Document:

EXHIBIT 10.21

 

[Execution Copy]

 

STATE
OF  LOUISIANA

 

PARISH
OF CALCASIEU

 

STOCK PURCHASE AGREEMENT

 

BE IT KNOWN, that before the undersigned Notaries Public
in the States of Louisiana and Florida and in the presence of the undersigned
competent witnesses, personally came and appeared:

 

ROGER L. MILLER and YVONNE
LEGER MILLER, husband and wife, residents of the State of Louisiana
(collectively, “MILLER”), domiciled in the Parish of Calcasieu and whose
mailing address is declared to be 6128 White Oak Drive, Lake Charles, Louisiana
70615;

 

ROBERT E. CHRISTMAN and
LOUISE C. CHRISTMAN, husband and wife, residents of the State of Louisiana
(collectively, “CHRISTMAN”), domiciled in the Parish of Calcasieu and whose
mailing address is declared to be 809 Henrietta Lane, Lake Charles, Louisiana
70605;

 

(MILLER and CHRISTMAN are
sometimes referred to collectively as  “Sellers”
and each is sometimes individually referred to as a “Seller”); and

 

JALOU II, INC.,  a Louisiana corporation (“Purchaser”),
domiciled and having a place of business in the Parish of St. Martin, State of
Louisiana and whose mailing address is declared to be 1869 Mills Highway,
Breaux Bridge, Louisiana 70517, herein represented by its duly authorized agent
Jeffrey P. Jacobs,

 

each of whom did execute this Agreement on
December 12, 2005 (the “Agreement Date”).

 

WITNESSETH:

 

WHEREAS, the Purchaser
desires to acquire all of the issued and outstanding shares of stock of Fuel
Stop 36, Inc., a Louisiana corporation (“Company”); 

 

WHEREAS, the Company owns the assets and operations of a
truck stop located at 108 N. Highway 397, Lake Charles, Calcasieu, Louisiana
70616 (the “Truck Stop”);

 

WHEREAS, the Truck Stop provides, inter alia,
retail motor and diesel fuels, convenience store and restaurant operations for
sale to or use by the general public as well as video draw poker devices for
play by the general public; 

 

WHEREAS, the Tract B-2 Sellers own the Tract B-2 (as
hereinafter defined);

 

1

 

WHEREAS, Sellers own all of the
issued and outstanding shares of the Company’s stock and are willing to sell
those shares to Purchaser on the terms and conditions set forth herein; and

 

WHEREAS, the Tract B-2
Sellers are willing to sell Tract B-2 to the Purchaser for the Tract B-2 Purchase Price.

 

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

 

ARTICLE
I

 

DEFINITIONS

 

1.1           “Agreement”
shall mean this Stock Purchase Agreement.

 

1.2            “Affiliate” of
any particular Person means any other Person directly or indirectly
controlling, controlled by or under common control with such particular
Person.  The term “control”
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of
securities, by contract or otherwise.

 

1.3           “Acquired Assets”
shall mean all assets, real property, privileges, rights, intellectual property
licenses, interests and claims (whether personal, tangible or intangible) of
every type and description owned by any Seller or the Company and used in the
operation of the Truck Stop, other than the Excluded Assets.  Acquired Assets specifically includes those
items listed on Schedule 1.3.

 

1.4           “Adverse Effects of
Hurricane Rita” shall mean those items listed on Schedule 1.4
as having been “repaired” or “unrepaired” as of the Closing Date.  Purchaser shall have the right to apply any
insurance proceeds received after the Closing, as a result of any claims made
prior to the Closing, first against the reasonable costs to repair of those
items on Schedule 1.4 listed as “unrepaired” and then shall disburse any
remaining balance to the Sellers for those items listed as “repaired”.

 

1.5           “Business Day”
shall mean a day other than a Saturday, Sunday or other day on which the banks
in the State of Louisiana are not required or authorized to close. 

 

1.6           “Capitalized Lease”
means a lease under which the obligations of the lessee should, in accordance
with generally accepted accounting principles consistently applied, be included
in determining total liabilities as shown on the liability side of a balance
sheet of the lessee.

 

1.7           “Closing” shall
mean the consummation of the transactions contemplated in this Agreement.  

 

1.8           “Closing Date”
shall mean the date on which the Closing occurs.

 

2

 

1.9           “Code” means the
Internal Revenue Code of 1986, as amended, and any reference to any particular Code section shall be
interpreted to include any revision of or successor to that section regardless
of how numbered or classified.

 

1.10         “Company” shall
mean Fuel Stop 36, Inc., a Louisiana corporation with its principal place of
business established at 108 N. Highway 397, Lake Charles, Calcasieu, Louisiana
70616 and owned by Sellers. 

 

1.11         “Deposit” shall
mean the sum of One Hundred Thousand and 00/100 Dollars ($100,000.00).

 

1.12         “Devices” shall
mean “Video Draw Poker Devices” as defined in the Video Draw Poker Devices
Control Law, Louisiana Revised Statutes, Title 27:301 et seq., as amended from
time to time.

 

1.13         “Easement” shall
mean that certain easement in form and substance substantially similar to the
easement attached hereto as Exhibit A.

 

1.14         “Environmental and Safety
Requirements” means all federal, State, parish and local statutes,
regulations, rules, ordinances and similar provisions having the force or
effect of law, all licenses, permits, authorizations, approvals, covenants or
criteria having the force or effect of law, all guidelines having the force or
effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law and equitable doctrines (including,
without limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability), in each case concerning public health
and safety, worker health and safety and pollution or protection of the
environment (including, without limitation, all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation), each as amended and
as now or hereafter in effect (or any successor legislation thereto).

 

1.15         “Escrow Holdback”
shall equal the sum of Seventy-Five Thousand Dollars ($75,000).

 

1.16         “Establishment
License” shall mean a Type V license to operate Devices at a
qualified truck stop facility as defined in the Video Draw Poker Devices
Control Law, Louisiana Revised Statutes, Title 27:301 et seq., and in Chapter
42 of the Louisiana Administrative Code, both as amended from time to time, for
the Premises.

 

1.17         “Excluded Assets”
shall mean those assets of the Company which are reserved unto Sellers, that
shall not be conveyed to Purchaser at the Closing, which are more fully
described in Schedule 1.17.

 

3

 

1.18         “Excluded Liabilities”
shall mean those liabilities of the Company which shall be assigned and
transferred on or before the Closing to the Sellers, which shall not be
liabilities or obligations of the Company nor conveyed to Purchaser upon the Closing,
which are more fully described in Schedule 1.18.

 

1.19         “Indebtedness”
means at a particular time, without duplication, (i) any indebtedness for
borrowed money or issued in substitution for or exchange of indebtedness for
borrowed money, (ii) any indebtedness evidenced by any note, bond,
debenture or other debt instrument, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business which are not more than 30 days past due, (iv) any commitment by
which a Person insures a creditor against loss (including, without limitation,
contingent reimbursement obligations with respect to letters of credit),
(v) any obligations for which a Person is obligated pursuant to a
guarantee, (vi) any obligations under Capitalized Leases with respect to
which a Person is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or with respect to which obligations a Person assures a creditor
against loss, (vii) any indebtedness secured by a Lien on a Person’s
assets and (viii) net obligations under hedging arrangements (including
without limitation derivatives) designed to protect a Person against
fluctuations in interest rates, currency exchange rates, commodity prices or
other financial transactions.

 

1.20         “Investment” as applied to any
Person means (i) any direct or indirect ownership, purchase or other acquisition by such Person of
any notes, obligations, instruments, stock, securities or ownership interests
(including partnership interests, membership interests and joint venture
interests) of any other Person and (ii) any capital contribution by such Person
to any other Person.

 

1.21         “Knowledge” or
any derivation thereof, shall mean, knowledge of a condition or set of facts as
has been obtained from any source, including, regardless of any common law or
statutory definition of the foregoing, information which would cause a
reasonable person to inquire further.  As
to any entity, “knowledge” shall include the knowledge of each officer, owner,
director or manager thereof. 

 

1.22         “Lien” means any
mortgage, deed of trust, pledge, security interest, encumbrance, lien, charge
or other restriction of any kind whatsoever (including any conditional sale or
other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any filing of or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute other than to reflect ownership by a third party of property
leased to the Company or any Seller for use in the Truck Stop under a lease
which is not in the nature of a conditional sale or title retention agreement. 

 

1.23         “Listed Devices”
shall mean those Devices listed on Schedule 1.23.

 

4

 

1.24         “Person” shall
mean an individual, partnership, limited liability company, corporation, trust
or unincorporated organization and a government or agency or political
subdivision thereof.

 

1.25         “Purchase Price”
shall mean a sum equal to FIVE MILLION SIX HUNDRED THOUSAND AND NO/100
($5,600,000.00) DOLLARS.

 

1.26         “Required Inventory Levels”
shall mean that at the Closing there shall exist at the Truck Stop sufficient
inventories of fuel, food and convenience store-type items as are appropriate
for the nature and scope of the Company’s operations; provided, however, in no event, shall the
amount of the Company’s inventory for any item of inventory, including, but not
limited to fuel, food or convenience items, be less than the average amount of
inventory for that item at any time during the preceding twelve (12) month
period.

 

1.27          “Schedules”
shall mean the Schedules attached to and referred to in this Agreement, each of
which is incorporated herein as if fully rewritten herein.

 

1.28         “Securities Act”
shall mean the Securities Acts of 1933 and 1934, as amended, or any similar
federal law then in force.

 

1.29         “Shares” shall
mean the one hundred (100) issued and outstanding shares of the Company’s
common stock which are all of the outstanding and issued common stock of the
Company. 

 

1.30         “State” shall
mean the State of Louisiana.

 

1.31         “Tax” or “Taxes” means any federal, state, county, parish, local,
foreign or other income, gross receipts, ad valorem, franchise, profits, sales
or use, transfer, registration, excise, utility, gaming, environmental,
communications, real or personal property, capital stock, membership interest,
license, payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated and
other taxes or fees of any kind whatsoever (including deficiencies, penalties,
additions to tax or fees, and interest attributable thereto) whether disputed
or not.

 

1.32         “Tax Return”
means any return, information report or filing with respect to Taxes, including
any schedules attached thereto and any amendment thereof.

 

1.33         “Title Company”
shall mean Lawyers Title Insurance Corporation of Baton Rouge, Louisiana. 

 

1.34         “Tract A” shall
mean that tract of land identified as “Tract A” on that certain ALTA Survey
prepared by C. Mistric Surveyors, Inc., dated                   ,
a copy of which is included herein as part of Exhibit B.

 

5

 

1.35         “Tract B-2”
shall mean that tract of land identified as “Tract B-2” on that certain ALTA
Survey prepared by C. Mistric Surveyors, Inc., dated                              ,
a copy of which is included herein as part of Exhibit B.

 

1.36         “Tract B-2 Purchase Price”
shall mean the sum of Three Hundred Thousand and no/100 Dollars ($300,000.00).

 

1.37         “Tract B-2 Sellers”
shall mean Christman.

 

ARTICLE
II

 

PURCHASE AND SALE OF SHARES

AND CERTAIN COVENANTS

 

2.1           Sale of Shares. 
Subject to the terms and conditions set forth in this Agreement, on the
Closing Date for the Purchase Price, Sellers shall sell, assign, transfer and
deliver to Purchaser, and Purchaser shall purchase and acquire from Sellers,
free and clear of all Liens and encumbrances whatsoever, the Shares.  The purchase of the Shares specifically
includes the purchase of the Company’s goodwill.

 

2.2           Consideration for Obligation Not To Do. 
The parties agree that One Hundred Thousand Dollars ($100,000) of the
Purchase Price represents the monetary consideration paid to Christman and
Miller for the “Obligation Not to do” as contained below.  The parties acknowledge and agree that this
allocation is a reasonable allocation given the individuals’ relative abilities
and experience in the gaming industry.

 

2.3           Sale of Tract B-2. 
Concurrently with the sale of the Shares, the Tract B-2 Sellers shall
sell, by execution and delivery of the Act of Cash Sale attached hereto as Exhibit
C,  the Tract B-2 to the Purchaser
for the Tract B-2 Purchase Price, free and clear of all Liens and encumbrances
except those listed on Schedule 2.2.

 

2.4           Closing.  The Closing
of the sale of the Shares and the Tract B-2 shall take place on December 16,
2005 and the parties shall meet on December 15, 2005 to execute any and all
necessary documents to be effective on December 16, 2005.  The Closing shall take place at the offices
of: (a) Joseph A. Delafield (“Delafield”), A Professional Corporation, in Lake
Charles, Louisiana, or (b) the Title Company or such other location to which
Sellers and Purchaser mutually agree.

 

2.5           Taxes.  Sellers shall
be personally responsible for paying, and if necessary shall reimburse the
Company for, all Taxes attributable to the Company’s operations and ownership
for all periods on or prior to the Closing Date, including but not limited to,
penalties and interest, that are unpaid as of the Closing.  Purchaser shall be solely responsible for all
Taxes accruing or related to the operations and ownership of the Company after
the Closing Date.

 

2.6           Accounts Receivable. 
Sellers shall retain all of the Company’s accounts receivable
outstanding and/or accrued as of the Closing Date (“Pre-Closing Accounts
Receivables”).

 

6

 

Sellers shall have no interest in nor right to any of
the Company’s accounts receivables that accrue or arise after the Closing
Date.  The Pre-Closing Accounts
Receivables are Excluded Assets and shall not pass with the sale of the
Shares.  The Seller’s shall also retain
the right, after the Closing Date, to collect any of the Pre-Closing Accounts
Receivables.

 

2.7           Trade Payables. 
Purchaser shall be responsible for the Company’s trade payables incurred
in the ordinary course of business following 7:00 a.m., on the Closing
Date.  Sellers shall be responsible for
the Company’s trade payables incurred in the ordinary course of business prior
to 7:00 a.m., on the Closing Date even if invoices related thereto are not
received until after the Closing Date.

 

2.8           Distribution of Certain Assets. 
Effective immediately prior to the Closing, Sellers may cause the
Company to distribute to them “as is, where is” all of the Excluded
Assets.  Sellers shall have a reasonable
amount of time after the Closing to physically remove such of the Excluded
Assets that remain on the Company’s premises; provided, however, Sellers shall
cause such removal only with advance notice to the Purchaser and in such a
manner so as to minimize the disruption to the Company’s operations.  Sellers shall be responsible for all risk of
damage to, or loss of, any Excluded Assets both before and after their removal
from the Company’s premises and any damage to the Company’s assets or
operations arising form such move. 
Sellers shall be responsible for all Taxes incurred by the Company
resulting from the distribution of the Excluded Assets.  If, after the Closing, the Company is
required to pay any Taxes related to the distribution of the Excluded Assets,
Sellers shall promptly reimburse the Company for the same.

 

2.9           Checking Accounts. 
On or prior to the Closing Date, Sellers shall remove all funds from the
Company’s operating account, save and except for $100,000.00 which shall remain
therein following sale of the Shares.

 

2.10         Due Diligence. 
Purchaser shall have the right from and after the Agreement Date through
the Closing Date to conduct such inspections, test, surveys, reviews, audits,
including soil borings and like tests, of all of the Company’s assets and
operations and so much of the Sellers’ assets and records as shall relate to
the Company’s operations as the Purchaser, in its sole discretion, shall deem
necessary.  Purchaser shall be solely
responsible for the costs of all such due diligence and shall hold the Company
and the Sellers harmless from any costs, fees or damages they may suffer as a
result of Purchaser’s due diligence hereunder, excluding the discovery of any
pre-existing conditions.

 

2.11         Deposit.  Within ten (10) days following the Agreement
Date, the Purchaser shall deliver the Deposit to the Title Company.  The Deposit shall be applied as a credit
toward the Purchase Price by the Title Company at the Closing.  The Deposit shall be non-refundable to the
Purchaser, except if the transactions contemplated by this Agreement fail to
close as a result of a default by the Sellers. 
Should the Purchaser fail to close under this Agreement for any reason
other than a default by the Sellers, the Deposit shall be forfeited by the
Purchaser to the Sellers as the full and final measure of their liquidated
damages hereunder, and not as a penalty, and thereafter this Agreement shall be
null and void and of no further force and effect.

 

7

 

2.12         Purchaser’s
Right of Termination. Notwithstanding anything contained in this
Agreement to the
contrary and in addition to any other rights of termination of the Purchaser
under this Agreement, if at any time prior to the Closing, any of the studies,
inspections, audits, reviews or other activities performed pursuant to Section
2.9, or any other information (including information related to any Permits or
the Purchaser’s financing o f the transactions contemplated herein), however
gathered or obtained, shall reveal information or conditions unacceptable to
the Purchaser, in its sole discretion, then Purchaser shall have the option to
terminate this Agreement.  Upon receipt
of such notice, this Agreement shall terminate and thereafter be null and void
and of no further force and effect.

 

ARTICLE
III

 

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

Sellers, jointly and
severally, represent and warrant to Purchaser that:

 

3.1           Corporate Organization and Capitalization.

 

(a)           The Company is duly formed, validly
existing and in good standing under the laws of the State of Louisiana and is
qualified to do business in every jurisdiction in which its ownership of
property or the conduct of business requires it to qualify.  The Company possesses all requisite power and
authority, and all licenses, permits and authorizations necessary, to own and
operate its properties, to carry on its businesses as now conducted and to
carry out the transactions contemplated by this Agreement.  The Company is not in violation of any of the
provisions of its Articles of Incorporation or By-Laws.

 

(b)           The Company owns one hundred percent
(100%) of all right, title and interest to the Acquired Assets, excepting only
Tract B-2, with full, unencumbered power and authority to convey the same.  The Acquired Assets are all of the assets
used in or necessary for the operation of the Company and the Truck Stop and
all of the Truck Stop’s operations are own one hundred percent (100%) by the
Company.  

 

(c)           The Shares constitute one hundred percent
(100%) of the issued and outstanding common stock of the Company.  The Sellers collectively own one hundred
percent (100%) of the Shares free and clear of any Liens or Indebtedness.  As of the Closing, neither the Company nor
any Seller shall have any contractual obligations involving any profit
participation features, nor shall it or they have outstanding any rights or
options to subscribe for or to purchase any Shares or any securities or
Investments convertible into or exchangeable for Shares.  As of the Closing, the Company shall not be
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any Shares.  The
Company has only one class of common stock. 
Other than the Shares, there are no other Investments in the Company. 

 

(d)           Each Seller is now and will be the sole,
full legal and beneficial owner of the Shares, as set forth on Schedule
3.1(d), with full and absolute right and power to sell, assign and transfer
the same.  After giving effect to the
consummation of the transactions contemplated by

 

8

 

this Agreement, the Purchaser will own the Shares
formerly owned by each Seller free and clear of any Lien or Indebtedness and
the Purchaser will own one hundred percent (100%) of the any Investment in the
Company.

 

(e)           There are no statutory or contractual
preemptive rights or rights of first refusal with respect to the transfer of
the Shares hereunder.  Neither the
Company nor any of the Sellers has violated any applicable federal or state
securities laws in connection with the offer or sale of any Shares hereunder.
The offer and sale of the Shares hereunder does not require registration under
the Securities Act or applicable State or local securities or other laws.

