Document:

EXHIBIT 10.19

BARE ESCENTUALS, INC.

INDEMNIFICATION AGREEMENT

This
Indemnification Agreement (“Agreement”) is made as of ___________, 2006
by and between Bare Escentuals, Inc., a Delaware corporation (the “Company”), and ________________ (“Indemnitee”).

RECITALS

WHEREAS, highly competent persons have become more
reluctant to serve corporations as directors, officers or in other capacities
unless they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “Board”) has
determined that, in order to attract and retain qualified individuals, the Company
will attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities.  Although the
furnishing of such insurance has been a customary and widespread practice among
United States-based corporations and other business enterprises, the Company
believes that, given current market conditions and trends, such insurance may
be available to it in the future only at higher premiums and with more
exclusions.  At the same time, directors,
officers and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself.  The certificate of incorporation of the
Company require indemnification of the officers and directors of the
Company.  Indemnitee also may be entitled
to indemnification pursuant to the General Corporation Law of the State of
Delaware (“DGCL”).  The certificate of incorporation and the DGCL
expressly provide that the indemnification provisions set forth therein are not
exclusive, and thereby contemplate that contracts may be entered into between
the Company and members of the Board, officers and other persons with respect
to indemnification;

WHEREAS, the uncertainties relating to such insurance
and to indemnification have increased the difficulty of attracting and
retaining such persons;

WHEREAS, the Board has determined that the increased
difficulty in attracting and retaining such persons is detrimental to the best
interests of the Company’s stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection
in the future;

WHEREAS, it is reasonable, prudent and necessary for
the Company contractually to obligate itself to indemnify, and to advance
expenses on behalf of, such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so indemnified;

 

WHEREAS, this Agreement is a supplement to and in
furtherance of the certificate of incorporation and bylaws of the Company and
any resolutions adopted pursuant thereto and shall not be deemed a substitute
therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection
available under the Company’s certificate of incorporation, bylaws and
insurance as adequate in the present circumstances, and may not be willing to
serve as an officer or director without adequate protection, and the Company
desires Indemnitee to serve in such capacity. 
Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he or
she be so indemnified.

NOW, THEREFORE, in consideration of the premises and
the covenants contained herein, the Company and Indemnitee do hereby covenant
and agree as follows:

1.             SERVICES TO THE COMPANY.  Indemnitee will serve or continue to serve as
an officer, director or key employee of the Company for so long as Indemnitee
is duly elected or appointed or until Indemnitee tenders his or her resignation.

2.             DEFINITIONS.  As used in this Agreement:

(a)           “Affiliate”
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified.

(b)           “Beneficial Owner” shall have the meaning
given to such term in Rule 13d-3 under the Exchange Act; provided, however,
that Beneficial Owner shall exclude any Person otherwise becoming a Beneficial
Owner by reason of the stockholders of the Company approving a merger of the
Company with another entity.

(c)           A “Change in Control” shall be deemed to
occur upon the earliest to occur after the date of this Agreement of any of the
following events:

(i)            Acquisition of Stock by Third
Party.  Any Person (as defined below)
other than a group comprised of Affiliates of both JH Partners, LLC and
Berkshire Partners, LLC is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 50.1% or more of the
combined voting power of the Company’s then outstanding securities;

(ii)           Change in Board of Directors.  During any period of two (2) consecutive
years (not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in Sections
2(b)(i), 2(b)(iii) or 2(b)(iv)) whose election by the Board or nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
of the members of the Board;

 

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(iii)          Corporate Transactions.  The effective date of a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50.1% of the combined voting
power of the voting securities of the surviving entity outstanding immediately
after such merger or consolidation and with the power to elect at least a
majority of the board of directors or other governing body of such surviving
entity; or

(iv)          Liquidation.  The approval by the stockholders of the
Company of a complete liquidation of the Company or an agreement or series of
agreements for the sale or disposition by the Company of all or substantially
all of the Company’s assets.

(d)           “Corporate Status” describes the status of a
person who is or was a director, officer, trustee, general partner, managing
member, fiduciary, employee or agent of the Company or of any other Enterprise
(as defined below) which such person is or was serving at the request of the
Company.

(e)           “Disinterested Director” means a director of
the Company who is not and was not a party to the Proceeding in respect of
which indemnification is sought by Indemnitee.

(f)            “Enterprise” shall mean the Company and
any other corporation, limited liability company, partnership, joint venture,
trust, employee benefit plan or other enterprise of which Indemnitee is or was
serving at the request of the Company as a director, officer, trustee, general
partner, managing member, fiduciary, employee or agent.

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

(h)           “Expenses” shall include all reasonable
attorneys’ fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and binding costs,
telephone charges, postage, delivery service fees and all other disbursements
or expenses of the type customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, being or preparing
to be a witness in, or otherwise participating in, a Proceeding.  Expenses also shall include Expenses incurred
in connection with any appeal resulting from any Proceeding, including, without
limitation, the premium, security for and other costs relating to any cost
bond, supersedeas bond or other appeal bond or its equivalent.  Expenses, however, shall not include amounts
paid in settlement by Indemnitee or the amount of judgments or fines against
Indemnitee.

(i)            “Independent Counsel” means a law firm,
or a member of a law firm, that is experienced in matters of corporation law
and neither presently is, nor in the past five years has been, retained to
represent:  (i) the Company or Indemnitee
in any matter material to either such party (other than with respect to matters
concerning Indemnitee under this Agreement, or of other indemnitees under
similar indemnification agreements), or (ii) any other party to the Proceeding
giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Counsel”
shall not include any person who, under the 

 

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applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee’s rights
under this Agreement.  The Company agrees
to pay the reasonable fees and expenses of the Independent Counsel referred to
above and to fully indemnify such counsel against any and all Expenses, claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto.

(j)            “Person” shall have the meaning set forth
in Sections 13(d) and 14(d) of the Exchange Act; provided, however,
that the term Person shall exclude (i) the Company, (ii) any trustee or other
fiduciary holding securities under an employee benefit plan of the Company and
(iii) any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of
stock of the Company.

(k)           The term “Proceeding” shall
include any threatened, pending or completed action, suit, arbitration,
alternate dispute resolution mechanism, investigation, inquiry, administrative
hearing or any other actual, threatened or completed proceeding, whether
brought in the right of the Company or otherwise and whether of a civil,
criminal, administrative or investigative nature, in which Indemnitee was, is
or will be involved as a party or otherwise by reason of the fact that
Indemnitee is or was a director or officer of the Company, by reason of any
action taken (or failure to act) by him or her or of any action (or failure to
act) on his or her part while acting as a director or officer of the Company,
or by reason of the fact that he or she is or was serving at the request of the
Company as a director, officer, trustee, general partner, manager, member,
fiduciary, employee or agent of any other Enterprise, in each case whether or
not serving in such capacity at the time any liability or expense is incurred
for which indemnification, reimbursement or advancement of expenses can be
provided under this Agreement.

(l)            References to “other enterprise”
shall include employee benefit plans; references to “fines” shall include
any excise tax assessed against Indemnitee with respect to his or her
administration of any employee benefit plan; references to “serving at the request of the
Company” shall include any service as a director, officer,
employee or agent of the Company which imposes duties on, or involves services
by, such director, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he or she reasonably believed to be in the best interests
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner “not opposed to the best interests of the Company”
as referred to in this Agreement.

3.             INDEMNITY IN THIRD-PARTY
PROCEEDINGS.  The Company
shall indemnify Indemnitee in accordance with the provisions of this Section 3
if Indemnitee is, or is threatened to be made, a party to or a participant (as
a witness or otherwise) in any Proceeding, other than a Proceeding by or in the
right of the Company to procure a judgment in its favor.  Pursuant to this Section 3, Indemnitee shall
be indemnified against all Expenses, judgments, fines, penalties and amounts
paid in settlement (including all interest, assessments and other charges paid
or payable in connection with or in respect of such Expenses, judgments, fines,
penalties and amounts paid in settlement) actually and reasonably incurred by
Indemnitee or on his or her behalf in connection with such Proceeding or any
claim, issue or matter therein, if Indemnitee acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best

 

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interests of the Company and, in the case of a
criminal proceeding, he or she had no reasonable cause to believe that his or
her conduct was unlawful.

4.             INDEMNITY IN PROCEEDINGS BY OR IN
THE RIGHT OF THE COMPANY.  
The Company shall indemnify Indemnitee in accordance with the provisions
of this Section 4 if Indemnitee is, or is threatened to be made, a party to or
a participant (as a witness or otherwise) in any Proceeding by or in the right
of the Company to procure a judgment in its favor.  Pursuant to this Section 4, Indemnitee shall
be indemnified against all Expenses actually and reasonably incurred by
Indemnitee or on his or her behalf in connection with such Proceeding or any
claim, issue or matter therein, if Indemnitee acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company.  No
indemnification for Expenses shall be made under this Section 4 in respect of
any claim, issue or matter as to which Indemnitee shall have been finally
adjudged by a court to be liable to the Company, unless and only to the extent
that any court in which the Proceeding was brought or the Delaware Court of
Chancery shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnification.

5.             INDEMNIFICATION FOR EXPENSES OF A
PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL.  Notwithstanding any other provisions of this
Agreement, to the extent that Indemnitee is a party to (or a participant in)
and is successful, on the merits or otherwise, in any Proceeding or in defense
of any claim, issue or matter therein, in whole or in part, the Company shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by
him or her in connection therewith.  If
Indemnitee is not wholly successful in such Proceeding but is successful, on
the merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or her or on his or her behalf
in connection with each successfully resolved claim, issue or matter.  If Indemnitee is not wholly successful in
such Proceeding, the Company also shall indemnify Indemnitee against all
Expenses reasonably incurred in connection with a claim, issue or matter
related to any claim, issue or matter on which Indemnitee was successful.  For purposes of this Section and without
limitation, the termination of any claim, issue or matter in such a Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.

6.             INDEMNIFICATION FOR EXPENSES OF A
WITNESS.  Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding to which Indemnitee is not
a party, he shall be indemnified against all Expenses actually and reasonably
incurred by him or her or on his or her behalf in connection therewith.

7.             ADDITIONAL INDEMNIFICATION.

(a)           Notwithstanding any limitation in
Sections 3, 4 or 5, the Company shall indemnify Indemnitee to the fullest extent
permitted by law if Indemnitee is a party to or threatened to be made a party
to any Proceeding (including a Proceeding by or in the right of the Company to
procure a judgment in its favor) against all Expenses, judgments, fines,
penalties and amounts paid in settlement (including all interest, assessments
and other charges paid or 

 

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payable in connection with or in respect of such
Expenses, judgments, fines, penalties and amounts paid in settlement) actually
and reasonably incurred by Indemnitee in connection with the Proceeding.  No indemnity shall be made under this Section
7(a) on account of Indemnitee’s conduct which constitutes a breach of
Indemnitee’s duty of loyalty to the Company or its stockholders or is an act or
omission not in good faith or which involves intentional misconduct or a
knowing violation of the law.

(b)           For purposes of Section 7(a), the
meaning of the phrase “to
the fullest extent permitted by law” shall include, but not be
limited to:

(i)            to the fullest extent permitted by
the provision of the DGCL that authorizes or contemplates additional
indemnification by agreement, or the corresponding provision of any amendment
to or replacement of the DGCL; and

(ii)           to the fullest extent authorized or
permitted by any amendments to or replacements of the DGCL adopted after the
date of this Agreement that increase the extent to which a corporation may
indemnify its officers and directors.

8.             EXCLUSIONS.  Notwithstanding any other provision in
this Agreement, the Company shall not be obligated under this Agreement to make
any indemnity in connection with any claim made against Indemnitee:

(a)           for which payment has actually been
received by or on behalf of Indemnitee under any insurance policy or other
indemnity provision, except with respect to any excess beyond the amount
actually received under any insurance policy or other indemnity provision;

(b)           for an accounting of profits made
from the purchase and sale (or sale and purchase) by Indemnitee of securities
of the Company within the meaning of Section 16(b) of the Exchange Act or
similar provisions of state statutory law or common law; or

(c)           except as otherwise provided in
Sections 13(d)-(f) hereof, prior to a Change in Control, in connection with any
Proceeding (or any part of any Proceeding) initiated by Indemnitee, including
any Proceeding (or any part of any Proceeding) initiated by Indemnitee against
the Company or its directors, officers, employees or other indemnitees, unless
(i) the Board of Directors of the Company authorized the Proceeding (or any
part of any Proceeding) prior to its initiation or (ii) the Company provides
the indemnification, in its sole discretion, pursuant to the powers vested in
the Company under applicable law.

9.             ADVANCES OF EXPENSES; DEFENSE OF CLAIM.

(a)           Notwithstanding any provision of this
Agreement to the contrary, the Company shall advance the Expenses incurred by
Indemnitee in connection with any Proceeding within ten (10) days after the
receipt by the Company of a statement or statements requesting such advances
from time to time, whether prior to or after final disposition of any
Proceeding.  Advances shall be unsecured
and interest free.  Advances shall be
made without regard to Indemnitee’s ability to repay the expenses and without
regard to Indemnitee’s ultimate entitlement to indemnification under the other
provisions of this Agreement.  Advances
shall 

 

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include any and all reasonable Expenses incurred
pursuing an action to enforce this right of advancement, including Expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed.  Indemnitee shall
qualify for advances solely upon the execution and delivery to the Company of
an undertaking providing that Indemnitee undertakes to repay the advance to the
extent that it is ultimately determined that Indemnitee is not entitled to be
indemnified by the Company.  This Section
9(a) shall not apply to any claim made by Indemnitee for which indemnity is
excluded pursuant to Section 8.

(b)           The Company will be entitled to
participate in the Proceeding at its own expense.

(c)           The Company shall not settle any
action, claim or Proceeding (in whole or in part) which would impose any
Expense, judgment, fine, penalty or limitation on Indemnitee without Indemnitee’s
prior written consent.

10.           PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION.

(a)           Within sixty (60) days after the
actual receipt by Indemnitee of notice that he or she is a party to or a
participant (as a witness or otherwise) in any Proceeding, Indemnitee shall
submit to the Company a written notice identifying the Proceeding.  The omission by Indemnitee to notify the
Company will not relieve the Company from any liability which it may have to
Indemnitee (i) otherwise than under this Agreement and (ii) under this
Agreement only to the extent the Company can establish that such omission to
notify resulted in actual prejudice to the Company.

(b)           Indemnitee shall thereafter deliver
to the Company a written application to indemnify Indemnitee in accordance with
this Agreement.  Such application(s) may
be delivered from time to time and at such time(s) as Indemnitee deems
appropriate in his or her sole discretion. 
Following such a written application for indemnification by Indemnitee,
Indemnitee’s entitlement to indemnification shall be determined in accordance
with Section 11(a) of this Agreement.

11.           PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.

(a)           Upon written request by Indemnitee
for indemnification pursuant to Section 10(b), a determination, if required by
applicable law, with respect to Indemnitee’s entitlement thereto shall be made
in the specific case:  (i) by a majority
vote of the Disinterested Directors, even though less than a quorum of the
Board; or (ii) if so requested by Indemnitee, in his or her sole discretion, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee.  If it is so
determined that Indemnitee is entitled to indemnification, payment to Indemnitee
shall be made within ten (10) days after such determination.  Indemnitee shall reasonably cooperate with
the person, persons or entity making such determination with respect to
Indemnitee’s entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination.  Any costs or expenses
(including attorneys’ fees and disbursements) incurred by Indemnitee in so 

 

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cooperating with the person, persons
or entity making such determination shall be borne by the Company (irrespective
of the determination as to Indemnitee’s entitlement to indemnification) and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(b)           In the event the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 11(a) hereof, the Independent Counsel shall be selected as provided in
this Section 11(b).  If a Change in
Control shall not have occurred, the Independent Counsel shall be selected by
the Board of Directors, and the Company shall give written notice to Indemnitee
advising him of the identity of the Independent Counsel so selected.  If a Change in Control shall have occurred,
the Independent Counsel shall be selected by Indemnitee (unless Indemnitee
shall request that such selection be made by the Board of Directors, in which
event the preceding sentence shall apply), and Indemnitee shall give written
notice to the Company advising it of the identity of the Independent Counsel so
selected.  In either event, Indemnitee or
the Company, as the case may be, may, within 10 days after such written notice
of selection shall have been received, deliver to the Company or to Indemnitee,
as the case may be, a written objection to such selection; provided, however,
that such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of “Independent Counsel” as
defined in Section 2 of this Agreement, and the objection shall set forth
with particularity the factual basis of such assertion.  Absent a proper and timely objection, the
person so selected shall act as Independent Counsel.  If such written objection is so made and
substantiated, the Independent Counsel so selected may not serve as Independent
Counsel unless and until such objection is withdrawn or a court of competent jurisdiction
has determined that such objection is without merit.  If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to
Section 10(b) hereof, no Independent Counsel shall have been selected and
not objected to, either the Company or Indemnitee may petition a court of
competent jurisdiction (the “Court”) for resolution of any objection which shall have
been made by the Company or Indemnitee to the other’s selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the Court or by such other person as the Court shall designate, and the
person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 11(a) hereof.  Upon the due commencement of any judicial
proceeding or arbitration pursuant to Section 13(a) of this Agreement,
Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).

(c)           The Company agrees to pay the
reasonable fees of Independent Counsel and to fully indemnify such Independent
Counsel against any and all Expenses, claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto.

12.           PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.

(a)           In making a determination with
respect to entitlement to indemnification hereunder, the person or persons or
entity making such determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 10(b) of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the 

 

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making by any person, persons or
entity of any determination contrary to that presumption.  Neither the failure of the Company (including
by the Board or Independent Counsel) to have made a determination prior to the
commencement of any action pursuant to this Agreement that indemnification is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct, nor an actual determination by the Company (including by the Board
or Independent Counsel) that Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct.

(b)           If the person, persons or entity
empowered or selected under Section 11 of this Agreement to determine whether
Indemnitee is entitled to indemnification shall not have made a determination
within sixty (60) days after receipt by the Company of the request therefor,
the requisite determination of entitlement to indemnification shall be deemed
to have been made and Indemnitee shall be entitled to such indemnification,
absent (i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee’s statement not materially
misleading, in connection with the request for indemnification or (ii) a
prohibition of such indemnification under applicable law; provided, however,
that such 60-day period shall be extended for a reasonable time, not to exceed
an additional thirty (30) days, if the person, persons or entity making the
determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto.

(c)           The termination of any Proceeding or
of any claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of nolo  contendere or its equivalent,
shall not (except as otherwise expressly provided in this Agreement) of itself
adversely affect the right of Indemnitee to indemnification or create a
presumption that Indemnitee did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable
cause to believe that his or her conduct was unlawful.

(d)           For purposes of any determination of
good faith, Indemnitee shall be deemed to have acted in good faith if
Indemnitee’s action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected by the Enterprise.  The provisions of this Section 12(d) shall
not be deemed to be exclusive or to limit in any way the other circumstances in
which Indemnitee may be deemed or found to have met the applicable standard of
conduct set forth in this Agreement.

(e)           The knowledge and/or actions, or
failure to act, of any other director, trustee, partner, managing member,
fiduciary, officer, agent or employee of the Enterprise shall not be imputed to
Indemnitee for purposes of determining the right to indemnification under this
Agreement.

 

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13.           REMEDIES OF INDEMNITEE.

(a)           In the event that (i) a determination
is made pursuant to Section 11 of this Agreement that Indemnitee is not
entitled to indemnification under this Agreement, (ii) advancement of
Expenses is not timely made pursuant to Section 9 of this Agreement, (iii)
no determination of entitlement to indemnification shall have been made
pursuant to Section 11(a) of this Agreement within the time period specified in
Section 12(b) of this Agreement, (iv) payment of indemnification is not made
pursuant to Section 5, 6, 7 or the last sentence of Section 11(a) of this
Agreement within ten (10) days after receipt by the Company of a written
request therefor or (v) payment of indemnification pursuant to Section 3 or
Section 4 of this Agreement is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to indemnification,
Indemnitee shall be entitled to an adjudication by a court of his or her
entitlement to such indemnification or advancement of Expenses.  Alternatively, Indemnitee, at his or her
option, may seek an award in arbitration to be conducted by a single arbitrator
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association.  The Company shall not
oppose Indemnitee’s right to seek any such adjudication or award in
arbitration.

(b)           In the event that a determination
shall have been made pursuant to Section 11(a) of this Agreement that
Indemnitee is not entitled to indemnification, any judicial proceeding or
arbitration commenced pursuant to this Section 13 shall be conducted in
all respects as a de  novo trial, or arbitration, on the merits
and Indemnitee shall not be prejudiced by reason of that adverse
determination.  In any judicial
proceeding or arbitration commenced pursuant to this Section 13, the Company
shall have the burden of proving Indemnitee is not entitled to indemnification
or advancement of Expenses, as the case may be, and the Company may not refer
to or introduce into evidence any determination pursuant to Section 11(a) of
this Agreement adverse to Indemnitee for any purpose.  If Indemnitee commences a judicial proceeding
or arbitration pursuant to this Section 13, Indemnitee shall not be required to
reimburse the Company for any advances pursuant to Section 9 until a final
determination is made with respect to Indemnitee’s entitlement to
indemnification (as to which all rights of appeal have been exhausted or
lapsed).

(c)           If a determination shall have been
made pursuant to Section 11(a) of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination
in any judicial proceeding or arbitration commenced pursuant to this
Section 13, absent (i) a misstatement by Indemnitee of a material fact, or
an omission of a material fact necessary to make Indemnitee’s statement not
materially misleading, in connection with the request for indemnification or
(ii) a prohibition of such indemnification under applicable law.

(d)           In the event that Indemnitee,
pursuant to this Section 13, seeks a judicial adjudication of or an award in
arbitration to enforce his or her rights under, or to recover damages for
breach of, this Agreement, Indemnitee shall be entitled to recover from the
Company, and shall be indemnified by the Company against, any and all Expenses
actually and reasonably incurred by him or her in such judicial adjudication or
arbitration.  If it shall be determined
in said judicial adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of Expenses
sought, Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any 

 

10

and all Expenses reasonably incurred
by Indemnitee in connection with such judicial adjudication or arbitration.

(e)           The Company shall be precluded from
asserting in any judicial proceeding or arbitration commenced pursuant to this
Section 13 that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.

(f)            The Company shall indemnify
Indemnitee to the fullest extent permitted by law against all Expenses and, if
requested by Indemnitee, shall (within ten (10) days after the Company’s
receipt of such written request) advance such Expenses to Indemnitee, which are
incurred by Indemnitee in connection with any judicial proceeding or
arbitration brought by Indemnitee for (i) indemnification or advances of
Expenses by the Company under this Agreement or any other agreement or
provision of the Company’s certificate of incorporation or bylaws now or
hereafter in effect or (ii) recovery or advances under any insurance policy
maintained by any person for the benefit of Indemnitee, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance or insurance recovery, as the case may be.

14.           NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.

(a)           The rights of indemnification and to
receive advancement of Expenses as provided by this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may at any time be
entitled under applicable law, the Company’s certificate of incorporation, the
Company’s bylaws, any agreement, a vote of stockholders, a resolution of
directors or otherwise.  No amendment,
alteration or repeal of this Agreement or of any provision hereof shall limit
or restrict any right of Indemnitee under this Agreement in respect of any
action taken or omitted by such Indemnitee in his Corporate Status prior to
such amendment, alteration or repeal.  To
the extent that a change in Delaware law, whether by statute or judicial
decision, permits greater indemnification or advancement of Expenses than would
be afforded currently under the Company’s bylaws and this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change. 
No right or remedy herein conferred is intended to be exclusive of any
other right or remedy, and every other right and remedy shall be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law, in equity or otherwise. 
The assertion or employment of any right or remedy hereunder or
otherwise, shall not prevent the concurrent assertion or employment of any
other right or remedy.

(b)           To the extent that the Company
maintains an insurance policy or policies providing liability insurance for
directors, officers, trustees, partners, managing members, fiduciaries,
employees or agents of the Company or of any other Enterprise which such person
serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, trustee, partner, managing
member, fiduciary, officer, employee or agent under such policy or
policies.  If, at the time the Company
receives notice from any source of a Proceeding as to which Indemnitee is a
party or a participant (as a witness or otherwise), the Company has director
and officer liability insurance in effect, the Company shall give prompt notice
of such 

 

11

Proceeding to the insurers in
accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of
Indemnitee, all amounts payable as a result of such Proceeding in accordance
with the terms of such policies.

(c)           In the event of any payment under
this Agreement, the Company shall be subrogated to the extent of such payment
to all of the rights of recovery of Indemnitee, who shall execute all papers
required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the Company to bring
suit to enforce such rights.

(d)           The Company shall not be liable under
this Agreement to make any payment of amounts otherwise indemnifiable hereunder
(or for which advancement is provided hereunder) if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.

(e)           The Company’s obligation to indemnify
or advance Expenses hereunder to Indemnitee who is or was serving at the
request of the Company as a director, officer, trustee, partner, managing
member, fiduciary, employee or agent of any other Enterprise shall be reduced
by any amount Indemnitee has actually received as indemnification or
advancement of expenses from such Enterprise.

15.           DURATION OF AGREEMENT.  This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director or officer of the Company or as a
director, officer, trustee, partner, managing member, fiduciary, employee or
agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which Indemnitee served at the request of the
Company; or (b) one (1) year after the final termination of any Proceeding
(including any rights of appeal thereto) then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any Proceeding commenced by Indemnitee pursuant to
Section 13 of this Agreement relating thereto (including any rights of
appeal of any Section 13 Proceeding).

16.           SEVERABILITY.  If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, each portion of
any Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby and shall remain
enforceable to the fullest extent permitted by law; (b) such provision or
provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.

 

12

17.           ENFORCEMENT AND BINDING EFFECT.

(a)           The Company expressly confirms and
agrees that it has entered into this Agreement and assumed the obligations
imposed on it hereby in order to induce Indemnitee to serve as a director or
officer of the Company, and the Company acknowledges that Indemnitee is relying
upon this Agreement in serving as a director or officer of the Company.

(b)           This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral, written and
implied, between the parties hereto with respect to the subject matter hereof.

(c)           The indemnification and advancement
of expenses provided by or granted pursuant to this Agreement shall apply to
Indemnitee’s service as an officer, director or key employee of the Company
prior to the date of this Agreement.

(d)           The indemnification and advancement
of expenses provided by or granted pursuant to this Agreement shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.

18.           MODIFICATION AND WAIVER.  No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by the parties
hereto.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions of this Agreement nor shall any waiver constitute a
continuing waiver.

19.           NOTICE BY INDEMNITEE.  Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.  The failure of
Indemnitee to so notify the Company shall not relieve the Company of any
obligation which it may have to Indemnitee under this Agreement or otherwise.

20.           NOTICES.  All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) if delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed or (b) mailed
by certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:

(a)           If to Indemnitee, at the address
indicated on the signature page of this Agreement, or such other address as
Indemnitee shall provide in writing to the Company.

(b)           If to the Company to:

Bare Escentuals, Inc.

71 Stevenson Street, 22nd Floor

San Francisco, CA 94105

 

13

or to any other address
as may have been furnished to Indemnitee in writing by the Company.

21.           CONTRIBUTION.  To the fullest extent permissible under
applicable law, if the indemnification provided for in this Agreement is
unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of
indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be
paid in settlement and/or for Expenses, in connection with any claim relating
to an indemnifiable event under this Agreement, in such proportion as is deemed
fair and reasonable in light of all of the circumstances of such Proceeding in
order to reflect: (i) the relative benefits received by the Company and
Indemnitee as a result of the event(s) and/or transaction(s) giving rise to
such Proceeding; and/or (ii) the relative fault of the Company (and its
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s).

22.           APPLICABLE LAW AND CONSENT TO
JURISDICTION.  This Agreement
and the legal relations among the parties shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware, without
regard to its conflict of laws rules. 
Except with respect to any arbitration commenced by Indemnitee pursuant
to Section 13(a) of this Agreement, the Company and Indemnitee hereby
irrevocably and unconditionally (i) agree that any action or proceeding arising
out of or in connection with this Agreement shall be brought only in the
Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other
state or federal court in the United States of America or any court in any
other country, (ii) consent to submit to the exclusive jurisdiction of the
Delaware Court for purposes of any action or proceeding arising out of or in
connection with this Agreement, (iii) appoint, to the extent such party is not
a resident of the State of Delaware, irrevocably Corporation Service Company,
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, as its agent in
the State of Delaware as such party’s agent for acceptance of legal process in
connection with any such action or proceeding against such party with the same
legal force and validity as if served upon such party personally within the
State of Delaware, (iv) waive any objection to the laying of venue of any such
action or proceeding in the Delaware Court and (v) waive, and agree not to
plead or to make, any claim that any such action or proceeding brought in the
Delaware Court has been brought in an improper or inconvenient forum.

23.           IDENTICAL COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.  Only one such counterpart signed by the party
against whom enforceability is sought needs to be produced to evidence the
existence of this Agreement.

24.           MISCELLANEOUS.  Use of the masculine pronoun shall be deemed
to include usage of the feminine pronoun where appropriate.  The headings of the sections and paragraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

14

 

IN WITNESS
WHEREOF, the
parties have caused this INDEMNIFICATION AGREEMENT to be signed as of the day and year
first above written.

 

	
  BARE ESCENTUALS, INC., 

  	
  INDEMNITEE

  
	
  a Delaware
  corporation

  	
   

  
	
   

  	
   

  
	
  BY:

  	
   

  	
  BY:

  	
   

  
	
  NAME:

  	
   

  	
  NAME:

  	
   

  
	
  TITLE:

  	
   

  	
  TITLE:

  	
   

  

 

 

15Exhibit 10.20

 

CREDIT
AGREEMENT

DATED
AS OF FEBRUARY 18, 2005

AMONG

MD BEAUTY, INC.,

as Company,

STB BEAUTY, INC.,

as Holdings,

THE LENDERS LISTED HEREIN,

as Lenders,

and

BNP PARIBAS,

as Administrative Agent

 

BNP PARIBAS

Lead Arranger

CIBC WORLD MARKETS CORP.

Syndication Agent

 

 

TABLE OF CONTENTS

	
   

  	
   

  	
   

  	
   

  	
  Page No.

  
	
  SECTION
  1.

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  
	
  1.1

  	
   

  	
  Certain Defined Terms

  	
   

  	
  1

  
	
  1.2

  	
   

  	
  Accounting Terms; Utilization of GAAP for Purposes of Calculations
  Under Agreement

  	
   

  	
  36

  
	
  1.3

  	
   

  	
  Other Definitional Provisions and Rules of Construction

  	
   

  	
  36

  
	
  SECTION
  2.

  	
   

  	
  AMOUNTS AND TERMS OF COMMITMENTS AND LOANS

  	
   

  	
  37

  
	
  2.1

  	
   

  	
  Commitments; Making of Loans; the Register; Optional Notes

  	
   

  	
  37

  
	
  2.2

  	
   

  	
  Interest on the Loans

  	
   

  	
  44

  
	
  2.3

  	
   

  	
  Fees

  	
   

  	
  47

  
	
  2.4

  	
   

  	
  Repayments, Prepayments and Reductions in Revolving Loan Commitments;
  General Provisions Regarding Payments; Application of Proceeds of Collateral
  and Payments Under Guaranties

  	
   

  	
  48

  
	
  2.5

  	
   

  	
  Use of Proceeds

  	
   

  	
  56

  
	
  2.6

  	
   

  	
  Special Provisions Governing LIBOR Loans

  	
   

  	
  56

  
	
  2.7

  	
   

  	
  Increased Costs; Taxes; Capital Adequacy

  	
   

  	
  58

  
	
  2.8

  	
   

  	
  Statement of Lenders; Obligation of Lenders and Issuing Lenders to
  Mitigate

  	
   

  	
  62

  
	
  2.9

  	
   

  	
  Replacement of a Lender

  	
   

  	
  63

  
	
  SECTION
  3.

  	
   

  	
  LETTERS OF CREDIT

  	
   

  	
  64

  
	
  3.1

  	
   

  	
  Issuance of Letters of Credit and Lenders’ Purchase of Participations
  Therein

  	
   

  	
  64

  
	
  3.2

  	
   

  	
  Letter of Credit Fees

  	
   

  	
  66

  
	
  3.3

  	
   

  	
  Drawings and Reimbursement of Amounts Paid Under Letters of Credit

  	
   

  	
  67

  
	
  3.4

  	
   

  	
  Obligations Absolute

  	
   

  	
  70

  
	
  3.5

  	
   

  	
  Nature of Issuing Lenders’ Duties

  	
   

  	
  71

  
	
  SECTION
  4.

  	
   

  	
  CONDITIONS TO LOANS AND LETTERS OF CREDIT

  	
   

  	
  71

  
	
  4.1

  	
   

  	
  Conditions to Term Loans and Initial Revolving Loans and Swing Line
  Loans

  	
   

  	
  72

  
	
  4.2

  	
   

  	
  Conditions to All Loans

  	
   

  	
  79

  
	
  4.3

  	
   

  	
  Conditions to Letters of Credit

  	
   

  	
  80

  
	
  SECTION
  5.

  	
   

  	
  COMPANY’S REPRESENTATIONS AND WARRANTIES

  	
   

  	
  81

  

 

 

	
  5.1

  	
   

  	
  Organization, Powers, Qualification, Good Standing, Business and
  Subsidiaries

  	
   

  	
  81

  
	
  5.2

  	
   

  	
  Authorization of Borrowing, etc

  	
   

  	
  82

  
	
  5.3

  	
   

  	
  Financial Condition

  	
   

  	
  83

  
	
  5.4

  	
   

  	
  No Material Adverse Change; No Restricted Junior Payments

  	
   

  	
  83

  
	
  5.5

  	
   

  	
  Title to Properties; Liens; Real Property; Intellectual Property

  	
   

  	
  83

  
	
  5.6

  	
   

  	
  Litigation; Adverse Facts

  	
   

  	
  84

  
	
  5.7

  	
   

  	
  Payment of Taxes

  	
   

  	
  84

  
	
  5.8

  	
   

  	
  Performance of Agreements; Material Contracts

  	
   

  	
  85

  
	
  5.9

  	
   

  	
  Governmental Regulation

  	
   

  	
  85

  
	
  5.10

  	
   

  	
  Securities Activities

  	
   

  	
  85

  
	
  5.11

  	
   

  	
  Employee Benefit Plans

  	
   

  	
  86

  
	
  5.12

  	
   

  	
  Certain Fees

  	
   

  	
  86

  
	
  5.13

  	
   

  	
  Environmental Protection

  	
   

  	
  86

  
	
  5.14

  	
   

  	
  Employee Matters

  	
   

  	
  87

  
	
  5.15

  	
   

  	
  Solvency

  	
   

  	
  87

  
	
  5.16

  	
   

  	
  Matters Relating to Collateral

  	
   

  	
  87

  
	
  5.17

  	
   

  	
  Disclosure

  	
   

  	
  88

  
	
  5.18

  	
   

  	
  First Lien Claims

  	
   

  	
  89

  
	
  SECTION
  6.

  	
   

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
  89

  
	
  6.1

  	
   

  	
  Financial Statements and Other Reports

  	
   

  	
  89

  
	
  6.2

  	
   

  	
  Existence, etc

  	
   

  	
  94

  
	
  6.3

  	
   

  	
  Payment of Taxes and Claims; Tax

  	
   

  	
  95

  
	
  6.4

  	
   

  	
  Maintenance of Properties; Insurance; Application of Net Insurance/
  Condemnation Proceeds

  	
   

  	
  95

  
	
  6.5

  	
   

  	
  Inspection Rights; Lender Meeting

  	
   

  	
  97

  
	
  6.6

  	
   

  	
  Compliance with Laws, etc

  	
   

  	
  97

  
	
  6.7

  	
   

  	
  Environmental Matters

  	
   

  	
  98

  
	
  6.8

  	
   

  	
  Execution of Subsidiary Guaranty and Personal Property Collateral
  Documents After the Closing Date

  	
   

  	
  99

  
	
  6.9

  	
   

  	
  Matters Relating to Additional Real Property Collateral

  	
   

  	
  100

  
	
  6.10

  	
   

  	
  Interest Rate Protection

  	
   

  	
  101

  
	
  6.11

  	
   

  	
  Deposit Accounts, Securities Accounts and Cash Management Systems

  	
   

  	
  101

  

 

2

 

	
  6.12

  	
   

  	
  Collateral Assignment of Life Insurance Policy

  	
   

  	
  102

  
	
  6.13

  	
   

  	
  Financial Assistance to Second Lien Term Loans.

  	
   

  	
  102

  
	
  SECTION
  7.

  	
   

  	
  NEGATIVE COVENANTS

  	
   

  	
  102

  
	
  7.1

  	
   

  	
  Indebtedness

  	
   

  	
  102

  
	
  7.2

  	
   

  	
  Liens and Related Matters

  	
   

  	
  104

  
	
  7.3

  	
   

  	
  Investments; Acquisitions

  	
   

  	
  106

  
	
  7.4

  	
   

  	
  Contingent Obligations

  	
   

  	
  108

  
	
  7.5

  	
   

  	
  Restricted Junior Payments

  	
   

  	
  109

  
	
  7.6

  	
   

  	
  Financial Covenants

  	
   

  	
  110

  
	
  7.7

  	
   

  	
  Restriction on Fundamental Changes; Asset Sales

  	
   

  	
  112

  
	
  7.8

  	
   

  	
  Consolidated Capital Expenditures

  	
   

  	
  113

  
	
  7.9

  	
   

  	
  Transactions with Shareholders and Affiliates

  	
   

  	
  113

  
	
  7.10

  	
   

  	
  Sales and Lease-Backs

  	
   

  	
  114

  
	
  7.11

  	
   

  	
  Conduct of Business

  	
   

  	
  114

  
	
  7.12

  	
   

  	
  Amendments or Waivers of Certain Agreements; Amendments of Documents
  Relating to Second Lien Term Loans

  	
   

  	
  115

  
	
  7.13

  	
   

  	
  Fiscal Year

  	
   

  	
  115

  
	
  7.14

  	
   

  	
  OFAC

  	
   

  	
  115

  
	
  SECTION
  8.

  	
   

  	
  EVENTS OF DEFAULT

  	
   

  	
  116

  
	
  8.1

  	
   

  	
  Failure to Make Payments When Due

  	
   

  	
  116

  
	
  8.2

  	
   

  	
  Default in Other Agreements

  	
   

  	
  116

  
	
  8.3

  	
   

  	
  Breach of Certain Covenants

  	
   

  	
  116

  
	
  8.4

  	
   

  	
  Breach of Warranty

  	
   

  	
  117

  
	
  8.5

  	
   

  	
  Other Defaults Under Loan Documents

  	
   

  	
  117

  
	
  8.6

  	
   

  	
  Involuntary Bankruptcy; Appointment of Receiver, etc

  	
   

  	
  117

  
	
  8.7

  	
   

  	
  Voluntary Bankruptcy; Appointment of Receiver, etc

  	
   

  	
  117

  
	
  8.8

  	
   

  	
  Judgments and Attachments

  	
   

  	
  118

  
	
  8.9

  	
   

  	
  Dissolution

  	
   

  	
  118

  
	
  8.10

  	
   

  	
  Employee Benefit Plans

  	
   

  	
  118

  
	
  8.11

  	
   

  	
  Change in Control

  	
   

  	
  118

  
	
  8.12

  	
   

  	
  Invalidity of Loan Documents; Failure of Security; Repudiation of
  Obligations

  	
   

  	
  118

  
	
  SECTION
  9.

  	
   

  	
  ADMINISTRATIVE AGENT

  	
   

  	
  120

  

 

 

3

 

	
  9.1

  	
   

  	
  Appointment

  	
   

  	
  120

  
	
  9.2

  	
   

  	
  Powers and Duties; General Immunity

  	
   

  	
  121

  
	
  9.3

  	
   

  	
  Independent Investigation by Lenders; No Responsibility For Appraisal
  of Creditworthiness

  	
   

  	
  123

  
	
  9.4

  	
   

  	
  Right to Indemnity

  	
   

  	
  123

  
	
  9.5

  	
   

  	
  Resignation of Administrative Agent; Successor Administrative Agent
  and Swing Line Lender

  	
   

  	
  124

  
	
  9.6

  	
   

  	
  Collateral Documents and Guaranties

  	
   

  	
  124

  
	
  9.7

  	
   

  	
  Duties of Other Agents

  	
   

  	
  126

  
	
  9.8

  	
   

  	
  Administrative Agent May File Proofs of Claim

  	
   

  	
  126

  
	
  SECTION
  10.

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  127

  
	
  10.1

  	
   

  	
  Successors and Assigns; Assignments and Participations in Loans and
  Letters of Credit

  	
   

  	
  127

  
	
  10.2

  	
   

  	
  Expenses

  	
   

  	
  130

  
	
  10.3

  	
   

  	
  Indemnity

  	
   

  	
  131

  
	
  10.4

  	
   

  	
  Set-Off

  	
   

  	
  132

  
	
  10.5

  	
   

  	
  Ratable Sharing

  	
   

  	
  133

  
	
  10.6

  	
   

  	
  Amendments and Waivers

  	
   

  	
  134

  
	
  10.7

  	
   

  	
  Independence of Covenants

  	
   

  	
  135

  
	
  10.8

  	
   

  	
  Notices; Effectiveness of Signatures

  	
   

  	
  135

  
	
  10.9

  	
   

  	
  Survival of Representations, Warranties and Agreements

  	
   

  	
  136

  
	
  10.10

  	
   

  	
  Failure or Indulgence Not Waiver; Remedies Cumulative

  	
   

  	
  136

  
	
  10.11

  	
   

  	
  Marshalling; Payments Set Aside

  	
   

  	
  137

  
	
  10.12

  	
   

  	
  Severability

  	
   

  	
  137

  
	
  10.13

  	
   

  	
  Obligations Several; Independent Nature of Lenders’ Rights; Damage
  Waiver

  	
   

  	
  137

  
	
  10.14

  	
   

  	
  Release of Security Interest or Guaranty

  	
   

  	
  138

  
	
  10.15

  	
   

  	
  Applicable Law

  	
   

  	
  138

  
	
  10.16

  	
   

  	
  Construction of Agreement; Nature of Relationship

  	
   

  	
  138

  
	
  10.17

  	
   

  	
  Consent to Jurisdiction and Service of Process

  	
   

  	
  139

  
	
  10.18

  	
   

  	
  Waiver of Jury Trial

  	
   

  	
  139

  
	
  10.19

  	
   

  	
  Confidentiality

  	
   

  	
  140

  
	
  10.20

  	
   

  	
  USA Patriot Act

  	
   

  	
  141

  
	
  10.21

  	
   

  	
  Counterparts; Effectiveness

  	
   

  	
  141

  

 

 

4

 

EXHIBITS

 

	
  I

  	
   

  	
  FORM OF NOTICE OF BORROWING

  
	
   

  	
   

  	
   

  
	
  II

  	
   

  	
  FORM OF NOTICE OF CONVERSION/CONTINUATION

  
	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  FORM OF REQUEST FOR ISSUANCE

  
	
   

  	
   

  	
   

  
	
  IV

  	
   

  	
  FORM OF TERM NOTE

  
	
   

  	
   

  	
   

  
	
  V

  	
   

  	
  FORM OF REVOLVING NOTE

  
	
   

  	
   

  	
   

  
	
  VI

  	
   

  	
  FORM OF SWING LINE NOTE

  
	
   

  	
   

  	
   

  
	
  VII

  	
   

  	
  FORM OF COMPLIANCE CERTIFICATE

  
	
   

  	
   

  	
   

  
	
  VIII

  	
   

  	
  FORM OF OPINION OF COMPANY COUNSEL

  
	
   

  	
   

  	
   

  
	
  IX

  	
   

  	
  FORM OF ASSIGNMENT AGREEMENT

  
	
   

  	
   

  	
   

  
	
  X

  	
   

  	
  FORM OF FINANCIAL CONDITION CERTIFICATE

  
	
   

  	
   

  	
   

  
	
  XI

  	
   

  	
  FORM OF SUBSIDIARY GUARANTY

  
	
   

  	
   

  	
   

  
	
  XII

  	
   

  	
  FORM OF SECURITY AGREEMENT

  
	
   

  	
   

  	
   

  
	
  XIII

  	
   

  	
  FORM OF HOLDINGS GUARANTY

  
	
   

  	
   

  	
   

  
	
  XIV

  	
   

  	
  FORM OF BORROWING BASE CERTIFICATE

  
	
   

  	
   

  	
   

  
	
  XV

  	
   

  	
  FORM OF COLLATERAL ACCESS AGREEMENT

  
	
   

  	
   

  	
   

  
	
  XVI

  	
   

  	
  FORM OF MANAGEMENT SUBORDINATION AGREEMENT

  

 

 

5

 

SCHEDULES

	
  1.1

  	
   

  	
  EXISTING DEBT

  
	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  REVOLVING
  LENDERS’ COMMITMENTS AND PRO RATA SHARES

  
	
   

  	
   

  	
   

  
	
  4.1C

  	
   

  	
  CORPORATE AND
  CAPITAL STRUCTURE; OWNERSHIP; MANAGEMENT

  
	
   

  	
   

  	
   

  
	
  4.1J

  	
   

  	
  ENVIRONMENTAL
  REPORTS

  
	
   

  	
   

  	
   

  
	
  4.1L

  	
   

  	
  CLOSING DATE
  MORTGAGED PROPERTIES

  
	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  SUBSIDIARIES OF
  HOLDINGS

  
	
   

  	
   

  	
   

  
	
  5.5B

  	
   

  	
  REAL PROPERTY

  
	
   

  	
   

  	
   

  
	
  5.5C

  	
   

  	
  INTELLECTUAL
  PROPERTY

  
	
   

  	
   

  	
   

  
	
  5.16E

  	
   

  	
  COLLATERAL
  LOCATIONS

  
	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  FISCAL YEARS

  
	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  PERMITTED
  INDEBTEDNESS

  
	
   

  	
   

  	
   

  
	
  7.2

  	
   

  	
  CERTAIN EXISTING
  LIENS

  
	
   

  	
   

  	
   

  
	
  7.3

  	
   

  	
  CERTAIN EXISTING
  INVESTMENTS

  
	
   

  	
   

  	
   

  
	
  7.4

  	
   

  	
  CONTINGENT OBLIGATIONS

  
	
   

  	
   

  	
   

  
	
  7.9

  	
   

  	
  TRANSACTIONS WITH
  SHAREHOLDERS AND AFFILIATES

  

 

 

6

 

MD BEAUTY, INC.

CREDIT AGREEMENT

This CREDIT
AGREEMENT is dated as of February 18, 2005 and entered into by and
among STB  BEAUTY, INC.,
a Delaware corporation (“Holdings”), MD BEAUTY, INC., a Delaware corporation (the “Company”), THE FINANCIAL INSTITUTIONS
LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a “Lender” and
collectively as “Lenders”),
and BNP PARIBAS (“BNP Paribas”), as administrative agent for Lenders (in such
capacity, “Administrative
Agent”).

R E C I T A L S

WHEREAS, Lenders have agreed to extend certain
credit facilities to Company, in an aggregate amount not to exceed
$170,000,000, consisting of $155,000,000 aggregate principal amount of Term
Loans (this and other capitalized terms used in these recitals without
definition being used as defined in subsection 1.1), the proceeds of which will
be used, together with the proceeds of the Second Lien Term Loans and the
Holdings Notes, to fund the Recapitalization and fees, commissions and expenses
related thereto, and up to $15,000,000 aggregate principal amount of Revolving
Loans, the proceeds of which will be used to provide financing for working
capital and other general corporate purposes of Company and its Subsidiaries;

WHEREAS, Company has agreed to secure all of the
Obligations hereunder and under the other Loan Documents by granting to
Administrative Agent, for the benefit of Lenders, a First Priority Lien on
substantially all of its fee owned real property and its personal and mixed
property, including a pledge of the Capital Stock of each of its Domestic Subsidiaries
and 66% of the Capital Stock of each of its first tier Foreign Subsidiaries;
and

WHEREAS, Holdings and all of the Subsidiaries of
Company have agreed to guarantee the Obligations hereunder and under the other
Loan Documents and to secure their guaranties by granting to Administrative
Agent for the benefit of Lenders, a First Priority Lien on substantially all of
their fee owned real property and their personal and mixed property, including
a pledge of all of the Capital Stock of their Domestic Subsidiaries and 66% of
the Capital Stock of their first tier Foreign Subsidiaries.

NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Holdings, Company,
Lenders, and Administrative Agent agree as follows:

Section
1.              DEFINITIONS

1.1                               Certain Defined Terms.

The following terms used
in this Agreement shall have the following meanings:

 

“Account”
means, with respect to any Person, all present and future rights of such Person
to payment for goods sold or leased or for services rendered (except those
evidenced by instruments or chattel paper), whether now existing or hereafter
arising and wherever arising.

“Acquisition Agreement” means the Agreement and Plan of Merger
dated as of May 3, 2004, by and among Holdings, STB Acquisition, Inc., a
Delaware corporation, Company, JH Partners and certain stockholders and option
holders of Company, as in effect on June 10, 2004 and as such agreement may be
amended from time to time thereafter to the extent permitted under subsection
7.12A.

“Additional
Mortgaged Property” has the meaning assigned to that term in
subsection 6.9.

“Additional
Mortgage” has the meaning assigned to that term in subsection 6.9.

“Adjusted LIBOR” means, for each Interest
Period in respect of any LIBOR Loan, an interest rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1% determined pursuant to the
following formula:

	
  Adjusted LIBOR 

  	
  =

  	
  LIBOR

  
	
   

  	
   

  	
  1.00 — Eurodollar Reserve
  Percentage

  

 

Adjusted LIBOR shall be adjusted automatically as of the effective date
of any change in the Eurodollar Reserve Percentage.

“Administrative
Agent” has the meaning assigned to that term in the introduction to
this Agreement and also means and includes any successor Administrative Agent
appointed pursuant to subsection 9.5A.

“Affected
Lender” has the meaning assigned to that term in subsection 2.6C.

“Affected
Loans” has the meaning assigned to that term in subsection 2.6C.

“Affiliate”
as applied to any Person, means any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person. For the
purposes of this definition, “control” (including, with correlative meanings,
the terms “controlling”, “controlled by” and “under common control with”), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract or
otherwise.  Notwithstanding the foregoing,
neither Administrative Agent nor any Lender shall be deemed to be an “Affiliate”
of any Loan Party or any Affiliate thereof.

“Agreement”
means this Credit Agreement dated as of February 18, 2005, as it may be
amended, supplemented or otherwise modified from time to time.

“Applicable Consolidated Leverage Ratio”
means, at any time, the ratio of (i) Consolidated Total Debt (minus all Cash
and Cash Equivalents held by any Loan Party subject to

 

2

 

a First Priority
Lien) at such date to (ii) Consolidated EBITDA for the four consecutive Fiscal
Quarters most recently ended as of the date for which a Compliance Certificate
has been most recently delivered pursuant to subsection 6.1(iv).

“Approved
Fund” means a Fund that is administered or managed by (i) a Lender,
(ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity
that administers or manages a Lender.

“Asset Sale”
means the sale (x) by Company or any of its Subsidiaries to any Person other
than Company or any Subsidiary Guarantor or (y) by any Foreign Subsidiary to
any Person other than Company or any of its Subsidiaries of, in each case,
(i) any of the stock of any of Company’s Subsidiaries,
(ii) substantially all of the assets of any division or line of business
of Company or any of its Subsidiaries, or (iii) any other assets (whether
tangible or intangible) of Company or any of its Subsidiaries (other than (a)
inventory (or other assets) sold, licensed, leased or disposed of in the ordinary
course of business, (b) sales, assignments, transfers or dispositions of
accounts in the ordinary course of business for purposes of collection and (c)
any such other assets to the extent that the aggregate value of such assets
sold in any single transaction or related series of transactions is equal to
$100,000 or less).

“Assignment
Agreement” means an Assignment and Assumption Agreement in
substantially the form of Exhibit IX annexed hereto.

“Bankruptcy Code”
means Title 11 of the United States Code entitled “Bankruptcy”, as now and
hereafter in effect, or any successor statute.

“Base Rate”
means, for any day, a rate per annum (rounded upwards to the nearest 1/100 of
1%) equal to the greater of (i) the Prime Rate in effect on such day and (ii)
the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.  If, for any reason, Administrative Agent
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate,
including the inability or failure of Administrative Agent to obtain sufficient
quotations in accordance with the terms hereof, the Base Rate shall be
determined without regards to clause (ii) of the first sentence of this
definition until the circumstances giving rise to such inability no longer
exist.  Any change in the Base Rate due
to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate or the Federal
Funds Effective Rate, respectively.

“Base Rate
Loans” means Loans bearing interest at rates determined by reference
to the Base Rate as provided in subsection 2.2A.

“Base Rate
Margin” means the margin over the Base Rate used in determining the
rate of interest of Base Rate Loans pursuant to subsection 2.2A.

“Berkshire
Partners” means Berkshire Partners LLC, a Massachusetts limited
liability company.

 

3

 

“Borrowing Base” means, as at any date of determination,
an aggregate amount equal to:

(i)            eighty
percent (80%) of the Value of Eligible Accounts Receivable as reflected in the
most recent Borrowing Base Certificate delivered hereunder, plus

(ii)           fifty
percent (50%) of the Value of Eligible Inventory as reflected in the most recent
Borrowing Base Certificate delivered hereunder;

provided that Administrative Agent may, in its
reasonable credit judgment based on its analysis of material changes arising
after the date hereof in the Value of Eligible Accounts Receivable and/or
Eligible Inventory, and on at least ten days’ prior notice to Company, revise
from time to time the percentage of the Value of any individual item of
Eligible Accounts Receivable and/or Eligible Inventory that shall be used in
determining the Borrowing Base; provided, however that
Administrative Agent shall not increase any of the percentage of Value of any
individual item of Eligible Accounts Receivable and/or Eligible Inventory to an
amount in excess of that in effect on the Closing Date without the prior consent
of the Requisite Class Lenders (Revolving Loans).

“Borrowing Base Certificate” means a certificate substantially in the
form of Exhibit XIV annexed hereto delivered to Lenders by Company
pursuant to subsection 4.1Q or subsection 6.1(xviii), with appropriate
attachments.

 “Business Day”
means (i) for all purposes other than as covered by clause (ii) below, any day
excluding Saturday, Sunday and any day which is a legal holiday under the laws
of the State of New York or is a day on which banking institutions located in
such state are authorized or required by law or other governmental action to
close, and (ii) with respect to all notices, determinations, fundings and
payments in connection with LIBOR or any LIBOR Loans, the term Business Day
shall mean any day which is a Business Day described in clause (i) and which is
also a day for trading by and between banks in Dollar deposits in the London
interbank market.

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

“Capital Stock” means the capital stock or other equity interests of
a Person.

“Cash”
means money, currency or a credit balance in a Deposit Account.

“Cash
Equivalents” means, as at any date of determination, (i) marketable
securities (a) issued or directly and unconditionally guaranteed as to interest
and principal by the United States government or (b) issued by any agency of
the United States the obligations of which are backed by the full faith and
credit of the United States, in each case maturing within one year after such
date; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality

 

4

 

thereof, in each
case maturing within one year after such date and having, at the time of the
acquisition thereof, the highest rating obtainable from either Standard &
Poor’s (“S&P”) or Moody’s Investors Service,
Inc. (“Moody’s”); (iii) commercial paper maturing no
more than one year from the date of creation thereof and having, at the time of
the acquisition thereof, a rating of at least A-1 from S&P or at least P-1
from Moody’s; (iv) certificates of deposit or bankers’ acceptances maturing
within one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that has Tier 1 capital (as defined
in such regulations) of not less than $100,000,000; and (v) shares of any money
market mutual fund that (a) has substantially all of its assets invested continuously
in the types of investments referred to in clauses (i) and (ii) above, (b) has
net assets of not less than $500,000,000, and (c) has the highest rating
obtainable from either S&P or Moody’s.

“CEO Payment Amount” means a one-time bonus payment to Leslie
Blodgett in the amount of $711,000 made in June, 2004.

“Certificate of Merger” means the Certificate of Merger dated as
of June 10, 2004, by and between STB Acquisition, Inc., a Delaware corporation,
and Company.

“Change in
Control” means any of the following: 
(i) (a) Permitted Holders shall cease to beneficially own and
control at least a majority of
the issued and outstanding shares of Capital Stock of Holdings entitled
(without regard to the occurrence of any contingency) to vote for the election
of members of the Governing Body of Holdings; (b) Permitted Holders shall cease
to beneficially own and control at least a majority of the issued and
outstanding shares of the Capital Stock of Holdings; (ii) the occurrence of a
change in the composition of the Governing Body of Holdings such that a
majority of the members of such Governing Body are not Continuing Members;
(iii) the failure at any time of Holdings to legally and beneficially own
and control 100% of the issued and outstanding shares of Capital Stock of
Company or the failure at any time of Holdings to have the ability to elect all
of the Governing Body of Company; and (iv) the occurrence of any “Change in
Control” or similar event under the Second Lien Term Loan Documents or the
Holdings Note Documents.  As used herein,
the term “beneficially own” or “beneficial ownership” shall have the meaning
set forth in the Exchange Act and the rules and regulations promulgated
thereunder.

“Class”
means, as applied to Lenders, each of the following two classes of
Lenders:  (i) Lenders having
Revolving Loan Exposure and (ii) Lenders having Term Loan Exposure.

“Closing Date”
means February 18, 2005, the date on which the initial Loans are made.

“Closing Date
Mortgage” has the meaning assigned to that term in subsection 4.1L.

“Closing Date
Mortgage Policies” has the meaning assigned to that term in
subsection 4.1L.

 

5

“Closing Date
Mortgaged Property” has the meaning assigned to that term in
subsection 4.1L.

 “Collateral”
means, collectively, all of the real, personal and mixed property (including
Capital Stock) in which Liens
are purported to be granted pursuant to the Collateral Documents as security
for the Obligations.

“Collateral Access Agreement” means any landlord waiver, mortgagee
waiver, bailee letter or any similar acknowledgement agreement of any landlord,
mortgagee or bailee in respect of any Real Property Asset where any Inventory
or machinery and equipment is located or any warehouseman or processor in
possession of Inventory or machinery and equipment, substantially in the form
of Exhibit XV annexed hereto, or in such other form with such
changes thereto as may be agreed to by Administrative Agent.

“Collateral
Account” has the meaning assigned to that term in the Security
Agreement.

“Collateral
Documents” means the Security Agreement, the Foreign Pledge
Agreements, the Mortgages, Control Agreements and all other instruments or
documents delivered by any Loan Party pursuant to this Agreement or any of the
other Loan Documents in order to grant to Administrative Agent, on behalf of
Lenders, a Lien on any real, personal or mixed property of that Loan Party as security
for the Obligations.

“Collateral
Location” means any Real Property Asset or Leasehold Property where
Collateral is located.

“Commercial
Letter of Credit” means any letter of credit or similar instrument
issued for the purpose of providing the primary payment mechanism in connection
with the purchase of any materials, goods or services by Company or any of its
Subsidiaries in the ordinary course of business of Company or such Subsidiary.

“Commitments”
means the commitments of Lenders to make Loans as set forth in
subsection 2.1A and subsection 3.3B.

“Company”
has the meaning assigned to that term in the introduction to this Agreement.

“Compliance
Certificate” means a certificate substantially in the form of Exhibit VII
annexed hereto.

“Conforming
Letter of Credit” means a letter of credit in form and substance
reasonably satisfactory to the Administrative Agent.

 “Confidential Information
Memorandum” means the Confidential Information Memorandum circulated
by Administrative Agent in connection with the syndication
of the Loans and the Commitments.

 

6

“Consolidated
Capital Expenditures” means, for any period, the sum of the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
by Company and its Subsidiaries during that period that, in conformity with
GAAP, are included in “additions to property, plant or equipment” or comparable
items reflected in the consolidated statement of cash flows of Company and its
Subsidiaries; provided that for purposes of this definition, the
purchase price of assets that are purchased simultaneously with the trade-in of
existing assets of a similar type and nature or with the application of Net
Insurance/Condemnation Proceeds or Net Asset Sale Proceeds (to the extent
permitted hereunder) shall be included in Consolidated Capital Expenditures
only to the extent of the gross amount of such purchase price less the credit
granted by the seller of such assets for the assets being traded in at such
time or the amount of such net proceeds, as the case may be; and provided,
further that Consolidated Capital Expenditures shall exclude (i)
acquisition costs in Permitted Acquisitions, (ii) Permitted Equity Contribution
Capex, and (iii) costs of leasehold improvements to the extent either paid for
by landlords or, if paid for by the Company or any of its Subsidiaries,
reimbursed by landlords, in each case so long as neither the Company nor any of
its Subsidiaries has any obligation to pay, reimburse or repay, as the case may
be, any portion of such amounts in any circumstances.

“Consolidated
Cash Interest Expense” means, for any period, Consolidated Interest
Expense for such period excluding, however, any interest expense
not payable in Cash; provided
that for the period from the Closing Date through the first anniversary of the
Closing Date, Consolidated Cash Interest Expense should be calculated as of any
date of determination by multiplying Consolidated Cash Interest Expense from
the Closing Date through such date of determination by a fraction the numerator
of which is 365 and the denominator of which is the number of days elapsed
since the Closing Date as of such date of determination.

“Consolidated
Current Assets” means, as at any date of determination, the total
assets of Company and its Subsidiaries on a consolidated basis which may
properly be classified as current assets in conformity with GAAP, excluding Cash
and Cash Equivalents.

“Consolidated
Current Liabilities” means, as at any date of determination, the
total liabilities of Company and its Subsidiaries on a consolidated basis which
may properly be classified as current liabilities in conformity with GAAP,
excluding the current portions of Funded Debt and Capital Leases.

“Consolidated
EBITDA” means, for any period, the sum, without duplication, of the
amounts for such period of (i) Consolidated Net Income,
(ii) Consolidated Interest Expense, (iii) taxes paid or provisions
for taxes based on income, (iv) total depreciation expense, (v) total
amortization expense, (vi) other non-cash items (including, without
limitation, non-cash effect of any purchase accounting, write-down of
intangibles and marking hedges to market), (vii) non-cash employee compensation
expenses, (viii) the CEO Payment Amount, (ix) Management Fees during such
period, (x) any charges associated with the one-time write offs related to the
Emeryville Lease and the Corporate Office Lease, provided that the 

 

7

aggregate amount
of such charges included in this clause (x) shall not exceed $2,000,000,
(xi) Transaction Costs and any other non-recurring or extraordinary Cash
costs incurred in such period, provided that the aggregate amount of
such other non-recurring or extraordinary Cash costs included in this clause
(xi) shall not exceed $2,000,000 in any one Fiscal Year or $4,000,000 in
the aggregate from and after the Closing Date, but only, in the case of clauses
(ii)-(xi), to the extent deducted in the calculation of Consolidated Net
Income, less other non-cash items added in the calculation of
Consolidated Net Income (other than any such non-cash item to the extent it
will result in the receipt of cash payments in any future period), all of the
foregoing as determined on a consolidated basis for Company and its
Subsidiaries in conformity with GAAP. 
Notwithstanding anything contained herein to the contrary, the creation
and reversal of reserves in the ordinary course of business shall not constitute
non-cash items for purposes of calculating Consolidated EBITDA.

“Consolidated
Excess Cash Flow” means, for any period, an amount (if positive)
equal to (i) the sum, without duplication, of the amounts for such period of
(a) Consolidated EBITDA (but determined by adding back thereto, but without
duplication, any amounts deducted in the calculation of Consolidated Net Income
for such period that were paid, incurred or accrued in violation of any of the
provisions of this Agreement) and (b) the Consolidated Working Capital
Adjustment minus (ii) the sum, without duplication, of the amounts
for such period of (a) voluntary and scheduled repayments of Consolidated Total
Debt (excluding repayments of Revolving Loans or Swing Line Loans except to the
extent the Revolving Loan Commitment Amount is permanently reduced in
connection with such repayments, and repayments of Indebtedness that is not
incurred in compliance with subsection 7.1), (b) Consolidated Capital
Expenditures (net of any proceeds of any related financings with respect to
such expenditures) made in accordance with subsection 7.8,
(c) Consolidated Cash Interest Expense in respect of Indebtedness incurred
in compliance with subsection 7.1, (d) current taxes based on income of
Company and its Subsidiaries paid in cash such period, (e) Transaction Costs
paid in cash during such period, (f) Management Fees paid in cash during such
period to the extent permitted pursuant to subsection 7.5, (g) any cash
consideration paid during such period by Company or any of its Subsidiaries in
connection with any Permitted Acquisition (net of any amount of Indebtedness
incurred or assumed or proceeds of any equity received, in connection
therewith), and (h) Transaction Costs and any other non-recurring or extraordinary
Cash costs incurred in such period; provided that the aggregate amount of such
other non-recurring or extraordinary Cash costs included in this clause (h)
incurred during the term of this Agreement shall not exceed the aggregate
amount included in Consolidated EBITDA pursuant to clause (xi) of the
definition of that term; provided that for Fiscal Year 2005, all
components of Consolidated Excess Cash Flow shall be calculated for the period
from the Closing Date to January 1, 2006.

“Consolidated
Fixed Charges” means, for any period, the sum (without duplication)
of the amounts for such period of (i) Consolidated Cash Interest Expense,
(ii) scheduled principal payments in respect of Consolidated Total Debt
with respect to such period, (iii) taxes based on income and payable in cash
with respect to such period, (iv) Restricted Junior Payments referred to
in subsections 7.5(iv)(a) and 7.5(iv)(b), and (v) the aggregate amount of all
rents paid or payable during that period under all Capital Leases to which
Company or any of its Subsidiaries is a party as lessee, all of the foregoing
as determined on a consolidated basis for Company and its Subsidiaries in
conformity with GAAP.

 

8

“Consolidated
Interest Expense” means, for any period, total interest expense paid
in or payable in respect of such period (including that portion attributable to
Capital Leases in accordance with GAAP and capitalized interest) of Company and
its Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of Company and its Subsidiaries, including all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers’ acceptance financing, net costs under Interest Rate Agreements, and
amounts referred to in subsection 2.3 payable to Administrative Agent and
Lenders that are considered interest expense in accordance with GAAP, but
excluding, however, any such amounts referred to in subsection 2.3 payable on
or before the Closing Date.

“Consolidated Leverage Ratio” means, as of the last day of any Fiscal
Quarter, the ratio of (i) Consolidated Total Debt (minus all Cash and
Cash Equivalents held by any Loan Party on the last day of such Fiscal Quarter
subject to a First Priority Lien) as at such date to (ii) Consolidated EBITDA
for the consecutive four Fiscal Quarters ending on such date.

“Consolidated
Net Income” means, for any period, the net income (or loss) of
Company and its Subsidiaries on a consolidated basis for such period taken as a
single accounting period determined in conformity with GAAP; provided
that there shall be excluded (i) the income (or loss) of any Person (other
than a Subsidiary of Company) in which any other Person (other than Company or
any of its Subsidiaries) has a joint interest, except to the extent of the amount
of dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss)
of any Person accrued prior to the date it becomes a Subsidiary of Company or
is merged into or consolidated with Company or any of its Subsidiaries or that
Person’s assets are acquired by Company or any of its Subsidiaries,
(iii) the income (or loss) of any Subsidiary of Company to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary,
(iv) any after-tax gains or losses attributable to asset sales or returned
surplus assets of any Pension Plan, and (v) (to the extent not included in
clauses (i) through (iv) above) any net extraordinary gains or net
non-cash extraordinary losses.

“Consolidated
Total Debt” means, as at any date of determination, the aggregate
stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.

“Consolidated Working Capital” means, as at any date of determination, the excess (or deficit)
of Consolidated Current Assets over Consolidated Current Liabilities.

“Consolidated Working Capital
Adjustment” means, for any period on a consolidated basis, the amount (which may
be a negative number) by which Consolidated Working Capital as of the beginning
of such period exceeds (or is less than) Consolidated Working Capital as of the
end of such period.

“Contingent
Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person (i) with respect to any
Indebtedness, lease, 

 

9

dividend or other
obligation of another Person if the primary purpose or intent thereof by the
Person incurring the Contingent Obligation is to provide assurance to the
obligee of such obligation of another that such obligation of another will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof, (ii) with respect to any letter of
credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings, or (iii) under Hedge
Agreements.  Contingent Obligations shall
include (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the
obligation of another, (b) the obligation to make take-or-pay or similar payments
if required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (1) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise)
or (2) to maintain the solvency or any balance sheet item, level of income
or financial condition of another if, in the case of any agreement described
under subclauses (1) or (2) of this sentence, the primary purpose or intent
thereof is as described in the preceding sentence.  The amount of any Contingent Obligation shall
be equal to the amount of the obligation so guaranteed or otherwise supported
or, if less, the amount to which such Contingent Obligation is specifically
limited.

“Contingent
Tax  Note” means that certain unsecured
Contingent Promissory Note dated June 10, 2004, issued by Company to the “Holder
Representative” (as defined therein) in a principal amount equal to the lesser
of (i) $5,700,000 and (ii) the aggregate amount of Tax Benefits (as defined
therein) received by Company.

“Continuing  Member” means, as of any date of determination any member of
the Governing Body of Holdings who (i) was a member of such Governing Body
on the Closing Date, or (ii) was nominated for election or elected to such
Governing Body with the affirmative vote of a majority of the members who were
either members of such Governing Body on the Closing Date or whose nomination
or election was previously so approved (iii) or was nominated for election or
elected to such Governing Body by one of the Sponsors.

“Contractual
Obligation”, as applied to any Person, means any provision of any
Security issued by that Person or of any material indenture, mortgage, deed of
trust, contract, undertaking, agreement or other instrument to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject.

“Control
Agreement” means
an agreement, reasonably satisfactory in form and substance to Administrative
Agent, entered into in connection with any Deposit Account, security account or
commodity account maintained by Holdings or any of its Subsidiaries, pursuant
to which the financial institution at which such account is maintained confirms
and acknowledges Administrative Agent’s security interest in, and after the
occurrence and during the continuance of an Event of Default and delivery of
written notice, sole dominion and control over, such account and limits its
rights to set-off with respect to amounts in such account.

 

10

“Corporate Office Lease” means that certain Office Lease and
Addendum (1), dated as of February 2, 2000, between MD Beauty, Inc., as
successor in interest to Bare Escentuals, Inc., f/k/a Dolphin Acquisition Corp.
d/b/a Bare Escentuals and Ascendant Inc., as amended by First Amendment to
Office Lease, dated as of November 12, 2001, and Second Amendment to Office
Lease, dated as of March 25, 2002 with respect to the property located at 425
Bush Street, San Francisco, California 94109.

“Currency
Agreement” means any foreign exchange contract, currency swap agreement,
currency futures contract, currency option contract, synthetic exchange rate
cap or other similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.

“Deposit
Account” means a demand, time, savings, passbook or like account
(including disbursement accounts, remittance accounts and zero balance
accounts) maintained with a bank, savings and loan association, credit union or
like organization, other than an account evidenced by a negotiable certificate
of deposit.

“Dollars”
and the sign “$” mean the lawful money of the
United States of America.

“Domestic
Subsidiary” means any Subsidiary of Company that is incorporated or
organized under the laws of the United States of America, any state thereof or
in the District of Columbia.

“Eligible Accounts Receivable” means, with respect to Company and each
of its Subsidiaries that is a Loan Party, the face amount of all Accounts of
Company or such Subsidiary as reduced by the amount of all returns, discounts,
deductions, claims, credits, charges, or other allowances with respect
thereto.  Unless otherwise approved in
writing by Administrative Agent, an Account shall not be an Eligible Account
Receivable if:

(a)           it
arises out of a sale made by Company or such Subsidiary to an Affiliate of
Company or such Subsidiary; or

(b)           its
payment terms are longer than 90 days from date of invoice; provided, however,
such period shall be 120 days for any investment grade account debtors or
account debtors backed by a Conforming Letter of Credit; or

(c)           it
is unpaid more than 90 days after the date of invoice; provided, however,
such period shall be 120 days for any investment grade account debtors or
Accounts backed by a Conforming Letter of Credit; or

(d)           it
is from the same account debtor or its Affiliate if 50% or more of the amount
of all Accounts from that account debtor (and its Affiliates) are ineligible
under (c) above; or

(e)           the
account debtor for such Account is a creditor of Company or any Subsidiary of
Company, has or has asserted a right of setoff against Company 

 

11

 

or any Subsidiary of Company, or has disputed its liability or
otherwise has made any claim with respect to such Account or any other Account
which has not been resolved, in each case to the extent of the amount owed by
Company or any Subsidiary of Company to such account debtor, the amount of such
actual or asserted right of setoff, or the amount of such dispute or claim, as
the case may be; or

(f)            the
account debtor is (or its assets are) the subject of an event or condition of
the type described in subsection 8.6 or 8.7; or

(g)           such
Account is not payable in Dollars or the account debtor for such Account is
located outside the United States, unless such Account is (i) supported by an
irrevocable letter of credit satisfactory to Administrative Agent (as to form,
substance and issuer) and assigned to and directly drawable by Administrative
Agent or (ii) covered by credit insurance acceptable to Administrative Agent;
or

(h)           such
Account is evidenced by a judgment or by a promissory note, chattel paper or
any other instrument or other document that is not in the possession of
Administrative Agent or does not contain all necessary endorsements in favor of
Administrative Agent; or

(i)            the
sale to the account debtor is on a bill-and-hold, guarantied sale,
sale-and-return, sale on approval or consignment basis or made pursuant to any
other written agreement providing for repurchase or return; or

(j)            the
account debtor is the United States of America or any department, agency or
instrumentality thereof, unless the applicable Loan Party duly assigns its
rights to payment of such Account to Administrative Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. §§ 3727 et seq.); or

(k)           the
goods giving rise to such Account have not been shipped and delivered to and
accepted by the account debtor, the services giving rise to such Account have
not been performed and accepted, or such Account otherwise does not represent a
final sale; or

(l)            such
Account does not comply with all material requirements of law, including the
Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and
Regulation Z of the Board of Governors of the Federal Reserve System; or

(m)          such
Account is subject to any adverse security deposit, progress payment or other
similar advance made by or for the benefit of the applicable account debtor; or

 

12

 

(n)           it
is not subject to a valid and perfected or registered First Priority Lien in
favor of Administrative Agent or does not otherwise conform to the
representations and warranties contained in the Loan Documents.

“Eligible
Assignee” means (A) (i) a commercial bank organized under the
laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or
any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that
(x) such bank is acting through a branch or agency located in the United States
or (y) such bank is organized under the laws of a country that is a member
of the Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity that is an “accredited
investor” (as defined in Regulation D under the Securities Act) that extends
credit or buys loans as one of its businesses including insurance companies,
mutual funds and lease financing companies, in each case (under clauses (i)
through (iv) above) that is acceptable to Administrative Agent; and
(B) any Lender, any Affiliate of any Lender and any Approved Fund of any
Lender; provided that none of any Sponsor, any Loan Party or any
Affiliate of any Sponsor or any Loan Party shall be an Eligible Assignee.

“Eligible
Inventory” means,
with respect to Company and each of its Subsidiaries that is a Loan Party, the
aggregate amount of Inventory of Company or such Subsidiary.  Unless otherwise approved in writing by
Administrative Agent, an item of Inventory shall not be included in Eligible
Inventory if:

(a)           it
is not owned solely by Company or such Subsidiary or Company or such Subsidiary
does not have good, valid and marketable title thereto; or

(b)           it
is not located in the United States; or

(c)           it
is not subject to a valid and perfected or registered First Priority Lien in
favor of Administrative Agent except, (i) with respect to Inventory located on
property leased by Company or such Subsidiary or in a contract warehouse, for
Liens for unpaid rent or normal and customary warehousing charges and, (ii)
with respect to QVC Inventory, for Liens in favor of QVC, Inc., securing
obligations of Company to QVC, Inc.; or

(d)           it
consists of goods returned that have been opened from their original packaging
or rejected by Company’s or such Subsidiary’s customers or goods in transit to
third parties other than to Company’s warehouse sites or QVC, Inc.; or

(e)           it
is in the possession or control of any of such Loan Party’s agents,
subcontractors, third party vendors or processors (other than QVC, Inc.); or

(f)            it
is not first-quality finished goods, is obsolete or slow moving, or damaged,
does not otherwise conform to the representations and warranties 

 

13

 

contained in the Loan Documents; or was not manufactured or produced in
compliance with all material requirements of law; provided that goods purchased
by such Loan Party for refurbishing and resale to other Persons shall not be
excluded from Eligible Inventory under this subparagraph (f) unless such
goods are obsolete or slow moving.

“Emeryville Lease” means that certain Standard
Industrial/Commercial Multi-Tenant Lease - Gross, dated as of May 15, 2002,
between Bare Escentuals, Inc. and Peter Coss - Managing Partner, et al., as
amended by Addendum to Lease dated as of May 15, 2002, and First Amendment to
Lease, dated as of August 2, 2002, and that relates to the real property
located at 1290 59th Street, Emeryville, California 94608.

 “Employee Benefit Plan”
means any (i) “employee benefit plan” as defined in Section 3(3) of ERISA which
is or, within the preceding six years, was maintained or contributed to by
Company or, any of its Subsidiaries or, solely with respect to liability under
Section 4980B of the Internal Revenue Code, any of their respective ERISA
Affiliates, and (ii) any Pension Plan.

“Environmental
Claim” means any investigation, notice, notice of violation, claim,
action, suit, proceeding, demand, abatement order or other order or directive
(conditional or otherwise), by any Government Authority or any other Person,
arising (i) pursuant to or in connection with any actual or alleged violation
of any Environmental Law, (ii) in connection with any Hazardous Materials or
any actual or alleged Hazardous Materials Activity, or (iii) in connection with
any actual or alleged damage, injury, threat or harm to health, safety, natural
resources or the environment.

“Environmental
Laws” means any and all current or future common law duties or
obligations, statutes, ordinances, orders, rules, regulations, guidance
documents, judgments, Governmental Authorizations, or any other requirements of
any Government Authority relating to (i) environmental matters, including
those relating to any Hazardous Materials Activity, (ii) the generation,
use, storage, transportation or disposal of Hazardous Materials, or
(iii) occupational safety and health, industrial hygiene, land use or the
protection of human, plant or animal health or welfare, in any manner
applicable to Holdings, Company or any of its Subsidiaries or any Facility.

“Equity
Documents” means, collectively, the Stockholder Agreement and each
of the Subscription Agreements.

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, and any successor thereto.

“ERISA
Affiliate”, as applied to
any Person, means (i) any corporation that is a member of a controlled
group of corporations within the meaning of Section 414(b) of the Internal
Revenue Code of which that Person is a member; (ii) any trade or business
(whether or not incorporated) that is a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is a 

 

14

member; and (iii)
solely with respect to liability under Section 4980B of the Internal Revenue
Code, any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member.  Any
former ERISA Affiliate of a Person or any of its Subsidiaries shall continue to
be considered an ERISA Affiliate of such Person or such Subsidiary within the
meaning of this definition to the extent that such Person or such Subsidiary
could reasonably expected to have any liability with respect thereto under the
Internal Revenue Code or ERISA.

“ERISA Event”
means (i) a “reportable event” within the meaning of Section 4043 of ERISA and
the regulations issued thereunder with respect to any Pension Plan (excluding
those for which the provision for 30-day notice to the PBGC has been waived by
regulation); (ii) the failure to meet the minimum funding standard of Section
412 of the Internal Revenue Code with respect to any Pension Plan (whether or
not waived in accordance with Section 412(d) of the Internal Revenue Code) or
the failure to make by its due date a required installment under Section 412(m)
of the Internal Revenue Code with respect to any Pension Plan (other than an
immaterial failure to make such an installment payment) or the failure to make
any required contribution to a Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a
notice of intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its
Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan
with two or more contributing sponsors or the termination of any such Pension
Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which could be reasonably likely to
constitute grounds under ERISA for the termination of, or the appointment by
PBGC of a trustee to administer, any Pension Plan; (vi) the imposition of
liability on Company, any of its Subsidiaries or any of their respective ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, any
of its Subsidiaries or any of their respective ERISA Affiliates in a complete
or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA)
from any Multiemployer Plan if there is any potential liability therefor, or
the receipt by Company, any of its Subsidiaries or any of their respective
ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the assertion of a material claim (other than routine claims for
benefits) against any Employee Benefit Plan other than a Multiemployer Plan or
the assets thereof, or against Company, any of its Subsidiaries or any of their
respective ERISA Affiliates in connection with any Employee Benefit Plan; (ix)
receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code; or (x) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.

 

15

“Eurodollar Reserve Percentage” means the
reserve percentage (expressed as a decimal, rounded upward, if necessary, to
the nearest 1/100 of 1%) in effect on the date LIBOR for such Interest Period
is determined (whether or not applicable to any Lender) under regulations
issued from time to time by the Federal Reserve Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as “Eurocurrency liabilities”) having a term comparable to such
Interest Period.

“Event of
Default” means each of the events set forth in Section 8.

“Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time, and
any successor statute.

“Existing
Credit Agreement” means that certain Credit Agreement, dated as of
June 10, 2004, by and between the Company, Holdings, the financial institutions party thereto and BNP Paribas, as amended to the date hereof.

“Existing Indebtedness” means the Existing Credit Agreement and the other
existing Indebtedness of Company and its Subsidiaries for borrowed money as set
forth in Schedule 1.1 annexed hereto and all
guaranties, collateral arrangements and other material agreements and
undertakings with respect thereto.

“Facilities”
means any and all real property (including all buildings, fixtures or other
improvements located thereon) now, hereafter owned or leased, operated or used
by Company or any of its Subsidiaries or any of their respective predecessors
or Affiliates.

“Federal
Funds Effective Rate” means, for any period, a fluctuating interest
rate expressed as a decimal, rounded upwards, if necessary, to the next higher
1/100 of 1% equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.

“Financial
Plan” has the meaning assigned to that term in subsection 6.1(xii).

“First
Priority” means, with respect to any Lien purported to be created in
any Collateral pursuant to any Collateral Document, that (i) such Lien is
perfected and has priority over any other Lien on such Collateral (other than
Liens permitted pursuant to subsection 7.2) and (ii) such Lien is the only Lien
(other than Liens permitted pursuant to subsection 7.2) to which such
Collateral is subject.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year (as
reflected on Schedule 6.1 annexed hereto).

 

16

“Fiscal Year” means the fiscal year of Holdings and its
Subsidiaries ending on the Fiscal Year End.

“Fiscal Year End” means, for any Fiscal Year, the applicable Fiscal
Year End reflected on Schedule 6.1 annexed hereto.

“Flood Hazard
Property” means a Closing Date Mortgaged Property or an Additional
Mortgaged Property located in an area designated by the Federal Emergency
Management Agency as having special flood or mud slide hazards.

“Foreign
Pledge Agreement” means each pledge agreement or similar instrument
governed by the laws of a country other than the United States, executed on the
Closing Date or from time to time thereafter in accordance with subsection 6.8
by Company or any Domestic Subsidiary that owns Capital Stock of one or more
Foreign Subsidiaries organized in such country, in form and substance
satisfactory to Administrative Agent, as such Foreign Pledge Agreement may be
amended, supplemented or otherwise modified from time to time.

“Foreign
Subsidiary” means any Subsidiary of Company that is not a Domestic
Subsidiary.

“Fund” means any Person (other than a natural Person) that
is (or will be) engaged in making, purchasing, holding or otherwise investing
in commercial loans and similar extensions of credit in the ordinary course of
its business.

“Funded Debt”
shall mean (i) all Indebtedness, and any other liabilities, and obligations,
now existing or hereafter arising, for money borrowed by the Loan Parties
(which shall be deemed to include all notes issued or other liabilities or
obligations for money borrowed by any Loan Party to its shareholders), whether
or not evidenced by any note, indenture, or agreement (including, without
limitation, the Notes and any Indebtedness for money borrowed from an Affiliate
of any Loan Party) and (ii) without duplication, all Indebtedness of others for
money borrowed (including Indebtedness of an Affiliate of any Loan Party) with
respect to which any Loan Party has become liable by way of a guarantee or
indemnity.  The term “Funded Debt” shall
not include any trade payables or other liabilities not for borrowed money (or
guarantees thereof) incurred in the ordinary course of business and
constituting current obligations of the Loan Parties.

“Funding and
Payment Office” means (i) the office of Administrative Agent and
Swing Line Lender located at 787 Seventh Avenue, New York, New York 10019, or
(ii) such other office of Administrative Agent and Swing Line Lender as may
from time to time hereafter be designated as such in a written notice delivered
by Administrative Agent and Swing Line Lender to Company and each Lender.

“Funding Date”
means the date of funding of a Loan.

“GAAP”
means, subject to the limitations on the application thereof set forth in
subsection 1.2, generally accepted accounting principles as in effect in the
United States of

 

17

America and set
forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.

“Governing
Body” means the board of directors or other body having the power to
direct or cause the direction of the management and policies of a Person that
is a corporation, partnership, trust or limited liability company.

“Government
Authority” means any political subdivision or department thereof,
any other governmental or regulatory body, commission, central bank, board,
bureau, organ or instrumentality or any court, in each case whether federal,
state, local or foreign (including supra-national bodies such as the European
Union or the European Central Bank).

“Governmental
Authorization” means any permit, license, registration,
authorization, plan, directive, accreditation, consent, order or consent decree
of or from, or notice to, any Government Authority.

“Guaranties”
means the Holdings Guaranty and the Subsidiary Guaranty.

“Hazardous
Materials” means (i) any chemical, material or substance at any
time defined as or included in the definition of “hazardous substances”, “hazardous
wastes”, “hazardous materials”, “extremely hazardous waste”, “acutely hazardous
waste”, “radioactive waste”, “biohazardous waste”, “pollutant”, “toxic
pollutant”, “contaminant”, “restricted hazardous waste”, “infectious waste”, “toxic
substances”, or any other term or expression intended to define, list or
classify substances by reason of properties harmful to health, safety or the
indoor or outdoor environment (including harmful properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, “TCLP toxicity” or “EP toxicity” or words of similar import under any
applicable Environmental Laws); (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling fluids,
produced waters and other wastes associated with the exploration, development
or production of crude oil, natural gas or geothermal resources; (iv) any
flammable substances or explosives; (v) any radioactive materials;
(vi) any asbestos-containing materials; (vii) urea formaldehyde foam
insulation; (viii) electrical equipment which contains any oil or
dielectric fluid containing polychlorinated biphenyls; (ix) pesticides;
and (x) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any Government Authority or which may or
could pose a hazard to the health and safety of the owners, occupants or any
Persons in the vicinity of any Facility or to the indoor or outdoor
environment.

“Hazardous
Materials Activity” means any past, current, proposed or threatened
activity, event or occurrence involving any Hazardous Materials, including the
use, manufacture, possession, storage, holding, presence, existence, location,
Release, threatened Release, discharge, placement, generation, transportation,
processing, construction, treatment, abatement, removal, remediation, disposal,
disposition or handling of any Hazardous Materials, and any corrective action
or response action with respect to any of the foregoing.

 

18

“Hedge
Agreement” means an Interest Rate Agreement or a Currency Agreement
designed to hedge against fluctuations in interest rates or currency values,
respectively.

 “Holdings” has
the meaning assigned to that term in the introduction to this Agreement.

“Holdings
Common Stock” means the common stock of Holdings, par value $0.01
per share.

“Holdings
Guaranty” means the Holdings Guaranty executed and delivered by
Holdings on the Closing Date, substantially in the form of Exhibit XIII
annexed hereto, as such Holdings Guaranty may thereafter be amended,
supplemented or otherwise modified from time to time.

“Holdings Note Purchase Agreement”
means that
certain Note Purchase Agreement dated as of the date hereof by and between
Holdings and  York Street Mezzanine
Partners, L.P., pursuant to which the Holdings Notes are issued on the Closing
Date.

“Holdings Note Documents” means the Holdings Note Purchase
Agreement, Holdings Subordination Agreement, Holdings Notes, the management fee
subordination agreement dated as of the date hereof by and between Berkshire
Partners LLC and York Street Mezzanine Partners, L.P., the management fee subordination
agreement dated as the date hereof by and between JH Partners LLC and York
Street Mezzanine Partners, L.P., and the Subordination Agreement dated as of
the date hereof by and among Holdings, York Street Mezzanine Partners, L.P.,
Berkshire Investors LLC, Berkshire Fund V Limited Partnership, Berkshire Fund
VI Limited Partnership and JH MDB Investors, L.P.

“Holdings Notes” means those certain 15.0% Senior
Subordinated Notes due February 18, 2014 issued by Holdings pursuant to the
Holdings Note Purchase Agreement.

 “Holdings Stockholders
Agreement” means the Stockholders Agreement, dated as of the Closing
Date, among Holdings, Sponsors, and the other holders of common stock and
equity securities of Holdings.

“Holdings Subordination Agreement” means that certain Subordination
Agreement dated as of the date hereof by and among Administrative Agent, BNP
Paribas, as administrative agent under the Second Lien Term Loan Agreement,
Holdings and York Street Mezzanine Partners, L.P.

“Indebtedness”
means as applied to any Person, (i) all indebtedness for borrowed money,
(ii) that portion of obligations with respect to Capital Leases that is
properly classified as a liability on a balance sheet in conformity with GAAP,
(iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money (excluding trade
payables incurred in the ordinary course of business and constituting current
obligations), (iv) any obligation owed for all or any part of the deferred
purchase price of 

 

19

property or
services (excluding any such obligations incurred under ERISA), which purchase
price is (a) due more than six months from the date of incurrence of the
obligation in respect thereof or (b) evidenced by a note (it being understood
that the Contingent Tax Note shall not constitute Indebtedness for purposes of
this Agreement), (v) Synthetic Lease Obligations, and (vi) all
indebtedness secured by any Lien on any property or asset owned or held by that
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person.  Obligations under Interest Rate Agreements
and Currency Agreements constitute (1) in the case of Hedge Agreements,
Contingent Obligations, and (2) in all other cases, Investments, and in neither
case constitute Indebtedness.

“Indemnified Liabilities” has the meaning assigned to that term in
subsection 10.3.

“Indemnitee”
has the meaning assigned to that term in subsection 10.3.

“Insolvency Event” means, with
respect to any Person, that (i) a court with jurisdiction over such Person
shall enter a decree or order for relief in respect of the Person or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief shall
be granted under any applicable federal or state law; or such Person or any of
its Subsidiaries shall commence a voluntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or an involuntary case shall be commenced against such
Person or any of its Subsidiaries under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect; or
a decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over such Person or any of its Subsidiaries, or
over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of such Person or any of its Subsidiaries for all or
a substantial part of its property; or (ii) a warrant of attachment, execution
or similar process shall have been issued against any substantial part of the
property of such Person or any of its Subsidiaries, and any such event
described in this clause (ii) shall continue for 30 days unless dismissed,
bonded or discharged.

“Insolvency or Liquidation Proceeding” means
(a) any voluntary or involuntary case or proceeding under the Bankruptcy Code
with respect to any Loan Party as a debtor, (b) any other voluntary or
involuntary insolvency, reorganization or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
with respect to any Loan Party as a debtor or with respect to any substantial
part of their respective assets, (c) any liquidation, dissolution,
reorganization or winding up of any Loan Party whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy or (d) any assignment for
the benefit of creditors or any other marshalling of assets and liabilities of
any Loan Party.

“Intellectual
Property” means all patents, trademarks, tradenames, copyrights,
technology, software, know-how and processes used in or necessary for the
conduct of the business of Company and its Subsidiaries as currently conducted
that are material to the 

 

20

condition
(financial or otherwise), business or operations of Company and its
Subsidiaries taken as a whole.

“Intercreditor Agreement” means that certain Intercreditor
Agreement dated as of February 18, 2005 by and between BNP Paribas as
Administrative Agent for Lenders, and BNP Paribas in its capacity as
administrative agent for the lenders under the Second Lien Term Loan Agreement
and consented to by Company, Holdings and each Subsidiary Guarantor.

“Interest
Payment Date” means (i) with respect to any Base Rate Loan,
each March 31, June 30, September 30 and December 31 of
each year, commencing on the first such date to occur after the Closing Date,
and (ii) with respect to any LIBOR Loan, the last day of each Interest
Period applicable to such Loan; provided that in the case of each
Interest Period of longer than three months “Interest
Payment Date” shall also include the date that is three months, or
any integral multiple thereof, after the commencement of such Interest Period.

“Interest
Period” has the meaning assigned to that term in subsection 2.2B.

“Interest
Rate Agreement” means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement
or arrangement to which Company or any of its Subsidiaries is a party.

“Interest
Rate Determination Date” means, with respect
to any Interest Period, the second Business Day prior to the first day of such
Interest Period.

“Internal
Revenue Code” means the Internal Revenue Code of 1986, as amended to
the date hereof and from time to time hereafter, and any successor statute.

“Inventory”
means, with respect to any Person as of any date of determination, all goods,
merchandise and other personal property which are then held by such Person for
sale or lease, including raw materials and work in process.

“Investment”
means (i) any direct or indirect purchase or other acquisition by Company
or any of its Subsidiaries of, or of a beneficial interest in, any Securities
of any other Person (including any Subsidiary of Company), (ii) any direct
or indirect redemption, retirement, purchase or other acquisition for value, by
any Subsidiary of Company from any Person other than Company or any of its
wholly-owned Subsidiaries, of any equity Securities of such Subsidiary,
(iii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital
contribution by Company or any of its Subsidiaries to any other Person (other
than a wholly-owned Subsidiary of Company), including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business
but excluding accounts receivable that are not so included, or (iv) Interest
Rate Agreements or Currency Agreements not constituting Hedge Agreements. The
amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to
such Investment (other 

 

21

than adjustments
for the repayment of, or the refund of capital with respect to, the original
principal amount of any such Investment).

“IP
Collateral” means, collectively, the Intellectual Property that
constitutes Collateral under the Security Agreement.

“IP Filing
Office” means the United States Patent and Trademark Office, the
United States Copyright Office or any successor or substitute office in which
filings are necessary or, in the opinion of Administrative Agent, desirable in
order to create or perfect Liens on any IP Collateral.

“Issuing
Lender” means, with
respect to any Letter of Credit, the Revolving Lender that agrees or is
otherwise obligated to issue such Letter of Credit, determined as provided in
subsection 3.1B(ii).

“JH Partners”
means JH Partners LLC f/k/a Jesse.Hansen & Co., LLC, a Delaware limited
liability company.

“Joint
Venture” means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form.

“Leasehold Property”
means any leasehold interest of any Loan Party as lessee under any lease of
real property.

“Lender”
and “Lenders” means the Persons identified
as “Lenders” and listed on the signature pages of this Agreement, together with
their successors and permitted assigns pursuant to subsection 10.1, and the
term “Lenders” shall include Swing Line Lender unless the context otherwise
requires; provided that the term “Lenders”, when used in the context of
a particular Commitment, shall mean Lenders having that Commitment.

“Lender Hedge
Agreement” means any Hedge Agreement entered into by Company or any
of its Subsidiaries and one or more Lenders or Affiliates thereof pursuant to
the terms of this Agreement.

“Letter of
Credit” or “Letters of Credit”
means Commercial Letters of Credit and Standby Letters of Credit issued or to
be issued by Issuing Lenders for the account of Company pursuant to subsection
3.1.

“Letter of
Credit Usage” means, as at any date of determination, the sum of
(i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding plus
(ii) the aggregate amount of all drawings under Letters of Credit honored by
Issuing Lenders and not theretofore reimbursed out of the proceeds of Revolving
Loans pursuant to subsection 3.3B or otherwise reimbursed by Company.

“LIBOR” means, for any Interest Rate
Determination Date with respect to an Interest Period for a LIBOR Loan, the
London interbank offered rate, rounded upward, if 

 

22

necessary, to the
nearest 1/100 of 1%, equal to the offered rate for deposits in Dollars for a
period equal to such Interest Period, commencing on the first day of such
Interest Period, which appears on Telerate Page 3750 (or such other page as may
replace Telerate Page 3750 on that service or any successor service for the
purpose of displaying London interbank offered rates of major banks) as of
11:00 A.M. (London time), on the Interest Rate Determination Date for such
Interest Period.  If the LIBOR rate for
an Interest Period cannot be determined pursuant to the preceding sentence,
then the LIBOR rate for such Interest Period shall be determined on the basis
of the rates at which deposits in Dollars are offered to BNP Paribas at
approximately 11:00 A.M. (London time) on the Interest Rate Determination Date
for such Interest Period, and on an amount that is approximately equal to the
principal amount of the LIBOR Loans to which such Interest Period is
applicable.  Administrative Agent will
request the principal London office of BNP Paribas to provide a quotation of
its rate.

