any such event,
such Lender (or the Administrative Agent, in the case of clause (i) above)
shall within a reasonable time thereafter give notice (if by telephone,
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Lenders).  Thereafter (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be
available until such time as the Administrative Agent notifies the Borrower and
the Lenders that the circumstances giving rise to such notice by the
Administrative Agent no longer exist (which notice the Administrative Agent
agrees to give at such time when such circumstances no longer exist), and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans that have

 

44

 

not yet been incurred shall be
deemed rescinded by the Borrower, (y) in the case of clause (ii) above,
the Borrower shall pay to such Lender, promptly after receipt of written demand
therefor such additional amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
reasonable discretion shall determine) as shall be required to compensate such
Lender for such increased costs or reductions in amounts receivable hereunder
(it being agreed that a written notice as to the additional amounts owed to
such Lender, showing in reasonable detail the basis for the calculation
thereof, submitted to the Borrower by such Lender shall, absent clearly
demonstrable error, be final and conclusive and binding upon all parties
hereto) and (z) in the case of clause (iii) above, the Borrower shall
take one of the actions specified in Section 2.10(b) as promptly as
possible and, in any event, within the time period required by law.

 

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

 

(c)           If, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, the National Association
of Insurance Commissioners, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by a Lender or its parent
with any request or directive made or adopted after the date hereof regarding
capital adequacy (whether or not having the force of law) of any such
authority, association, central bank or comparable agency, has or would have
the effect of reducing the rate of return on such Lender’s or its parent’s or
its Related Party’s capital or assets as a consequence of such Lender’s
commitments or obligations hereunder to a level below that which such Lender or
its parent or its Related Party could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration such Lender’s or
its parent’s policies with respect to capital adequacy), then from time to
time, promptly after demand by such Lender (with a copy to the Administrative
Agent), the Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender or its parent for such reduction, it being
understood and agreed, however, that a Lender shall not be entitled to such compensation
as a result of such Lender’s compliance with, or pursuant to any request or
directive to comply with, any such law, rule or regulation as in effect on
the date hereof.  Each Lender, upon
determining in good faith that any additional amounts will be payable pursuant
to this Section 2.10(c), will give prompt written notice thereof to the
Borrower (on its own behalf) which notice shall set forth in reasonable detail
the basis of the calculation of such additional amounts, although the failure
to give any such notice shall not, subject to Section 2.13, release or
diminish any of the Borrower’s obligations to pay additional amounts pursuant
to this Section 2.10(c) upon receipt of such notice.

 

45

 

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

 

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

 

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

 

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

 

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

 

(b)           the Commitment and Credit Exposure of
such Defaulting Lender shall not be included in determining whether all Lenders
or the Required Lenders have taken or may take any action hereunder (including
any consent to any amendment or waiver pursuant

 

46

 

to Section 14.1), provided that any waiver, amendment or
modification requiring the consent of all Lenders or each affected Lender which
affects such Defaulting Lender differently than each other applicable Lender
shall require the consent of such Defaulting Lender;

 

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

 

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

 

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

 

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

 

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

 

(v)           to the extent any
Defaulting Lender’s Letter of Credit Exposure is neither cash collateralized
nor reallocated pursuant to this Section 2.14(c), then, without prejudice
to any rights or remedies of the Letter of Credit Issuer or any Lender
hereunder, all fees that would have otherwise been payable to such Defaulting
Lender under Section 4.1(b) with respect to such portion of such
Letter of Credit Exposure shall instead be payable to the Letter of Credit
Issuer until such portion of such Defaulting Lender’s Letter of Credit Exposure
is cash collateralized and/or reallocated;

 

47

 

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

 

(vii)         any amount payable
to such Defaulting Lender hereunder (whether on account of principal, interest,
fees or otherwise and including any amount that would otherwise be payable to
such Defaulting Lender pursuant to Section 14.8(b) but excluding Section 14.7)
shall, in lieu of being distributed to such Defaulting Lender, be retained by
the Administrative Agent in a segregated account and, subject to any applicable
requirements of law, be applied at such time or times as may be determined by
the Administrative Agent (i) first, to the payment of any amounts
owing by such Defaulting Lender to the Administrative Agent hereunder, (ii) second,
pro rata, to the payment of any amounts owing by such
Defaulting Lender to the Letter of Credit Issuer or Swingline Lender hereunder,
(iii) third, if so determined by the Administrative Agent or
requested by a Letter of Credit Issuer or Swingline Lender, to be held in such
account as cash collateral for future funding obligations of the Defaulting
Lender of any participating interest in any Swingline Loan or Letter of Credit,
(iv) fourth, to the funding of any Loan in respect of which such
Defaulting Lender has failed to fund its portion thereof as required by this
Agreement, as determined by the Administrative Agent, (v) fifth, if
so determined by the Administrative Agent and the Borrower, held in such
account as cash collateral for future funding obligations of the Defaulting
Lender of any Revolving Credit Loans under this Agreement, (vi) sixth,
to the payment of any amounts owing to the Lenders, in respect of obligations under
this Agreement, a Letter of Credit Issuer or Swingline Lender as a result of
any judgment of a court of competent jurisdiction obtained by any Lender, such
Letter of Credit Issuer or Swingline Lender against such Defaulting Lender as a
result of such Defaulting Lender’s breach of its obligations under this
Agreement, (vii) seventh, to the payment of any amounts owing to
the Borrower as a result of any judgment of a court of competent jurisdiction
obtained by the Borrower against such Defaulting Lender as a result of such
Defaulting Lender’s breach of its obligations under this Agreement, and (viii) eighth,
to such Defaulting Lender or as otherwise directed by a court of competent
jurisdiction; provided that if such payment is (x) a prepayment of
the principal amount of any Revolving Credit Loans or drawings in respect of
Letter of Credits for which a Defaulting Lender has funded its participation
obligations and (y) made at a time when the conditions set forth in Section 7
are satisfied, such payment shall be applied solely to prepay the Revolving
Credit Loans of, and reimbursement obligations owed to, all non-Defaulting
Lenders pro rata prior to being applied to the prepayment of
any Revolving Credit Loans, or reimbursement obligations owed to, any
Defaulting Lender; and

 

48

 

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

 

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

 

On any Increased Amount Date, subject to the
satisfaction of the foregoing terms and conditions, (a) each of the
Lenders with Commitments shall assign to each of the New Lenders, and each of
the New Lenders shall purchase from each of the Lenders with Commitments, at
the principal amount thereof (together with accrued interest), such interests
in the Revolving Credit Loans outstanding on such Increased Amount Date as shall
be necessary in order that, after giving effect to all such assignments and
purchases, such Revolving Credit Loans will be held 

 

49

 

by existing
Lenders with Revolving Credit Loans and New Lenders ratably in accordance with
their respective Commitments after giving effect to the addition of such New
Commitments to the Commitments, (b) each New Commitment shall be deemed
for all purposes a Commitment and each Loan made thereunder shall be deemed,
for all purposes, a Revolving Credit Loan and (c) each New Lender shall
become a Lender with respect to the New Commitment and all matters relating
thereto.

 

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

 

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

 

SECTION 3.                    Letters of Credit

 

3.1.          Letters of Credit.

 

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

 

(b)           Notwithstanding the foregoing, (i) no
Letter of Credit shall be issued the Stated Amount of which, when added to the
Letters of Credit Outstanding at such time, would exceed the Letter of Credit
Commitment then in effect; (ii) no Letter of Credit shall be issued,
amended (to increase the Stated Amount thereof), extended or renewed if, after
giving effect to such issuance, amendment, extension or renewal, the Total
Credit Exposure would exceed the lesser of (x) the Total Commitment then
in effect and (y) the Borrowing Base then in effect; (iii) no Letter
of Credit denominated in Canadian Dollars shall be issued the Stated Amount of
which when added to the Stated Amount of all other Letters of Credit
denominated in Canadian Dollars would exceed the Canadian Letter of Credit
Sublimit; (iv) each Letter of Credit shall have an expiration date
occurring no later than one year after the date of issuance thereof, unless
otherwise agreed upon by the Administrative Agent and the Letter of Credit
Issuer, provided that in no event shall such expiration date occur later
than the L/C Maturity Date; (v) no Letter of Credit shall be issued if it
would be illegal under any applicable law for the beneficiary of the Letter of
Credit to have a Letter of Credit issued in its favor; and (vi) no Letter
of Credit shall be issued by a Letter of Credit Issuer after it has received a
written notice from the Borrower or any Lender stating that a Default has
occurred and is continuing until such time as the Letter of Credit Issuer shall
have received a written notice of (x) rescission of such notice from the
party or parties originally delivering such notice or (y) the waiver of
such Default in accordance with the provisions of Section 14.1.