 

(f)            There are no individuals who have any
spousal or dower rights in any of the Shares or the Acquired Assets, under any
federal, State or local law, including, but not limited to, Louisiana Civil
Code Article 2531, who are not parties hereto.

 

(g)           The Company has no Affiliates and no
Seller has any Affiliates with any Investment in the Shares, the Company or the
Acquired Assets.. 

 

(h)           The execution, delivery and performance
of this Agreement and all other agreements, instruments and transactions contemplated
hereby and thereby to which any Seller is a party have been duly authorized by
all requisite organizational approvals. 
This Agreement and all other agreements and instruments contemplated
hereby to which any Seller is a party each constitutes a valid and binding
obligation of each Seller, as applicable, enforceable in accordance with its
terms.  Assuming the payment of all Liens
or Indebtedness by the Sellers, the execution and delivery by each Seller of
this Agreement and all other agreements and instruments contemplated hereby to
which any Seller is a party, the offering and sale of the Shares hereunder and
the fulfillment of and compliance with the respective terms hereof by each
Seller, does not and shall not: (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a default under,
(iii) result in the creation of any Lien or Indebtedness upon the Company
or the Acquired Assets pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing with, any
third-party, any court or administrative or governmental body or agency
pursuant to, the Articles of Incorporation or By-laws of the Company, or any
law, statute, rule or regulation to which any Seller is subject or any
agreement, instrument, order, judgment or decree to which any Seller or their
assets are subject, other than: (a) appropriate notifications to the Louisiana
State Police and Louisiana gaming authorities of the consummations of the
transfers contemplated by this Agreement; and (b) appropriate licensure and/or
findings of suitability of the Purchaser by the Louisiana Gaming Control Board.

 

3.2           No Distribution. 
No assets of the Company, except: (i) such cash transferred prior to the
sale hereunder as shall be necessary to ensure that the Company has not less
than $100,000 in cash at the Closing; (ii) the Excluded Assets; and (iii) those
assets sold or consumed in the ordinary course of the operations of the
Company, have been distributed or otherwise disposed of

 

9

 

during the six (6) months preceding the Agreement Date
and no assets of the Company will be distributed from the Agreement Date to the
Closing Date except those identified above.

 

3.3           No Indebtedness. 
Neither the Company nor any of the Acquired Assets shall have any
Indebtedness or Liens at the time of the transfer of the Shares hereunder
except normal reoccurring trade payables.

 

3.4           No Adverse Change. 
From January 1, 2005 to and through the Closing Date, save and except
for the Adverse Effects of Hurricane Rita, there has not been nor shall there
be any adverse change in the operating results, operations, condition
(financial or otherwise), prospects, employee relations or customer or supplier
relations of the Company or the Acquired Assets.

 

3.5           Permits.  Schedule
3.5 hereto lists all of the permits, rights, privileges and franchises in
the name of or held by the Company (hereafter sometime referred to collective
as the “Permits”).  Except as set forth
on Schedule 3.5, those are all of the Permits required by the Company
for the ownership of its properties and for the conduct of its business; all of
the Permits are validly issued and in effect; and the execution and delivery of
this Agreement, the performance of Sellers of Sellers’ obligation under this
Agreement, and consummation by Sellers of the transactions contemplated by this
Agreement shall not terminate, rescind or revoke the Permits or give any third
party a right to terminate, revoke or rescind the same.

 

3.6           Company Agreements. 
The Company is not a party to any contract, lease, employment agreement
(other than unwritten employment at-will agreements which the Company can
terminate at Closing without any liability), mortgage, security agreement,
note, other evidence of Indebtedness or any other agreement of any nature,
type, kind or duration (hereafter sometimes referred to individually as a “Company
Agreement”) for which the Company will have continuing liability following the
Closing.  Schedule 1.14 reflects
all Excluded Liabilities which will be assigned and/or transferred to the
Sellers, pursuant to instruments approved of by the Purchaser, prior to the
Closing Date.   Each of the Sellers does
hereby, individually, indemnify, defend and hold the Purchaser and the Company
harmless from any claims, loss, fees, expenses or charge, including reasonable
attorney’s fees, arising from or related to the Excluded Liabilities.  Sellers, as part of the Closing, shall
deliver such release or other documents or instruments, reasonably acceptable
to the Purchaser, evidencing the release of the Company and the Acquired Assets
from the Excluded Liabilities.

 

3.7           Financial Statements.  Schedule
3.7 contains (a) the unaudited Financial Statements for the Company for the
calendar years of 2001 through 2004 and (b) the Company’s 2005 Financial
Statements for the months ended September 30, 2005, prepared by the Company’s
accountant (collectively, “Financial Statements”) each in accord with generally
accepted accounting principles.

 

(a)           The Financial Statements are: (i) true,
accurate and complete, in all material respects; (ii) in accordance with the
books and records of the Sellers and the Company; and (iii) fair presentations
of the financial position and results of operations of the Truck Stop and the

 

10

 

Company, in conformity with generally accepted
accounting principles applied on a consistent basis.

 

(b)           Each of the Sellers, jointly and
severally, represent and warrant that the financial condition of the Company
from and after the date of the last Financial Statements has only improved and
that there has been no adverse change since such date that would otherwise
adversely effect the Company, the Acquired Assets or the Financial Statements.

 

3.8           Absence of Certain Developments. 
Except as set forth on Schedule 3.8 hereto, from and after July
1, 2004 and continuing until the Closing Date, there has not occurred, nor is
there threatened, (a) any adverse change in the financial or other condition of
the Company or in its assets, liabilities, properties, business or prospects or
the Acquired Assets, and (b) to the best of the Sellers’ knowledge, no Seller
is aware of any event or condition that has or might reasonably have an adverse
effect on the Company’s financial condition, business, assets or prospects or
the Acquired Assets, save and except the Adverse Effects of Hurricane Rita.

 

3.9           Compliance with Law.  To the best of Sellers’ knowledge,
information and belief, except as set forth on Schedule 3.9 hereto, the
Company is not in violation of any laws, ordinances, governmental rules or
regulations to which it is subject.

 

3.10         Pending and
Threatened Actions.  Except as set forth on Schedule 3.10,
there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the best of any Seller’s knowledge, threatened against or
affecting the Company, the Acquired Assets or pending or threatened by any
Seller or the Company against any third party, at law or in equity, and
affecting in any manner the Company or the Acquired Assets or the prospects
thereof, before or by any federal, foreign, state, parish or local court,
governmental department, commission, board, bureau, agency or instrumentality
(including any actions, suits, proceedings or investigations with respect to
the transactions contemplated by this Agreement).  Neither the Company nor any of the Sellers is
subject to any arbitration proceedings or any governmental investigations or
inquiries (including inquiries as to the qualification to hold or receive any
license or permit, including, but not limited to, the right to have Devices or
sell liquor and sell or store petroleum products or by-products); and, to each
Seller’s best knowledge information and belief, there is no basis for any of
the foregoing.  Neither the Company, nor
any Seller is subject to any judgment, order or decree of any court or other
governmental agency, and has not received any written opinion or memorandum
from legal counsel to the effect that it or they are exposed, from a legal
standpoint, to any liability which may involve or be related, in any manner, to
the Company or the Acquired Assets and which may have a continuing effect,
after the Closing Date, upon the Company or the Acquired Assets or for which
the Company or the Acquired Assets may incur any liability in any manner
whatsoever.

 

(a)           Each Seller does, jointly and severally,
hereby indemnify, defend and hold harmless the Purchaser, its assigns, and the
Company from and against any and all expenses, claims, fees, damages or losses,
including reasonable attorney’s fees, which the Purchaser or the Company may
suffer as a result of any litigation matter, claim or choses in action existing
or accruing as of the Closing Date or arising or filed thereafter and related,
in any manner, to the

 

11

 

operation of the Company or ownership of the Shares or
Acquired Assets at or prior to the Closing Date (each a “Litigation Matter”).  Purchaser shall have the right, at its sole
election, to participate in the defense of any Litigation Matter, including,
but not limited to, requiring the defense to be conducted by legal counsel of
its choice.

 

3.11         Absence of Undisclosed Liabilities and
Indebtedness.  Except as set forth on Schedule 3.11
hereto, the Company does not have any liability or Indebtedness, absolute or
contingent, which is not reflected in this Agreement, in the Financial
Statements or in other Schedules or Exhibits to this Agreement.

 

3.12         Employees.  Schedule 3.12 lists all of the Company’s employees and each
employee’s current salary and benefits, including but not limited to, their
accrued vacation days with pay and accrued sick days with pay and the basis of
determining the number of vacation days with pay and sick days with pay to
which each employee is entitled.  Except
as set forth on Schedule 3.12, the Company has no employees, has no
employment contract with any of its employees and has no collective bargaining
agreements covering any of its employees. 
There are no controversies or labor troubles pending (or to the best of
any Seller’s knowledge, information and belief threatened) between the Company
and any of its employees; to the best of any Seller’s knowledge, information
and belief, the Company has complied in all respects with all applicable
Federal and state laws and regulations respecting employment and employment
practices, terms and conditions of employment, wages and hours and other laws
related to employment; and there are no arrears in the payments of wages;
withholding or social security taxes, unemployment or workingman’s compensation
insurance premiums or other similar obligations.

 

3.13         Employee Benefit Plans.  Schedule
3.13 hereto lists all pension plans, profit-sharing plans, contracts,
bonuses, commissions, savings, stock options, former or current employees of
the Company or under which the Company has any obligation or liability (“Benefit
Arrangements”).  To the best of any
Seller’s knowledge, information and belief, the Benefit Arrangements are and
have been administered in substantial compliance with their terms and the
requirements of applicable law; the Pension Benefit Guaranty Corporation (“PBGC”)
has not instigated or threatened to instigate proceedings to terminate any
Benefit Agreements; no litigation or investigation is pending or threatened concerning
or involving any Benefit Agreements; and no unfunded liability or accumulated
funding deficiency exists under or with respect to Benefit Agreements which has
not been properly reflected on the Financial Statements.

 

3.14         Title to Assets. 
The Company has good and merchantable title to all of its assets and,
excluding only Tract B-2, to the Acquired Assets.  Except as set forth on Schedule 3.14,
none of the Company’s assets nor the Acquired Assets are subject to any
mortgage, pledge, Lien, security interest, lease, encumbrance, Indebtedness or
charge except for accrued Taxes not yet due and payable.  

 

3.15         Condition of Tangible Property.  Each of the Acquired
Assets is in good operating condition and repair, normal wear and tear
excepted.

 

12

 

3.16         Brokerage.  There are no claims for brokerage
commissions or finder’s fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement made by or
on behalf of the Company or the Sellers for which the Purchaser or the Company
shall have liability following the Closing, and Sellers agree to indemnify and
hold Purchaser and the Company harmless against any costs or damages incurred
as a result of any such claim.

 

3.17         Environmental Matters.  Except as listed on Schedule
3.17 hereto,

 

(a)           The operations of the Company comply in
all respects with all Environmental and Safety Requirements except where any
noncompliance shall not have an adverse effect on the condition (financial or
otherwise), affairs or business operations of the Company or the Acquired
Assets;

 

(b)           without limiting the generality of the
foregoing, the Company and each Seller have obtained and complied with, and are
in compliance, in all respects, with all permits, licenses and other
authorizations that may be required pursuant to Environmental and Safety
Requirements for the occupation and operation of the Truck Stop, including, but
not limited to, the sale and storage of fuel and fuel oil; a list of all such
permits, licenses and other authorizations is set forth on Schedule 3.17(b);

 

(c)           neither the Company, nor its current
property or operations are subject to any order from or agreement with any
governmental authority or third party respecting (i) the failure of the Company
to comply with any Environmental and Safety Requirements or any remedial action
or (ii) any environmental liabilities and costs arising from a violation or
alleged violation of any Environmental and Safety Requirements except for those
orders and agreements with which the Company has complied and are listed on Schedule  3.17(c);

 

(d)           neither the Company nor its operations is
subject to any judicial or administrative proceeding alleging a violation of
any Environmental and Safety Requirement and no Seller has received any notice
(whether oral or written) related to the same nor to the best of any the Seller’s
knowledge is there any reason or grounds for the same; 

 

(e)           none of the current or past operations of
the Company is subject of any investigation by any governmental authority
evaluating whether any remedial action is needed to respond to a violation or
threatened violation of any Environmental and Safety Requirements; and

 

(f)            Schedule 3.17(f) is a full, complete and accurate list of
all Underground Storage and Aboveground Storage Tanks (UST’s and AST’s,
respectively) on the Acquired Assets, each of which is now and has at all times
prior hereto been operated and maintained in full compliance with all
applicable Environmental and Safety requirements.

 

3.18         Insurance.  Schedule
3.18 lists all insurance policies and programs owned by the Company, the
premiums for each insurance policy and program and the date on which each

 

13

 

insurance policy and program premium is next due.  Except as set forth on Schedule 3.18,
to the best of any Seller’s knowledge, information and belief, each of those
insurance policies and programs is in full force and effect, and the insurance
premiums for those policies and programs have been paid in full through the
Closing Date.  There are no outstanding
claims under any insurance policies or program.

 

3.19         Truck Stop Real Property. 
To the best of each Sellers’ knowledge, there is not now pending nor threatened:
(a) any litigation or proceeding to take all or any portion of the Acquired
Assets by eminent domain; (b) any street widening or changes in any highway or
traffic lanes or patterns in the immediate vicinity of the Truck Stop; or (c)
other change or modification by a state, local or federal authority or agency
which would adversely affect the Truck Stop or any of the Acquired Assets.  Further, (i) the Truck Stop is connected to
and serviced by adequate water, natural gas, sewage disposal and electric
facilities; (ii) all material systems of the Truck Stop, including, but not
limited to, heating, ventilation, air conditioning, electrical, sewage,
plumbing, etc., are in good operating condition, subject to reasonable and
ordinary wear and tear; and (iii) to the knowledge of each Seller, the Truck
Stop and all improvements located thereon are in full compliance with current
building and zoning laws.  No Seller has
any information or knowledge that any portion of the Acquired Assets are being
condemned or otherwise taken for use as part of any street or highway widening
process.

 

3.20         Continued Operations. 
Each of the Sellers’ represents and warrants that the Company shall be
able to continue to operate the Truck Stop, without change and without being subject
to any Liens, Indebtedness or claims of any nature, on the same basis as it was
operated prior to the Closing Date.

 

3.21         Tax Matters. 
The Purchaser shall have no liability for or exposure to any Taxes
arising from the operation(s) of the Company or the Acquired Assets prior to
the Closing Date.  All necessary and
required Tax Returns have been timely filed and are correct in all material
respects as to the amount of any Tax owed and have been prepared in compliance
with all applicable laws and regulations in all respects; the Company has paid
all Taxes due and owing by it (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the appropriate
taxing authority all Taxes which it is required to withhold from amounts paid
or owing to any employee, member, creditor or other third party; no Seller has
waived any statute of limitations with respect to any Taxes or agreed to any
extension of time with respect to any material Tax assessment or deficiency; as
of the Agreement Date; no foreign, federal, state, parish or local tax audits
or administrative or judicial proceedings are pending or being conducted with
respect to the Company or any of the Acquired Assets; no information related to
Tax matters has been requested by any foreign, federal, State or local taxing
authority and no written notice indicating an intent to open an audit or other
review has been received by the Company or any Seller from any foreign,
federal, State, parish or local taxing authority.

 

(a)           The Company has not made an election
under §341(f) of the Code.  The Company
is not liable for the Taxes of another Person (i) under Treas. Reg. §
1.1502-6 (or comparable provisions of state, local or foreign law),
(ii) to any Seller’s knowledge, as a transferee or

 

14

 

successor, or (iii) by contract or
indemnity.  The Company is not a party to
any tax sharing agreement; and

 

(b)           On the date of its formation and at all
times thereafter, the Company has been classified as either a sub-chapter “S”
corporation under the Code for (i) federal income tax purposes and (ii) for
state and local income tax purposes in Louisiana.

 

(c)           The Company is now a sub-chapter “S”
corporation under the Code and was not at any prior time a “C”
corporation.  

 

(d)            Not less than twenty (20) days prior to
filing any Tax Return for the tax year of 2005 or any part thereof, each such
Tax Return shall be submitted to the Purchaser. 

 

3.22         Listed Devices. 
The Listed Devices are all of the Devices currently placed in the Truck
Stop and each Listed Device is owned by the Company.  Each Seller agrees, as a part of the Closing,
to request a coordinated transfer of the Listed Devices from the Louisiana
gaming regulatory authorities and to cooperate in the transfer of said Listed
Devices and to timely provide all documentation and information as shall be
necessary to ensure the orderly and proper transfer of Listed Devices at the
Truck Stop, including ensuring that there is no period of time during such a
transfer when the Listed Devices are not legally operating at the Truck Stop
and available for play by the general public. 
Concurrently herewith, each Seller agrees for themselves and to cause
the Company to execute a purchase agreement with Southern Trading Company, a
Louisiana corporation, or any other designee of the Purchaser, transferring all
of Company’s interest in the Listed Devices to Southern Trading Corporation for
the total consideration of One Dollar ($1.00) per Device.

 

(a)           The amount and type of fuel sales at the
Truck Stop, at all times for the last twenty-four (24) months, have been
sufficient to qualify the Truck Stop, pursuant to the Liquor and Gaming Laws of
the State of Louisiana, as a truck stop facility approved to operate not less
than fifty (50) Devices.  No Seller has
any knowledge of any information that would lead any party to reasonably
anticipate any change in the foreseeable future in the level and type of fuel
sales at the Truck Stop.  Except as set
forth on Schedule 3.23, not more than one (1) percent of all fuel sales
at the Truck Stop during any one (1) year period were made to any Seller or any
Affiliate of the same.

 

(b)           The Company currently has and will as of
the Closing have a validly issued Establishment License and a Device Owners
License and neither of the foregoing is now nor at the Closing shall be subject
to any investigation or condition.

 

3.23         Interest in Competitors, Suppliers and
Customers.  Except as set forth on Schedule 3.23,
none of the Sellers has any ownership interest in any competitor, supplier or
customer of the Company.

 

15

 

3.24         United States Securities Law Compliance.

 

(a)           No Seller has either directly nor
indirectly offered the Shares for sale, nor solicited any offer to buy the
Shares, by means of any general advertising or by any other form of general
solicitation.  No Seller has either
directly nor indirectly offered the Shares for sale, nor solicited any offer to
buy the Shares, in any other manner that would require the sale of such Shares
to be subject to the registration requirements of the Securities Act or any
state securities law, rule or regulation.

 

(c)           No Seller is selling the Shares on behalf
of the Company in connection with the distribution of such Shares.

 

(d)           Each Seller confirms that he or she did
not acquire the Shares with a view to, or for, the resale in connection with
any distribution thereof within the meaning of the Securities Act or any state
securities law, rule or regulation which would not be exempt from the
registration requirements of the Securities Act or any state securities law
rule or regulation.

