Document:

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                                                                   EXHIBIT 10.44

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                                 LOAN AGREEMENT

                                  BY AND AMONG

                        SOURCE INTERLINK COMPANIES, INC.

                                       AND

           EACH OF ITS SUBSIDIARIES THAT ARE NAMED HEREIN AS BORROWERS

                                  AS BORROWERS,

          EACH OF ITS SUBSIDIARIES THAT ARE NAMED HEREIN AS GUARANTORS

                                 AS GUARANTORS,

                     THE LENDERS THAT ARE SIGNATORIES HERETO

                                 AS THE LENDERS,

                                       AND

                           WELLS FARGO FOOTHILL, INC.

                    AS THE ARRANGER AND ADMINISTRATIVE AGENT

                          DATED AS OF OCTOBER 30, 2003

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                                 LOAN AGREEMENT

                  THIS LOAN AGREEMENT (this "Agreement"), is entered into as of
October 30, 2003, by and among, on the one hand, the lenders identified on the
signature pages hereof (such lenders, together with their respective successors
and permitted assigns, are referred to hereinafter each individually as a
"Lender" and collectively as the "Lenders"), WELLS FARGO FOOTHILL, INC., a
California corporation, as the arranger and administrative agent for the Lenders
("Agent"), and, on the other hand, SOURCE INTERLINK COMPANIES, INC., a Missouri
corporation ("Parent"), each of Parent's Subsidiaries identified on the
signature pages hereof as "Borrowers" (such Subsidiaries, together with Parent,
are referred to hereinafter each individually as a "Borrower", and individually
and collectively, jointly and severally, as the "Borrowers"), and each of
Parent's Subsidiaries identified on the signature pages hereof as "Guarantors"
(such Subsidiaries are referred to hereinafter each individually as a
"Guarantor", and individually and collectively, jointly and severally, as the
"Guarantors ") .

                  The parties agree as follows:

         1.       DEFINITIONS AND CONSTRUCTION.

                  1.1.     DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:

                  "Account" means an account (as that term is defined in the
Code), and any and all supporting obligations in respect thereof.

                  "Account Debtor" means any Person who is obligated under, with
respect to, or on account of, an Account, chattel paper, or a General
Intangible.

                  "ACH Transactions" means any cash management or related
services (including the Automated Clearing House processing of electronic funds
transfers through the direct Federal Reserve Fedline system) provided by a Bank
Product Provider for the account of Administrative Borrower or its Subsidiaries.

                  "Acquisition" means the acquisition of (i) all or
substantially all of the Stock of any Person, or (ii) all or substantially all
of the assets of any Person or the assets comprising any material line of
business of such Person.

                  "Administrative Borrower" has the meaning set forth in Section
17.10.

                  "Advances" has the meaning set forth in Section 2.1(a).

                  "Affiliate" means, as applied to any Person, any other Person
who, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" means the possession, directly or indirectly through
one or more intermediaries, of the power to direct the management and policies
of a Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, for purposes of the definition of Eligible Accounts and
Section 7.13 hereof:

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(a) any Person which owns directly or indirectly 10% or more of the Stock having
ordinary voting power for the election of directors or other members of the
governing body of a Person or 10% or more of the partnership or other ownership
interests of a Person (other than as a limited partner of such Person) shall be
deemed an Affiliate of such Person, (b) each director (or comparable manager) of
a Person shall be deemed to be an Affiliate of such Person, and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed an Affiliate of such Person.

                  "Agent" means WFF, in its capacity as arranger and
administrative agent hereunder, and any successor thereto.

                  "Agent Advances" has the meaning set forth in Section
2.3(e)(i).

                  "Agent-Related Persons" means Agent, together with its
Affiliates, officers, directors, employees, attorneys, and agents.

                  "Agent's Account" means the Deposit Account of Agent
identified on Schedule A-1.

                  "Agreement" has the meaning set forth in the preamble to this
Agreement.

                  "Applicable Excess Cash Flow Percentage" means, with respect
to Excess Cash Flow for any Fiscal Year of the Parent, the percentage of Excess
Cash Flow set forth below opposite the applicable Total Debt Ratio as of the
last day of such Fiscal Year, as determined by Agent based upon the Loan
Parties' financial statements delivered to Agent and Lenders pursuant to Section
6.3(b) for such Fiscal Year:

<TABLE>
<CAPTION>
 Total Debt Ratio                          Percentage of Excess Cash Flow
 ----------------                          ------------------------------
<S>                                        <C>
3.0 to 1.0 or higher                                 25%

Lower than 3.0 to 1.0 but
higher than or equal
to 2.5 to 1.0                                        15%

Lower than 2.5 to 1.0 but
higher than or equal
to 2.0 to 1.0                                        10%

Lower than 2.0 to 1.0                                 0%
</TABLE>

provided, that, notwithstanding the foregoing, if the Loan Parties fail to
deliver financial statements to the Agent and the Lenders for any Fiscal Year in
accordance with Section 6.3(b), then until such financial statements are
delivered, the Applicable Excess Cash Flow Percentage shall be 25%.

                  "Applicable Prepayment Premium" means, as of any date of
determination, an amount equal to (a) during the period from and after the date
of the execution and delivery of this

                                     - 2 -

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Agreement up to the date that is the first anniversary of the Closing Date, 3%
times the sum of (i) the Maximum Revolver Amount, plus (ii) the outstanding
principal balance of the Term Loan on the date immediately prior to the date of
determination, (b) during the period from and including the date that is the
first anniversary of the Closing Date up to the date that is the second
anniversary of the Closing Date, 2% times the sum of (i) the Maximum Revolver
Amount, plus (ii) the outstanding principal balance of the Term Loan on the date
immediately prior to the date of determination, and (c) during the period from
and including the date that is the second anniversary of the Closing Date up to
the Maturity Date, 1% times the sum of (i) the Maximum Revolver Amount, plus
(ii) the outstanding principal balance of the Term Loan on the date immediately
prior to the date of determination.

                  "Appraised Value" means the net forced liquidation value (net
of liquidation expenses) of any Equipment or the net fair market value (net of
liquidation expenses) of any Real Property Collateral, in each case, determined
by the most recent appraisal performed by a qualified independent appraiser
selected by Agent, which appraisal is in form and substance satisfactory to
Agent.

                  "Assignee" has the meaning set forth in Section 14.1(a).

                  "Assignment and Acceptance" means an Assignment and Acceptance
Agreement substantially in the form of Exhibit A-1.

                  "Authorized Person" means any officer or employee of
Administrative Borrower.

                  "Availability" means, as of any date of determination, the
amount that Borrowers are entitled to borrow as Advances hereunder (after giving
effect to all then outstanding Obligations (other than Bank Product Obligations)
and all sublimits and reserves then applicable hereunder).

                  "Bank Product" means any financial accommodation extended to
Administrative Borrower or its Subsidiaries by a Bank Product Provider (other
than pursuant to this Agreement) including: (a) credit cards, (b) credit card
processing services, (c) debit cards, (d) purchase cards, (e) ACH Transactions,
(f) cash management, including controlled disbursement, accounts or services, or
(g) transactions under Hedge Agreements.

                  "Bank Product Agreements" means those agreements entered into
from time to time by Administrative Borrower or its Subsidiaries with a Bank
Product Provider in connection with the obtaining of any of the Bank Products.

                  "Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Administrative
Borrower or its Subsidiaries to any Bank Product Provider pursuant to or
evidenced by the Bank Product Agreements and irrespective of whether for the
payment of money, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including all such amounts
that Administrative Borrower or its Subsidiaries are obligated to reimburse to
Agent or any member of the Lender Group as a result of Agent or such member of
the Lender Group purchasing participations from, or executing indemnities or
reimbursement obligations to,

                                     - 3 -

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a Bank Product Provider with respect to the Bank Products provided by such Bank
Product Provider to Administrative Borrower or its Subsidiaries.

                  "Bank Product Provider" means Wells Fargo or any of its
Affiliates.

                  "Bank Product Reserve" means, as of any date of determination,
the amount of reserves that Agent has established (based upon the Bank Product
Providers' reasonable determination of the maximum expected credit exposure in
respect of then extant Bank Products) in respect of Bank Products then provided
or outstanding, provided that such reserves shall be established at the time
Wells Fargo or any of its Affiliates provides the applicable Bank Products.

                  "Bankruptcy Code" means, as applicable, (i) the United States
Bankruptcy Code, (ii) the Bankruptcy and Insolvency Act (Canada) or (iii) the
Companies' Creditors Arrangement Act (Canada), or any similar legislation in a
relevant jurisdiction, in each case as in effect from time to time.

                  "Barnes and Noble" means, collectively, Barnes and Noble, Inc.
and each of its Affiliates.

                  "Base LIBOR Rate" means the rate per annum, determined by
Agent in accordance with its customary procedures, and utilizing such electronic
or other quotation sources as it considers appropriate (rounded upwards, if
necessary, to the next 1/100%), to be the rate at which Dollar deposits (for
delivery on the first day of the requested Interest Period) are offered to major
banks in the London interbank market 2 Business Days prior to the commencement
of the requested Interest Period, for a term and in an amount comparable to the
Interest Period and the amount of the LIBOR Rate Loan requested (whether as an
initial LIBOR Rate Loan or as a continuation of an extant LIBOR Rate Loan or as
a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Administrative
Borrower in accordance with this Agreement, which determination shall be
conclusive in the absence of manifest error.

                  "Base Rate" means, the rate of interest announced, from time
to time, within Wells Fargo at its principal office in San Francisco as its
"prime rate", with the understanding that the "prime rate" is one of Wells
Fargo's base rates (not necessarily the lowest of such rates) and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto and is evidenced by the recording thereof after its
announcement in such internal publications as Wells Fargo may designate.

                  "Base Rate Loan" means the portion of the Advances or the Term
Loan that bears interest at a rate determined by reference to the Base Rate.

                  "Base Rate Margin" means the percentage points set forth below
corresponding to average Excess Availability for the three-month period ending
as of the last day of the immediately preceding month, as determined by Agent
based upon the Borrowing Base and Excess Availability calculation delivered to
Agent pursuant to Section 6.2(j) for such three-month period:

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<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
  Level             Average Excess Availability                      Base Rate Margin
-----------------------------------------------------------------------------------------
<S>          <C>                                                   <C>
     I       Greater than $10,000,000                              Zero percentage points
-----------------------------------------------------------------------------------------
    II       $10,000,000 or less but greater than or               0.25 percentage points
             equal to $5,000,000
-----------------------------------------------------------------------------------------
    III      Less than $5,000,000                                  0.50 percentage points
-----------------------------------------------------------------------------------------
</TABLE>

provided, that, notwithstanding the foregoing, (a) each adjustment to the Base
Rate Margin shall be effective from the date of delivery of the Loan Parties'
Excess Availability calculation for the three-month period used to determine the
Base Rate Margin until the date of delivery of such Excess Availability
calculation pursuant to Section 6.2(j) hereof for the next succeeding
three-month period, (b) if the Loan Parties fail to deliver the Excess
Availability calculation to the Agent for any three-month period in accordance
with Section 6.2(j) hereof, then until such Excess Availability calculation is
delivered, the Base Rate Margin shall be set in accordance with Level III, and
(c) on and after the Closing Date and until the Excess Availability calculation
is delivered for the three-month period ending on January 31, 2004, the Base
Rate Margin shall be set at Level II above.