 

50

 

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

 

3.2.          Letter of Credit Requests.

 

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

 

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

 

3.3.          Letter of Credit Participations.

 

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

 

(b)           In determining whether to pay under
any Letter of Credit, the Letter of Credit Issuer shall have no obligation
relative to the L/C Participants other than to confirm that any documents required
to be delivered under such Letter of Credit have been delivered and that they
appear to comply on their face with the requirements of such Letter of
Credit.  Any action taken or omitted to
be taken by the Letter of Credit Issuer under or in connection with any Letter
of Credit issued by it, if taken or omitted in the absence of gross negligence
or willful misconduct, shall not create for the Letter of Credit Issuer any
resulting liability.

 

(c)           In the event that the Letter of Credit
Issuer makes any payment under any Letter of Credit issued by it and the
Borrower shall not have repaid such amount in full to the respective Letter of
Credit Issuer pursuant to Section 3.4(a), the Letter of Credit Issuer
shall 

 

51

 

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

 

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

 

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

 

52

 

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

 

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

 

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

 

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

 

(v)           the
occurrence of any Default;

 

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

 

3.4.          Agreement to Repay Letter of Credit Drawings.

 

(a)           The Borrower hereby agrees to
reimburse the Letter of Credit Issuer, by making payment in Dollars to the
Administrative Agent in immediately available funds for any payment or
disbursement made by the Letter of Credit Issuer under any Letter of Credit
(the Dollar Equivalent of each such amount so paid until reimbursed, an “Unpaid
Drawing”) immediately after, and in any event on the date of, such payment,
with interest on the amount so paid or disbursed by the Letter of Credit
Issuer, to the extent not reimbursed prior to 5:00 p.m. (New York time) on
the date of such payment or disbursement, from and including the date paid or
disbursed to but excluding the date the Letter of Credit Issuer is reimbursed
therefor at a rate per annum that shall at all times be the ABR Margin plus the
ABR as in effect from time to time, provided that, notwithstanding
anything contained in this Agreement to the contrary, (i) unless the Borrower
shall have notified the Administrative Agent and the Letter of Credit Issuer
prior to 10:00 a.m. (New York time) on the date of such drawing that the
Borrower intends to reimburse the Letter of Credit Issuer for the amount of
such drawing with funds other than the proceeds of Loans, the Borrower be shall
be deemed to have given a Notice of Borrowing requesting that the Lenders with
Commitments make Revolving Credit Loans (which shall be ABR Loans) on the date
on which such drawing is honored in an amount equal to the amount of such
drawing and (ii) the Administrative Agent shall promptly notify each relevant
L/C Participant of such drawing and the amount of its Revolving Credit Loan to
be made in respect thereof, and, subject to the conditions set forth in Section 2.1(a),
each L/C Participant shall be irrevocably obligated to make 

 

53

 

a Revolving Credit Loan to the Borrower in
the manner deemed to have been requested in the amount of its Applicable
Percentage of the applicable Unpaid Drawing by 12:00 noon (New York time) on
such Business Day by making the amount of such Revolving Credit Loan available
to the Administrative Agent.  Such
Revolving Credit Loans shall be made without regard to the minimum Borrowing
amount for ABR Loans set forth in Section 2.2.  The Administrative Agent shall use the proceeds
of such Revolving Credit Loans solely for purpose of reimbursing the Letter of
Credit Issuer for the related Unpaid Drawing.

 

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

 

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

 

54

 

Administrative
Agent) setting forth in reasonable detail the basis for the determination of
such additional amount or amounts necessary to compensate the Letter of Credit
Issuer or such L/C Participant as aforesaid shall be conclusive and binding on
the Borrower absent clearly demonstrable error.

 

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

 

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

 

SECTION 4.                    Fees; Commitments

 

4.1.          Fees.

 

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

 

(b)           The Borrower agrees to pay to the
Administrative Agent in Dollars for the account of the Lenders pro rata
on the basis of their respective Applicable Percentages, a fee in respect of
each Letter of Credit (the “Letter of Credit Fee”), for the period from
and including the date of issuance of such Letter of Credit to but excluding
the termination date of such Letter of 

 

55

 

Credit computed at the per annum rate for
each day equal to the Eurodollar Margin for Revolving Credit Loans on the
average daily Stated Amount of such Letter of Credit.  Such Letter of Credit Fees shall be due and
payable quarterly in arrears on the first day of each April, July, October and
January and on the date upon which the Total Commitment terminates and the
Letters of Credit Outstanding shall have been reduced to zero.

 

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

 

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

 

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

 

4.3.          Mandatory Termination of Commitments.

 

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

 

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

 

SECTION 5.                    Payments

 

5.1.          Voluntary Prepayments.  The Borrower shall have the right to prepay Revolving
Credit Loans and Swingline Loans in whole or in part from time to time on the
following terms and conditions:  (a) the
Borrower shall give the Administrative Agent at the Administrative Agent’s
Office written notice (or telephonic notice promptly confirmed in writing) of
its intent to make such prepayment, the amount of such prepayment and (in the
case of Eurodollar Loans) the specific Borrowing(s) pursuant to which
made, which notice shall be given by the Borrower no 

 

56

 

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

 

5.2.          Mandatory Prepayments.

 

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

 

(b)           Application to Revolving Credit
Loans.  With respect to each prepayment
of Revolving Credit Loans required by Section 5.2(a), the Borrower may
designate the Types of Loans that are to be prepaid and the specific Borrowing(s) pursuant
to which made, provided that (x) Eurodollar Loans may be designated
for prepayment pursuant to this Section 5.2 only on the last day of an
Interest Period applicable thereto unless all Eurodollar Loans with Interest Periods
ending on such date of required prepayment and all ABR Loans have been paid in
full; (y) if any prepayment by the Borrower of Eurodollar Loans made
pursuant to a single Borrowing shall reduce the outstanding amount of the
Revolving Credit Loans made pursuant to such Borrowing to an amount less than
$2,000,000, such Borrowing shall immediately be converted into ABR Loans; and (z) each
prepayment of any Revolving Credit Loans made pursuant to a Borrowing shall be
applied pro rata among such Revolving Credit Loans of each
Lender in accordance with their respective Applicable Percentages.  In the absence of a designation by the
Borrower as described

 

57

 

in the preceding sentence, the Administrative
Agent shall, subject to the above, make such designation in its reasonable
discretion with a view, but no obligation, to minimize breakage costs owing
under Section 2.11.

 

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

 

5.3.          Payments Generally.

 

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

 

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

 

(c)           Subject to the terms of the
Intercreditor Agreement, (x) any proceeds of the sale, transfer or other
disposition of Collateral outside of the ordinary course of business received
by the Administrative Agent after an Event of Default has occurred and is continuing
or (y) any other proceeds of Collateral received by the Administrative
Agent after an Event of Default specified in Section 11.5 or a termination
of the Total Commitment or acceleration of the Obligations under this Agreement
pursuant to Section 11 has occurred and is continuing shall in the case of
either (x) or (y) be applied ratably first, to pay any fees,
indemnities, or expense reimbursements including amounts then due to the Administrative
Agent, the Security Agents and the Letter of Credit Issuer from the Credit
Parties (other than in connection with Secured Cash Management Agreements and
Secured Hedge Agreements), second, to pay any fees or expense 

 

58

 

reimbursements then due to the Lenders from
the Credit Parties (other than in connection with Secured Cash Management
Agreements and Secured Hedge Agreements), third, to pay interest due in respect
of the Protective Advances, fourth, to pay the principal of the
Protective Advances, fifth, to pay interest then due and payable on the
Loans (other than the Protective Advances) ratably, sixth, to prepay
principal on the remaining Loans, Unpaid Drawings and any Specified Secured
Hedge Agreement, ratably, seventh, to pay an amount to the
Administrative Agent equal to one hundred five percent (105%) of the aggregate
undrawn face amount of all outstanding Letters of Credit and the aggregate
amount of any unpaid Unpaid Drawings, to be held as cash collateral for such
Obligations, eighth, to the payment of any amounts owing with respect to
Secured Hedge Agreements, ninth, to payment of any amounts owing with
respect to Secured Cash Management Agreements, and tenth, to the payment
of any other Obligation due to the Administrative Agent or any Secured Party.

 

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

 

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

 

59

 

5.4.          Net Payments.

 

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

 

60

 

Borrower showing payment thereof.  If the Borrower (or applicable Credit Party)
fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts
or other required documentary evidence, such Credit Party shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest, costs
or penalties that may become payable by the Administrative Agent or any Lender
as a result of any such failure.  The
agreements in this Section 5.4(a) shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.