 

(e)           This Agreement has been duly executed and
delivered by each Seller and, assuming the due authorization, execution and
delivery by the Purchaser, constitutes the legal, valid and binding obligation
of each Seller enforceable against each Seller in accordance with its
terms.  Each Seller is of the age of
majority and of sound mind and under no mental disabilities whatsoever.

 

ARTICLE
IV

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

4.1           Purchaser represents and warrants to each
of the Sellers as follows:.  

 

(a)           The Purchaser is duly formed, validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in every jurisdiction in which its ownership of
property or the conduct of business requires it to qualify.  The Purchaser possesses all requisite power
and authority, and all licenses, permits and authorizations necessary, to own
and operate its properties, to carry on its businesses as now conducted and to
carry out the transactions contemplated by this Agreement.  The Purchaser is not in violation of any of
the provisions of its Articles of Incorporation or By-Laws.

 

(b)           Purchaser has taken all action necessary
for the due authorization, execution, delivery and performance of this
Agreement and its respective obligations under this Agreement.  Upon execution and delivery by Purchaser and
Sellers, this Agreement shall constitute the valid and legally binding
obligation of Purchaser in accordance with its terms.

 

(c)           There are no claims for brokerage
commissions of finder’s fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement made by or
on behalf of Purchaser that will become a liability of the Seller, and
Purchaser agrees to indemnify and hold Sellers harmless against any costs or
damages incurred as a result of any such claim.

 

16

 

(d)           Execution and delivery by Purchaser of
this Agreement, performance by Purchaser of its respective obligations under
this Agreement and consummation by Purchaser of the transactions contemplated
by this Agreement do not require Purchaser to obtain any consent, approval or
action by, or make any filing with or give any notice to, any Person, except
such as have been duly obtained or made, as the case may be, and are in full
force and effect, and routine filings with regulatory authorities.

 

ARTICLE
V

 

CONDITIONS PRECEDENT

 

5.1           Conditions to the Purchaser’s Obligations. 
The obligation of the Purchaser to purchase the Shares and the Tract B-2
and to consummate the transactions contemplated in this Agreement shall be
expressly subject to the satisfaction and fulfillment, at or before the
Closing, of each of the following conditions precedent and any other conditions
stated elsewhere in this Agreement.

 

(a)           There shall be no cause of action, order
or preliminary or permanent injunction entered, pending or threatened in any
action or proceeding before any United States federal or state court or agency,
or any foreign court, of competent jurisdiction or governmental authority
(which has jurisdiction over the enforcement of any applicable laws) enjoining
or threatening, in whole or in part, the Company’s current operations, making
illegal or prohibiting the consummation of the transactions hereunder,
including the transfer of the Shares or the Acquired Assets and/or the
operation of Devices at the Truck Stop.

 

(b)           The representations and warranties of
each Seller set forth in this Agreement and the Exhibits, Schedules,
attachments, documents, certificates, Financial Statements or other items
prepared or supplied to the Purchaser by or on behalf of any Seller or the
Company shall be true and correct in all respects on the Closing Date with the
same effect as though all such items had been made on and as of such date, and
each Seller shall deliver, as a part of the Closing hereunder, to the Purchaser
a certificate certifying such or identifying any changes as of the Closing
Date.

 

(c)           The Purchaser shall have received a good
standing certificate for the Company dated within fifteen (15) days prior to
the Closing Date.

 

(d)           The Acquired Assets shall be in good
physical and operating condition, excepting normal wear and tear only, as
existed on the Agreement Date.  No damage
or casualty shall have occurred to the Acquired Assets, Devices or operations
of the Company prior to the Closing Date.

 

(e)           Purchaser shall have received a legal
opinion, in the form of Exhibit D attached hereto, from legal counsel
for the Sellers.

 

17

 

(f)            As of the Closing Date, there shall be no
adverse change in the operating results, operations, condition (financial or
otherwise), prospects, employee relations or customer or supplier relations of
the Company or the Acquired Assets, as applicable.  

 

(g)           The Purchaser shall have received from
each Seller as appropriate each of the instruments and other documents referred
to elsewhere in this Agreement.

 

(h)           All Managers, Directors and Officers of
the Company shall have resigned effective as of midnight on the Closing Date
and the Purchaser shall have received from each Manager, Director and Officer
the written resignation described above.

 

(i)            Each Seller agrees that on or prior to
the Closing Date, they shall, as applicable, have executed a purchase agreement
between the Company and Southern Trading Corporation, or any other designee of
the Purchaser, transferring to Southern Trading Corporation, or such other
designee, all of the Listed Devices as of the Closing Date.

 

5.2           Conditions to the Sellers’ Obligations. 
The obligation of each Seller to sell the Shares and the Tract B-2 to
the Purchaser shall be subject to the satisfaction and fulfillment, at or
before the Closing, of the following conditions precedent: 

 

(a)           There shall be no cause of action, order
or preliminary or permanent injunction entered, pending or threatened in any
action or proceeding before any United States federal or state court or agency,
or any foreign court, of competent jurisdiction or governmental authority
(which has jurisdiction over the enforcement of any applicable laws) enjoining
or threatening, in whole or in part, the Company’s current operations, making
illegal or prohibiting the consummation of the transactions hereunder,
including the transfer of the Shares, the Acquired Assets and/or the operation
of Devices at the Truck Stop;

 

(b)           Purchaser has timely delivered or caused
to be delivered the Purchase Price and the Tract B-2 Purchase Price, plus or
minus any applicable prorations hereunder, to the Title Company;

 

(c)           Purchaser shall have performed all
obligations and complied with all agreements and covenants required hereunder
to be performed by Purchaser on or before the Closing Date;

 

(d)           Purchaser’s representations and
warranties contained herein and in any documents furnished to the Sellers on or
prior to the Closing Date shall be true and correct in all respects as of the
Closing Date;

 

(e)           The Title Company has confirmed to
Sellers that the Title Company is unconditionally prepared to disburse the
Purchase Price and the Tract B-2 Purchase Price (plus or minus all applicable
prorations and the Escrow Hold-Back) to the Sellers or their designees subject
only to the performance by the Sellers of their respective obligations under
this Agreement;

 

18

 

ARTICLE
VI

 

ACT OF CASH SALE, ADJUSTMENTS AND PRORATIONS, CLOSING.

 

6.1           Act of Cash Sale. 
The Tract B-2 Sellers shall convey Tract B-2 to Purchaser by an Act of
Cash Sale, attached hereto as Exhibit B, conveying good, marketable and
indefeasible fee simple title to Tract B-2 subject only to the encumbrances
identified on Schedule 2.2.  

 

6.2           Taxes and Assessments: Closing Costs.

 

(a)           Real estate and ad valorem
taxes, general and special and assessments (collectively “Real Estate Taxes”),  utilities and other similar charges, shall be
prorated between the Sellers, as applicable, and the Purchaser as of the
Closing Date, such that credits, charges and expenses of the Company, up to
7:00 a.m. local time on the Closing Date and all days preceding the Closing
Date, shall be allocated to Sellers, as applicable (regardless of when an
invoice is issued or payment for such charges and expenses is due), and
credits, charges and expenses after 7:00 a.m. local time on the Closing Date
shall be allocated to Purchaser.  The
Purchase Price shall be adjusted at the Closing to reflect the prorations.

 

(b)           If the actual amount of Real Estate Taxes
is not known on the Closing Date, Real Estate Taxes shall be prorated on the
basis of the rate shown on the last available tax duplicate.  Each Seller represents and warrants that
there are no special assessments with regard to the any real property owned by
the Company or Tract B-2.  Upon receipt
of the final tax duplicate for the period encompassing the Closing Date, the
parties shall adjust, outside of the escrow, the proration of Real Estate Taxes
based upon the actual tax duplicate.

 

(c)           If any errors or omissions are made
regarding adjustments and prorations as aforesaid, the parties shall make the
appropriate corrections promptly upon the discovery thereof. Any corrected
adjustment or proration shall be paid in cash to the party entitled thereto.
Purchaser shall pay for recording fees and any escrow fees and transfer taxes
and conveyance fees associated with the conveyance of any real property
hereunder.  

 

6.3           Closing.  This
transaction shall be closed through an escrow that is to be held by the Title
Company, in accordance with the general provisions of the usual form of escrow
agreement then in use by such Title Company for transactions similar to this
with such special provisions inserted as may be required to conform with this
Agreement.  Each party shall execute and
deliver on a timely basis all escrow instructions, acts of cash sale, funds,
settlement statements and other documents reasonably necessary to accomplish
Closing.  In addition to, and not in
limitation of, the foregoing:

 

(a)           On or before the Closing Date, Sellers,
as applicable, shall execute, deliver or cause to be delivered to the Title
Company all of the items listed below:

 

i.              The Act of Cash Sale;

 

19

 

ii.             The assignment, in blank, of the Shares;

 

iii.            The Share Certificates;

 

iv.            The Company’s corporate records and
corporate record book;

 

v.             Any other instruments then required
pursuant to any other sections of this Agreement;

 

vi.            Mechanics Lien Affidavit required by the
Title Company; 

 

vii.           A non-imputation affidavit; and

 

viii.          Affidavit of non-foreign status, as
contemplated by Section 1445 of the Code.

 

(b)           On or before the Closing Date, Purchaser
shall deliver or cause to be delivered to Title Company the Purchase Price and
the Tract B-2 Purchase Price, less the Escrow Hold Back and the Deposit, and
subject to the prorations and credits as herein provided.

 

(c)           The transactions provided for in this Agreement
shall be completed by the Title Company on the Closing Date by doing each of
the following:

 

i.              by filing the Act of Cash Sale for record
in the Records of Calcasieu Parish, Louisiana;

 

ii.             by causing the issuance of the Title
Policy, subject only to the Permitted Encumbrances, and forwarding the Title
Policy to Purchaser;

 

iii.            by prorating taxes, assessments and other
amounts, in accordance with this Agreement and the settlement statement, and
paying and charging Purchaser and Sellers for those costs and expenses to be
paid by Sellers or Purchaser pursuant hereto;

 

iv.            by disbursing, pursuant to the settlement
statement, any and all funds then on deposit hereunder and all documents
hereunder to the applicable parties; and

 

v.             by preparing and forwarding to Purchaser
and the Sellers four (4) signed copies of the settlement statement setting
forth all receipts and disbursements provided for herein.

 

(d)           In the event the Title Company is unable
to simultaneously perform all instructions set forth in Section 6.3(c) on the
Closing Date, the Title Company shall so notify Sellers and Purchaser, and
shall retain, unless otherwise instructed by the party depositing the same, all
documents and funds deposited with the Title Company until receipt by the Title
Company of written instructions executed by Sellers and Purchaser or by a court
of competent jurisdiction.

 

20

 

6.4           Possession.  At Noon local
time on the Closing Date, Sellers shall cease operation of the Company and the
Acquired Assets and shall deliver possession thereof to the Purchaser, and all
risk of loss with respect thereto shall pass to the Purchaser or its designee.

 

6.5           Closing Activities. 
The Sellers and Purchaser agree that at 7:00 a.m. local time, or such
agreeable time thereafter on the Closing Date, a representative from each of
them (the “Representatives”) shall meet at the Truck Stop and shall jointly
perform the following functions:

 

(a)           Representatives of the Purchaser shall be
permitted to fully inspect the Truck Stop to ensure it is in compliance with
the obligations and representations and warranties contained herein and that
the Acquired Assets, including the Required Inventory Levels, are in place; 

 

i.              If less than the Required Inventory
Levels are in place, Purchaser shall receive a credit against the Purchase
Price for the amount of inventory (at cost not retail) necessary to meet the
minimum Required Inventory Levels.

 

(b)           shall further cooperate to turn over all
keys, passwords, accounts, and copies of all records, documents, instruments
and any other items necessary for the immediate and complete operation of the
Truck Stop; and

 

(c)           verify that as of the Closing there is no
less than $100,000 in cash left in the Company’s operating account.

 

6.6           Escrow Hold Back. 
On the Closing Date, the Title Company shall withhold and pay over to
Delafield, who shall act as escrow agent under this Section 6.6 (“Escrow Agent”),
the Escrow Hold Back from the Sellers’ proceeds hereunder who shall hold such
funds in escrow for the benefit of all parties as outlined herein.  In the event the Purchaser shall receive any
invoice, bill or letter demanding payment for any costs, Taxes or any other
claims that accrued or relate to any period of time on or prior to the Closing
Date (“Escrow Claim”), including, but not limited to, any point liability under
the Truck Stop’s frequent player program(s), Purchaser shall send evidence of
such Escrow Claim to the Escrow Agent and to the Sellers (“Hold Back Notice”).  

 

(a)           Sellers shall have ten (10) Business Days
following their receipt of the Hold Back Notice to serve, in writing to both
the Escrow Agent and the Purchaser, any objections they may have to the
same.  If no objection is timely served
by the Sellers, Escrow Agent is herewith authorized, without further action by
any party, to promptly pay such Escrow Claim out of the Escrow Hold Back.  

 

i.              If Sellers shall timely object to any
payment out of the Escrow Hold Back and the basis for an objection is that the
Operating Costs that are the subject of the Hold Back Notice arose after the
Closing Date, then the Escrow Agent shall hold such amount as is identified in
the Hold Back Notice until such time as it receives written instructions from
all parties to disburse the same; or

 

ii.             If Sellers shall timely object to any
payment out of the Escrow Hold Back and the basis for an objection is anything
other than an objection based upon Section 6.6(a)(i)

 

21

 

above, the Escrow Agent shall hold the funds
identified in the Hold Back Notice for an additional thirty (30) days, after
which it shall disburse such funds at the sole direction of the Purchaser.

 

(b)           Promptly after that date which is three
(3) full calendar months after the Closing Date, Escrow Agent shall release any
funds then remaining in the Escrow Hold Back to the Sellers.

 

6.7           Sellers’ Release. 
Each Seller, on behalf of themselves and their heirs, executors,
administrators, personal representatives, Affiliates, agents and the employees,
owners, members, shareholders, officers, directors, successors and assigns of
the Company prior to the Closing Date, hereby fully releases and discharges
Purchaser, any other past or future shareholders, members, officers and
directors of the Purchaser and their heirs, executors, administrators, personal
representatives, successors and assigns and the Company and the Acquired Assets
(the “Released Parties”), from any and all rights, claims, actions, causes of
action, demands, damages, costs and expenses, claims for salaries or
reimbursements, etc., whatsoever that any of the Sellers or any of the
foregoing parties now has or may hereafter have against the Released Parties,
directly or indirectly, arising out of or in any way relating to any Seller’s
operation or ownership of the Truck Stop, the Acquired Assets or the Company,
whether as an officer, director, agent, owner, member, shareholder, employee or
otherwise.  In addition to the foregoing,
each Seller shall cause its owners, members, shareholders, employees, officers
and agents to resign, effective as of the Closing Date, any positions they may
hold within the Company, including, but not limited to, the positions of
director, officer, manager or agent. 
Nothing contained in the foregoing is intended to nor shall it be
construed as releasing any claims that any Seller may have arising under this
Agreement.

 

ARTICLE
VII

 

OBLIGATION NOT TO DO

 

7.1           Obligation Not To Do. 
For a period of five (5) years after the Closing Date, Sellers neither
directly nor indirectly (a) shall own any interest in, manage, be employed by
or provide services to or consult with, directly or indirectly in any manner
whatsoever, any Person (other than the Company) engaged in gaming or any
activities related to the Truck Stop anywhere within the Parish of Calcasieu,
(b) shall solicit any current or former customers of the Company concerning
gaming or any activities related to the Truck Stop or (c) solicit any current
or future employee of the Company to leave the Company’s employment for other
employment in gaming or any activities related to the Truck Stop.  

 

(a)           The foregoing restriction is an
obligation not to do an act or take an action. 
Each Seller, for themselves and their Affiliates, acknowledge that the
foregoing obligation not to do an act is a material inducement for the
Purchaser to enter into this Agreement and is a necessary, reasonable and
appropriate restriction.

 

22

 

(b)           Given the unique and competitive nature
of the video poker industry and the operation of truck stop facilities, the
parties hereto acknowledge and agree that the restrictions contained in this
Section 7.1 are reasonable and necessary to protect the Truck Stop from
competition for which it otherwise has little or no ability to defend
itself.  The parties hereto further
acknowledge and agree that the restrictions contained herein do not impose a
burden upon one party which is not commensurate with the risk to any other
party.

 

(c)           If a court of competent jurisdiction
determines that the restrictions contained herein are too restrictive to be
enforced, in whole or in part, this provision shall not be invalid, and all
parties agree that the court shall modify the restrictions contained herein to
the extent necessary to permit their enforcement.

 

(d)           In the event of a breach or threatened
breach of the provisions of this section, the Purchaser shall be entitled to an
injunction restraining each of the Sellers from competing against the Purchaser
or the Company or from rendering any services to any person, firm, corporation,
association, partnership or other entity that is competing against the
Purchaser.  Nothing contained in this
section shall be construed as prohibiting the Purchaser from pursuing any other
remedies available for a breach or threatened breach of the restrictions
contained in this section, including the recovery of damages from the any of
the Sellers. 

 

ARTICLE
VIII

 

MISCELLANEOUS

 

8.1           Default.  If
there is a default under this Agreement, a party not in default shall give
notice of the default to the party in default, and the party in default shall
have seven (7) calendar days from notice in which to cure the default.  If any default cannot reasonably be cured
within the seven (7) day period following notice, the party in default shall
have such additional time as is reasonably required to cure the default,
provided the party in default diligently and continuously pursues all actions
necessary to cure the default and further provided that, in no case, shall the
party in default have more than fifteen (15) calendar days from notice in which
to cure the default.

 

8.2           Specific Performance.  Each
party shall have the right to enforce this Agreement by specific performance.

 

8.3           Governing Law.  This
agreement shall be governed by and construed in accordance with the laws of the
State.

 

8.4           Jurisdiction and Venue.  The
exclusive jurisdiction and venue for any disputes arising under this Agreement
and any instruments or transactions contemplated by this Agreement shall be the
14th Judicial District Court, Calcasieu Parish, Louisiana.

 

23

 

8.5           Notices.  

 

(a)           All communications under this Agreement
shall be in writing and shall be mailed by first class mail, postage prepaid:

 

i.              if to Sellers, at:

 

Robert
E. Christman and Louise C. Christman

809
Henrietta Lane

Lake
Charles, Louisiana 70605

 

Roger
L. Miller and Yvonne Leger Miller

6128
White Oak Drive

Lake
Charles, Louisiana 70615

 

Copy
to:

 

Joseph
A. Delafield

A
Professional Corporation

3401
Ryan Street, Suite 307

P.O.
Box 4272

Lake
Charles, LA 70606

Facsimile:
(337) 477-4738

 

ii.             if to Purchaser, at:

 

Gameco
Holdings, Inc.

Attn:
Stan Guidroz

c/o
Jalou

1869
Mills Highway

Breaux
Bridge, Louisiana 70517

Facsimile:
337-507-2280

 

Copy
to:

 

Hahn
Loeser & Parks LLP

3300
BP Tower

200
Public Square

Cleveland,
Ohio 44114

Attn:
Stanley R. Gorom III, Esq.