                  "Base Rate Term Loan Margin" means 2.50 percentage points.

                  "Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) or a benefit plan under Canadian Employee Benefit Laws
for which any Loan Party or any Subsidiary or ERISA Affiliate of any Loan Party
has been an "employer" (as defined in Section 3(5) of ERISA) or has held
equivalent status under Canadian Employee Benefit Laws within the past six
years.

                  "Board of Directors" means the board of directors (or
comparable managers) of Parent or any committee thereof duly authorized to act
on behalf of the board of directors (or comparable managers).

                  "Books" means all of Administrative Borrower's and its
Subsidiaries' now owned or hereafter acquired books and records (including all
of their Records indicating, summarizing, or evidencing their assets (including
the Collateral) or liabilities, all of Administrative Borrower's and its
Subsidiaries' Records relating to their business operations or financial
condition, and all of their goods or General Intangibles related to such
information).

                  "Borders" means, collectively, Borders Group, Inc. and each of
its Affiliates.

                  "Borrower" and "Borrowers" have the respective meanings set
forth in the preamble to this Agreement.

                  "Borrowing" means a borrowing hereunder consisting of Advances
(or term loans, in the case of the Term Loan) made on the same day by the
Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing
Loan, or by Agent in the case of an Agent Advance, in each case, to
Administrative Borrower.

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                  "Borrowing Base" means, as of any date of determination, the
result of:

                  (a)      the lesser of:

                           (i)      the sum of:

                                    (A)      the lesser of:

                                             (x)      the sum of: (1) 85% of the
                           amount of Eligible Accounts of the Fulfillment/ANS
                           Business Segment of the Loan Parties, less the
                           amount, if any, of the Dilution Reserve for the
                           Fulfillment/ANS Business Segment of the Loan Parties,
                           (2) 85% of the amount of Eligible Accounts of the
                           Fulfillment/DEYCO Business Segment of the Loan
                           Parties, less the amount, if any, of the Dilution
                           Reserve for the Fulfillment/DEYCO Business Segment of
                           the Loan Parties, (3) 85% of the amount of Eligible
                           Accounts of the Fulfillment/IPD Business Segment of
                           the Loan Parties, less the amount, if any, of the
                           Dilution Reserve for the Fulfillment/IPD Business
                           Segment of the Loan Parties, and (4) 85% of the
                           amount of Eligible Accounts of the Fulfillment/WMS
                           Business Segment of the Loan Parties, less the
                           amount, if any, of the Dilution Reserve for the
                           Fulfillment/WMS Business Segment of the Loan Parties,
                           and

                                             (y)      an amount equal to
                           Borrowers' Collections with respect to Accounts of
                           the Fulfillment Business Segment of the Loan Parties
                           for the immediately preceding 45 day period, and

                                    (B)      the lesser of:

                                             (x)      the sum of: (1) 85% of the
                           amount of Eligible Accounts of the In-Store
                           Services/Wire Business Segment of the Loan Parties,
                           less the amount, if any of the Dilution Reserve for
                           the In-Store Services/Wire Business Segment of the
                           Loan Parties, (2) 85% of the amount of Eligible
                           Accounts of the In-Store Services/Claiming Business
                           Segment of the Loan Parties, less the amount, if any
                           of the Dilution Reserve for the In-Store
                           Services/Claiming Business Segment of the Loan
                           Parties, and (3) 85% of the amount of Eligible
                           Accounts of the In-Store Services/Other Business
                           Segment of the Loan Parties, less the amount, if any
                           of the Dilution Reserve for the In-Store
                           Services/Other Business Segment of the Loan Parties,
                           and

                                             (y)      (1) if such date of
                           determination is prior to the first anniversary of
                           the Closing Date, an amount equal to 66-2/3% of
                           Borrowers' Collections with respect to Accounts of
                           the In-Store Services Business Segments of the Loan
                           Parties for the immediately preceding 90 day period,
                           (2) if such date of determination is on or after the
                           first anniversary of the Closing Date and prior to
                           the second anniversary of the Closing Date, an amount
                           equal to 50% of the Borrowers' Collections with
                           respect to Accounts of the In-Store Services Business
                           Segments of the

                                     - 6 -

<PAGE>

                           Loan Parties for the immediately preceding 90day
                           period, and (3) if such date of determination is on
                           or after the second anniversary of the Closing Date,
                           an amount equal to 33-1/3% of the Borrowers'
                           Collections with respect to Accounts of the In-Store
                           Services Business Segments of the Loan Parties for
                           the immediately preceding 90 day period, and

                                    (C)      the lesser of:

                                             (x)      the sum of: (1) 85% of the
                           amount of Eligible Accounts of the Wood
                           Manufacturing/NC Business Segment of the Loan
                           Parties, less the amount, if any, of the Dilution
                           Reserve for the Wood Manufacturing/NC Business
                           Segment of the Loan Parties, and (2) 85% of the
                           amount of Eligible Accounts of the Wood
                           Manufacturing/Quincy Business Segment of the Loan
                           Parties, less the amount, if any, of the Dilution
                           Reserve for the Wood Manufacturing/Quincy Business
                           Segment of the Loan Parties, and

                                             (y)      an amount equal to
                           Borrowers' Collections with respect to Accounts of
                           the Wood Manufacturing Business Segments of the Loan
                           Parties for the immediately preceding 60 day period,
                           and

                           (ii)     on and after the date that is 45 days after
         the Closing Date, the WFF Availability,

         provided that the aggregate amount of the Borrowing Base that may be
         supported by In-Store Services Accounts at any time shall not exceed
         the In-Store Services Subline Amount, minus

                  (b)      the sum of (i) the Bank Product Reserve, (ii) the
Yaqui Lien Reserve, (iii) the Rent Reserve and (iv) the aggregate amount of such
other reserves, if any, established by Agent under Section 2.1(b).

                  "Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks are authorized or required to close in the State of
New York, except that, if a determination of a Business Day shall relate to a
LIBOR Rate Loan, the term "Business Day" also shall exclude any day on which
banks are closed for dealings in Dollar deposits in the London interbank market.

                  "Business Segment" means any of the Fulfillment Business
Segments, the In-Store Services Business Segments or the Wood Manufacturing
Business Segments.

                  "Canadian Account Debtors" means Account Debtors which either
maintain their chief executive offices in Canada or are organized under the laws
of Canada.

                  "Canadian Documents" means the Canadian Security Agreement,
the Canadian Pledge Agreement and the Canadian Guaranty.

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<PAGE>

                  "Canadian Employee Benefits Laws" means the Canadian Pension
Plan Act (Canada), the Pension Benefit Act (Ontario), the Pension Benefits
Standards Act (British Columbia), the Health Insurance Act (Ontario), the
Employment Standard Act (Ontario), the Employment Standards Act (British
Columbia) and any federal, provincial or local counterparts or equivalents, in
each case, as amended from time to time.

                  "Canadian Guaranty" means, collectively, those certain
Guaranties executed and delivered by the Canadian Guarantors in favor of Agent,
for the benefit of Lender Group, in form and substance satisfactory to Agent.

                  "Canadian Guarantors" means collectively the Subsidiaries of
Parent named in Part I of Schedule G-1.

                  "Canadian Income Tax Act" means the Income Tax Act (Canada),
R.S.C. 1985 C.1 (5th Supp), as amended.

                  "Canadian Pledge Agreement" means, collectively, those certain
Pledge Agreements executed and delivered by the Parent and The Source-Canada
Corp. in favor of Collateral Agent, for the benefit of Lender Group, the Bank
Product Providers and the Term Loan B Lender Group, in form and substance
satisfactory to Agent.

                  "Canadian Security Agreement" means, collectively, those
certain Security Agreements executed and delivered by the Canadian Guarantors in
favor of Collateral Agent, for the benefit of Lender Group, the Bank Product
Providers and the Term Loan B Lender Group, in form and substance satisfactory
to Agent.

                  "Capital Expenditures" means, with respect to any Person for
any period, the sum of (a) the aggregate of all expenditures by such Person and
its Subsidiaries during such period that are capital expenditures as determined
in accordance with GAAP, whether such expenditures are paid in cash or financed,
and (b) to the extent not covered by clause (a), the aggregate of all
expenditures by such Person and its Subsidiaries during such period to acquire
by purchase or otherwise the business or capitalized assets of, or the Stock of,
any other Person.

                  "Capital Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.

                  "Capitalized Lease Obligation" means that portion of the
obligations under a Capital Lease that is required to be capitalized in
accordance with GAAP.

                  "Cash Equivalents" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 1 year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Rating Group ("S&P") or Moody's Investors Service, Inc.
("Moody's"), (c) commercial paper maturing no more than 270 days from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from

                                     - 8 -

<PAGE>

S&P or at least P-1 from Moody's, (d) certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof issued
by any bank organized under the laws of the United States or any state thereof
having at the date of acquisition thereof combined capital and surplus of not
less than $250,000,000, (e) demand Deposit Accounts maintained with any bank
organized under the laws of the United States or any state thereof so long as
the amount maintained with any individual bank is less than or equal to $100,000
and is insured by the Federal Deposit Insurance Corporation, and (f) Investments
in money market funds substantially all of whose assets are invested in the
types of assets described in clauses (a) through (e) above.

                  "Cash Management Account" has the meaning set forth in Section
2.7(a).

                  "Cash Management Agreements" means those certain cash
management agreements, in form and substance satisfactory to Agent, each of
which is among Administrative Borrower or one of its Subsidiaries, Collateral
Agent, and one of the Cash Management Banks.

                  "Cash Management Bank" has the meaning set forth in Section
2.7(a).

                  "Change of Control" means that (a) any "person" or "group"
(within the meaning of Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 20%, or more, of the Stock of
Parent having the right to vote for the election of members of the Board of
Directors, or (b) a majority of the members of the Board of Directors do not
constitute Continuing Directors, or (c) any Borrower ceases to own, directly or
indirectly, and control 100% of the outstanding Stock of each of its
Subsidiaries extant as of the Closing Date, or (d) either S. Leslie Flegel or
Jim Gillis ceases to be involved in the day to day operations and management of
the business of the Loan Parties, and a successor reasonably acceptable to Agent
is not appointed on terms reasonably acceptable to Agent within 120 days of such
cessation of involvement, provided that Agent agrees that Jason S. Flegel shall
be an acceptable successor for either Person.

                  "Closing Date" means the date of the making of the initial
Advance (or other extension of credit) hereunder.

                  "Closing Date Business Plan" means the set of Projections of
the Loan Parties for the 2 year period following the Closing Date (on a year by
year basis, and for the 1 year period following the Closing Date, on a month by
month basis), in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent.

                  "Code" means the New York Uniform Commercial Code, as in
effect from time to time.

                  "Collateral" means all assets and interests in assets and
proceeds thereof now owned or hereafter acquired by any Loan Party in or upon
which a Lien is granted under any of the Loan Documents.