“LIBOR Loans”
means Loans bearing interest at rates determined by reference to Adjusted LIBOR
as provided in subsection 2.2A.

“LIBOR Margin”
means the margin over Adjusted LIBOR used in determining the rate of interest
of LIBOR Loans pursuant to subsection 2.2A.

“Lien”
means any lien, mortgage, pledge, assignment, security interest, charge or
encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.

“Loan”
or “Loans” means one or more of the Loans
made by Lenders to Company pursuant to subsection 2.1A.

“Loan
Documents” means this Agreement, the Notes, Letters of Credit (and
any applications for, or reimbursement agreements or other documents or
certificates executed by Company in favor of an Issuing Lender relating to, the
Letters of Credit), the Guaranties, the Collateral Documents, the Intercreditor
Agreement, each Compliance Certificate, each Borrowing Base Certificate, each
Lender Hedge Agreement, each Management Subordination Agreement, the Holdings
Subordination Agreement, each certificate, each fee letter, and each other
instrument, document and agreement from time to time delivered by any Loan
Party pursuant to this Agreement or any other Loan Document and all amendments,
waivers and consents relating thereto.

“Loan Party”
means each of Holdings, Company
and any of Company’s Subsidiaries from time to time executing a Loan Document,
and “Loan Parties” means all such Persons,
collectively.

“Management
Agreements” means collectively, (i) that certain Management Agreement
dated as of June 10, 2004 by and between JH Partners and Company, as amended by
The First Amendment to Management Agreement dated as of February 18, 2004 and
(ii) that certain Management Agreement dated as of June 10, 2004 by and between
Berkshire Partners and Company, as amended by The First Amendment to Management
Agreement dated as of 

 

23

February 18, 2004,
as such agreements are in effect on the Closing Date and as it may thereafter
be amended supplemented or otherwise modified to the extent permitted under
subsection 7.12.

“Management
Fees” means (i) the structuring and negotiation fees payable by
Company to each of Berkshire Partners and JH Partners on the Closing Date and
reimbursement of out of pocket expenses in connection therewith pursuant to the
Management Agreements; provided that the aggregate amount of such fees
shall in no event exceed $2,400,000 plus the amount of any expense
reimbursement paid at Closing, (ii) the fees for services rendered in
connection with financing, acquisition and disposition transactions involving
any Loan Party, equaling one-half of one percent (0.50%) of the gross
transaction value of each such transaction and payable by Company to each of
Berkshire Partners and JH Partners at the closing of such transactions pursuant
to the Management Agreements (iii) all other fees, expenses and other
amounts or consideration payable by Company or any of its Subsidiaries to any
manager or other Person (other than Company or any of its Subsidiaries, or any
direct employee thereof) for management or consulting services or arrangements
(other than as an employee of Company or any of its Subsidiaries), including,
without limitation, the management fees payable pursuant to the Management
Agreements; provided that the aggregate amount of such other fees and
other amounts or consideration shall in no event exceed $600,000 plus expenses
for any Fiscal Year, and (iv) amounts payable solely to reimburse reasonable
amounts paid by such manager or other Person to Persons that are not Affiliates
on behalf of Company and its Subsidiaries.

“Management Subordination Agreement” means each of (i) the Management
Subordination Agreement executed and delivered by JH Partners and Company, and
(ii) the Management Subordination Agreement executed and delivered by Berkshire
Partners, in each case substantially in the form of Exhibit XVI annexed
hereto, as such agreement may hereafter be amended, supplemented or otherwise
modified to the extent permitted under subsection 7.12.

“Margin Stock”
has the meaning assigned to that term in Regulation U of the Board of Governors
of the Federal Reserve System as in effect from time to time.

“Material
Adverse Effect” means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries taken as a whole or (ii) the
impairment (other than by reasons of the type set forth in clause (i)) of the
ability of any Loan Party to perform, or of Administrative Agent or Lenders to enforce,
the Obligations.

“Material
Contract” means any contract or other arrangement to which Holdings,
Company or any of its Subsidiaries is a party (other than the Loan Documents)
for which breach, nonperformance, cancellation or failure to renew could have a
Material Adverse Effect.

“Maximum Consolidated Capital Expenditures Amount”
has the meaning assigned to that term in subsection 7.8.

“Mortgage”
means (i) a security instrument (whether designated as a deed of trust or a
mortgage or by any similar title) executed and delivered by any Loan Party, in
form 

 

24

and substance
satisfactory to Administrative Agent in its reasonable discretion, in each case
with such changes thereto as may be recommended by Administrative Agent’s local
counsel based on local laws or customary local mortgage or deed of trust
practices, or (ii) at Administrative Agent’s option, in the case of an
Additional Mortgaged Property, an amendment to an existing Mortgage, in form
satisfactory to Administrative Agent, adding such Additional Mortgaged Property
to the Real Property Assets encumbered by such existing Mortgage, in either
case as such security instrument or amendment may be amended, supplemented or
otherwise modified from time to time.  “Mortgages” means all such instruments, including any
Additional Mortgages, collectively.

“Multiemployer
Plan” means any “multiemployer plan” as defined in Section 3(37) of
ERISA, to which the Company, any Subsidiary or any ERISA Affiliate currently
contributes or is obligated to contribute, or with respect to which the
Company, any Subsidiary or any ERISA Affiliate has or could reasonably be
expected to have any liability (whether absolute or contingent).

“Net Asset
Sale Proceeds” means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or by
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale, net of any bona fide direct
costs or expenses incurred by any Loan Party in connection with such Asset
Sale, including (i) income taxes reasonably estimated to be actually
payable by any Loan Party within two years of the date of such Asset Sale as a
result of any gain recognized in connection with such Asset Sale and (ii) payment
of the outstanding principal amount of, premium or penalty, if any, and
interest on any Indebtedness (other than the Loans) that is (a) secured by a
Lien on the stock or assets in question and that is required to be repaid under
the terms thereof or under applicable law as a result of such Asset Sale and
(b) actually paid at the time of receipt of such cash payment to a Person that
is not an Affiliate of any Loan Party or of any Affiliate of a Loan Party.

“Net
Insurance/Condemnation Proceeds” means any Cash payments or proceeds
received by Holdings, Company, or any of its Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Holdings, Company
or any of its Subsidiaries by any Person pursuant to the power of eminent
domain, condemnation or otherwise, or pursuant to a sale of any such assets to
a purchaser with such power under threat of such a taking, in each case net of
any (a) actual and reasonable documented costs incurred by Holdings, Company or
any of its Subsidiaries in connection with the adjustment or settlement of any
claims of Holdings, Company or such Subsidiary in respect thereof and (b) any
reasonable costs incurred in connection with any sale of such assets as
referred to in clause (ii) of this definition including, without limitation,
income taxes payable as a result of any gain recognized in connection
therewith.

“Net
Securities Proceeds” means the cash proceeds (net of underwriting discounts
and commissions and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses) from (i) the issuance of
Securities of or the 

 

25

incurrence of
Indebtedness by Holdings, Company or any of its Subsidiaries and (ii) capital
contributions made by a holder of Capital Stock of Holdings.

“Non-US
Lender” means a Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other political
subdivision thereof.

“Notes”
means one or more of the Term Notes, Revolving Notes or Swing Line Note or any
combination thereof.

“Notice of
Borrowing” means a notice substantially in the form of Exhibit I
annexed hereto.

“Notice of
Conversion/Continuation” means a notice substantially in the form of
Exhibit II annexed hereto.

“Obligations”
means all obligations of every nature of each Loan Party from time to time owed
to Administrative Agent, Lenders or any of them under the Loan Documents,
whether for principal, interest (including interest accruing on or after the
occurrence of an Insolvency Event), reimbursement of amounts drawn under
Letters of Credit, fees, expenses, indemnification or otherwise.

“OFAC”
means the Office of Foreign Assets Control of the United States Department of
the Treasury, or any successor office or agency.

“Officer”
means the president, chief executive officer, a vice president, chief financial
officer, treasurer, general partner (if an individual), managing member (if an
individual) or other individual appointed by the Governing Body or the
Organizational Documents of a corporation, partnership, trust or limited
liability company to serve in a similar capacity as any of the foregoing.

“Officer’s
Certificate” as applied to any Person that is a corporation, partnership,
trust or limited liability company, means a certificate executed on behalf of
such Person by one or more Officers of such Person or one or more Officers of a
general partner or a managing member if such general partner or managing member
is a corporation, partnership, trust or limited liability company.

“Operating
Lease” means, as applied to
any Person, any lease (including leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a Capital
Lease other than any such lease under which that Person is the lessor.

“Organizational
Documents” means the documents (including Bylaws, if applicable)
pursuant to which a Person that is a corporation, partnership, trust or limited
liability company is organized.

“Participant”
means a purchaser of a participation in the rights and obligations under this
Agreement pursuant to subsection 10.1C.

 

26

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

“Pension Plan”
means any employee benefit plan, within the meaning of Section 3(3) of
ERISA, other than a Multiemployer Plan, that is subject to Section 412 of the
Internal Revenue Code or Section 302 of ERISA that is currently maintained or
contributed to by the Company, any Subsidiary or any ERISA Affiliate, or with
respect to which the Company, any Subsidiary or any ERISA Affiliate has or
could reasonably be expected to have any liability (whether absolute or
contingent).

“Permitted
Acquisition” has the meaning assigned to that term in subsection
7.3(x).

“Permitted
Encumbrances” means the following types of Liens (excluding any such
Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue
Code or by ERISA, any such Lien relating to or imposed in connection with any
Environmental Claim, and any such Lien expressly prohibited by any applicable
terms of any of the Collateral Documents):

(i)            Liens
for taxes, assessments or governmental charges or claims the payment of which
is not, at the time, required by subsection 6.3;

(ii)           statutory
Liens of landlords, Liens of collecting banks under the UCC on items in the
course of collection, statutory Liens and rights of set-off of banks, statutory
Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen,
and other Liens imposed by law, in each case incurred in the ordinary course of
business (a) for amounts not yet overdue or (b) for amounts that are overdue
and that (in the case of any such amounts overdue for a period in excess of 30
days) are being contested in good faith by appropriate proceedings, so long as
(1) such reserves or other appropriate provisions, if any, as shall be required
by GAAP shall have been made for any such contested amounts, and (2) in the
case of a Lien with respect to any portion of the Collateral, such contest
proceedings conclusively operate to stay the sale of any portion of the
Collateral on account of such Lien;

(iii)          deposits
made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of social security, or to
secure the performance of statutory obligations, bids, leases, government
contracts, trade contracts and other similar obligations (exclusive of
obligations for the payment of borrowed money), so long as no foreclosure, sale
or similar proceedings have been commenced with respect to any portion of the
Collateral on account thereof;

(iv)          any
attachment or judgment Lien not constituting an Event of Default under
subsection 8.8;

(v)           licenses
(with respect to Intellectual Property and other property), leases or subleases
granted to third parties in accordance with any applicable terms of the
Collateral Documents and not interfering in any material respect with the
ordinary 

 

27

 

conduct of the business of Company or any of its Subsidiaries or
resulting in a material diminution in the value of any Collateral as security
for the Obligations;

(vi)          easements,
rights-of-way, restrictions, encroachments, and other minor defects or
irregularities in title, in each case which do not and will not interfere in
any material respect with the ordinary conduct of the business of Company or
any of its Subsidiaries or result in a material diminution in the value of any
Collateral as security for the Obligations;

(vii)         any
(a) interest or title of a lessor or sublessor under any lease not
prohibited by this Agreement, (b) Lien or restriction that the interest or
title of such lessor or sublessor may be subject to, or (c) subordination
of the interest of the lessee or sublessee under such lease to any Lien or
restriction referred to in the preceding clause (b), so long as the holder of
such Lien or restriction agrees to recognize the rights of such lessee or
sublessee under such lease;

(viii)        Liens
arising from filing UCC financing statements relating solely to leases not
prohibited by this Agreement;

(ix)           Liens
in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;

(x)            any
zoning or similar law or right reserved to or vested in any governmental office
or agency to control or regulate the use of any real property;

(xi)           Liens
granted pursuant to the Collateral Documents;

(xii)          Liens
securing obligations (other than obligations representing Indebtedness for
borrowed money) under operating, reciprocal easement or similar agreements
entered into in the ordinary course of business of Company and its
Subsidiaries; and

(xiii)         Liens
in respect of an agreement to sell or otherwise transfer any  property, to the extent such sale or transfer
is permitted by subsection 7.7.

“Permitted
Equity Contribution Capex” means any expenditure by Company or its
Subsidiaries for capital improvements financed by a non-refundable cash equity
contribution to Company or such Subsidiary; provided that the aggregate
amount of all such expenditures shall in no event exceed $5,000,000.

“Permitted
Holders” means (i) Sponsors or any entity controlled thereby or any
of the partners thereof and/or (ii) any of the Permitted Transferees of any
Person in clause (i) hereof.

“Permitted
Transferees” means, with respect to any Person, (i) any Affiliates
of such Person, (ii) the heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of any such Person or (iii) a trust, the
beneficiaries of which, or a corporation or 

 

28

partnership, the
stockholders, or general and limited partners, of which, or a limited liability
company, the members of which, include only such Person or his or her spouse or
lineal descendants, in each case to whom such Person has transferred the
beneficial ownership of any Securities of Holdings.

“Person”
means and includes natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, limited liability partnerships,
joint stock companies, Joint Ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations, whether
or not legal entities, and Government Authorities.

“Pledged
Collateral” means collectively, the “Pledged Collateral” as defined
in the Security Agreement and any Foreign Pledge Agreement.

“Potential
Event of Default” means a condition or event that, after notice or
lapse of time or both, would constitute an Event of Default.

“Prepaid Amount” has the meaning assigned to that term in
subsection 2.4B(iii)(e).

“Pricing
Certificate” means an Officer’s Certificate of Company certifying
the Consolidated Leverage Ratio as at the last day of any Fiscal Quarter and
setting forth the calculation of such Consolidated Leverage Ratio in reasonable
detail.

“Prime Rate”
means the rate that BNP Paribas in New York announces from time to time as its
prime rate, effective as of the date
announced as the effective date of any change in such prime rate. Without
notice to Company or any other Person, the Prime Rate shall change
automatically from time to time as and in the amount by which such prime rate
shall fluctuate.  The Prime Rate
is a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer.  BNP
Paribas or any other Lender may make commercial loans or other loans at rates
of interest at, above or below the Prime Rate.

“Proceedings”
means any action, suit, proceeding (whether administrative, judicial or
otherwise), governmental investigation or arbitration.

“Pro Rata
Share” means (i) with respect to all payments, computations and
other matters relating to the Term Loan Commitment or the Term Loan of any
Lender, the percentage obtained by dividing (x) the Term Loan
Exposure of that Lender by (y) the aggregate Term Loan Exposure of
all Lenders, (ii) with respect to all payments, computations and other
matters relating to the Revolving Loan Commitment or the Revolving Loans of any
Lender or any Letters of Credit issued or participations therein deemed
purchased by any Lender or any assignments of any Swing Line Loans deemed
purchased by any Lender, the percentage obtained by dividing
(x) the Revolving Loan Exposure of that Lender by (y) the
aggregate Revolving Loan Exposure of all Lenders, and (iii) for all other
purposes with respect to each Lender, the percentage obtained by dividing
(x) the sum of the Term Loan Exposure of that Lender plus the
Revolving Loan Exposure of that Lender by (y) the sum of the aggregate
Term Loan Exposure of all Lenders plus the aggregate Revolving Loan
Exposure of all Lenders, in any such case as the 

 

29

applicable
percentage may be adjusted by assignments permitted pursuant to subsection 10.1
or required pursuant to subsection 10.5. 
The initial Pro Rata Share of each Revolving Lender for purposes of each
of clause (ii) of the preceding sentence is set forth opposite the name of that
Lender in Schedule 2.1 annexed hereto.

“QVC
Inventory” means Inventory owned by Company and located in one or
more premises of QVC, Inc.

“Real
Property Asset” means, at any time of determination, any interest
then owned by any Loan Party in any real property including any fee or
leasehold interest.

“Recapitalization” means the recapitalization of the
Company in which the Existing Indebtedness (except Existing Indebtedness
described on Schedule 7.1) will be repaid in an amount not to exceed
$92,550,000, plus accrued interest and applicable prepayment premium, on the
Closing Date and the Recapitalization Payment will be made on or about the
Closing Date, in each case with the proceeds of the Term Loans and the Second
Lien Term Loans and certain cash-on-hand of the Company.

“Recapitalization Payment” means the application by the Company of
the proceeds of the Term Loans, the Second Lien Term Loans and cash-on-hand on
or about the Closing Date towards a dividend by the Company to Holdings in an
aggregate amount not to exceed $110,000,000, which Holdings in turn shall
dividend, together with the net proceeds of the Holdings Notes, to its
shareholders.

“Refunded
Swing Line Loans” has the meaning assigned to that term in
subsection 2.1A(iii).

“Register”
has the meaning assigned to that term in subsection 2.1D.

“Regulation D”
means Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.

“Reimbursement
Date” has the meaning assigned to that term in subsection 3.3B.

“Related Agreements” means, collectively, Acquisition Agreement, the
Certificate of Merger, the Contingent Tax Note, the Management Agreements and
the Management Subordination Agreements.

“Release”
means any release, spill, emission, leaking, pumping, pouring, injection,
escaping, deposit, disposal, discharge, dispersal, dumping, leaching or
migration of Hazardous Materials into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), or into or out of
including the movement of any Hazardous Materials through the air, soil,
surface water, groundwater or property.

 

30

 

“Request for
Issuance” means a request substantially in the form of Exhibit III
annexed hereto.

“Requisite
Class Lenders” means, at any time of determination (i) for the
Class of Lenders having Revolving Loan Exposure, Lenders having or holding more
than 50% of the aggregate Revolving Loan Exposure of all Lenders, and
(ii) for the Class of Lenders having Term Loan Exposure, Lenders having or
holding more than 50% of the aggregate Term Loan Exposure of all Lenders.

“Requisite
Lenders” means
Lenders having or holding more than 50% of the sum of the aggregate Term
Loan Exposure of all Lenders plus the aggregate Revolving Loan Exposure
of all Lenders.

“Restricted
Junior Payment” means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Company
or Holdings now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of Company or Holdings now or hereafter outstanding, (iii) any payment
made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of Company or
Holdings now or hereafter outstanding, (iv) any payment or prepayment of
principal of, premium, if any, or interest on, or redemption, purchase,
retirement, defeasance (including in-substance or legal defeasance), sinking
fund or similar payment with respect to, any Indebtedness under the Second Lien
Term Loan Documents or the Holdings Note Documents and (v) any payment of any
Management Fees.

“Revolving
Lender” means a Lender that has a Revolving Loan Commitment and/or
that has an outstanding Revolving Loan.

“Revolving
Loan Commitment” means the commitment of a Revolving Lender to make
Revolving Loans to Company pursuant to subsection 2.1A(ii), and “Revolving Loan Commitments” means such commitments of all
Revolving Lenders in the aggregate.

“Revolving
Loan Commitment Amount” means, at any date, the aggregate amount of
the Revolving Loan Commitments of all Revolving Lenders.

“Revolving Loan Commitment Termination Date”
means February 18, 2011.

“Revolving Loan
Exposure” means, with respect
to any Revolving Lender, as of any date of determination (i) prior to the
termination of the Revolving Loan Commitments, the amount of that Lender’s
Revolving Loan Commitment, and (ii) after the termination of the Revolving
Loan Commitments, the sum of (a) the aggregate outstanding principal
amount of the Revolving Loans of that Lender plus (b) in the event
that Lender is an Issuing Lender, the aggregate Letter of Credit Usage in
respect of all Letters of Credit issued by that Lender (in each case net of any
participations purchased by other Lenders in such Letters of Credit or in any
unreimbursed drawings thereunder) plus (c) the aggregate amount of
all participations purchased

 

31

 

by that Lender in
any outstanding Letters of Credit or any unreimbursed drawings under any
Letters of Credit plus (d) in the case of Swing Line Lender, the
aggregate outstanding principal amount of all Swing Line Loans (net of any
assignments thereof deemed purchased by other Revolving Lenders) plus
(e) the aggregate amount of all assignments deemed purchased by that
Lender in any outstanding Swing Line Loans.

“Revolving
Loans” means the Loans made by Revolving Lenders to Company pursuant
to subsection 2.1A(ii).

“Revolving
Notes” means (i) the promissory notes of Company issued
pursuant to subsection 2.1E and (ii) any promissory notes issued by
Company pursuant to 10.1B(i) in connection with assignments of the Revolving
Loan Commitments and Revolving Loans of any Revolving Lenders, in each case substantially
in the form of Exhibit V annexed hereto, as they may be amended,
supplemented or otherwise modified from time to time.

“Second Lien Hedge Agreement
Obligations”
means obligations in respect of Hedge Agreement required pursuant to the Second
Lien Term Loan Agreement.

“Second Lien Term Loan” means
the term loans made to the Company pursuant to the Second Lien Term Loan
Agreement.

“Second Lien Term Loan Agreement” means
the Term Loan Credit Agreement dated as of the date hereof, by and among Holdings,
Company, the financial institutions party thereto and BNP Paribas, as
administrative agent, and any replacement agreement or facility existing at any
time and permitted pursuant to the terms hereof; provided that the lenders
party to such replacement agreement or facility expressly agree to be bound by
the Intercreditor Agreement or enter into an intercreditor agreement in form
and substance satisfactory to Administrative Agent and the Requisite Lenders.

“Second Lien Term Loan Documents”
means, collectively, (i) the Second Lien Term Loan Agreement and (ii) all
principal documents executed by Company and/or any of its Affiliates in
connection therewith, in each case in the form delivered to Administrative
Agent and Lenders prior to the Closing Date, with such modifications thereto
prior to the execution and delivery thereof as may be reasonably satisfactory
to Administrative Agent.

“Securities”
means any stock, shares, partnership interests, voting trust certificates,
certificates of interest or participation in any profit-sharing agreement or
arrangement, options, warrants, bonds, debentures, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated, certificated or
uncertificated, or otherwise, or in general any instruments commonly known as “securities”
or any certificates of interest, shares or participations in temporary or
interim certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.

“Securities
Account” means an
account to which a financial asset is or may be credited in accordance with an
agreement under which the Person maintaining the account

 

32

 

undertakes to
treat the Person for whom the account is maintained as entitled to exercise the
rights that comprise the financial asset.

“Securities
Act” means the Securities Act of 1933, as amended from time to time,
and any successor statute.

“Security
Agreement” means the Security Agreement executed and delivered on
the Closing Date, substantially in the form of Exhibit XII annexed
hereto, as such Security Agreement may thereafter be amended, supplemented or
otherwise modified from time to time.

“Solvent”
means, with respect to any Person, that as
of the date of determination both (i)(a) the then fair saleable value of
the property of such Person is (1) greater than the total amount of
liabilities (including contingent liabilities) of such Person and (2) not
less than the amount that will be required to pay the probable liabilities on
such Person’s then existing debts as they become absolute and due considering
all financing alternatives and potential asset sales reasonably available to
such Person; (b) such Person’s capital is not unreasonably small in
relation to its business or any contemplated or undertaken transaction; and
(c) such Person does not intend to incur, or believe (nor should it
reasonably believe) that it will incur, debts beyond its ability to pay such
debts as they become due; and (ii) such Person is “solvent” within the meaning
given that term and similar terms under applicable laws relating to fraudulent
transfers and conveyances.  For purposes
of this definition, the amount of any contingent liability at any time shall be
computed as the amount that, in light of all of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.

“Sponsors”
means, collectively, (i) Berkshire Partners or its Affiliates and (ii) JH
Partners or its Affiliates.

“Standby
Letter of Credit” means any standby letter of credit or similar
instrument issued for the purpose of supporting (i) Indebtedness of
Company or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers’ compensation liabilities of
Company or any of its Subsidiaries, (iii) the obligations of third party
insurers of Company or any of its Subsidiaries arising by virtue of the laws of
any jurisdiction requiring third party insurers, (iv) obligations with respect
to Capital Leases or Operating Leases of Company or any of its Subsidiaries,
and (v) performance, payment, deposit or surety obligations of Company or
any of its Subsidiaries, in any case if required by law or governmental rule or
regulation or in accordance with custom and practice in the industry.

“Stated Maturity Date” means February 18, 2012.

“Stockholder
Agreement” means that certain Stockholder Agreement, dated as of
June 10, 2004, by and among Holdings, JH MDB Investors, L.P., Bershire Fund VI
Investment Corp., a Massachusetts corporation, Berkshire Fund V, Limited
Partnership, Berkshire Fund VI, Limited Partnership, and Berkshire Investors
LLC.

 

33

 

“Subscription
Agreements” means, collectively, the (i) Stock Subscription
Agreement, dated as of June 10, 2004, by and between Holdings and Gleacher
Mezzanine Fund I, L.P., (ii) Stock Subscription Agreement, dated as of June 10,
2004, by and between Holdings and Gleacher Mezzanine Fund P, L.P., and (iii)
Stock Subscription Agreement, dated as of June 10, 2004, by and between
Holdings and York Street Mezzanine Partners, L.P.

“Subsidiary”
means, with respect to any Person, any
corporation, partnership, trust, limited liability company, association, Joint
Venture or other business entity of which more than 50% of the total voting
power of shares of stock or other ownership interests entitled (without regard
to the occurrence of any contingency) to vote in the election of the members of
the Governing Body is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof.

“Subsidiary
Guarantor” means any Subsidiary of Company that executes and
delivers a counterpart of the Subsidiary Guaranty on the Closing Date or from
time to time thereafter pursuant to subsection 6.8.

“Subsidiary
Guaranty” means the Subsidiary Guaranty executed and delivered by
existing Subsidiaries of Company on the Closing Date and to be executed and
delivered by additional Subsidiaries of Company from time to time thereafter in
accordance with subsection 6.8, substantially in the form of Exhibit XI
annexed hereto, as such Subsidiary Guaranty may hereafter be amended,
supplemented or otherwise modified from time to time.

“Supplemental
Collateral Agent” has the meaning assigned to that term in
subsection 9.1B.

“Swing Line
Lender” means Administrative Agent, or any Person serving as a
successor Administrative Agent
hereunder, in its capacity as Swing Line Lender hereunder.

“Swing Line
Loan Commitment” means the commitment of Swing Line Lender to make
Swing Line Loans to Company pursuant to subsection 2.1A(iii).

“Swing Line
Loans” means the Loans made by Swing Line Lender to Company pursuant
to subsection 2.1A(iii).

“Swing Line
Note” means (i) the promissory note of Company issued pursuant
to subsection 2.1E on the Closing Date and (ii) any promissory note issued
by Company to any successor Administrative Agent and Swing Line Lender pursuant
to the last sentence of subsection 9.5B, in each case substantially in the form
of Exhibit VI annexed hereto, as it may be amended, supplemented or
otherwise modified from time to time.

“Synthetic Lease Obligation” means the monetary obligation of a
Person under (i) a so-called synthetic, off-balance sheet or tax retention
lease, or (ii) an agreement for the use or possession of property creating
obligations that do not appear on the balance sheet of such Person but which,
upon the insolvency or bankruptcy of such Person, would be characterized as the
indebtedness of such Person (without regard to accounting treatment).

 

34

 

“Tax”
or “Taxes” means any present or future tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature and
whatever called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed, including interest, penalties, additions to
tax and any similar liabilities with respect thereto; except that, in the case
of a Lender, there shall be excluded (i) taxes that are imposed on the
overall net income or net profits (including franchise taxes imposed in lieu
thereof) (a) by the United States, (b) by any other Government
Authority under the laws of which such Lender is organized or has its principal
office or maintains its applicable lending office, or (c) by any jurisdiction
solely as a result of a present or former connection between such Lender and
such jurisdiction (other than any such connection arising solely from such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, any of the Loan Documents), and (ii) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which such Lender is located.

“Term Loan Commitment” means the commitment of a Lender to make
a Term Loan to Company pursuant to subsection 2.1A(i), and “Term Loan Commitments” means such commitments of all
Lenders in the aggregate.

“Term Loan Exposure” with respect to any Lender, means, as of
any date of determination (i) prior to the funding of the Term Loans, that
Lender’s Term Loan Commitment, and (ii), after the funding of the Term Loans,
the outstanding principal amount of the Term Loan of that Lender.

“Term Loans”
means the Loans made by Lenders to Company pursuant to subsection 2.1A(i).

“Term Notes” means any promissory notes of Company
issued pursuant to subsection 2.1E to evidence the Term Loans of any Lenders
and (ii) any promissory notes issued by Company pursuant to subsection 10.1B(i)
in connection with assignments of the Term Loan Commitments or Term Loans of
any Lenders, in each case, substantially in the form of Exhibit IV
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.

“Title
Company” means one or more title insurance companies reasonably
satisfactory to Administrative Agent.”

“Total
Utilization of Revolving Loan Commitments” means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans plus (ii) the aggregate principal amount of all outstanding
Swing Line Loans plus (iii) the Letter of Credit Usage.

“Transaction
Costs” means all fees, costs, expenses, premiums, termination
payments and prepayment penalties incurred by any Loan Party on or before the
Closing Date (or promptly thereafter in connection with the transactions
occurring on the Closing Date) in connection with the transactions contemplated
by the Loan Documents and the Related Agreements, including write-off of
deferred financing costs.

 

35

 

“UCC”
means the Uniform Commercial Code as in effect in any applicable jurisdiction.

“Unasserted
Obligations” means, at any time, Obligations for taxes, costs,
indemnifications, reimbursements, damages and other liabilities (except for (i)
the principal of and interest on, and fees relating to, any Indebtedness and
(ii) contingent reimbursement obligations in respect of amounts that may be
drawn under Letters of Credit) in respect of which no claim or demand for
payment has been made (or, in the case of obligations for indemnification, no
notice for indemnification has been issued by the indemnitee) at such time.

“Value” means, as determined in accordance with
GAAP, (a) with respect to Eligible Accounts Receivable, the gross face amount
of Eligible Accounts Receivable less the sum of (i) sales, excise or
similar taxes included in the amount thereof and (ii) charges and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto and (b) with respect to Eligible
Inventory, the lower of (i) cost computed on a first-in first-out basis in
accordance with GAAP or (ii) market value.

1.2                               Accounting Terms;
Utilization of GAAP for Purposes of Calculations Under Agreement.

Except as otherwise
expressly provided in this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with
GAAP.  Financial statements and other
information required to be delivered by Company to Lenders pursuant to clauses
(ii), (iii) and (xii) of subsection 6.1 shall be prepared in accordance with
GAAP as in effect at the time of such preparation (and delivered together with
the reconciliation statements provided for in subsection 6.1(v)).  Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize GAAP as in
effect on the date of determination, applied in a manner consistent with that
used in preparing the financial statements referred to in subsection 5.3. If at
any time any change in GAAP would affect the computation of any financial ratio
or requirement set forth in any Loan Document, and Company, Administrative
Agent or Requisite Lenders shall so request, Administrative Agent, Lenders and
Company shall negotiate in good faith to amend such ratio or requirement to preserve
the original intent thereof in light of such change in GAAP (subject to the
approval of Requisite Lenders), provided that, until so amended, such
ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and Company shall provide to Administrative Agent
and Lenders reconciliation statements provided for in subsection 6.1(v).

1.3                               Other Definitional
Provisions and Rules of Construction.

A.            Any of the terms defined herein may,
unless the context otherwise requires, be used in the singular or the plural,
depending on the reference.

B.            References to “Sections” and “subsections”
shall be to Sections and subsections, respectively, of this Agreement unless
otherwise specifically provided.  Section
and subsection headings in this Agreement are included herein for convenience
of reference only

 

36

 

and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.

C.            An Event of Default shall “continue” or
be “continuing” until such Event of Default has been waived in accordance with
subsection 10.6 hereof or otherwise cured.

D.            The use in any of the Loan Documents of
the word “include” or “including”, when following any general statement, term
or matter, shall not be construed to limit such statement, term or matter to
the specific items or matters set forth immediately following such word or to
similar items or matters, whether or not nonlimiting language (such as “without
limitation” or “but not limited to” or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all other items or
matters that fall within the broadest possible scope of such general statement,
term or matter.

E.             Any reference herein or in any other Loan
Document to any agreement, document or instrument, including this Agreement,
the Notes, the other Loan Documents and any schedules or exhibits thereto,
unless expressly noted otherwise, shall be a reference to each such agreement,
document or instrument as it may be amended, restated, supplemented or
otherwise modified from time to time in accordance with its terms and to the
extent permitted (or not restricted) hereunder or under the applicable Loan
Document.

Section
2.              AMOUNTS AND TERMS OF
COMMITMENTS AND LOANS

2.1                               Commitments; Making of
Loans; the Register; Optional Notes.

A.            Commitments. 
Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Company herein set forth, each
Lender hereby severally agrees to make the Loans described in subsections
2.1A(i) and 2.1A(ii) and Swing Line Lender hereby agrees to make the Swing Line
Loans as described in subsection 2.1A(iii).

(i)            Term
Loans.  Each Lender that has a Term
Loan Commitment severally agrees to lend to Company on the Closing Date an
amount not exceeding its Pro Rata Share of the aggregate amount of the Term
Loan Commitments to be used for the purposes identified in subsection
2.5A.  The amount of each Lender’s Term
Loan Commitment shall be set forth in the Register on the Closing Date and the
aggregate amount of the Term Loan Commitments is $155,000,000; provided
that the Term Loan Commitments of each Lender shall be adjusted to give effect
to any assignments of such Term Loan Commitments pursuant to subsection 10.1B.  Each Lender’s Term Loan Commitment shall
expire immediately and without further action on February 18, 2005 if the Term
Loans are not made on or before that date. 
Company may make only one borrowing under the Term Loan Commitments.  Amounts borrowed under this subsection
2.1A(i) and subsequently repaid or prepaid may not be reborrowed.

(ii)           Revolving
Loans.  Each Lender that has a
Revolving Loan Commitment severally agrees, subject to the limitations set
forth below with respect to the maximum

 

37

 

amount of Revolving Loans permitted to be outstanding from time to
time, to lend to Company from time to time during the period from the Closing
Date to but excluding the Revolving Loan Commitment Termination Date an
aggregate amount not exceeding its Pro Rata Share of the aggregate amount of
the Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B.  The original amount of
each Revolving Lender’s Revolving Loan Commitment is set forth opposite its
name on Schedule 2.1 annexed hereto and the original Revolving Loan
Commitment Amount is $15,000,000; provided that the amount of the
Revolving Loan Commitment of each Revolving Lender shall be adjusted to give
effect to any assignment of such Revolving Loan Commitment pursuant to subsection
10.1B and shall be reduced from time to time by the amount of any reductions
thereto made pursuant to subsection 2.4. 
Each Revolving Lender’s Revolving Loan Commitment shall expire on the
Revolving Loan Commitment Termination Date and all Revolving Loans and all
other amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that date; provided
that each Revolving Lender’s Revolving Loan Commitment shall expire immediately
and without further action on February 18, 2005 if the Term Loans are not made
on or before that date.  Amounts borrowed
under this subsection 2.1A(ii) may be repaid and reborrowed to but excluding
the Revolving Loan Commitment Termination Date.

Anything contained in
this Agreement to the contrary notwithstanding, the Revolving Loans and the
Revolving Loan Commitments shall be subject to the following limitations in the
amounts and during the periods indicated:

(a)           in
no event shall the Total Utilization of Revolving Loan Commitments at any time
exceed the Revolving Loan Commitment Amount then in effect; and

(b)           in
no event shall the Total Utilization of Revolving Loan Commitments at any time
exceed the Borrowing Base then in effect.

(iii)          Swing
Line Loans.

(a)           General
Provisions.  Swing Line Lender hereby
agrees, subject to the limitations set forth in the last paragraph of
subsection 2.1A(ii) and set forth below with respect to the maximum amount of
Swing Line Loans permitted to be outstanding from time to time, to make a
portion of the Revolving Loan Commitments available to Company from time to
time during the period from the Closing Date to but excluding the Revolving
Loan Commitment Termination Date by making Swing Line Loans to Company in an
aggregate amount not exceeding the amount of the Swing Line Loan Commitment to
be used for the purposes identified in subsection 2.5B, notwithstanding the
fact that such Swing Line Loans, when aggregated with Swing Line Lender’s
outstanding Revolving Loans and Swing Line Lender’s Pro Rata Share of the
Letter of Credit Usage then in effect, may exceed Swing Line Lender’s Revolving
Loan Commitment.  The original amount of
the Swing Line Loan Commitment is $5,000,000; provided

 

38

 

that any reduction of the Revolving Loan Commitment Amount made
pursuant to subsection 2.4 that reduces the Revolving Loan Commitment Amount to
an amount less than the then current amount of the Swing Line Loan Commitment
shall result in an automatic corresponding reduction of the amount of the Swing
Line Loan Commitment to the amount of the Revolving Loan Commitment Amount, as
so reduced, without any further action on the part of Company, Administrative
Agent or Swing Line Lender.  The Swing
Line Loan Commitment shall expire on the Revolving Loan Commitment Termination
Date and all Swing Line Loans and all other amounts owed hereunder with respect
to the Swing Line Loans shall be paid in full no later than that date; provided
that the Swing Line Loan Commitment shall expire immediately and without
further action on February 18, 2005 if the Term Loans are not made on or before
that date.  Amounts borrowed under this
subsection 2.1A(iii) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.

Anything contained in
this Agreement to the contrary notwithstanding, the Swing Line Loans and the
Swing Line Loan Commitment shall be subject to the following limitations in the
amounts and during the periods indicated:

(1)           in
no event shall the Total Utilization of Revolving Loan Commitments at any time
exceed the Revolving Loan Commitments then in effect; and

(2)           in no event shall the Total Utilization of
Revolving Loan Commitments at any time exceed the Borrowing Base then in
effect.

(b)           Swing
Line Loan Prepayment with Proceeds of Revolving Loans.  With respect to any Swing Line Loans that
have not been voluntarily prepaid by Company pursuant to subsection 2.4B(i),
Swing Line Lender may, at any time in its sole and absolute discretion, deliver
to Administrative Agent (with a copy to Company), not later than 10:00 A.M.
(New York City time) on the first Business Day in advance of the proposed
Funding Date, a notice requesting Revolving Lenders to make Revolving Loans
that are Base Rate Loans on such Funding Date in an amount equal to the amount
of such Swing Line Loans (the “Refunded Swing Line Loans”)
outstanding on the date such notice is given. 
Company hereby authorizes the giving of any such notice and the making
of any such Revolving Loans.  Anything
contained in this Agreement to the contrary notwithstanding, (1) the
proceeds of such Revolving Loans made by Revolving Lenders other than Swing
Line Lender shall be immediately delivered by Administrative Agent to Swing
Line Lender (and not to Company) and applied to repay a corresponding portion
of the Refunded Swing Line Loans and (2) on the day such Revolving Loans
are made, Swing Line Lender’s Pro Rata Share of the Refunded Swing Line Loans
shall be deemed to be paid with the proceeds of a Revolving Loan made by Swing
Line Lender, and such portion of the Swing Line Loans deemed to be so paid
shall no longer be outstanding as Swing Line Loans and shall no longer be due
under the Swing Line Note, if any, of Swing Line

 

39

 

Lender but shall instead constitute part of Swing Line Lender’s
outstanding Revolving Loans and shall be due under the Revolving Note, if any,
of Swing Line Lender.  Company hereby
authorizes Administrative Agent and Swing Line Lender to charge Company’s
accounts with Administrative Agent and Swing Line Lender (up to the amount
available in each such account) in order to immediately pay Swing Line Lender
the amount of the Refunded Swing Line Loans to the extent the proceeds of such
Revolving Loans made by Revolving Lenders, including the Revolving Loan deemed
to be made by Swing Line Lender, are not sufficient to repay in full the
Refunded Swing Line Loans.  If any
portion of any such amount paid (or deemed to be paid) to Swing Line Lender
should be recovered by or on behalf of Company from Swing Line Lender in any
Insolvency or Liquidation Proceeding, in any assignment for the benefit of
creditors or otherwise, the loss of the amount so recovered shall be ratably
shared among all Lenders in the manner contemplated by subsection 10.5.

(c)           Swing
Line Loan Assignments.  On the
Funding Date of each Swing Line Loan, each Revolving Lender shall be deemed to,
and hereby agrees to purchase an assignment of such Swing Line Loan in an
amount equal to its Pro Rata Share.  If
for any reason (1) Revolving Loans are not made upon the request of Swing Line
Lender as provided in the immediately preceding paragraph in an amount
sufficient to repay any amounts owed to Swing Line Lender in respect of such
Swing Line Loan or (2) the Revolving Loan Commitments are terminated at a time
when such Swing Line Loan is outstanding, upon notice from Swing Line Lender as
provided below, each Revolving Lender shall fund the purchase of such
assignment in an amount equal to its Pro Rata Share (calculated, in the case of
the foregoing clause (2), immediately prior to such termination of the
Revolving Loan Commitments) of the unpaid amount of such Swing Line Loan
together with accrued interest thereon. 
Upon one Business Day’s notice from Swing Line Lender, each Revolving
Lender shall deliver to Swing Line Lender such amount in same day funds at the
Funding and Payment Office.  In order to
further evidence such assignment (and without prejudice to the effectiveness of
the assignment provisions set forth above), each Revolving Lender agrees to enter
into an Assignment Agreement at the request of Swing Line Lender in form and
substance reasonably satisfactory to Swing Line Lender.  In the event any Revolving Lender fails to
make available to Swing Line Lender any amount as provided in this paragraph,
Swing Line Lender shall be entitled to recover such amount on demand from such
Revolving Lender together with interest thereon at the rate customarily used by
Swing Line Lender for the correction of errors among banks for three Business
Days and thereafter at the Base Rate.  In
the event Swing Line Lender receives a payment of any amount with respect to
which other Revolving Lenders have funded the purchase of assignments as
provided in this paragraph, Swing Line Lender shall promptly distribute to each
such other Revolving Lender its Pro Rata Share of such payment.

 

40

 

(d)           Revolving
Lenders’ Obligations.  Anything
contained herein to the contrary notwithstanding, each Revolving Lender’s
obligation to make Revolving Loans for the purpose of repaying any Refunded
Swing Line Loans pursuant to subsection 2.1A(iii)(b) and each Revolving Lender’s
obligation to purchase an assignment of any unpaid Swing Line Loans pursuant to
the immediately preceding paragraph shall be absolute and unconditional and
shall not be affected by any circumstance, including (1) any set-off,
counterclaim, recoupment, defense or other right which such Revolving Lender
may have against Swing Line Lender, Company or any other Person for any reason
whatsoever; (2) the occurrence or continuation of an Event of Default or a
Potential Event of Default; (3) any adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of Company or any of its Subsidiaries; (4) any breach of this Agreement or
any other Loan Document by any party thereto; or (5) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing; provided that such obligations of each Revolving Lender
are subject to the condition that (x) Swing Line Lender believed in good
faith that all conditions under Section 4 to the making of the applicable
Refunded Swing Line Loans or other unpaid Swing Line Loans, as the case may be,
were satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line
Loans were made or (y) the satisfaction of any such condition not
satisfied had been waived in accordance with subsection 10.6 prior to or at the
time such Refunded Swing Line Loans or other unpaid Swing Line Loans were made.

B.            Borrowing Mechanics. 
Loans made on any Funding Date (other than Swing Line Loans, Revolving
Loans made pursuant to a request by Swing Line Lender pursuant to subsection
2.1A(iii) or Revolving Loans made pursuant to subsection 3.3B) shall be in an
aggregate minimum amount of $100,000 and multiples of $100,000 in excess of
that amount; provided that Loans, made as LIBOR Loans with a particular
Interest Period shall be in an aggregate minimum amount of $1,000,000 and
multiples of $100,000 in excess of that amount. 
Swing Line Loans made on any Funding Date shall be in an aggregate
minimum amount of $100,000 and multiples of $100,000 in excess of that
amount.  Whenever Company desires that
Lenders make Term Loans or Revolving Loans it shall deliver to Administrative
Agent a duly executed Notice of Borrowing not later than 12:00 Noon (New York
City time) at least three Business Days in advance of the proposed Funding Date
(in the case of a LIBOR Loan) or at least one Business Day in advance of the
proposed Funding Date (in the case of a Base Rate Loan).  Whenever Company desires that Swing Line
Lender make a Swing Line Loan, it shall deliver to Administrative Agent a duly
executed Notice of Borrowing not later than 12:00 Noon (New York City time) on
the proposed Funding Date.  Term Loans
and Revolving Loans may be continued as or converted into Base Rate Loans and
LIBOR Loans in the manner provided in subsection 2.2D.  In lieu of delivering a Notice of Borrowing,
Company may give Administrative Agent telephonic notice by the required time of
any proposed borrowing under this subsection 2.1B; provided that such
notice shall be promptly confirmed in writing by delivery of a duly executed
Notice of Borrowing to Administrative Agent on or before the applicable Funding
Date.

 

41

 

Neither Administrative
Agent nor any Lender shall incur any liability to Company in acting upon any
telephonic notice referred to above that Administrative Agent believes in good
faith to have been given by an Officer or other person authorized to borrow on
behalf of Company or for otherwise acting in good faith under this subsection
2.1B or under subsection 2.2D, and upon funding of Loans by Lenders, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to any Loans pursuant to subsection 2.2D, in each case in
accordance with this Agreement, pursuant to any such telephonic notice Company
shall have effected Loans or a conversion or continuation, as the case may be,
hereunder.

Company shall notify
Administrative Agent prior to the funding of any Loans in the event that any of
the matters to which Company is required to certify in the applicable Notice of
Borrowing is no longer true and correct as of the applicable Funding Date, and
the acceptance by Company of the proceeds of any Loans shall constitute a
re-certification by Company, as of the applicable Funding Date, as to the
matters to which Company is required to certify in the applicable Notice of
Borrowing.

Except as otherwise
provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for or a
Notice of Conversion/Continuation for conversion to, or continuation of, a
LIBOR Loan (or telephonic notice in lieu thereof) shall be irrevocable on and
after the related Interest Rate Determination Date, and Company shall be bound
to make a borrowing or to effect a conversion or continuation in accordance
therewith.

Notwithstanding the
foregoing provisions of this subsection 2.1B, no LIBOR Loans may be made and no
Base Rate Loan may be converted into a LIBOR Loan until the earlier of the
seventh day after the Closing Date and the date specified by Administrative
Agent to Company on which the primary syndication of the Commitments and the
Loans has been completed.

C.            Disbursement of Funds. 
All Term Loans and Revolving Loans shall be made by Lenders
simultaneously and proportionately to their respective Pro Rata Shares, it
being understood that neither Administrative Agent nor any Lender shall be
responsible for any default by any other Lender in that other Lender’s
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender’s obligation
to make a Loan requested hereunder. 
Promptly after receipt by Administrative Agent of a Notice of Borrowing
pursuant to subsection 2.1B (or telephonic notice in lieu thereof),
Administrative Agent shall notify each Lender for that type of Loan or Swing
Line Lender, as the case may be, of the proposed borrowing.  Each such Lender (other than Swing Line
Lender) shall make the amount of its Loan available to Administrative Agent not
later than 1:00 P.M. (New York City time) on the applicable Funding Date, and
Swing Line Lender shall make the amount of its Swing Line Loan available to
Administrative Agent not later than 2:00 P.M. (New York City time) on the
applicable Funding Date, in each case in same day funds in Dollars, at the
Funding and Payment Office.  Except as
provided in subsection 2.1A(iii) and subsection 3.3B with respect to Revolving
Loans used to repay Refunded Swing Line Loans or to reimburse any Issuing
Lender for the amount of a drawing under a Letter of Credit issued by it, upon

 

42

satisfaction or
waiver of the conditions precedent specified in subsections 4.1 (in the case of
Loans made on the Closing Date) and 4.2 (in the case of all Loans),
Administrative Agent shall make the proceeds of such Loans available to Company
on the applicable Funding Date by causing an amount of same day funds in
Dollars equal to the proceeds of all such Loans received by Administrative
Agent from Lenders to be credited to the account of Company at the Funding and
Payment Office.