Facsimile:
(216) 274-2460

 

or
to such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.

 

24

 

(b)           Any notice so addressed, postage prepaid,
and mailed by registered or certified mail shall be deemed to be given on the
third Business Day after the date it is mailed.

 

8.6           Survival:
Indemnification.

 

(a)           All warranties, representations and
covenants made by Purchaser or by Sellers in this Agreement or in any
certificate or other instrument delivered by Purchaser or Sellers under this
Agreement shall be considered to have been relied upon by Seller or Purchaser,
as the case may be, and shall survive delivery by Sellers to Purchaser of the
Shares or the payment by Purchaser to Sellers of the Purchase Price or the
Tract B-2 Purchase Price, regardless of any investigation made by Sellers or
Purchaser or on Sellers’ or Purchaser’s behalf. 
All statements on any certificate or other instrument delivered
hereunder shall constitute warranties and representations by Sellers or
Purchaser, as the case may be.

 

(b)           Sellers, jointly and severally, shall
indemnify, defend and hold Purchaser and its shareholders, officers, directors
and agents harmless from all damages, losses, claims, obligations, fees, liabilities
and expenses, including reasonable counsel fees incurred in litigation or
otherwise (“Damages”) assessed, incurred, paid or sustained by or against them
with respect to or arising out of, directly or indirectly:

 

i.              the failure of any representation or
warranty made by Sellers in this Agreement or in any Schedule, Exhibit or
certificate, document or instrument delivered pursuant to this Agreement to be
true and correct in all respects as of the Closing Date; and 

 

ii.             the failure of Sellers to perform and
comply in all material respects with all agreements, obligations and conditions
required of Sellers under this Agreement when and as required by this
Agreement.

 

(c)           if a suit or administrative proceeding is
brought against Purchaser or its parents, subsidiaries or affiliates and/or
directors, officers, stockholders, members, partners, agents, servants,
employees, successors or assigns or each or any of them (each, an “Indemnified
Party”) to recover for or on account of any liability for which Sellers are
responsible under this Agreement and/or law or as a result of a breach by any
Seller of this Agreement, Sellers shall appear and defend that suit or
administrative proceeding at Sellers’ sole cost and expense (including, but not
limited to, court costs and attorney fees and expenses) and shall pay any
judgment (or settlement in lieu thereof) that may be entered against one or
more of the Indemnified Party, as the case may be.  If, in an Indemnified Party’s reasoned
opinion, it becomes necessary for the Indemnified Party to defend itself in a
suit or administrative proceeding, Sellers shall pay all court costs, attorney
fees and expenses and other expenses incurred by the Indemnified Party.

 

8.7           Successors and
Assigns.  This Agreement shall inure
to the benefit of and be binding upon Sellers and Purchaser and the successors
and assigns of each of them.  Sellers
shall not assign any or all of their rights or obligations under this Agreement
without the prior written consent of Purchaser or its successors and assigns,
as the case may be.  Purchaser and its

 

25

 

successors and assigns shall not assign its rights or obligations under
this Agreement without Sellers’ prior written consent except that Purchaser without
Sellers’ prior written consent may assign its rights and obligations under this
Agreement to any Person who purchases the part of the Shares owned by the
Purchaser and except that the Purchaser and its successors and assigns may
assign their rights and obligations under this Agreement without Sellers’ prior
written consent to any Person that acquires all or substantially all of the
Company’s assets.  If, pursuant to the
requirements in this Section 8.7, Purchaser assigns its rights and obligations
under this Agreement without Sellers’ prior written consent, Purchaser shall
not be responsible for any failure of the assignee to satisfy the obligations
assigned.  If consent to an assignment is
required and if consent is given, the party giving the consent shall specify
whether the party or parties assigning his, its or their rights under this
Agreement shall or shall not continue to be responsible for any failure of the
assignee to satisfy the obligations assumed.

 

8.8           Entire Agreement;
Amendment and Waiver.  This Agreement
constitutes the entire understanding of the parties hereto and supersedes all
prior agreements or understandings with respect to the subject matter hereof
between the parties.  This Agreement may
not be amended, and the observance of any term of this Agreement may not be
waived, without Purchaser’s or Sellers’ prior written consent, as the case may
be.  Unless expressly provided otherwise
in the Agreement, no act, delay, omission or course of dealing on the part of
any party hereto in exercising any right, power or remedy hereunder shall
operate as, or be construed as, as a waiver or otherwise prejudice such party’s
rights, powers and remedies under this Agreement.

 

8.9           Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy, and all of
which together shall constitute one agreement binding on the parties hereto.

 

8.10         Additional
Instruments and Information.  All
parties agree and obligate themselves to promptly execute any additional
documents and instruments and take any other actions necessary and proper for
the complete and expeditious implementation and satisfaction of the provisions
and intent of this Agreement.  In
addition, each Seller agrees that during and subsequent to the sale
transaction, each Seller shall have a continuing duty to supply such
information and documentation and to perform such acts as may be required by
any federal, state or local authority or the Liquor and Gaming Laws of the
State of Louisiana.

 

8.11         Mutual
Negotiation.  Sellers and Purchaser
agree they have participated jointly in the negotiation and drafting of this
Agreement and, if there is an ambiguity or question of intent or question of
interpretation concerning this Agreement, this Agreement shall be construed as
having been jointly negotiated and drafted by all parties without the creation
of any burden of proof favoring or disfavoring any party that arose from the
negotiation and drafting of this Agreement.

 

8.12         Severability.  Each provision of this Agreement shall be
considered severable and, and if for any reason any provision which is not
essential to the effectuation of the basic purposes of the Agreement is
determined to be invalid and contrary to any existing or future law, that invalidity

 

26

 

shall not impair the
operation of, or affect, those provisions of the Agreement that are valid,
provided the valid provisions remaining result in an equitable agreement.

 

8.13         Force
Majure.  Any time period or
obligation to timely perform imposed upon any party hereunder shall be extended
as necessary when performance of such obligation(s) is rendered impossible or
unreasonably difficult as a result of any acts of God, war, labor strikes or
unrest, weather, acts of terrorism, general disruptions to the economy or
day-to-day operations of the government of the Parish of Calcasieu, the State
of Louisiana or the United States of America which make conducting general
business unreasonably difficult or impossible.

 

8.14         Legal
Fees.  Following the Closing, in any
action by one party to the Agreement against the other party to enforce its
rights under this Agreement and/or any instrument contemplated by this
Agreement, the losing party shall reimburse the prevailing party for the
reasonable and verifiable attorney fees and for the costs and expense incurred
by the prevailing party in enforcing its rights and remedies under this
Agreement.

 

8.15         Closing
Costs.  Except as provided otherwise
herein, each party shall be responsible for its own closing costs and fees.

 

8.16         Gender
and Plurals.  Whenever required by
the context of this Agreement, the masculine gender shall include the feminine
and neuter genders, and vice-versa, and the singular shall include the plural
and vice-versa.

 

8.17         Paragraph
and Section Headings.  The headings
of the sections of this Agreement are inserted for convenience only and shall
not be deemed to constitute a part thereof.

 

8.18         Resolutory
Condition.  Sellers and Purchaser
acknowledge and agree that it is not their intent to create a vendor’s lien,
mortgage or resolutory condition in this Agreement and that, if one is created,
it is hereby released, relinquished, renounced and waived. 

 

8.19         Incorporation.  Any and all Schedules, Exhibits or other
documents referred to herein or attached hereto are incorporated herein as if
fully rewritten in this Agreement.

 

8.20         Employee
Contact and Communication.  Purchaser
agrees that, with the exception of the Truck Stop’s manager and bookkeeper, the
Purchaser will not contact any employee of the Truck Stop without the prior
oral permission of any one of the Sellers. 
Both parties agree that they will not disclose the Purchase Price to any
third-party without the prior consent of the other party, excepting only
disclosures: (i) as may be required for the purpose of reporting any Taxes
arising as a result hereof; (ii) to any and all governmental authorities,
including any and all state gaming or other regulators; and (iii) to any and
all agents or employees of any party hereto, including accountants, attorneys,
lenders, investment bankers, title agents or other similar parties.

 

27

 

THUS DONE AND PASSED on the 12th day of
December, 2005, at the City of Lake Charles, State of Louisiana, the
undersigned parties having affixed its signature in the presence of me, Notary,
and the undersigned competent witnesses, after due reading of the whole.

 

	
  WITNESSES:

  	
  SELLERS:

  
	
   

  	
   

  
	
  /s/ Rebecca A. Hughes

  	
   

  	
  /s/ Roger L. Miller, Sr.

  
	
   

  	
  ROGER L. MILLER, SR., Seller

  
	
   

  	
   

  
	
  /s/ Brenda Delafield

  	
   

  	
  /s/ Yvonne Leger Miller

  
	
   

  	
  YVONNE LEGER MILLER, Seller

  
	
   

  	
   

  
	
   

  	
  /s/ Robert E. Christman

  
	
   

  	
  ROBERT E. CHRISTMAN, Seller

  
	
   

  	
   

  
	
   

  	
  /s/ Louise C. Christman

  
	
   

  	
  LOUISE C. CHRISTMAN, Seller

  

 

 

	
   

  	
  /s/ Joseph A. Delafield

  	
   

  
	
   

  	
  NOTARY PUBLIC

  

 

THUS DONE AND PASSED on the       
day of December, 2005, at the City of Lake Charles, State of Louisiana, the
undersigned parties having affixed its signature in the presence of me, Notary,
and the undersigned competent witnesses, after due reading of the whole.

 

	
   

  	
   

  
	
  WITNESSES:

  	
  JALOU II, INC:

  
	
   

  	
   

  
	
  /s/ Rebecca A. Hughes

  	
   

  	
  By:

  	
  /s/ Stan Guidior,
  Authorized Rep.

  
	
   

  	
  Jeffery P. Jacobs, Authorized Officer

  
	
   

  	
   

  
	
  /s/ Brenda Delafield

  	
   

  	
   

  

 

 

	
   

  	
  /s/ Joseph A. Delafield

  	
   

  
	
   

  	
  NOTARY PUBLIC

  

 

28

 

SCHEDULES AND EXHIBITS

 

	
  1.

  	
   

  	
  Schedule 1.3

  	
   

  	
  Acquired Assets

  
	
  2.

  	
   

  	
  Schedule 1.4

  	
   

  	
  Adverse Effects of
  Hurricane Rita

  
	
  3.

  	
   

  	
  Schedule 1.17

  	
   

  	
  Excluded Assets

  
	
  4.

  	
   

  	
  Schedule 1.18

  	
   

  	
  Excluded Liabilities

  
	
  5.

  	
   

  	
  Schedule 1.23

  	
   

  	
  Listed Devices

  
	
  6.

  	
   

  	
  Schedule 2.2

  	
   

  	
  Tract B-2 Permitted
  Encumbrances

  
	
  7.

  	
   

  	
  Schedule 3.1(d)

  	
   

  	
  Ownership of Shares

  
	
  8.

  	
   

  	
  Schedule 3.5

  	
   

  	
  Permits

  
	
  9.

  	
   

  	
  Schedule 3.7

  	
   

  	
  Financial Statements

  
	
  10.

  	
   

  	
  Schedule 3.8

  	
   

  	
  Absence of Certain
  Developments

  
	
  11.

  	
   

  	
  Schedule 3.9

  	
   

  	
  Compliance with Laws

  
	
  12.

  	
   

  	
  Schedule 3.10

  	
   

  	
  Pending/Threatened Actions

  
	
  13.

  	
   

  	
  Schedule 3.11

  	
   

  	
  Undisclosed Liabilities

  
	
  14.

  	
   

  	
  Schedule 3.12

  	
   

  	
  List of Employees

  
	
  15.

  	
   

  	
  Schedule 3.13

  	
   

  	
  Employee Benefits

  
	
  16.

  	
   

  	
  Schedule 3.14

  	
   

  	
  Title to Assets

  
	
  17.

  	
   

  	
  Schedule 3.17

  	
   

  	
  Environmental Matters

  
	
  18.

  	
   

  	
  Schedule 3.17(b)

  	
   

  	
  Authorizations

  
	
  19.

  	
   

  	
  Schedule 3.17(c)

  	
   

  	
  Orders

  
	
  20.

  	
   

  	
  Schedule 3.17(b)

  	
   

  	
  UST/AST

  
	
  21.

  	
   

  	
  Schedule 3.18

  	
   

  	
  Insurance

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A.

  	
   

  	
   

  	
   

  	
  Easement

  
	
  B.

  	
   

  	
   

  	
   

  	
  Tract A and Tract B-2

  
	
  C.

  	
   

  	
   

  	
   

  	
  Act of Cash Sale

  
	
  D.

  	
   

  	
   

  	
   

  	
  Legal Opinion

  

 

29

 

EXHIBIT A

 

[Easement]

 

 STATE OF LOUISIANA

 

PARISH OF CALCASIEU

 

SERVITUDE/EASEMENT

 

BE IT
KNOWN, that, before the undersigned Notary(ies) Public in the State of
Louisiana, and in the presence of the undersigned competent witnesses,
personally came and appeared:

 

                      ,
having an address at                                         
(“Grantor”), in favor of FUEL STOP 36, INC., 
a Louisiana limited liability company, having an address at 108 N.
Highway 397, Lake Charles, Louisiana 70616 (“Grantee”).

 

Each
of whom did execute this Servitude/Easement (the “Easement”) this      
day of                     ,
2005 (“Easement Date”).

 

RECITALS

 

a.             Grantor
is the owner of certain real property upon which is situated an access street
named “Wright Road” with its eastern most terminus at Opelousas Street in the
City of Lake Charles, Parish of Calcasieu, State of Louisiana (the “Roadway”); 

 

b.             Grantee
is the owner of certain real property located adjacent to the Roadway in the
City of Lake Charles, Parish of Calcasieu, State of Louisiana (the “Grantee’s
Property”); and

 

c.             The
Roadway and the Grantee’s Property are identified on Exhibit A attached hereto
and incorporated by this reference herein.

 

NOW, THEREFORE, in consideration of ten and
no/100 dollars ($10.00) and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.             Incorporation
of recitals.  The foregoing recitals
are incorporated herein as if fully rewritten herein.

 

 2.            Grant
of access, ingress and egress easement. 
Grantor does hereby give, grant, bargain, sell, release and convey to
Grantee, its successors and assigns forever, the perpetual non-exclusive right
to move pedestrian and vehicular traffic over, on and across the Roadway,
including semi-tractor trailers and any other vehicles.

 

3.                                       Repair
of Easement.  Grantor and Grantee
shall mutually agree upon the extent, type and nature of any repairs and
maintenance needed to the Easement Area on the Roadway (as identified on
Exhibit A).  Grantee will be responsible
for no more than one-half (1/2) of the costs of all such agreed upon repairs
and/or maintenance.

 

4.                                       Limitation
on Grant.  This Easement does not
contain and grants to Grantee no rights to the subsurface of any easement area,
all such rights and privileges being expressly reserved to the Grantor.

 

5.                                       Not
a Public Dedication.  Nothing
contained herein shall be deemed to be a gift or dedication of any portion of
any easement area to the general public or for the benefit of the general
public or for any public purpose whatsoever, it being the intention of the
Grantor that this Easement shall be strictly limited to and for the purposes
herein expressed.

 

6.                                       Successors.  The terms, covenants and provisions of this
Easement shall extend to and be binding upon the respective heirs, personal
representatives, administrators, executors, beneficiaries, successors and
assigns, as applicable, of Grantor and Grantee. 
The parties agree that the easements, covenants, conditions and terms
hereof are intended to and shall run with the land and shall benefit the
Grantee’s Property and burden

 

30

 

the Grantor’s
Property.

 

7.                                       Representations
or Warranties.  Grantor does hereby
represent and warrant to the Grantee that it is well seized of the Grantor’s
Property and have full, right, title and interest in the same and full right,
title and power to grant the easements described herein.

 

8.                                       Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given: (i) if
personally delivered; (ii) three (3) days after being placed in the United
States’ mail, certified, return receipt requested; or (iii) one (1) day after
being placed for delivery with a nationally recognized overnight courier, in
each case addressed to the addresses first above written.

 

9.                                       Mutual
Indemnification.

 

(a)           Grantor
does herewith indemnify, defend and hold harmless Grantee from any and all
claims, expenses, losses, causes of action or liabilities it may suffer as a
result of the use of the Easement Area by Grantor or any of their employees,
agents, customers or invitees, including the occupants of the industrial park
located to the West of the Easement Area.

 

(b)           Grantee
does herewith indemnify, defend and hold harmless Grantor from any and all
claims, expenses, losses, causes of action or liabilities they may suffer as a
result of the use of the Easement Area by Grantee or any of its employees,
agents, customers or invitees.

 

10.                                 If
any portion of this Easement or any provision herein shall be found to be
invalid or unenforceable, the remaining provisions shall continue to be fully
effective and enforceable and the Grantor do hereby consent to the modification
hereof, in any manner as a court may deem necessary, to preserve the grant of
easements contained herein.

 

THUS DONE AND PASSED on the          
day of                             ,
2005, at the City of                          ,
Parish of                                     ,
State of                                    ,
the undersigned party having affixed her signature in the presence of me,
Notary, and the undersigned competent witnesses, after due reading of the
whole.

 

	
  WITNESSES:

  	
  GRANTOR:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
                                             

  	
  ,

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
											

 

 

	
   

  	
   

  	
   

  
	
  NOTARY PUBLIC

  

 

31

 

THUS DONE AND PASSED on the              
day of                          ,
2005, at the City of                            ,
Parish of                                   ,
State of                        ,
the undersigned party having affixed her signature in the presence of me,
Notary, and the undersigned competent witnesses, after due reading of the
whole.

 

	
  WITNESSES:

  	
  GRANTEE:

  	
   

  
	
  FUEL STOP 36,
  INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  ,

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
											

 

 

	
   

  	
   

  	
   

  
	
  NOTARY PUBLIC

  

 

This Instrument prepared
by and after

recording please return to:

 

Stanley R. Gorom III,
Esq.