                  "Collateral Access Agreement" means a landlord waiver, bailee
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person

                                     - 9 -

<PAGE>

in possession of, having a Lien upon, or having rights or interests in any Loan
Party's Books, Equipment or, Inventory, in each case, in form and substance
satisfactory to Agent.

                  "Collateral Agent" means WFF, in its capacity as collateral
agent for (i) Agent, the Lenders and the Bank Product Providers and (ii) the
Term Loan B Agent and the Term Loan B Lenders.

                  "Collateral Agent's Liens" means the Liens granted by Loan
Parties or their Subsidiaries to the Collateral Agent, for the benefit of the
Lender Group, the Bank Product Providers and the Term Loan B Lender Group, under
any of the Loan Documents.

                  "Collections" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).

                  "Commitment" means, with respect to each Lender, its Revolver
Commitment, its Term Loan Commitment, or its Total Commitment, as the context
requires, and, with respect to all Lenders, their Revolver Commitments, their
Term Loan Commitments, or their Total Commitments, as the context requires, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on Schedule C-1 or in the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 14.1.

                  "Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 delivered by the chief financial officer of Parent to
Agent.

                  "Continuing Director" means (a) any member of the Board of
Directors who was a director (or comparable manager) of Parent on the Closing
Date, and (b) any individual who becomes a member of the Board of Directors
after the Closing Date if such individual was appointed or nominated for
election to the Board of Directors by a majority of the Continuing Directors,
but excluding any such individual originally proposed for election in opposition
to the Board of Directors in office at the Closing Date in an actual or
threatened election contest relating to the election of the directors (or
comparable managers) of Parent and whose initial assumption of office resulted
from such contest or the settlement thereof.

                  "Contribution Agreement" means a contribution agreement
executed and delivered by each Borrower and Guarantor, the form and substance of
which is satisfactory to Agent.

                  "Control Agreement" means a control agreement, in form and
substance satisfactory to Agent, executed and delivered by any Loan Party,
Collateral Agent, and the applicable securities intermediary (with respect to a
Securities Account) or a bank (with respect to a Deposit Account).

                  "Copyright Security Agreement" means a copyright security
agreement executed and delivered by each applicable Loan Party and Collateral
Agent, the form and substance of which is satisfactory to Agent.

                                     - 10 -

<PAGE>

                  "Daily Balance" means, as of any date of determination and
with respect to any Obligation, the amount of such Obligation owed at the end of
such day.

                  "Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.

                  "Defaulting Lender" means any Lender that fails to make any
Advance (or other extension of credit) that it is required to make hereunder on
the date that it is required to do so hereunder.

                  "Defaulting Lender Rate" means (a) for the first 3 days from
and after the date the relevant payment is due, the Base Rate, and (b)
thereafter, the interest rate then applicable to Advances that are Base Rate
Loans (inclusive of the Base Rate Margin applicable thereto).

                  "Deposit Account" or "DDA" means any deposit account (as that
term is defined in the Code).

                  "Designated Account" means the Deposit Account of
Administrative Borrower identified on Schedule D-1.

                  "Designated Account Bank" has the meaning ascribed thereto on
Schedule D-1.

                  "DEYCO" means David E. Young, Inc., a New York corporation.

                  "DEYCO Letter of Intent" means the letter agreement dated
August 11, 2003, between JVCO, an entity to be owned by John Amann, Vince
Ohanyan and Bill McCurdy, and ICI, with respect to a proposed management
agreement between ICI and JVCO pursuant to which, among other things, JVCO would
manage the operations of DEYCO and JVCO would be granted the exclusive right to
purchase certain assets of DEYCO.

                  "DEYCO Sale" has the meaning ascribed thereto in Section 7.4.

                  "Dilution" means, for any Business Segment, 3-Month Dilution
or 12-Month Dilution, whichever is greater.

                  "Dilution Reserve" means, for each Business Segment as of any
date of determination, an amount sufficient to reduce the advance rate against
Eligible Accounts of such Business Segment by 1 percentage point for each
percentage point by which Dilution for such Business Segment is in excess of 5%.

                  "Disbursement Letter" means an instructional letter executed
and delivered by Administrative Borrower to Agent regarding the extensions of
credit to be made on the Closing Date, the form and substance of which is
satisfactory to Agent.

                  "Dollars" or "$" means United States dollars.

                                     - 11 -

<PAGE>

                  "Due Diligence Certificate" means the Due Diligence
Certificate submitted by Agent to Administrative Borrower, together with
Borrowers' completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Agent.

                  "EBITDA" means, with respect to any fiscal period, Parent's
and its Subsidiaries' consolidated net earnings (or loss), minus extraordinary
gains and interest income, plus interest expense, income taxes, depreciation and
amortization, the prepayment premium in the amount of $125,000 to be paid by
certain Borrowers to Congress Financial Corporation (Western) on the Closing
Date, non-cash charges related to the termination on the Closing Date of the
credit facilities provided by the Existing Lenders to the Loan Parties and
relocation expenses for such period, as determined in accordance with GAAP,
provided that only relocation expenses incurred prior to the Closing Date shall
be added to consolidated net earnings (or loss) for purpose of this definition.

                  "Eligible Accounts" means those Accounts created by one of the
Eligible Loan Parties in the ordinary course of its business, that arise out of
its sale of goods or rendition of services, that comply with each of the
representations and warranties respecting Eligible Accounts made in the Loan
Documents, and that are not excluded as ineligible by virtue of one or more of
the excluding criteria set forth below; provided, however, that such criteria
may be revised from time to time by Agent in Agent's Permitted Discretion to
address the results of any audit performed by Agent from time to time after the
Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits and unapplied cash. Eligible Accounts
shall not include the following:

                           (a)      (i) Accounts that the Account Debtor has
         failed to pay within 90 days of original invoice date, provided that,
         up to $5,000,000 of In-Store Services Accounts outstanding at any time
         shall not be excluded from Eligible Accounts solely by reason of this
         subclause (i) if such In-Store Services Accounts are not past the
         invoice date by more than 180 days, or (ii) Accounts with selling terms
         of more than 60 days, provided that (A) Fulfillment/WMS Accounts shall
         not be excluded from Eligible Accounts solely by reason of this
         subclause (ii) if such Accounts have selling terms of not more than 90
         days, (B) In-Store Services/Claiming Accounts arising under the retail
         display payment claiming business of US Marketing Services shall not be
         excluded from Eligible Accounts solely by reason of this subclause (ii)
         if such Accounts have selling terms providing for payment not more than
         90 days after the end of each calendar quarter, and (C) Accounts which
         are covered by a credit insurance policy (which policy has been
         assigned to the Collateral Agent) in accordance with subclause (z) of
         clause (f) below shall not be excluded from Eligible Accounts solely by
         reason of this subclause (ii) if such Accounts have selling terms of
         not more than 90 days,

                           (b)      Accounts owed by an Account Debtor (or its
         Affiliates) where 50% or more of all Accounts owed by that Account
         Debtor (or its Affiliates) are deemed ineligible under clause (a)
         above, provided that no Accounts shall be excluded from Eligible
         Accounts solely by reason of this clause (b) until the date which is 10
         Business Days after Agent has delivered to Administrative Borrower
         written notice of the effectiveness of this clause (b),

                                     - 12 -

<PAGE>

                           (c)      Accounts with respect to which the Account
         Debtor is an Affiliate of any Loan Party or an employee or agent of any
         Loan Party or any Affiliate of any Loan Party,

                           (d)      Accounts arising in a transaction wherein
         goods are placed on consignment or are sold pursuant to a guaranteed
         sale, a sale or return (other than in connection with any Fulfillment
         Accounts), a sale on approval, a bill and hold, or any other terms by
         reason of which the payment by the Account Debtor may be conditional,
         unless such Accounts arise under a Program Contract which includes the
         security interest or bill and hold provisions, as applicable, set forth
         in Exhibit P-1,

                           (e)      Accounts that are not payable in (i)
         Dollars, (ii) in the case of Accounts of any Canadian Guarantor,
         Canadian Dollars, or (iii) in the case of Accounts eligible by reason
         of subclause (y) or (z) of clause (f) below, Australian Dollars or
         Euros,

                           (f)      Accounts with respect to which the Account
         Debtor either (i) does not maintain its chief executive office in the
         United States or Canada, or (ii) is not organized under the laws of the
         United States or any state thereof, of the laws of Canada or any
         province thereof, or (iii) is the government of any foreign country or
         sovereign state, or of any state, province, municipality, or other
         political subdivision thereof, or of any department, agency, public
         corporation, or other instrumentality thereof, unless (y) the Account
         is supported by an irrevocable letter of credit satisfactory to Agent
         (as to form, substance, and issuer or domestic confirming bank) that
         has been delivered to Agent and is directly drawable by Agent, or (z)
         (1) the Account is covered by credit insurance in form, substance, and
         amount, and by an insurer, satisfactory to Agent, (2) all rights with
         respect thereto have been assigned to Collateral Agent, and (3) not
         more than 180 days have elapsed from the invoice date for such Account,
         provided that, except for Accounts described in the preceding
         subclauses (y) or (z), the aggregate amount of Eligible Accounts owing
         by Canadian Account Debtors shall not exceed $3,000,000.

                           (g)      Accounts with respect to which the Account
         Debtor is either (i) the United States, Canada or any department,
         agency, or instrumentality of the United States (exclusive, however, of
         Accounts with respect to which the applicable Borrower has complied, to
         the reasonable satisfaction of Agent, with the Assignment of Claims
         Act, 31 USC Section 3727 or the Financial Administration Act (Canada)),
         or (ii) any state of the United States or province of Canada,

                           (h)      Accounts with respect to which the Account
         Debtor is a creditor of any Loan Party, has or has asserted a right of
         setoff, or has disputed its obligation to pay all or any portion of the
         Account, to the extent of such claim, right of setoff, or dispute,

                           (i)      Accounts with respect to an Account Debtor
         whose total obligations owing to any Business Segment of the Loan
         Parties exceed (A) if such Account Debtor is Barnes and Noble or
         Borders, (x) in the case of Wood Manufacturing Accounts and Fulfillment
         Accounts owing by Barnes and Noble or Borders, 35% for each such
         Account Debtor in each such Business Segment and (y) in the case of all
         other Accounts owing by Barnes and Noble or Border, 15% for each such
         Account Debtor, and

                                     - 13 -

<PAGE>

         (B) for all other Account Debtors, 10% for each such Account Debtor
         (such applicable percentage, as applied to a particular Account Debtor,
         being subject to reduction by Agent in its Permitted Discretion if the
         creditworthiness of such Account Debtor deteriorates) of all Eligible
         Accounts to such Business Segment, to the extent of the obligations
         owing by such Account Debtor to such Business Segment in excess of such
         percentages; provided, however, that, in each case, the amount of
         Eligible Accounts that are excluded because they exceed the foregoing
         percentages shall be determined by Agent based on all of the otherwise
         Eligible Accounts of such Business Segments prior to giving effect to
         any eliminations based upon the foregoing concentration limit for such
         Business Segment,