 

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

 

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

 

(i)            deliver
to the Borrower and the Administrative Agent two copies of either (x) in
the case of Non-U.S. Lender claiming exemption from U.S. Federal withholding
tax under Section 871(h) or 881(c) of the Code with respect to
payments of “portfolio interest”, Internal Revenue Service Form W-8BEN
(together with a certificate representing that such Non-U.S. Lender is not a
bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code)
of the Borrower, is not a controlled foreign corporation related to the
Borrower (within the meaning of Section 864(d)(4) of the Code) and
that no payments in connection with the Credit Documents are effectively
connected with such Non-U.S. Lender’s conduct of a U.S. trade or business (a “Certificate”)),
(y) Internal Revenue Service Form W-8BEN or Form W-8ECI, in each
case properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or reduced rate of, U.S. Federal withholding tax on
payments by the Borrower under this Agreement or (z) in the case of a
Non-U.S. Lender that not the beneficial owner (for example, where the Non-U.S.
Lender is a partnership or participating Lender granting a typical
participation), Internal Revenue Service Form W-8IMY, accompanied by a Form W-8ECI,
W-8BEN, a Certificate, Form W-9 and/or other certification documents from
each beneficial owner, as applicable; provided that, if the Non-U.S.
Lender is a partnership (and not a participating Lender) and one or more
beneficial owners of such Non-U.S. Lender are claiming the portfolio interest exemption,
such Non-U.S. Lender may provide a Certificate on behalf of such beneficial
owner(s);

 

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

 

61

 

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

 

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

 

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

 

(e)           If the Borrower determines in good
faith that a reasonable basis exists for contesting any Non-Excluded Taxes for
which indemnification has been made hereunder, the relevant Lender or the
Administrative Agent, as applicable, shall use reasonable efforts to cooperate
with Borrower in challenging such taxes at Borrower’s expense if so requested
by Borrower in writing; provided that nothing in this Section 5.4(e) shall
obligate the Administrative Agent or any Lender to take any action that, in its
reasonable judgment, would be materially disadvantageous to such person. If any
Lender or the Administrative Agent, as applicable, receives a refund of a
Non-Excluded Tax for which a payment has been made by the Borrower pursuant to
this Agreement, which refund in the sole good faith judgment of such Lender or Administrative
Agent, as the case may be, is attributable to such payment made by such
Borrower, then the Lender or the Administrative Agent, as the case may be,
shall reimburse Borrower for such amount (without interest other than any
interest received by the Governmental Authority with respect to such refund) as
the Lender or Administrative Agent, as the case may be, determines to be the
proportion of the refund as will leave it, after such reimbursement, in no
better or worse net after-tax position than it would have been in if the
Non-Excluded Taxes giving rise to such refund had not been imposed in the first
instance; provided that the Borrower, upon the request of the
Administrative Agent or such Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in
the event the Administrative Agent or such Lender is required to repay such
refund to such Governmental Authority.  
Neither a Lender nor the Administrative Agent shall be obliged to
disclose any information regarding its tax affairs or computations to the
Borrower in connection with this paragraph (e) or any other provision of
this Section 5.4.

 

62

 

5.5.          Computations of Interest and Fees.

 

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

 

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

 

5.6.          Limit on Rate of Interest.

 

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

 

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

 

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

 

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

 

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

 

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

 

63

 

SECTION 6.                    Conditions Precedent to
Initial Borrowing

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6.8.          Corporate Proceedings of Each Credit Party.  The Administrative Agent shall have received
a copy of the resolutions, in form and substance satisfactory to the Administrative

 

64

 

Agent, of the
board of directors of each Credit Party (or a duly authorized committee
thereof) authorizing (a) the execution, delivery and performance of the
Credit Documents (and any agreements relating thereto) to which it is a party
and (b) in the case of the Borrower, the extensions of credit contemplated
hereunder.

 

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

 

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

 

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

 

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

 

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

 

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

 

6.15.        Pledged Stock; Stock
Powers; Pledged Notes.  The
collateral agent for the Initial Secured Notes shall have received (i) the
certificates representing the certificated equity interests pledged pursuant to
the Pledge Agreement, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the pledgor
thereof, and (ii) each promissory note (if any) pledged to the Collateral
Agent pursuant to the Security Agreement or the Pledge Agreement endorsed
(without recourse) in blank (or accompanied by an executed transfer form in
blank) by the pledgor thereof.

 

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

 

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

 

65

 

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

 

SECTION 7.                    Conditions
Precedent to All Credit Events

 

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

 

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

 

7.2.          Notice of Borrowing;
Letter of Credit Request.

 

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

 

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

 

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

 

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

 

SECTION 8.                    Representations,
Warranties and Agreements

 

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

 

8.1.          Corporate Status.  Holdings, the Borrower, each Credit Party and
each Material Subsidiary (a) is a duly organized and validly existing
corporation or other entity in good standing under the laws of the jurisdiction
of its organization and has the corporate or other 

 

66

 

organizational
power and authority to own its property and assets and to transact the business
in which it is engaged and (b) is duly qualified and is authorized to do
business and is in good standing in all jurisdictions where it is required to
be so qualified, except where the failure to be so qualified could not reasonably
be expected to result in a Material Adverse Effect.

 

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

 

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

 

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

 

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

 

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

 

67

 

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

 

8.8.          True and Complete
Disclosure.

 

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

 

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

 

8.9.          Financial Condition;
Financial Statements.  The (a) unaudited
historical quarterly consolidated financial information of Parent filed with
the SEC for the most recently ended fiscal quarter prior to the Signing Date
(and the corresponding prior year period), and (b) the Historical
Financial Statements, in each case present or will, when provided, present
fairly in all material respects the combined financial position of the Borrower
at the respective dates of said information, statements and results of
operations for the respective periods covered thereby.  The financial statements referred to in
clause (b) of this Section 8.9 have been prepared in accordance with
GAAP consistently applied except to the extent provided in the notes to said
financial statements.  There has been no
Material Adverse Effect since November 30, 2008.

 

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

 

8.11.        Compliance with ERISA.  Each Plan is in compliance with ERISA, the
Code and any applicable Requirement of Law; no Reportable Event has occurred
(or is reasonably likely to occur) with respect to any Plan; no Plan is
insolvent or in reorganization (or is reasonably

 

68

 

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

 

8.12.        Subsidiaries.  On the
Effective Date, Holdings does not have any Subsidiaries other than the Borrower
and its Subsidiaries.  Schedule 8.12
lists each Subsidiary of the Borrower (and the direct and indirect ownership
interest of the Borrower therein), in each case existing on the Effective
Date.  Each Material Subsidiary as of the
Effective Date has been so designated on Schedule 8.12.

 

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

 

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

 

69

 

8.15.        Environmental Laws.

 

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

 

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

 

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

 

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

 

SECTION 9.                    Affirmative
Covenants

 

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

 

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

 

(a)           Annual Financial
Statements.  As soon as available and
in any event on or before the date on which such financial statements are
required to be filed with the SEC (or, if such financial statements are not
required to be filed with the SEC, on or before the date that is 90 days after
the end of each such fiscal year), the consolidated balance sheet of (i) Parent,
Holdings, the Borrower and the Restricted Subsidiaries and (ii) Parent,
Holdings and its Subsidiaries, in each case as at the end of such fiscal year,
and the related consolidated statement of operations and cash flows for such
fiscal year, setting forth comparative consolidated figures for the preceding
fiscal year, and certified by independent certified public accountants of
recognized national standing whose opinion shall not be qualified as to the
scope of audit or as to the status of Parent, Holdings, the Borrower or any of
the Material Subsidiaries as a going concern, together in any event with a
certificate of such accounting firm stating that in the course of its regular
audit of the business of Parent, Holdings, the Borrower and the Material
Subsidiaries, which audit 

 

70

 

was conducted in accordance with generally accepted auditing standards,
such accounting firm has obtained no knowledge of any Event of Default relating
to Section 10.9 that has occurred and is continuing or, if in the opinion
of such accounting firm such an Event of Default has occurred and is
continuing, a statement as to the nature thereof.  The requirements of this Section 9.1(a) shall
be satisfied by delivery of financial statements of Parent and its Subsidiaries
which otherwise meet the requirements hereof and are accompanied by
reconciliations for any difference between what is delivered hereunder and what
would have been delivered by Holdings and its Subsidiaries pursuant to this Section 9.1(a).

 

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

 

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

 

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

 

71

 

previously provided and, in either case, in reasonable detail, the
calculations and basis therefor.

 

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

 

(f)            Notice of Material
Events.  Promptly after an Authorized
Officer of any of Holdings, the Borrower or any of the Subsidiaries obtains
knowledge thereof, notice of (i) the occurrence of any event that
constitutes a Default, which notice shall specify the nature thereof, the
period of existence thereof and what action any of Holdings or the Borrower
proposes to take with respect thereto, (ii) any litigation or governmental
proceeding pending against any of Holdings, the Borrower or any of the
Subsidiaries that could reasonably be expected to result in a Material Adverse
Effect, (iii) any Lien (other than Liens permitted by Section 10.02)
or material claim made or asserted in writing against any material portion of
the Collateral; (iv) any loss, damage or destruction to a material portion
of the Collateral in the amount of $5,000,000 or more, whether or not covered
by insurance; and (v) any and all default notices received under or with
respect to any leased location or public warehouse where Collateral with a cost
in excess of $250,000 is located (which shall be delivered within two Business
Days after receipt thereof).