Unless Administrative Agent
shall have been notified by any Lender prior to a Funding Date that such Lender
does not intend to make available to Administrative Agent the amount of such
Lender’s Loan requested on such Funding Date, Administrative Agent may assume
that such Lender has made such amount available to Administrative Agent on such
Funding Date and Administrative Agent may, in its sole discretion, but shall
not be obligated to, make available to Company a corresponding amount on such
Funding Date.  If such corresponding amount
is not in fact made available to Administrative Agent by such Lender,
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
customary rate set by Administrative Agent for the correction of errors among
banks for three Business Days and thereafter at the Base Rate.  If such Lender does not pay such
corresponding amount forthwith upon Administrative Agent’s demand therefor,
Administrative Agent shall promptly notify Company and Company shall
immediately pay such corresponding amount to Administrative Agent together with
interest thereon, for each day from such Funding Date until the date such
amount is paid to Administrative Agent, at the rate payable under this
Agreement for Base Rate Loans.  Nothing
in this subsection 2.1C shall be deemed to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Company may have against any Lender as a result of any default by such Lender
hereunder.

D.            The Register. 
Administrative Agent, acting for these purposes solely as an agent of
Company (it being acknowledged that Administrative Agent, in such capacity, and
its officers, directors, employees, agent and affiliates shall constitute
Indemnitees under subsection 10.3), shall maintain at its address referred to
in subsection 10.8 a register for the recordation of, and shall record, the names
and addresses of Lenders and the respective amounts of the Term Loan
Commitment, Revolving Loan Commitment, Swing Line Loan Commitment, Term Loan,
Revolving Loans and Swing Line Loans of each Lender from time to time (the “Register”). 
Administrative Agent shall make the Register available for inspection by
the Company and the Lenders upon reasonable prior notice at reasonable times, provided
that a Lender shall only be entitled to inspect its own entry in the Register
and not that of any other Lender.  Company, Administrative Agent and Lenders
shall deem and treat the Persons listed as Lenders in the Register as the
holders and owners of the corresponding Commitments and Loans listed therein
for all purposes hereof; all amounts owed with respect to any Commitment or
Loan shall be owed to the Lender listed in the Register as the owner thereof;
and any request, authority or consent of any Person who, at the time of making
such request or giving such authority or consent, is listed in the Register as
a Lender shall be conclusive and binding on any subsequent holder, assignee or
transferee of the corresponding Commitments or Loans.  Each Lender shall record on its internal
records the amount of its Loans and Commitments and each payment in

 

43

respect hereof,
and any such recordation shall be conclusive and binding on Company, absent
manifest error, subject to the entries in the Register, which shall, absent
manifest error, govern in the event of any inconsistency with any Lender’s
records.  Failure to make any recordation
in the Register or in any Lender’s records, or any error in such recordation,
shall not affect any Loans or Commitments or any Obligations in respect of any
Loans.

E.             Optional
Notes.  If so requested by any Lender by written
notice to Company (with a copy to Administrative Agent) at least two Business
Days prior to the Closing Date or at any time thereafter, Company shall execute
and deliver to such Lender (and/or, if applicable and if so specified in such
notice, to any Person who is an assignee of such Lender pursuant to subsection
10.1) on the Closing Date (or, if such notice is delivered after the Closing
Date, promptly after Company’s receipt of such notice) a promissory note or
promissory notes to evidence such Lender’s Term Loan, Revolving Loans or Swing
Line Loans, substantially in the form of Exhibit IV, Exhibit V or
Exhibit VI, annexed hereto, respectively, with appropriate insertions.

2.2                               Interest on the Loans.

A.            Rate of Interest.  Subject
to the provisions of subsections 2.6 and 2.7, each Term Loan and each Revolving
Loan shall bear interest on the unpaid principal amount thereof from the date
made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate or LIBOR.  Subject to the provisions of subsection 2.7,
each Swing Line Loan shall bear interest on the unpaid principal amount thereof
from the date made through maturity (whether by acceleration or otherwise) at a
rate determined by reference to the Base Rate. 
The applicable basis for determining the rate of interest with respect
to any Term Loan or any Revolving Loan shall be selected by Company initially
at the time a Notice of Borrowing is given with respect to such Loan pursuant
to subsection 2.1B (subject to the last sentence of subsection 2.1B), and the
basis for determining the interest rate with respect to any Term Loan or any
Revolving Loan may be changed from time to time pursuant to subsection 2.2D
(subject to the last sentence of subsection 2.1B).  If on any day a Term Loan or Revolving Loan
is outstanding with respect to which notice has not been delivered to
Administrative Agent in accordance with the terms of this Agreement specifying
the applicable basis for determining the rate of interest, then for that day
that Loan shall bear interest determined by reference to the Base Rate.

(i)            Subject
to the provisions of subsections 2.2E, 2.2G and 2.7, the Term Loans and the
Revolving Loans shall bear interest through maturity as follows:

(a)           if
a Base Rate Loan, then at the sum of the Base Rate plus the Base Rate
Margin set forth in the table below opposite the Consolidated Leverage Ratio
for the four Fiscal Quarter period for which the applicable Pricing Certificate
has been delivered pursuant to subsection 6.1(iv); or

(b)           if
a LIBOR Loan, then at the sum of Adjusted LIBOR plus the LIBOR Margin
set forth in the table below opposite the Consolidated  Leverage

 

44

Ratio for the four Fiscal Quarter period for which the applicable
Pricing Certificate has been delivered pursuant to subsection 6.1(iv):

 

	
  Consolidated Leverage Ratio

  	
   

  	
  LIBOR Margin

  	
   

  	
  Base Rate Margin

  	
   

  
	
  Greater than or equal to
  3.50:1.00

  	
   

  	
  3.25

  	
  %

  	
  2.25

  	
  %

  
	
  Greater than or equal to
  2.75:1:00 but less than 3.50:1.00

  	
   

  	
  3.00

  	
  %

  	
  2.00

  	
  %

  
	
  Less than 2.75:1.00

  	
   

  	
  2.75

  	
  %

  	
  1.75

  	
  %

  

 

provided that,
until the delivery of the Pricing Certificate for the first Fiscal Quarter of
2005, the applicable margin for Term Loans and Revolving Loans that are LIBOR
Loans shall be 3.25% per annum and for Term Loans and Revolving Loans that are
Base Rate Loans shall be 2.25% per annum. 
Upon delivery of the Pricing Certificate by Company to Administrative
Agent pursuant to subsection 6.1(iv), the Base Rate Margin and the LIBOR Margin
shall automatically be adjusted in accordance with such Pricing Certificate,
such adjustment to become effective as of the third Business Day after the 45th
day following the end of the most recently completed Fiscal Quarter; provided
that, if at the time a Pricing Certificate is not delivered by the time
required pursuant to subsection 6.1(iv), from the time such Pricing Certificate
was required to be delivered until delivery of such Pricing Certificate, the
applicable margins shall be the maximum percentage amount for the relevant Loan
set forth above.

B.            Interest Periods. 
In connection with each Base Rate Loan, interest shall be payable
quarterly on March 31, June 30, September 30 and December 31 of each year, and
in connection with each LIBOR Loan, Company may, pursuant to the applicable
Notice of Borrowing or Notice of Conversion/Continuation, as the case may be,
select an interest period (each an “Interest
Period”) to be applicable to such Loan, which Interest Period shall
be, at Company’s option, either a one, two, three or six month period; provided
that:

(i)            the
initial Interest Period for any LIBOR Loan shall commence on the Funding Date
in respect of such Loan, in the case of a Loan initially made as a LIBOR Loan,
or on the date specified in the applicable Notice of Conversion/Continuation,
in the case of a Loan converted to a LIBOR Loan;

(ii)           in
the case of immediately successive Interest Periods applicable to a LIBOR Loan
continued as such pursuant to a Notice of Conversion/Continuation, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;

(iii)          if
an Interest Period would otherwise expire on a day that is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day; provided
that, if any Interest Period would otherwise expire on a day that is not a
Business Day but

 

45

is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding Business
Day;

(iv)          any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to clause (v) of this
subsection 2.2B, end on the last Business Day of a calendar month;

(v)           no
Interest Period with respect to any portion of the Term Loans shall extend
beyond the Stated Maturity Date, and no Interest Period with respect to any
portion of the Revolving Loans or Swing Line Loans shall extend beyond the
Revolving Loan Commitment Termination Date;

(vi)          there
shall be no more than five Interest Periods outstanding at any time; and

(vii)         in
the event Company fails to specify an Interest Period for any LIBOR Loan in the
applicable Notice of Borrowing or Notice of Conversion/Continuation, Company
shall be deemed to have selected an Interest Period of one month.

C.            Interest Payments. 
Subject to the provisions of subsection 2.2E, interest on each Loan
shall be payable in arrears on and to each Interest Payment Date applicable to
that Loan, upon any prepayment of that Loan (to the extent accrued on the
amount being prepaid) and at maturity (including final maturity); provided that in the event any
Swing Line Loans or any Revolving Loans that are Base Rate Loans are prepaid
pursuant to subsection 2.4B(i), interest accrued on such Loans through the date
of such prepayment shall be payable on the next succeeding Interest Payment
Date applicable to Base Rate Loans (or, if earlier, at final maturity).

D.            Conversion or
Continuation.  Subject to the provisions of subsection 2.6,
Company shall have the option (i) to convert at any time all or any part
of its outstanding Term Loans or Revolving Loans equal to $1,000,000 and
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the
expiration of any Interest Period applicable to a LIBOR Loan, to continue all
or any portion of such Loan equal to $1,000,000 and multiples of $100,000 in
excess of that amount as a LIBOR Loan; provided,  however, that a
LIBOR Loan may only be converted into a Base Rate Loan on the expiration date
of an Interest Period applicable thereto unless Company pays on such conversion
date all amounts owing to Lenders under subsection 2.6D; provided, further
that, until the earlier of the seventh day after the Closing Date and the date
specified by Administrative Agent to Company on which the primary syndication
of the Commitments and the Loan has been completed, no Base Rate Loans may be
converted into LIBOR Loans.

Company shall deliver a
duly executed Notice of Conversion/Continuation to Administrative Agent not
later than 12:00 Noon (New York City time) at least one Business Day in advance
of the proposed conversion date (in the case

 

46

of a conversion to
a Base Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a LIBOR Loan).  In lieu of delivering
a Notice of Conversion/Continuation, Company may give Administrative Agent
telephonic notice by the required time of any proposed conversion/continuation
under this subsection 2.2D; provided that such notice shall be promptly
confirmed in writing by delivery of a duly executed Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date.  Upon
receipt of written or telephonic notice of any proposed conversion/continuation
under this subsection 2.2D, Administrative Agent shall notify each Lender of
any Loan subject to the Notice of Conversion/Continuation.

E.             Default Rate. 
Upon the occurrence and during the continuation of any Event of Default
under any of subsection 8.1, 8.6 or 8.7, the outstanding principal amount of
all Loans and, to the extent permitted by applicable law, any interest payments
thereon not paid when due and any fees and other amounts then due and payable
hereunder, shall thereafter bear interest (including post-petition interest in
any Insolvency or Liquidation Proceeding) payable upon demand by Administrative
Agent at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in excess
of the interest rate otherwise payable under this Agreement for Base Rate
Loans); provided that, in the case of LIBOR Loans, upon the expiration
of the Interest Period in effect at the time any such increase in interest rate
is effective such LIBOR Loans shall thereupon become Base Rate Loans and shall
thereafter bear interest payable upon demand at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base
Rate Loans.  Payment or acceptance of the
increased rates of interest provided for in this subsection 2.2E is not a
permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of
Administrative Agent or any Lender.

F.             Computation
of Interest.  Interest on the Loans shall be
computed on the basis of a 360-day year, in each case for the actual number of
days elapsed in the period during which it accrues.  In computing interest on any Loan, the date
of the making of such Loan or the first day of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being converted from a LIBOR
Loan, the date of conversion of such LIBOR Loan to such Base Rate Loan, as the
case may be, shall be included, and the date of payment of such Loan or the
expiration date of an Interest Period applicable to such Loan or, with respect
to a Base Rate Loan being converted to a LIBOR Loan, the date of conversion of
such Base Rate Loan to such LIBOR Loan, as the case may be, shall be excluded; provided
that if a Loan is repaid on the same day on which it is made, one day’s
interest shall be paid on that Loan.

G.            Maximum Rate. 
Notwithstanding the foregoing provisions of this subsection 2.2, in no
event shall the rate of interest payable by Company with respect to any Loan
exceed the maximum rate of interest permitted to be charged under applicable
law.

2.3                               Fees.

A.            Commitment Fees. 
Company agrees to pay to Administrative Agent, for distribution to each
Revolving Lender in proportion to that Revolving Lender’s Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the

 

47

Revolving
Commitment Termination Date in an amount equal to the average of the daily
excess of the Revolving Loan Commitment Amount over the Total Utilization of
Revolving Loan Commitments (excluding Swing Line Loans) multiplied by
0.50% per annum, such commitment fees to be calculated on the basis of a
360-day year and the actual number of days elapsed and to be payable quarterly
in arrears on March 31, June 30, September 30, and
December 31 of each year, commencing
on the first such date to occur after the Closing Date, and on the Revolving
Loan Commitment Termination Date.

B.            Other Fees. 
Company agrees to pay to Administrative Agent such fees in the amounts
and at the times separately agreed upon between Company and Administrative
Agent.

2.4                               Repayments, Prepayments and
Reductions in Revolving Loan Commitments; General Provisions Regarding
Payments; Application of Proceeds of Collateral and Payments Under Guaranties.

A.            Scheduled Payments of
Term Loans.  Company shall make principal payments on
the Term Loans in installments on the dates and in the amounts set forth below:

 

48

 

	
  Date

  	
   

  	
  Scheduled Repayment

  	
   

  
	
  June 30, 2005

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  September 30, 2005

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  December 31, 2005

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  March 31, 2006

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  September 30, 2008

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  September 30, 2010

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  December 31, 2010

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  March 31, 2011

  	
   

  	
  $

  	
  1,937,500

  	
   

  
	
  June 30, 2011

  	
   

  	
  $

  	
  27,125,000

  	
   

  
	
  September 30, 2011

  	
   

  	
  $

  	
  27,125,000

  	
   

  
	
  December 31, 2011

  	
   

  	
  $

  	
  27,125,000

  	
   

  
	
  Stated Maturity Date

  	
   

  	
  $

  	
  27,125,000

  	
   

  
	
  TOTAL:

  	
   

  	
  $

  	
  155,000,000

  	
   

  

 

; provided that
the scheduled installments of principal of the Term Loans set forth above shall
be reduced in connection with any voluntary or mandatory prepayments of the
Term Loans in accordance with subsection 2.4B(iv); and provided, further
that the Term Loans and all other amounts owed hereunder with respect to the
Term Loans shall be paid in full no later than the Stated Maturity Date, and
the final installment payable by Company in respect of the Term Loans on such
date shall be in an amount, if such amount is different from that specified
above, sufficient to repay all amounts owing by Company under this Agreement
with respect to the Term Loans.

B.            Prepayments and
Unscheduled Reductions in Revolving Loan Commitment Amount.

(i)            Voluntary
Prepayments.  Company may, upon
written or telephonic notice to Administrative Agent on or prior to 1:00 P.M.
(New York City time) on the date of prepayment, which notice, if telephonic,
shall be promptly confirmed in writing, at any time and from time to time
prepay any Swing Line Loan on any Business Day in whole or in part in an
aggregate minimum amount of $100,000 and multiples of $100,000 in excess of
that amount.  Company may, upon not less
than one Business Day’s prior written or telephonic notice, in the case of Base
Rate Loans, and three Business Days’ prior written or telephonic notice, in the
case of LIBOR Loans, in each case given to Administrative Agent by 1:00 P.M.
(New York City time) on the date required and, if given by telephone, promptly
confirmed in writing to Administrative Agent, who will promptly notify each
Lender whose Loans are to be prepaid of such prepayment), at any time and from
time to time prepay any Term Loans or Revolving Loans on any Business

 

49

Day in whole or in part in an aggregate minimum amount of $100,000 and
multiples of $100,000 in excess of that amount; provided, however,
that a LIBOR Loan may only be prepaid on the expiration of the Interest Period
applicable thereto unless Company complies with subsection 2.6D with respect to
any breakage costs resulting from such prepayment being made on a date prior to
the expiration of the applicable Interest Period.  Notice of prepayment having been given as
aforesaid, the principal amount of the Loans specified in such notice shall
become due and payable on the prepayment date specified therein.  Any such voluntary prepayment shall be
applied as specified in subsection 2.4B(iv).

(ii)           Voluntary
Reductions of Revolving Loan Commitments. 
Company may, upon not less than three Business Days’ prior written or
telephonic notice confirmed in writing to Administrative Agent, or upon such
lesser number of days’ prior written or telephonic notice, as determined by
Administrative Agent in its sole discretion, at any time and from time to time
terminate in whole or permanently reduce in part, without premium or penalty,
the Revolving Loan Commitment Amount in an amount up to the amount by which the
Revolving Loan Commitment Amount exceeds the Total Utilization of Revolving
Loan Commitments at the time of such proposed termination or reduction; provided
that any such partial reduction of the Revolving Loan Commitment Amount shall
be in an aggregate minimum amount of $1,000,000 and multiples of $100,000 in
excess of that amount.  Company’s notice
to Administrative Agent (who will promptly notify each Revolving Lender of such
notice) shall designate the date (which shall be a Business Day) of such
termination or reduction and the amount of any partial reduction, and such
termination or reduction of the Revolving Loan Commitment Amount shall be
effective on the date specified in Company’s notice and shall reduce the amount
of the Revolving Loan Commitment of each Revolving Lender proportionately to
its Pro Rata Share.  Any such voluntary
reduction of the Revolving Loan Commitment Amount shall be applied as specified
in subsection 2.4B(iv).

(iii)          Mandatory
Prepayments and Mandatory Reductions of Revolving Loan Commitments.  The Loans shall be prepaid and/or the
Revolving Loan Commitment Amount shall be permanently reduced in the amounts
and under the circumstances set forth below, all such prepayments and/or
reductions to be applied as set forth below or as more specifically provided in
subsection 2.4B(iv) and subsection 2.4D:

(a)           Prepayments
and Reductions From Net Asset Sale Proceeds.  No later than five (5) Business Days
following the receipt by Holdings, Company or any of its Subsidiaries of any
Net Asset Sale Proceeds in respect of any Asset Sale, Company shall either (1)
prepay the Loans and/or the Revolving Loan Commitment Amount shall be
permanently reduced in an aggregate amount equal to such Net Asset Sale
Proceeds or (2), so long as no Potential Event of Default or Event of Default
shall have occurred and be continuing, deliver to Administrative Agent an
Officer’s Certificate setting forth (x) that portion of such Net Asset Sale
Proceeds that Company or such Subsidiary intends to reinvest in equipment or
other productive assets of the general type used in the business of Company and
its Subsidiaries within 270 days of such date of receipt and (y) the proposed
use

 

50

of such portion of the Net Asset Sale Proceeds and such other
information with respect to such reinvestment as Administrative Agent may
reasonably request, and Company shall, or shall cause one or more of its
Subsidiaries to, promptly and diligently apply such portion to such
reinvestment purposes; provided, however, that, pending such
reinvestment, such portion of the Net Asset Sale Proceeds shall be applied to
prepay outstanding Revolving Loans (without a reduction in the Revolving Loan
Commitment Amount) to the full extent thereof if there are any Revolving Loans
then outstanding.  In addition, Company
shall, no later than 270 days after receipt of such Net Asset Sale Proceeds
that have not theretofore been applied to the Obligations or that have not been
so reinvested as provided above, make an additional prepayment of the Loans
(and/or the Revolving Loan Commitment Amount shall be permanently reduced) in
the full amount of all such Net Asset Sale Proceeds.

(b)           Prepayments
and Reductions from Net Insurance/Condemnation Proceeds.  No later than the five (5) Business Days
following the receipt by Administrative Agent or by Holdings, Company or any of
its Subsidiaries of any Net Insurance/Condemnation Proceeds that are required
to be applied to prepay the Loans and/or reduce the Revolving Loan Commitment
Amount pursuant to the provisions of subsection 6.4C, Company shall prepay the
Loans and/or the Revolving Loan Commitment Amount shall be permanently reduced
in an aggregate amount equal to the amount of such Net Insurance/Condemnation
Proceeds.

(c)           Prepayments
and Reductions Due to Issuance of Equity Securities.  On the date of receipt of the Net Securities
Proceeds from the issuance of any equity Securities of Holdings, Company or any
other Subsidiary of Holdings after the Closing Date (excluding, Net Securities
Proceeds from (i) the issuance of equity Securities invested in Permitted
Equity Contribution Capex, (ii) the issuance of equity Securities invested in
Permitted Acquisitions, (iii) the issuance of equity Securities by a Subsidiary
to another Subsidiary or to Company (to the extent not prohibited by this
Agreement), (iv) the issuance of Holdings Capital Stock financed by loans from
the Company pursuant to subsection 7.3(vi), and (v) Net Securities Proceeds of
up to $300,000 from the issuance of equity Securities in connection with the exercise
of stock options relating to Holdings common stock on or about the Closing
Date), Company shall prepay the Loans and/or the Revolving Loan Commitment
Amount shall be permanently reduced in an aggregate amount equal to such Net
Securities Proceeds.

(d)           Prepayments
and Reductions Due to Issuance of Indebtedness.  On the date of receipt of the Net Securities
Proceeds from the issuance of any Indebtedness of Company, Holdings or any of
its other Subsidiaries after the Closing Date (other than Indebtedness permitted
pursuant to subsection 7.1),
Company shall prepay the Loans and/or the Revolving Loan Commitment Amount
shall be permanently reduced in an aggregate amount equal to such Net
Securities Proceeds.

 

51

(e)           Prepayments
and Reductions from Consolidated Excess Cash Flow.  In the event that there shall be Consolidated
Excess Cash Flow for any Fiscal Year (commencing with the Fiscal Year ending on
January 1, 2006), Company shall, no later than 120 days after the end of such
Fiscal Year, prepay the Loans and/or the Revolving Loan Commitment Amount shall
be permanently reduced in an aggregate amount equal to 75% (the “Consolidated Excess Cash Flow Percentage”) of such
Consolidated Excess Cash Flow; provided that if the Applicable
Consolidated Leverage Ratio as of the end of such Fiscal Year is 2.00:1.00 or
less, Consolidated Excess Cash Flow Percentage shall be 50%, provided, further,
that if the calculation of such Consolidated Excess Cash Flow includes a deduction
for voluntary prepayment of the Term Loans (the “Prepaid
Amount”), then (i) Consolidated Excess Cash Flow shall be deemed
increased by the Prepaid Amount for the purposes of determining prepayments
and/or reductions required under this subsection (e), and (ii) Company shall
receive a credit equal to the amount of the Prepaid Amount against any
prepayments and/or reductions required under this subsection (e) with respect
to the Fiscal Year in which such voluntary prepayment was made (such credit may
not be carried forward to subsequent years).

(f)            Calculations
of Net Proceeds Amounts; Additional Prepayments and Reductions Based on
Subsequent Calculations. 
Concurrently with any prepayment of the Loans and/or reduction of the
Revolving Loan Commitment Amount pursuant to subsections 2.4B(iii)(a)-(e),
Company shall deliver to Administrative Agent an Officer’s Certificate
demonstrating the calculation of the amount of the applicable Net Asset Sale
Proceeds, Net Insurance/Condemnation Proceeds, Net Securities Proceeds, or
Consolidated Excess Cash Flow, as the case may be, that gave rise to such
prepayment and/or reduction.  In the
event that Company shall subsequently determine that the actual amount was
greater than the amount set forth in such Officer’s Certificate, Company shall
promptly make an additional prepayment of the Loans (and/or, if applicable, the
Revolving Loan Commitment Amount shall be permanently reduced) in an amount
equal to the amount of such excess, and Company shall concurrently therewith deliver
to Administrative Agent an Officer’s Certificate demonstrating the derivation
of the additional amount resulting in such excess.

(g)           Prepayments
Due to Reductions or Restrictions of Revolving Loan Commitment Amount or due to
Insufficient Borrowing Base.  Company
shall from time to time prepay first the Swing Line Loans and second
the Revolving Loans (and, after prepaying all Revolving Loans, Cash
collateralize any outstanding Letters of Credit by depositing the requisite
amount in the Collateral Account) to the extent necessary (1) so that the
Total Utilization of Revolving Loan Commitments shall not at any time exceed
the lesser of (1) the Revolving Loan Commitment Amount then in effect or
(2) the Borrowing Base then in effect. 
At such time as the Total Utilization of Revolving Loan Commitments
shall be equal to or less than the Revolving Loan Commitment Amount and the

 

52

Borrowing Base then in effect if no Event of Default has occurred and
is continuing, to the extent any Cash collateral was provided by Company and
has not been applied to any Obligations as provided in the Security Agreement,
such amount may, at the request of Company, be released to Company.

(iv)          Application
of Prepayments and Unscheduled Reductions of Revolving Loan Commitment Amount.

(a)           Application
of Voluntary Prepayments by Type of Loans and Order of Maturity.  Any voluntary prepayments pursuant to
subsection 2.4B(i) shall be applied as specified by Company in the applicable
notice of prepayment (subject to the next sentence); provided that in
the event Company fails to specify the Loans to which any such prepayment shall
be applied, such prepayment shall be applied first to repay outstanding
Swing Line Loans to the full extent thereof, second to repay outstanding
Revolving Loans to the full extent thereof, and third to repay
outstanding Term Loans to the full extent thereof.  Any voluntary prepayments of the Term Loans
pursuant to subsection 2.4B(i) shall be applied to reduce the scheduled
installments of principal of the Term Loans set forth in subsection 2.4A on a
pro rata basis (in accordance with the respective outstanding principal amounts
thereof) to each remaining scheduled installment of principal of the Term Loans
set forth in subsection 2.4A.

(b)           Application
of Mandatory Prepayments by Type of Loans. 
Except as provided in subsection 2.4D, any amount required to be applied
as a mandatory prepayment of the Loans and/or a reduction of the Revolving Loan
Commitment Amount pursuant to subsections 2.4B(iii)(a)-(f) shall, be applied first
to prepay the Term Loans to the full extent thereof, second, to the
extent of any remaining portion of such amount, to prepay the Swing Line Loans
to the full extent thereof and to permanently reduce the Revolving Loan
Commitment Amount by the amount of such prepayment, and third, to the
extent of any remaining portion of such amount, to prepay the Revolving Loans
to the full extent thereof (and, after prepaying all Revolving Loans, Cash
collateralize any outstanding Letters of Credit by depositing the requisite
amount in the Collateral Account) and to further permanently reduce the
Revolving Loan Commitment Amount by the amount of such prepayment.  Any mandatory reduction of the Revolving Loan
Commitment Amount pursuant to this subsection 2.4B shall be in proportion to
each Revolving Lender’s Pro Rata Share.

(c)           Application
of Mandatory Prepayments of Term Loans and the Scheduled Installments of
Principal Thereof.  Except as
provided in subsection 2.4D, any mandatory prepayments of the Term Loans
pursuant to subsection 2.4B(iii) shall be applied to reduce the scheduled
installments of principal of the Term Loans set forth in subsection 2.4A on a
pro rata basis (in accordance with the respective outstanding principal amounts
thereof) to each scheduled installment of principal of the Term Loans set forth
in subsection 2.4A that is unpaid at the time of such prepayment.

 

53

(d)           Application
of Prepayments to Base Rate Loans and LIBOR Loans.  Considering Term Loans and Revolving Loans
being prepaid separately, any prepayment thereof shall be applied first to Base
Rate Loans to the full extent thereof before application to LIBOR Loans, in
each case in a manner that minimizes the amount of any payments required to be
made by Company pursuant to subsection 2.6D.

(e)           Application
of Unscheduled Reductions of the Revolving Loan Commitment Amount.  Any voluntary or mandatory reduction of the
Revolving Loan Commitment Amount pursuant to subsection 2.4B(ii) or 2.4B(iii), respectively, shall be in proportion
of each Lender’s Pro Rata Share.

C.            General Provisions
Regarding Payments.

(i)            Manner
and Time of Payment.  All payments by
Company of principal, interest, fees and other Obligations shall be made in
Dollars in same day funds, without defense, setoff or counterclaim, free of any
restriction or condition, and delivered to Administrative Agent not later than
1:00 P.M. (New York City time) on the date due at the Funding and Payment
Office for the account of Lenders.  Funds
received by Administrative Agent after that time on such due date shall be
deemed to have been paid by Company on the next succeeding Business Day.  Company hereby authorizes Administrative
Agent to charge its accounts with Administrative Agent in order to cause timely
payment to be made to Administrative Agent of all principal, interest, fees and
expenses due hereunder (subject to sufficient funds being available in its
accounts for that purpose).

(ii)           Application
of Payments to Principal and Interest. 
Except as provided in subsection 2.2C, all payments in respect of the
principal amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments shall be
applied to the payment of interest before application to principal.

(iii)          Apportionment
of Payments.  Aggregate payments of
principal and interest shall be apportioned among all outstanding Loans to
which such payments relate, in each case proportionately to Lenders’ respective
Pro Rata Shares.  Administrative Agent
shall promptly distribute to each Lender, at the account specified in the
payment instructions delivered to Administrative Agent by such Lender, its Pro
Rata Share of all such payments received by Administrative Agent and the
commitment fees and letter of credit fees of such Lender, if any, when received
by Administrative Agent pursuant to subsection 2.3 and subsection
3.2.  Notwithstanding the foregoing
provisions of this subsection 2.4C(iii), if, pursuant to the provisions of
subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any
Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its
Pro Rata Share of any LIBOR Loans, Administrative Agent shall give effect
thereto in apportioning interest payments received thereafter.

 

54

(iv)          Payments
on Business Days.  Whenever any
payment to be made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of the payment
of interest hereunder or of the commitment fees hereunder, as the case may be.

(v)           Notation
of Payment.  Each Lender agrees that
before disposing of any Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation thereon of
all Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
that the failure to make (or any error in the making of) a notation of any Loan
made under such Note shall not limit or otherwise affect the obligations of
Company hereunder or under such Note with respect to any Loan or any payments
of principal or interest on such Note.

D.            Application of Proceeds
of Collateral and Payments after Event of Default.

Upon the occurrence and
during the continuation of an Event of Default, if requested by Requisite
Lenders, or upon acceleration of the Obligations pursuant to Section 8,
(a) all payments received by Administrative Agent, whether from Company,
Holdings or any Subsidiary Guarantor or otherwise, and (b) all proceeds
received by Administrative Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral under any Collateral
Document may, in the discretion of Administrative Agent, be held by
Administrative Agent as Collateral for, and/or (then or at any time thereafter)
applied in full or in part by Administrative Agent, in each case in the
following order of priority:

(i)            to
the payment of all costs and expenses of such sale, collection or other
realization, all other expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, and all amounts for which
Administrative Agent is entitled to compensation (including the fees described
in subsection 2.3), reimbursement and indemnification under any Loan Document
and all advances made by Administrative Agent thereunder for the account of the
applicable Loan Party, and to the payment of all costs and expenses paid or
incurred by Administrative Agent in connection with the Loan Documents, all in
accordance with subsections 9.4, 10.2 and 10.3 and the other terms of this
Agreement and the Loan Documents;

(ii)           thereafter,
to the payment of the Obligations and obligations of Loan Parties under any
Lender Hedge Agreement for the ratable benefit of the holders thereof (subject
to the provisions of subsection 2.4C(ii) hereof); and

(iii)          thereafter,
to the payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct.

 

55

2.5                               Use of Proceeds.

A.            Term Loans.  The proceeds of the Term Loans, together with
the proceeds of the Second Lien Term Loans, shall be applied by the Company (i)
to refinance Existing Indebtedness, (ii) to make the Recapitalization Payment
and (iii) to pay for related fees and expenses.

B.            Revolving
Loans and Swing Line Loans.  The proceeds of
the Revolving Loans and Swing Line Loans shall be applied by Company for the
issuance of Letters of Credit and for working capital and other general
corporate purposes, which may include (1) the making of intercompany loans to
any wholly-owned Subsidiaries in accordance with subsection 7.1(iv), for their
own general corporate purposes and (2) Permitted Acquisitions.

C.            Margin Regulations. 
No portion of the proceeds of any borrowing under this Agreement shall
be used by Company or any of its Subsidiaries in any manner that might cause
the borrowing or the application of such proceeds to violate Regulation U,
Regulation T or Regulation X of the Board of Governors of the Federal
Reserve System or any other regulation of such Board or to violate the Exchange
Act, in each case as in effect on the date or dates of such borrowing and such
use of proceeds.

2.6                               Special Provisions
Governing LIBOR Loans.

Notwithstanding any other
provision of this Agreement to the contrary, the following provisions shall
govern with respect to LIBOR Loans as to the matters covered:

A.            Determination of
Applicable Interest Rate.  On each Interest Rate
Determination Date, Administrative Agent shall determine in accordance with the
terms of this Agreement (which determination shall, absent manifest error, be
final conclusive and binding upon all parties) the interest rate that shall
apply to the LIBOR Loans for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in writing
or by telephone confirmed in writing) to Company and each applicable Lender.

B.            Inability to Determine
Applicable Interest Rate.  In the event that
Administrative Agent shall have determined (which determination shall be final,
conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date that by reason of circumstances affecting the London
interbank market adequate and fair means do not exist for ascertaining the
interest rate applicable to such Loans on the basis provided for in the
definition of LIBOR, Administrative Agent shall on such date give notice (by
telefacsimile or by telephone confirmed in writing) to Company and each Lender
of such determination, whereupon (i) no Loans may be made as, or converted
to, LIBOR Loans until such time as Administrative Agent notifies Company and
such Lenders that the circumstances giving rise to such notice no longer exist
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation
given by Company with respect to the Loans in respect of which such
determination was made shall be deemed to be for a Base Rate Loan.

 

56

C.            Illegality or
Impracticability of LIBOR Loans.  In the event
that on any date any Lender shall have determined (which determination shall be
final, conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Administrative Agent) that the making,
maintaining or continuation of its LIBOR Loans (i) has become unlawful as a
result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful)
or (ii) has become impracticable, or would cause such Lender material
hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the London interbank market or
the position of such Lender in that market, then, and in any such event, such
Lender shall be an “Affected Lender”
and it shall on that day give notice (by telefacsimile or by telephone
confirmed in writing) to Company and Administrative Agent of such
determination.  Administrative Agent
shall promptly notify each other Lender of the receipt of such notice.  Thereafter (a) the obligation of the
Affected Lender to make Loans as, or to convert Loans to, LIBOR Loans shall be
suspended until such notice shall be withdrawn by the Affected Lender,
(b) to the extent such determination by the Affected Lender relates to a
LIBOR Loan then being requested by Company pursuant to a Notice of Borrowing or
a Notice of Conversion/Continuation, the Affected Lender shall make such Loan
as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the
Affected Lender’s obligation to maintain its outstanding LIBOR Loans (the “Affected Loans”) shall be terminated at the
earlier to occur of the expiration of the Interest Period then in effect with
respect to the Affected Loans or when required by law, and (d) the
Affected Loans shall automatically convert into Base Rate Loans on the date of
such termination.  Notwithstanding the
foregoing, to the extent a determination by an Affected Lender as described
above relates to a LIBOR Loan then being requested by Company pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, Company shall have
the option, subject to the provisions of subsection 2.6D, to rescind such
Notice of Borrowing or Notice of Conversion/Continuation as to all Lenders by
giving notice (by telefacsimile or by telephone confirmed in writing) to
Administrative Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above.  Administrative Agent shall promptly notify
each other Lender of the receipt of such notice.  Except as provided in the immediately
preceding sentence, nothing in this subsection 2.6C shall affect the obligation
of any Lender other than an Affected Lender to make or maintain Loans as, or to
convert Loans to, LIBOR Loans in accordance with the terms of this Agreement.

D.            Compensation For
Breakage or Non-Commencement of Interest Periods.  Company shall
compensate each Lender, upon written request by that Lender pursuant to
subsection 2.8, for all reasonable losses, expenses and liabilities (including
any interest paid by that Lender to lenders of funds borrowed by it to make or
carry its LIBOR Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds but
excluding any loss of profit such as the LIBOR Margin) which that Lender may
sustain: (i) if for any reason (other than a default by that Lender) a
borrowing of any LIBOR Loan does not occur on a date specified therefor in a
Notice of Borrowing or a telephonic request therefor, or a conversion to or
continuation of any LIBOR Loan does not occur on a date specified therefor in a
Notice of Conversion/Continuation or a telephonic request 

 

57

therefor,
(ii) if any prepayment or other principal payment or any conversion of any
of its LIBOR Loans (including any prepayment or conversion occasioned by the
circumstances described in subsection 2.6C) occurs on a date prior to the last
day of an Interest Period applicable to that Loan, and (iii) if any
prepayment of any of its LIBOR Loans is not made on any date specified in a
notice of prepayment given by Company.

E.             Booking of LIBOR Loans. 
Any Lender may make, carry or transfer LIBOR Loans at, to, or for the
account of any of its branch offices or the office of an Affiliate of that
Lender.

F.             Assumptions Concerning
Funding of LIBOR Loans.  Calculation of all amounts
payable to a Lender under this subsection 2.6 and under subsection 2.7A shall
be made as though that Lender had funded each of its LIBOR Loans through the
purchase of a LIBOR deposit bearing interest at the rate obtained pursuant to
the definition of LIBOR in an amount equal to the amount of such LIBOR Loan and
having a maturity comparable to the relevant Interest Period, whether or not
its LIBOR Loans had been funded in such manner.

G.            LIBOR Loans After
Default.  After the occurrence of and during the
continuation of an Event of Default, if Requisite Lenders so elect,
(i) Company may not elect to have a Loan be made or maintained as, or
converted to, a LIBOR Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection
2.6D, any Notice of Borrowing or Notice of Conversion/Continuation given by
Company with respect to a requested borrowing or conversion/continuation that
has not yet occurred shall be deemed to be for a Base Rate Loan or, if the
conditions to making a Loan set forth in subsection 4.2 cannot then be
satisfied, to be rescinded by Company.

2.7                               Increased Costs; Taxes;
Capital Adequacy.

A.            Compensation for
Increased Costs.  Subject to the provisions of subsection 2.7B
(which shall be controlling with respect to the matters covered thereby), in
the event that any Lender (including any Issuing Lender) shall determine (which
determination shall, be final and conclusive and binding upon all parties
hereto) that any law, treaty or governmental rule, regulation or order, or any
change therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or other Government
Authority, in each case that becomes effective after the date such Lender
became a Lender, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other Government
Authority (whether or not having the force of law):

(i)            subjects
such Lender to any additional Tax with respect to this Agreement or any of its
obligations hereunder (including with respect to issuing or maintaining any
Letters of Credit or purchasing or maintaining any participations therein or
maintaining any Commitment hereunder) or any payments to such Lender of
principal, interest, fees or any other amount payable hereunder;

 

58

(ii)           imposes,
modifies or holds applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets held by, or deposits or
other liabilities in or for the account of, or advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of such
Lender (other than any such reserve or other requirements with respect to LIBOR
Loans that are reflected in the definition of LIBOR); or

(iii)          imposes
any other condition (other than with respect to Taxes) on or affecting such
Lender or its obligations hereunder or the London interbank market;

and the result of any of
the foregoing is to increase the cost to such Lender of agreeing to make,
making or maintaining its Loans or Commitments or agreeing to issue, issuing or
maintaining any Letter of Credit or agreeing to purchase, purchasing or
maintaining any participation therein or to reduce any amount received or
receivable by such Lender with respect thereto; then, in any such case, Company
shall promptly pay to such Lender, upon receipt of the statement referred to in
subsection 2.8A, such additional amount or amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender in its sole discretion shall determine) as may be necessary to
compensate such Lender on an after-tax basis for any such increased cost or
reduction in amounts received or receivable hereunder; provided that
Company shall not be obligated to pay such additional amounts to the extent such
additional amounts are incurred more than nine (9) months prior to the giving
of such statement; provided, further, that, if such law, rule, regulation,
order, guideline, request or other legal requirement giving rise to such
increased costs or reductions is retroactive, then the nine (9) month period
referred to above shall be extended to include the period of retroactive effect
thereof.

B.            Taxes.

(i)            Payments
to Be Free and Clear.  All sums
payable by Company under this Agreement and the other Loan Documents shall be
paid free and clear of, and without any deduction or withholding on account of,
any Tax imposed, levied, collected, withheld or assessed by or within the
United States of America or any political subdivision in or of the United
States of America or any other jurisdiction from or to which a payment is made
by or on behalf of Company or by any federation or organization of which the
United States of America or any such jurisdiction is a member at the time of
payment.

(ii)           Grossing-up
of Payments.  If Company or any other
Person is required by law to make any deduction or withholding on account of
any such Tax from any sum paid or payable by Company to Administrative Agent or
any Lender under any of the Loan Documents:

(a)           Company
shall notify Administrative Agent of any such requirement or any change in any
such requirement as soon as Company becomes aware of it;

(b)           Company
shall pay any such Tax when such Tax is due, such payment to be made (if the
liability to pay is imposed on Company) for its own

 

59

account or (if that liability is imposed on Administrative Agent or
such Lender, as the case may be) on behalf of and in the name of Administrative
Agent or such Lender;

(c)           the
sum payable by Company in respect of which the relevant deduction, withholding
or payment is required shall be increased to the extent necessary to ensure
that, after the making of that deduction, withholding or payment,
Administrative Agent or such Lender, as the case may be, receives on the due
date a net sum equal to what it would have received had no such deduction,
withholding or payment been required or made; and

(d)           within
30 days after paying any sum from which it is required by law to make any
deduction or withholding, and within 30 days after the due date of payment of
any Tax which it is required by clause (b) above to pay, Company shall deliver
to Administrative Agent evidence satisfactory to the other affected parties of
such deduction, withholding or payment and of the remittance thereof to the
relevant taxing or other authority;

provided that no such additional amount shall be
required to be paid to any Lender under clause (c) above except to the extent
that any change after the date on which such Lender became a Lender in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect on the date on which such Lender became a Lender in
respect of payments to such Lender.

(iii)          Evidence
of Exemption from U.S. Withholding Tax.

(a)           Each
Non-US Lender shall deliver to
Administrative Agent and to Company, on or prior to the Closing Date (in the
case of each Lender listed on the signature pages hereof) or on or prior to the
date of the Assignment Agreement pursuant to which it becomes a Lender (in the
case of each other Lender), and at such other times as may be necessary in the
determination of Company or Administrative Agent (each in the reasonable exercise
of its discretion), two original copies of Internal Revenue Service Form W-8BEN
or W-8ECI (or any successor forms) properly completed and duly executed by such
Lender, or, in the case of a Non-US Lender claiming exemption from United
States federal withholding tax under Section 871(h) or 881(c) of the Internal
Revenue Code with respect to payments of “portfolio interest”, a form W-8BEN,
and a certificate of such Lender certifying that such Lender is not (i) a “bank”
for purposes of Section 881(c) of the Internal Revenue Code, (ii) a ten-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue
Code) of Company or Holdings or (iii) a controlled foreign corporation
related to Company (within the meaning of Section 864(d)(4) of the Internal
Revenue Code), in each case together with any other certificate or statement of
exemption required under the Internal Revenue Code or the regulations issued
thereunder to establish that such Lender is not subject to United States withholding
tax with respect to any payments to such Lender of amounts payable under any of
the Loan Documents.

 

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(b)           Each
Non-US Lender, to the extent it does not act or ceases to act for its own
account with respect to any portion of any sums paid or payable to such Lender
under any of the Loan Documents (for example, in the case of a typical
participation by such Lender), shall deliver to Administrative Agent and to
Company, on or prior to the Closing Date (in the case of each Lender listed on
the signature pages hereof), on or prior to the date of the Assignment
Agreement pursuant to which it becomes a Lender (in the case of each other
Lender), or on such later date when such Lender ceases to act for its own account
with respect to any portion of any such sums paid or payable, and at such other
times as may be necessary in the determination of Company or Administrative
Agent (each in the reasonable exercise of its discretion), (1) two original
copies of the forms or statements required to be provided by such Lender under
subsection 2.7B(iii)(a), properly completed and duly executed by such Lender,
to establish the portion of any such sums paid or payable with respect to which
such Lender acts for its own account that is not subject to United States
withholding tax, and (2) two original copies of Internal Revenue Service Form W-8IMY
(or any successor forms) properly completed and duly executed by such Lender,
together with any information, if any, such Lender chooses to transmit with
such form, and any other certificate or statement of exemption required under
the Internal Revenue Code or the regulations issued thereunder, to establish
that such Lender is not acting for its own account with respect to a portion of
any such sums payable to such Lender.

(c)           Each
Non-US Lender hereby agrees, from time to time after the initial delivery by
such Lender of such forms, whenever a lapse in time or change in circumstances
renders such forms, certificates or other evidence so delivered obsolete or
inaccurate in any material respect, that such Lender shall promptly
(1) deliver to Administrative Agent and to Company two original copies of
renewals, amendments or additional or successor forms, properly completed and
duly executed by such Lender, together with any other certificate or statement
of exemption required in order to confirm or establish that such Lender is not
subject to United States withholding tax with respect to payments to such
Lender under the Loan Documents and, if applicable, that such Lender does not
act for its own account with respect to any portion of such payment, or
(2) notify Administrative Agent and Company of its inability to deliver
any such forms, certificates or other evidence.

(d)           Company
shall not be required to pay any additional amount to any Non-US Lender under
clause (c) of subsection 2.7B(ii), (1) with respect to any Tax required to be
deducted or withheld on the basis of the information, certificates or
statements of exemption such Lender chooses to transmit with an Internal
Revenue Service Form W-8IMY pursuant to subsection 2.7B(iii)(b)(2) or (2) if
such Lender shall have failed to satisfy the requirements of clause (a), (b) or
(c)(1) of this subsection 2.7B(iii); provided that if such Lender shall
have satisfied the requirements of subsection 2.7B(iii)(a) on the date such
Lender became a 

 

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Lender, nothing in this subsection 2.7B(iii)(d) shall relieve Company
of its obligation to pay any amounts pursuant to subsection 2.7B(ii)(c) in the
event that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer properly
entitled to deliver forms, certificates or other evidence at a subsequent date
establishing the fact that such Lender is not subject to withholding as
described in subsection 2.7B(iii)(a).

C.            Capital Adequacy
Adjustment.  If any Lender shall have determined that the
adoption, effectiveness, phase-in or applicability after the date hereof of any
law, rule or regulation (or any provision thereof) regarding capital adequacy,
or any change therein or in the interpretation or administration thereof by any
Government Authority charged with the interpretation or administration thereof,
or compliance by any Lender with any guideline, request or directive regarding
capital adequacy (whether or not having the force of law) of any such
Government Authority, has or would have the effect of reducing the rate of
return on the capital of such Lender or any corporation controlling such Lender
as a consequence of, or with reference to, such Lender’s Loans or Commitments
or Letters of Credit or participations therein or other obligations hereunder
with respect to the Loans or the Letters of Credit to a level below that which
such Lender or such controlling corporation could have achieved but for such
adoption, effectiveness, phase-in, applicability, change or compliance (taking
into consideration the policies of such Lender or such controlling corporation
with regard to capital adequacy), then from time to time, within five Business
Days after receipt by Company from such Lender of the statement referred to in
subsection 2.8A, Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction; provided that Company shall not be
obligated to pay such additional amounts to the extent such additional amounts
are incurred more than nine (9) months prior to the giving of such statement; provided,
further, that, if such law, rule, regulation, order, guideline, request
or other legal requirement giving rise to such additional amounts is
retroactive, then the nine (9) month period referred to above shall be extended
to include the period of retroactive effect thereof.

2.8                               Statement of Lenders;
Obligation of Lenders and Issuing Lenders to Mitigate.

A.            Statements. 
Each Lender claiming compensation or reimbursement pursuant to
subsection 2.6D, 2.7 or 2.8B shall deliver to Company (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis of the calculation of such compensation or reimbursement, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.