                           (j)      Accounts owing by an Account Debtor whose
         total obligations owing to the Loan Parties, on a consolidated basis,
         exceed (A) if such Account Debtor is Barnes and Noble or Borders, 15%
         for each such Account Debtor, and (B) for all other Account Debtors,
         10% for each such Account Debtor (such applicable percentage, as
         applied to a particular Account Debtor, being subject to reduction by
         Agent in its Permitted Discretion if the creditworthiness of such
         Account Debtor deteriorates) of all Eligible Accounts, to the extent of
         the obligations in excess of such percentage owing by such Account
         Debtor, as applicable; provided, however, that, in each case, the
         amount of Eligible Accounts that are excluded because they exceed the
         foregoing percentage shall be determined by Agent based on all of the
         otherwise Eligible Accounts prior to giving effect to any eliminations
         based upon the foregoing concentration limit,

                           (k)      Accounts with respect to which the Account
         Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone
         out of business, or as to which a Loan Party has received notice of an
         imminent Insolvency Proceeding or a material impairment of the
         financial condition of such Account Debtor,

                           (l)      Accounts with respect to which the Account
         Debtor is located in a state or jurisdiction (e.g., New Jersey,
         Minnesota, and West Virginia) that requires, as a condition to access
         to the courts of such jurisdiction, that a creditor qualify to transact
         business, file a business activities report or other report or form, or
         take one or more other actions, unless the applicable Eligible Loan
         Party has so qualified, filed such reports or forms, or taken such
         actions (and, in each case, paid any required fees or other charges),
         except to the extent that the applicable Eligible Loan Party may
         qualify subsequently as a foreign entity authorized to transact
         business in such state or jurisdiction and gain access to such courts,
         without incurring any cost or penalty viewed by Agent to be significant
         in amount, and such later qualification cures any access to such courts
         to enforce payment of such Account,

                           (m)      Accounts, the collection of which, Agent, in
         its Permitted Discretion, believes to be doubtful by reason of the
         Account Debtor's financial condition,

                           (n)      Accounts that are not subject to a valid and
         perfected first priority Agent's Lien,

                                     - 14 -

<PAGE>

                           (o)      Accounts with respect to which (i) the goods
         giving rise to such Account have not been shipped and billed to the
         Account Debtor, or (ii) the services giving rise to such Account have
         not been performed and billed to the Account Debtor, provided that this
         clause (o) shall not exclude Accounts where only delivery is required
         to complete performance so long as such Accounts arise under a Program
         Contract which includes the bill and hold provisions set forth in
         Exhibit P-1, or

                           (p)      Accounts that represent the right to receive
         progress payments or other advance billings that are due prior to the
         completion of performance by the applicable Eligible Loan Party of the
         subject contract for goods or services.

                  "Eligible Equipment" means Equipment of the Eligible Loan
Parties located at one of the business locations of such Eligible Loan Parties
set forth on Schedule E-1, that complies with each of the representations and
warranties respecting Eligible Equipment made by such Eligible Loan Parties in
the Loan Documents, and that is not excluded as ineligible by virtue of the one
or more of the criteria set forth below; provided, however, that such criteria
may be fixed and revised from time to time by Agent in Agent's Permitted
Discretion to address the results of any audit or appraisal performed by Agent
from time to time after the Closing Date. In determining the amount to be
included, Equipment shall be valued based upon the Net Liquidation Percentage
times the most recent appraised value of such Equipment, which appraisal shall
be based upon the net forced liquidation value of such Equipment. An item of
Equipment shall not be included in Eligible Equipment if:

                           (a)      an Eligible Loan Party does not have good,
         valid, and marketable title thereto,

                           (b)      it is not located at one of the locations in
         the continental United States or Canada set forth on Schedule E-1,

                           (c)      it is located on real property leased by a
         Loan Party unless (i) it is either subject to a Collateral Access
         Agreement executed by the lessor, or other third party, as the case may
         be, or (ii) Agent has established a Rent Reserve against the Borrowing
         Base for such Leased Real Property location,

                           (d)      it is not subject to a valid and perfected
         first priority Agent's Lien,

                           (e)      it is substantially worn, damaged, defective
         or obsolete, or it constitutes furnishings, parts, fixtures or is
         affixed to real property, unless such Equipment is affixed to Real
         Property that comprises Eligible Real Property Collateral,

                           (f)      the Agent has not received evidence of the
         property insurance required by this Agreement with respect to such
         Equipment, or

                           (g)      it is subject to a lease with any Person.

The Administrative Borrower may amend Schedule E-1, provided that (i) such
amendment occurs by written notice to Agent not less than 30 days prior to the
date on which the Eligible Equipment is moved to such new location, (ii) such
new location is within the continental United

                                     - 15 -

<PAGE>

States or Canada, and (iii) at the time of such written notification, the
applicable Eligible Loan Party provides any financing statements or fixture
filings necessary to perfect and continue perfected the Collateral Agent's Liens
on such assets and, to the extent it is located on real property leased by a
Loan Party, provides to Agent a Collateral Access Agreement.

                  "Eligible Loan Party" mean any Loan Party named in Schedule
E-2.

                  "Eligible Real Property Collateral" has the meaning set forth
in Section 3.1(v).

                  "Eligible Transferee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $250,000,000, (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country and
which has total assets in excess of $250,000,000, provided that such bank is
acting through a branch or agency located in the United States, (c) a finance
company, insurance company, or other financial institution or fund that is
engaged in making, purchasing, or otherwise investing in commercial loans in the
ordinary course of its business and having (together with its Affiliates) total
assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of
a Lender, (e) so long as no Event of Default has occurred and is continuing, any
other Person approved by Agent and Administrative Borrower (which approval of
Administrative Borrower shall not be unreasonably, withheld, delayed, or
conditioned), and (f) during the continuation of an Event of Default, any other
Person approved by Agent.

                  "Enterprise Value" means the "enterprise value" of Parent and
its Subsidiaries, as determined by Agent pursuant to an enterprise valuation
satisfactory to Agent, using a methodology similar to the methodology used in
the enterprise valuation required pursuant to Section 3.2(d), and performed by a
third party valuation company engaged by, and acceptable to, Agent (it being
understood that the Borrowers shall be responsible for all fees, costs and
expenses incurred by Agent in connection with each such valuation to the extent
set forth in Section 2.11(c)).

                  "Environmental Actions" means any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, judicial
or administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations or alleged
violations of Environmental Laws or releases of Hazardous Materials from (a) any
assets, properties, or businesses of any Loan Party, any Subsidiary of a Loan
Party, or any of their predecessors in interest, (b) from adjoining properties
or businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by any Loan Party, any Subsidiary of a Loan Party, or any of
their predecessors in interest.

                  "Environmental Law" means any applicable federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
permit, binding and enforceable guideline, binding and enforceable written
policy or rule of common law now or hereafter in effect and in each case as
amended, or any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, to the extent
binding on any Loan Party or any Subsidiary of a Loan Party, relating to the
environment, human health, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water

                                     - 16 -

<PAGE>

Pollution Control Act, 33 USC Section 1251 et seq; the Toxic Substances Control
Act, 15 USC Section 2601 et seq; the Clean Air Act, 42 USC Section 7401 et seq.;
the Safe Drinking Water Act, 42 USC Section 3803 et seq.; the Oil Pollution Act
of 1990, 33 USC Section 2701 et seq.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 USC Section 11001 et seq.; the Hazardous Material
Transportation Act, 49 USC Section 1801 et seq.; and the Occupational Safety and
Health Act, 29 USC Section 651 et seq. (to the extent it regulates occupational
exposure to Hazardous Materials); the Canadian Environmental Protection Act
(Canada); the Fisheries Act (Canada); the Transportation of Dangerous Goods Act
(Canada); the Environmental Protection Act (Ontario); the Water Resource Act
(Ontario); the Waste Management Act (British Columbia); the Environmental
Quality Act (Quebec); and any federal, state, provincial and local or foreign
counterparts or equivalents, in each case as amended from time to time.

                  "Environmental Liabilities and Costs" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts, or consultants,
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.

                  "Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.

                  "Equipment" means equipment (as that term is defined in the
Code), and includes machinery, machine tools, motors, furniture, furnishings,
fixtures, vehicles (including motor vehicles), computer hardware, tools, parts,
and goods (other than consumer goods, farm products, or Inventory), wherever
located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.

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

                  "ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Loan Party or a Subsidiary of a Loan Party under IRC Section 414(b), (b) any
trade or business subject to ERISA whose employees are treated as employed by
the same employer as the employees of a Loan Party or a Subsidiary of a Loan
Party under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA
and Section 412 of the IRC, any organization subject to ERISA that is a member
of an affiliated service group of which a Loan Party or a Subsidiary of a Loan
Party is a member under IRC Section 414(m), or (d) solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA
that is a party to an arrangement with a Loan Party or a Subsidiary of a Loan
Party and whose employees are aggregated with the employees of a Loan Party or a
Subsidiary of a Loan Party under IRC Section 414(o).

                  "ERISA Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of a Loan Party, any of
its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in
which it was a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA), (c) the providing of notice of intent to terminate a

                                     - 17 -

<PAGE>

Benefit Plan in a distress termination (as described in Section 4041(c) of
ERISA), (d) the institution by the PBGC of proceedings to terminate a Benefit
Plan or Multiemployer Plan, (e) any event or condition (i) that provides a basis
under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of a Loan Party, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by a Loan Party or its
Subsidiaries or any of their ERISA Affiliates or (h) any equivalent event,
action, condition, proceeding or otherwise under Canadian Employee Benefit Laws.

                  "Event of Default" has the meaning set forth in Section 8.

                  "Excess Availability" means, as of any date of determination
or period, the amount equal to (x) Availability, plus (y) the amount of
unrestricted cash and Cash Equivalents of Borrowers and their Subsidiaries on
deposit in a Deposit Account or Securities Account which is the subject of a
Control Agreement and is maintained by a branch office of the bank or securities
intermediary located within the United States, minus (z) the aggregate amount,
if any, of all trade payables of Borrowers and their Subsidiaries aged in excess
of their historical levels with respect thereto and all book overdrafts of
Borrowers and their Subsidiaries in excess of their historical practices with
respect thereto, in each case as determined by Agent in its Permitted Discretion
for such date or period.

                  "Excess Cash Flow" means, for any fiscal period of Parent,
without duplication, (i) Parent's and its Subsidiaries' consolidated net
earnings (or loss), minus extraordinary gains and interest income, for such
period, plus (ii) all non-cash charges of Parent and its Subsidiaries deducted
in arriving at such consolidated net earnings (or loss) for such period, less
(iii) all non-cash credits of Parent and its Subsidiaries included in arriving
at such consolidated net earnings (or loss) for such period, less (iv) all
scheduled and mandatory cash principal payments on the Advances and the Term
Loan made during such period (but, in the case of the Advances, only to the
extent that the Revolver Commitment is permanently reduced by the amount of such
payments), and all scheduled cash principal payments on other Indebtedness of
Parent or any of its Subsidiaries during such period to the extent such other
Indebtedness is permitted to be incurred, and such payments are permitted to be
made, under this Agreement, less (v) the cash portion of Capital Expenditures
made by Parent and its Subsidiaries during such period to the extent permitted
to be made under this Agreement.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
in effect from time to time.