 

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

 

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

 

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

 

(iii)          Any
condition or occurrence on any Real Estate that could reasonably be anticipated
to cause such Real Estate to be subject to any restrictions 

 

72

 

on the
ownership, occupancy, use or transferability of such Real Estate under any
Environmental Law; and

 

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

 

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

 

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

 

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

 

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

 

73

 

9.3.          Maintenance of
Insurance.

 

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

 

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

 

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

 

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

 

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

 

74

 

9.7.                              ERISA.  Promptly after
Holdings and the Borrower or any Subsidiary or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following events that, individually
or in the aggregate (including in the aggregate such events previously
disclosed or exempt from disclosure hereunder, to the extent the liability
therefor remains outstanding), would be reasonably likely to have a Material
Adverse Effect, Parent, Holdings or the Borrower will deliver to each of the
Lenders a certificate of an Authorized Officer or any other senior officer of
the Borrower setting forth details as to such occurrence and the action, if
any, that Holdings, the Borrower, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices (required, proposed or
otherwise) given to or filed with or by Holdings, the Borrower, such Subsidiary,
such ERISA Affiliate, the PBGC, a Plan participant (other than notices relating
to an individual participant’s benefits) or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency has been incurred or an application is to be made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan;
that a Plan having an Unfunded Current Liability has been or is to be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA (including the giving of written notice thereof); that a Plan has an Unfunded
Current Liability that has or will result in a lien under ERISA or the Code;
that proceedings will be or have been instituted to terminate a Plan having an
Unfunded Current Liability (including the giving of written notice thereof);
that a proceeding has been instituted against the Borrower, a Subsidiary or an
ERISA Affiliate pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that the PBGC has notified Holdings, the Borrower, any
Subsidiary or any ERISA Affiliate of its intention to appoint a trustee to
administer any Plan; that Holdings, the Borrower, any Subsidiary or any ERISA
Affiliate has failed to make a required installment or other payment pursuant
to Section 412 of the Code with respect to a Plan; or that Holdings, the
Borrower, any Subsidiary or any ERISA Affiliate has incurred or will incur (or
has been notified in writing that it will incur) any liability (including any
contingent or secondary liability) to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971
or 4975 of the Code.

 

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

 

9.9.                              Transactions with
Affiliates.  Each of Holdings and the
Borrower will conduct, and cause each of the Restricted Subsidiaries to
conduct, all transactions with any of its Affiliates on terms that are
substantially as favorable to Holdings, the Borrower or such Restricted
Subsidiary as it would obtain in a comparable arm’s-length transaction with a
Person that is not an Affiliate, provided that the foregoing restrictions
shall not apply to (a) the payment of customary annual fees to KKR and/or
its Affiliates for management, consulting and financial 

 

75

 

services rendered to Holdings,
the Borrower and the Subsidiaries and customary investment banking fees paid to
KKR and its Affiliates for services rendered to Holdings, the Borrower and the
Subsidiaries in connection with divestitures, acquisitions, financings and
other transactions, (b) customary fees paid to members of the board of directors
of Holdings, the Borrower and the Subsidiaries, (c) transactions permitted
by Section 10.6 and (d) the transactions pursuant to the Forward
Purchase Contract and the Initial PIK Convertible Notes.

 

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

 

9.11.                        Additional Subsidiary
Guarantors and Grantors.  Each of
Holdings and the Borrower will cause any direct or indirect Restricted Domestic
Subsidiary (other than an Excluded Subsidiary) (a) formed or otherwise
purchased or acquired after the Effective Date (including pursuant to a
Permitted Acquisition) or (b) which ceases to be an Excluded Subsidiary
following the Effective Date, in each case to execute a supplement to each of
the Guarantee and the Security Agreement, substantially in the form of Annex B
or Annex 1, as applicable, to the respective agreement in order to become a
Guarantor under the Guarantee and a grantor under the Security Agreement.

 

9.12.                        Pledges of Additional Stock
and Evidence of Indebtedness.

 

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

 

(b)                                 [Reserved].

 

76

 

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

 

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

 

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

 

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

 

9.15.                        Further Assurances.

 

(a)                                  Each of Holdings and
the Borrower will, and will cause each other Credit Party to, execute any and
all further documents, financing statements, agreements and instruments, and
take all such further actions (including the filing and recording of financing
statements, fixture filings, mortgages, deeds of trust and other documents),
which may be required under any applicable law, or which the Administrative
Agent, the Security Agents or the Required Lenders may reasonably request, in
order to grant, preserve, protect and perfect the validity and priority of the
security interests created or intended to be created by the Security Agreement,
the Pledge Agreement or any Mortgage, all at the expense of Holdings, the
Borrower and the Restricted Subsidiaries.

 

(b)                                 If any assets
(including any real estate or improvements thereto or any interest therein)
with a book value or fair market value in excess of $1,000,000 are acquired by
any Credit Party after the Effective Date (other than assets constituting
Collateral under the Security Agreement that become subject to the Lien of the
Security Agreement upon acquisition thereof) that are of the nature secured by
the Security Agreement or any Mortgage, as the case may be, the Borrower will
notify the Administrative Agent and the Lenders thereof, and, if requested by
the Administrative Agent or the Required Lenders, the Borrower will cause such
assets to be subjected to a Lien securing the Obligations and will take, and
cause the other Credit Parties to take, such actions as shall be necessary or
reasonably requested by the Administrative Agent to grant and perfect such
Liens consistent with the applicable requirements of the Security Documents,
including actions described in paragraph (a) of this Section, all at the
expense of the Credit Parties.  Any
Mortgage delivered to the Administrative Agent in accordance with the preceding
sentence shall be accompanied by (w) a policy or policies of title
insurance issued by a nationally recognized title insurance company insuring
the Lien of each Mortgage as a valid second Lien on the Mortgaged Property
described therein, free of any other Liens except as expressly permitted by Section 10.2,
together with such endorsements, coinsurance and reinsurance 

 

77

 

as the Administrative Agent may reasonably request, (x) an opinion
of local counsel to the Borrower (or in the event a Subsidiary of the Borrower
is the mortgagor, to such Subsidiary) in form reasonably satisfactory to the
Administrative Agent with respect to customary matters, (y) a “Life-of-Loan”
Federal Emergency Management Agency Standard Flood Hazard Determination with
respect to each Mortgaged Property (together with a notice about special flood
hazard area status and flood disaster assistance duly executed by the Borrower
and each Credit Party relating thereto in the event any such Mortgaged Property
is located in a special flood hazard area) and (z) a copy of or a
certificate as to coverage under the insurance policies required by Section 9.3
(including, without limitation, flood insurance policies) and the applicable
provisions of the Security Documents.

 

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

 

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

 

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

 

78

 

portion of the Collateral or
interest therein under power of eminent domain or by condemnation or similar
proceeding.

 

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

 

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

 

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

 

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

 

(iv)                              Title
Insurance.  With respect to each
Mortgage encumbering any Mortgaged Property, a policy of title insurance (or
commitment to issue such a policy having the effect of a policy of title insurance)
insuring (or committing to insure) the lien of such Mortgage as a valid and
enforceable second priority mortgage or deed of trust lien on the Mortgaged
Property described therein, in an amount not less than 100% of the fair market
value of such Mortgaged Property as reasonably determined, in good faith, by
the Borrower and reasonably acceptable to the Security Agents, (such policies
collectively, the “Mortgage Policies”) issued by such Title Company,
which reasonably assures the Security Agents that the Mortgages on such
Mortgaged Properties are valid and enforceable mortgage liens on the respective
Mortgaged Properties, free and clear of all defects and encumbrances except (I) Permitted
Liens of the type described as (A) survey exceptions, encumbrances,
easements or reservations of, or rights of others for, licenses, rights-of-way,
sewers, electric lines, telegraph and telephone lines and other similar purposes,
or 

 