B.            Mitigation. 
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case
may be, becomes aware of the occurrence of an event or the existence of a
condition that would cause such Lender to become an Affected Lender or that
would entitle such Lender or Issuing Lender to receive payments under
subsection 2.7, it will use reasonable efforts to make, issue, fund or maintain
the

 

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Commitments of
such Lender or the Loans or Letters of Credit of such Lender or Issuing Lender
through another lending or letter of credit office of such Lender or Issuing
Lender, if (i) as a result thereof the circumstances which would cause such
Lender to be an Affected Lender would cease to exist or the additional amounts
which would otherwise be required to be paid to such Lender or Issuing Lender
pursuant to subsection 2.7 would be materially reduced and (ii) as determined
by such Lender or Issuing Lender in its sole discretion, such action would not
otherwise be disadvantageous to such Lender or Issuing Lender; provided
that such Lender or Issuing Lender will not be obligated to utilize such other
lending or letter of credit office pursuant to this subsection 2.8B unless
Company agrees to pay all incremental expenses incurred by such Lender or
Issuing Lender as a result of utilizing such other lending or letter of credit
office as described above.

2.9                               Replacement of a Lender.

If Company receives a
statement of amounts due pursuant to subsection 2.8A from a Lender, a Revolving
Lender defaults in its obligations to fund a Revolving Loan pursuant to this
Agreement, a Lender (a “Non-Consenting Lender”)
refuses to consent to an amendment, modification or waiver of this Agreement
that, pursuant to subsection 10.6, requires consent of 100% of the Lenders or
100% of the Lenders with Obligations directly affected or a Lender becomes an
Affected Lender (any such Lender, a “Subject Lender”),
so long as (i) no Potential Event of Default or Event of Default shall have
occurred and be continuing and Company has obtained a commitment from another
Lender or an Eligible Assignee to purchase at par the Subject Lender’s Loans
and assume the Subject Lender’s Commitments and all other obligations of the
Subject Lender hereunder, (ii) such Lender is not an Issuing Lender with
respect to any Letters of Credit outstanding (unless all such Letters of Credit
are terminated or arrangements acceptable to such Issuing Lender (such as a “back-to-back”
letter of credit) are made) and (iii), if applicable, the Subject Lender is
unwilling to withdraw the notice delivered to Company pursuant to subsection
2.8 and/or is unwilling to remedy its default upon 10 days prior written notice
to the Subject Lender and Administrative Agent, Company may require the Subject
Lender to assign all of its Loans and Commitments to such other Lender,
Lenders, Eligible Assignee or Eligible Assignees pursuant to the provisions of
subsection 10.1B; provided that, prior to or concurrently with such
replacement, (1) the Subject Lender shall have received payment in full of all
principal, interest, fees and other amounts (including all amounts under
subsections 2.6D, 2.7 and/or 2.8B (if applicable)) through such date of
replacement and a release from its obligations under the Loan Documents, (2)
the processing fee required to be paid by subsection 10.1B(i) shall have been
paid to Administrative Agent, (3) all of the requirements for such assignment
contained in subsection 10.1B, including, without limitation, the consent of
Administrative Agent (if required) and the receipt by Administrative Agent of
an executed Assignment Agreement and other supporting documents, have been
fulfilled, and (4) in the event such Subject Lender is a Non-Consenting Lender,
each assignee shall consent, at the time of such assignment, to each matter in
respect of which such Subject Lender was a Non-Consenting Lender and Company
also requires each other Subject Lender that is a Non-Consenting Lender to
assign its Loans and Commitments.  For
the avoidance of doubt, if a Lender is a Non-Consenting Lender solely because
it refused to consent to an amendment, modification or waiver that required the
consent of 100% of Lenders with Obligations directly affected thereby (which

 

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amendment,
modification or waiver did not accordingly require the consent of 100% of all
Lenders), the Loans and Commitments of such Non-Consenting Lender that are
subject to the assignments required by this subsection 2.9 shall include
only those Loans and Commitments that constitute the Obligations directly
affected by the amendment, modification or waiver to which such Non-Consenting
Lender refused to provide its consent.

Section
3.              LETTERS OF CREDIT

3.1                               Issuance of Letters of
Credit and Lenders’ Purchase of Participations Therein.

A.            Letters of Credit. 
In addition to Company requesting that Lenders make Loans pursuant to
subsection 2.1A, Company may request, in accordance with the provisions of this
subsection 3.1, from time to time during the period from the Closing Date to
but excluding the 30th day prior to the Revolving Loan Commitment
Termination Date, that one or more Revolving Lenders issue Letters of Credit
payable on a sight basis for the account of Company for the general corporate purposes
of Company or a Subsidiary of Company. 
Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Company herein set forth, any one or
more Revolving Lenders may, but (except as provided in subsection 3.1B(ii))
shall not be obligated to, issue such Letters of Credit in accordance with the
provisions of this subsection 3.1; provided that Company shall not
request that any Revolving Lender issue (and no Revolving Lender shall issue):

(i)            any
Letter of Credit if, after giving effect to such issuance, the Total
Utilization of Revolving Loan Commitments would exceed the lesser of the
Revolving Loan Commitment Amount then in effect or the Borrowing Base then in
effect;

(ii)           any
Letter of Credit if, after giving effect to such issuance, the Letter of Credit
Usage would exceed $5,000,000;

(iii)          any
Standby Letter of Credit having an expiration date later than the earlier of
(a) ten days prior to the Revolving Loan Commitment Termination Date and
(b) the date which is one year from the date of issuance of such Standby
Letter of Credit; provided that the immediately preceding clause (b)
shall not prevent any Issuing Lender from agreeing that a Standby Letter of
Credit will automatically be extended for one or more successive periods not to
exceed one year each unless such Issuing Lender elects not to extend for any
such additional period; and provided, further that such Issuing
Lender shall elect not to extend such Standby Letter of Credit if it has
knowledge that an Event of Default has occurred and is continuing (and has not
been waived in accordance with subsection 10.6) at the time such Issuing Lender
must elect whether or not to allow such extension;

(iv)          any
Standby Letter of Credit issued for the purpose of supporting (a) trade
payables or (b) any Indebtedness constituting “antecedent debt” (as that term
is used in Section 547 of the Bankruptcy Code);

 

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(v)           any
Commercial Letter of Credit having an expiration date (a) later than the
earlier of (1) the date which is 30 days prior to the Revolving Loan
Commitment Termination Date and (2) the date which is 180 days from the date of
issuance of such Commercial Letter of Credit or (b) that is otherwise
unacceptable to the applicable Issuing Lender in its reasonable discretion; or

(vi)          any
Letter of Credit denominated in a currency other than Dollars.

B.            Mechanics of Issuance.

(i)            Request
for Issuance.  Whenever Company
desires the issuance of a Letter of Credit, it shall deliver to Administrative
Agent a Request for Issuance not later than 1:00 P.M. (New York City time) at
least three Business Days (in the case of Standby Letters of Credit) or five
Business Days (in the case of Commercial Letters of Credit), or in each case
such shorter period as may be agreed to by the Issuing Lender in any particular
instance, in advance of the proposed date of issuance.  The Issuing Lender, in its reasonable
discretion, may require changes in the text of the proposed Letter of Credit or
any documents described in or attached to the Request for Issuance (it being
understood that if any term of such proposed Letter of Credit or such other
document shall contradict or otherwise conflict with any term or provision
contained in this Agreement, the term or provision contained in this Agreement
shall control).  In furtherance of the
provisions of subsection 10.8, and not in limitation thereof, Company may
submit Requests for Issuance by telefacsimile and Administrative Agent and
Issuing Lenders may rely and act upon any such Request for Issuance without
receiving an original signed copy thereof.

Company shall notify the
applicable Issuing Lender (and Administrative Agent, if Administrative Agent is
not such Issuing Lender) prior to the issuance of any Letter of Credit in the
event that any of the matters to which Company is required to certify in the
applicable Request for Issuance is no longer true and correct as of the
proposed date of issuance of such Letter of Credit, and upon the issuance of
any Letter of Credit Company shall be deemed to have re-certified, as of the
date of such issuance, as to the matters to which Company is required to
certify in the applicable Request for Issuance.

(ii)           Determination
of Issuing Lender.  Upon receipt by
Administrative Agent of a Request for Issuance pursuant to subsection 3.1B(i)
requesting the issuance of a Letter of Credit, in the event Administrative
Agent elects to issue such Letter of Credit, Administrative Agent shall
promptly so notify Company, and Administrative Agent shall be the Issuing
Lender with respect thereto.  In the
event that Administrative Agent, in its sole discretion, elects not to issue
such Letter of Credit, Administrative Agent shall promptly so notify Company,
whereupon Company may request any other Revolving Lender to issue such Letter
of Credit by delivering to such Revolving Lender a copy of the applicable
Request for Issuance.  Any Revolving
Lender so requested to issue such Letter of Credit shall promptly notify
Company and Administrative Agent whether or not, in its sole discretion, it has
elected to issue such Letter of Credit, and any such Revolving Lender that so
elects to issue such Letter of Credit shall be the Issuing Lender

 

65

with respect thereto.  In the
event that all other Revolving Lenders shall have declined to issue such Letter
of Credit, notwithstanding the prior election of Administrative Agent not to
issue such Letter of Credit, Administrative Agent shall be obligated to issue
such Letter of Credit and shall be the Issuing Lender with respect thereto,
notwithstanding the fact that the Letter of Credit Usage with respect to such
Letter of Credit and with respect to all other Letters of Credit issued by Administrative
Agent, when aggregated with Administrative Agent’s outstanding Revolving Loans
and Swing Line Loans, may exceed the amount of Administrative Agent’s Revolving
Loan Commitment then in effect.

(iii)          Issuance
of Letter of Credit.  Upon
satisfaction or waiver (in accordance with subsection 10.6) of the conditions
set forth in subsection 4.3, the Issuing Lender shall issue the requested
Letter of Credit in accordance with the Issuing Lender’s standard operating
procedures.

(iv)          Notification
to Revolving Lenders.  Upon the
issuance of or amendment to any Standby Letter of Credit the applicable Issuing
Lender shall promptly notify Administrative Agent and Company of such issuance
or amendment in writing and such notice shall be accompanied by a copy of such
Standby Letter of Credit or amendment. 
Upon receipt of such notice (or, if Administrative Agent is the Issuing
Lender, together with such notice), Administrative Agent shall notify each
Revolving Lender in writing of such issuance or amendment and the amount of
such Revolving Lender’s respective participation in such Standby Letter of
Credit or amendment, and, if so requested by a Revolving Lender, Administrative
Agent shall provide such Lender with a copy of such Letter of Credit or
amendment.  In the case of Commercial
Letters of Credit, in the event that Issuing Lender is other than
Administrative Agent, such Issuing Lender will send by facsimile transmission
to Administrative Agent, promptly upon the first Business Day of each week, a
report of its daily aggregate maximum amount available for drawing under
Commercial Letters of Credit for the previous week.  Upon receipt of such report, Administrative
Agent shall notify each Revolving Lender in writing of the contents thereof.

C.            Revolving Lenders’ Purchase
of Participations in Letters of Credit.  Immediately
upon the issuance of each Letter of Credit, each Revolving Lender shall be
deemed to, and hereby agrees to, have irrevocably purchased from the Issuing
Lender a participation in such Letter of Credit and any drawings honored
thereunder in an amount equal to such Revolving Lender’s Pro Rata Share of the
maximum amount that is or at any time may become available to be drawn
thereunder.

3.2                               Letter of Credit Fees.

Company agrees to pay the
following amounts with respect to Letters of Credit issued hereunder:

(i)            with
respect to each Letter of Credit, (a) a fronting fee, payable directly to
the applicable Issuing Lender for its own account, equal to 0.25% per annum of
the daily amount available to be drawn under such Letter of Credit and
(b) a letter of credit fee,

 

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payable to Administrative Agent for the account of Revolving Lenders,
equal to the applicable LIBOR Margin for the Revolving Loans multiplied by the
daily amount available to be drawn under such Letter of Credit, each such
fronting fee or letter of credit fee to be payable in arrears on and to (but
excluding) each March 31, June 30, September 30 and
December 31 of each year and computed on the basis of a 360-day year for the actual number of days elapsed; and

(ii)           with
respect to the issuance, amendment or transfer of each Letter of Credit and
each payment of a drawing made thereunder (without duplication of the fees
payable under clause (i) above), documentary and processing charges payable
directly to the applicable Issuing Lender for its own account in accordance
with such Issuing Lender’s standard schedule for such charges in effect at the
time of such issuance, amendment, transfer or payment, as the case may be.

For purposes of
calculating any fees payable under clause (i) of this subsection 3.2,
the daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of business on any date of determination.

3.3                               Drawings and
Reimbursement of Amounts Paid Under Letters of Credit.

A.            Responsibility of
Issuing Lender With Respect to Drawings.  In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine
the documents delivered under such Letter of Credit with reasonable care so as
to ascertain whether they appear on their face to be in accordance with the
terms and conditions of such Letter of Credit.

B.            Reimbursement by Company
of Amounts Paid Under Letters of Credit.  In the event
an Issuing Lender has determined to honor a drawing under a Letter of Credit
issued by it, such Issuing Lender shall immediately notify Company and
Administrative Agent, and Company shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the “Reimbursement Date”)
in an amount in Dollars and in same day funds equal to the amount of such
payment; provided that, anything contained in this Agreement to the
contrary notwithstanding, (i) unless Company shall have notified Administrative
Agent and such Issuing Lender prior to 12:00 Noon (New York City time) on the
date such drawing is honored that Company intends to reimburse such Issuing
Lender for the amount of such payment with funds other than the proceeds of
Revolving Loans, Company shall be deemed to have given a timely Notice of
Borrowing to Administrative Agent requesting Revolving Lenders to make
Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount
in Dollars equal to the amount of such payment and Administrative Agent shall
promptly notify each Revolving Lender of the proposed borrowing and (ii)
subject to satisfaction or waiver of the conditions specified in subsection
4.2B, Revolving Lenders shall, on the Reimbursement Date, make Revolving Loans
that are Base Rate Loans in the amount of such payment, the proceeds of which
shall be applied directly by Administrative Agent to reimburse such Issuing
Lender for the amount of such payment; and provided, further that
if for any reason proceeds of Revolving Loans are not received by such

 

67

 

Issuing Lender on
the Reimbursement Date in an amount equal to the amount of such payment,
Company shall reimburse such Issuing Lender, on demand, in an amount in same
day funds equal to the excess of the amount of such payment over the aggregate
amount of such Revolving Loans, if any, which are so received.  Nothing in this subsection 3.3B shall be
deemed to relieve any Revolving Lender from its obligation to make Revolving
Loans on the terms and conditions set forth in this Agreement, and Company
shall retain any and all rights it may have against any Revolving Lender
resulting from the failure of such Revolving Lender to make such Revolving
Loans under this subsection 3.3B.

C.            Payment by Lenders of
Unreimbursed Amounts Paid Under Letters of Credit.

(i)            Payment
by Revolving Lenders.  In the event
that Company shall fail for any reason to reimburse any Issuing Lender as
provided in subsection 3.3B in an amount equal to the amount of any payment by
such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender
shall promptly notify Administrative Agent, who shall promptly notify each
Revolving Lender of the unreimbursed amount of such honored drawing and of such
Revolving Lender’s respective participation therein based on such Revolving
Lender’s Pro Rata Share.  Each Revolving
Lender (other than such Issuing Lender) shall make available to Administrative
Agent an amount equal to its respective participation, in Dollars, in same day
funds, at the Funding and Payment Office, not later than 1:00 P.M. (New York
City time) on the first Business Day after the date notified by Administrative
Agent, and Administrative Agent shall make available to such Issuing Lender in
Dollars, in same day funds, at the office of such Issuing Lender on such
Business Day the aggregate amount of the payments so received by Administrative
Agent.  In the event that any Revolving
Lender fails to make available to Administrative Agent on such Business Day the
amount of such Revolving Lender’s participation in such Letter of Credit as
provided in this subsection 3.3C, such Issuing Lender shall be entitled to
recover such amount on demand from such Revolving Lender together with interest
thereon at the rate customarily used by such Issuing Lender for the correction
of errors among banks for three Business Days and thereafter at the Base
Rate.  Nothing in this subsection 3.3C
shall be deemed to prejudice the right of Administrative Agent to recover, for the
benefit of Revolving Lenders, from any Issuing Lender any amounts made
available to such Issuing Lender pursuant to this subsection 3.3C in the event
that it is determined by the final judgment of a court of competent
jurisdiction that the payment with respect to a Letter of Credit by such
Issuing Lender in respect of which payments were made by Revolving Lenders
constituted gross negligence, bad faith or willful misconduct on the part of
such Issuing Lender.

(ii)           Distribution
to Lenders of Reimbursements Received From Company.  In the event any Issuing Lender shall have
been reimbursed by other Revolving Lenders pursuant to subsection 3.3C(i) for
all or any portion of any payment by such Issuing Lender under a Letter of
Credit issued by it, and Administrative Agent or such Issuing Lender thereafter
receives any payments from Company in reimbursement of such payment under the
Letter of Credit, to the extent any such payment is received by such Issuing
Lender, it shall distribute such payment to Administrative Agent, and

 

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Administrative Agent shall (or, to the extent that Administrative Agent
receives any such payment directly, it shall) distribute to each other
Revolving Lender that has paid all amounts payable by it under subsection
3.3C(i) with respect to such payment such Revolving Lender’s Pro Rata Share of
all payments subsequently received by Administrative Agent or by such Issuing
Lender from Company.  Any such
distribution shall be made to a Revolving Lender at the account specified in
subsection 2.4C(iii).

D.            Interest on Amounts Paid
Under Letters of Credit.

(i)            Payment
of Interest by Company.  Company
agrees to pay to Administrative Agent, with respect to payments under any
Letters of Credit issued by any Issuing Lender, interest on the amount paid by
such Issuing Lender in respect of each such payment from the date a drawing is
honored to but excluding the date such amount is reimbursed by Company
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B) at a rate equal to (a) for the period from the
date such drawing is honored to but excluding the Reimbursement Date, the rate
then in effect under this Agreement with respect to Revolving Loans that are Base
Rate Loans and (b) thereafter, a rate which is 2% per annum in excess of the
rate of interest otherwise payable under this Agreement with respect to
Revolving Loans that are Base Rate Loans. 
Interest payable pursuant to this subsection 3.3D(i) shall be computed
on the basis of a 360-day year for
the actual number of days elapsed in the period during which it accrues and
shall be payable on demand or, if no demand is made, on the date on which the
related drawing under a Letter of Credit is reimbursed in full.

(ii)           Distribution
of Interest Payments by Administrative Agent.  Promptly upon receipt by Administrative Agent
of any payment of interest pursuant to subsection 3.3D(i) with respect to a
payment under a Letter of Credit, (a) Administrative Agent shall distribute to
(x) each Revolving Lender (including the Revolving Lender that paid such
drawing) out of the interest received by Administrative Agent in respect of the
period from the date such drawing is honored to but excluding the date on which
the applicable Issuing Lender is reimbursed for the amount of such payment
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B), the amount that such Revolving Lender would have
been entitled to receive in respect of the letter of credit fee that would have
been payable in respect of such Letter of Credit for such period pursuant to
subsection 3.2 if no drawing had been honored under such Letter of Credit, and
(y) such Issuing Lender the amount, if any, remaining after payment of the
amounts applied pursuant to clause (x), and (b) in the event such Issuing
Lender shall have been reimbursed by other Revolving Lenders pursuant to
subsection 3.3C(i) for all or any portion of such payment, Administrative Agent
shall distribute to each Revolving Lender (including such Issuing Lender) that
has paid all amounts payable by it under subsection 3.3C(i) with respect to
such payment such Revolving Lender’s Pro Rata Share of any interest received by
Administrative Agent in respect of that portion of such payment so made by
Revolving Lenders for the period from the date on which such Issuing Lender was
so reimbursed to but excluding the date on which such portion of such payment
is reimbursed by Company.  Any such
distribution shall be made to a Revolving Lender at the account specified in
subsection 2.4C(iii).

 

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E.             Cash
Collateralization.  If Administrative Agent notifies Company at
any time that the Letter of Credit Usage at such time exceeds 105% of the
sublimit for Letters of Credit specified in subsection 3.1A(ii), then,
within two  Business Days after receipt
of such notice, Company shall deposit in the Collateral Account established
pursuant to the Security Agreement an amount equal to the amount by which the
Letter of Credit Usage exceeds such sublimit, which amount shall constitute
Collateral and be subject to the provisions of the Security Agreement.  At such time as the Letter of Credit Usage
shall be equal to or less than such sublimit, if no Event of Default has
occurred and is continuing, such amount may, at the request of Company, be
released to Company.

3.4                               Obligations Absolute.

The obligation of Company
to reimburse each Issuing Lender for payments under the Letters of Credit
issued by it and to repay any Revolving Loans made by Revolving Lenders
pursuant to subsection 3.3B and the obligations of Revolving Lenders under
subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances
including any of the following circumstances:

(i)            any
lack of validity or enforceability of any Letter of Credit;

(ii)           the
existence of any claim, set-off, defense or other right which Company or any Lender
may have at any time against a beneficiary or any transferee of any Letter of
Credit (or any Persons for whom any such transferee may be acting), any Issuing
Lender or other Revolving Lender or any other Person or, in the case of a
Revolving Lender, against Company, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated transaction (including
any underlying transaction between Company or one of its Subsidiaries and the
beneficiary for which any Letter of Credit was procured);

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

(iv)          payment
by the applicable Issuing Lender under any Letter of Credit against
presentation of a draft or other document which does not substantially comply
with the terms of such Letter of Credit;

(v)           any
adverse change in the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Company or any of its Subsidiaries;

(vi)          any
breach of this Agreement or any other Loan Document by any party thereto;

(vii)         any
other circumstance or happening whatsoever, whether or not similar to any of
the foregoing; or

 

70

 

(viii)        the
fact that an Event of Default or a Potential Event of Default shall have
occurred and be continuing;

provided, in each case, that payment by the
applicable Issuing Lender under the applicable Letter of Credit shall not have
constituted gross negligence, bad faith or willful misconduct of such Issuing
Lender under the circumstances in question (as determined by a final judgment
of a court of competent jurisdiction).

3.5                               Nature of Issuing
Lenders’ Duties.

As between Company and
any Issuing Lender, Company assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the
respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the
foregoing, such Issuing Lender shall not be responsible for:  (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any such Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to transfer
or assign any such Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (iii) failure of the beneficiary of any such
Letter of Credit to comply fully with any conditions required in order to draw
upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission
or otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond
the control of such Issuing Lender, including any act or omission by a
Government Authority, and none of the above shall affect or impair, or prevent
the vesting of, any of such Issuing Lender’s rights or powers hereunder.

In furtherance and
extension and not in limitation of the specific provisions set forth in the
first paragraph of this subsection 3.5, any action taken or omitted by any
Issuing Lender under or in connection with the Letters of Credit issued by it
or any documents and certificates delivered thereunder, if taken or omitted in
good faith, shall not put such Issuing Lender under any resulting liability to Company.

Notwithstanding anything
to the contrary contained in this subsection 3.5, Company shall retain any and
all rights it may have against any Issuing Lender for any liability arising
solely out of the gross negligence or willful misconduct of such Issuing
Lender, as determined by a final judgment of a court of competent jurisdiction.

Section
4.              CONDITIONS TO LOANS AND
LETTERS OF CREDIT

The obligations of
Lenders to make Loans and the issuance of Letters of Credit hereunder are
subject to the satisfaction of the following conditions.

 

71

 

4.1                               Conditions to Term Loans
and Initial Revolving Loans and Swing Line Loans.

The obligations of
Lenders to make the Term Loans and any Revolving Loans and Swing Line Loans to
be made on the Closing Date are, in addition to the conditions precedent
specified in subsection 4.2, subject to prior or concurrent satisfaction of the
following conditions:

A.            Loan Party Documents. 
On or before the Closing Date, Holdings and Company shall, and shall
cause each other Loan Party to, deliver to Lenders (or to Administrative Agent
with sufficient originally executed copies, where appropriate, for each Lender)
the following with respect to Holdings, Company or such Loan Party, as the case
may be, each, unless otherwise noted, dated the Closing Date:

(i)            Copies
of the Organizational Documents of such Person, certified by the Secretary of
State of its jurisdiction of organization and dated a recent date prior to the
Closing Date or, if such document is of a type that may not be so certified,
certified by the secretary or similar officer of the applicable Loan Party,
together with a good standing certificate from the Secretary of State of its
jurisdiction of organization and each other state in which such Person is
qualified to do business, each dated a recent date prior to the Closing Date;

(ii)           Resolutions
of the Governing Body of such Person approving and authorizing the execution,
delivery and performance of the Loan Documents and the Second Lien Term Loan
Agreement to which it is a party, certified as of the Closing Date by the
secretary or similar officer of such Person as being in full force and effect
without modification or amendment;

(iii)          Signature
and incumbency certificates of the officers of such Person executing the Loan
Documents to which it is a party;

(iv)          Executed
originals of the Loan Documents to which such Person is a party; and

(v)           Such
other documents as Administrative Agent may reasonably request.

B.            Fees. 
Company shall have paid to Administrative Agent, for distribution (as
appropriate) to Administrative Agent and Lenders, the fees payable on the
Closing Date referred to in subsection 2.3.

C.            Corporate and Capital
Structure; Ownership.

(i)            Corporate
Structure.  The corporate
organizational structure of Holdings and its Subsidiaries after giving effect
to the Recapitalization, shall be as set forth on Schedule 4.1C annexed
hereto.

 

72

 

(ii)           Capital
Structure and Ownership.  The capital
structure and ownership of Holdings and Company, after giving effect to the
Recapitalization, shall be as set forth on Schedule 4.1C annexed hereto.

D.            Representations and
Warranties; Performance of Agreements.  Company shall
have delivered to Administrative Agent an Officer’s Certificate, in form and
substance reasonably satisfactory to Administrative Agent, to the effect that
the representations and warranties in Section 5 are true, correct and complete
in all material respects on and as of the Closing Date to the same extent as
though made on and as of that date (or, to the extent such representations and
warranties specifically relate to an earlier date, that such representations
and warranties were true, correct and complete in all material respects on and
as of such earlier date) and that Company shall have performed in all material
respects all agreements and satisfied all conditions which the Loan Documents
provide shall be performed or satisfied by it on or before the Closing Date
except as otherwise disclosed to and agreed to in writing by Administrative
Agent; provided that, if a representation and warranty, covenant or
condition is qualified as to materiality, with respect to such representation
and warranty, covenant or condition the applicable materiality qualifier set
forth above shall be disregarded for purposes of this condition.

E.             Financial Statements; Pro
Forma Financial Statements. 
On or before the Closing Date, Lenders shall have received (i) audited
financial statements of Company and its Subsidiaries for Fiscal Years 2001,
2002 and 2003, consisting of consolidated balance sheets and the related
consolidated statements of income, stockholders’ equity and cash flows for such
Fiscal Years, together with the report thereon of Ernst & Young and in
reasonable detail and certified by the chief financial officer of Company that
they fairly present in all material respects the consolidated financial
condition of Company and its Subsidiaries, as at the dates indicated and the
results of their operations for the periods indicated, (ii) unaudited financial
statements of Company and its Subsidiaries as at the end of each Fiscal Quarter
ended more than 45 days prior to the Closing Date and monthly financial
statements for any monthly period ending after the most recent Fiscal Quarter
and more than 30 days prior to the Closing Date, consisting of a consolidated
balance sheet and the related consolidated statements of income and cash flows
for the periods indicated, all in reasonable detail and certified by the chief
financial officer of Company that they fairly present in all material respects
the consolidated financial condition of Company and its Subsidiaries as at the
dates indicated and the results of their operations for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments,
(iii) pro forma consolidated balance sheets of Company and its
Subsidiaries as at January 2, 2005, reflecting the Recapitalization and the
transactions contemplated by the Loan Documents and the Second Lien Term Loan
Agreement, and (iv) a consolidated plan and financial forecast for the six-year
period after the Closing Date, including forecasted balance sheet, consolidated
statements of income, and cash flows of Company and its Subsidiaries on a
monthly basis for Fiscal Year 2004 and on an annual basis for each Fiscal Year
thereafter during such period, together with an explanation of the assumptions
on which such forecasts are based.  Each of
the foregoing financial statements shall (1) be in form and substance
reasonably satisfactory to Administrative Agent and Lenders, (2) be
substantially consistent with any financial statements for the same periods
delivered to Administrative Agent prior to the Closing Date, and (3) in the

 

73

 

case of such financial statements for
subsequent periods, be substantially consistent with any projected financial
results for such periods delivered to Administrative Agent prior to the Closing
Date.

 

F.             Opinions of Counsel to
Loan Parties.  Lenders shall have received originally
executed copies of one or more favorable written opinions of Latham &
Watkins, LLP, counsel for Loan Parties, in form and substance reasonably
satisfactory to Administrative Agent and its counsel, addressed to
Administrative Agent and Lenders and dated as of the Closing Date and setting
forth substantially the matters in the opinions designated in Exhibit VIII
annexed hereto and as to such other matters as Administrative Agent acting on
behalf of Lenders may reasonably request (this Agreement constituting a written
request by Company to such counsel to deliver such opinions to Lenders).

G.            Solvency Assurances. 
On the Closing Date, Administrative Agent and Lenders shall have
received an Officer’s Certificate of Company dated the Closing Date,
substantially in the form of Exhibit X annexed hereto and with
appropriate attachments, in each case demonstrating that, after giving effect
to the consummation of the Recapitalization and the transactions contemplated
by the Loan Documents and the Second Lien Term Loan Agreement, (i) Holdings and
its Subsidiaries on a consolidated basis and (ii) Company and its Subsidiaries
on a consolidated basis, will be Solvent.

H.            Evidence of Insurance. 
Administrative Agent shall have received a certificate from Company’s
insurance broker or other evidence reasonably satisfactory to it that all
insurance required to be maintained pursuant to subsection 6.4 is in full force
and effect and that Administrative Agent on behalf of Lenders has been named as
additional insured and/or loss payee thereunder to the extent required under
subsection 6.4.

I.              Necessary Governmental
Authorizations and Consents; Expiration of Waiting Periods, Etc. 
Company shall have obtained all Governmental Authorizations and all
consents of other Persons, in each case that are necessary in connection with
the transactions contemplated by the Loan Documents and the Second Lien Term
Loan Agreement and the continued operation of the business conducted by Company
and its Subsidiaries in substantially the same manner as conducted prior to the
Closing Date.  Each such Governmental
Authorization and consent shall be in full force and effect, except in a case where
the failure to obtain or maintain a Governmental Authorization or consent,
either individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.  All
applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority that would restrain, prevent or otherwise
impose adverse conditions on the transactions contemplated by the Loan
Documents and the Second Lien Term Loan Agreement.  No action, request for stay, petition for
review or rehearing, reconsideration, or appeal with respect to any of the
foregoing shall be pending, and the time for any applicable Government
Authority to take action to set aside its consent on its own motion shall have
expired.

J.             Environmental Reports. 
On or prior to the Closing Date, Company shall, or shall cause its
Subsidiaries to, deliver to Administrative Agent Phase I and letter reports

 

74

 

and other material
documents and information, which are in the possession or control of Company or
any Subsidiary, regarding material environmental matters relating to Holdings
and its Subsidiaries and the Facilities. 
These documents and information are set forth on Schedule 4.1J  annexed hereto.

K.            Security Interests in
Personal and Mixed Property.  To the extent
not otherwise satisfied pursuant to subsection 4.1L, Administrative Agent shall
have received evidence reasonably satisfactory to it that Holdings, Company and
Subsidiary Guarantors shall have taken or caused to be taken all such actions,
executed and delivered or caused to be executed and delivered all such
agreements, documents and instruments, and made or caused to be made all such
filings and recordings (other than the filing or recording of items described
in clauses (ii), (iii) and (iv) below) that may be necessary or, in the opinion
of Administrative Agent, desirable in order to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and (upon such filing
and recording) perfected First Priority Lien in the entire personal and mixed
property Collateral, except as provided to the contrary in the Security
Agreement.  Such actions shall include
the following, except as provided to the contrary in the Security Agreement:

(i)            Stock
Certificates and Instruments. 
Delivery to Administrative Agent of (a) certificates (which certificates
shall be accompanied by irrevocable undated stock powers, duly endorsed in
blank and otherwise reasonably satisfactory in form and substance to
Administrative Agent) representing all Capital Stock pledged pursuant to the
Security Agreement and any Foreign Pledge Agreement and (b) all promissory
notes or other instruments (duly endorsed, where appropriate, in a manner
reasonably satisfactory to Administrative Agent) evidencing any Collateral;

(ii)           Lien
Searches and UCC Termination Statements. 
Delivery to Administrative Agent of (a) the results of a recent search,
by a Person reasonably satisfactory to Administrative Agent, of all effective
UCC financing statements and fixture filings and all judgment and tax lien
filings which may have been made with respect to any personal or mixed property
of any Loan Party, together with copies of all such filings disclosed by such
search, and (b) UCC termination statements duly executed (if required) by all
applicable Persons for filing in all applicable jurisdictions as may be
necessary to terminate any effective UCC financing statements or fixture
filings disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding pursuant to
the terms of this Agreement);

(iii)          UCC
Financing Statements and Fixture Filings. 
Delivery to Administrative Agent of UCC financing statements and, where
appropriate, fixture filings and/or consignment filings, as the case may be,
duly executed by each applicable Loan Party (if required) with respect to all
personal and mixed property Collateral of such Loan Party, for filing in all
jurisdictions as may be necessary or, in the opinion of Administrative Agent,
desirable to perfect the security interests created in such Collateral
pursuant to the Collateral Documents;

(iv)          PTO
Cover Sheets, Etc.  Delivery to
Administrative Agent of all cover sheets or other documents or instruments
required to be filed with any IP Filing Office in

 

75

 

order to create or perfect Liens in respect of any IP Collateral,
together with releases duly executed (if necessary) of security interests by
all applicable Persons for filing in all applicable jurisdictions as may be
necessary to terminate any effective filings in any IP Filing Office in respect
of any IP Collateral (other than any such filings in respect of Liens permitted
to remain outstanding pursuant to the terms of this Agreement);

(v)           Foreign
Pledge Agreements.  Execution and
delivery to Administrative Agent of Foreign Pledge Agreements with respect to
66% of the Capital Stock owned by Company or a Domestic Subsidiary of all first
tier Foreign Subsidiaries (if any) with respect to which Administrative Agent
deems a Foreign Pledge Agreement necessary or advisable to perfect or otherwise
protect the First Priority Liens granted to Administrative Agent on behalf of
Lenders in such Capital Stock, and the taking of all such other actions under
the laws of such jurisdictions as Administrative Agent may deem necessary or
advisable to perfect or otherwise protect such First Priority Liens; and

(vi)          Opinions
of Local Counsel.  Delivery to
Administrative Agent of an opinion of counsel (which counsel shall be
reasonably satisfactory to Administrative Agent) under the laws of the
jurisdiction of organization of any Loan Party with respect to the perfection
of the security interests in favor of Administrative Agent in personal or mixed
property Collateral and such other matters governed by the laws of such
jurisdiction regarding such security interests as Administrative Agent may
reasonably request, in each case in form and substance reasonably satisfactory
to Administrative Agent.

L.            Closing Date Mortgages;
Closing Date Mortgage Policies; Etc.  Administrative
Agent shall have received from Company and each applicable Subsidiary
Guarantor:

(i)            Closing
Date Mortgages.  Fully executed and
notarized Mortgages (each a “Closing Date Mortgage”
and, collectively, the “Closing Date Mortgages”), in proper form for recording in all appropriate places in all
applicable jurisdictions, encumbering each Real Property Asset listed in Schedule 4.1L
annexed hereto (each a “Closing Date Mortgaged Property” and, collectively, the “Closing Date Mortgaged Properties”);

(ii)           Opinions
of Local Counsel.  An opinion of
counsel (which counsel shall be reasonably satisfactory to Administrative
Agent) in each state in which a Closing Date Mortgaged Property is located with
respect to the enforceability of the form(s) of Closing Date Mortgages to be
recorded in such state and such other matters as Administrative Agent may
reasonably request, in each case in form and substance reasonably satisfactory
to Administrative Agent;

(iii)          Title
Insurance.  (a) ALTA mortgagee title
insurance policies or unconditional commitments therefor (the “Closing Date Mortgage
Policies”) issued by
the Title Company with respect to the Closing Date Mortgaged Properties listed
in Part A of Schedule 4.1L annexed hereto, in amounts not less than the
respective amounts designated therein with respect to any particular Closing
Date Mortgaged Properties,

 

76

 

insuring fee simple title to each such Closing Date Mortgaged Property
vested in such Loan Party and assuring Administrative Agent that the applicable
Closing Date Mortgages create valid and enforceable First Priority mortgage
Liens on the respective Closing Date Mortgaged Properties encumbered thereby,
subject only to a standard survey exception, which Closing Date Mortgage
Policies (1) shall include an endorsement for mechanics’ liens, for future
advances under this Agreement and for any other matters reasonably requested by
Administrative Agent and (2) shall provide for affirmative insurance and such
reinsurance as Administrative Agent may reasonably request, all of the
foregoing in form and substance reasonably satisfactory to Administrative
Agent; and (b) evidence satisfactory to Administrative Agent that such Loan
Party has (i) delivered to the Title Company all certificates and affidavits
required by the Title Company in connection with the issuance of the Closing
Date Mortgage Policies and (ii) paid to the Title Company or to the appropriate
Governmental Authorities all expenses and premiums of the Title Company in
connection with the issuance of the Closing Date Mortgage Policies and all
recording and stamp taxes (including mortgage recording and intangible taxes)
payable in connection with recording the Closing Date Mortgages in the
appropriate real estate records;

(iv)          Title
Reports.  With respect to each
Closing Date Mortgaged Property listed in Part B of Schedule 4.1L
annexed hereto, a title report issued by the Title Company with respect
thereto, dated not more than 30 days prior to the Closing Date and satisfactory
in form and substance to Administrative Agent;

(v)           Copies
of Documents Relating to Title Exceptions. 
Copies of all recorded documents listed as exceptions to title or otherwise
referred to in the Closing Date Mortgage Policies or in the title reports
delivered pursuant to subsection 4.1L(iv);

(vi)          Matters
Relating to Flood Hazard Properties. 
(a) Evidence, which may be in the form of a letter from an insurance
broker or a municipal engineer, as to whether (1) any Closing Date
Mortgaged Property is a Flood Hazard Property and (2) the community in
which any such Flood Hazard Property is located is participating in the
National Flood Insurance Program, (b) if there are any such Flood Hazard
Properties, such Loan Party’s written acknowledgement of receipt of written
notification from Administrative Agent (1) as to the existence of each
such Flood Hazard Property and (2) as to whether the community in which
each such Flood Hazard Property is located is participating in the National
Flood Insurance Program, and (c) in the event any such Flood Hazard Property is
located in a community that participates in the National Flood Insurance
Program, evidence that Company has obtained flood insurance in respect of such
Flood Hazard Property to the extent required under the applicable regulations
of the Board of Governors of the Federal Reserve System;

(vii)         Environmental
Indemnity.  If requested by
Administrative Agent, an environmental indemnity agreement, satisfactory in
form and substance to Administrative Agent and its counsel, with respect to the
indemnification of Administrative Agent and Lenders for any liabilities that
may be imposed on or incurred by any of them as a result of any Hazardous
Materials Activity; and

 

77

 

M.           Matters
Relating to Existing Indebtedness of Company and its Subsidiaries.

(i)            Termination
of Existing Credit Agreement and Related Liens.  On the Closing Date, Company and its
Subsidiaries shall have (a) repaid in full all Indebtedness outstanding under
the Existing Credit Agreement (the aggregate principal amount of which
Indebtedness shall not exceed $65,550,000), (b) terminated any commitments to
lend or make other extensions of credit thereunder, (c) delivered to
Administrative Agent all documents or instruments necessary to release all
Liens securing Indebtedness or other obligations of Company and its
Subsidiaries thereunder, and (d) made arrangements satisfactory to Administrative
Agent with respect to the cancellation of any letters of credit outstanding
thereunder or the issuance of Letters of Credit to support the obligations of
Company and its Subsidiaries with respect thereto.

(ii)           Repayment
of Company Subordinated Notes.  On
the Closing Date, Company shall have repaid in full the Company Subordinated
Notes referenced in the Existing Credit Agreement.

(iii)          Existing
Indebtedness to Remain Outstanding. 
The Existing Indebtedness described in Schedule 7.1 annexed hereto shall
remain outstanding.

N.            Agreements
in Full Force and Effect; Consummation of the Recapitalization.

(i)            Agreements
in Full Force and Effect. 
Administrative Agent shall have received a fully executed or conformed
copy of each Related Agreement, Second Lien Term Loan Documents and Holdings
Note Document (each in form and substance reasonably satisfactory to
Administrative Agent) certified as of the Closing Date by the secretary or
similar officer of the Company as being in full force and effect without
modification, waiver or amendment.

(ii)           Consummation
of the Recapitalization.

(a)           (1)
Company shall have received, on the Closing Date, gross proceeds from the
Second Lien Term Loans of at least $54,500,000, (2) Holdings shall have
received, on the Closing Date, gross proceeds from the Holdings Notes of at
least $15,000,000, and (3)  the
Recapitalization Payment shall not exceed $125,000,000.

(b)           There
shall not be an Event of Default or Potential Event of Default after giving
effect to the Recapitalization.

(iii)          Officer’s
Certificate.  On the Closing Date,
Company shall have delivered to Administrative Agent an Officer’s Certificate
of Company certifying that the conditions set forth in subsection 4.1N(ii) have
been met.

 

 

78

O.            No
Material Adverse Change. Since December 31, 2003, nothing shall have occurred (and the Lenders
shall have become aware of no facts or conditions not previously known) which
Administrative Agent determines could reasonably be expected to have a Material
Adverse Effect.

P.            Litigation. 
No litigation by any entity (private or governmental) shall be pending
or, to the knowledge of Holdings, Company or their respective Subsidiaries,
threatened with respect to this Agreement, any other Loan Document, any Related
Agreement or any other documentation executed in connection herewith or with
respect to the transactions contemplated hereby, or which the Administrative
Agent shall determine could reasonably be expected to have a Material Adverse
Effect.

Q.            Borrowing
Base Certificate.  On or before the Closing Date, Company shall
have delivered to Administrative Agent and Lenders a Borrowing Base Certificate
relating to the Borrowing Base, prepared as of a recent date prior to the
Closing Date.  After giving effect to the
Loans funded and the Letters of Credit issued on the Closing Date, the
Borrowing Base on the Closing Date shall exceed the Total Utilization of
Revolving Loan Commitments.

R.            Certificate
Regarding Financial Covenant.  On the
Closing Date, Company shall have delivered to Administrative Agent an Officer’s
Certificate executed by the chief financial officer of the Company certifying
that the Consolidated EBITDA for the twelve-month period ending January 2,
2005, calculated on a pro-forma basis
as if the Recapitalization and the other transactions consummated on the
Closing Date had occurred at the beginning of such period is not less than
$46,000,000 together with calculations demonstrating the foregoing in form and
substance reasonably satisfactory to Administrative Agent.

S.            Completion of
Proceedings.  All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Administrative
Agent, acting on behalf of Lenders, and its counsel shall be reasonably
satisfactory in form and substance to Administrative Agent and such counsel,
and Administrative Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.

4.2                               Conditions to All Loans.

The obligation of each
Lender to make Loans on each Funding Date are subject to the following further
conditions precedent:

A.            Administrative Agent shall have received
before that Funding Date, in accordance with the provisions of subsection 2.1B,
a duly executed Notice of Borrowing, in each case signed by a duly authorized
Officer of Company.

B.            As of that Funding Date:

 

79

 

(i)            The
representations and warranties contained herein and in the other Loan Documents
shall be true, correct and complete in all material respects on and as of that
Funding Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case such representations and warranties shall have been
true, correct and complete in all material respects on and as of such earlier
date; provided, that, if a representation and warranty, covenant or
condition is qualified as to materiality, with respect to such representation
and warranty, covenant or condition the applicable materiality qualifier set
forth above shall be disregarded for purposes of this condition;

(ii)           No
event shall have occurred and be continuing or would result from the
consummation of the borrowing contemplated by such Notice of Borrowing that
would constitute an Event of Default or a Potential Event of Default;

(iii)          Each
Loan Party shall have performed in all material respects all agreements and
satisfied all conditions which this Agreement provides shall be performed or
satisfied by it on or before that Funding Date;

(iv)          No
order, judgment or decree of any arbitrator or Government Authority shall
purport to enjoin or restrain such Lender from making the Loans to be made by
it on that Funding Date; and

(v)           After
giving effect to the Loans requested on such Funding Date, the Total
Utilization of Revolving Loan Commitments shall not exceed (1) the Revolving
Loans then in effect or (2) the Borrowing Base then in effect.

4.3                               Conditions to Letters of
Credit.

The issuance of any
Letter of Credit hereunder (whether or not the applicable Issuing Lender is
obligated to issue such Letter of Credit) is subject to the following
conditions precedent:

A.            On or before the date of issuance of the
initial Letter of Credit pursuant to this Agreement, the initial Loans shall
have been made.

B.            On or before the date of issuance of such
Letter of Credit, Administrative Agent shall have received, in accordance with
the provisions of subsection 3.1B(i), an originally executed Request for
Issuance (or a facsimile copy thereof) in each case signed by a duly authorized
Officer of Company, together with all other information specified in subsection
3.1B(i) and such other documents or information as the applicable Issuing
Lender may reasonably require in connection with the issuance of such Letter of
Credit.

C.            On the date of issuance of such Letter of
Credit, all conditions precedent described in subsection 4.2B shall be
satisfied to the same extent as if the issuance of such Letter of Credit were
the making of a Loan and the date of issuance of such Letter of Credit were a
Funding Date.

 

80

 

Section
5.              COMPANY’S REPRESENTATIONS
AND WARRANTIES

In order to induce
Lenders to enter into this Agreement and to make the Loans, to induce Issuing
Lenders to issue Letters of Credit and to induce Revolving Lenders to purchase
participations therein, Company and Holdings represents and warrants to each
Lender:

5.1                               Organization, Powers,
Qualification, Good Standing, Business and Subsidiaries.

A.            Organization and Powers. 
Each of Holdings and its Subsidiaries is a corporation, partnership or
limited liability company duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization as specified in Schedule
5.1 annexed hereto.  Each of Holdings
and its Subsidiaries has all requisite power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and the Second Lien Term Loan
Agreement to which it is a party and to carry out the transactions contemplated
thereby.

B.            Qualification and Good
Standing.  Each of Holdings and its Subsidiaries is qualified
to do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified or in good standing has
not had and could not reasonably be expected to result in a Material Adverse
Effect.

C.            Conduct of Business. 
Holdings and its Subsidiaries are engaged only in the businesses
permitted to be engaged in pursuant to subsection 7.11.

D.            Subsidiaries. 
All of the Subsidiaries of Holdings and their jurisdictions of
organization are identified in Schedule 5.1 annexed hereto, as said
Schedule 5.1 may be supplemented from time to time pursuant to the
provisions of subsection 6.1(xv).  The
Capital Stock of each of the Subsidiaries of Holdings identified in Schedule 5.1
annexed hereto (as so supplemented) is duly authorized, validly issued, fully
paid and nonassessable and none of such Capital Stock constitutes Margin
Stock.  Each of the Subsidiaries of
Holdings identified in Schedule 5.1 annexed hereto (as so
supplemented) is a corporation, partnership or limited liability company duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization set forth therein, has all requisite
power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted, and is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in
each case except where failure to be so qualified or in good standing or a lack
of such power and authority has not had and could not reasonably be expected to
result in a Material Adverse Effect.  Schedule 5.1
annexed hereto (as so supplemented) correctly sets forth the ownership interest
of Holdings and each of its Subsidiaries in each of the Subsidiaries of
Holdings identified therein.

 

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5.2                               Authorization of
Borrowing, etc.

A.            Authorization of Borrowing. 
The execution, delivery and performance of the Loan Documents and the
Second Lien Term Loan Agreement have been duly authorized by all necessary
action on the part of each Loan Party that is a party thereto.