                  "Existing Lenders" means Bank of America, N.A. and Congress
Financial Corporation (Western).

                  "Extraordinary Receipts" means any Collections received by the
Parent or any of its Subsidiaries not in the ordinary course of business (and
not consisting of proceeds described in Section 2.4(c)(v), (c)(vi) or (c)(viii)
hereof), including, (i) foreign, United States, state or local tax refunds
(other than the Specified Tax Refund), (ii) pension plan reversions, (iii)
proceeds of

                                     - 18 -

<PAGE>

insurance (including proceeds of the key man life insurance policies), but
excluding insurance with respect to Inventory, (iv) judgments, proceeds of
settlements or other consideration of any kind in connection with any cause of
action, (v) condemnation awards (and payments in lieu thereof), but excluding
condemnation awards with respect to Inventory, (vi) indemnity payments, and
(vii) any purchase price adjustment received in connection with any purchase
agreement.

                  "Family Member" means, with respect to any individual, any
other individual having a relationship by blood (to the second degree of
consanguinity), marriage, or adoption to such individual.

                  "Family Trusts" means, with respect to any individual, trusts
or other estate planning vehicles established for the benefit of such individual
or Family Members of such individual and in respect of which such individual
serves as trustee or in a similar capacity.

                  "Fee Letter" means that certain fee letter, dated as of even
date herewith, between Borrowers and Agent, in form and substance satisfactory
to Agent.

                  "FEIN" means Federal Employer Identification Number.

                  "Fiscal Year" means (i) in the case of the Parent and its
Subsidiaries other than IPD, Huck NC and Huck Quincy, a fiscal year ending on
January 31st of each calendar year, and (ii) in the case of IPD, Huck NC and
Huck Quincy, a fiscal year ending on the Friday closest to January 31 of each
calendar year.

                  "Fixed Charges" means with respect to Parent and its
Subsidiaries for any period, the sum, without duplication, of (a) Interest
Expense, (b) principal payments required to be paid during such period in
respect of Indebtedness, and (c) payments made pursuant to a lease and
distribution agreement dated April 29, 2002 between the Loan Parties and
Worldwide Media Service, Inc.

                  "Fixed Charge Coverage Ratio" means, with respect to Parent
and its Subsidiaries for any period, the ratio of (i) EBITDA for such period
minus Capital Expenditures made (to the extent not already incurred in a prior
period) or incurred during such period, and all federal, state, and local income
taxes accrued for such period to (ii) Fixed Charges for such period.

                  "Florida Headquarters" means the Loan Parties' Bonita Springs,
Florida corporate headquarters.

                  "Flow of Funds Agreement" means an agreement among the Loan
Parties, Collateral Agent and the Term Loan B Agent with respect to the fundings
to be made on the Closing Date.

                  "Fulfillment Accounts" means Accounts arising from goods sold
and services rendered by the Fulfillment Business Segments of the Loan Parties.

                  "Fulfillment Business Segments" means the Fulfillment/WMS
Business Segment, Fulfillment/DEYCO Business Segment, Fulfillment/ANS Business
Segment and Fulfillment/IPD Business Segment.

                                     - 19 -

<PAGE>

                  "Fulfillment/ANS Business Segment" means the business and
operations of the Loan Parties related to the distribution of magazines,
confections and general merchandise to the retail and wholesale market conducted
under the trade name "Austin News Service" on the Closing Date by the
Subsidiaries of Parent named in Part I-A of Schedule S-1.

                  "Fulfillment/DEYCO Business Segment" means the business and
operations of the Loan Parties related to the distribution of magazines,
confections and general merchandise to the retail and wholesale market conducted
on the Closing Date by the Subsidiaries of Parent named in Part I-B of Schedule
S-1.

                  Fulfillment/IPD Business Segment" means the business and
operations of the Loan Parties related to the distribution of magazines,
confections and general merchandise to the retail and wholesale market conducted
on the Closing Date by the Subsidiaries of Parent named in Part I-C of Schedule
S-1.

                  Fulfillment/WMS Accounts" means Accounts arising from goods
sold or services rendered by the Fulfillment/WMS Business Segment of the Loan
Parties.

                  "Fulfillment/WMS Business Segment" means the business and
operations of the Loan Parties related to the export of United States magazine
titles for distribution outside of the United States including that conducted on
the Closing Date by Source Interlink International, Inc., or under the trade
name "Worldwide Media Service" by the Subsidiaries of Parent named in Part I-D
of Schedule S-1.

                  "Funding Date" means the date on which a Borrowing occurs.

                  "Funding Losses" has the meaning set forth in Section
2.13(b)(ii).

                  "GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.

                  "General Intangibles" means general intangibles (as that term
is defined in the Code), including payment intangibles, contract rights, rights
to payment, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trade secrets, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to payment and
other rights under any royalty or licensing agreements, infringement claims,
computer programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, insurance premium rebates, tax refunds, and tax
refund claims, and any and all supporting obligations in respect thereof, and
any other personal property other than Accounts, Deposit Accounts, goods,
Investment Property, and Negotiable Collateral.

                  "Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.

                  "Governmental Authority" means any federal (including the
federal government of Canada), state, provincial, local, or other governmental
or administrative body,

                                     - 20 -

<PAGE>

instrumentality, department, or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body.

                  "Guarantor" means each Subsidiary of Parent named in Schedule
G-1 and each other Person that guarantees, pursuant to Section 6.15 or
otherwise, all or any part of the Obligations.

                  "Guaranty" means the Guaranty set forth in Section 18, the
Canadian Guaranty and any other guaranty executed and delivered by a Guarantor
in favor of Agent, for the benefit of the Lender Group and the Bank Product
Providers, in form and substance satisfactory to Agent.

                  "Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any Environmental Law as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, (d) asbestos in any form or electrical equipment
that contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of 50 parts per million and (e) any other substance, the
storage, manufacture, disposal, treatment, generation, use, transportation,
remediation, release into or concentration in the environment of which is
prohibited, controlled, regulated or licensed by any Governmental Authority
under any Environmental Law.

                  "Hedge Agreement" means any and all agreements, or documents
now existing or hereafter entered into by Administrative Borrower or its
Subsidiaries that provide for an interest rate, credit, commodity or equity
swap, cap, floor, collar, forward foreign exchange transaction, currency swap,
cross currency rate swap, currency option, or any combination of, or option with
respect to, these or similar transactions, for the purpose of hedging
Administrative Borrower's or its Subsidiaries' exposure to fluctuations in
interest or exchange rates, loan, credit exchange, security or currency
valuations or commodity prices.

                  "Hilco" means Hilco Capital LP, a Delaware limited
partnership.

                  "Holdout Lender" has the meaning set forth in Section 15.2(a).

                  "Huck NC" means Huck Store Fixture Company of North Carolina,
a North Carolina corporation.

                  "Huck Quincy" means Source-Huck Store Fixture Company, a
Delaware corporation.

                  "ICI" means The Interlink Companies, Inc., a Delaware
corporation.

                                     - 21 -

<PAGE>

                  "Indebtedness" means (a) all obligations for borrowed money,
(b) all obligations evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations in respect of letters of
credit, bankers acceptances, interest rate swaps, or other financial products,
(c) all obligations as a lessee under Capital Leases, (d) all obligations or
liabilities of others secured by a Lien on any asset of a Person or its
Subsidiaries, irrespective of whether such obligation or liability is assumed,
(e) all obligations to pay the deferred purchase price of assets (other than
trade payables incurred in the ordinary course of business and repayable in
accordance with customary trade practices), (f) all obligations owing under
Hedge Agreements, and (g) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
sold with recourse) any obligation of any other Person that constitutes
Indebtedness under any of clauses (a) through (f) above.

                  "Indemnified Liabilities" has the meaning set forth in Section
11.3.

                  "Indemnified Person" has the meaning set forth in Section
11.3.

                  "Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of any applicable Bankruptcy Code or
under any other state, provincial or federal bankruptcy or insolvency law,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.

                  "In-Store Services Accounts" means Accounts arising from goods
sold and services rendered by the In-Store Services Business Segments of the
Loan Parties.

                  "In-Store Services Business Segments" means, collectively, the
In-Store Services/Wire Business Segment, the In-Store Services/Claiming Business
Segment and the In-Store Services/Other Business Segment.

                  "In-Store Services/Claiming Accounts" means Accounts arising
from services rendered by the In-Store Services/Claiming Business Segment of the
Loan Parties.

                  "In-Store Services/Claiming Business Segment" means the
business and operations of the Loan Parties related to collecting rebates and
other payments on behalf of Loan Parties and retailers and related services
conducted on the Closing Date by the Subsidiaries of Parent named in Part II-B
of Schedule S-1.

                  "In-Store Services/Other Business Segment" means the business
and operations of the Loan Parties related to providing retail sales information
and other services to retailers conducted on the Closing Date by the
Subsidiaries of Parent named in Part II-C of Schedule S-1.

                  "In-Store Services Subline Amount" means an amount equal to
$22,500,000, which amount shall be reduced by $416,667 each month, each such
reduction to occur on the first day of each such month commencing on January 1,
2004, provided that the last such reduction shall occur on December 1, 2005.
Borrowers shall have the option, from time to time, to effect additional
reductions in the In-Store Services Subline Amount, provided that each such
reduction shall be in an amount which is an integral multiple of $416,667, shall
be made by

                                     - 22 -

<PAGE>

providing not less than five (5) Business Days' prior written notice to Agent
and shall be irrevocable. Once reduced, the In-Store Services Subline Amount may
not be increased.

                  "In-Store Services/Wire Business Segment" means the business
and operations of the Loan Parties related to manufacturing wire racks for
retailers and related services conducted on the Closing Date by the Subsidiaries
of Parent named in Part II-A of Schedule S-1.

                  "Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.

                  "Intercompany Subordination Agreement" means a subordination
agreement executed and delivered by Loan Parties and each of their Subsidiaries
and Agent, the form and substance of which is satisfactory to Agent.

                  "Intercreditor and Collateral Agency Agreement" means the
Intercreditor and Collateral Agency Agreement dated as of October 30, 2003, by
and among Agent, the Term Loan B Agent and the Collateral Agent.

                  "Interest Expense" means, for any period, the aggregate of the
interest expense of Parent and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

                  "Interest Period" means, with respect to each LIBOR Rate Loan,
a period commencing on the date of the making of such LIBOR Rate Loan (or the
continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a
LIBOR Rate Loan) and ending 1, 2, or 3 months thereafter; provided, however,
that (a) if any Interest Period would end on a day that is not a Business Day,
such Interest Period shall be extended (subject to clauses (c)-(e) below) to the
next succeeding Business Day, (b) interest shall accrue at the applicable rate
based upon the LIBOR Rate from and including the first day of each Interest
Period to, but excluding, the day on which any Interest Period expires, (c) any
Interest Period that would end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an 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), the Interest Period shall end on the last Business Day of the calendar
month that is 1, 2, or 3 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf
thereof) may not elect an Interest Period which will end after the Maturity
Date.

                  "Inventory" means inventory (as that term is defined in the
Code).