79

 

zoning or other similar restrictions as to
the use of real properties or liens incidental to the conduct of the business
of such person or to the ownership of its properties which were not incurred in
connection with debt and which do not individually or in the aggregate materially
adversely affect the value of the property affected thereby or materially
impair the use of such property in the operation of the business of such
person, (B) general real estate taxes and assessments not yet delinquent
or being contested in good faith for which adequate reserves are maintained in
accordance with GAAP; provided that the Borrower shall bond
over or take any other action necessary or required by the Title Company to
delete any exception to title relating to unpaid taxes and assessments, (C) other
liens (not securing Indebtedness) incidental to the conduct of the business of
the Borrower or any of its subsidiaries, as the case may be, or the ownership
of their assets which do not individually or in the aggregate materially
adversely affect the value of the property affected thereby or materially
impair the use of such property in the operation of the business of the
Borrower or its subsidiaries, (D) any warehousemen’s, materialmen’s,
landlord’s or other similar liens arising by law for sums not then due and
payable (or which, if due and payable, are being contested in good faith and
with respect to which adequate reserves are being maintained, to the extent
required by GAAP; provided that
the Borrower shall take any and all commercially reasonable actions necessary
or required by the Title Company to delete any exception to title relating
thereto, (E) leases, subleases, licenses or sublicenses granted to others
in the ordinary course of business so long as such leases, subleases, licenses
or sublicenses are subordinate in all respects to the liens granted and
evidenced by the Security Documents and which do not materially interfere with
the ordinary conduct of the business of the Borrower or any subsidiaries and do
not secure any Indebtedness, (II) Liens of the type described in clauses (a) and
(h) of Section 10.2(A) and (III) such other similar items
as the Security Agents may consent to (such consent not to be unreasonably
withheld), and such Mortgage Policies shall otherwise be in form and substance
reasonably satisfactory to the Security Agents and shall include such title endorsements
as the Security Agents shall reasonably request, to the extent available at
commercially reasonably rates (excluding endorsements or coverage related to
creditor’s rights).

 

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

 

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

 

(vii)                           Flood
Hazard Determination.  A “Life-of-Loan”
Federal Emergency Management Agency Standard Flood Hazard Determination with
respect to each Mortgaged Property (together with a notice about special flood
hazard area status and flood disaster assistance duly executed by the Borrower
and each Credit Party relating thereto and evidence

 

80

 

of flood
insurance in compliance with Section 9.3 of the Credit Agreement, in the
event any such Mortgaged Property is located in a special flood hazard area).

 

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

 

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

 

SECTION 10.                          Negative
Covenants

 

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

 

10.1.                        Limitation on Indebtedness.

 

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

 

(a)                                  Indebtedness
arising under the Credit Documents;

 

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

 

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

 

(d)                                 Guarantee
Obligations incurred by (i) Restricted Subsidiaries which are not
Subsidiary Guarantors in respect of Indebtedness of the Borrower or other
Restricted Subsidiaries that is permitted to be incurred under this Agreement, (ii) the
Borrower or Subsidiary Guarantors in respect of Indebtedness of the Borrower or
Restricted Subsidiaries that are Subsidiary Guarantors that is permitted to be
incurred under this Agreement (including where the Parent is the co-issuer of
such Indebtedness, a guarantee of the obligations of Parent thereunder) and (iii) subject
to compliance with the requirements of Section 10.5, the Borrower or
Subsidiary Guarantors in respect of Indebtedness of Restricted Subsidiaries
that are not Subsidiary Guarantors that is permitted to be incurred 

 

81

 

under this
Agreement, provided that there shall be no Guarantee (a) by a
Restricted Foreign Subsidiary of any Indebtedness of the Borrower or a
Subsidiary Guarantor and (b) in respect of Indebtedness that is
subordinated to the Obligations, unless such Guarantee is made by a Guarantor
and such Guarantee is unsecured and subordinated to the Obligations to the same
extent as the Indebtedness so Guaranteed;

 

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

 

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

 

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

 

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

 

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

 

(j)                                     (i) Indebtedness
of a Person or Indebtedness attaching to assets of a Person that, in either
case, becomes a Restricted Subsidiary or Indebtedness attaching to assets that
are acquired by the Borrower or any Restricted Subsidiary, in each case after
the Effective Date as the result of an Investment permitted by Section 10.5,
provided that (x) such Indebtedness existed at the time such
Person became a Restricted Subsidiary or at the time such assets were acquired
and, in each case, was not created in anticipation thereof and (y) such
Indebtedness is not guaranteed in any respect by the Borrower or any 

 

82

 

Restricted
Subsidiary (other than any such person that so becomes a Restricted Subsidiary)  and (ii) any refinancing, refunding,
renewal or extension of any Indebtedness specified in subclause (i) above,
provided that except to the extent otherwise permitted hereunder, (x) the
principal amount of any such Indebtedness is not increased above the principal
amount thereof outstanding immediately prior to such refinancing, refunding, renewal  or extension and (y) the direct and
contingent obligors with respect to such Indebtednesses are not changed in
respect thereof in an aggregate principal amount outstanding pursuant to this
clause (j) not to exceed $20,000,000 at any time;

 

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

 

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

 

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

 

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

 

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

 

10.2.                        Limitation on Liens.

 

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

 

(a)                                  Liens
arising under the Credit Documents;

 

(b)                                 Permitted
Liens;

 

83

 

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

 

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

 

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

 

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

 

(g)                                 additional
Liens so long as the aggregate principal amount of the obligations so secured
does not exceed $50,000,000 at any time outstanding less the lesser of (x) the
principal amount of Permitted Additional Secured Notes outstanding in reliance
on subclause (e)(y) of the definition thereof and (y) $40,000,000;
and

 

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

 

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

 

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

 

10.3.                        Limitation on Fundamental
Changes.

 

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

 

84

 

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

 

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

 

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

 

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

 

85

 

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

 

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

 

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

 

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

 

86

 

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

 

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

 

(b)                                 the
Borrower and the Restricted Subsidiaries may sell, transfer or otherwise
dispose of other assets (other than accounts receivable) for fair value, provided
that (i) the aggregate amount of such sales, transfers and disposals by the
Borrower and the Restricted Subsidiaries, taken as a whole, pursuant to this
clause (b) shall not exceed in the aggregate $150,000,000, (ii) any
consideration in excess of $5,000,000 received by the Borrower or any Guarantor
in connection with such sales, transfers and other dispositions of assets
pursuant to this clause (b) that is in the form of Indebtedness shall be
pledged to the Administrative Agent pursuant to Section 9.12, (iii) the
consideration received for any such sales, transfers and disposals shall
consist of not less than 75% cash consideration; provided that for the
purposes of this clause (iii) the following shall be deemed to be
cash:  (A) any liabilities (as shown
on the Borrower’s or such Restricted Subsidiary’s most recent balance sheet
provided hereunder or in the footnotes thereto) of the Borrower or such
Restricted Subsidiary assumed by the transferee with respect to the applicable
sale, transfer or disposal, as to which the Borrower and all of the Restricted
Subsidiaries shall have been released by all applicable creditors in writing,
other than liabilities that are by their terms (1) subordinated to the
payment in cash of the Obligations or (2) in the case of a sale by the
Borrower or a Subsidiary Guarantor, not secured by the assets that are the
subject of such sale, transfer or disposal and (B) any securities received
by the Person making such sale, transfer or disposal from the transferee that
are converted by such Person into cash (to the extent of the cash received)
within 180 days following the closing of the applicable sale, transfer or
disposal and (iv) after giving effect to any such sale, transfer or
disposition, no Default shall have occurred and be continuing;

 

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

 

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

 

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

 

87

 

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

 

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

 

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

 

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

 

(b)                                 Permitted
Investments;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

88

 

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

 

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

 

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

 

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

 

10.6.                        Limitation
on Restricted Payments.  None of
Holdings, the Borrower or any Restricted Subsidiary will make any Restricted
Payment, provided that, (a) so long as no Default or Event of
Default exists or would exist after giving effect thereto, Holdings or the Borrower
may redeem in whole or in part any of its capital stock for another class of
capital stock or rights to acquire its capital stock or with proceeds from
substantially concurrent equity contributions or issuances of new shares of its
capital stock (or pay dividends with such proceeds), provided that such
other class of capital stock contains terms and provisions at least as
advantageous to the Lenders in all respects material to their interests as
those contained in the capital stock redeemed thereby, (b) the Borrower
and Holdings may declare and pay dividends and/or make distributions on its capital
stock, as applicable the proceeds of which will be used by Parent or Holdings
solely to pay (i) taxes of Parent, Holdings, the Borrower and the
Subsidiaries as part of a consolidated tax filing group for U.S. federal, state
or local tax purposes in an amount not to exceed the income tax liabilities
that would have been payable by the Borrower and its Restricted Subsidiaries on
a stand-alone basis, reduced by any such income taxes paid or to be paid
directly by Borrower or its Restricted Subsidiaries, and (ii) franchise
taxes, administrative and similar expenses related to Parent’s and Holdings’
existence and ownership of the Borrower, as 

 