B.            No Conflict. 
The execution, delivery and performance by Loan Parties of the Loan
Documents and the Second Lien Term Loan Documents to which they are parties and
the consummation of the transactions contemplated by the Loan Documents and the
Second Lien Term Loan Documents do not and will not (i) violate any
provision of any law or any governmental rule or regulation applicable to
Holdings or any of its Subsidiaries, the Organizational Documents of Holdings
or any of its Subsidiaries or any order, judgment or decree of any court or other
Government Authority binding on Holdings or any of its Subsidiaries,
(ii) conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any Contractual Obligation of
Holdings or any of its Subsidiaries, (iii) result in or require the
creation or imposition of any Lien upon any of the properties or assets of
Holdings or any of its Subsidiaries (other than any Liens created under any of
the Loan Documents in favor of the Administrative Agent on behalf of Lenders and
the Second Lien Term Loan Documents in favor of the administrative agent under
the Second Lien Term Loan Agreement on behalf of the lenders party thereto), or
(iv) require any approval of stockholders or any approval or consent of
any Person under any Contractual Obligation of Holdings or any of its
Subsidiaries, except for such approvals or consents which will be obtained on
or before the Closing Date and disclosed in writing to Lenders and except, in
each case, to the extent such violation, conflict, Lien or failure to obtain
such approval or consent could not reasonably be expected to result in a
Material Adverse Effect.

C.            Governmental Consents. 
The execution, delivery and performance by Loan Parties of the Loan
Documents and the Second Lien Term Loan Documents to which they are parties and
the consummation of the transactions contemplated by the Loan Documents and the
Second Lien Term Loan Documents do not and will not require any Governmental
Authorization, except as have been obtained.

D.            Binding Obligation. 
Each of the Loan Documents and the Second Lien Term Loan Document has
been duly executed and delivered by each Person that is a party thereto and is
the legally valid and binding obligation of such Person, enforceable against
such Loan Party in accordance with its respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability.

E.             Valid
Issuance of Holdings Common Stock.  The Holdings
Common Stock to be sold on or before the Closing Date, when issued and
delivered, will be duly and validly issued, fully paid and nonassessable.  The issuance and sale of such Holdings Common
Stock upon such issuance and sale, will either (a) have been registered or
qualified under applicable federal and state securities laws or (b) be exempt
therefrom.

 

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F.             Valid
Execution of Second Lien Term Loan Documents.  Each of
Holdings, Company and each Subsidiary party to any Second Lien Term Loan
Document has the corporate power and authority to enter in the Second Lien Term
Loan Documents to which it is a party.

5.3                               Financial Condition.

Company has heretofore
delivered to Lenders, at Lenders’ request, the financial statements and
information described in subsection 4.1E. 
All such statements other than pro
forma financial statements were prepared in conformity with GAAP and
fairly present, in all material respects, the financial position (on a
consolidated basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows
(on a consolidated basis) of the entities described therein for each of the
periods then ended, subject, (a) in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments and
(b) in the case of interim financials, the absence of footnotes.  None of Holdings, Company or any of its Subsidiaries
have (and none of Holdings, Company or any of its Subsidiaries will have
following the funding of the initial Loans) any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that, as of the periods reported for such financial
statements, is not reflected in the foregoing financial statements or the notes
thereto, if any, and that, in any such case, is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company and any of its Subsidiaries taken as a whole.

5.4                               No Material Adverse
Change; No Restricted Junior Payments.

Since December 31,
2003, no event or change has occurred that has resulted in or evidences, either
in any case or in the aggregate, a Material Adverse Effect.  Neither Company nor any of its Subsidiaries
has directly or indirectly declared, ordered, paid or made, or set apart any
sum or property for, any Restricted Junior Payment or agreed to do so except as
permitted by subsection 7.5.

5.5                               Title to Properties;
Liens; Real Property; Intellectual Property.

A.            Title to Properties;
Liens.  Company and its Subsidiaries have (i) good,
sufficient and legal title to (in the case of fee interests in real property),
(ii) valid leasehold interests in (in the case of leasehold interests in real
or personal property), or (iii) good title to (in the case of all other
personal property), all of their respective properties and assets reflected in
the financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, in each case except
for assets disposed of since the date of such financial statements in the
ordinary course of business or as otherwise permitted under subsection 7.7.  Except as permitted by this Agreement, all
such properties and assets are free and clear of Liens.

B.            Real Property. 
As of the Closing Date, Schedule 5.5B annexed hereto contains a
true, accurate and complete list of (i) all fee interests in any Real Property
Assets and (ii) all leases, subleases or assignments of leases (together with
all amendments, modifications, 

 

83

 

supplements,
renewals or extensions of any thereof) affecting each Real Property Asset,
regardless of whether a Loan Party is the landlord or tenant (whether directly
or as an assignee or successor in interest) under such lease, sublease or
assignment.  As of the Closing Date,
except as specified in Schedule 5.5B annexed hereto, each agreement
listed in clause (ii) of the immediately preceding sentence is in full force
and effect and Company does not have knowledge of any default that has occurred
and is continuing thereunder, and each such agreement constitutes the legally
valid and binding obligation of each applicable Loan Party, enforceable against
such Loan Party in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles.

C.            Intellectual Property. 
As of the Closing Date, Company and its Subsidiaries own or have the
right to use, all Intellectual Property used in the conduct of their business,
except where the failure to own or have such right to use in the aggregate
could not reasonably be expected to result in a Material Adverse Effect.  No claim has been asserted and is pending by
any Person challenging or questioning the use of any such Intellectual Property
or the validity or effectiveness of any such Intellectual Property, nor does Company
know of any valid basis for any such claim, except for such claims that in the
aggregate could not reasonably be expected to result in a Material Adverse
Effect.  To the Company’s knowledge, the
use of such Intellectual Property by Company and its Subsidiaries does not
infringe on the rights of any Person, except for such claims and infringements
that, in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect.  All federal and
state and all foreign registrations of and applications for Intellectual
Property, and all unregistered Intellectual Property, that are owned or
licensed by Company or any of its Subsidiaries on the Closing Date are
described on Schedule 5.5C annexed hereto.

5.6                               Litigation; Adverse
Facts.

There are no Proceedings
(whether or not purportedly on behalf of Holdings, Company or any of its
Subsidiaries) at law or in equity, or before or by any court or other
Government Authority (including any Environmental Claims) that are pending or,
to the knowledge of Company, threatened against or affecting any Loan Party or
any property of any Loan Party and that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.  Neither Holdings nor Company nor any of its
Subsidiaries (i) is in violation of any applicable laws (including
Environmental Laws) that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, or (ii) is subject to or
in default with respect to any final judgments, writs, injunctions, decrees,
rules or regulations of any court or other Government Authority that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.

5.7                               Payment of Taxes.

Except to the extent permitted
by subsection 6.3, all material tax returns and reports of Holdings and its
Subsidiaries required to be filed by any of them have been timely filed, and
all taxes shown on such tax returns to be due and payable and all assessments,
fees and other governmental charges upon Holdings and its Subsidiaries and upon
their respective 

 

84

properties,
assets, income, businesses and franchises that are due and payable have been
paid when due and payable (subject to valid extensions).  Company knows of no proposed tax assessment
against Holdings or any of its Subsidiaries that is not being actively
contested by Holdings or such Subsidiary in good faith and by appropriate
proceedings; provided that such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have
been made or provided therefor and in the case of a Lien with respect to any
portion of the Collateral, such contest proceedings operate to stay the sale of
any portion of the Collateral on account of such Lien.

5.8                               Performance of
Agreements; Material Contracts.

A.            Neither Holdings nor Company nor any of
its Subsidiaries is in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any of its Contractual
Obligations, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, could
not reasonably be expected to result in a Material Adverse Effect.

B.            Neither Holdings nor Company nor any of
its Subsidiaries is a party to or is otherwise subject to any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.

5.9                               Governmental Regulation.

Neither
Holdings nor Company nor any of its Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any
other federal or state statute or regulation which may limit its ability to
incur Indebtedness or which may otherwise render all or any portion of the
Obligations unenforceable.

5.10                        Securities Activities.

A.            Neither Holdings nor Company nor any of
its Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
any Margin Stock.

B.            Following application of the proceeds of
each Loan, not more than 25% of the value of the assets (either of Company only
or of Company and its Subsidiaries on a consolidated basis) subject to the
provisions of subsection 7.2 or 7.7 or subject to any restriction contained in
any agreement or instrument, between Company and any Lender or any Affiliate of
any Lender, relating to Indebtedness and within the scope of subsection 8.2,
will be Margin Stock.

 

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5.11                        Employee Benefit Plans.

A.            Company, each of its Subsidiaries and,
solely for purposes of Section 4980B of the Internal Revenue Code and Title IV
of ERISA, each of their respective ERISA Affiliates are in compliance with all
applicable provisions and requirements of ERISA or applicable Law and the
regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed all their obligations under each
Employee Benefit Plan, except as would not reasonably be expected to cause a
Material Adverse Effect.  Each Employee
Benefit Plan that is intended to qualify under Section 401(a) of the Internal
Revenue Code has received a favorable determination letter from the Internal
Revenue Service indicating that such Employee Benefit Plan is so qualified and
nothing has occurred subsequent to the issuance of such determination letter
which would reasonably be expected to cause such Employee Benefit Plan to lose
its qualified status.

B.            No ERISA Event has occurred or is
reasonably expected to occur which would result in a liability in excess of
$1,000,000 or is reasonably likely to result in a
Lien.

C.            Except to the extent required under
Section 4980B of the Internal Revenue Code or otherwise required by law, no
Employee Benefit Plan provides health or welfare benefits (through the purchase
of insurance or otherwise) for any retired or former employee of Company, any
of its Subsidiaries or any of their respective ERISA Affiliates the liability
for which would cause a Material Adverse Effect.

D.            As of the most recent valuation date for
any Pension Plan, the amount of unfunded benefit liabilities (as defined in
Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension
Plans (determined based on assumptions used for purposes of GAAP) excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed an amount which, if payable, could
reasonably be expected to result in a Material Adverse Effect.

5.12                        Certain Fees.

No broker’s or finder’s
fee or commission will be payable with respect to this Agreement or any of the
transactions contemplated hereby, and Company hereby indemnifies Lenders
against, and agrees that it will hold Lenders harmless from, any claim, demand
or liability for any such broker’s or finder’s fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.

5.13                        Environmental Protection.

Except for such exceptions
as individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect:

(i)            neither
Company nor any of its Subsidiaries nor any of their respective Facilities or
operations are subject to any outstanding written order, consent decree or 

 

86

 

settlement agreement with any Person relating to (a) any
Environmental Law, (b) any Environmental Claim, or (c) any Hazardous
Materials Activity;

(ii)           neither
Company nor any of its Subsidiaries has received any letter or request for
information under Section 104 of the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. § 9604) or any comparable state
law;

(iii)          there
are and, to Company’s knowledge, have been no conditions, occurrences, or
Hazardous Materials Activities that could reasonably be expected to form the
basis of an Environmental Claim against Company or any of its Subsidiaries; and

(iv)          Company
and its Subsidiaries have been and are in compliance with all current or
reasonably foreseeable future requirements pursuant to or under Environmental
Laws, except where any non-compliance would not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse Effect.

5.14                        Employee Matters.

There is no strike or
work stoppage in existence or threatened involving Company or any of its
Subsidiaries that could reasonably be expected to result in a Material Adverse
Effect.

5.15                        Solvency.

Holdings and its
Subsidiaries on a consolidated basis, and Company and its Subsidiaries on a
consolidated basis are and, upon the incurrence of any Obligations on any date
on which this representation is made, will be, Solvent.

5.16                        Matters Relating to
Collateral.

A.            Creation, Perfection and
Priority of Liens.  The execution and delivery of the Collateral
Documents by Loan Parties, together with (i) the actions taken to date pursuant
to subsections 4.1K, 4.1L, 6.8 and 6.9 and (ii) the delivery to Administrative
Agent of any Pledged Collateral not delivered to Administrative Agent at the
time of execution and delivery of the applicable Collateral Document (all of
which Pledged Collateral has been so delivered) are effective to create in
favor of Administrative Agent, for the benefit of Lenders, as security for the
Obligations, a valid First Priority Lien on all of the Collateral (except as
provided to the contrary in the Security Agreement), and all filings and other
actions necessary or desirable to perfect and maintain the perfection and
priority status of such Liens have been duly made or taken and remain in full
force and effect, other than the filing of any UCC financing statements
delivered to Administrative Agent for filing (but not yet filed) and the
periodic filing of UCC continuation statements in respect of UCC financing
statements filed by or on behalf of Administrative Agent.

B.            Governmental
Authorizations.  No authorization, approval or other action
by, and no notice to or filing with, any Government Authority is required for
either (i) the 

 

87

 

pledge or grant by
any Loan Party of the Liens purported to be created in favor of Administrative
Agent pursuant to any of the Collateral Documents or (ii) the exercise by
Administrative Agent of any rights or remedies in respect of any Collateral
(whether specifically granted or created pursuant to any of the Collateral
Documents or created or provided for by applicable law), except for filings or
recordings contemplated by subsection 5.16A and except as may be required, in
connection with the disposition of any Pledged Collateral, by laws generally
affecting the offering and sale of securities.

C.            Absence of Third-Party
Filings.  Except for filings perfecting Liens permitted
under subsection 7.2A and Liens securing the Second Lien Term Loans and filings
naming Administrative Agent as secured party, in accordance with this Agreement
and the other Loan Documents, (i) no effective UCC financing statement, fixture
filing or other instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office and (ii) no effective
filing covering all or any part of the IP Collateral is on file in any IP
Filing Office.

D.            Margin Regulations. 
The pledge of the Pledged Collateral pursuant to the Collateral
Documents does not violate Regulation T, U or X of the Board of Governors of
the Federal Reserve System.

E.             Collateral Locations.  As of the Closing Date, Schedule 5.16E
annexed hereto contains a true, accurate and complete list of all of the
Collateral Locations and correctly identifies (i) all of the Collateral Locations
owned by each Loan Party or any other Person, as the case may be, and (ii) all
material leases, subleases or assignments of leases to which any Loan Party or
such other Person, as the case may be is a party (together with all amendments,
modifications, supplements, renewals or extensions of any thereof, the “Lease Documents”) affecting such Collateral
Locations of each Loan Party or such other Person, as the case may be,
regardless of whether such Loan Party or other Person is the landlord or tenant
(whether directly or as an assignee or successor in interest) under such Lease
Document.  All of the Eligible Inventory
is, as of the Closing Date, located at the Collateral Locations, except for
Eligible Inventory which, in the ordinary course of business, is in transit
either (i) from a supplier to a Loan Party, (ii) between Collateral Locations,
or (iii) to customers of a Loan Party.

5.17                        Disclosure.

No representation or
warranty of any Loan Party contained in the Confidential Information
Memorandum, in any Loan Document or in any other document, certificate or
written statement furnished to Lenders by or on behalf of any Loan Party or any
of its Subsidiaries for use in connection with the transactions contemplated by
this Agreement contains any untrue statement of a material fact or omits to
state a material fact (known to Company, in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made.  Any projections and pro forma financial information contained
in such materials are based upon good faith estimates and assumptions believed
by Company to be reasonable at the time made, it being recognized by Lenders
that such projections as to future events are not to be viewed as facts and
that actual results during the period or periods covered by any such 

 

88

projections may
differ from the projected results.  There
are no facts known (or which should upon the reasonable exercise of diligence
be known) to Company (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such
other documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.

5.18                        First Lien Claims.

The Obligations
constitute “First Lien Claims” under the Intercreditor Agreement.

Section
6.              AFFIRMATIVE COVENANTS

Each of Holdings and
Company covenants and agrees that, so long as any of the Commitments hereunder
shall remain in effect and until payment in full of all of the Loans and other
Obligations (other than Unasserted Obligations) and the cancellation, expiration
or cash collateralization of all Letters of Credit, unless Requisite Lenders
shall otherwise give prior written consent, each of Holdings and Company shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 6.

6.1                               Financial Statements and
Other Reports.

Holdings will maintain,
and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP.  Company will deliver to Administrative Agent
(and Lenders through Administrative Agent):

(i)            Events
of Default, etc.:  promptly upon any
officer of Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or becoming
aware that any Lender has given any notice (other than to Administrative Agent)
or taken any other action with respect to a claimed Event of Default or
Potential Event of Default, (b) that any Person has given any notice to
Company or any of its Subsidiaries or taken any other action with respect to a
claimed default or event or condition of the type referred to in subsection
8.2, (c) of any condition or event that would be required to be disclosed in a
current report filed by Company with the Securities and Exchange Commission on
Form 8-K if Company were required to file such reports under the Exchange Act,
or (d) of the occurrence of any event or change that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect, an Officer’s
Certificate specifying the nature and period of existence of such condition,
event or change, or specifying the notice given or action taken by any such
Person and the nature of such claimed Event of Default, Potential Event of
Default, default, event or condition, and what action Company has taken, is
taking and proposes to take with respect thereto;

(ii)           Monthly
and Quarterly Financials:  as soon as
available and in any event within 30 days after the end of each month and
within 60 days after the end of each Fiscal 

 

89

 

Quarter, (a) the consolidated balance sheet of Holdings and its
Subsidiaries as at the end of such fiscal period and the related consolidated
statements of income, stockholders’ equity and cash flows of Holdings and its
Subsidiaries for such fiscal period and for the period from the beginning of
the then current Fiscal Year to the end of such fiscal period, setting forth in
each case in comparative form the corresponding figures for the corresponding
periods of the previous Fiscal Year and the corresponding figures from the
Financial Plan for the current Fiscal Year, to the extent prepared for such
fiscal period, all in detail reasonably satisfactory to Administrative Agent and
certified by the chief financial officer of Company that they fairly present,
in all material respects, the financial condition of Holdings and its
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting from
audit and normal year-end adjustments, and (b) a narrative report
describing the operations of Holdings and its Subsidiaries for such fiscal
period and for the period from the beginning of the then current Fiscal Year to
the end of such fiscal quarter;

(iii)          Year-End
Financials:  as soon as available and
in any event within 120 days after the end of each Fiscal Year, (a) the
consolidated balance sheet of Holdings and its Subsidiaries as at the end of
such Fiscal Year and the related consolidated statements of income,
stockholders’ equity and cash flows of Holdings and its Subsidiaries for such
Fiscal Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year and the corresponding figures from the
Financial Plan for the Fiscal Year covered by such financial statements, all in
reasonable detail and certified by the chief financial officer of Company that
they fairly present, in all material respects, the financial condition of  Holdings and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, (b) a narrative report describing the operations of Holdings
and its Subsidiaries for such Fiscal Year in a form reasonably satisfactory to
Administrative Agent, and (c) in the case of such consolidated financial
statements, a report thereon of Ernst & Young or other independent
certified public accountants of recognized national standing selected by Company
and satisfactory to Administrative Agent, which report shall be unqualified,
shall express no doubts, assumptions or qualifications concerning the ability
of Holdings and its Subsidiaries to continue as a going concern, and shall
state that such consolidated financial statements fairly present, in all
material respects, the consolidated financial position of Holdings and its
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;

(iv)          Pricing
and Compliance Certificates: 
together with each delivery of financial statements pursuant to
subdivisions (ii) and (iii) above, (a) an Officer’s Certificate of Company
stating that the signers have reviewed the terms of this Agreement and have
made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of Holdings and its Subsidiaries
during

 

90

 

the accounting period covered by such financial statements and that
such review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the existence
as at the date of such Officer’s Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action Company has taken, is taking and proposes to
take with respect thereto; (b) a Compliance Certificate demonstrating in
reasonable detail compliance during and at the end of the applicable accounting
periods with the restrictions contained in subsection 7.6, in each case to
the extent compliance with such restrictions is required to be tested at the
end of the applicable accounting period; in addition, on or before the 45th day
following the end of each Fiscal Quarter, a Pricing Certificate demonstrating
in reasonable detail the calculation of the Consolidated Leverage Ratio as of
the end of the four-Fiscal Quarter period then ended;

(v)           Reconciliation
Statements:  if, as a result of any
change in accounting principles or any material change in accounting policies
from those used in the preparation of the audited financial statements referred
to in subsection 5.3, the consolidated financial statements of Holdings and its
Subsidiaries delivered pursuant to subdivisions (ii), (iii) or (xii) of this
subsection 6.1 will differ in any material respect from the consolidated
financial statements that would have been delivered pursuant to such
subdivisions had no such change in accounting principles or any material change
in accounting policies been made, then (a) together with the first delivery
of financial statements pursuant to subdivision (ii), (iii) or (xii) of this
subsection 6.1 following such change, consolidated financial statements of
Holdings and its Subsidiaries for (y) the current Fiscal Year to the
effective date of such change and (z) the two full Fiscal Years
immediately preceding the Fiscal Year in which such change is made, in each
case prepared on a pro forma
basis as if such change had been in effect during such periods, and
(b) together with each delivery of financial statements pursuant to
subdivision (ii), (iv) or (xii) of this subsection 6.1 following such
change, if required pursuant to subsection 1.2, a written statement of the
chief accounting officer or chief financial officer of Company setting forth
the differences (including any differences that would affect any calculations
relating to the financial covenants set forth in subsection 7.6) which would
have resulted if such financial statements had been prepared without giving
effect to such change;

(vi)          Accountants’
Certification:  together with each
delivery of consolidated financial statements pursuant to subdivision (iii)
above, a written statement by the independent certified public accountants
giving the report thereon (a) stating that their audit examination has included
a review subsection 7.6 of this Agreement, and (b) stating whether, in
connection with their audit examination, any condition or event that
constitutes an Event of Default or Potential Event of Default has come to their
attention under subsection 7.6 and, if such a condition or event has come to
their attention, specifying the nature and period of existence thereof; provided
that such accountants shall not be liable by reason of any failure to obtain
knowledge of any such Event of

 

91

 

Default or Potential Event of Default that would not be disclosed in
the course of their audit examination;

(vii)         Accountants’
Reports:  promptly upon receipt
thereof (unless restricted by applicable professional standards), copies of all
reports submitted to Holdings or Company or any of its Subsidiaries by
independent certified public accountants in connection with each annual,
interim or special audit of the financial statements of Holdings, Company and
its Subsidiaries made by such accountants, including any comment letter
submitted by such accountants to management in connection with their annual
audit;

(viii)        SEC
Filings and Press Releases:  promptly
upon their becoming available, copies of (a) all financial statements,
reports, notices and proxy statements sent or made available generally by
Holdings or Company to its security holders or by any Subsidiary of Company to
its security holders other than Holdings, Company or another Subsidiary of
Company, (b) all regular and periodic reports and all registration statements
(other than on Form S-8 or a similar form) and prospectuses, if any, filed by
Holdings or Company or any of its Subsidiaries with any securities exchange or
with the Securities and Exchange Commission or any governmental or private
regulatory authority, and (c) all press releases and other statements made
available generally by Company or any of its Subsidiaries to the public
concerning material developments in the business of Holdings or Company or any
of its Subsidiaries;

(ix)           Litigation
or Other Proceedings: 
(a) promptly upon any Officer of Company obtaining knowledge of (1)
the institution of, or non-frivolous threat of, any Proceeding against or
affecting Holdings, Company or any of its Subsidiaries or any property of
Holdings, Company or any of its Subsidiaries not previously disclosed in
writing by Company to Lenders or (2) any material development in any Proceeding
that, in any case:

                (x)            if
adversely determined, has a reasonable possibility of giving rise to a Material
Adverse Effect; or

                (y)           seeks
to enjoin or otherwise prevent the consummation of, or to recover any damages
or obtain relief as a result of, the transactions contemplated hereby;

written notice thereof
together with such other information as may be reasonably available to Company
to enable Lenders and their counsel to evaluate such matters; and
(b) within twenty days after the end of each Fiscal Quarter, a schedule of
all Proceedings involving an alleged liability of, or claims against or
affecting, Holdings, Company or any of its Subsidiaries equal to or greater
than $500,000, and promptly after request by Administrative Agent such other
information as may be reasonably requested by Administrative Agent to enable
Administrative Agent and its counsel to evaluate any of such Proceedings;

 

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(x)            ERISA
Events:  promptly upon becoming aware
of the occurrence or forthcoming occurrence of any ERISA Event, a written
notice specifying the nature thereof, what action Company, any of its
Subsidiaries or any of their then-existing ERISA Affiliates has taken, is
taking or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of Labor or
the PBGC with respect thereto;

(xi)           ERISA
Notices:  with reasonable promptness,
copies of (a) all notices received by Company, any of its Subsidiaries or any
of their then-existing ERISA Affiliates from a Multiemployer Plan sponsor
concerning an ERISA Event; and (b) copies of such other documents or
governmental reports or filings relating to any Employee Benefit Plan as
Administrative Agent shall reasonably request;

(xii)          Financial
Plans:  as soon as practicable and in
any event no later than 30 days after the beginning of each Fiscal Year, a
consolidated plan and financial forecast for such Fiscal Year and the next
succeeding Fiscal Year (the “Financial Plan”
for such Fiscal Year), including (a) a forecasted consolidated balance sheet
and forecasted consolidated statements of income and cash flows of Company and
its Subsidiaries for each such Fiscal Year prepared on a monthly basis,
together with a pro forma
Compliance Certificate for each such Fiscal Year and an explanation of the
assumptions on which such forecasts are based and (b) such other information
and projections as any Lender may reasonably request;

(xiii)         Insurance:  together with the financial statements
delivered pursuant to clause (iii) above, a certificate in form and substance
reasonably satisfactory to Administrative Agent (which shall be from an
insurance broker and consistent with past practices) outlining all material
insurance coverage maintained as of the date of such certificate by Company and
its Subsidiaries and all material insurance coverage planned to be maintained
by Company and its Subsidiaries in the immediately succeeding Fiscal Year and
confirming the status of Administrative Agent as additional insured and/or loss
payee under all such insurance to the extent required by subsection 6.4;

(xiv)        Governing
Body:  with reasonable promptness,
written notice of any change in the Governing Body of Holdings or Company;

(xv)         New
Subsidiaries:  promptly upon any
Person becoming a Subsidiary of Company, a written notice setting forth with
respect to such Person (a) the date on which such Person became a Subsidiary of
Company and (b) all of the data required to be set forth in Schedule 5.1
annexed hereto with respect to all Subsidiaries of Company (it being understood
that such written notice shall be deemed to supplement Schedule 5.1
annexed hereto for all purposes of this Agreement);

(xvi)        Material
Contracts:  promptly, and in any
event within ten Business Days after any Material Contract of Company or any of
its Subsidiaries is terminated or amended in a manner that is materially
adverse to Company or such Subsidiary, as the case may be, or any new Material
Contract is entered into, a written statement describing

 

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such event with copies of such material amendments or new contracts,
and an explanation of any actions being taken with respect thereto;

(xvii)       Notice
from Holders of Second Lien Term Loans: 
promptly, upon receipt, copies of all default, event of default or
acceleration notices from holders of Second Lien Term Loans or a trustee, agent
or other representative of such a holder;

(xviii)      Borrowing
Base Certificates:  as soon as
available and in any event within thirty (30) days after the last Business Day
of each month ending after the Closing Date, a Borrowing Base Certificate dated
as of the last Business Day of such month. 
In addition to such monthly Borrowing Base Certificates, Company may
from time to time deliver to Administrative Agent and Lenders on any Business
Day after the Closing Date a Borrowing Base Certificate dated as of such
Business Day and the most recent Borrowing Base Certificate described in this
clause (xviii) that is delivered to Administrative Agent shall be used in
calculating the Borrowing Base as of any date of determination;

(xix)         Environmental
Audits and Reports:  as soon as
practicable following receipt thereof, copies of all significant non-privileged
environmental audits and reports, whether prepared by personnel of Holdings,
Company or any of its Subsidiaries or by independent consultants, with respect
to significant environmental matters at any Facility or which relate to an
Environmental Claim in either case which could reasonably be expected to result
in a Material Adverse Effect;

(xx)          Second
Lien Term Loan Documents and Related Agreements:  promptly upon execution and delivery thereof,
copies of any material amendment, restatement, supplement or other modification
to or waiver of any Second Lien Term Loan Documents or Related Agreement
entered into after the date hereof; and

(xxi)         Other
Information:  with reasonable
promptness, such other information and data with respect to Holdings, Company
or any of its Subsidiaries as from time to time may be reasonably requested by
any Lender.

6.2                               Existence, etc.

Except as permitted under
subsection 7.7, Company will, and will cause each of its Subsidiaries to, at
all times preserve and keep in full force and effect its existence in the
jurisdiction of organization specified on Schedule 5.1 and all rights
and franchises material to its business; provided, however that
neither Company nor any of its Subsidiaries shall be required to preserve any
such right or franchise if the Governing Body of Company or such Subsidiary
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of Company or such Subsidiary, as the case may be, and
that the loss thereof is not disadvantageous in any material respect to
Company, such Subsidiary or Lenders.

 

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6.3                               Payment of Taxes and Claims; Tax

A.            Company will, and will cause each of its
Subsidiaries to, pay all material taxes, assessments and other governmental
charges imposed upon it or any of its properties or assets or in respect of any
of its income, businesses or franchises before any penalty accrues thereon, and
all claims (including claims for labor, services, materials and supplies) for
sums that have become due and payable and that by law have or may become a Lien
upon any of its properties or assets, prior to the time when any penalty or
fine shall be incurred with respect thereto; provided that no such tax,
assessment, charge or claim need be paid if it is being contested in good faith
by appropriate proceedings promptly instituted and diligently conducted, so
long as (i) such reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor and (ii) in the
case of a Tax or claim, which has or may become a Lien against any of the
Collateral, such proceedings conclusively operate to stay the sale of any
portion of the Collateral to satisfy such charge or claim.

B.            Company will not, nor will it permit any
of its Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than Company or any of its
Subsidiaries).

6.4                               Maintenance of Properties; Insurance;
Application of Net Insurance/ Condemnation Proceeds

A.            Maintenance of
Properties.  Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Company and its Subsidiaries (including all
Intellectual Property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof.

B.            Insurance. 
Company will maintain or cause to be maintained, with financially sound
and reputable insurers, such public liability insurance, third party property
damage insurance, business interruption insurance and casualty insurance with
respect to liabilities, losses or damage in respect of the assets, properties
and businesses of Company and its Subsidiaries as may customarily be carried or
maintained under similar circumstances by corporations of established
reputation engaged in similar businesses, in each case in such amounts (giving
effect to self-insurance), with such deductibles, covering such risks and
otherwise on such terms and conditions as shall be customary for corporations
similarly situated in the industry. 
Without limiting the generality of the foregoing, Company will maintain
or cause to be maintained (i) flood insurance with respect to each Flood Hazard
Property that is located in a community that participates in the National Flood
Insurance Program, in each case in compliance with any applicable regulations
of the Board of Governors of the Federal Reserve System, (ii) replacement value
casualty insurance on the Collateral under such policies of insurance, with
such insurance companies, in such amounts, with such deductibles, and covering
such risks as are at all times satisfactory to Administrative Agent in its
commercially reasonable judgment, and (iii) “key-man” life insurance with
respect to Leslie A. Blodgett on such terms and amounts as are consistent with
such “key-man” life insurance in effect as of the Closing Date. Each such
policy of insurance shall (a) name Administrative Agent for the benefit of

 

95

 

Lenders as an
additional insured thereunder as its interests may appear and (b) in the case
of each business interruption and casualty insurance policy, contain a lender
(or, as the case may be, mortgagee) loss payable clause or endorsement,
reasonably satisfactory in form and substance to Administrative Agent, that
names Administrative Agent for the benefit of Lenders as the lender (or, as the
case may be, mortgagee) loss payee thereunder for any covered loss in excess of
$250,000 and provides for at least 30 days prior written notice to
Administrative Agent of any modification or cancellation of such policy.

C.            Application of Net
Insurance/Condemnation Proceeds.

(i)            Business
Interruption Insurance.  Upon receipt
by Holdings, Company or any of its Subsidiaries of any business interruption
insurance proceeds constituting Net Insurance/Condemnation Proceeds,
(a) so long as no Event of Default under any of subsection 8.1, 8.6 or 8.7
shall have occurred and be continuing, Company or such Subsidiary may retain
and apply such Net Insurance/Condemnation Proceeds for working capital
purposes, and (b) if an Event of Default under any of subsection 8.1, 8.6 or
8.7 shall have occurred and be continuing, Company shall apply an amount equal
to such Net Insurance/Condemnation Proceeds to prepay the Loans (and/or the
Revolving Loan Commitment Amount shall be reduced) as provided in
subsections 2.4B and 2.4D;

(ii)           Net
Insurance/Condemnation Proceeds Received by Administrative Agent or Loan
Parties.  Upon receipt by (a)
Administrative Agent or (b) Holdings or any of its Subsidiaries of any Net
Insurance/Condemnation Proceeds (other than any business interruption insurance
proceeds pursuant to clause (i) above), in the case of clause (a), Company
hereby authorizes Administrative Agent to apply, and in the case of clause (b),
Company shall apply, an amount equal to such Net Insurance/Condemnation
Proceeds, to prepay the Loans and/or to reduce the Revolving Loan Commitment
Amount as provided in subsection 2.4B; provided, however, that if
(1) no Event of Default or Potential Event of Default shall have occurred and
is continuing and (2) the aggregate amount of such Net Insurance/Condemnation
Proceeds received during such Fiscal Year does not exceed $250,000, the Loans
shall not be required to be prepaid and the Commitment shall not be reduced by
such an amount; provided, further, that if (1) no Event of
Default or Potential Event of Default shall have occurred and is continuing and
(2) the aggregate amount of such Net Insurance/Condemnation Proceeds received
during such Fiscal Year exceeds $250,000, the Revolving Loans shall be prepaid
by such an amount but the Revolving Loan Commitment Amount shall not be reduced
(and any Net Insurance/Condemnation Proceeds in excess of the Revolving Loans
shall be delivered to Company), if Company delivers to Administrative Agent an
Officer’s Certificate setting forth (A) that portion of such Net
Insurance/Condemnation Proceeds (the “Proposed Insurance
Reinvestment Proceeds”) that Holdings or such Subsidiary intends to
use within 270 days of such date of receipt to pay or reimburse the costs of
repairing, restoring or replacing the assets in respect of which such Net
Insurance/Condemnation Proceeds were received and (B) the proposed use of the
Proposed Insurance Reinvestment Proceeds and such other information with
respect to such proposed use as Administrative Agent may reasonably request
(all of the foregoing, collectively, “Restoration and Repair”)
in respect of which such Proposed Insurance Reinvestment Proceeds were
received; provided, further, that at

 

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the end of such 270 day period, (i) Company shall provide to
Administrative Agent an Officer’s Certificate, together with such evidentiary
documentation as Administrative Agent may request, setting forth the amount, if
any, by which the Proposed Reinsurance Reinvestment Proceeds exceeded the total
costs of such Restoration and Repair (such excess, the “Unused
Insurance Proceeds Amount”) and (ii) the Loans shall be repaid
and/or the Revolving Loan Commitment Amount shall be permanently reduced by an
amount equal to any Unused Insurance Proceeds Amount in accordance with
subsection 2.4B(iv).

6.5                               Inspection Rights;
Lender Meeting.

A.            Inspection Rights. 
Company shall, and shall cause each of the other Loan Parties to, permit
(i) any authorized representatives designated by Administrative Agent (which
may be accompanied by representatives of any Lender at such Lender’s expense)
to visit and inspect any of the properties of any Loan Party, to inspect, copy
and take extracts from its and their financial and accounting records at
Company’s expense, and to discuss its and their affairs, finances and accounts
with its and their officers and independent public accountants (provided that
Holdings or any of its Subsidiaries may, if it so chooses, be present at or
participate in any such discussion), and (ii) any authorized representatives
designated by Administrative Agent to conduct one audit or appraisal of all
Collateral of Loan Parties during each Fiscal Year ending after the Closing
Date (exclusive of the audits and appraisals conducted by Administrative Agent
prior to the Closing Date (collectively, the “Base Audit”))
or more frequently if reasonably requested by Administrative Agent and at
Administrative Agent’s expense provided that after the occurrence and
during the continuance of an Event of Default Company shall, and shall cause
its Subsidiaries to permit such additional audits as Administrative Agent may
deem necessary or advisable, each such audit or appraisal to be substantially
similar in scope and substance to the Base Audit, and at Company’s expense, all
upon reasonable notice and at such reasonable times during normal business
hours and as often as may reasonably be requested.

B.            Lender Meeting. 
Without in any way limiting the foregoing, Company will, upon the
request of Administrative Agent or Requisite Lenders, participate in a meeting
of Administrative Agent and Lenders at least once during each Fiscal Year to be
held at Company’s principal offices (or at such other location as may be agreed
to by Company and Administrative Agent) at such time as may be agreed to by
Company and Administrative Agent.

6.6                               Compliance with Laws,
etc.

Company shall comply, and
shall cause each of its Subsidiaries and all other Persons on or occupying any
Facilities to comply, with the requirements of all applicable laws, rules,
regulations and orders of any Government Authority (including all Environmental
Laws), noncompliance with which could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect.

 

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6.7                               Environmental Matters.

A.            Environmental Disclosure. 
Company will deliver to Administrative Agent and Lenders:

(i)            Environmental
Audits and Reports.  As soon as
practicable following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether prepared
by personnel of Company or any of its Subsidiaries or by independent
consultants, governmental authorities or any other Persons, with respect to
significant environmental matters at any Facility that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect or
with respect to any Environmental Claims that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.

(ii)           Notice
of Certain Releases, Remedial Actions, Etc. 
Promptly upon the occurrence thereof, written notice describing in
reasonable detail (a) any Release required to be reported to any federal, state
or local governmental or regulatory agency under any applicable Environmental
Laws, and (b) any remedial action taken by Company or any other Person in
response to (1) any Hazardous Materials Activities the existence of which
could reasonably be expected to result in one or more Environmental Claims
having, individually or in the aggregate, a Material Adverse Effect, or
(2) any Environmental Claims that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.

(iii)          Written
Communications Regarding Environmental Claims, Releases, Etc.  As soon as practicable following the sending
or receipt thereof by Company or any of its Subsidiaries, a copy of any and all
written communications with respect to (a) any Environmental Claims that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect, (b) any Release required to be reported to any
federal, state or local governmental or regulatory agency, and (c) any
request for information from any governmental agency that suggests such agency
is investigating whether Company or any of its Subsidiaries may be potentially
responsible for any Hazardous Materials Activity.

(iv)          Notice
of Certain Proposed Actions Having Environmental Impact.  Prompt written notice describing in
reasonable detail (a) any proposed acquisition of stock, assets, or
property by Company or any of its Subsidiaries that could reasonably be
expected to (1) expose Company or any of its Subsidiaries to, or result in,
Environmental Claims that could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect or (2) affect the
ability of Company or any of its Subsidiaries to maintain in full force and
effect all material Governmental Authorizations required under any
Environmental Laws for their respective operations and (b) any proposed
action to be taken by Company or any of its Subsidiaries to commence
manufacturing or other industrial operations or to modify current operations in
a manner that could reasonably be expected to subject Company or any of its
Subsidiaries to any material additional

 

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obligations or requirements under any Environmental Laws that could
reasonably be expected to result in, individually or in the aggregate, a
Material Adverse Effect.

B.            Company’s Actions
Regarding Hazardous Materials Activities, Environmental Claims and Violations
of Environmental Laws.

(i)            Remedial
Actions Relating to Hazardous Materials Activities.  Company shall, in compliance with all
applicable Environmental Laws, promptly undertake, and shall cause each of its
Subsidiaries promptly to undertake, any and all investigations, studies,
sampling, testing, abatement, cleanup, removal, remediation or other response
actions necessary to remove, remediate, clean up or abate any Hazardous
Materials Activity on, under or about any Facility that is in violation of any
Environmental Laws or that presents a material risk of giving rise to an
Environmental Claim.

(ii)           Actions
with Respect to Environmental Claims and Violations of Environmental Laws.  Company shall promptly take, and shall cause
each of its Subsidiaries promptly to take, any and all actions necessary to (i)
cure any material violation of applicable Environmental Laws by Company or its
Subsidiaries that could reasonably be expected to result in, individually or in
the aggregate, a Material Adverse Effect and (ii) make an appropriate response
to any Environmental Claim against Company or any of its Subsidiaries and
discharge any obligations it may have to any Person thereunder where failure to
do so could reasonably be expected to result in, individually or in the
aggregate, a Material Adverse Effect.

6.8                               Execution of Subsidiary
Guaranty and Personal Property Collateral Documents After the Closing Date.

A.            Execution
of Subsidiary Guaranty and Personal Property Collateral Documents. 
In the event that any Person becomes a Domestic Subsidiary of Company
after the date hereof, Company will promptly notify Administrative Agent of
that fact and cause such Domestic Subsidiary to execute and deliver to
Administrative Agent a counterpart of the Subsidiary Guaranty and Security
Agreement and to take all such further actions and execute all such further
documents and instruments (including actions, documents and instruments
comparable to those described in subsection 4.1K) as may be necessary or, in
the opinion of Administrative Agent, desirable to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and perfected First
Priority Lien on all of the personal and mixed property assets of such Domestic
Subsidiary except as provided to the contrary in the Collateral Documents.  In addition, as provided in the Security
Agreement, Company shall, or shall cause the Subsidiary that owns the Capital
Stock of such Person, to execute and deliver to Administrative Agent a
supplement to the Security Agreement and to deliver to Administrative Agent all
certificates representing such Capital Stock of such Person (accompanied by
irrevocable undated stock powers, duly endorsed in blank).

B.            Foreign Subsidiaries. 
In the event that any Person becomes a Foreign Subsidiary of Company
after the date hereof, Company will promptly notify Administrative Agent of
that fact and, if such Subsidiary is directly owned by Company or a Domestic

 

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Subsidiary, cause
such Subsidiary to execute and deliver to Administrative Agent such documents
and instruments and take such further actions (including actions, documents and
instruments comparable to those described in subsection 4.1K) as may be
necessary, or in the reasonable opinion of Administrative Agent, desirable to
create in favor of Administrative Agent, for the benefit of the Lenders, a
valid and perfected First Priority Lien on 66% of the Capital Stock of such
first tier Foreign Subsidiary.

C.            Subsidiary
Organizational Documents, Legal Opinions, Etc.  Company shall
deliver to Administrative Agent, together with such Loan Documents,
(i) certified copies of such Subsidiary’s Organizational Documents,
together with, if such Subsidiary is a Domestic Subsidiary, a good standing
certificate from the Secretary of State of the jurisdiction of its organization
and each other state in which such Person is qualified to do business and, to
the extent generally available, a certificate or other evidence of good
standing as to payment of any applicable franchise or similar taxes from the
appropriate taxing authority of each of such jurisdictions, each to be dated a
recent date prior to their delivery to Administrative Agent, (ii) a
certificate executed by the secretary or similar officer of such Subsidiary as
to (a) the fact that the attached resolutions of the Governing Body of
such Subsidiary approving and authorizing the execution, delivery and
performance of such Loan Documents are in full force and effect and have not
been modified or amended and (b) the incumbency and signatures of the
officers of such Subsidiary executing such Loan Documents, (iii) an
executed supplement to the Security Agreement evidencing the pledge of the Capital Stock of such Subsidiary by
Company or a Subsidiary of Company that owns such Capital Stock, accompanied by
all certificates evidencing such Capital Stock, together with an irrevocable
undated stock powers duly endorsed in blank and satisfactory in form and
substance to Administrative Agent, and (iv) a favorable opinion of counsel
to such Subsidiary, in form and substance satisfactory to Administrative Agent
and its counsel, as to (a) the due organization and good standing of such
Subsidiary, (b) the due authorization, execution and delivery by such
Subsidiary of such Loan Documents, (c) the enforceability of such Loan Documents
against such Subsidiary and (d) such other matters (including matters
relating to the creation and perfection of Liens in any Collateral pursuant to
such Loan Documents) as Administrative Agent may reasonably request, all of the
foregoing to be satisfactory in form and substance to Administrative Agent and
its counsel.

6.9                               Matters Relating to
Additional Real Property Collateral.

A.            Additional Mortgages,
Etc.  From and after the Closing Date, in the event
that (i) Company or any Subsidiary Guarantor acquires any fee interest in
real property or (ii) at the time any Person becomes a Subsidiary Guarantor,
such Person owns or holds any fee interest in real property, (a) in each case,
reasonably determined by Administrative Agent to be of material value as
Collateral or of a material importance to the operations of Company and its
Subsidiaries, and (b) in the case of clause (ii), excluding any such Real
Property Asset the encumbrancing of which requires the consent of any
then-existing senior lienholder, where Company and its Subsidiaries have
attempted in good faith, but are unable, to obtain such or senior lienholder’s
consent (any such non-excluded Real Property Asset described in the foregoing
clause (i) or (ii) being an “Additional
Mortgaged Property”), Company or such Subsidiary Guarantor shall
deliver to Administrative Agent, as soon as practicable after such Person
acquires such Additional Mortgaged Property or becomes a Subsidiary Guarantor,
as the

 

100

 

case may be, a
fully executed and notarized Mortgage (an “Additional
Mortgage”), in proper form for recording in all appropriate places in all applicable jurisdictions,
encumbering the interest of such Loan Party in such Additional Mortgaged
Property; and such opinions, appraisal, documents, title insurance, environmental
reports that would have been delivered on the Closing Date if such Additional
Mortgaged Property were a Closing Date Mortgaged Property or that may be
reasonably required by Administrative Agent.

B.            Real Estate Appraisals. 
Company shall, and shall cause each of its Subsidiaries to, permit an
independent real estate appraiser satisfactory to Administrative Agent, upon
reasonable notice, to visit and inspect any Additional Mortgaged Property for
the purpose of preparing an appraisal of such Additional Mortgaged Property
satisfying the requirements of any applicable laws and regulations (in each
case to the extent required under such laws and regulations as determined by
Administrative Agent in its discretion).

C.            Collateral
Access Agreements.  Company shall use good faith efforts to, or
cause any of its Subsidiaries to, promptly enter into a Collateral Access
Agreement with respect to any leased warehouse if requested by Administrative
Agent.

6.10                        Interest Rate Protection.

At all times after the
date that is 180 days after the Closing Date, Company shall maintain in effect
for three years after the Closing Date one or more Interest Rate Agreements in
an aggregate notional principal amount of not less than 40% of the aggregate
principal amount of the Term Loans and the Second Lien Term Loans outstanding,
each such Interest Rate Agreement to be in form and substance satisfactory to
Administrative Agent; provided that Company shall not be obligated to maintain
in effect any such Interest Rate Agreements at any time that the Applicable
Consolidated Leverage Ratio is less than or equal to 2.00:1:00.  For purposes of clarification, while the
above described Interest Rate Agreements are required to be maintained during
the above described periods, each individual Interest Rate Agreement is not
required to be of such duration.

6.11                        Deposit Accounts,
Securities Accounts and Cash Management Systems.

Company shall, and shall
cause each of its Subsidiaries to, use and maintain its Deposit Accounts,
Securities Accounts and cash management systems in a manner reasonably
satisfactory to Administrative Agent. 
From and after the date which is 30 days after the Closing Date, Company
shall not permit any of such Deposit Accounts and Securities Accounts at any
time to have a principal balance in excess of $250,000 unless Company or such Subsidiary, as the case may be, has
(i) executed and delivered to Administrative Agent a Control Agreement,
and (ii) taken all other steps necessary or, in the opinion of
Administrative Agent, desirable to ensure that Administrative Agent has a
perfected security interest in such account, including without limitation, an
opinion of counsel reasonably requested by Administrative Agent; provided
that,  if Company or such Subsidiary is
unable to obtain a Control Agreement from the financial institution at which
the Deposit Account or Securities Account is maintained, Company shall, or
shall cause such Subsidiary to transfer all amounts in the applicable Deposit
Account to a Deposit Account maintained at a financial institution from which
Company or such Subsidiary

 

 

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has obtained a Control Agreement.  From and after the date which is 30 days
after the Closing Date, Company shall not permit the aggregate principal
balance of all Deposit Accounts and Securities Accounts of Company and of its
Subsidiaries (other than Deposit Accounts and Securities Accounts subject to a
Control Agreement) at any time to exceed $1,000,000.

 

6.12                        Collateral Assignment of
Life Insurance Policy.

Company shall no later than
45 days after the Closing Date, deliver to Administrative Agent, a “Collateral
Assignment of Life Insurance Policy” relating to Leslie A. Blodget’s “Key-Person”
life insurance.