                  "Investment" means, with respect to any Person, any investment
by such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practice), purchases or other
acquisitions of Indebtedness, Stock, or all or substantially all of the assets
of such other Person (or of any

                                     - 23 -

<PAGE>

division or business line of such other Person), and any other items that are or
would be classified as investments on a balance sheet prepared in accordance
with GAAP.

                  "Investment Property" means investment property (as that term
is defined in the Code), and any and all supporting obligations in respect
thereof.

                  "IPD" means International Periodical Distributors, Inc., a
Nevada corporation.

                  "IRC" means the Internal Revenue Code of 1986, as in effect
from time to time.

                  "Issuing Lender" means WFF or any other Lender that, at the
request of Administrative Borrower and with the consent of Agent, agrees, in
such Lender's sole discretion, to become an Issuing Lender for the purpose of
issuing L/Cs or L/C Undertakings pursuant to Section 2.12.

                  "L/C" has the meaning set forth in Section 2.12(a).

                  "L/C Disbursement" means a payment made by the Issuing Lender
pursuant to a Letter of Credit.

                  "L/C Undertaking" has the meaning set forth in Section
2.12(a).

                  "Leased Real Property" means any leasehold interests in real
property now held or hereafter acquired by a Loan Party and the improvements
thereto.

                  "Lender" and "Lenders" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of Section 14.1.

                  "Lender Group" means, individually and collectively, each of
the Lenders (including the Issuing Lender) and Agent.

                  "Lender Group Expenses" means all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by a Loan Party or
its Subsidiaries under any of the Loan Documents that are paid, advanced, or
incurred by the Lender Group, (b) fees or charges paid or incurred by Agent in
connection with the Lender Group's transactions with the Loan Parties or their
Subsidiaries, including, fees or charges for photocopying, notarization,
couriers and messengers, telecommunication, public record searches (including
tax lien, litigation, and UCC and PPSA searches and including searches with the
patent and trademark office, the copyright office, or the department of motor
vehicles), filing, recording, publication, appraisal (including periodic
collateral appraisals or business valuations to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement,
real estate surveys, real estate title policies and endorsements, and
environmental audits, (c) costs and expenses incurred by Agent in the
disbursement of funds to or for the account of Borrowers or other members of the
Lender Group (by wire transfer or otherwise), (d) charges paid or incurred by
Agent resulting from the dishonor of checks, (e) reasonable costs and expenses
paid or incurred by the Lender Group to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing

                                     - 24 -

<PAGE>

for sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated, (f) audit fees and expenses of
Agent related to audit examinations of the Books to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement,
(g) reasonable costs and expenses of third party claims or any other suit paid
or incurred by the Lender Group in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or the
Lender Group's relationship with any Loan Party or any Subsidiary of a Loan
Party, (h) Agent's and each Lender's reasonable costs and expenses (including
attorneys fees) incurred in advising, structuring, drafting, reviewing,
administering, syndicating, or amending the Loan Documents, and (i) Agent's and
each Lender's reasonable costs and expenses (including attorneys, accountants,
consultants, and other advisors fees and expenses) incurred in terminating,
enforcing (including attorneys, accountants, consultants, and other advisors
fees and expenses incurred in connection with a "workout," a "restructuring," or
an Insolvency Proceeding concerning any Loan Party or any Subsidiary of a Loan
Party or in exercising rights or remedies under the Loan Documents), or
defending the Loan Documents, irrespective of whether suit is brought, or in
taking any Remedial Action concerning the Collateral.

                  "Lender-Related Person" means, with respect to any Lender,
such Lender, together with such Lender's Affiliates, officers, directors,
employees, attorneys, and agents.

                  "Letter of Credit" means an L/C or an L/C Undertaking, as the
context requires.

                  "Letter of Credit Usage" means, as of any date of
determination, the aggregate undrawn amount of all outstanding Letters of
Credit.

                  "LIBOR Deadline" has the meaning set forth in Section
2.13(b)(i).

                  "LIBOR Notice" means a written notice in the form of Exhibit
L-1.

                  "LIBOR Option" has the meaning set forth in Section 2.13(a).

                  "LIBOR Rate" means, for each Interest Period for each LIBOR
Rate Loan, the rate per annum determined by Agent (rounded upwards, if
necessary, to the next 1/100%) by dividing (a) the Base LIBOR Rate for such
Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall
be adjusted on and as of the effective day of any change in the Reserve
Percentage.

                  "LIBOR Rate Loan" means each portion of an Advance that bears
interest at a rate determined by reference to the LIBOR Rate.

                  "LIBOR Rate Margin" means the percentage points set forth
below corresponding to average Excess Availability for the three-month period
ending as of the last day of the immediately preceding month, as determined by
Agent based upon the Borrowing Base and Excess Availability calculations
delivered to Agent pursuant to Section 6.2(j) for such period:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Level             Average Excess Availability                     LIBOR Rate Margin
--------------------------------------------------------------------------------------
<S>          <C>                                                <C>
  I          Greater than $10,000,000                           3.25 percentage points
--------------------------------------------------------------------------------------
</TABLE>

                                     - 25 -

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Level             Average Excess Availability                     LIBOR Rate Margin
--------------------------------------------------------------------------------------
<S>          <C>                                                <C>
 II          $10,000,000 or less but greater than               3.50 percentage points
             or equal to $5,000,000
--------------------------------------------------------------------------------------
 III         Less than $5,000,000                               3.75 percentage points
--------------------------------------------------------------------------------------
</TABLE>

provided, that, notwithstanding the foregoing, (a) each adjustment to the LIBOR
Rate Margin shall be effective from the date of delivery of the Loan Parties'
Excess Availability calculation for the three-month period used to determine the
LIBOR Rate Margin until the date of delivery of such Excess Availability
calculation pursuant to Section 6.2(j) hereof for the next succeeding
three-month period, (b) if the Loan Parties fail to deliver the Excess
Availability calculation to the Agent for any three-month period in accordance
with Section 6.2(j) hereof, then until such Excess Availability calculation is
delivered, the LIBOR Rate Margin shall be set in accordance with Level III, and
(c) on and after the Closing Date and until the Excess Availability calculation
is delivered for the three-month period ending on January 31, 2004, the LIBOR
Rate Margin shall be set at Level II above.

                  "Lien" means any interest in an asset securing an obligation
owed to, or a claim by, any Person other than the owner of the asset,
irrespective of whether (a) such interest is based on the common law, statute,
or contract, (b) such interest is recorded or perfected, and (c) such interest
is contingent upon the occurrence of some future event or events or the
existence of some future circumstance or circumstances. Without limiting the
generality of the foregoing, the term "Lien" includes the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also includes reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.

                  "Loan Account" has the meaning set forth in Section 2.10.

                  "Loan Documents" means this Agreement, the Bank Product
Agreements, the Security Agreement, the Intercreditor and Collateral Agency
Agreement, the Cash Management Agreements, the Control Agreements, the Copyright
Security Agreement, the Disbursement Letter, the Due Diligence Certificate, the
Fee Letter, each Guaranty, the Validity and Support Guaranty, the Canadian
Documents, the Contribution Agreement, the Intercompany Subordination Agreement,
the Letters of Credit, the Mortgages, the Patent Security Agreement, the Pledge
Agreement, the Trademark Security Agreement, any note or notes executed by a
Borrower in connection with this Agreement and payable to a member of the Lender
Group, and any other agreement entered into, now or in the future, by a Loan
Party and the Lender Group in connection with this Agreement.

                  "Loan Party" means any Borrower and any Guarantor.

                  "Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of an Eligible Loan Party, or
of the Loan Parties and their Subsidiaries, taken as a whole, (b) a

                                     - 26 -

<PAGE>

material impairment of the ability of the Loan Parties, taken as a whole, to
perform their obligations under the Loan Documents or of the Lender Group's
ability to enforce the Obligations or realize upon the Collateral, or (c) a
material impairment of the enforceability or priority of the Collateral Agent's
Liens with respect to the Collateral as a result of an action or failure to act
on the part of a Loan Party or a Subsidiary of a Loan Party.

                  "Material Contracts" means any agreement or contract of any
Loan Party which has a term of one year or longer and (a) involves consideration
to such Loan Party of $500,000 or more in any year, (b) involves consideration
by such Loan Party of $500,000 or more in any year, (c) imposes financial
obligations on any Loan Party of $500,000 or more in any year (other than any
agreement that by its terms may be terminated by any Loan Party or any
Subsidiary in less than one year), or (d) is otherwise material (or together
with related agreements and contracts, is material) to the business, operations,
financial condition, performance or properties of an Eligible Loan Party, or the
Loan Parties, taken as a whole, excluding, however, customer purchase orders or
purchase orders to any vendor, in each case entered into in the ordinary course
of a Loan Party's business.

                  "Maturity Date" has the meaning set forth in Section 3.4.

                  "Maximum Revolver Amount" means $45,000,000.

                  "Mortgages" means, individually and collectively, one or more
mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a
Loan Party or a Subsidiary of a Loan Party in favor of Collateral Agent, for the
benefit of the Lender Group, the Bank Product Providers and the Term Loan B
Lender Group, in form and substance satisfactory to Agent, that encumber the
Real Property Collateral and the related improvements thereto.

                  "Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) or such equivalent plan under Canadian Employee
Benefit Laws to which a Loan Party, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.

                  "Myco IRB" means the Industrial Project Revenue Bonds, Series
1995 (Myco, Inc. Project), issued pursuant to the Indenture of Trust dated as of
January 1, 1995, between the City of Rockford, Illinois and Amalgamated Bank of
Chicago, as trustee and tender agent.

                  "Negotiable Collateral" means letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.

                  "Net Liquidation Percentage" means the percentage of the
Appraised Value of Loan Parties' Equipment that is estimated to be recoverable
in a forced liquidation of such Equipment, such percentage to be as determined
from time to time by a qualified appraisal company selected by Agent.

                  "Obligations" means (a) all loans (including the Term Loan),
Advances, debts, principal, interest (including any interest that, but for the
commencement of an Insolvency Proceeding, would have accrued), contingent
reimbursement obligations with respect to

                                     - 27 -

<PAGE>

outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrowers' Loan Account pursuant hereto), obligations (including
indemnification obligations), fees (including the fees provided for in the Fee
Letter), charges, costs, Lender Group Expenses (including any fees or expenses
that, but for the commencement of an Insolvency Proceeding, would have accrued),
lease payments, guaranties, covenants, and duties of any kind and description
owing by Loan Parties to the Lender Group pursuant to or evidenced by the Loan
Documents and irrespective of whether for the payment of money, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all interest not paid when due and all Lender
Group Expenses that Loan Parties are required to pay or reimburse by the Loan
Documents, by law, or otherwise, and (b) all Bank Product Obligations. Any
reference in this Agreement or in the Loan Documents to the Obligations shall
include all extensions, modifications, renewals, or alterations thereof, both
prior and subsequent to any Insolvency Proceeding.

                  "Originating Lender" has the meaning set forth in Section
14.1(e).

                  "Overadvance" has the meaning set forth in Section 2.5.

                  "Owned Real Property" means any fee interests in Real Property
now owned or hereafter acquired by any Loan Party and the improvements thereto.