89

 

applicable, provided
that the amount of such dividends pursuant to this subclause (ii) does not
exceed in any fiscal year the amount of such taxes and expenses payable for
such fiscal year (it being understood that such expenses shall in no event exceed
$1,000,000 in the aggregate per fiscal year), (c) Holdings, the Borrower
and the Restricted Subsidiaries may make other Restricted Payments; provided
that (A) both immediately before and immediately after giving effect to
such Restricted Payment, no Event of Default shall have occurred and be
continuing, (B) at the time any Restricted Payment is made on a Pro Forma
Basis, (x) the Fixed Charge Coverage Ratio for the most recently ended
Test Period for which Section 9.1 Financials have been delivered shall not
be less than 1.25 to 1.00 and (y) average daily Availability for the
period of sixty (60) consecutive days (or, if less, the number of days from and
including the Effective Date to and including the date of determination)
immediately preceding such Restricted Payment has been and for the period of
six consecutive months immediately following such Restricted Payment is
projected to be not less than the greater of (1) 25% of the Total
Commitment and (2) $25,000,000 and (C) any amount received by
Holdings shall be promptly used by Holdings to make a Restricted Payment and (d) Holdings,
the Borrower and its Restricted Subsidiaries may make Restricted Payments to repurchase
or settle shares of capital stock of Parent (or options, warrants or stock
appreciation rights with respect to such capital stock or any other
equity-based award) in an aggregate amount not to exceed (x) $15,000,000
prior to the Final Date or (y) $5,000,000 in any twelve month period.

 

10.7.                        Limitations
on Debt Payments and Certain Amendments.

 

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

 

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

 

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

 

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

 

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

 

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

 

90

 

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

 

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

 

(H)                               other payments with
respect to Indebtedness; provided that (A) both immediately before
and immediately after giving effect to such payment, no Event of Default shall
have occurred and be continuing and (B) at the time any payment is made on
a Pro Forma Basis, (x) the Fixed Charge Coverage Ratio for the most
recently ended Test Period for which Section 9.1 Financials have been
delivered shall not be less than 1.25 to 1.00 and (y) average daily
Availability for the period of sixty (60) consecutive days (or, if less, the
number of days from and including the Effective Date to and including the date
of determination) immediately preceding such payment has been and for the
period of six consecutive months immediately following such payment is
projected by the Borrower to be not less than the greater of (1) 25% of
the Total Commitment and (2) $25,000,000;

 

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

 

(J)                                   payments or
distributions made with common stock of Parent or warrants or options to
purchase such common stock (including upon conversion of any Indebtedness).

 

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

 

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

 

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

 

For purposes of determining compliance with
this Section 10.9 only, any cash common equity contribution (an “Equity
Cure”) to the Borrower by Holdings after the date on which financial
statements are required to be delivered for a Test Period in accordance with Section
9.1

 

91

 

and on or
prior to the day that is 10 days after such date, shall at the request of the
Borrower, be included in the calculation of Consolidated EBITDA solely for the
purposes of determining compliance with this Section 10.9 for such Test
Period and applicable subsequent Test Periods, provided that (a) in
each four fiscal quarter period, there shall be at least two fiscal quarters in
respect of which no Equity Cure is made and (b) the amount of any such
Equity Cure shall be no greater than the amount required to cause the Borrower
to be in compliance with this Section 10.9.

 

SECTION 11.                                                       Events
of Default

 

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

 

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

 

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

 

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

 

11.4.                        Default
Under Other Agreements.  (a) Any
of Holdings, the Borrower or any of the Restricted Subsidiaries shall (i) default
in any payment with respect to any Indebtedness (other than the Obligations) in
excess of $20,000,000 in the aggregate, for Holdings, the Borrower and such
Subsidiaries, beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created or (ii) default in
the observance or performance of any agreement or condition relating to any
such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, any such Indebtedness to become due
(or to cause Holdings, the Borrower or any of its Restricted Subsidiaries to
purchase any such Indebtedness) prior to its stated maturity; or (b) without
limiting the provisions of clause (a) above, any such Indebtedness shall
be declared 

 

92

 

to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment or as a mandatory prepayment, prior to the stated maturity thereof
or (c) the Forward Purchase Contract is terminated prior to the settlement
date or one or more conditions precedent to the purchase of the Initial PIK
Convertible Notes by Sealy Holding LLC pursuant to the Forward Purchase
Contract has not been satisfied or becomes impossible to satisfy and such condition
or conditions has not been waived by Sealy Holding LLC; or

 

11.5.                        Bankruptcy,
etc.  Holdings, the Borrower or any
Specified Subsidiary shall commence a voluntary case, proceeding or action
concerning itself under (a) Title 11 of the United States Code entitled “Bankruptcy”,
or (b) in the case of any Foreign Subsidiary that is a Specified
Subsidiary, any domestic or foreign law relating to bankruptcy, insolvency
reorganization or relief of debtors legislation of its jurisdiction of
incorporation, in each case as now or hereafter in effect, or any successor
thereto (collectively, the “Bankruptcy Code”); or an involuntary case,
proceeding or action is commenced against any of Holdings, the Borrower or any
Specified Subsidiary and the petition is not controverted within 10 days after
commencement of the case, proceeding or action; or an involuntary case,
proceeding or action is commenced against any of Holdings, the Borrower or any
Specified Subsidiary and the petition is not dismissed within 60 days after
commencement of the case, proceeding or action; or a custodian (as defined in
the Bankruptcy Code) receiver, receiver manager, trustee or similar person is appointed
for, or takes charge of, all or substantially all of the property of any of
Holdings, the Borrower or any Specified Subsidiary; or any of Holdings, the
Borrower or any Specified Subsidiary commences any other proceeding or action
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to any of Holdings, the Borrower or
any Specified Subsidiary; or there is commenced against any of Holdings, the
Borrower, or any Specified Subsidiary any such proceeding or action that
remains undismissed for a period of 60 days; or any of Holdings, the Borrower
or any Specified Subsidiary is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding or action is
entered; or any of Holdings, the Borrower or any Specified Subsidiary suffers
any appointment of any custodian receiver, receiver manager, trustee or the
like for it or any substantial part of its property to continue undischarged or
unstayed for a period of 60 days; or any of Holdings, the Borrower or any
Specified Subsidiary makes a general assignment for the benefit of creditors;
or any corporate action is taken by any of Holdings, the Borrower or any
Specified Subsidiary for the purpose of effecting any of the foregoing; or

 

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

 

93

 

interest, or a
liability, or the reasonable likelihood of incurring a lien, security interest
or liability; and (c) such lien, security interest or liability will or
would be reasonably likely to have a Material Adverse Effect; or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

then, and in any such event,
and at any time thereafter, if any Event of Default shall then be continuing,
the Administrative Agent shall, upon the written request of the Required
Lenders, by written notice to the Borrower, take any or all of the following
actions, without prejudice to the rights of the Administrative Agent or any
Lender to enforce its claims against the Borrower, except as otherwise
specifically provided for in this Agreement (provided that, if an Event
of Default specified in Section 11.5 shall occur with respect to the
Borrower, the result that would occur

 

94

 

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

 

SECTION 12.                                             The
Agents

 

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

 

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

 

12.3.                        Exculpatory
Provisions.  Neither the
Administrative Agent nor any Security Agent, nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall
be (a) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Credit
Document (except for its or such Person’s own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower 

 

95

 

or any
Guarantor or any officer thereof contained in this Agreement or any other
Credit Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent or any
Security Agent under or in connection with, this Agreement or any other Credit
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Credit Document or for any
failure of the Borrower or any Guarantor to perform its obligations hereunder
or thereunder.  Neither the
Administrative Agent nor any Security Agent shall be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Credit Document, or to inspect the properties, books or records of the Borrower.

 

12.4.                        Reliance
by Administrative Agent and Security Agents.  The Administrative Agent and each Security
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including counsel to the Borrower), independent accountants and
other experts selected by the Administrative Agent or such Security Agent, as
the case may be.  The Administrative
Agent and each Security Agent may deem and treat the Lender specified in the
Register with respect to any amount owing hereunder as the owner thereof for
all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative Agent.  Neither the Administrative Agent nor any Security
Agent shall be deemed to have knowledge of any Secured Cash Management Agreement
or Secured Hedge Agreement unless and until it has received written notice
thereof from the applicable Hedge Bank or Cash Management Bank.

 

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

 

12.6.                        Non-Reliance
on Administrative Agent, Security Agents and Other Lenders.  Each Lender expressly acknowledges that
neither the Administrative Agent nor any Security Agent, nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent or any Security Agent hereinafter taken, including any
review of the affairs of the Borrower or any Guarantor, shall be deemed to constitute
any representation or warranty by the Administrative Agent or any Security
Agent to any Lender.  Each Lender
represents to the Administrative Agent and each Security Agent that it has,
independently and without reliance upon the Administrative Agent, any Security
Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Credit Parties and made its own decision to make its
Loans hereunder and enter into this Agreement. 
Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent, any Security Agent or any other Lender,
and based on such documents and 

 

96

 

information as
it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Credit Documents, and to make such investigation as it
deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Credit Parties.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent and the Security
Agents shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, assets, operations,
properties, financial condition, prospects or creditworthiness of the Credit
Parties that may come into the possession of the Administrative Agent or any
Security Agent or any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates.