Hahn Loeser & Parks
LLP

3300 BP Tower

200 Public Square

Cleveland, Ohio 44114

Phone: (216) 274-2461

 

32

 

EXHIBIT B

 

[Survey of Tract A and Tract B-2]

 

33

 

EXHIBIT C

 

STATE OF LOUISIANA

 

PARISH OF CALCASIEU

 

ACT OF CASH SALE OF IMMOVABLE
PROPERTY

 

BE IT
KNOWN, that, before the undersigned Notary(ies) Public in the State of
Louisiana, and in the presence of the undersigned competent witnesses,
personally came and appeared:

 

ROBERT
E. CHRISTMAN, a resident of the State of Louisiana, and whose
mailing address is declared to be 108 N. Highway 397, Lake Charles, Louisiana
70616, and

 

LOUISE
C. CHRISTMAN, a resident of the State of Louisiana, and whose
mailing address is declared to be 108 N. Highway 397, Lake Charles, Louisiana
70616,

 

(ROBERT E. CHRISTMAN and LOUISE C. CHRISTMAN are
collectively, the “Seller”),

 

who declared that for and in consideration of the sum
of                     
Dollars ($                 ),
and other good and valuable consideration, in cash paid, the receipt and
sufficiency of which are hereby acknowledged by the Seller, Seller does hereby
grant, bargain, sell, convey, transfer, assign, deliver, and set over with full
guarantee and with full warranty of title, and with subrogation to all rights
and actions of warranty against all previous owners that Seller may otherwise
have, unto:

 

FUEL
STOP 36, INC., a corporation of the State of Louisiana,
domiciled and with its principal place of business in the Parish of Calcasieu,
with federal tax identification number                  ,
and whose mailing address is declared to be                                                       ,
hereinafter referred to as “Purchaser”,

 

purchasing and accepting for itself, its successors
and assigns, and acknowledging the delivery and possession thereof, the
following described property, with all of its component parts, including all
rights, ways, privileges, servitudes and appurtenances thereto belonging,
to-wit:

 

COMMENCE AT THE INTERSECTION OF THE WEST RIGHT-OF-WAY
LINE OF LA. HWY 397 AND THE NORTH RIGHT-OF-WAY LINE OF THE SOUTHERN PACIFIC
RAILROAD THENCE ALONG THE SAID NORTH RIGHT-OF-WAY LINE N88°58’45”W A DISTANCE
OF 199.60 FEET TO THE POINT OF BEGINNING; THENCE FROM THE POINT OF BEGINNING
CONTINUE ALONG THE NORTH RIGHT-OF-WAY LINE OF THE SOUTHERN PACIFIC RAILROAD
N88°58’45”W A DISTANCE OF 399.30 FEET TO A POINT AND CORNER; THENCE N00°58’21”E
A DISTANCE OF 260.00 FEET TO A POINT AND CORNER; THENCE S89°01’39”E A DISTANCE
OF 10.00 FEET TO A POINT AND CORNER; THENCE N00°58’21”E A DISTANCE OF 43.77
FEET TO A POINT AND CORNER; THENCE S88°58’45”W A DISTANCE OF 225.26 FEET TO A
POINT AND CORNER; THENCE ALONG AN ARC OF A CURVE TO THE LEFT 86.39 FEET HAVING
A RADIUS OF 55.00 FEET AND A LONG CHORD THAT BEARS N46°01’15”E A DISTANCE OF
77.78 FEET TO A POINT AND CORNER; THENCE N01°01’15”E A DISTANCE OF 286.23 FEET
TO THE SOUTH RIGHT-OF-WAY LINE OF WRIGHT RD. AND CORNER; THENCE ALONG SAID
SOUTH RIGHT-OF-WAY LINE S88°58’45”E A DISTANCE OF 109.30 FEET TO A POINT AND
CORNER; THENCE LEAVING SAID SOUTH RIGHT-OF-WAY LINE S01°01’15”W A DISTANCE OF
645.00 FEET TO THE POINT OF BEGINNING CONTAINING WITHIN SAID BOUNDS 3.647 ACRES
MORE OR LESS BEING MORE FULLY SHOWN HEREON.

 

TO HAVE AND TO HOLD the above described property unto
the said Purchaser, the Purchaser’s successors and assigns, forever. The taxes
for the above described property shall be prorated as of the date of

 

34

 

transfer and the Seller declares that all taxes due and eligible on the
property herein sold through the calendar year prior to the date of transfer
have been timely paid by the Seller. 
Subject to the proration, the Purchaser shall be responsible for
remitting the taxes for the calendar year in which the above described property
shall transfer and all future taxes as they shall become due and payable.

 

The Seller hereby declares that the property herein
conveyed has not been heretofore alienated by the said Seller and that as of
the Closing there shall be no mortgages, liens or encumbrances of record
against the said property.

 

The Seller declares that in the federal, state or
local courts there are no judgments, general or particular, of record against
the said property.

 

The Seller hereby agrees to deliver possession of the
above described property to the Purchaser on even date herewith.

 

All parties signing the within instrument, whether as
parties or as witnesses, have declared themselves to be of full legal capacity.

 

All agreements and stipulations herein and all of the
obligations assumed herein shall inure to the benefit of and be binding upon
the successors and assigns of the respective parties, and the Purchaser, its
successors and assigns shall have and hold the above described property in full
ownership forever.

 

No title examination has been requested of or
performed by me, Notary.   The title
description is provided by the parties, and the Notary appears solely and only
for the purpose of notarizing this document.

 

Both parties agree and obligate themselves to promptly
execute any additional acts, documents and/or instruments necessary and proper
for the complete and expeditious implementation and satisfaction of the
provisions and intent of this Act of Cash Sale.

 

The parties hereto have participated jointly in the
negotiation and drafting of this Act of Cash Sale.  In the event any ambiguity or questions of
intent or interpretation arise, this Act of Cash Sale shall be construed as if
jointly drafted by the parties and no presumption or burden of proof shall
arise favoring any of the parties by virtue of authorship of any of the
provisions of this Act of Cash Sale.

 

In the event of a default of any condition or
obligation of this Act of Cash Sale on the part of any of the parties hereto
which results in the institution of any legal proceeding, the non-prevailing
party shall pay to the prevailing party of the litigation all reasonable costs
and expenses of the legal proceeding, and any appeal there from, including
attorney’s fees.

 

No change or modification hereof shall be valid or
binding unless the same is in writing and signed by the party intended to be
bound.  No waiver of any provisions of
this Act of Cash Sale shall be valid unless the same is in writing and signed
by the party against whom such waiver is sought to be enforced; moreover, no
valid waiver of any provisions of this Act of Cash Sale at any time shall be
deemed a waiver of any other provision of this Act of Cash Sale at such time,
nor will it be deemed a valid waiver of such.

 

No determination by any court, governmental body or
otherwise that any provision of this Act of Cash Sale or any amendment hereof
is invalid or unenforceable in any instance shall affect the validity or
enforceability of (a) any other provision thereof, or (b) that provision in any
circumstance not controlled by the determination. Each such provision shall be
valid and enforceable to the fullest extent allowed by, and shall be construed
wherever possible as being consistent with, applicable law.

 

All questions
concerning the construction, validity, and interpretation of this Act of Cash
Sale and the performance of the obligations imposed hereby shall be governed by
the laws of the State of Louisiana.

 

35

 

The parties do not intend, nor shall this Act of Cash
Sale be construed as, creating any resolutory conditions, vender’s lien(s), or
stipulation pour autri and if any of the foregoing are deemed created by this
instrument the same are herewith waived by the parties hereto.

 

THUS DONE AND PASSED on the              
day of                             ,
2005, at the City of
                       ,
Parish of                                      ,
State of                            ,
the undersigned party having affixed her signature in the presence of me,
Notary, and the undersigned competent witnesses, after due reading of the
whole.

 

 

	
  WITNESSES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Robert E. Christman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

 

	
   

  	
   

  	
   

  
	
  NOTARY PUBLIC

  

 

THUS DONE AND PASSED on the            
day of                                       ,
2005, at the City of                            ,
Parish of                                             ,
State of                                         ,
the undersigned party having affixed her signature in the presence of me, Notary,
and the undersigned competent witnesses, after due reading of the whole.

 

	
  WITNESSES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Louise C. Christman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

 

	
   

  	
   

  	
   

  
	
  NOTARY PUBLIC

  

 

36

 

THUS DONE AND PASSED on the                   
day of                                  ,
2005, at the City of                                ,
Parish of                                      ,
State of                                 ,
the undersigned party having affixed her signature in the presence of me,
Notary, and the undersigned competent witnesses, after due reading of the
whole.

 

	
  WITNESSES:

  	
  PURCHASER:

  	
   

  
	
   

  	
  FUEL STOP 36, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  , Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
										

 

 

	
   

  	
   

  	
   

  
	
  NOTARY PUBLIC

  

 

37

 

EXHIBIT D

 

[Legal Opinion]

 

[Letterhead]

 

                               ,
2005

 

JALOU II, INC.

1869 Mills Highway

Breaux Bridge, Louisiana
70517

 

Re:          Purchase Agreement, dated as of November      ,
2005

 

Ladies and Gentlemen:

 

We have acted as counsel for Fuel Stop 36, Inc., a
Louisiana corporation (the “Company”),
Roger L. Miller, Yvonne Ledger Miller, Robert E. Christman and Louise C.
Christman (Roger L. Miller, Yvonne Ledger Miller, Robert E. Christman and
Louise C. Christman are collectively, the “Sellers”) in connection with the
transactions contemplated by the Purchase Agreement, dated December    ,
2005 (the “Agreement”), by and among the
Company, the Sellers and JALOU II, INC., or its designee, a Louisiana
corporation (the “Purchaser”).   Capitalized terms used but not defined
herein are used as defined in the Agreement.

 

In rendering the opinions set forth herein, we have
examined originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Agreement and certain of the other Transaction Documents
as listed on Exhibit A (attached hereto and incorporated herein by reference)
and referred to collectively as the “Transaction Documents,” (ii) such company
records and other agreements, documents and instruments necessary to give the
opinions set forth below and (iii) such certificates or comparable documents of
public officials and officers and representatives of the Company and Sellers,
as the case may be, and we have made such inquiries of such officers and
representatives and considered such matters of law as we have deemed
appropriate.

 

In all cases, we have assumed the genuineness of
signatures on all documents except those of the Company and the Sellers, the
legal competence of each person signing on behalf of each party, the
authenticity and completeness of documents submitted to us as originals and the
conformity to authentic original documents of documents submitted to us as
copies.  As to the opinions expressed in
Section 7 below, only, we have entirely relied upon certificates of Officers of
the Company originals of which are attached hereto (the “Certificates”).  We have no independent knowledge of any
information, circumstances or set of facts that would cause us to question the
veracity of the information contained in the Certificates.

 

Based upon the foregoing, we are of the opinion, as of
the date hereof, that:

 

1.               The Company is duly organized, validly existing and in
good standing under the laws of the State of Louisiana, with all requisite
corporate power and authority to own its properties and to conduct business as
described in the Agreement.  The Company
is duly qualified to carry on its business as currently being conducted in each
jurisdiction where such qualification is required, including, but not limited
to the State of Louisiana.

 

2.               The Agreement has been duly authorized, executed and
delivered by the Company and the Sellers, and the Agreement constitutes the
legal, valid and binding obligations of the Company and the Sellers,
enforceable against each of them in accordance with its terms, subject as to
enforceability to applicable bankruptcy,

 

38

 

insolvency, reorganization, moratorium, liquidation or
similar laws in effect from time to time relating to or affecting the enforcement
of the rights of creditors generally.

 

3.               The execution and delivery by the Company and the
Sellers of the Agreement and the performance of their obligations there under
will not, as applicable, (a) result in the violation of any Louisiana corporate
or federal or state securities statutes or regulations, or any order or decree
known to us to have been issued by any court or governmental authority which is
binding upon the Company or the Sellers or any of their respective property, or
(b) conflict with or result in a breach or violation of any of the terms or
provisions of the Company’s Articles of Incorporation or Bylaws or violate,
conflict with or result in a breach or termination of, or otherwise give any
Person additional rights or compensation under, or the right to terminate or
accelerate, or constitute (with notice or lapse of time, or both) a default
under the terms of any material agreement or instrument to which the Company or
the Sellers is a party or by which any of the Company’s assets or properties
are bound or result in creation of a lien upon any of the properties or assets
of the Company, under any agreement of the Company or the Sellers.

 

4.               The authorized capital stock of the Company consists
of:                      
of Common Stock, without par value (the “Common Stock”), of which                      
will be issued and outstanding (the “Shares”) upon the sale of the shares to
the Purchaser in accordance with the terms and conditions of the
Agreement.  The Shares are duly
authorized, validly issued, fully paid and non-assessable and are not subject
to any pre-emptive rights under the laws of Louisiana, the Articles of
Incorporation and Bylaws of the Company or under any agreement to which the
Company or any of the Sellers are a party. 
The Sellers are each the legal, beneficial and record owner of all the
issued and outstanding shares of Common Stock of the Company, free and clear of
any lien, encumbrance or claim, and prior to the sale of the Shares, the
Sellers are the sole shareholders of the Company.

 

5.               The Shares have been duly authorized for sale to the
Purchaser pursuant to the Agreement and, when issued and delivered by the
Sellers pursuant to the Agreement against payment of the consideration therefor
as provided therein, will be duly authorized, validly issued, fully paid and
non-assessable.  After delivery of the
Shares to Purchaser, the Purchaser will be the sole shareholder of the Company.

 

6.               The sale of the Shares as contemplated by the
Agreement is not subject to any statutory or contractual preemptive
rights.  There are no outstanding
options, warrants or other rights, agreements or obligations calling for the
issuance of Common Stock.

 

7.               No actions, suits, claims or proceedings against the
Company other the Sellers are pending nor are any actions, suits, proceedings
or claims threatened, that if adversely determined would, either in any single
case or in the aggregate, question the validity of or prevent the consummation
of the transactions contemplated by the Agreement or have a Material Adverse
Effect on the financial conditions, properties or operations of the Company.

 

8.               Please note that no title examination of the Company’s
or the Sellers’ assets has been requested of or performed by the undersigned.

 

9.               This opinion letter is given solely to the Purchaser
and its designee and may be relied upon only by the Purchaser and its designees
and may not be relied upon by any other party or entity, except for the
Purchaser’s lender, for any purpose whatsoever. 
This opinion letter may not be quoted, circulated or published without
the prior written consent of the issuer, except among the Purchaser’s officers,
agents, lender and representatives and as necessary to enforce the terms of
this opinion letter or the Agreement. 
The opinions stated herein are made as of the date hereof, and we assume
no obligation to advise you of any changes to the foregoing.

 

Very truly yours,

 

39Exhibit 4.1

 

FIRST AMENDMENT TO

CREDIT AGREEMENT

 

This First Amendment to Credit Agreement (the “First Amendment”) is
made as of the 23rd day of March, 2006 by and among:

 

TRANS WORLD
ENTERTAINMENT CORPORATION, a New York corporation, having its principal place
of business at 38 Corporate Circle, Albany, New York 12203, as Lead Borrower
(in such capacity, the “Lead Borrower”) for the Borrowers;

 

the Borrowers party hereto;

 

the Facility Guarantors party hereto;

 

the Lenders party hereto;

 

BANK OF AMERICA, N.A., as Issuing Bank; and

 

BANK OF AMERICA, N.A., as Administrative Agent and as Collateral Agent
(in such capacities, the “Agent”).

 

In consideration
of the mutual covenants herein contained and benefits to be derived herefrom,
the parties hereto agree as follows:

 

WITNESSETH

 

WHEREAS, the Lead Borrower, the Borrowers, the Lenders, the Issuing
Bank and the Agent have entered into a Credit Agreement dated as of January 5,
2006 (the “Credit Agreement”); and

 

WHEREAS, the Lead Borrower has advised the Agent and the Lenders that
the Borrowers desire to increase the Total Commitments to $130,000,000.00 in
accordance with Section 2.02 of the Credit Agreement; and

 

WHEREAS, pursuant to the terms and provisions of Section 2.02(b)(i) of
the Credit Agreement, each Additional Commitment Lender is required to join in,
and become party to, the Credit Agreement as a condition to any Commitment
Increase becoming effective; and

 

WHEREAS, in connection with the proposed Commitment Increase, (i) the
Lenders identified on Schedule 1 hereto as “Additional Commitment Lenders”
desire to become parties to the Credit Agreement as Lenders thereunder and (ii)
the Lead Borrower, the Borrowers, the Lenders, the Issuing Bank and the Agent
desire to amend certain provisions of the Credit Agreement as set forth herein.

 

NOW THEREFORE, it is hereby agreed as follows:

 

1

 

1.                         Definitions:
All capitalized terms used herein and not otherwise defined shall have the same
meaning herein as in the Credit Agreement.

 

2.                         Joinder
to Credit Agreement by the Additional Commitment Lenders. Effective as of
the date of this First Amendment, each Additional Commitment Lender hereby
acknowledges that it has received and reviewed a copy of the Credit Agreement
and the other Loan Documents, and acknowledges and agrees, as indicated with
its signature below, (i) to be bound by all of the representations, warranties
and agreements set forth in Section 9.05(b) of the Credit Agreement, (ii) to be
a party to and be bound by the provisions of the Credit Agreement as if such
Additional Commitment Lender was a signatory to the Credit Agreement and was
expressly named as a Lender therein, and (iii) to the extent of the Increased
Commitment assigned to the Additional Commitment Lender, to have the rights and
obligations of a Lender under the Credit Agreement. The Lead Borrower, the
other Borrowers and the Facility Guarantors hereby consent to the joinder of
each Additional Commitment Lender to the Credit Agreement, and acknowledge that
each Additional Commitment Lender is a party to the Credit Agreement as if such
Additional Commitment Lender was a signatory to the Credit Agreement and was
expressly named as a Lender therein.

 

3.                         Amendment
of Schedule 1.1(a) to the Credit Agreement. Effective as of the date of
this First Amendment, Schedule 1.1(a) to the Credit Agreement setting forth the
Commitments of the Lenders is amended and restated in its entirety to read as
set forth on Schedule 1.1(a) attached hereto.

 

4.                         Joinder
to Credit Agreement as a “Borrower” by Movies Plus, Inc. and Record Town Utah,
LLC Effective as of the date of this First Amendment, each of Movies Plus,
Inc. and Record Town Utah, LLC, hereby acknowledges that it has received and
reviewed a copy of the Credit Agreement and the other Loan Documents, and
acknowledges and agrees, as indicated with its signature below, (i) to be a
party to and be bound by the provisions of the Credit Agreement and the other
Loan Documents as a “Borrower” thereunder as if Movies Plus, Inc., and Record
Town Utah, LLC, respectively, was a signatory to the Credit Agreement and was
expressly named as a Borrower therein, (ii) to be bound, jointly and severally
with all of the other Borrowers, by all of the representations, warranties, covenants
and agreements of the Borrowers set forth in the Credit Agreement and the other
Loan Documents, and (iii) to execute and deliver to the Agent (A) a Note
evidencing the obligations of Movies Plus, Inc., and Record Town Utah, LLC,
respectively, as a Borrower under the Credit Agreement and the other Loan
Documents and (B) such other instruments, documents and agreements as the Agent
may reasonably request. The Lead Borrower, the other Borrowers and the Facility
Guarantors hereby consent to the joinder to the Credit

 

2

 

Agreement of each
of Movies Plus, Inc. and Record Town Utah, LLC, as a Borrower thereunder.

 

5.         Amendments to the Credit Agreement.
The Credit Agreement is hereby amended as follows:

 

a.                          The
definition of “Borrower(s)” “ in Section 1.01 of the Credit Agreement is
deleted in its entirety and the following is substituted in its stead:

 

““Borrower(s)”
means Movies Plus, Inc., Record Town, Inc., Record Town USA, LLC, Trans World
Entertainment Corporation, Trans World New York, LLC, Trans World Florida, LLC,
and Record Town Utah, LLC.”