6.13                        Financial Assistance to
Second Lien Term Loans. 

In the event that any
Loan Party or any Affiliate of any Loan Party establishes or issues a
guarantee, letter of comfort or other financial or credit support to the
holders of any Second Lien Term Loans such Loan Party shall, or shall cause
such Affiliate to, promptly establish or issue a guarantee, letter of comfort
or other financial or credit support to Administrative Agent on behalf of the
Lenders pursuant to documentation substantially identical (with appropriate
changes) to the documentation executed in favor of the holders of such Second
Lien Term Loans together with (unless waived by Requisite Lenders in their sole
discretion) an opinion of counsel to such Loan Party or such Affiliate (which
shall cover, among other things, the legality, validity, binding effect and enforceability
of such documentation).

Section
7.              NEGATIVE COVENANTS

Each of Holdings and
Company covenants and agrees that, so long as any of the Commitments hereunder
shall remain in effect and until payment in full of all of the Loans and other
Obligations (other than Unasserted Obligations) and the cancellation,
expiration or cash collateralization of all Letters of Credit, unless Requisite
Lenders shall otherwise give prior written consent, each of Holdings and
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.

7.1                               Indebtedness.

Each of Holdings and
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume or guaranty, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:

(i)            Company
may become and remain liable with respect to the Obligations;

(ii)           Company
and its Subsidiaries may become and remain liable with respect to Contingent
Obligations permitted by subsection 7.4 and, upon any matured obligations
actually arising pursuant thereto, the Indebtedness corresponding to the
Contingent Obligations so extinguished;

 

102

 

 

(iii)          Company
and its Subsidiaries may become and remain liable with respect to Indebtedness
in respect of Capital Leases or to finance the purchase price of equipment,
fixtures, inventory and other similar property of Company and its Subsidiaries
aggregating not in excess of $2,000,000 in Fiscal Year 2005, $4,000,000 in
Fiscal Year 2006, $6,000,000 in Fiscal Year 2007, $8,000,000 in Fiscal Year
2008 and $10,000,000 in Fiscal Year 2009 and thereafter;

(iv)          Company
may become and remain liable with respect to Indebtedness to any Subsidiary,
and any Subsidiary may become and remain liable with respect to Indebtedness to
Company or any other Subsidiary; provided that (a) a Lien on all
such intercompany Indebtedness shall have been granted to Administrative Agent
for the benefit of Lenders, (b) if such intercompany Indebtedness is evidenced
by a promissory note or other instrument, such promissory note or other
instrument shall have been pledged to Administrative Agent pursuant to the
Security Agreement and (c) if Company or any Subsidiary Guarantor becomes
liable with respect to Indebtedness to any Subsidiary which is not a Subsidiary
Guarantor, such Indebtedness shall be subordinated in right of payment to the
Obligations in a manner and to an extent reasonably satisfactory to
Administrative Agent;

(v)           Company
and its Subsidiaries, as applicable, may remain liable with respect to
Indebtedness described in Schedule 7.1 annexed hereto, including
any refinancings, refundings, renewals or extensions thereof (without any
increase in the principal amount thereof or any shortening of the maturity of
any principal amount thereof);

(vi)          Company
and its Subsidiaries may become liable with respect to the Second Lien Term
Loans made pursuant to the Second Lien Term Loan Agreement in an aggregate
principal amount not to exceed $54,500,000;

(vii)         Foreign
Subsidiaries may become and remain liable with respect to Indebtedness to
Company or any of its Subsidiaries;

(viii)        Foreign
Subsidiaries of Company may become and remain liable with respect to additional
Indebtedness to finance working capital and otherwise in an aggregate principal
amount not to exceed $4,000,000 at any time outstanding;

(ix)           Holdings
may remain liable with respect to any promissory note issued in exchange for
Holdings Capital Stock in transactions otherwise permitted by subsection
7.5(v); provided that such promissory notes shall be subordinated to the
Obligations on terms reasonably satisfactory to Administrative Agent; and

(x)            Holdings
may become and remain liable with respect to Indebtedness under the Holdings
Note Documents.

 

103

 

7.2                               Liens and Related Matters.

A.            Prohibition on Liens. 
Each of Holdings and Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Holdings or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the UCC or under any similar recording or notice statute, except:

(i)            Permitted
Encumbrances;

(ii)           Liens
described in Schedule 7.2 annexed hereto;

(iii)          Liens
securing Indebtedness incurred pursuant to subsection 7.1(iii); provided
that such Liens shall not in the aggregate secure Indebtedness in excess of
$10,000,000 at any time;

(iv)          Liens
securing the Second Lien Term Loans, provided the same are subordinated
pursuant to the Intercreditor Agreement, further provided, that no such Lien
shall extend to or cover any assets other than the assets subject to the First
Priority Lien granted to Administrative Agent; and

(v)           Other
Liens in an aggregate amount not to exceed $100,000 at any time outstanding.

Notwithstanding the
foregoing, Holdings and its Subsidiaries shall not enter into, or suffer to
exist, any control agreements (as such term is defined in the UCC), other than
Control Agreements entered into pursuant to subsection 6.11 or the
Security Agreement.

B.            Equitable
Lien in Favor of Lenders.  If Holdings or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the
foregoing, this covenant shall not be construed as a consent by Requisite
Lenders to the creation or assumption of any such Lien not permitted by the
provisions of subsection 7.2A.

C.            No Further Negative
Pledges.  Except as set forth in the Second Lien Term
Loan Agreement, neither Holdings nor any of its Subsidiaries shall enter into
any agreement (other than the Loan Documents) prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired, except with respect to (i) restrictions by reason of
customary provisions restricting assignment, subletting or other transfers
contained in leases, licenses and similar agreements entered into in the
ordinary 

 

104

 

course of business
(provided that such restrictions are limited to the property or assets
secured by such Liens or the property or assets subject to such leases,
licenses or similar agreements, as the case may be), (ii) purchase money
Indebtedness and Capital Leases permitted to be incurred under this subsection,
Permitted Encumbrances described in
clause (iii) of such defined term or Liens permitted under subsection 7.2A(ii) and restrictions in the agreements
relating thereto that limit the right of the Company to dispose of or transfer
the assets subject to such Liens, (iii) restrictions imposed by customary
provisions in partnership agreements, limited liability company organizational
governance documents, joint venture agreements and other similar agreements
that restrict the transfer of ownership interests in such partnership, limited
liability company, joint venture or similar Person, (iv) specific property encumbered to secure payment of particular
Indebtedness or to be sold pursuant to an executed agreement with respect to a
permitted Asset Sale and other permitted sales of assets, (v) restrictions
contained in agreements with respect to Indebtedness incurred by any Foreign
Subsidiary in accordance with this Agreement; provided that such
restrictions are limited to the property or assets of such Foreign Subsidiary,
and (vi) provisions limiting the disposition or distribution of assets or
property in joint venture agreements, sale-leaseback agreements, stock sale
agreements and other similar agreements, which limitation is applicable only to
the assets that are the subject of such agreements.

D.            No Restrictions on
Subsidiary Distributions to Company or Other Subsidiaries. 
Except as provided in the Loan Documents, the Second Lien Term Loan
Documents and the Holdings Note Documents, Holdings and Company will not, and
will not permit any of its Subsidiaries to, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of any
kind on the ability of any such Subsidiary to (i) pay dividends or make any
other distributions on any of such Subsidiary’s Capital Stock owned by Company
or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness
owed by such Subsidiary to Company or any other Subsidiary of Company, (iii)
make loans or advances to Company or any other Subsidiary of Company, or
(iv) transfer any of its property or assets to Company or any other
Subsidiary of Company, except (a) as provided in this Agreement, (b) as may be
provided in an agreement with respect to a permitted Asset Sale and other
permitted sales of assets, (c) by
reason of customary provisions restricting assignments, subletting or other
transfers contained in leases, licenses, joint venture agreements and similar
agreements entered into in the ordinary course of business (provided that such
restrictions are limited to the property or assets subject to such leases,
licenses, joint venture agreements or similar agreements, as the case may be),
(d) that are or were created by virtue of any transfer of, agreement to
transfer or option or right with respect to any property, assets or Capital
Stock not otherwise prohibited under this Agreement, (e) in any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness or Capital Stock was incurred in connection with
or in contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired; provided
that, in the case of Indebtedness, such Indebtedness was permitted by
subsection 7.1 to be incurred, (f) in any agreement for the sale or other
disposition of a Subsidiary that restricts distributions by that Subsidiary
pending the sale or other disposition, (g) restrictions on the disposal of or transfer of assets subject
to Liens relating 

 

105

 

to purchase money
Indebtedness and Capital Leases and (h) in provisions in agreements or instruments which prohibit the
payment of dividends or the making of other distributions with respect to any
class of Capital Stock of a Person other than on a pro rata basis.

7.3                               Investments; Acquisitions.

Holdings shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, make or
own any Investment in any Person, including any Joint Venture, or acquire, by purchase
or otherwise, all or substantially all the business, property or fixed assets
of, or Capital Stock or other ownership interest of any Person, or any division
or line of business of any Person except:

(i)            Company
and its Subsidiaries may make and own Investments in Cash Equivalents;

(ii)           Company
and Subsidiary Guarantors may make and own equity Investments in other
Subsidiary Guarantors and Holdings may own the Investments owned by it in
Company;

(iii)          Company
and its Subsidiaries may make intercompany loans to the extent permitted under
subsection 7.1(iv);

(iv)          Company
and its Subsidiaries may make Consolidated Capital Expenditures permitted by
subsection 7.8;

(v)           Company
and its Subsidiaries may continue to own the Investments owned by them and described
in Schedule 7.3 annexed hereto;

(vi)          Holdings,
Company or any Subsidiary may make loans to their respective employees for the
purchase of shares of the Capital Stock of Holdings; provided that the
aggregate principal amount of all such loans at any time outstanding does not
exceed $10,000,000 during the term of the Agreement; and such Person pledges
any notes evidencing such loans to Administrative Agent for the benefit of
Lenders pursuant to the Security Agreement, and that the proceeds of the sale of
such Capital Stock are promptly contributed by Holdings to Company;

(vii)         Company
and its Subsidiaries may acquire Securities in connection with the satisfaction
or enforcement of Indebtedness or claims due or owing to Company or any of its
Subsidiaries or as security for any such Indebtedness or claim;

(viii)       
Company and its Subsidiaries may receive Investments in connection with
permitted Asset Sales pursuant to subsection 7.7(iii) and other permitted sales
of assets under subsection 7.7(v); provided that all such Investments are
pledged to Administrative Agent for the benefit of Lenders pursuant to the
Security Agreement;

 

106

 

(ix)           Holdings
may repurchase shares of Holdings Capital Stock (or any options or rights to
acquire such Capital Stock) from any former or current employee of Holdings or
its Subsidiaries to the extent permitted under subsection 7.5;

(x)            Company
and its Subsidiaries may acquire assets (including Capital Stock and including
Capital Stock of Subsidiaries formed in connection with any such acquisition)
(in each case, a “Permitted Acquisition”)
and continue to own such assets after the acquisition thereof; provided
that (i) the aggregate amount of Cash consideration paid by Company and its
Subsidiaries for Permitted Acquisitions shall not exceed $5,000,000 in any one
Fiscal Year or $15,000,000 in the aggregate, and (ii) the aggregate amount of
consideration consisting of equity Securities paid by Company and its
Subsidiaries for Permitted Acquisitions shall not exceed $5,000,000; and provided
further that (i) Company shall, and shall cause its Subsidiaries to, comply
with the requirements of subsections 6.8 and 6.9 with respect to each such
acquisition that results in a Person becoming a Subsidiary, (ii) Company shall
have delivered a disclosure statement updating each of the Schedules to this
Agreement and the other Loan Documents to reflect any factual revisions or
modifications to the information set forth therein resulting from such acquisition;
provided that any such update which alters the substantive effect of any
representation or warranty, covenant or any other term or condition of this
Agreement or any other Loan Document or which discloses an event or
circumstance that, in any case, would otherwise require the consent of
Administrative Agent, Requisite Lenders or Lenders to such modification, event
or circumstance, shall not constitute a modification of this Agreement or any
other Loan Document or a permitted disclosure hereunder or thereunder, and
shall not excuse any Event of Default or Potential Event of Default which may
otherwise arise in connection therewith, without written consent required
hereunder of Administrative Agent, Requisite Lenders or Lenders, as the case
may be; (iii) after giving effect to such acquisition, Company and its
Subsidiaries (1) shall not be engaged in any business not permitted by
subsection 7.11, (2) shall be in compliance on a pro forma basis after giving
effect to such acquisition with each of the financial covenants contained in
subsection 7.6, (3) no Event of Default or Potential Event of Default shall
have occurred and be continuing or would result from such acquisition, (4) the
representations and warranties in Section 5 hereof  (as supplemented in accordance with (ii)
above) shall be true, correct and complete in all material respects on and as
of the Permitted Acquisition closing date to the same extent as though made on
and as of that date (or, to the extent such representations and warranties specifically
relate to an earlier date, such representations and warranties shall have been
true, correct and complete in all material respects on and as of such earlier
date), and (5) Company shall have delivered to Administrative Agent and the
Lenders an Officer’s Certificate to the effect set forth in the foregoing
clauses (1) through (4) and a Compliance Certificate to evidence clause (2);
and (iv) on or before the Permitted Acquisition closing date, Lenders shall
have received from Company such other documents and information (including
financial information) in respect of such Permitted Acquisition as any Lender
may (through Administrative Agent) reasonably request;

 

107

 

(xi)           Company  and its Subsidiaries may make and own
Investments deemed to arise out of guaranties which are otherwise permitted by
this Agreement;

(xii)          Company
and the Subsidiary Guarantors may make and own Investments in Foreign
Subsidiaries, provided that the amount of all such Investments made from and
after the Closing Date minus the amount of all cash dividends, distributions
and other payments received by Company or any of the Subsidiary Guarantors in
respect of such Investments after the Closing Date shall not at any time exceed
$5,000,000;

(xiii)         Foreign
Subsidiaries may make and own Investments in the Company or any of its
Subsidiaries; and

(xiv)        Company
and the Subsidiary Guarantors may make and own other Investments in addition to
the Investments otherwise permitted in this subsection 7.3; provided that the
aggregate amount of such Investments does not exceed $1,000,000.

7.4                               Contingent Obligations.

Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, create or
become or remain liable with respect to any Contingent Obligation, except:

(i)            Subsidiaries
of Company may become and remain liable with respect to Contingent Obligations
in respect of the Subsidiary Guaranty;

(ii)           Company
and its Subsidiaries may become and remain liable with respect to Contingent
Obligations in respect of Letters of Credit;

(iii)          Company
may become and remain liable with respect to Contingent Obligations under (a)
Second Lien Hedge Agreement Obligations and (b) Hedge Agreements required under
subsection 6.10;

(iv)          Company
and its Subsidiaries may become and remain liable with respect to Contingent
Obligations in respect of customary indemnification and purchase price
adjustment obligations incurred in connection with Asset Sales or other sales
of assets, in each case, permitted hereunder;

(v)           Company
and its Subsidiaries may become and remain liable with respect to Contingent
Obligations under guarantees in the ordinary course of business of the
obligations of suppliers, customers, franchisees and licensees of Company and
its Subsidiaries, in an aggregate amount not to exceed at any time $1,000,000;

(vi)          Company
and its Subsidiaries may become and remain liable with respect to Contingent
Obligations in respect of any Indebtedness of Company or any of its
Subsidiaries permitted by subsection 7.1 or any other obligations of the
Company and its Subsidiaries are not prohibited hereby;

 

108

 

(vii)         Company
and its Subsidiaries, as applicable, may remain liable with respect to Contingent
Obligations described in Schedule 7.4 annexed hereto;

(viii)        Company
and its Subsidiaries may become and remain liable with respect to other
Contingent Obligations; provided that the maximum aggregate liability,
contingent or otherwise, of Company and its Subsidiaries in respect of all such
Contingent Obligations shall at no time exceed $2,000,000; and

(ix)           Company
and its Subsidiaries may become and remain liable with respect to Contingent
Obligations under take-or pay contracts in an aggregate amount not too exceed
at any time $8,000,000.

7.5                               Restricted Junior
Payments.

Neither Company nor
Holdings shall, nor shall either permit any of its Subsidiaries to, directly or
indirectly, declare, order, pay, make or set apart any sum for any Restricted
Junior Payment; provided that (i) Company may on the Closing Date
make a dividend to Holdings in the amount of the Recapitalization Payment, and
Holdings may make a dividend in the amount of the Recapitalization Payment plus
the net proceeds of the Holdings Notes to its shareholders, (ii)  Company
may make regularly scheduled payments of interest on the Second Lien Term Loans
so long as no Event of Default described in subsection 8.1, 8.6 or 8.7 exists,
and so long as the Administrative Agent has not delivered to the Borrower
written notice of acceleration or the intent to commence any other remedy with
respect to any other then-existing Event of Default, (iii) Company may
prepay the Second Lien Term Loans with the Excess Cash Flow not required to be
prepaid under subsection 2.4B(iii)(e) provided that the Applicable
Consolidated Leverage Ratio is 3.00:1.00 or less, (iv) Company may make
Restricted Junior Payments to Holdings (a) in an aggregate amount not to exceed
$300,000 in any Fiscal Year, to the extent necessary to permit Holdings to pay
general administrative costs and expenses (other than Management Fees), and (b)
to the extent necessary to permit Holdings to discharge the consolidated tax
liabilities of Holdings and its Subsidiaries, in each case so long as Holdings
applies the amount of any such Restricted Junior Payment for such purpose, (v)
so long as no Event of Default or Potential Event of Default shall have
occurred and be continuing or shall be caused thereby, Company may make
Restricted Junior Payments to Holdings to the extent necessary to permit
Holdings to repurchase Holdings Capital Stock (or any options rights to acquire
such Capital Stock) from any former or current employee of Holdings or its
Subsidiaries so long as the aggregate amount of all such repurchases shall not
exceed $3,500,000 in any Fiscal Year and shall not exceed $7,500,000 in the
aggregate, and Holdings may repurchase such Capital Stock using the proceeds of
such Restricted Junior Payments by Company or, if such Restricted Payments are
not made by Company in sufficient amounts to effect such repurchase, Holdings
may issue promissory notes in exchange for such Capital Stock and may
subsequently redeem such promissory notes, and (vi) so long as no Event of
Default under any of subsection 8.1, 8.6 or 8.7 shall have occurred and be
continuing, Company may pay Management Fees with respect to and as provided
under the terms of the Management Agreements.

 

109

 

7.6                               Financial Covenants.

A.            Minimum Cash Interest
Coverage Ratio.  Company shall not permit the ratio of
(i) Consolidated EBITDA to (ii) Consolidated Cash Interest Expense
for any four-Fiscal Quarter period ending during any of the periods set forth
below to be less than the correlative ratio indicated:

	
  Period ending

  	
   

  	
  Minimum Cash Interest Ratio

  
	
   

  	
   

  	
   

  
	
  Second Fiscal Quarter 2005

  	
   

  	
  2.70:1.00

  
	
  Third Fiscal Quarter 2005

  	
   

  	
  2.70:1.00

  
	
  Fourth Fiscal Quarter 2005

  	
   

  	
  2.75:1.00

  
	
  First Fiscal Quarter 2006

  	
   

  	
  2.80:1.00

  
	
  Second Fiscal Quarter 2006

  	
   

  	
  2.80:1.00

  
	
  Third Fiscal Quarter 2006

  	
   

  	
  2.85:1.00

  
	
  Fourth Fiscal Quarter 2006

  	
   

  	
  2.90:1.00

  
	
  First Fiscal Quarter 2007

  	
   

  	
  2.95:1.00

  
	
  Second Fiscal Quarter 2007

  	
   

  	
  3.00:1.00

  
	
  Third Fiscal Quarter 2007

  	
   

  	
  3.00:1.00

  
	
  Fourth Fiscal Quarter 2007

  	
   

  	
  3.10:1.00

  
	
  First Fiscal Quarter 2008

  	
   

  	
  3.30:1.00

  
	
  Second Fiscal Quarter 2008

  	
   

  	
  3.30:1.00

  
	
  Third Fiscal Quarter 2008

  	
   

  	
  3.30:1.00

  
	
  Fourth Fiscal Quarter 2008

  	
   

  	
  3.30:1.00

  
	
  First Fiscal Quarter 2009

  	
   

  	
  3.40:1.00

  
	
  Second Fiscal Quarter 2009

  	
   

  	
  3.40:1.00

  
	
  Third Fiscal Quarter 2009

  	
   

  	
  3.40:1.00

  
	
  Fourth Fiscal Quarter 2009

  	
   

  	
  3.40:1.00

  
	
  First Fiscal Quarter 2010
  and each Fiscal Quarter thereafter

  	
   

  	
  3.50:1.00

  

 

B.            Minimum Fixed Charge
Coverage Ratio.  Company shall not permit the ratio of
(i) the sum of (a) Consolidated EBITDA minus (b) cash Consolidated
Capital Expenditures (other than Permitted Equity Contribution Capex) to
(ii) Consolidated Fixed Charges, for any four-Fiscal Quarter period ending
during any of the periods set forth below to be less than the correlative ratio
indicated: 

	
  Period ending

  	
   

  	
  Minimum Fixed Charge Coverage Ratio

  
	
   

  	
   

  	
   

  
	
  Second Fiscal Quarter 2005

  	
   

  	
  1.05:1.00

  
	
  Third Fiscal Quarter 2005

  	
   

  	
  1.05:1.00

  
	
  Fourth Fiscal Quarter 2005

  	
   

  	
  1.00:1.00

  
	
  First Fiscal Quarter 2006

  	
   

  	
  1.05:1.00

  
	
  Second Fiscal Quarter 2006

  	
   

  	
  1.05:1.00

  
	
  Third Fiscal Quarter 2006

  	
   

  	
  1.10:1.00

  
	
  Fourth Fiscal Quarter 2006

  	
   

  	
  1.10:1.00

  
	
  First Fiscal Quarter 2007

  	
   

  	
  1.15:1.00

  
	
  Second Fiscal Quarter 2007

  	
   

  	
  1.15:1.00

  
	
  Third Fiscal Quarter 2007

  	
   

  	
  1.15:1.00

  
	
  Fourth Fiscal Quarter 2007

  	
   

  	
  1.15:1.00

  
	
  First Fiscal Quarter 2008

  	
   

  	
  1.15:1.00

  
	
  Second Fiscal Quarter 2008

  	
   

  	
  1.15:1.00

  
	
  Third Fiscal Quarter 2008

  	
   

  	
  1.15:1.00

  
	
  Fourth Fiscal Quarter 2008

  	
   

  	
  1.15:1.00

  
	
  First Fiscal Quarter 2009
  and each Fiscal Quarter thereafter

  	
   

  	
  1.20:1.00

  

 

110

 

For purposes of calculating compliance with the Minimum Fixed Charge
Coverage Ratio covenant set forth in this subsection 7.6B for the period from
the Closing Date though the first anniversary of the Closing Date, the
component of such calculation consisting of or including (i) (1) scheduled
principal payments in respect of Consolidated Total Debt and (2) Consolidated
Cash Interest Expense, shall be calculated as of any date of determination by
multiplying such component from the Closing Date through such date of
determination by a fraction the numerator of which is 365 and the denominator
of which is the number of days elapsed since the Closing Date as of such date
of determination and (ii) “provisions for taxes based on income” shall be
deemed to be $2,461,000 for the second Fiscal Quarter of 2004, $2,444,000 for
the third Fiscal Quarter of 2004, and 
$5,028,000 for the fourth Fiscal Quarter of 2004.

C.            Maximum Leverage Ratio. 
Company shall not permit the Consolidated Leverage Ratio as of the last
day of the most recently ended Fiscal Quarter ending during any of the periods
set forth below to exceed the correlative ratio indicated:

	
  Period ending

  	
   

  	
  Maximum Leverage Ratio

  
	
   

  	
   

  	
   

  
	
  Second Fiscal Quarter 2005

  	
   

  	
  4.75:1.00

  
	
  Third Fiscal Quarter 2005

  	
   

  	
  4.75:1.00

  
	
  Fourth Fiscal Quarter 2005

  	
   

  	
  4.60:1.00

  
	
  First Fiscal Quarter 2006

  	
   

  	
  4.30:1.00

  
	
  Second Fiscal Quarter 2006

  	
   

  	
  4.25:1.00

  
	
  Third Fiscal Quarter 2006

  	
   

  	
  4.00:1.00

  
	
  Fourth Fiscal Quarter 2006

  	
   

  	
  3.90:1.00

  
	
  First Fiscal Quarter 2007

  	
   

  	
  3.50:1.00

  
	
  Second Fiscal Quarter 2007

  	
   

  	
  3.50:1.00

  
	
  Third Fiscal Quarter 2007

  	
   

  	
  3.50:1.00

  
	
  Fourth Fiscal Quarter 2007

  	
   

  	
  3.50:1.00

  
	
  First Fiscal Quarter 2008

  	
   

  	
  3.00:1.00

  
	
  Second Fiscal Quarter 2008

  	
   

  	
  3.00:1.00

  
	
  Third Fiscal Quarter 2008

  	
   

  	
  3.00:1.00

  
	
  Fourth Fiscal Quarter 2008

  	
   

  	
  3.00:1.00

  
	
  First Fiscal Quarter 2009
  and each Fiscal Quarter thereafter

  	
   

  	
  2.00:1.00

  

 

111

 

7.7                               Restriction on
Fundamental Changes; Asset Sales.

Company shall not, and
shall not permit any of its Subsidiaries to, alter the corporate, capital or
legal structure of Company or any of its Subsidiaries, or enter into any
transaction of merger or consolidation, or liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution), or convey, sell, lease or
sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any part of its business,
property or assets (including its notes or receivables and Capital Stock of a
Subsidiary, whether newly issued or outstanding), whether now owned or hereafter
acquired, except:

(i)            any
Subsidiary of Company may be merged with or into Company or any Subsidiary
Guarantor, or be liquidated, wound up or dissolved, or all or any part of its
business, property or assets may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to Company or any
Subsidiary Guarantor; provided that, in the case of such a merger,
Company or such Subsidiary Guarantor shall be the continuing or surviving
Person;

(ii)           any
Foreign Subsidiary that is not a Subsidiary Guarantor may be merged with or
into any Subsidiary or be liquidated, wound up or dissolved;

(iii)          Company
and its Subsidiaries may sell or otherwise dispose of assets in transactions
that do not constitute or are excluded from the definition of Asset Sales; provided
that the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof;

(iv)          Company
and its Subsidiaries may dispose of obsolete, worn out or surplus property in the
ordinary course of business, including the abandonment of any trademarks, trade
names or other intellectual property no longer useful in the business of the
Loan Parties;

(v)           Company
and its Subsidiaries may make Asset Sales of assets having an aggregate,
cumulative fair market value not in excess of $400,000 per
Fiscal Year; provided that (a) the consideration received for such
assets shall be in an amount at least equal to the fair market value thereof;
(b)  the consideration received shall be at
least 75% cash; and (c) the proceeds of such Asset Sales shall be applied
as required by subsection 2.4B(iii)(a) or subsection 2.4D;

(vi)          in
order to resolve disputes that occur in the ordinary course of business,
Company and its Subsidiaries may discount or otherwise compromise for less than
the face value thereof, notes or accounts receivable;

 

112

 

(vii)         Company
or a Subsidiary may sell or dispose of shares of Capital Stock of any of its
Subsidiaries in order to qualify members of the Governing Body of the
Subsidiary if required by applicable law; and

(viii)        Any
Person may be merged with or into Company or any Subsidiary if the acquisition
of the Capital Stock of such Person by Company or such Subsidiary would have
been permitted pursuant to subsection 7.3; provided that (a) in the case of Company, Company shall
be the continuing or surviving Person, (b) if
a Subsidiary is not the surviving or continuing Person, the surviving Person
becomes a Subsidiary and complies with the provisions of subsection 6.8 and (c)
no Potential Event of Default or Event of Default shall have occurred or be
continuing after giving effect thereto.

7.8                               Consolidated Capital
Expenditures.

Company shall not, and
shall not permit its Subsidiaries to, make or incur Consolidated Capital
Expenditures (other than a Permitted Equity Contribution Capex) in any Fiscal
Year indicated below, in an aggregate amount in excess of the corresponding
amount (the “Maximum Consolidated Capital Expenditures Amount”)
set forth below opposite such Fiscal Year; provided that the Maximum
Consolidated Capital Expenditures Amount for any Fiscal Year shall be increased
by an amount equal to the excess, if any, (but in no event more than
$2,250,000) of the Maximum Consolidated Capital Expenditures Amount for the
previous Fiscal Year (as adjusted in accordance with this proviso) over the
actual amount of Consolidated Capital Expenditures for such previous Fiscal
Year; provided, further that in no event shall the amount of such
increase exceed 50% of the Maximum Consolidated Capital Expenditures Amount for
such previous Fiscal Year:

 

	
  Fiscal Year

  	
   

  	
  Maximum
  Consolidated

  Capital Expenditures

  
	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  $7,500,000

  
	
  2006
  and each Fiscal Year thereafter

  	
   

  	
  $4,500,000

  

 

7.9                               Transactions with
Shareholders and Affiliates.

Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder of 5%
or more of any class of equity Securities of Company or with any Affiliate of
Company or of any such holder, on terms that are less favorable to Company or
that Subsidiary, as the case may be, than those that might be obtained at the
time from Persons who are not such a holder or Affiliate; provided that
the foregoing restriction shall not apply to (i) any transaction between
Company and any of its wholly-owned Subsidiaries or between any of its
wholly-owned Subsidiaries, (ii) reasonable and customary fees paid to
independent members of the Governing Bodies of Company and its 

 

113

 

Subsidiaries,
(iii) employment agreements in the ordinary course, (iv) performance under the
Related Agreements and the Equity Documents (to the extent the same is not
otherwise prohibited by this Agreement), (v) payments of fees to Sponsors
and their Affiliates on the Closing Date and reimbursement of expenses to
Sponsors on the Closing Date, (vi) reimbursement of reasonable
out-of-pocket expenses of Sponsors incurred in connection with the Business of
Holdings and its Subsidiaries, (vii) reimbursement of Transaction Costs,
(viii) distributions to Holdings to permit Holdings to repurchase its Capital
Stock as permitted by subsection 7.3(ix) and subsection 7.5(iv), (ix)
transactions pursuant to the Management Agreements which are not otherwise
prohibited hereunder, (x) the payment of the CEO Payment Amount, or (xi)
transactions set forth on Schedule 7.9 annexed hereto.

7.10                        Sales and Lease-Backs.

Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, become or
remain liable as lessee or as a guarantor or other surety with respect to any
lease, whether an Operating Lease or a Capital Lease, of any property (whether
real, personal or mixed), whether now owned or hereafter acquired,
(i) that Company or any of its Subsidiaries has sold or transferred or is
to sell or transfer to any other Person (other than Company or any of its
Subsidiaries that is a Subsidiary Guarantor) or (ii) that Company or any
of its Subsidiary Guarantors intends to use for substantially the same purpose
as any other property that has been or is to be sold or transferred by Company
or any of its Subsidiary Guarantors to any Person (other than Company or any of
its Subsidiaries that is a Subsidiary Guarantor) in connection with such lease;
provided that Company and its Subsidiaries may become and remain liable
as lessee, guarantor or other surety with respect to any such lease if and to
the extent that Company or any of its Subsidiaries would be permitted to enter
into, and remain liable under, such lease to the extent that the transaction
would be permitted under subsection 7.1, assuming the sale and lease back
transaction constituted Indebtedness in a principal amount equal to the gross
proceeds of the sale.

7.11                        Conduct of Business.

From and after the
Closing Date, Company shall not, and shall not permit any of its Subsidiaries
to, engage in any businesses other than (i) the personal care business
engaged in by Company and its Subsidiaries on the Closing Date and similar or
related businesses and (ii) such other lines of business as may be consented to
by Requisite Lenders.  From and after the
Closing Date, Holdings shall not (i) engage in any business other than entering
into and performing its obligations under and in accordance with the Loan
Documents, the Second Lien Term Loan Documents, the Related Agreements, the
Equity Documents and the Holdings Note Documents to which it is a party
(including, without limitation, the payment of Transaction Costs) and other
activities incidental thereto (including the issuance of notes (which are
subordinated to the Obligations on terms reasonably satisfactory to
Administrative Agent) in payment of redemption price for Holdings’ Capital
Stock (or any option rights to acquire such Capital Stock) from any former or
current employer of any Loan Party) or (ii) own any assets other than (a) the
Capital Stock of Company and (b) Cash and Cash Equivalents in an amount not to
exceed $250,000.

 

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7.12                        Amendments or Waivers of
Certain Agreements; Amendments of Documents Relating to Second Lien Term Loans.

A.            Amendments or Waivers of
Certain Agreements.  Neither Company nor any of its Subsidiaries
will agree to any amendment to, or waive any of its rights under, any Related
Agreements after the Closing Date without in each case obtaining the prior
written consent of Requisite Lenders to such amendment or waiver, if the effect
of such amendment or waiver, together with all other amendments or waivers,
would be materially adverse to Company or Lenders.

B.            Amendments or Waivers
with Respect to Second Lien Term Loan Agreement.  Company shall
not, nor shall it permit Holdings or any of its Subsidiaries to, amend,
supplement or otherwise change the terms of the Second Lien Term Loan Agreement
or any Second Lien Term Loan Document or any related document, or make any
payment consistent with an amendment thereof or change thereto, if the effect
of such amendment, supplement or change is to increase the interest rate on the
Second Lien Term Loans, change (to earlier dates) any dates upon which payments
of principal or interest are due thereon, change any event of default or
condition to an event of default with respect thereto (other than to eliminate
any such event of default or increase any grace period related thereto), change
any financial covenant (other than to make it less restrictive), change any
other covenant to make such covenant more restrictive than the corresponding
covenant in the Loan Documents, change the redemption, prepayment or defeasance
provisions thereof, add to the collateral securing the Second Lien Term Loans,
or if the effect of such amendment or change, together with all other
amendments or changes made, is to increase materially the obligations of or
restrictions applicable to Company, Holdings or any of its Subsidiaries or to
confer any additional rights on the holders of the Second Lien Term Loans (or
the administrative agent under the Second Lien Term Loan Agreement or other
representative on their behalf) which would be adverse to any Loan Party or
Lenders.

C.            Amendments of the
Holdings Note Documents.  Company shall not, nor shall
it permit Holdings or any of its Subsidiaries to, amend or otherwise change or
supplement the terms of any Holdings Note Document.  No Loan Party shall grant or permit to be
granted any security or guaranty with respect to the Holdings Note Documents.

7.13                        Fiscal Year.

Company shall not and
shall not permit any of its Subsidiaries to, change their respective Fiscal
Year-end or their respective Fiscal Quarter-ends from that in effect on the
Closing Date.

7.14                        OFAC.

Neither Company nor any
Subsidiary of Company: (i) will become a person whose property or interests in
property are blocked or subject to blocking pursuant to Section 1 of Executive
Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism
(66 Fed. 

 

115

 

Reg. 49079(2001)),
(ii) will engage in any dealings or transactions prohibited by Section 2 of
such executive order, or be otherwise associated with any such person in any
manner violative of Section 2, or (iii) will otherwise become a person on the
list of Specially Designated Nationals and Blocked Persons or subject to the
limitations or prohibitions under any other OFAC regulation or executive order.

Section
8.              EVENTS OF DEFAULT

If any of the following
conditions or events (“Events of Default”)
shall occur:

8.1                               Failure to Make Payments When Due.

Failure by Company to pay
any installment of principal of any Loan when due, whether at stated maturity,
by acceleration, by notice of voluntary prepayment, by mandatory prepayment or
otherwise; failure by Company to pay when due any amount payable to an Issuing
Lender in reimbursement of any drawing under a Letter of Credit; or failure by
Company to pay any interest on any Loan or any fee or any other amount due
under this Agreement within five days after the date due; or

8.2                               Default in Other Agreements.

(i)            Failure
of Holdings, Company or any of its Subsidiaries to pay when due any principal
of or interest on or any other amount payable in respect of one or more items
of Indebtedness (other than Indebtedness referred to in subsection 8.1) or
Contingent Obligations in an individual principal amount of $1,500,000 or more
or with an aggregate principal amount of $1,500,000 or more, in each case
beyond the end of any grace period provided therefor; or

(ii)           breach
or default by Holdings, Company or any of its Subsidiaries with respect to any
other material term of (a) one or more items of Indebtedness or Contingent
Obligations in the individual or aggregate principal amounts referred to in
clause (i) above or (b) any loan agreement, mortgage, indenture or other
agreement relating to such item(s) of Indebtedness or Contingent Obligation(s),
if the effect of such breach or default is to cause, or to permit the holder or
holders of that Indebtedness or Contingent Obligation(s) (or a trustee on
behalf of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may
be (upon the giving or receiving of notice, lapse of time, both, or otherwise);
or

8.3                               Breach of Certain Covenants.

Failure of Company to
perform or comply with any term or condition contained in subsection 2.5, 6.2
or Section 7 of this Agreement; or

 

116

 

8.4                               Breach of Warranty.

Any representation,
warranty, certification or other statement made by Holdings, Company or any of
its Subsidiaries in any Loan Document or in any statement or certificate at any
time given by Holdings, Company or any of its Subsidiaries in writing pursuant
hereto or thereto or in connection herewith or therewith shall be false in any
material respect on the date as of which made; or

8.5                               Other Defaults Under Loan Documents.

Any Loan Party shall default
in the performance of or compliance with any term contained in this Agreement
or any of the other Loan Documents, other than any such term referred to in any
other subsection of this Section 8, and such default shall not have been
remedied or waived within 30 days after the earlier of (i) an Officer of
Holdings, Company or such Loan Party becoming aware of such default or (ii) receipt by Company or such Loan Party
of notice from Administrative Agent or any Lender of such default; or

8.6                               Involuntary Bankruptcy; Appointment
of Receiver, etc.

(i)            A
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of Holdings Company or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or

(ii)           an
involuntary case shall be commenced against Holdings, Company or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a decree
or order of a court having jurisdiction in the premises for the appointment of
a receiver, liquidator, sequestrator, trustee, custodian or other officer
having similar powers over Holdings, Company or any of its Subsidiaries, or
over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of Holdings, Company or any of its Subsidiaries for
all or a substantial part of its property; or a warrant of attachment,
execution or similar process shall have been issued against any substantial
part of the property of Holdings, Company or any of its Subsidiaries, and any
such event described in this clause (ii) shall continue for 60 days unless
dismissed, bonded or discharged; provided that each of Holdings and Company
(for itself and its Subsidiaries) hereby expressly authorizes Administrative
Agent and Lenders to appear in any court conducting any relevant case or
proceeding during such 60-day period to preserve, protect and defend their
rights under the Loan Documents; or

8.7                               Voluntary Bankruptcy; Appointment of
Receiver, etc.

(i)            Holdings,
Company or any of its Subsidiaries shall have an order for relief entered with
respect to it or commence a voluntary case under the Bankruptcy Code or 

 

117

 

under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or Holdings, Company or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or

(ii)           Holdings,
Company or any of its Subsidiaries shall be unable, or shall fail generally, or
shall admit in writing its inability, to pay its debts as such debts become
due; or the Governing Body of Holdings, Company or any of its Subsidiaries (or
any committee thereof) shall adopt any resolution or otherwise authorize any
action to approve any of the actions referred to in clause (i) above or this
clause (ii); or

8.8                               Judgments and
Attachments.

Any money judgment, writ
or warrant of attachment or similar process involving (i) in any
individual case an amount in excess of $1,500,000 or (ii) in the aggregate
at any time an amount in excess of $1,500,000, in either case to the extent not
adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage, shall be entered or filed against
Holdings, Company or any of its Subsidiaries or any of their respective assets
and shall remain undischarged, unvacated, unbonded or unstayed for a period of
60 days (or in any event later than five days prior to the date of any proposed
sale thereunder); or

8.9                               Dissolution.

Any order, judgment or
decree shall be entered against Holdings, Company or any of its Subsidiaries
decreeing the dissolution or split up of Holdings, Company or that Subsidiary
and such order shall remain undischarged or unstayed for a period in excess of
30 days; or

8.10                        Employee Benefit Plans.

There shall occur one or
more ERISA Events that individually or in the aggregate result in or could
reasonably be expected to result in liability of Company, any of its
Subsidiaries (including any such liability of their respective ERISA Affiliates
for which the Company or its Subsidiaries are jointly and severally liable) in
excess of $2,000,000 during the term of this Agreement; or

8.11                        Change in Control.

A Change in Control shall
have occurred; or

8.12                        Invalidity of Loan
Documents; Failure of Security; Repudiation of Obligations.

At any time after the
execution and delivery thereof, (i) any Loan Document or any provision thereof,
for any reason, other than the satisfaction in full of all Obligations, shall
cease to be in full force and effect (other than in accordance with its terms)
or shall be declared 

 

118

 

to be null and
void, (ii) any Collateral Document shall cease to be in full force and effect
(other than by reason of a release of Collateral thereunder in accordance with
the terms hereof or thereof, the satisfaction in full of the Obligations or any
other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void, or Administrative Agent
shall not have or shall cease to have a valid and perfected First Priority Lien
in any Collateral purported to be covered thereby (other than in accordance
with its terms), in each case for any reason other than the failure of
Administrative Agent or any Lender to take any action within its control, or
(iii) any Loan Party shall contest the validity or enforceability of any Loan
Document or any provision thereof in writing or deny in writing that it has any
further liability, including with respect to future advances by Lenders, under
any Loan Document to which it is a party:

THEN (i) upon the occurrence of any
Event of Default described in subsection 8.6, 8.7 or 8.11, each of (a) the
unpaid principal amount of and accrued interest on the Loans, (b) an
amount equal to the maximum amount that may at any time be drawn under all
Letters of Credit then outstanding (whether or not any beneficiary under any
such Letter of Credit shall have presented, or shall be entitled at such time
to present, the drafts or other documents or certificates required to draw
under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Administrative Agent to issue any Letter of Credit and the right
of any Lender to issue any Letter of Credit hereunder shall thereupon
terminate, and (ii) upon the occurrence and during the continuation of any
other Event of Default, Administrative Agent shall, upon the written request or
with the written consent of Requisite Lenders, by written notice to Company,
declare all or any portion of the amounts described in clauses (a) through (c)
above to be, and the same shall forthwith become, immediately due and payable,
and the obligation of each Lender to make any Loan, the obligation of
Administrative Agent to issue any Letter of Credit and the right of any Lender
to issue any Letter of Credit hereunder shall thereupon terminate; provided
that the foregoing shall not affect in any way the obligations of Revolving
Lenders under subsection 3.3C(i) or the obligations of Revolving Lenders to
purchase assignments of any unpaid Swing Line Loans as provided in
subsection 2.1A(iii).

Any amounts described in
clause (b) above, when received by Administrative Agent, shall be held by
Administrative Agent pursuant to the terms of the Security Agreement and shall
be applied as therein provided.

Notwithstanding
anything contained in the second preceding paragraph, if at any time within 60
days after an acceleration of the Loans pursuant to clause (ii) of such
paragraph Company shall pay all arrears of interest and all payments on account
of principal which shall have become due other than as a result of such
acceleration (with interest on principal and, to the extent permitted by law,
on overdue interest, at the rates specified in this Agreement) and all Events
of Default and Potential Events of Default (other than non-payment of the
principal of and accrued interest on the Loans, in each case which is due and
payable solely by virtue of acceleration) shall be remedied or waived pursuant
to subsection 10.6, then Requisite Lenders, by written notice to Company, may
at their option rescind and annul such acceleration and its 

 

119

 

consequences; but such action shall not affect any subsequent Event of
Default or Potential Event of Default or impair any right consequent
thereon.  The provisions of this
paragraph are intended merely to bind Lenders to a decision which may be made
at the election of Requisite Lenders and are not intended, directly or
indirectly, to benefit Company, and such provisions shall not at any time be
construed so as to grant Company the right to require Lenders to rescind or
annul any acceleration hereunder or to preclude Administrative Agent or Lenders
from exercising any of the rights or remedies available to them under any of
the Loan Documents, even if the conditions set forth in this paragraph are met.

Section
9.              ADMINISTRATIVE AGENT

9.1                               Appointment.

A.            Appointment
of Administrative Agent.  BNP Paribas is hereby appointed
Administrative Agent hereunder and under the other Loan Documents.  Each Lender hereby authorizes Administrative
Agent to act as Administrative Agent in accordance with the terms of this
Agreement and the other Loan Documents. 
Administrative Agent agrees to act upon the express conditions contained
in this Agreement and the other Loan Documents, as applicable.  The provisions of this Section 9 are
solely for the benefit of Administrative Agent and Lenders and no Loan Party
shall have rights as a third party beneficiary of any of the provisions
thereof.  In performing its functions and
duties under this Agreement, Administrative Agent (other than as provided in
subsection 2.1D) shall act solely as an agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation towards or relationship
of agency or trust with or for Company or any other Loan Party.

B.            Appointment
of Supplemental Collateral Agents.  It is the
purpose of this Agreement and the other Loan Documents that there shall be no
violation of any law of any jurisdiction denying or restricting the right of
banking corporations or associations to transact business as Administrative
Agent or trustee in such jurisdiction. 
It is recognized that in case of litigation under this Agreement or any
of the other Loan Documents, and in particular in case of the enforcement of
any of the Loan Documents, or in case Administrative Agent deems that by reason
of any present or future law of any jurisdiction it may not exercise any of the
rights, powers or remedies granted herein or in any of the other Loan Documents
or take any other action which may be desirable or necessary in connection
therewith, it may be necessary that Administrative Agent appoint an additional
individual or institution as a separate trustee, co-trustee, collateral agent
or collateral co-agent (any such additional individual or institution being
referred to herein individually as a “Supplemental Collateral
Agent” and collectively as “Supplemental Collateral
Agents”).

In the event that
Administrative Agent appoints a Supplemental Collateral Agent with respect to
any Collateral, (i) each and every right, power, privilege or duty expressed or
intended by this Agreement or any of the other Loan Documents to be exercised
by or vested in or conveyed to Administrative Agent with respect to such
Collateral shall be exercisable by and vest in such Supplemental Collateral
Agent to the extent, and only to the extent, necessary to enable such
Supplemental Collateral Agent to exercise such rights, powers and privileges
with respect to such Collateral and to perform such duties with respect to such
Collateral, and every 

 

120

 

covenant and
obligation contained in the Loan Documents and necessary to the exercise or
performance thereof by such Supplemental Collateral Agent shall run to and be
enforceable by Administrative Agent or such Supplemental Collateral Agent, and
(ii) the provisions of this Section 9 and of subsections 10.2 and 10.3 that
refer to Administrative Agent shall inure to the benefit of such Supplemental
Collateral Agent and all references therein to Administrative Agent shall be
deemed to be references to Administrative Agent and/or such Supplemental
Collateral Agent, as the context may require.

Should any instrument in
writing from Company or any other Loan Party be required by any Supplemental
Collateral Agent so appointed by Administrative Agent for more fully and
certainly vesting in and confirming to him or it such rights, powers,
privileges and duties, Company shall, or shall cause such Loan Party to,
execute, acknowledge and deliver any and all such instruments promptly upon
request by Administrative Agent.  In case
any Supplemental Collateral Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges and
duties of such Supplemental Collateral Agent, to the extent permitted by law,
shall vest in and be exercised by Administrative Agent until the appointment of
a new Supplemental Collateral Agent.

C.            Control. Each
Lender and Administrative Agent hereby appoint each other Lender as agent for
the purpose of perfecting Administrative Agent’s security interest in assets
that, in accordance with the UCC, can be perfected by possession or control.