 

12.7.                        Indemnification.  The Lenders agree to indemnify the
Administrative Agent and the Security Agents, each in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation
of the Borrower to do so), ratably according to their Applicable Percentage in
effect on the date on which indemnification is sought (or, if indemnification
is sought after the date upon which the Commitments shall have terminated and
the Total Credit Exposure shall have been paid in full, ratably in accordance
with their respective portions of the Total Credit Exposure in effect
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever that may at any time
(including at any time following the payment of the Loans) be imposed on,
incurred by or asserted against the Administrative Agent or any Security Agent
in any way relating to or arising out of, the Commitments, this Agreement, any
of the other Credit Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Administrative Agent or any Security Agent under
or in connection with any of the foregoing, provided that no Lender
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent’s or such Security Agent’s,
as the case may be, gross negligence or willful misconduct.  The agreements in this Section 12.7
shall survive the payment of the Loans and all other amounts payable hereunder.

 

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

 

12.9.                        Successor
Agent.  The Administrative or any
Security Agent may resign as Administrative Agent or Security Agent, as the
case may be, upon 20 days’ prior written notice to the Lenders and the
Borrower.  If the Administrative Agent or
any Security Agent shall resign as Administrative Agent or Security Agent, as
the case may be, under this Agreement and 

 

97

 

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

 

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

 

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

 

98

 

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

 

SECTION 13.                                             [Reserved]

 

SECTION 14.                                             Miscellaneous

 

14.1.                        Amendments
and Waivers.

 

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

 

99

 

Lender, or (vi) increase the advance
rates set forth in the definition of Borrowing Base or add new categories of
eligible assets, without the written consent of both of the Security Agents and
the Required Supermajority Lenders, or (vii) release all or substantially
all of the Guarantors under the Guarantee (except as expressly permitted by the
Guarantee) or, except as permitted in Section 14.1(b), release all or
substantially all of the Collateral under the Pledge Agreement, the Security
Agreement and the Mortgages, in each case without the prior written consent of
each Lender, or (viii) amend Section 2.9 so as to permit Interest
Period intervals greater than six months without regard to the consent of each
Lender, without the written consent of each Lender directly and adversely
affected thereby, or (ix) amend, modify or waive the application of proceeds
provisions of Section 2.5(b), Section 5.2(a) or Section 5.3(c),
without the written consent of each Lender directly and adversely affected
thereby, or (x) decrease the amount or allocation of any optional or
mandatory prepayment to be received by any Lender holding any Loans without the
written consent of such Lender, or (xi) waive any condition set forth in Section 6
without the written consent of each Initial Lender.  Any such waiver and any such amendment, supplement
or modification shall apply equally to each of the affected Lenders and shall
be binding upon the Borrower, such Lenders, the Administrative Agent, the Collateral
Agent and all future holders of the affected Loans.  In the case of any waiver, the Borrower, the
Lenders, the Collateral Agent and the Administrative Agent shall be restored to
their former positions and rights hereunder and under the other Credit Documents,
and any Default waived shall be deemed to be cured and not continuing, it being
understood that no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon.

 

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

 

14.2.                        Notices. 
All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy 

 

100

 

notice, when
received, addressed as follows in the case of the Borrower and the Administrative
Agent, and in the case of the other parties hereto to such other address as may
be hereafter notified by the respective parties hereto:

 

	
  The Borrower:

  	
  Sealy
  Mattress Company

  
	
   

  	
  One Office
  Parkway

  
	
   

  	
  Trinity, NC
  27370

  
	
   

  	
  Attention:
  Kenneth L. Walker

  
	
   

  	
  Fax:
  336-861-3786

  
	
   

  	
   

  
	
   

  	
  with a copy
  to

  
	
   

  	
   

  
	
   

  	
  Kohlberg
  Kravis Roberts & Co., L.P.

  
	
   

  	
  9 West 57th
  Street

  
	
   

  	
  Suite 4200

  
	
   

  	
  New York, NY
  10019

  
	
   

  	
  Attention:
  Brian Carroll

  
	
   

  	
  Fax:
  212-750-0003

  
	
   

  	
   

  
	
  The
  Administrative Agent or

  	
   

  
	
  Collateral
  Agent:

  	
  JPMorgan
  Chase Bank, N.A.

  
	
   

  	
  1111 Fannin
  St., Floor 10

  
	
   

  	
  Houston, TX
  77002

  
	
   

  	
  Attention:
  Siraz Maknojia

  
	
   

  	
  Fax: (713)
  750-2782

  
	
   

  	
   

  
	
   

  	
  with a copy
  to

  
	
   

  	
   

  
	
   

  	
  JPMorgan
  Chase Bank, N.A.,

  
	
   

  	
  270 Park
  Avenue, Floor 4

  
	
   

  	
  New York,
  New York 10017

  
	
   

  	
  Attention:
  Tony Yung

  
	
   

  	
  Fax: (212)
  270-6637

  
	
   

  	
   

  
	
  The Co-Collateral Agent

  	
  General
  Electric Capital Corporation

  
	
   

  	
  299 Park
  Avenue

  
	
   

  	
  New York,
  New York 10171

  
	
   

  	
  Attention:
  Sealy Account Manager

  
	
   

  	
  Fax: (646)
  428-7094

  
	
   

  	
   

  
	
   

  	
  with a copy
  to:

  
	
   

  	
   

  
	
   

  	
  General
  Electric Capital Corporation

  
	
   

  	
  299 Park
  Avenue

  
	
   

  	
  New York,
  New York 10171

  
	
   

  	
  Attention:
  Counsel GE Global Sponsor Finance

  
	
   

  	
  Fax:
  646-428-7295

  

 

101

 

	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Winston &
  Strawn LLP

  
	
   

  	
  200 Park
  Avenue

  
	
   

  	
  New York,
  New York 10166

  
	
   

  	
  Attention:
  William D. Brewer

  
	
   

  	
  Fax:
  212-294-4700

  

 

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

 

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

 

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

 

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

 

102

 

officers,
employees, trustees, agents, attorneys-in-fact from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever,
including reasonable and documented fees, disbursements and other charges of
counsel, with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Credit Documents and any such other
documents, including any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law or any actual or alleged
presence of Hazardous Materials applicable to the operations of the Borrower,
any of its Subsidiaries or any of the Real Estate (all the foregoing in this
clause (d), collectively, the “indemnified liabilities”), provided
that the Borrower shall have no obligation hereunder to the Administrative
Agent, any Security Agent or any Lender nor any of their respective directors,
officers, employees and agents with respect to indemnified liabilities arising
from (i) the gross negligence or willful misconduct of the party to be
indemnified, (ii) a material breach of any Credit Document by the party to
be indemnified or (iii) disputes solely among Lenders (in their capacities
as such) and not involving any conduct of any Credit Party.  The agreements in this Section 14.5
shall survive repayment of the Loans and all other amounts payable
hereunder.  Expenses being reimbursed by
the Borrower under this Section include, without limiting the generality
of the foregoing, but in each case subject to the limitations of the foregoing,
reasonable out-of-pocket costs and expenses incurred in connection with:

 

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

 

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

 

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

 

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

 

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

 

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

 

14.6.                        Successors
and Assigns; Participations and Assignments.

 

(a)                                  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted hereby
(including any Affiliate of the Letter of Credit Issuer that issues any Letter
of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without 

 

103

 

the prior written consent of each Lender (and
any attempted assignment or transfer by the Borrower without such consent shall
be null and void) and (ii) no Lender may assign or otherwise transfer its
rights or obligations hereunder except in accordance with this Section.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including any
Affiliate of the Letter of Credit Issuer that issues any Letter of Credit),
Participants (to the extent provided in paragraph (c) of this Section)
and, to the extent expressly contemplated hereby, the Related Parties of each
of the Administrative Agent, the Letter of Credit Issuer and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

104

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

105

 

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

 

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

 

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

 

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

 

106

 

Register shall be available for inspection by
the Administrative Agent at any reasonable time and from time to time upon
reasonable prior notice.

 

(d)                                 Any
Lender may, without the consent of the Borrower or the Administrative Agent, at
any time pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section
shall not apply to any such pledge or assignment of a security interest, provided
that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or assignee
for such Lender as a party hereto.  In
order to facilitate such pledge or assignment, the Borrower hereby agrees that,
upon request of any Lender at any time and from time to time after the Borrower
has made its initial Borrowing hereunder, the Borrower shall provide to such
Lender, at the Borrower’s own expense, a promissory note, in form reasonably
satisfactory to each Initial Lender, as the case may be, evidencing the
Revolving Credit Loans and Swingline Loans, respectively, owing to such Lender.