 

b.                         The
definition of “Borrowing Base” in Section 1.01 of the Credit Agreement is
deleted in its entirety and the following is substituted in its stead:

 

““Borrowing Base” means, at any time of
calculation, an amount equal to:

 

(a)                     the
lesser of (i) (A) the Appraisal Percentage multiplied
by (B) the Appraised Value of Eligible Inventory (less Inventory
Reserves (provided such Inventory Reserves shall not be duplicative of any
reserve specifically provided for in the calculation of Appraised Value)) or
(ii) (A) the Inventory Advance Rate multiplied
by (B) the Cost of Eligible Inventory (less Inventory Reserves); provided
that at any time going out-of-business sales or other liquidation sales
are occurring in the greater of (x) five (5) or more of the Borrowers’ stores;
or (y) twenty-five (25) or more of the Borrowers’ stores if at such time the
Cost of Eligible Inventory (less Inventory Reserves) as reflected on the most
recent Borrowing Base Certificate delivered by the Borrowers pursuant to
Section 5.01(f) is equal to or greater than three (3) times the amount of the
then Total Commitments then, (a) all Inventory located in all such stores in
which a Loan Party is conducting the going-out-of-business or other liquidation
sales shall be excluded from Eligible Inventory for purposes of calculating the
Borrowing Base and (b) the Appraisal Percentage or Inventory Advance Rate, as
the case may be, applicable to Eligible Inventory located in stores in which an
independent professional liquidation company, reasonably acceptable to the
Agent, is conducting the going-out-of-business or other liquidation sales
(which Eligible Inventory shall not be excluded for purposes of calculating the
Borrowing Base) shall be subject to adjustment by the Administrative Agent in
its reasonable discretion; minus

 

(b)                    the
then amount of all Availability Reserves.”

 

3

 

c.                          The
definition of “Facility Guarantors” in Section 1.01 of the Credit Agreement is
deleted in its entirety and the following is substituted in its stead:

 

““Facility
Guarantors” means (i) Media Logic USA, LLC, and (ii) each other Subsidiary
that is required to execute and deliver a Facility Guarantee pursuant to
Section 5.12 hereof.”

 

d.                         Section
1.01 of the Credit Agreement is hereby amended by the addition of the following
definitions inserted in appropriate alphabetical order:

 

“Musicland”
means Musicland Holding Corp., a Delaware corporation.

 

“Musicland
Acquisition” means that transactions contemplated by the Musicland Asset
Purchase Agreement whereby the Lead Borrower will (i) acquire from Musicland
the “Acquired Assets” (as such term is defined in the Musicland Asset Purchase
Agreement) for consideration in the amount of the Musicland Purchase Price and
(ii) assume the Assumed Liabilities (as such term is defined in the Musicland
Asset Purchase Agreement) to be assumed by the Lead Borrower pursuant to the
Musicland Asset Purchase Agreement.

 

“Musicland
Asset Purchase Agreement” means the Asset Purchase Agreement dated as of
February 17, 2006, by and among the Lead Borrower, Musicland, Musicland’s
debtor affiliates and the chapter 11 estates of Musicland and its debtor
affiliates, without giving effect to any amendment, modification, supplement or
other agreement relating thereto not approved in writing by the Agent.

 

“Musicland
Purchase Price” means the Purchase Price payable by the Lead Borrower as
defined in the Musicland Asset Purchase Agreement.

 

e.                          The
definition of “Permitted Acquisition” in Section 1.01 of the Credit Agreement
is hereby amended by deleting the proviso at the end of such definition and
substituting in its stead the following:

 

“provided, however
if the consideration paid or payable in connection with the proposed
Acquisition, plus (i) the aggregate consideration paid or payable in connection
with all other Acquisitions consummated since the Closing Date (excluding the
Musicland Purchase Price), (ii) the aggregate sum of all Restricted Payments
made pursuant to Section 6.06 since the Closing Date, and (iii) the aggregate
consideration paid or payable in connection with all Permitted Minority
Investments made after the Closing Date are in an aggregate amount equal to or
greater than $50,000,000, then as a condition to the consummation of such
Acquisition, in addition to the requirements set forth in clauses (a) through
(f) above, (x) the Payment Conditions shall have been satisfied and (y) the
Borrowers

 

4

 

shall have
delivered to the Administrative Agent a certificate of a Financial Officer of
the Lead Borrower stating that the Payment Conditions have been satisfied,
together with supporting documentation demonstrating satisfaction of the
Payment Conditions, which supporting documentation shall be reasonably
satisfactory to the Administrative Agent; and provided, further
that the Musicland Acquisition shall be deemed a “Permitted Acquisition”.”

 

f.                            The
definition of “Permitted Minority Investment “ in Section 1.01 of the Credit
Agreement is hereby amended by deleting the proviso at the end of such
definition and substituting in its stead the following:

 

“provided, however
if the consideration paid or payable in connection with the proposed Permitted
Minority Investment plus the (i) aggregate consideration paid or payable in
connection with all other Permitted Minority Investments made after the Closing
Date, (ii) the aggregate consideration paid or payable in connection with all
Permitted Acquisitions consummated after the Closing Date (excluding the
Musicland Purchase Price), and (iii) the aggregate sum of all Restricted
Payments made pursuant to Section 6.06 after the Closing Date are in the
aggregate amount equal to or greater than $50,000,000, then as a condition to
the Investment, in addition to the requirements set forth in clauses (a)
through (d) above, (x) the Payment Conditions shall have been satisfied and (y)
the Borrowers shall have delivered to the Administrative Agent a certificate of
a Financial Officer of the Lead Borrower stating that the Payment Conditions
have been satisfied, together with supporting documentation demonstrating
satisfaction of the Payment Conditions, which supporting documentation shall be
reasonably satisfactory to the Administrative Agent.”

 

g.                         The
definition of “Permitted Overadvance” in Section 1.01 of the Credit Agreement
is hereby amended by deleting the clause “ninety (90) consecutive Business Days”
in clause (b)(ii) thereof and substituting the clause “ninety (90) consecutive
calendar days” in its stead.

 

h.                         Section
5.08 (b) of the Credit Agreement is deleted in its entirety and the following
is substituted in its stead:

 

“(b) Each Loan
Party will, and will cause each of the Subsidiaries to, from time to time upon
the request of the Collateral Agent or the Required Lenders through the
Administrative Agent and after reasonable prior notice during normal business
hours, permit any Agent or professionals (including investment bankers, consultants,
accountants, lawyers and appraisers) retained by the Agents to conduct
appraisals, commercial finance examinations and other evaluations, including,
without limitation, of (i) the Borrowers’ practices in the computation of the
Borrowing Base and (ii) the assets included in the Borrowing Base and related
financial information such as, but not limited to, sales, gross margins,
payables,

 

5

 

accruals and
reserves, provided, however, unless a Default or Event of Default
has occurred and is continuing the Agents may cause no more than three (3)
Inventory appraisals and three (3) commercial finance examinations to be
undertaken during any Fiscal Year. The Loan Parties subject to the limitations
set forth below shall pay the reasonable fees and expenses of the Agents or
such professionals with respect to such evaluations and appraisals. The Loan
Parties acknowledge and agree that during any Fiscal Year in which (x) any
Revolving Loans are outstanding and (y) the Cost of the Borrowers’ Eligible
Inventory as reflected on the most recent Borrowing Base Certificate (net of
Inventory Reserves and after giving effect to any proposed Permitted Store
Closures) is less than three (3) times the then Total Commitments, the Loan
Parties shall reimburse the Agents the reasonable cost of up to one (1)
Inventory appraisal and up to one (1) commercial finance examination during
such Fiscal Year; provided, however, during any Fiscal Year in
which Excess Availability is less than thirty percent (30%) of the Total
Commitments, as reflected on the most recent Borrowing Base Certificate at
anytime during such Fiscal Year, the Loan Parties shall reimburse the Agents
the reasonable cost of up to a total of two (2) Inventory appraisals and up to
a total of two (2) commercial finance examinations during such Fiscal Year; provided,
further, however, that the Agents shall be entitled to undertake
such additional commercial finance examinations and Inventory appraisals each
Fiscal Year at the Agents’ own expense. Notwithstanding the foregoing, upon the
occurrence and during the continuance of a Default or Event of Default, the
Loan Parties shall reimburse the Agents for up to a total of three (3)
Inventory appraisals and up to three (3) commercial finance examinations during
any Fiscal Year to be undertaken as the Agents in their discretion deem
necessary or appropriate or as may be required by Applicable Law.”

 

i.                             Section
6.05 (e) of the Credit Agreement is deleted in its entirety and the following
is substituted in its stead:

 

“(e) the sale and
disposition of assets pursuant to the liquidation or closure of the Borrowers’
stores (including, without limitation, the equipment and Inventory therein) in
the ordinary course of business;”

 

j.                             Section
6.06 (a) of the Credit Agreement is hereby amended by deleting the proviso at
the end of such section and substituting in its stead the following:

 

“provided,  further
however, if the payments made in connection with clauses (i), (ii), or
(iii) hereof after the Closing Date, plus the sum of (x) the aggregate
consideration paid or payable in connection with all Permitted Acquisitions
consummated after the Closing Date (excluding the Musicland Purchase Price) and
(y) the aggregate consideration paid or payable in connection with all
Permitted Minority Investments made after the Closing Date are in an aggregate

 

6

 

amount equal to or
greater than $50,000,000, then as a condition to the making of such proposed
payment, (x) the Payment Conditions shall have been satisfied and (y) the
Borrowers shall have delivered to the Administrative Agent a certificate of a
Financial Officer of the Lead Borrower stating that the Payment Conditions have
been satisfied, together with supporting documentation demonstrating
satisfaction of the Payment Conditions, which supporting documentation shall be
reasonably satisfactory to the Administrative Agent.”

 

k.                          Section
9.02 (b) (iv) of the Credit Agreement is deleted in its entirety and the
following is substituted in its stead:

 

“(iv) change
Sections 2.20, 2.22, 2.23 or 2.26 of this Agreement or Section 6.2 of the
Security Agreement, without the Consent of each Lender,”

 

1.                          Section
9.03 (a) of the Credit Agreement is deleted in its entirety and the following
is substituted in its stead:

 

“(a) The Loan
Parties shall jointly and severally pay (i) all reasonable out-of-pocket
expenses incurred by the Agents and their Affiliates, including the reasonable
fees, charges and disbursements of counsel for the Agents, outside consultants
for the Agents, appraisers and for commercial finance examinations permitted
under this Agreement, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of the Loan
Documents or any amendments, modifications or waivers of the provisions thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the
Issuing Bank in connection with the issuance, amendment, renewal or extension
of any Letter of Credit or any demand for payment thereunder, and (iii) all
reasonable out-of-pocket expenses incurred by the Agents, Bank of America, the
Issuing Bank or the Lenders, including the reasonable fees, charges and
disbursements of any counsel and any outside consultants for the Agents, Bank
of America, the Issuing Bank or the Lenders in connection with the Loans made
or Letters of Credit issued hereunder, or in connection with the enforcement or
protection of the rights of the Agents, Bank of America, the Issuing Bank or
the Lenders in connection with the Loan Documents, including their rights under
this Section, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans; provided that
the Lenders who are not the Agents or the Issuing Bank shall be entitled to
reimbursement for no more than one counsel or outside consultant representing
all such Lenders (absent a conflict of interest in which case the Lenders may
engage and be reimbursed for additional counsel or outside consultants).

 

7

 

6.                         Conditions
to Effectiveness. This First Amendment shall not be effective until each of
the following conditions precedent have been fulfilled to the satisfaction of
the Agent:

 

a.                          This
First Amendment shall have been duly executed and delivered by the Lead
Borrower, the other Borrowers, the Facility Guarantors, the Agent and the
Required Lenders. The Agent shall have received a fully executed copy hereof
and of each other document required hereunder, including, without limitation,
Notes executed by each of Movies Plus, Inc. and Record Town Utah, LLC.

 

b.                         All
action on the part of the Lead Borrower, the other Borrowers and the Facility
Guarantors necessary for the valid execution, delivery and performance by such
Persons of this First Amendment shall have been duly and effectively taken. The
Agent shall have received from the Lead Borrower, the other Borrowers and the
Facility Guarantors true copies of their respective certificate of the
resolutions authorizing the transactions described herein, each certified by
their secretary or other appropriate officer to be true and complete.

 

c.                          The Borrowers
shall have paid the Agent all fees due in connection with this First Amendment
and reimbursed the Agent for all costs and expenses to be reimbursed in
connection with this First Amendment, each as set forth in the Fee Letter
between the Borrowers and the Agent dated the date hereof.

 

d.                         No
Default or Event of Default shall have occurred and be continuing.

 

e.                          The
Borrowers shall have provided such additional instruments, documents, and
opinions of counsel to the Agent as the Agent and their counsel may have
reasonably requested.

 

7.                         Miscellaneous.

 

a.                          Except
as provided herein, all terms and conditions of the Credit Agreement and the
other Loan Documents remain in full force and effect. The Lead Borrower, the
other Borrowers and the Facility Guarantors hereby ratify, confirm, and
reaffirm all of the representations, warranties and covenants therein
contained. Without limiting the generality of the foregoing, the Lead Borrower,
the other Borrowers and the Facility Guarantors hereby acknowledge, confirm and
agree that all Collateral shall continue to secure the Obligations as they may
be modified or amended pursuant to this First Amendment or by any future
modifications, amendments, substitutions or renewals of the Credit Agreement.
Each Facility Guarantor hereby (i) ratifies, confirms and reaffirms, all and

 

8

 

singular, the
terms and conditions of, and all warranties and representations set forth in,
their respective Facility Guarantees, (ii) acknowledges, confirms and agrees
that their respective Facility Guarantees remain in full force and effect and
shall in no way be limited or affected by this First Amendment and (iii)
acknowledges and agrees that such Person has no offsets, defenses, or
counterclaims against the Agent or any Lender with respect to such Person’s
Facility Guarantee or otherwise, and to the extent that any of the undersigned
has any such offsets, defenses, or counterclaims, then such Person hereby WAIVES and RELEASES the same.

 

b.                         This First
Amendment may be executed in several counterparts and by each party on a
separate counterpart, each of which when so executed and delivered, each shall
be an original, and all of which together shall constitute one instrument.
Delivery of an executed counterpart of a signature page hereto by telecopy
shall be effective as delivery of a manually executed counterpart hereof.

 

c.                          This
First Amendment expresses the entire understanding of the parties with respect
to the matters set forth herein and supersedes all prior discussions or
negotiations hereon. Any determination that any provision of this First
Amendment or any application hereof is invalid, illegal or unenforceable in any
respect and in any instance shall not effect the validity, legality, or enforceability
of such provision in any other instance, or the validity, legality or
enforceability of any other provisions of this First Amendment.

 

9

 

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be executed and their seals to be hereto affixed as the date first above
written.

 

	
   

  	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD ENTERTAINMENT

  CORPORATION, as Lead Borrower and

  Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MOVIES
  PLUS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN USA, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN UTAH, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  

 

10

 

	
   

  	
   

  	
  TRANS
  WORLD NEW YORK, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  

 

11

 

	
   

  	
   

  	
  TRANS
  WORLD FLORIDA, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FACILITY
  GUARANTORS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEDIA
  LOGIC USA, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Record Town, Inc., its
  sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  

 

12

 

	
   

  	
   

  	
  BANK
  OF AMERICA, N.A., as
  Administrative

  Agent, Collateral Agent, Swingline Lender, Issuing

  Bank and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Sally A. Sheehan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Sally A. Sheehan

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  40 Broad Street, 10th Floor

  Boston, Massachusetts 02109

  Attn: Sally A. Sheehan

  Telephone: (617) 434-4045

  Telecopy: (617) 434-4339

  

 

13

 

	
   

  	
   

  	
  LASALLE
  BANK NATIONAL ASSOCIATION,

  as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Mark Mital

  	
   

  
	
   

  	
   

  	
  Name:

  	
  MARK MITAL

  	
   

  
	
   

  	
   

  	
  Title:

  	
  SENIOR VICE PRESIDENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  135 South LaSalle Street, Suite 1126

  Chicago, Illinois 60603

  Attn: Mark Mital

  Telephone: (312) 904-2747

  Telecopy: (312) 904-6546

  

 

14

 

	
   

  	
   

  	
  JPMORGAN
  CHASE BANK, N.A., as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ James M. Barbato

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James M. Barbato

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:
  One Chase Square; T-25

  Rochester, N.Y. 14643

  Attn: Trans World Client Mgr.

  
	
   

  	
   

  	
  Telephone: (585) 258 -
  6466

  
	
   

  	
   

  	
  Telecopy: (585) 258 -
  7440

  

 

15

 

	
   

  	
   

  	
  FIRST
  NIAGARA BANK, as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Schuyler Tilly

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Schuyler Tilly

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:
  18 Corporate Woods Boulevard

  Suite 100

  Albany, NY 12211

  
	
   

  	
   

  	
  Attn: Schuyler
  Tilly, Corporate Banking

  
	
   

  	
   

  	
  Telephone:
  518-694-3339

  
	
   

  	
   

  	
  Telecopy:
  518-694-3013

  

 

16

 

	
   

  	
   

  	
  SCHEDULE 1

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Additional Commitment
  Lenders

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  — JPMorgan Chase Bank,
  N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  — First Niagara Bank

  

 

17

 

Schedule 1.1 (a)

Lenders and Commitments

 

 

	
  Lender

  	
   

  	
  Commitment

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  70,000,000.00

  	
   

  
	
  LaSalle Bank National Association

  	
   

  	
  $

  	
  25,000,000.00

  	
   

  
	
  JPMorgan Chase Bank, N.A.

  	
   

  	
  $

  	
  25,000,000.00

  	
   

  
	
  First Niagara Bank

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  

 

18

 

JOINDER TO PLEDGE AGREEMENT

 

This Joinder to Pledge Agreement (this “Joinder”) is made as of
this 23rd day of March 2006, by and among (a) each of the Pledgors listed on
the signature pages hereto (the “Existing Pledgors”), (b) Record Town
USA, LLC (“Record Town USA”) and (c) Bank of America, N.A., as
Collateral Agent (in such capacity, the “Collateral Agent”) for the
Secured Parties (as defined in the Pledge Agreement referred to below).

 

W I T N E S S E T H:

 

A.       Reference is hereby made
to (i) the Credit Agreement dated as of January 5, 2006, by and among (a) Trans
World Entertainment Corporation (the “Lead Borrower”), (b) the other
Borrowers party thereto, (c) the Facility Guarantors party thereto, (d) the
Lenders party thereto, (e) Bank of America, N.A., as Issuing Bank and (f) Bank
of America, N.A., as Administrative Agent and Collateral Agent (such Credit
Agreement, as amended by the First Amendment to Credit Agreement, dated as of
March 23, 2006 (the “First Amendment”), is referred to herein as the “Credit
Agreement”), and (ii) the Pledge Agreement dated as of January 5, 2006, by
and among the Existing Pledgors and the Collateral Agent for the benefit of the
Secured Parties (the “Pledge Agreement”). All capitalized terms not
otherwise defined herein shall have the meanings given such terms in the Pledge
Agreement.