                  "Parent" has the meaning set forth in the preamble to this
Agreement.

                  "Participant" has the meaning set forth in Section 14.1(e).

                  "Patent Security Agreement" means a patent security agreement
executed and delivered by each applicable Loan Party and Collateral Agent, the
form and substance of which is satisfactory to Agent.

                  "Pay-Off Letter" means a letter, in form and substance
satisfactory to Agent, from each Existing Lender to Agent respecting the amount
necessary to repay in full all of the obligations of the Loan Parties and their
Subsidiaries owing to such Existing Lender and obtain a release of all of the
Liens existing in favor of such Existing Lender in and to the assets of the Loan
Parties and their Subsidiaries.

                  "PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto or equivalent entity
under Canadian Employee Benefit Laws.

                  "Permitted Acquisition" means any Acquisition by a Loan Party
to the extent that each of the following conditions shall have been satisfied:

                           (a)      (i) Excess Availability is at least
                  $15,000,000 both (A) for the 30 consecutive day period
                  immediately prior to the date of such Acquisition and (B)
                  immediately after giving effect to such Acquisition, (ii) no
                  Default or Event of Default shall have occurred and be
                  continuing immediately prior to such Acquisition or
                  immediately after giving effect thereto, and (iii) the
                  aggregate consideration payable by the Loan Parties in
                  connection with such Acquisition shall not exceed $1,000,000;

                                     - 28 -

<PAGE>

                           (b)      (i) neither the Borrower nor any of its
                  Subsidiaries shall, in connection with such Acquisition,
                  assume or remain liable in respect of any Indebtedness of the
                  Seller or Sellers, or other obligation (including contingent
                  obligations) of the Seller or Sellers (except for obligations
                  incurred in the ordinary course of business in operating the
                  property so acquired and necessary and desirable to the
                  continued operation of such property and except for
                  Indebtedness that the Required Lenders otherwise expressly
                  consents to in writing after their review of the terms of the
                  proposed Acquisition), and (ii) all property to be so acquired
                  in connection with such Acquisition shall be free and clear of
                  any and all Liens, except for Permitted Liens (and if any such
                  property is subject to any Lien not permitted by this clause
                  (ii) then concurrently with such Acquisition such Lien shall
                  be released);

                           (c)      any Subsidiary to be acquired or formed as a
                  result of such Acquisition shall be a Borrower or a Guarantor
                  (as determined by the Agent) and shall be engaged in the same
                  business as the other Loan Parties and such Subsidiary will be
                  a direct wholly-owned Subsidiary of one of the other Loan
                  Parties;

                           (d)      such Acquisition shall be effected in such a
                  manner so that the acquired Stock or assets are owned by a
                  Borrower or a Guarantor (as determined by the Agent) and, if
                  effected by merger or consolidation involving a Borrower or a
                  Guarantor, a Borrower or Guarantor shall be the continuing or
                  surviving Person; and

                           (e)      any such Subsidiary shall execute and
                  deliver the agreements, instruments and other documents
                  required by Section 6.15.

                  "Permitted Discretion" means a determination made in good
faith and in the exercise of reasonable (from the perspective of a secured
asset-based lender) business judgment.

                  "Permitted Dispositions" means (a) sales or other dispositions
of Equipment that is substantially worn, damaged, or obsolete in the ordinary
course of business, (b) sales of Inventory to buyers in the ordinary course of
business, (c) the use or transfer of money or Cash Equivalents in a manner that
is not prohibited by the terms of this Agreement or the other Loan Documents,
(d) the licensing, on a non-exclusive basis, of patents, trademarks, copyrights,
and other intellectual property rights in the ordinary course of business, (e)
sales or other dispositions of any assets by a Borrower to any other Borrower or
by a Guarantor to any other Loan Party, and (f) the sale of the residential real
property owned by the Loan Parties located at 1677 Maine Street, Quincy,
Illinois.

                  "Permitted Holder" means (a) Jonathan Ledecky, his Family
Members, and his Family Trusts, and (b) Fidelity Management.

                  "Permitted Investments" means (a) Investments in cash and Cash
Equivalents, (b) Investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, and (d) Investments received in settlement of amounts due to
a Borrower or any Subsidiary of a Borrower effected in the

                                     - 29 -

<PAGE>

ordinary course of business or owing to a Borrower or any Subsidiary of a
Borrower as a result of Insolvency Proceedings involving an Account Debtor or
upon the foreclosure or enforcement of any Lien in favor of a Borrower or any
Subsidiary of a Borrower.

                  "Permitted Liens" means (a) Liens held by Collateral Agent,
(b) Liens for unpaid taxes that either (i) are not yet delinquent, or (ii) do
not constitute an Event of Default hereunder and are the subject of Permitted
Protests, (c) Liens set forth on Schedule P-1, (d) the interests of lessors
under operating leases, (e) purchase money Liens or the interests of lessors
under Capital Leases to the extent that such Liens or interests secure Permitted
Purchase Money Indebtedness and so long as such Lien attaches only to the asset
purchased or acquired and the proceeds thereof, (f) Liens arising by operation
of law in favor of warehousemen, landlords, carriers, mechanics, materialmen,
laborers, or suppliers, incurred in the ordinary course of Borrowers' business
and not in connection with the borrowing of money, and which Liens either (i)
are for sums not yet delinquent, or (ii) are the subject of Permitted Protests,
(g) Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (h) Liens or deposits to secure
performance of bids, tenders, or leases incurred in the ordinary course of
business and not in connection with the borrowing of money, (i) Liens granted as
security for surety or appeal bonds in connection with obtaining such bonds in
the ordinary course of business, (j) Liens resulting from any judgment or award
that is not an Event of Default hereunder, and (k) with respect to any Real
Property, easements, rights of way, and zoning restrictions that do not
materially interfere with or impair the use or operation thereof.

                  "Permitted Protest" means the right of Administrative Borrower
or any of its Subsidiaries to protest any Lien (other than any Lien that secures
the Obligations), taxes (other than payroll taxes or taxes that are the subject
of a United States or Canadian federal or provincial tax lien), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the Books in such amount as is required under GAAP, (b) any such
protest is instituted promptly and prosecuted diligently by Administrative
Borrower or any of its Subsidiaries, as applicable, in good faith, and (c) Agent
is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of the Collateral
Agent's Liens.

                  "Permitted Purchase Money Indebtedness" means, as of any date
of determination, Purchase Money Indebtedness incurred after the Closing Date in
an aggregate amount outstanding at any one time not in excess of $250,000.

                  "Person" means natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.

                  "Personal Property Collateral" means all Collateral other than
Real Property.

                  "Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by a Loan Party or with respect to
which it may incur liability subject to ERISA.

                                     - 30 -

<PAGE>

                  "Pledge Agreement" means a pledge and security agreement, in
form and substance satisfactory to Agent, executed and delivered by each Loan
Party (including the Parent) that owns Stock of a Subsidiary of Parent or that
is the holder of any promissory note, in favor of the Collateral Agent for the
benefit of the Lender Group, the Bank Product Providers and the Term Loan B
Lender Group.

                  "PPSA" means the Personal Property Security Act of the
applicable Canadian province or provinces in respect of the Canadian Guarantors.

                  "Program Contracts" means the standard form agreements used by
the Loan Parties in connection with (i) their Advance Pay, Double Advance Pay
and Standard RDA Service Programs for collection of retail display allowances in
the In-Store Services/Claiming Business Segment and (ii) their Front-End
Merchandiser Programs for sales of display fixtures in the In-Store
Services/Wire Business Segment.

                  "Projections" means Parent's forecasted (a) balance sheets,
(b) profit and loss statements, and (c) cash flow statements, all prepared on a
consistent basis with Parent's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.

                  "Pro Rata Share" means, as of any date of determination:

                           (a)      with respect to a Lender's obligation to
         make Advances and receive payments of principal, interest, fees, costs,
         and expenses with respect thereto, (i) prior to the Revolver
         Commitments being terminated or reduced to zero, the percentage
         obtained by dividing (y) such Lender's Revolver Commitment, by (z) the
         aggregate Revolver Commitments of all Lenders, and (ii) from and after
         the time that the Revolver Commitments have been terminated or reduced
         to zero, the percentage obtained by dividing (y) the aggregate
         outstanding principal amount of such Lender's Advances by (z) the
         aggregate outstanding principal amount of all Advances,

                           (b)      with respect to a Lender's obligation to
         participate in Letters of Credit, to reimburse the Issuing Lender, and
         to receive payments of fees with respect thereto, (i) prior to the
         Revolver Commitments being terminated or reduced to zero, the
         percentage obtained by dividing (y) such Lender's Revolver Commitment,
         by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from
         and after the time that the Revolver Commitments have been terminated
         or reduced to zero, the percentage obtained by dividing (y) the
         aggregate outstanding principal amount of such Lender's Advances by (z)
         the aggregate outstanding principal amount of all Advances,

                           (c)      with respect to a Lender's obligation to
         make the Term Loan and receive payments of interest, fees, and
         principal with respect thereto, (i) prior to the making of the Term
         Loan, the percentage obtained by dividing (y) such Lender's Term Loan
         Commitment, by (z) the aggregate amount of all Lenders' Term Loan
         Commitments, and (ii) from and after the making of the Term Loan, the
         percentage obtained by dividing (y) the principal amount of such
         Lender's portion of the Term Loan by (z) the principal amount of the
         Term Loan, and

                                     - 31 -

<PAGE>

                           (d)      with respect to all other matters as to a
         particular Lender (including the indemnification obligations arising
         under Section 16.7), the percentage obtained by dividing (i) such
         Lender's Revolver Commitment plus the outstanding principal amount of
         such Lender's portion of the Term Loan, by (ii) the aggregate amount of
         Revolver Commitments of all Lenders plus the outstanding principal
         amount of the Term Loan; provided, however, that in the event the
         Revolver Commitments have been terminated or reduced to zero, Pro Rata
         Share under this clause shall be the percentage obtained by dividing
         (A) the outstanding principal amount of such Lender's Advances plus
         such Lender's ratable portion of the Risk Participation Liability with
         respect to outstanding Letters of Credit plus the outstanding principal
         amount of such Lender's portion of the Term Loan, by (B) the
         outstanding principal amount of all Advances plus the aggregate amount
         of the Risk Participation Liability with respect to outstanding Letters
         of Credit plus the outstanding principal amount of the Term Loan.

                  "Purchase Money Indebtedness" means Indebtedness (other than
the Obligations, but including Capitalized Lease Obligations), incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.

                  "Qualified Cash" means, as of any date of determination, the
amount of unrestricted cash and Cash Equivalents of Borrowers and their
Subsidiaries that is paid to Agent by wire transfer in immediately available
funds on or prior to the Closing Date for deposit into the Agent's Account.

                  "Real Property" means any estates or interests in real
property now owned or hereafter acquired by any Loan Party or a Subsidiary of
any Loan Party and the improvements thereto.

                  "Real Property Collateral" means the parcel or parcels of Real
Property identified on Schedule R-1 and any Real Property hereafter acquired by
a Loan Party or any Subsidiary of a Loan Party.