 

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

 

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

 

107

 

14.8.                        Adjustments;
Set-off.

 

(a)                                  Except
as otherwise provided herein, if any Lender (a “benefited Lender”) shall
at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 11.5, or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender’s Loans, or interest thereon, such benefited Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender’s Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefited Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.

 

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

 

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

 

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

 

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

 

108

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14.14.                  Acknowledgments.  The Borrower hereby acknowledges that:

 

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

 

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

 

109

 

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

 

14.15.                  WAIVERS OF JURY TRIAL.  THE BORROWER, THE ADMINISTRATIVE AGENT, THE
COLLATERAL AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

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

 

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

 

[Signature Pages Follow]

 

110

 

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

 

 

	
   

  	
  SEALY MATTRESS COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/ Kenneth L. Walker

  
	
   

  	
   

  	
  Name:

  	
  Kenneth L. Walker

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
  General Counsel &
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SEALY MATTRESS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kenneth L. Walker

  
	
   

  	
   

  	
  Name:

  	
  Kenneth L. Walker

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
  General Counsel &
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SEALY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kenneth L. Walker

  
	
   

  	
   

  	
  Name:

  	
  Kenneth L. Walker

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
  General Counsel &
  Secretary

  

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  as Administrative Agent, Collateral Agent,

  
	
   

  	
  Letter of Credit Issuer and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Tony Yung

  
	
   

  	
   

  	
  Name:

  	
  Tony Yung

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  GENERAL ELECTRIC CAPITAL CORPORATION

  
	
   

  	
  as Co-Collateral Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Philip F. Carfora

  
	
   

  	
   

  	
  Name:

  	
  Philip F. Carfora

  
	
   

  	
   

  	
  Title:

  	
  Duly Authorized Signatory

  

 

 

	
   

  	
  CITICORP NORTH AMERICA, INC.

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Thomas M. Halsch

  
	
   

  	
   

  	
  Name:

  	
  Thomas M. Halsch

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  MIZUHO CORPORATE BANK, LTD.

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ William Getz

  
	
   

  	
   

  	
  Name:

  	
  William Getz

  
	
   

  	
   

  	
  Title:

  	
  Deputy General Managerexh10_1.htm

     

    Exhibit
10.1

     

    
      [LEXICON
PHARMACEUTICALS LETTERHEAD]

      

      May 4,
2009

       

      

      Personal
and Confidential

      Mr. Ajay
Bansal

      [Address]

      

      Dear
Ajay:

      

      The
management and board of directors of Lexicon believe you have the personal and
professional attributes required to make a significant contribution to the
future of medicine as a member of our team.   Therefore, I am
pleased to offer you the position of executive vice president,
corporate development and chief financial officer to support Lexicon in
fulfilling its mission: to discover and develop breakthrough treatments for
human disease.

       

      In this
position, you will be responsible for leading Lexicon’s finance and corporate
development efforts. You will be an executive officer reporting to the president
and chief executive officer, and will serve as a member of Lexicon’s executive
management committee.  Your place of employment will be at Lexicon’s
headquarters in The Woodlands, Texas.

       

      The terms
under which we are offering you this position are outlined below:

       

      Base
Salary

       

      You will
receive a monthly base salary of $28,333.33 ($340,000 per year), paid in
accordance with our standard payroll policies.  We currently pay
salaried employees on the 15th and
last day of each month.

       

      Bonus Arrangements

       

      You will
be eligible for an annual bonus with a bonus target (i.e., the amount payable if
all objectives are fully achieved) of 35% of your annual base
salary.  The actual amount of your bonus will be determined by the
compensation committee of the board of directors in consultation with the
president and chief executive officer, based upon achievement of individual and
corporate objectives established at the beginning of each year.  As is
the case with all Lexicon officers, decisions regarding the payment of bonuses
are subject to the discretion of the compensation committee of the board of
directors.

       

      We expect
typically to make bonus determinations following the end of the calendar year to
which the bonus relates, and to pay bonuses, if any, shortly after such
determinations are made.

       

      Stock
Options

       

      Subject
to the approval by the compensation committee of the board of directors, you
will receive options under our equity incentive plan giving you the right to
purchase 250,000 shares of Lexicon’s common stock at an exercise price equal to
the fair market value of the common stock (as fair market value is defined in
the plan) on the date you commence employment with the company.  The
options will vest and become exercisable with respect to (1) 25% of the shares
subject to the option on the first anniversary of your employment with the
company and (2) 1/48th of the
shares subject to the option each month thereafter. The options will have a
ten-year term and will be subject to the terms and conditions of the plan and
our standard form of stock option agreement for company officers, which you will
receive when the options are granted.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Benefits

       

      You will
be eligible to participate in the employee benefit plans we make available to
our employees generally, which currently include health, dental, vision, life
and disability insurance, as well as a 401(k) retirement plan.  We
currently make matching contributions under our 401(k) plan in an amount equal
to 50% of an employee’s contributions up to five percent of
salary.  We will provide you with life insurance coverage under our
group term policy that provides for a death benefit of two times your annual
salary.

       

      Paid
Time Off

       

      You will
be entitled to four weeks paid time off under our employee paid time off
policy.

       

      Severance

       

      In the
event your employment is terminated without “cause” by the company, you will be
entitled to receive, and the company shall be obligated to pay, salary
continuation payments (pursuant to the company’s normal payroll procedures) in
an amount equal to your then-current base salary for a period of 12 months
following such termination.  For purposes of the foregoing,
termination for “cause” shall mean termination of employment directly resulting
from (1) intentional misconduct causing a material violation by the company of
any state or federal laws, (2) a theft of corporate funds or corporate assets or
in a material act of fraud upon the company, (3) an act of personal
dishonesty that was intended to result in personal enrichment at the expense of
the company, (4) conviction of a felony; and

       

      Subject
to the payment obligations of the company, if any, under the preceding paragraph
of this letter, this letter does not create any term of employment, and both you
and the company will be free to terminate your employment at any time for any
reason.

       

      Start
Date

       

      We expect
that you will begin work on or about June 1, 2009, or at an earlier date to be
mutually agreed upon.

       

      Relocation
Assistance

       

      Lexicon
will provide you with a total of $75,000 to assist you in your relocation to The
Woodlands, payable promptly following your start date.  This amount
will include the company’s payment or reimbursement of your moving expenses that
may be excluded from your taxable income, with the balance, less applicable
taxes, to be used at your discretion.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      In
addition to the foregoing amounts, Lexicon will pay the expenses of two trips of
reasonable duration for you and your family to locate suitable housing in The
Woodlands.

       

      Preexisting
Business and Personal Obligations

       

      We
understand that you have an existing consulting obligation that may require you
to take a brief unpaid leave in order to make a trip in June 2009, completing
this consultancy and all associated work within the quarter.  Subject
to this exception due to a preexisting obligation, you will be subject to the
same policy that applies to all Lexicon officers which requires pre-approval for
any arrangement involving service on the board of directors (or similar
governing body) of, or as a consultant to, any third party
business.

       

      We also
understand that you expect to take approximately one week of unpaid leave in
connection with a family trip in July 2009 that is not expected to overlap with
Lexicon’s board of directors’ meeting scheduled for July 22 and 23,
2009.

       

      Proprietary
Information Agreement

       

      We
consider the protection of our confidential information and proprietary rights
to be very important.  As a result, our offer of employment is
conditioned upon your signing our standard form of Employee Proprietary
Information Agreement.

       

      If you
have any questions regarding this offer or our employee benefits plans, please
contact Steven A. Tragash, vice president of corporate affairs, at (281)
863-3787. If you find this offer to be acceptable, please indicate your
acceptance by signing and returning one of the two copies of this letter on or
before May 15, 2009.

       

      We
believe that this offer represents an excellent opportunity, and that you have
the experience, intellect, drive, engaging personality, appreciation for team
play and demonstrated effectiveness which make you a “natural” to join Lexicon
on its profound mission. Ajay, I believe you will enjoy you working with us and
that you will thrive at Lexicon. I hope you sense the same.

       

      
        	 
      	
                Sincerely,

              
	 
      	 
      
	 
      	
                /s/
      Arthur T. Sands

              
	 
      	 
      
	 
      	
                Arthur
      T. Sands, M.D., Ph.D.

                President
      and Chief Executive Officer

              

      

      

      
        
          
            	
                    Accepted
      and agreed:

                  
	 
      
	
                    /s/
      Ajay Bansal

                  
	
                    Ajay
      Bansal

                  
	 
      
	
                    Date:  May
      5, 2009

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}]]