 

B.        Pursuant to the Pledge
Agreement, the Existing Pledgors have granted to the Collateral Agent, for the
benefit of the Secured Parties, a continuing security interest in and to the
Pledged Collateral (as defined in the Pledge Agreement).

 

C.        Record Town USA has
formed Record Town Utah, LLC, a New York limited liability company, as a new
Subsidiary, and pursuant to the First Amendment Record Town Utah, LLC has
joined the Credit Agreement as a Borrower thereunder.

 

D.        Pursuant to Section 5.12
of the Credit Agreement, the Loan Parties are required to cause Record Town USA
to pledge the Capital Stock of Record Town Utah, LLC to the Collateral Agent
for the benefit of the Secured Parties pursuant to the Pledge Agreement.

 

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

 

1.                          As
security for the payment and performance, as the case may be, in full of the
Obligations, Record Town USA hereby (i) agrees (a) to be a party to and be
bound by the provisions of the Pledge Agreement and the other Loan Documents as
a “Pledgor” thereunder as if Record Town USA was a signatory to the Pledge
Agreement and was expressly named as a Pledgor therein and (b) to be bound,
jointly and severally, with all of the other Pledgors, by all of the
representations, warranties, covenants and agreements of the Pledgors set forth
in the Pledge Agreement and the other Loan Documents, (ii) transfers, grants,
bargains, sells, conveys, hypothecates, pledges, sets over and delivers

 

 

unto the
Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the benefit of the Secured
Parties, a security interest in all of Record Town USA’s right, title and
interest in, to and under: (a) the membership interests in Record Town Utah,
LLC listed on Schedule A hereto and the securities, if any, representing
all such membership interests (the “Additional Pledged Securities”), (b)
subject to Section 6 of the Pledge Agreement, all dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed or distributable, in respect of, or in exchange for, the Additional
Pledged Securities, (c) subject to Section 6 of the Pledge Agreement, all
rights and privileges of Record Town USA with respect to the Additional Pledged
Securities and (d) all proceeds of any of the foregoing (collectively, the “Additional
Pledged Collateral”), TO HAVE AND TO HOLD the Additional Pledged
Collateral, together with all right, title, interest, powers, privileges and
preferences pertaining or incidental thereto, unto the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties and (iii) agrees
to deliver to the Collateral Agent any and all certificates or other
instruments or documents representing the Additional Pledged Securities and to
execute and deliver to the Collateral Agent such other instruments, documents
and agreements as the Collateral Agent may reasonably request.

 

2.                          Record
Town USA and the Existing Pledgors hereby (i) agree that Schedule A
attached hereto shall be attached to, and hereafter constitute a part of, Schedule
I to the Pledge Agreement and (ii) agree that the Additional Pledged
Securities constitute “Pledged Securities” for all purposes of the Pledge
Agreement, (iii) agree that the Additional Pledged Collateral constitutes “Pledged
Collateral” for all purposes of the Pledge Agreement and (iii) represent,
warrant and covenant to and with the Collateral Agent that each of the
representations and warranties contained in Section 4 of the Pledge Agreement
are true and correct in all material respects on the date hereof after giving
effect to the addition of Schedule A hereto to Schedule 1 of the Pledge
Agreement.

 

3.                          All
of the terms and conditions of the Pledge Agreement, as supplemented herein,
remain in full force and effect.

 

4.                          This
Joinder, which may be executed in multiple counterparts, constitutes the entire
agreement of the parties regarding the matters contained herein and shall not
be modified by any prior oral or written discussions.

 

5.                          It
is intended that this Joinder take effect as an instrument under seal as of the
date first written above.

 

[Signature Pages Follow]

 

 

	
  COLLATERAL
  AGENT:

  	
  BANK
  OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sally A. Sheehan

  	
   

  
	
   

  	
   

  	
  Sally A. Sheehan

  Managing Director

  

 

5

 

IN WITNESS WHEREOF, the parties hereto have caused this Joinder to be
executed by their duly authorized officers under seal as of the date first
appearing above.

 

	
   

  	
   

  	
  PLEDGORS:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD ENTERTAINMENT

  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title: 

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD NEW YORK, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN USA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

 

SCHEDULE A

 

Record Town Utah, LLC does not have any authorized, issued or
outstanding membership interests of any class or any commitments to issue any
membership interests of any class or any securities convertible into or
exchangeable for any membership interests of any class except as otherwise
stated in this Schedule I.

 

	
  Issuer

  	
   

  	
  Record

  Owner

  	
   

  	
  Type of Interest

  held by Record

  Owner

  	
   

  	
  Percentage of

  Membership

  Interests held by

  Record Owner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Record
  Town Utah, LLC

  	
   

  	
  Record
  Town USA, LLC

  	
   

  	
  Limited
  liability company membership interest

  	
   

  	
  100%

  

 

 

JOINDER TO SECURITY AGREEMENT

 

This Joinder to Security Agreement (this “Joinder”) is made as
of this 23rd day of March 2006 by and among (a) each of the Grantors listed on
the signature pages hereto (the “Existing Grantors”), (b) Record Town
Utah, LLC (“Record Town Utah”) and (c) Bank of America, N.A., as
Collateral Agent (in such capacity, the “Collateral Agent”) for the
Secured Parties (as defined in the Security Agreement referred to below).

 

W I T N E S S E T H:

 

A.       Reference is hereby made
to (i) the Credit Agreement dated as of January 5, 2006, by and among (a) Trans
World Entertainment Corporation (the “Lead Borrower”), (b) the other
Borrowers party thereto, (c) the Facility Guarantors party thereto, (d) the
Lenders party thereto, (e) Bank of America, N.A., as Issuing Bank and (f) Bank
of America, N.A., as Administrative Agent and Collateral Agent (such Credit
Agreement, as amended by the First Amendment to Credit Agreement, dated as of
March 23, 2006 (the “First Amendment”), is referred to herein as the “Credit
Agreement”), and (ii) the Security Agreement dated as of January 5, 2006,
by and among the Existing Grantors and the Collateral Agent for the benefit of
the Secured Parties (the “Security Agreement”). All capitalized terms
not otherwise defined herein shall have the meanings given such terms in the
Security Agreement.

 

B.        Pursuant to the Security
Agreement, the Existing Grantors have granted to the Collateral Agent, for the
benefit of the Secured Parties, a continuing security interest in and to the
Collateral (as defined in the Security Agreement).

 

C.        Pursuant to the First
Amendment, Record Town Utah has joined the Credit Agreement as a Borrower
thereunder.

 

D.        Pursuant to Section 5.12
of the Credit Agreement, the Loan Parties are required to cause Record Town
Utah to join the Security Agreement.

 

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

 

1.                          As security for the payment and performance, as the case may be, in full
of the Obligations, Record Town Utah hereby (i) agrees (a) to be a party
to and be bound by the provisions of the Security Agreement and the other Loan
Documents as a “Grantor” thereunder as if Record Town Utah was a signatory to
the Security Agreement and was expressly named as a Grantor therein and (b) to
be bound, jointly and severally, with all of the other Grantors, by all of the
representations, warranties, covenants and agreements of the Grantors set forth
in the Security Agreement and the other Loan Documents and (ii) bargains,
assigns, mortgages, pledges, hypothecates and transfers to the Collateral
Agent, its successors and assigns, for the benefit of the Secured Parties, and
hereby grants to the Collateral Agent, its successors and assigns, for the
benefit of the Secured Parties, a

 

1

 

security interest
in, all of Record Town Utah’s right, title and interest in, to and under the
Collateral. Without limiting the foregoing, Record Town Utah hereby designates
the Collateral Agent as Record Town Utah’s true and lawful attorney,
exercisable by the Collateral Agent whether or not an Event of Default exists,
with full power of substitution, at the Collateral Agent’s option, to file one
or more Financing Statements, continuation statements, or to sign other
documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by Record Town Utah, without the
signature of Record Town Utah (Record Town Utah hereby appointing the
Collateral Agent as such Person’s attorney to sign such Person’s name to any
such instrument or document, whether or not an Event of Default exists), and
naming Record Town Utah as debtor and the Collateral Agent as secured party.

 

2.                          All
of the terms and conditions of the Security Agreement, as supplemented herein,
remain in full force and effect.

 

3.                          This
Joinder, which may be executed in multiple counterparts, constitutes the entire
agreement of the parties regarding the matters contained herein and shall not
be modified by any prior oral or written discussions.

 

4.                          It
is intended that this Joinder take effect as an instrument under seal as of the
date first written above.

 

[Signature Pages Follow]

 

2

 

IN WITNESS WHEREOF, the parties hereto have caused this Joinder to be
executed by their duly authorized officers under seal as of the date first
appearing above.

 

 

	
   

  	
   

  	
  GRANTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD ENTERTAINMENT

  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN USA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD NEW YORK, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD FLORIDA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

 

	
   

  	
   

  	
  MOVIES
  PLUS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEDIA
  LOGIC USA, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Record Town, Inc., its
  sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN UTAH, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Record Town USA, LLC,
  its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

 

	
  COLLATERAL
  AGENT:

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sally A. Sheehan

  	
   

  
	
   

  	
   

  	
  Sally A. Sheehan

  Managing Director

  

 

 

REVOLVING NOTE

 

	
  $70,000,000.00

  	
   

  	
  March 23, 2006

  	
   

  

 

FOR VALUE RECEIVED, the undersigned (singly, a “Borrower”, and
collectively, the “Borrowers”, together with successors and assigns),
jointly and severally promise to pay to the order of BANK OF AMERICA, N.A.
(hereinafter, together with its successors in title and assigns, the “Lender”),
c/o Bank of America, N.A., 40 Broad Street, Boston, Massachusetts 02109, the
principal sum of SEVENTY MILLION DOLLARS ($70,000,000.00), or, if less, the
aggregate unpaid principal balance of Revolving Loans made by the Lender to or
for the account of any Borrower pursuant to the Credit Agreement dated January
5, 2006 (as such may be amended, modified, supplemented or restated, the “Credit
Agreement”) by, among others, (i) Trans World Entertainment Corporation, as
Lead Borrower, (ii) the other Borrowers party thereto, (iii) the Facility
Guarantors party thereto, (iv) the Lenders named therein, (v) Bank of America,
N.A., as Administrative Agent for the Lenders and as Collateral Agent for the
Secured Parties (in such capacities, the “Agent”), and (vi) Bank of
America, N.A., as Swingline Lender and Issuing Bank, with interest, fees,
expenses, and costs at the rate and payable in the manner stated therein.

 

This is a “Revolving Note” to which reference is made in the Credit
Agreement and is subject to all terms and provisions thereof. The principal of,
and interest on, this Revolving Note shall be payable at the times, in the
manner, and in the amounts as provided in the Credit Agreement and shall be
subject to prepayment and acceleration as provided therein. Borrowers shall
have the right to borrow, re-pay and re-borrow amounts hereunder pursuant to
the terms and subject to the conditions of the Credit Agreement Capitalized
terms used herein and not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.

 

The Agent’s books and records concerning the Revolving Loans, the
accrual of interest thereon, and the repayment of such Revolving Loans, shall
be prima facie evidence of the indebtedness hereunder, absent manifest error.

 

No delay or omission by the Agent or the Lender in exercising or
enforcing any of Agent’s or such Lender’s powers, rights, privileges, remedies,
or discretions hereunder shall operate as a waiver thereof on that occasion nor
on any other occasion. No waiver of any Event of Default shall operate as a
waiver of any other Event of Default, nor as a continuing waiver.

 

Each Borrower, and each endorser and guarantor of this Revolving Note,
waives presentment, demand, notice, and protest, and also waives any delay on
the part of the holder hereof. Each Borrower assents to any extension or other
indulgence (including, without limitation, the release or substitution of
Collateral) permitted by any Agent and/or the Lender with respect to this
Revolving Note and/or any Collateral or any extension or other indulgence with
respect to any other liability or any collateral given to secure any other
liability of any Borrower or any other Person obligated on account of this
Revolving Note.

 

1

 

This Revolving Note shall be binding upon each Borrower, and each
endorser and guarantor hereof, and upon their respective successors, assigns,
and representatives, and shall inure to the benefit of the Lender and its
successors, endorsees, and assigns.

 

The liabilities of each Borrower, and of any endorser or guarantor of
this Revolving Note, are joint and several, provided,
however, the release by Agent or the Lender of any one or more such
Persons shall not release any other Person obligated on account of this
Revolving Note. Each reference in this Revolving Note to each Borrower, any
endorser, and any guarantor, is to such Person individually and also to all
such Persons jointly. No Person obligated on account of this Revolving Note may
seek contribution from any other Person also obligated unless and until all
liabilities, obligations and indebtedness to the Lender of the Person from whom
contribution is sought have been satisfied in full.

 

Each Borrower agrees that any suit for the enforcement of this
Revolving Note or any other Loan Document may be brought in any New York state
or federal court sitting in New York County as the Agent may elect in its sole
discretion and consents to the non-exclusive jurisdiction of such courts. Each
Borrower hereby waives any objection which it may now or hereafter have to the
venue of any such suit or any such court or that such suit is brought in an
inconvenient forum. Each Borrower agrees that any action commenced by any
Borrower asserting any claim or counterclaim arising under or in connection
with this Revolving Note or any other Loan Document shall be brought solely in
any New York state or federal court sitting in New York County as the Agent may
elect in its sole discretion and consents to the exclusive jurisdiction of such
courts with respect to any such action.

 

THIS REVOLVING NOTE IS DELIVERED TO THE LENDER AT THE OFFICES OF THE
AGENT IN BOSTON, MASSACHUSETTS, AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.

 

Each Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Agent and the Lender, in the
establishment and maintenance of their respective relationship with the Borrowers
contemplated by this Revolving Note, is relying thereon. EACH BORROWER, EACH
GUARANTOR, ENDORSER AND SURETY, AND THE LENDER BY ITS ACCEPTANCE HEREOF, HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A JURY
IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH ANY SUCH BORROWER, GUARANTOR,
ENDORSER, SURETY OR LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST ANY SUCH BORROWER, GUARANTOR, ENDORSER,
SURETY OR LENDER OR IN WHICH ANY SUCH BORROWER, GUARANTOR, ENDORSER, SURETY OR
LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES
DIRECTLY OR INDIRECTLY OUT OF OR RELATES TO THIS REVOLVING NOTE, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER

 

2

 

PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS REVOLVING NOTE
BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

 

3

 

IN WITNESS WHEREOF, the Borrowers have caused this Revolving Note to be
duly executed as of the date set forth above.

 

 

	
   

  	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD ENTERTAINMENT CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN USA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD NEW YORK, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD FLORIDA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

4

 

	
   

  	
   

  	
  MOVIES
  PLUS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN UTAH, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

5

 

	
  REVOLVING NOTE

  

 

	
  $25,000,000.00

  	
   

  	
  March 23, 2006

  	
   

  

 

FOR VALUE RECEIVED, the undersigned (singly, a “Borrower”, and
collectively, the “Borrowers”, together with successors and assigns),
jointly and severally promise to pay to the order of LASALLE BANK NATIONAL
ASSOCIATION (hereinafter, together with its successors in title and assigns,
the “Lender”), c/o Bank of America, N.A., 40 Broad Street, Boston,
Massachusetts 02109, the principal sum of TWENTY FIVE MILLION DOLLARS
($25,000,000.00), or, if less, the aggregate unpaid principal balance of
Revolving Loans made by the Lender to or for the account of any Borrower
pursuant to the Credit Agreement dated January 5, 2006 (as such may be amended,
modified, supplemented or restated, the “Credit Agreement”) by, among
others, (i) Trans World Entertainment Corporation, as Lead Borrower, (ii) the
other Borrowers party thereto, (iii) the Facility Guarantors party thereto,
(iv) the Lenders named therein, (v) Bank of America, N.A., as Administrative
Agent for the Lenders and as Collateral Agent for the Secured Parties (in such
capacities, the “Agent”), and (vi) Bank of America, N.A., as Swingline
Lender and Issuing Bank, with interest, fees, expenses, and costs at the rate
and payable in the manner stated therein.

 

This is a “Revolving Note” to which reference is made in the Credit
Agreement and is subject to all terms and provisions thereof. The principal of,
and interest on, this Revolving Note shall be payable at the times, in the
manner, and in the amounts as provided in the Credit Agreement and shall be
subject to prepayment and acceleration as provided therein. Borrowers shall
have the right to borrow, re-pay and re-borrow amounts hereunder pursuant to
the terms and subject to the conditions of the Credit Agreement. Capitalized
terms used herein and not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.

 

The Agent’s books and records concerning the Revolving Loans, the
accrual of interest thereon, and the repayment of such Revolving Loans, shall
be prima facie evidence of the indebtedness hereunder, absent manifest error.

 

No delay or omission by the Agent or the Lender in exercising or
enforcing any of Agent’s or such Lender’s powers, rights, privileges, remedies,
or discretions hereunder shall operate as a waiver thereof on that occasion nor
on any other occasion. No waiver of any Event of Default shall operate as a
waiver of any other Event of Default, nor as a continuing waiver.

 

Each Borrower, and each endorser and guarantor of this Revolving Note,
waives presentment, demand, notice, and protest, and also waives any delay on
the part of the holder hereof. Each Borrower assents to any extension or other
indulgence (including, without limitation, the release or substitution of
Collateral) permitted by any Agent and/or the Lender with respect to this
Revolving Note and/or any Collateral or any extension or other indulgence

 

1

 

with respect to
any other liability or any collateral given to secure any other liability of
any Borrower or any other Person obligated on account of this Revolving Note.

 

This Revolving Note shall be binding upon each Borrower, and each
endorser and guarantor hereof, and upon their respective successors, assigns, and
representatives, and shall inure to the benefit of the Lender and its
successors, endorsees, and assigns.

 

The liabilities of each Borrower, and of any endorser or guarantor of
this Revolving Note, are joint and several, provided,
however, the release by
Agent or the Lender of any one or more such Persons shall not release any other
Person obligated on account of this Revolving Note. Each reference in this
Revolving Note to each Borrower, any endorser, and any guarantor, is to such
Person individually and also to all such Persons jointly. No Person obligated
on account of this Revolving Note may seek contribution from any other Person
also obligated unless and until all liabilities, obligations and indebtedness
to the Lender of the Person from whom contribution is sought have been
satisfied in full.

 

Each Borrower agrees that any suit for the enforcement of this
Revolving Note or any other Loan Document may be brought in any New York state
or federal court sitting in New York County as the Agent may elect in its sole
discretion and consents to the non-exclusive jurisdiction of such courts. Each
Borrower hereby waives any objection which it may now or hereafter have to the
venue of any such suit or any such court or that such suit is brought in an
inconvenient forum. Each Borrower agrees that any action commenced by any
Borrower asserting any claim or counterclaim arising under or in connection
with this Revolving Note or any other Loan Document shall be brought solely in
any New York state or federal court sitting in New York County as the Agent may
elect in its sole discretion and consents to the exclusive jurisdiction of such
courts with respect to any such action.