9.2                               Powers and Duties;
General Immunity.

A.            Powers; Duties Specified. 
Each Lender irrevocably authorizes the Administrative Agent to take such
action on such Lender’s behalf and to exercise such powers, rights and remedies
hereunder and under the other Loan Documents as are specifically delegated or
granted to Administrative Agent by the terms hereof and thereof, together with
such powers, rights and remedies as are reasonably incidental thereto.  Administrative Agent shall have only those
duties and responsibilities that are expressly specified in this Agreement and
the other Loan Documents.  Administrative
Agent may exercise such powers, rights and remedies and perform such duties by
or through its agents or employees. 
Administrative Agent shall not have, by reason of this Agreement or any
of the other Loan Documents, a fiduciary relationship in respect of any Lender
or Company; and nothing in this Agreement or any of the other Loan Documents,
expressed or implied, is intended to or shall be so construed as to impose upon
Administrative Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.  Administrative Agent is further authorized by
the Lenders to enter into agreements supplemental hereto with any Loan Party
for the purpose of curing any formal defect, inconsistency, omission or
ambiguity in this Agreement or any Loan Document to which it is a party
(without any consent or approval by the Lenders).

B.            No Responsibility for
Certain Matters.  Administrative Agent shall not be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or 

 

121

 

certificates or
any other documents furnished or made by Administrative Agent to Lenders or by
or on behalf of Sponsors, Holdings, Company or any of its Subsidiaries to
Administrative Agent or any Lender in connection with the Loan Documents and
the transactions contemplated thereby or for the financial condition or
business affairs of Sponsors, Holdings, Company or any of its Subsidiaries or
any other Person liable for the payment of any Obligations, nor shall
Administrative Agent be required to ascertain or inquire as to the performance
or observance of any of the terms, conditions, provisions, covenants or
agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or as to the
existence or possible existence of any Event of Default or Potential Event of
Default.  Anything contained in this
Agreement to the contrary notwithstanding, Administrative Agent shall have no
liability arising from confirmations of the amount of outstanding Loans or the
Letter of Credit Usage or the component amounts thereof.

C.            Exculpatory Provisions. 
Neither Administrative Agent nor any of its officers, directors,
employees or agents shall be liable to Lenders for any action taken or omitted
by Administrative Agent under or in connection with any of the Loan Documents
except to the extent caused by Administrative Agent’s gross negligence or
willful misconduct.  Administrative Agent
shall be entitled to refrain from any act or the taking of any action
(including the failure to take an action) in connection with this Agreement or
any of the other Loan Documents or from the exercise of any power, discretion
or authority vested in it hereunder or thereunder unless and until
Administrative Agent shall have received instructions in respect thereof from
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6) and, upon receipt of such instructions from
Requisite Lenders (or such other Lenders, as the case may be), Administrative
Agent shall be entitled to act or (where so instructed) refrain from acting, or
to exercise such power, discretion or authority, in accordance with such
instructions; provided that Administrative Agent shall not be required
to take any action that, in its opinion or the opinion of its counsel, may
expose Administrative Agent to liability or that is contrary to any Loan
Document or applicable law.  Without
prejudice to the generality of the foregoing, (i) Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication (including any electronic message, Internet or intranet website
posting or other distribution), instrument or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and shall be entitled to rely and shall be protected in relying on
opinions and judgments of attorneys (who may be attorneys for Holdings, Company
and its Subsidiaries), accountants, experts and other professional advisors
selected by it; and (ii) no Lender shall have any right of action
whatsoever against Administrative Agent as a result of Administrative Agent
acting or (where so instructed) refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).

D.            Administrative Agent
Entitled to Act as Lender.  The agency hereby created
shall in no way impair or affect any of the rights and powers of, or impose any
duties or obligations upon, Administrative Agent in its individual capacity as
a Lender hereunder.  With respect to its
participation in the Loans and the Letters of Credit, Administrative Agent
shall have the same rights and powers hereunder as any other Lender and may
exercise the same as 

 

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though it were not
performing the duties and functions delegated to it hereunder, and the term “Lender”
or “Lenders” or any similar term shall, unless the context clearly otherwise
indicates, include Administrative Agent in its individual capacity.  Administrative Agent and its Affiliates may
accept deposits from, lend money to, acquire equity interests in and generally
engage in any kind of commercial banking, investment banking, trust, financial
advisory or other business with Company or any of its Affiliates as if it were
not performing the duties specified herein, and may accept fees and other
consideration from Company for services in connection with this Agreement and
otherwise without having to account for the same to Lenders.

9.3                               Independent Investigation
by Lenders; No Responsibility For Appraisal of Creditworthiness.

Each Lender agrees that
it has made its own independent investigation of the financial condition and
affairs of Holdings, Company and its Subsidiaries in connection with the making
of the Loans and the issuance of Letters of Credit hereunder and that it has
made and shall continue to make its own appraisal of the creditworthiness of
Holdings, Company and its Subsidiaries. Administrative Agent shall have no duty
or responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter, Administrative shall have no responsibility with respect to
the accuracy of or the completeness of any information provided to Lenders.

9.4                               Right to Indemnity.

Each Lender, in
proportion to its Pro Rata Share, severally agrees to indemnify Administrative
Agent and its officers, directors, employees, agents, attorneys, professional
advisors and Affiliates to the extent that any such Person shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including counsel fees and disbursements and fees and disbursements of any
financial advisor engaged by Administrative Agent) or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent or such other Person in exercising the powers, rights and
remedies of Administrative Agent or performing duties of Administrative Agent
hereunder or under the other Loan Documents or otherwise in its capacity as
Administrative Agent in any way relating to or arising out of this Agreement or
the other Loan Documents; provided that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of Administrative
Agent resulting solely from Administrative Agent’s gross negligence, bad faith
or willful misconduct as determined by a final judgment of a court of competent
jurisdiction.  If any indemnity furnished
to Administrative Agent or any other such Person for any purpose shall, in the
opinion of Administrative Agent, be insufficient or become impaired,
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.

 

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9.5                               Resignation of
Administrative Agent; Successor Administrative Agent and Swing Line Lender.

A.            Resignation;
Successor Administrative Agent.  Administrative
Agent may resign at any time by giving 30 days’ prior written notice thereof to
Lenders and Company.  Upon any such
notice of resignation by Administrative Agent, Requisite Lenders shall have the
right, upon five Business Days’ notice to Company, to appoint a successor
Administrative Agent.  If no such
successor shall have been so appointed by Requisite Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, the retiring Administrative Agent may,
on behalf of Lenders, appoint a successor Administrative Agent.  If such Administrative Agent shall notify
Lenders and Company that no Person has accepted such appointment as successor
Administrative Agent, such resignation shall nonetheless become effective in
accordance with  Administrative Agent’s
notice and (i) the retiring Administrative Agent shall be discharged from its
duties and obligations under the Loan Documents, except that any Collateral
held by Administrative Agent will continue to be held by it until a Person
shall have accepted the appointment of successor Administrative Agent, and
(ii) all payments, communications and determinations provided to be made
by, to or through Administrative Agent shall instead be made by, to or through
each Lender directly, until such time as Requisite Lenders appoint a successor
Administrative Agent in accordance with this subsection 9.5A.  Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, that
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement (if not already discharged
as set forth above).  After any retiring
Administrative Agent’s resignation hereunder, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement.

B.            Successor Swing Line
Lender.  Any resignation of Administrative Agent
pursuant to subsection 9.5A shall also constitute the resignation of Administrative
Agent or its successor as Swing Line Lender, and any successor Administrative
Agent appointed pursuant to subsection 9.5A shall, upon its acceptance of such
appointment, become the successor Swing Line Lender for all purposes hereunder.  In such event (i) Company shall prepay
any outstanding Swing Line Loans made by the retiring Administrative Agent in
its capacity as Swing Line Lender, (ii) upon such prepayment, the retiring
Administrative Agent and Swing Line Lender shall surrender any Swing Line Note
held by it to Company for cancellation, and (iii) if so requested by the
successor Administrative Agent and Swing Line Lender in accordance with
subsection 2.1E, Company shall issue a new Swing Line Note to the successor
Administrative Agent and Swing Line Lender substantially in the form of Exhibit
VI annexed hereto, in the amount of the Swing Line Loan Commitment then in
effect and with other appropriate insertions.

9.6                               Collateral Documents and
Guaranties.

Each Lender (which term
shall include, for purposes of this subsection 9.6, any Lender in its capacity
as a counterparty to a Hedge Agreement with Company or one of its 

 

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Subsidiaries)
hereby further authorizes Administrative Agent, on behalf of and for the
benefit of Lenders, to enter into each Collateral Document as secured party and
to be the agent for and representative of Lenders under each Guaranty, and each
Lender agrees to be bound by the terms of each Collateral Document, the
Intercreditor Agreement, the Holdings Subordination Agreement and each
Guaranty; provided that Administrative Agent shall not (i) enter into or
consent to any material amendment, modification, termination or waiver of or
departure from any provision contained in any Collateral Document, the
Intercreditor Agreement, the Holdings Subordination Agreement or the Guaranties
or (ii) release any Collateral (except as otherwise expressly permitted or
required pursuant to the terms of this Agreement or the applicable Collateral Document),
in each case without the prior written consent of Requisite Lenders (or, if
required pursuant to subsection 10.6, all Lenders); provided  further,
however, that, without further written consent or authorization from
Lenders, Administrative Agent may execute any documents or instruments
necessary to (a) release any Lien encumbering any item of Collateral that
is the subject of a sale or other disposition of assets permitted by this
Agreement or to which Requisite Lenders have otherwise consented, (b) release
any Subsidiary Guarantor from the Subsidiary Guaranty if all of the Capital
Stock of such Subsidiary Guarantor is sold to any Person (other than an
Affiliate of Company) pursuant to a sale or other disposition permitted
hereunder or to which Requisite Lenders have otherwise consented or
(c) subordinate the Liens of 
Administrative Agent, on behalf of Lenders, to any Liens permitted by
subsection 7.2 (other than Liens securing Second Lien Term Loans); provided
that, in the case of a sale of such item of Collateral or stock referred to in
subdivision (a) or (b), the requirements of subsection 10.14 are
satisfied.  Anything contained in any of
the Loan Documents to the contrary notwithstanding, Company, Administrative
Agent and each Lender hereby agree that (1) no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral
Document or to enforce any Guaranty, it being understood and agreed that all
powers, rights and remedies under the Collateral Documents, the Intercreditor
Agreement and the Guaranties may be exercised solely by Administrative Agent
for the benefit of Lenders in accordance with the terms thereof, and (2) in the
event of a foreclosure by Administrative Agent on any of the Collateral
pursuant to a public or private sale, Administrative Agent or any Lender may be
the purchaser of any or all of such Collateral at any such sale and
Administrative Agent, as agent for and representative of Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Administrative Agent at such sale.  Without limiting the foregoing, in the event
the Second Lien Term Loan Agreement is refinanced or replaced following the
Closing Date, Administrative Agent is hereby authorized by Lenders to, enter
into a replacement Intercreditor Agreement substantially similar to the
Intercreditor Agreement as in effect on the Closing Date, or as subsequently
amended, restated, supplemented or modified pursuant to the terms hereof and
thereof.

Without derogating from
any other authority granted to Administrative Agent herein or in the Collateral
Documents or any other document relating thereto, each Lender hereby
specifically (i) authorizes Administrative Agent to enter into pledge
agreements pursuant to this subsection 9.6 with respect to the Capital Stock of
all existing and future Foreign 

 

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Subsidiaries,
which pledge agreements may be governed by the laws of each of the
jurisdictions of formation of such Foreign Subsidiaries, as agent on behalf of
each of Lenders, with the effect that Lenders each become a secured party
thereunder or, where relevant as agent and trustee with the effect that the
Lenders each become beneficiaries of the trust and Administrative Agent has all
the rights, powers, discretions, protections and exemptions from liability set
out in the pledge agreements and (ii) except in connection with any such pledge
agreement where Administrative Agent holds the security as agent and trustee
for the Lenders, appoints Administrative Agent as its attorney-in-fact granting
it the powers to execute each such pledge agreement and any registrations of
the security interest thereby created, in each case in its name and on its
behalf, with the effect that each Lender becomes a secured party
thereunder.  With respect to each such
pledge agreement, Administrative Agent has the power to sub-delegate to third
parties its powers as attorney-in-fact of each Lender.

9.7                               Duties of Other Agents.

To the extent that any
Lender is identified in this Agreement as a co-agent, documentation agent or
syndication agent, such Lender shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Lenders as such. 
Without limiting the foregoing, none of such Lenders shall have or be
deemed to have a fiduciary relationship with any Lender.

9.8                               Administrative Agent May
File Proofs of Claim.

In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
Holdings, Company or any of the Subsidiaries of Holdings or Company,
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether Administrative Agent shall have made any demand on Company)
shall be entitled and empowered, by intervention in such proceeding or
otherwise:

(i)            to
file and prove a claim for the whole amount of principal and interest owing and
unpaid in respect of the Loans and any other Obligations that are owing and
unpaid and to file such other papers or documents as may be necessary or
advisable in order to have the claims of Lenders and Administrative Agent
(including any claim for the reasonable compensation, expenses, disbursements
and advances of Lenders and Administrative Agent and their agents and counsel
and all other amounts due Lenders and Administrative Agent under subsections
2.3 and 10.2) allowed in such judicial proceeding, and

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

and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make
such payments to Administrative Agent and, in the event that Administrative
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such payments directly to
Lenders, to pay to Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of Administrative Agent and
its agents and counsel, and any other amounts due to Administrative Agent under
subsections 2.3 and 10.2.

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

Section 10.            MISCELLANEOUS

10.1                        Successors and Assigns;
Assignments and Participations in Loans and Letters of Credit

A.            General. 
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders’ rights of assignment are subject to the further provisions of this
subsection 10.1).  Neither Company’s
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Company without the prior written consent of all Lenders (and any
attempted assignment or transfer by Company without such consent shall be null
and void).  No sale, assignment or
transfer or participation of any Letter of Credit or any participation therein
may be made separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving Loans
of the Revolving Lender effecting such sale, assignment, transfer or
participation.  Anything contained herein
to the contrary notwithstanding, except as provided in subsection 2.1A(iii) and
subsection 10.5, the Swing Line Loan Commitment and the Swing Line Loans of
Swing Line Lender may not be sold, assigned or transferred as described below
to any Person other than a successor Administrative Agent and Swing Line Lender
to the extent contemplated by subsection 9.5. 
Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Affiliates of each of Administrative Agent and Lenders
and Indemnitees) any legal or equitable right, remedy or claim under or by
reason of this Agreement.

B.            Assignments.

(i)            Amounts
and Terms of Assignments.  Any Lender
may assign to one or more Eligible Assignees all or any portion of its rights
and obligations under this Agreement; provided that (a), except
(1) in the case of an assignment of the entire remaining amount of the
assigning Lender’s rights and obligations under this Agreement or (2) in
the case of an assignment to a Lender or an Affiliate of a Lender or an
Approved Fund of a Lender, the aggregate amount of the Revolving Loan Exposure
or Term Loan Exposure, as the case may be, of the assigning Lender and the
assignee subject to each such assignment shall not be less than $2,500,000, in
the case of any assignment of a 

 

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Revolving Loan, or $1,000,000, in the case of any assignment of a Term
Loan (or $250,000 in the case of any assignment of a Term Loan by a Lender or
an Approved Fund to a Lender or an Approved Fund that in each case has, or is
affiliated with or managed by a Lender with Affiliates and/or Approved Funds
that collectively have, aggregate Term Loan Exposure of not less than
$1,000,000), unless Administrative Agent otherwise consents (such consent not
to be unreasonably withheld or delayed), (b) each partial assignment shall
be made as an assignment of a proportionate part of all the assigning Lender’s
rights and obligations under this Agreement with respect to the Loan or the
Commitment assigned, (c) the parties to each assignment shall execute and
deliver to Administrative Agent an Assignment Agreement, together with a
processing and recordation fee of $3,500 (unless the assignee is an Affiliate
or an Approved Fund of the assignor, in which case no fee shall be required),
and the Eligible Assignee, if it shall not be a Lender, shall deliver to
Administrative Agent information reasonably requested by Administrative Agent,
including such forms, certificates or other evidence, if any, with respect to
United States federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iii) and (d) except in the case of an assignment to
another Lender, an Affiliate of a Lender or an Approved Fund of a Lender,
Administrative Agent, and, if no Event of Default has occurred and is
continuing, Company, shall have consented thereto (which consent shall not be
unreasonably withheld or delayed).

                                Upon such
execution, and delivery and consent, from and
after the effective date specified in such Assignment Agreement, (y) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and
(z) the assigning Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights (other than any rights which survive the
termination of this Agreement under subsection 10.9B) and be released from its
obligations under this Agreement (and, in the case of an Assignment Agreement
covering all or the remaining portion of an assigning Lender’s rights and
obligations under this Agreement, such Lender shall cease to be a party hereto;
provided that, anything contained in any of the Loan Documents to the
contrary notwithstanding, if such Lender is an Issuing Lender such Lender shall
continue to have all rights and obligations of an Issuing Lender until the
cancellation or expiration of any Letters of Credit issued by it and the reimbursement
of any amounts drawn thereunder).  The
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its Notes, if any, to
Administrative Agent for cancellation, and thereupon new Notes shall, if so
requested by the assignee and/or the assigning Lender in accordance with
subsection 2.1E, be issued to the assignee and/or to the assigning Lender,
substantially in the form of Exhibit IV, Exhibit V or Exhibit
VI annexed hereto, as the case may be, with appropriate insertions, to
reflect the amounts of the new Commitments and/or outstanding Revolving Loans
and/or outstanding Term Loans of the assignee and/or the assigning Lender.  Other than as provided in subsection
2.1A(iii) and subsection 10.5, any assignment or transfer by a Lender of rights
or obligations under this

 

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Agreement that
does not comply with this subsection 10.1B shall be treated for purposes of
this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with subsection 10.1C.  Notwithstanding the foregoing, in the case of
an assignment to an Eligible Assignee which is, immediately prior to such assignment,
an Affiliate of the assigning Lender or an Approved Fund of the assigning
Lender, such assignment shall be effective between such assigning Lender and
its Affiliate or Approved Fund (as the case may be) immediately without
compliance with the conditions for assignment under this subsection 10.1B, but
shall not be effective with respect to Company, Administrative Agent, any
Issuing Lender or any Lender, and Company, Administrative Agent, each Issuing
Lender and each Lender shall be entitled to deal solely and directly with such
assigning Lender under any such assignment, in each case, until the conditions
for assignment under this subsection 10.1B have been complied with.

(ii)           Acceptance
by Administrative Agent; Recordation in Register.  Upon its receipt of an Assignment Agreement
executed by an assigning Lender and an assignee representing that it is an
Eligible Assignee, together with the processing and recordation fee referred to
in subsection 10.1B(i) (if required) and any forms, certificates or other
evidence with respect to United States federal income tax withholding matters
that such assignee may be required to deliver to Administrative Agent pursuant
to subsection 2.7B(iii), Administrative Agent shall, if Administrative Agent
and Company have consented to the assignment evidenced thereby (in each case to
the extent such consent is required pursuant to subsection 10.1B(i)),
(a) accept such Assignment Agreement by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register, and (c) give prompt notice thereof to
Company.  Administrative Agent shall
maintain a copy of each Assignment Agreement delivered to and accepted by it as
provided in this subsection 10.1B(ii).

(iii)          Deemed
Consent by Company.  If the consent
of Company to an assignment or to an Eligible Assignee is required hereunder
(including a consent to an assignment which does not meet the minimum
assignment thresholds specified in subsection 10.1B(i)), Company shall be
deemed to have given its consent five Business Days after the date notice
thereof has been delivered by the assigning Lender (through Administrative
Agent) unless such consent is expressly refused by Company prior to such fifth
Business Day.

C.            Participations. 
Any Lender may, without the consent of, or notice to, Company or
Administrative Agent, sell participations to one or more Persons (other than a
natural Person or Company or any of its Affiliates) in all or a portion of such
Lender’s rights and/or obligations under this Agreement; provided that
(i) such Lender’s obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) Company, Administrative Agent and
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right

 

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to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant,
agree to any amendment, modification or waiver directly affecting (i) the
extension of the scheduled final maturity date of any Loan allocated to such
participation or (ii) a reduction of the principal amount of or the rate
of interest payable on any Loan allocated to such participation.  Subject to the further provisions of this subsection
10.1C, Company agrees that each Participant shall be entitled to the benefits
of subsections 2.6D and 2.7 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to subsection 10.1B.  To the extent permitted by law, each
Participant also shall be entitled to the benefits of subsection 10.4 as though
it were a Lender, provided such Participant agrees to be subject to subsection
10.5 as though it were a Lender.  A
Participant shall not be entitled to receive any greater payment under
subsections 2.6D and 2.7 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant unless the
sale of the participation to such Participant is made with Company’s prior
written consent.  A Participant that
would be a Non-US Lender if it were a Lender shall not be entitled to the
benefits of subsection 2.7 unless Company is notified of the participation sold
to such Participant and such Participant agrees, for the benefit of Company, to
comply with subsection 2.7B(iii) as though it were a Lender.

D.            Pledges
and Assignments.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its Loans, and the other Obligations
owed to such Lender, to secure obligations of such Lender, including without
limitation any pledge or assignment to secure obligations to any Federal
Reserve Bank; provided that (i) no Lender shall be relieved of any
of its obligations hereunder as a result of any such assignment or pledge and
(ii) in no event shall any assignee or pledgee be considered to be a “Lender” or be entitled to require the assigning Lender to
take or omit to take any action hereunder.

E.             Information. 
Each Lender may furnish any information concerning Holdings, Company and
its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 10.19.

F.             Agreements
of Lenders.  Each Lender listed on the signature pages
hereof hereby agrees, and each Lender that becomes a party hereto pursuant to
an Assignment Agreement shall be deemed to agree, (i) that it is an Eligible
Assignee described in clause (A) of the definition thereof; (ii) that it has
experience and expertise in the making of or purchasing loans such as the
Loans; and (iii) that it will make or purchase Loans for its own account in the
ordinary course of its business and without a view to distribution of such
Loans within the meaning of the Securities Act or the Exchange Act or other
federal securities laws (it being understood that, subject to the provisions of
this subsection 10.1, the disposition of such Loans or any interests therein
shall at all times remain within its exclusive control).

10.2                        Expenses.

Whether or not the
transactions contemplated hereby shall be consummated, Company agrees to pay
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and execution of the Loan Documents and any consents, amendments, waivers
or other modifications thereto; (ii) all costs and expenses of furnishing
all opinions by counsel for Company (including any opinions requested by
Administrative Agent or Lenders as to any legal matters arising hereunder) and
of Company’s performance of and compliance with all agreements and conditions
on its part to be performed or complied with under this Agreement and the other
Loan Documents including with respect to confirming compliance with
environmental, insurance and solvency requirements; (iii) all reasonable
fees, expenses and disbursements of counsel to Administrative Agent (including
allocated costs of internal counsel) in connection with the negotiation,
preparation, execution and administration of the Loan Documents and any consents,
amendments, waivers or other modifications thereto and any other documents or
matters requested by Company; (iv) all costs and expenses of creating and
perfecting Liens in favor of Administrative Agent on behalf of Lenders pursuant
to any Collateral Document, including filing and recording fees, expenses and
taxes, stamp or documentary taxes, search fees, title insurance premiums, and
reasonable fees, expenses and disbursements of counsel to Administrative Agent
and of counsel providing any opinions that Administrative Agent or Requisite
Lenders may request in respect of the Collateral Documents or the Liens created
pursuant thereto; (v) all costs and expenses (including the reasonable
fees, expenses and disbursements of any auditors, accountants or appraisers and
any environmental or other consultants, advisors and agents employed or
retained by Administrative Agent or its counsel) of obtaining and reviewing any
appraisals provided for under this Agreement and any environmental audits or
reports provided for under this Agreement; (vi) all costs and expenses
incurred by Administrative Agent in connection with the custody or preservation
of any of the Collateral; (vii) all other costs and expenses incurred by
Administrative Agent in connection with the syndication of the Commitments;
(viii) all costs and expenses, including reasonable attorneys’ fees (including
allocated costs of internal counsel) and fees, costs and expenses of
accountants, advisors and consultants, incurred by Administrative Agent and its
counsel relating to efforts to (a) evaluate or assess any Loan Party, its
business or financial condition and (b) protect, evaluate, assess or dispose of
any of the Collateral; and (ix) all costs and expenses, including reasonable
attorneys’ fees (including allocated costs of internal counsel), fees, costs
and expenses of accountants, advisors and consultants and costs of settlement,
incurred by Administrative Agent and Lenders in enforcing any Obligations of or
in collecting any payments due from any Loan Party hereunder or under the other
Loan Documents (including in connection with the sale of, collection from, or
other realization upon any of the Collateral or the enforcement of the Loan
Documents) or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a “work-out” or
pursuant to any insolvency or bankruptcy proceedings.

10.3                        Indemnity

In addition to the
payment of expenses pursuant to subsection 10.2, whether or not the
transactions contemplated hereby shall be consummated, Company agrees to defend
(subject to Indemnitees’ selection of counsel), indemnify, pay and hold
harmless Administrative Agent and Lenders (including Issuing Lenders), and the
officers, directors, trustees, employees, agents, advisors and Affiliates of
Administrative Agent and Lenders (collectively called the “Indemnitees”),
from and against any and all Indemnified Liabilities (as hereinafter defined);

 

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provided
that Company shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise solely from the gross negligence or willful misconduct of
that Indemnitee as determined by a final judgment of a court of competent
jurisdiction.

As used herein, “Indemnified Liabilities” means, collectively, any and all
liabilities, obligations, losses, damages (including natural resource damages),
penalties, actions, judgments, suits, claims (including Environmental Claims),
costs (including the costs of any investigation, study, sampling, testing,
abatement, cleanup, removal, remediation or other response action necessary to
remove, remediate, clean up or abate any Hazardous Materials Activity), expenses
and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel for Indemnitees (including allocated costs of
internal counsel) in connection with any investigative, administrative or
judicial proceeding commenced or threatened by any Person, whether or not any
such Indemnitee shall be designated as a party or a potential party thereto and
including any such proceeding initiated by or on behalf of a Loan Party, and
any fees or expenses incurred by Indemnitees in enforcing this indemnity),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including securities and
commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner
relating to or arising out of (i) this Agreement, the other Loan Documents or
the Related Agreements or the transactions contemplated hereby or thereby
(including Lenders’ agreement to make the Loans hereunder or the use or
intended use of the proceeds thereof or the issuance of Letters of Credit
hereunder or the use or intended use of any thereof, the failure of an Issuing
Lender to honor a drawing under a Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto Government Authority, or any enforcement of any of the Loan Documents (including
any sale of, collection from, or other realization upon any of the Collateral
or the enforcement of the Guaranties)), (ii) the statements contained in the
commitment letter delivered by any Lender to Company with respect thereto,  or (iii) any Environmental Claim or any
Hazardous Materials Activity relating to or arising from, directly or
indirectly, any past or present activity, operation, land ownership, or
practice of Company or any of its Subsidiaries.

To the extent that the
undertakings to defend, indemnify, pay and hold harmless set forth in this
subsection 10.3 may be unenforceable in whole or in part because they are
violative of any law or public policy, Company shall contribute the maximum
portion that it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees
or any of them.

10.4                        Set-Off.

In addition to any rights
now or hereafter granted under applicable law and not by way of limitation of
any such rights, upon the occurrence and during the continuation of any Event
of Default and consultation with Administrative Agent, each of Lenders and
their Affiliates is hereby authorized by Company at any time or from time to
time, without notice to Company or to any other Person, any such notice being
hereby expressly waived, to set off and

 

132

 

to appropriate and
to apply any and all deposits (general or special, time or demand, provisional
or final, including Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender or any Affiliate of that
Lender to or for the credit or the account of Company and each other Loan Party
against and on account of the Obligations of Company or any other Loan Party to
that Lender (or any Affiliate of that Lender) or to any other Lender (or any
Affiliate of any other Lender) under this Agreement, the Letters of Credit and
participations therein and the other Loan Documents, including all claims of
any nature or description arising out of or connected with this Agreement, the
Letters of Credit and participations therein or any other Loan Document,
irrespective of whether or not (i) that Lender shall have made any demand
hereunder or (ii) the principal of or the interest on the Loans or any amounts
in respect of the Letters of Credit or any other amounts due hereunder shall
have become due and payable pursuant to Section 8 and although said
obligations and liabilities, or any of them, may be contingent or unmatured.

10.5                        Ratable Sharing.

Lenders hereby agree
among themselves that if any of them shall, whether by voluntary or mandatory
payment (other than a payment or prepayment of Loans made and applied in
accordance with the terms of this Agreement), by realization upon security,
through the exercise of any right of set-off or banker’s lien, by counterclaim
or cross action or by the enforcement of any right under the Loan Documents
(including any bid or purchase at public or private sale) or otherwise, or as
adequate protection of a deposit treated as cash collateral under the
Bankruptcy Code, receive payment or reduction of a proportion of the aggregate
amount of principal, interest, amounts payable in respect of Letters of Credit,
fees and other amounts then due and owing to that Lender hereunder or under the
other Loan Documents (collectively, the “Aggregate Amounts Due”
to such Lender) that is greater than the proportion received by any other
Lender in respect of the Aggregate Amounts Due to such other Lender, then the
Lender receiving such proportionately greater payment shall, unless such
proportionately greater payment is required by the terms of this Agreement, (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase assignments (which it
shall be deemed to have purchased from each seller of an assignment
simultaneously upon the receipt by such seller of its portion of such payment)
of the Aggregate Amounts Due to the other Lenders so that all such recoveries
of Aggregate Amounts Due shall be shared by all Lenders in proportion to the
Aggregate Amounts Due to them; provided that (A) if all or part of such
proportionately greater payment received by such purchasing Lender is
thereafter recovered from such Lender upon the bankruptcy or reorganization of
Company or otherwise, those purchases shall be rescinded and the purchase
prices paid for such assignments shall be returned to such purchasing Lender
ratably to the extent of such recovery, but without interest and (B) the
foregoing provisions shall not apply to (1) any payment made by Company
pursuant to and in accordance with the express terms of this Agreement or (2)
any payment obtained by a Lender as consideration for the assignment (other
than an assignment pursuant to this subsection 10.5) of or the sale of a
participation in any of its Obligations to any Eligible Assignee or Participant
pursuant to subsection 10.1B.  Company
expressly consents to the foregoing arrangement and agrees that any purchaser
of an assignment so purchased may

 

133

exercise any and
all rights of a Lender as to such assignment as fully as if that Lender had
complied with the provisions of subsection 10.1B with respect to such
assignment.  In order to further evidence
such assignment (and without prejudice to the effectiveness of the assignment
provisions set forth above), each purchasing Lender and each selling Lender
agree to enter into an Assignment Agreement at the request of a selling Lender
or a purchasing Lender, as the case may be, in form and substance reasonably
satisfactory to each such Lender.

10.6                        Amendments and Waivers.

A.            No amendment, modification, termination
or waiver of any provision of this Agreement or of the Notes or any other Loan
Documents (other than Hedge Agreements), and no consent to any departure by
Loan Party or any other Person therefrom, shall in any event be effective
without the prior written concurrence of Requisite Lenders; provided
that any such amendment, modification, termination, waiver or consent which:

(a)           extends
the final scheduled maturity of any Loan or Note, or extends the stated
maturity of any Letter of Credit beyond the Revolving Loan Commitment
Termination Date, or reduces the rate or extends the time of payment of
interest or fees thereon (except in connection with a waiver of applicability
of any post-default increase in interest rates), or reduces the principal
amount thereof (except to the extent repaid in cash) shall not be effective
without the prior written consent of each Lender directly affected thereby; or

(b)           (i)
releases all or substantially all of (x) the Collateral (except as expressly
provided in the Loan Documents) under all the Collateral Documents, or (y) the
Loan Parties (except as expressly provided in the Loan Documents) from their
obligations under any of the Guaranties; (ii) amends, modifies or waives any
provision of this subsection 10.6; (iii) reduces the percentage specified in
the definition of “Requisite Lenders”
or “Requisite Class Lenders” (it being
understood that, with the consent of Requisite Lenders, additional extensions
of credit (within an existing Class or a new Class) pursuant to this Agreement
may be included in the determination of Requisite Lenders and Requisite Class
Lenders on substantially the same basis as the extensions of Term Loans and
Revolving Loan Commitments are included on the Closing Date); and (iv) consents
to the assignment or transfer by Company of any of its rights and obligations
under this Agreement or any other Loan Document shall be effective only if
evidenced in a prior writing signed by or on behalf of all Lenders.

In addition, (i) no
amendment, modification, termination or waiver which shall increase the
Commitment of any Lender over the amount then in effect or postpone the
scheduled date of expiration of the Commitment of any Lender shall be effective
without the prior written consent of such Lender (it being understood that,
waivers or modifications of conditions precedent, covenants, Potential Events
of Default or Events of Default or of a mandatory reduction in the Commitments
shall not constitute an increase of the Commitment of any Lender and that an
increase in the available portion of the Commitment of any Lender shall not
constitute an increase in the Commitment of such Lender), (ii) no amendment,
modification, 

 

134

termination or
waiver of any provision of subsection 2.1A(iii) or of any other provision of
this Agreement relating to the Swing Line Loan Commitment or the Swing Line
Loans shall be effective without the written concurrence of Swing Line Lender, (iii)
no amendment, modification, termination or waiver of any provision of Section 9
or of any other provision of this Agreement which, by its terms, expressly
requires the approval or concurrence of Administrative Agent shall be effective
without the written concurrence of Administrative Agent, (iv) no amendment,
modification, termination or waiver of any provision of subsection 2.4 which
has the effect of changing any interim scheduled payments, voluntary or
mandatory prepayments, or Commitment reductions applicable to a Class in a
manner that disproportionately disadvantages such Class relative to any other
Class shall be effective without the written concurrence of Requisite Class
Lenders of such affected Class; provided that any change to the stated
amount or specified date of scheduled amortization payments set forth in
subsection 2.4A shall not be effective without the written concurrence of all
Lenders of such affected Class (it being understood and agreed that any
amendment, modification, termination or waiver of any such provision which only
postpones or reduces any interim scheduled payment, voluntary or mandatory
prepayment, or Commitment reduction from those set forth in subsection 2.4 with
respect to one Class but not the other Class shall be deemed to
disproportionately disadvantage such one Class but not to disproportionately
disadvantage any such other Class for purposes of this clause (iv)), and (v) no
amendment, modification, termination or waiver of any provision of Section 3 or
other provisions in this Agreement relating to Letters of Credit or Issuing
Lender shall be effective without the written concurrence of Issuing Lender
which has a Letter of Credit then outstanding or which has not been reimbursed
for a drawing under a Letter of Credit issued by it.

B.            Administrative Agent may, but shall have
no obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of that Lender.  Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was
given.  No notice to or demand on Company
in any case shall entitle Company to any other or further notice or demand in
similar or other circumstances.  Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 10.6 shall be binding upon each Lender at the time
outstanding, each future Lender and, if signed by Company, on Company.

10.7                        Independence of Covenants.

All covenants hereunder
shall be given independent effect so that if a particular action or condition
is not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or would otherwise be within the limitations of, another
covenant shall not avoid the occurrence of an Event of Default or Potential
Event of Default if such action is taken or condition exists.

10.8                        Notices; Effectiveness of
Signatures.

Unless otherwise
specifically provided herein, any notice or other communication herein required
or permitted to be given shall be in writing and may be personally served, or
sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given

 

135

when delivered in
person or by courier service, upon receipt of telefacsimile in complete and
legible form, or three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed; provided that notices
to Administrative Agent, Swing Line Lender and any Issuing Lender shall not be
effective until received.  For the
purposes hereof, the address of each party hereto shall be as set forth under
such party’s name on the signature pages hereof or (i) as to Company and
Administrative Agent, such other address as shall be designated by such Person
in a written notice delivered to the other parties hereto and (ii) as to
each other party, such other address as shall be designated by such party in a
written notice delivered to Administrative Agent.  Electronic mail and Internet and intranet
websites may be used to distribute routine communications, such as financial
statements and other information, and to distribute agreements and other
documents to be signed by Administrative Agent, Lenders and the Loan Parties.  Administrative Agent or Company may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.

Loan Documents and
notices under the Loan Documents may be transmitted and/or signed by
telefacsimile and by signatures delivered in ‘PDF’ format by electronic mail; provided,
however, that no signature with respect to any notice, request,
agreement, waiver, amendment or other document that is intended to have binding
effect may be sent by electronic mail. 
The effectiveness of any such documents and signatures shall, subject to
applicable law, have the same force and effect as an original copy with manual
signatures and shall be binding on all Loan Parties, Administrative Agent and
Lenders.  Administrative Agent may also
require that any such documents and signature be confirmed by a manually-signed
copy thereof; provided, however, that the failure to request or
deliver any such manually-signed copy shall not affect the effectiveness of any
facsimile document or signature.

10.9                        Survival of
Representations, Warranties and Agreements.

A.            All representations, warranties and
agreements made herein shall survive the execution and delivery of this
Agreement and the making of the Loans and the issuance of the Letters of Credit
hereunder.

B.            Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of Company set
forth in subsections 2.6D, 2.7, 10.2, 10.3, 10.4, 10.17 and 10.18 and the
agreements of Lenders set forth in subsections 9.2C, 9.4, 10.5 and 10.18 shall
survive the payment of the Loans, the cancellation or expiration of the Letters
of Credit and the reimbursement of any amounts drawn thereunder, and the
termination of this Agreement.

10.10                 Failure or Indulgence Not
Waiver; Remedies Cumulative.

No failure or delay on
the part of Administrative Agent or any Lender in the exercise of any power,
right or privilege hereunder or under any other Loan Document shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other power, right or privilege.  All
rights and

 

136

remedies existing
under this Agreement and the other Loan Documents are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

10.11                 Marshalling; Payments Set
Aside.

Neither Administrative
Agent nor any Lender shall be under any obligation to marshal any assets in
favor of Company or any other party or against or in payment of any or all of
the Obligations.  To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law,
common law or any equitable cause (and whether as a result of any demand,
settlement, litigation or otherwise), then, to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor or related thereto, shall be revived and continued
in full force and effect as if such payment or payments had not been made or
such enforcement or setoff had not occurred.

10.12                 Severability.

In case any provision in
or obligation under this Agreement or the Notes shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

10.13                 Obligations Several;
Independent Nature of Lenders’ Rights; Damage Waiver.

The obligations of
Lenders hereunder are several and no Lender shall be responsible for the
obligations or Commitments of any other Lender hereunder.  Nothing contained herein or in any other Loan
Document, and no action taken by Lenders pursuant hereto or thereto, shall be
deemed to constitute Lenders, or Lenders and Company, as a partnership, an
association, a Joint Venture or any other kind of entity. The amounts payable
at any time hereunder to each Lender shall be a separate and independent debt,
and each Lender shall be entitled to protect and enforce its rights arising out
of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.

To the extent permitted
by law, Company shall not assert, and hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with or as a result of this Agreement (including, without
limitation, subsection 2.1C hereof), any other Loan Document, any transaction
contemplated by the Loan Documents, any Loan or the use of proceeds
thereof.  No Indemnitee shall be liable
for any damages arising from the use by unintended recipients of any
information or other materials distributed by it through 

 

137

telecommunications,
electronic or other information transmission systems in connection with the
Loan Documents or the transactions contemplated thereby.

10.14                 Release of Security
Interest or Guaranty.

Upon the proposed sale or
other disposition of any Collateral to any Person (other than an Affiliate of
Company) that is permitted by this Agreement or to which Requisite Lenders have
otherwise consented, or the sale or other disposition of all of the Capital
Stock of a Subsidiary Guarantor to any Person (other than an Affiliate of
Company) that is permitted by this Agreement or to which Requisite Lenders have
otherwise consented, for which a Loan Party desires to obtain a security
interest release or a release of the Subsidiary Guaranty from Administrative
Agent, such Loan Party shall deliver an Officer’s Certificate (i) stating that
the Collateral or the Capital Stock subject to such disposition is being sold
or otherwise disposed of in compliance with the terms hereof and (ii)
specifying the Collateral or Capital Stock being sold or otherwise disposed of
in the proposed transaction.  Upon the
receipt of such Officer’s Certificate, Administrative Agent shall, at such Loan
Party’s expense, so long as Administrative Agent (a) has no reason to believe
that the facts stated in such Officer’s Certificate are not true and correct
and (b), if the sale or other disposition of such item of Collateral or Capital
Stock constitutes an Asset Sale, shall have received evidence satisfactory to
it that arrangements satisfactory to it have been made for delivery of the Net
Asset Sale Proceeds if and as required by subsection 2.4, execute and deliver
such releases of its security interest in such Collateral or such Subsidiary
Guaranty, as may be reasonably requested by such Loan Party.

10.15                 Applicable Law.

THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN ANY SUCH LOAN DOCUMENT),
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND SECTION
5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW.

10.16                 Construction of Agreement;
Nature of Relationship.

Each of the parties
hereto acknowledges that (i) it has been represented by counsel in the
negotiation and documentation of the terms of this Agreement, (ii) it has had
full and fair opportunity to review and revise the terms of this Agreement,
(iii) this Agreement has been drafted jointly by all of the parties hereto, and
(iv) neither Administrative Agent nor any Lender has any fiduciary relationship
with or duty to Company arising out of or in connection with this Agreement or
any of the other Loan Documents, and the relationship between Administrative
Agent and Lenders, on one hand, and Company, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor.  Accordingly, each of the parties

 

138

hereto
acknowledges and agrees that the terms of this Agreement shall not be construed
against or in favor of another party.

10.17                 Consent to Jurisdiction
and Service of Process.

ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY OBLIGATIONS HEREUNDER AND THEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK.  BY EXECUTING AND DELIVERING
THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
IRREVOCABLY

(I)            ACCEPTS GENERALLY AND
UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;

(II)           WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;

(III)         AGREES THAT SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SUBSECTION 10.8;

(IV)         AGREES THAT SERVICE AS PROVIDED IN
CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY
IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT;

(V)          AGREES THAT LENDERS RETAIN THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND

(VI)         AGREES THAT THE PROVISIONS OF THIS
SUBSECTION 10.17 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND
ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.

10.18                 Waiver of Jury Trial.

EACH OF
THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE 

 

139

LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED.  The scope of
this waiver is intended to be all-encompassing of any and all disputes that may
be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. 
Each party hereto acknowledges that this waiver is a material inducement
to enter into a business relationship, that each has already relied on this
waiver in entering into this Agreement, and that each will continue to rely on
this waiver in their related future dealings. 
Each party hereto further warrants and represents that it has reviewed
this waiver with its legal counsel and that it knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel.  THIS WAIVER
IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER.  In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.

10.19                 Confidentiality.

Each Lender shall hold
all non-public information of a confidential nature obtained pursuant to the
requirements of this Agreement in accordance with such Lender’s customary
procedures for handling confidential information of this nature, it being
understood and agreed by Company that in any event a Lender may
make disclosures (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such information and instructed to keep
such information confidential), (b) to the extent requested by any
Government Authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other
party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this subsection 10.19,
to (i) any Eligible Assignee of or participant in, or any prospective
Eligible Assignee of or Participant in, any of its rights or obligations under
this Agreement or (ii) any direct or indirect contractual counterparty or
prospective counterparty (or such contractual counterparty’s or prospective
counterparty’s professional advisor) to any credit derivative transaction
relating to obligations of Company, (g) with the consent of Company,
(h) to the extent such information (i) becomes publicly available
other than as a result of a breach of this subsection 10.19 or
(ii) becomes available to Administrative Agent or any Lender on a nonconfidential
basis from a source other than Company or (i) to the National Association
of Insurance Commissioners or any other similar organization or any nationally
recognized rating agency that requires access to information about a Lender’s
or its Affiliates’ investment portfolio in connection with ratings issued with
respect to such Lender or its Affiliates; provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify 

 

140

Company of any
request by any Government Authority or representative thereof (other than any
such request in connection with any examination of the financial condition or
other routine examinations or inquiries of such Lender by such Government
Authority) for disclosure of any such non-public information prior to
disclosure of such information; and provided, further that in no
event shall any Lender be obligated or required to return any materials
furnished by Company or any of its Subsidiaries.  In addition, Administrative Agent and Lenders
may disclose the existence of this Agreement and information about this
Agreement to market data collectors, similar service providers to the lending
industry, and service providers to Administrative Agent and Lenders, and
Administrative Agent or any of its Affiliates may place customary “tombstone” advertisements
(which may include any of Company’s or its Subsidiaries’ trade names or
corporate logos) in publications of its choice (including without limitation “e-tombstones”
published or otherwise circulated in electronic form and related
hyperlinks to any of Company’s or its Subsidiaries’ corporate websites)  at its own
expense.

10.20                 USA Patriot Act.

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

 

10.21                 Counterparts;
Effectiveness.

This
Agreement and any amendments, waivers, consents or supplements hereto or in
connection herewith
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. 
This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.

[**Remainder of page intentionally left
blank**]

 

141

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.

 

COMPANY:                               MD BEAUTY, INC.

By:  /s/ Leslie
A. Blodgett                                                    

Name: Leslie A.
Blodgett

Title:  President and Chief Executive Officer

 

Notice Address:

425 Bush Street

San Francisco, CA
94108

HOLDINGS:                              STB BEAUTY, INC.

By:  /s/ Leslie
A. Blodgett                                                    

Name: Leslie A.
Blodgett

Title:  President and Chief Executive Officer

 

Notice Address:

c/o Berkshire Partners
LLC

One Boston Place

Suite 3300

Boston, MA 02108

 

 

 

LENDERS:

BNP PARIBAS,

individually and as Administrative Agent

By:  /s/ Amy
Kirschner                                                          

Name: Amy
Kirschner

Title: Director

 

By:  /s/ M.
Finkelman                                                             

Name: M. Finkelman

Title: Managing
Director

 

 

Notice Address:

787 Seventh Avenue, 32nd Floor

New York, NY 10019

Attention: Amy Kirschner

 

 

 

LENDERS:

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND

By:  /s/ John
S. Holt                                                                 

Name: John S. Holt

Title: Authorised
Signatory

 

By:  /s/ Louise
O’Connor                                                       

Name: Louise O’Connor

Title: Authorised
Signatory

 

 

Notice Address:

Bank of Ireland (US Rep Office)

75 Holly Hill Lane

Greenwich, CT 06830

Telephone: 203-861-8974

Facsimile: 203-556-0656

Attention: Carol Lawlor

 

 

 

LENDERS:

CIT LENDING SERVICES CORPORATION

By:  /s/
John P. Sirico, II                                                          

Name: John P.
Sirico, II

Title: Vice
President

 

 

 

Notice Address:

 

c/o CIT Group, Inc.

Business Credit/Corporate Finance Group

1 CIT Drive

Livingston, New Jersey 07039

Telephone: (973) 740-5538

Facsimile (973) 740-5721

Attention: Michael L. LaManes, Director

 

with a copy to:

 

c/o CIT Group, Inc.

Corporate Legal Department

1 CIT Drive

Livingston, New Jersey 07039

Telephone: (973) 422-5858

Facsimile: (973) 422-5822 or (973) 740-5841

Attention: John P. Sirico, II,

Vice President and Assistant Chief Counsel

 

 

 

LENDERS:

CIBC, Inc.

By:  /s/ Gerald
Girardi                                                          

Name: GERALD
GIRARDI

Title: EXECUTIVE
DIRECTOR, CIBC WORLD MARKETS CORP., AS AGENT

 

 

 

Notice Address:

 

Gerald J. Girardi

CIBC World Markets

4th Floor

300 Madison Avenue

New York, NY 10017

Telephone: 212-856-3649

Facsimile: 212-856-3991

Attention: Gerald J. Girardi

 

 

 

 

SCHEDULE
2.1

 

REVOLVING
LENDERS' COMMITMENTS AND PRO RATA SHARES

 

	
  Lender

  	
   

  	
  Revolving

  Loan

  Commitment

  	
   

  	
  Pro Rata

  Share (re:

  Rev. Loans)

  	
   

  
	
  BNP Paribas

  	
   

  	
  $

  	
  6,500,000

  	
   

  	
  43.333333

  	
  %

  
	
  CIBC, Inc.

  	
   

  	
  $

  	
  6,500,000

  	
   

  	
  43.333333

  	
  %

  
	
  The Governor and Company
  of the Bank of Ireland

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  13.333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  $

  	
  15,000,000

  	
   

  	
  100

  	
  %

  

 

 

 

SCHEDULE
5.1

 

SUBSIDIARIES
OF COMPANY

 

	
  Entity

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Direct

  Parent(s)

  	
   

  	
  Ownership

  By (Each)

  Direct Parent

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}]]