 

THIS REVOLVING NOTE IS DELIVERED TO THE LENDER AT THE OFFICES OF THE
AGENT IN BOSTON, MASSACHUSETTS, AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.

 

Each Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Agent and the Lender, in the
establishment and maintenance of their respective relationship with the
Borrowers contemplated by this Revolving Note, is relying thereon. EACH
BORROWER, EACH GUARANTOR, ENDORSER AND SURETY, AND THE LENDER BY ITS ACCEPTANCE
HEREOF, HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH ANY SUCH
BORROWER, GUARANTOR, ENDORSER, SURETY OR LENDER IS OR BECOMES A PARTY (WHETHER
SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY SUCH BORROWER,
GUARANTOR, ENDORSER, SURETY OR LENDER OR IN WHICH ANY SUCH BORROWER, GUARANTOR,
ENDORSER, SURETY OR LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR
CONTROVERSY ARISES DIRECTLY OR INDIRECTLY OUT OF OR RELATES TO THIS REVOLVING
NOTE, ANY OTHER LOAN

 

2

 

DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY) EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS REVOLVING NOTE BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

 

3

 

IN WITNESS WHEREOF, the Borrowers have caused this Revolving Note to be
duly executed as of the date set forth above.

 

	
   

  	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD ENTERTAINMENT

  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN USA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD NEW YORK, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD FLORIDA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

4

 

	
   

  	
   

  	
  MOVIES
  PLUS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN UTAH, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

5

 

REVOLVING NOTE

 

	
  $25,000,000.00

  	
   

  	
  March 23, 2006

  	
   

  

 

FOR VALUE RECEIVED, the undersigned (singly, a “Borrower”, and
collectively, the “Borrowers”, together with successors and assigns),
jointly and severally promise to pay to the order of JPMORGAN CHASE BANK, N.A.
(hereinafter, together with its successors in title and assigns, the “Lender”),
c/o Bank of America, N.A., 40 Broad Street, Boston, Massachusetts 02109, the
principal sum of TWENTY FIVE MILLION DOLLARS ($25,000,000.00), or, if less, the
aggregate unpaid principal balance of Revolving Loans made by the Lender to or
for the account of any Borrower pursuant to the Credit Agreement dated January
5, 2006 (as such may be amended, modified, supplemented or restated, the “Credit
Agreement”) by, among others, (i) Trans World Entertainment Corporation, as
Lead Borrower, (ii) the other Borrowers party thereto, (iii) the Facility
Guarantors party thereto, (iv) the Lenders named therein, (v) Bank of America,
N.A., as Administrative Agent for the Lenders and as Collateral Agent for the
Secured Parties (in such capacities, the “Agent”), and (vi) Bank of
America, N.A., as Swingline Lender and Issuing Bank, with interest, fees,
expenses, and costs at the rate and payable in the manner stated therein.

 

This is a “Revolving Note” to which reference is made in the Credit
Agreement and is subject to all terms and provisions thereof. The principal of,
and interest on, this Revolving Note shall be payable at the times, in the
manner, and in the amounts as provided in the Credit Agreement and shall be
subject to prepayment and acceleration as provided therein. Borrowers shall
have the right to borrow, re-pay and re-borrow amounts hereunder pursuant to
the terms and subject to the conditions of the Credit Agreement. Capitalized
terms used herein and not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.

 

The Agent’s books and records concerning the Revolving Loans, the
accrual of interest thereon, and the repayment of such Revolving Loans, shall
be prima facie evidence of the indebtedness hereunder, absent manifest error.

 

No delay or omission by the Agent or the Lender in exercising or
enforcing any of Agent’s or such Lender’s powers, rights, privileges, remedies,
or discretions hereunder shall operate as a waiver thereof on that occasion nor
on any other occasion. No waiver of any Event of Default shall operate as a
waiver of any other Event of Default, nor as a continuing waiver.

 

Each Borrower, and each endorser and guarantor of this Revolving Note,
waives presentment, demand, notice, and protest, and also waives any delay on
the part of the holder hereof. Each Borrower assents to any extension or other
indulgence (including, without limitation, the release or substitution of
Collateral) permitted by any Agent and/or the Lender with respect to this
Revolving Note and/or any Collateral or any extension or other indulgence

 

1

 

with respect to
any other liability or any collateral given to secure any other liability of
any Borrower or any other Person obligated on account of this Revolving Note.

 

This Revolving Note shall be binding upon each Borrower, and each
endorser and guarantor hereof, and upon their respective successors, assigns,
and representatives, and shall inure to the benefit of the Lender and its
successors, endorsees, and assigns.

 

The liabilities of each Borrower, and of any endorser or guarantor of
this Revolving Note, are joint and several, provided,
however, the release by Agent or the Lender
of any one or more such Persons shall not release any other Person obligated on
account of this Revolving Note. Each reference in this Revolving Note to each
Borrower, any endorser, and any guarantor, is to such Person individually and
also to all such Persons jointly. No Person obligated on account of this
Revolving Note may seek contribution from any other Person also obligated
unless and until all liabilities, obligations and indebtedness to the Lender of
the Person from whom contribution is sought have been satisfied in full.

 

Each Borrower agrees that any suit for the enforcement of this
Revolving Note or any other Loan Document may be brought in any New York state
or federal court sitting in New York County as the Agent may elect in its sole
discretion and consents to the non-exclusive jurisdiction of such courts. Each
Borrower hereby waives any objection which it may now or hereafter have to the
venue of any such suit or any such court or that such suit is brought in an
inconvenient forum. Each Borrower agrees that any action commenced by any
Borrower asserting any claim or counterclaim arising under or in connection
with this Revolving Note or any other Loan Document shall be brought solely in
any New York state or federal court sitting in New York County as the Agent may
elect in its sole discretion and consents to the exclusive jurisdiction of such
courts with respect to any such action.

 

THIS REVOLVING NOTE IS DELIVERED TO THE LENDER AT THE OFFICES OF THE
AGENT IN BOSTON, MASSACHUSETTS, AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.

 

Each Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Agent and the Lender, in the
establishment and maintenance of their respective relationship with the
Borrowers contemplated by this Revolving Note, is relying thereon. EACH
BORROWER, EACH GUARANTOR, ENDORSER AND SURETY, AND THE LENDER BY ITS ACCEPTANCE
HEREOF, HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH ANY SUCH
BORROWER, GUARANTOR, ENDORSER, SURETY OR LENDER IS OR BECOMES A PARTY (WHETHER
SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY SUCH BORROWER,
GUARANTOR, ENDORSER, SURETY OR LENDER OR IN WHICH ANY SUCH BORROWER, GUARANTOR,
ENDORSER, SURETY OR LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR
CONTROVERSY ARISES DIRECTLY OR INDIRECTLY OUT OF OR RELATES TO THIS REVOLVING
NOTE, ANY OTHER LOAN

 

2

 

DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS REVOLVING NOTE BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

 

3

 

IN WITNESS WHEREOF, the Borrowers have caused this Revolving Note to be
duly executed as of the date set forth above.

 

	
   

  	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD ENTERTAINMENT

  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN USA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD NEW YORK, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD FLORIDA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

4

 

	
   

  	
   

  	
  MOVIES
  PLUS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN UTAH, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  

 

5

 

REVOLVING NOTE

 

	
  $10,000,000.00

  	
   

  	
  March
  23, 2006

  	
   

  

 

FOR VALUE RECEIVED, the undersigned (singly, a “Borrower”, and
collectively, the “Borrowers”, together with successors and assigns),
jointly and severally promise to pay to the order of FIRST NIAGARA BANK
(hereinafter, together with its successors in title and assigns, the “Lender”),
c/o Bank of America, N.A., 40 Broad Street, Boston, Massachusetts 02109, the
principal sum of TEN MILLION DOLLARS ($10,000,000.00), or, if less, the
aggregate unpaid principal balance of Revolving Loans made by the Lender to or
for the account of any Borrower pursuant to the Credit Agreement dated January
5, 2006 (as such may be amended, modified, supplemented or restated, the “Credit
Agreement”) by, among others, (i) Trans World Entertainment Corporation, as
Lead Borrower, (ii) the other Borrowers party thereto, (iii) the Facility
Guarantors party thereto, (iv) the Lenders named therein, (v) Bank of America,
N.A., as Administrative Agent for the Lenders and as Collateral Agent for the
Secured Parties (in such capacities, the “Agent”), and (vi) Bank of
America, N.A., as Swingline Lender and Issuing Bank, with interest, fees,
expenses, and costs at the rate and payable in the manner stated therein.

 

This is a “Revolving Note” to which reference is made in the Credit
Agreement and is subject to all terms and provisions thereof. The principal of,
and interest on, this Revolving Note shall be payable at the times, in the
manner, and in the amounts as provided in the Credit Agreement and shall be
subject to prepayment and acceleration as provided therein. Borrowers shall
have the right to borrow, re-pay and re-borrow amounts hereunder pursuant to
the terms and subject to the conditions of the Credit Agreement. Capitalized
terms used herein and not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.

 

The Agent’s books and records concerning the Revolving Loans, the
accrual of interest thereon, and the repayment of such Revolving Loans, shall
be prima facie evidence of the indebtedness hereunder, absent manifest error.

 

No delay or omission by the Agent or the Lender in exercising or
enforcing any of Agent’s or such Lender’s powers, rights, privileges, remedies,
or discretions hereunder shall operate as a waiver thereof on that occasion nor
on any other occasion. No waiver of any Event of Default shall operate as a
waiver of any other Event of Default, nor as a continuing waiver.

 

Each Borrower, and each endorser and guarantor of this Revolving Note,
waives presentment, demand, notice, and protest, and also waives any delay on
the part of the holder hereof. Each Borrower assents to any extension or other
indulgence (including, without limitation, the release or substitution of
Collateral) permitted by any Agent and/or the Lender with respect to this
Revolving Note and/or any Collateral or any extension or other indulgence

 

1

 

with respect to
any other liability or any collateral given to secure any other liability of
any Borrower or any other Person obligated on account of this Revolving Note.

 

This Revolving Note shall be binding upon each Borrower, and each
endorser and guarantor hereof, and upon their respective successors, assigns,
and representatives, and shall inure to the benefit of the Lender and its
successors, endorsees, and assigns.

 

The liabilities of each Borrower, and of any endorser or guarantor of
this Revolving Note, are joint and several, provided,
however, the release by Agent or the Lender of any one or more such
Persons shall not release any other Person obligated on account of this
Revolving Note. Each reference in this Revolving Note to each Borrower, any
endorser, and any guarantor, is to such Person individually and also to all
such Persons jointly. No Person obligated on account of this Revolving Note may
seek contribution from any other Person also obligated unless and until all
liabilities, obligations and indebtedness to the Lender of the Person from whom
contribution is sought have been satisfied in full.

 

Each Borrower agrees that any suit for the enforcement of this
Revolving Note or any other Loan Document may be brought in any New York state
or federal court sitting in New York County as the Agent may elect in its sole
discretion and consents to the non-exclusive jurisdiction of such courts. Each
Borrower hereby waives any objection which it may now or hereafter have to the
venue of any such suit or any such court or that such suit is brought in an
inconvenient forum. Each Borrower agrees that any action commenced by any
Borrower asserting any claim or counterclaim arising under or in connection
with this Revolving Note or any other Loan Document shall be brought solely in
any New York state or federal court sitting in New York County as the Agent may
elect in its sole discretion and consents to the exclusive jurisdiction of such
courts with respect to any such action.

 

THIS REVOLVING NOTE IS DELIVERED TO THE LENDER AT THE OFFICES OF THE
AGENT IN BOSTON, MASSACHUSETTS, AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.

 

Each Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Agent and the Lender, in the
establishment and maintenance of their respective relationship with the
Borrowers contemplated by this Revolving Note, is relying thereon. EACH
BORROWER, EACH GUARANTOR, ENDORSER AND SURETY, AND THE LENDER BY ITS ACCEPTANCE
HEREOF, HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH ANY SUCH
BORROWER, GUARANTOR, ENDORSER, SURETY OR LENDER IS OR BECOMES A PARTY (WHETHER
SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY SUCH BORROWER,
GUARANTOR, ENDORSER, SURETY OR LENDER OR IN WHICH ANY SUCH BORROWER, GUARANTOR,
ENDORSER, SURETY OR LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR
CONTROVERSY ARISES DIRECTLY OR INDIRECTLY OUT OF OR RELATES TO THIS REVOLVING
NOTE, ANY OTHER LOAN

 

2

 

DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS REVOLVING NOTE BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

 

3

 

IN WITNESS WHEREOF, the Borrowers have caused this Revolving Note to be
duly executed as of the date set forth above.

 

	
   

  	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD ENTERTAINMENT

  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN USA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD NEW YORK, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD FLORIDA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

4

 

	
   

  	
   

  	
  MOVIES
  PLUS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN UTAH, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

5

 

OFFICER’S CLOSING AND SOLVENCY CERTIFICATE

 

Reference is made to the Credit Agreement dated as of January 5, 2006
(the “Credit Agreement”), as amended by the First Amendment (the “First
Amendment”), dated as of March 23, 2006 (as such may be further amended,
modified, supplemented or restated hereafter, the “Amended Credit Agreement”)
by, among others, (i) Trans World Entertainment Corporation, as Lead Borrower,
(ii) the other Borrowers party thereto, (iii) the Facility Guarantors party
thereto, (iv) the Lenders named therein, (v) Bank of America, N.A., as
Administrative Agent for the Lenders and as Collateral Agent for the Secured
Parties (in such capacities, the “Agent”), and (vi) Bank of America,
N.A., as Swingline Lender and Issuing Bank. Capitalized terms used herein and
not defined herein shall have the meanings assigned to such terms in the
Amended Credit Agreement.

 

Pursuant to the provisions of Section 6.e of the First Amendment, the
undersigned, in his capacity as the Senior Vice President, Chief Financial
Officer and Treasurer of Trans World Entertainment Corporation, Record Town,
Inc., Record Town USA, LLC, Trans World New York, LLC, Trans World Florida,
LLC, and Movies Plus, Inc., the Senior Vice President, Chief Financial Officer
and Treasurer of the sole member of Media Logic USA, LLC, and the Executive
Vice President, CFO and Secretary of Record Town Utah, LLC, hereby certifies to
the Agent that, to the best of his knowledge after due investigation, as of
this day:

 

a.                         All
representations and warranties made by each of the Loan Parties in the Amended
Credit Agreement, and in any other Loan Document to which any of the Loan Parties
is a party, are true and complete in all material respects;

 

b.                        No
event has occurred or failed to occur, which occurrence or which failure to
occur constitutes, or solely with the passage of time or the giving of notice
(or both) would constitute, a Default or Event of Default; and

 

c.                         The
Loan Parties are each Solvent.

 

IN WITNESS WHEREOF, the undersigned has executed this certificate as
the officer set forth above of each Loan Party as of the 23rd day of
March, 2006.

 

	
   

  	
  TRANS WORLD
  ENTERTAINMENT CORPORATION

  RECORD TOWN, INC.

  RECORD
  TOWN USA, LLC

  RECORD TOWN UTAH, LLC

  TRANS WORLD NEW YORK, LLC

  TRANS WORLD FLORIDA, LLC

  MEDIA LOGIC USA, LLC, by its sole member

  MOVIES PLUS, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
  Name:

  	
  John J. Sullivan

  
					

 

 

March 23, 2006

 

Trans World
Entertainment Corporation

38 Corporate
Circle

Albany, New York
12203

Attn:       John J. Sullivan

Chief Financial Officer

 

Re:  First Amendment to Senior
Secured Revolving Credit Facility with Bank of America, N.A. as Agent

 

Dear
Mr. Sullivan:

 

Reference is made to the First Amendment to Credit Agreement dated as
of even date herewith (as amended, supplemented or otherwise modified from time
to time, the “First Amendment”), by, among others, (i) Trans World
Entertainment Corporation, as Lead Borrower, (ii) the other Borrowers party
thereto, (iii) the Facility Guarantors party thereto, (iv) the Lenders named
therein, (v) Bank of America, N.A., as Administrative Agent for the Lenders and
as Collateral Agent for the Secured Parties (in such capacities, the “Agent”),
and (vi) Bank of America, N.A., as Swingline Lender and Issuing Bank.
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the First Amendment.

 

In connection with, and in consideration for, the agreements contained
in the First Amendment and to induce the Agent to enter into the First
Amendment, the Loan Parties jointly and severally agree as follows:

 

1.                          The
Borrowers shall pay the Agent, for the Agent’s own account, an arrangement fee
(the “Arrangement Fee”) in an amount equal to .10% of the Commitment
Increase (i.e. $30,000,000 x .10% = $30,000.00). The Arrangement Fee shall be
fully earned and paid by the Borrowers in full on the date of the First
Amendment. The Arrangement Fee shall not be subject to refund or rebate under
any circumstances. The Agent, without prior notice to or consent from the
Borrowers, may allocate and pay over a portion of the Arrangement Fee to a
Lender or Lenders, in such amounts as the Agent in its discretion determines.

 

2.                          The
Borrowers shall reimburse the Agent and the Lenders for all expenses incurred
in connection with the First Amendment, including, without limitation,
reasonable attorneys’ fees (to the extent such attorneys’ fees exceed
$5,000.00) and costs and expenses.

 

3.                          The Loan
Parties shall execute such instruments, documents and agreements as the Agent
and its counsel may reasonably require in order to implement the terms of this
Fee Letter. The Loan Parties agree to keep the terms of this Fee Letter confidential
and not to disclose same to any other person or entity (including, without
limitation, any proposed or actual lender or participant in the credit
facilities), without the Agent’s prior written consent.

 

 

This Fee Letter is subject to, and is a part of, and is specifically
incorporated, in the First Amendment, which documents together constitute one
entire agreement. Without limiting the foregoing, as set forth in the First
Amendment, this Fee Letter shall be governed by and construed in accordance
with, the laws of the State of New York.

 

This Fee Letter is intended to be solely for the benefit of the parties
hereto and is not intended to confer any benefits upon, or create any rights in
favor of, any person other than the parties hereto.

 

This Fee Letter may be executed in any number of counterparts, each of
which shall be an original, and all of which, when taken together, shall
constitute one agreement. Delivery of an executed signature page of this Fee
Letter by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.

 

[Remainder of page intentionally left blank]

 

2

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  BANK
  OF AMERICA, N.A., as Administrative

  Agent and Collateral Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sally A. Sheehan

  	
   

  
	
   

  	
  Name:

  	
  Sally
  A. Sheehan

  
	
   

  	
  Title:

  	
  Managing
  Director

  

 

 

	
   

  	
   

  	
  The foregoing is agreed
  to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD ENTERTAINMENT CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MOVIES
  PLUS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RECORD
  TOWN USA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD NEW YORK, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANS
  WORLD FLORIDA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President, Chief Financial Officer

  and Secretary

  

 

 

	
   

  	
   

  	
  FACILITY
  GUARANTORS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEDIA
  LOGIC USA, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John J. Sullivan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  J. Sullivan

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President,
  Chief Financial Officer

  and Secretary

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}]]