                  "Record" means information that is inscribed on a tangible
medium or which is stored in an electronic or other medium and is retrievable in
perceivable form.

                  "Remedial Action" means all actions taken to (a) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate, or in any way
address Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601.

                  "Rent Reserve" means a reserve in the amount of three-months
rent established by Agent for each Leased Real Property location set forth in
Schedule L-1, provided that the reserve established for any such location shall
be reduced to zero on the date that Collateral Agent shall receive a Collateral
Access Agreement for such location.

                                     - 32 -

<PAGE>

                  "Replacement Lender" has the meaning set forth in Section
15.2(a).

                  "Report" has the meaning set forth in Section 16.17.

                  "Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days' notice to the PBGC is waived under
applicable regulations.

                  "Required Availability" means that the sum of (a) Excess
Availability (without giving effect to clause (y) of the definition thereof),
plus (b) Qualified Cash, exceeds $7,500,000.

                  "Required Lenders" means, at any time, Lenders whose aggregate
Pro Rata Shares (calculated under clause (d) of the definition of Pro Rata
Shares) equal or exceed 66-2/3%.

                  "Reserve Percentage" means, on any day, for any Lender, the
maximum percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.

                  "Revolver Commitment" means, with respect to each Lender, its
Revolver Commitment, and, with respect to all Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or in the Assignment
and Acceptance pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 14.1.

                  "Revolver Usage" means, as of any date of determination, the
sum of (a) the then extant amount of outstanding Advances, plus (b) the then
extant amount of the Letter of Credit Usage.

                  "Risk Participation Liability" means, as to each Letter of
Credit, all reimbursement obligations of Borrowers to the Issuing Lender with
respect to an L/C Undertaking, consisting of (a) the amount available to be
drawn or which may become available to be drawn, (b) all amounts that have been
paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed
by Borrowers, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.

                  "SEC" means the United States Securities and Exchange
Commission and any successor thereto.

                  "Securities Account" means a "securities account" as that term
is defined in the Code.

                  "Security Agreement" means a security agreement, in form and
substance satisfactory to Agent, executed and delivered by each Loan Party
(including the Parent), other

                                     - 33 -

<PAGE>

than a Canadian Guarantor, in favor of Collateral Agent for the benefit of
Lender Group, the Bank Product Providers and the Term Loan B Lender Group.

                  "Seller" means any Person that sells Stock or other property
or assets to a Loan Party or a Subsidiary of a Loan Party in a Permitted
Acquisition.

                  "Senior Debt" means, at any date, the sum of (x) the Revolver
Usage at such date, plus (y) the aggregate outstanding principal amount of the
Term Loan at such date, plus (z) the aggregate outstanding principal amount of
the Term Loan B at such date.

                  "Senior Debt Ratio" means, at any date, the ratio of (i)
Senior Debt at such date, to (ii) EBITDA for the trailing four fiscal quarters
most recently ended on or prior to such date.

                  "Settlement" has the meaning set forth in Section 2.3(f)(i).

                  "Settlement Date" has the meaning set forth in Section
2.3(f)(i).

                  "Solvent" means, with respect to any Person on a particular
date, that, at fair valuations, the sum of such Person's assets is greater than
all of such Person's debts.

                  "Specified Tax Refunds" means the tax refunds expected to be
received by the Loan Parties from the taxing authorities for the Fiscal Years
and in the approximate amounts, in each case set forth on Schedule S-2.

                  "Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).

                  "Subordinated Indebtedness" means unsecured Indebtedness of
any Loan Party which has been expressly subordinated in right of payment to all
Indebtedness of such Loan Party under the Loan Documents by the execution and
delivery of a subordination agreement, in form and substance satisfactory to the
Required Lenders, which Indebtedness is on terms and conditions (including,
without limitation, payment terms, interest rates, covenants, defaults and other
material terms) satisfactory to Required Lenders.

                  "Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power to
elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or other
entity.

                  "Swing Lender" means WFF or any other Lender that, at the
request of Administrative Borrower and with the consent of Agent agrees, in such
Lender's sole discretion, to become the Swing Lender under Section 2.3(d).

                  "Swing Loan" has the meaning set forth in Section 2.3(d)(i).

                                     - 34 -

<PAGE>

                  "Syndicated Amount" has the meaning set forth in Section
3.2(b).

                  "Taxes" has the meaning set forth in Section 16.11.

                  "Term Loan" has the meaning set forth in Section 2.2.

                  "Term Loan Amount" means the lesser of (a) $5,000,000, and (b)
the sum of:

                  (i)      80% times the Net Liquidation Percentage times the
                           Appraised Value of Eligible Equipment, and

                  (ii)     50% of the Appraised Value of Eligible Real Property
                           Collateral, less the amount, if any, of reserves
                           established by Agent, for potential environmental
                           remediation costs relating to such Eligible Real
                           Property Collateral.

                  "Term Loan B" means a term loan in an aggregate principal
amount of $15,000,000, made by the Term Loan B Lenders to the Borrowers on the
Closing Date pursuant to the Term Loan B Loan Agreement.

                  "Term Loan B Agent" means Hilco, in its capacity as agent for
the Term Loan B Lenders, and any successor in such capacity.

                  "Term Loan B Event of Default" means an "Event of Default", as
such term is defined in the Term Loan B Loan Agreement.

                  "Term Loan B Lender Group" means the Term Loan B Lenders and
the Term Loan B Agent.

                  "Term Loan B Lenders" means the lenders from time to time
party to the Term Loan B Loan Agreement.

                  "Term Loan B Loan Agreement" means the Loan Agreement dated as
of October 30, 2003, by and among the Borrowers, the Term Loan B Lenders and the
Term Loan B Agent.

                  "Term Loan B Loan Documents" means the "Loan Documents", as
such term is defined in the "Term Loan B Loan Agreement.

                  "Term Loan Commitment" means, with respect to each Lender, its
Term Loan Commitment, and, with respect to all Lenders, their Term Loan
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or in the Assignment
and Acceptance pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 14.1.

                  "Termination Event" means (i) a Reportable Event with respect
to any Benefit Plan, (ii) any event that causes any Loan Party or any of its
ERISA Affiliates to incur liability under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section

                                     - 35 -

<PAGE>

4971 or 4975 of the IRC, (iii) the filing of a notice of intent to terminate a
Benefit Plan or the treatment of a Benefit Plan amendment as a termination under
Section 4041 of ERISA, (iv) the institution of proceedings by the PBGC to
terminate a Benefit Plan, (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan, or (vi) any equivalent
event, action, condition, proceeding or otherwise under Canadian Employee
Benefit Laws.

                  "Total Commitment" means, with respect to each Lender, its
Total Commitment, and, with respect to all Lenders, their Total Commitments, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on Schedule C-1 attached hereto or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 14.1.

                  "Total Debt Ratio" means, at any date, the ratio of (i) the
sum of (A) Senior Debt at such date, plus (B) the aggregate outstanding
principal amount of all other Indebtedness of the Parent and its Subsidiaries at
such date, to (ii) EBITDA for the trailing twelve-month period most recently
ended on or prior to such date.

                  "Trademark Security Agreement" means a trademark security
agreement executed and delivered by each applicable Loan Party and Collateral
Agent, the form and substance of which is satisfactory to Agent.

                  "UCC Filing Authorization Letter" means a letter duly executed
by each Loan Party authorizing Collateral Agent to file appropriate financing
statements on Form UCC-1 without the signature of such Loan Party, in such
office or offices as may be necessary or, in the opinion of Agent, desirable to
perfect the security interests purported to be created by the Loan Documents.

                  "Underlying Issuer" means a third Person which is the
beneficiary of an L/C Undertaking and which has issued a letter of credit at the
request of the Issuing Lender for the benefit of Borrowers.

                  "Underlying Letter of Credit" means a letter of credit that
has been issued by an Underlying Issuer.

                  "United States" means the United States of America.

                  "US Marketing Services" means Source-U.S. Marketing Services,
Inc., a Delaware corporation.

                  "Validity and Support Guaranty" means each Validity and
Support Guaranty made by S. Leslie Flegel, James R. Gillis, John Bode and Marc
Fierman in favor of Agent, the form and substance of which is satisfactory to
Agent.

                  "Voidable Transfer" has the meaning set forth in Section 17.7.

                  "Wells Fargo" means Wells Fargo Bank, National Association, a
national banking association.

                                     - 36 -

<PAGE>

                  "Wood Manufacturing Accounts" means Accounts arising from
goods sold and services rendered by the Wood Manufacturing Business Segments of
the Loan Parties.

                  "Wood Manufacturing Business Segments" means the Wood
Manufacturing/Quincy Business Segment and the Wood Manufacturing/NC Business
Segment.

                  "Wood Manufacturing/NC Business Segment" means the business
and operations of the Loan Parties related to designing and manufacturing custom
wood and wire displays for periodicals conducted on the Closing Date by the
Subsidiaries of Parent named in Part III-A of Schedule S-1.

                  "Wood Manufacturing/Quincy Business Segment" means the
business and operations of the Loan Parties related to designing and
manufacturing custom wood and wire displays for periodicals conducted on the
Closing Date by the Subsidiaries of Parent named in Part III-B of Schedule S-1.

                  "WFF" means Wells Fargo Foothill, Inc., a California
corporation.

                  "WFF Availability" means, as of any date of determination, an
amount equal to 45% of the most recently determined Enterprise Value of the Loan
Parties.

                  "WFF Debt" means, at any date, the sum of (x) the Maximum
Revolver Amount, plus (y) the aggregate outstanding principal amount of the Term
Loan at such date.

                  "WFF Debt Ratio" means, at any date, the ratio of (i) WFF Debt
at such date, to (ii) EBITDA for the trailing four fiscal quarters most recently
ended on or prior to such date.

                  "Yaqui" means Yaqui Investment Limited.

                  "Yaqui Lien Reserve" means a reserve established by Agent
against the Borrowing Base in the amount of $2,447,401.77, plus interest on such
amount accruing from September 30, 2003 at a rate per annum of 12%, such reserve
to be reduced to zero on the date that Yaqui terminates its Liens on the
Collateral and authorizes Collateral Agent to file UCC-3 termination statements
for each UCC-1 financing statement filed by Yaqui against any portion of the
Collateral.

                  "Zoning Letters" has the meaning set forth in Section 3.2(j).

                  "3-Month Dilution" means, for each Business Segment, as of any
date of determination, a percentage, based upon the experience of the
three-month period ending as of the last day of the immediately preceding fiscal
month which is the result of dividing the Dollar amount of (a) bad debt
write-downs, discounts, advertising allowances, credits, profit sharing
deductions or other dilutive items with respect to Loan Parties' Accounts for
such Business Segment during such period, by (b) Loan Parties' billings with
respect to Accounts for such Business Segment during such period.

                  "12-Month Dilution" means, for each Business Segment, as of
any date of determination, a percentage, based upon the experience of the
twelve-month period ending as of

                                     - 37 -

<PAGE>

the last day of the immediately preceding fiscal month which is the result of
dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, profit sharing deductions or other dilutive items with
respect to Loan Parties' Accounts for such Business Segment during such period,
by (b) Loan Parties' billings with respect to Accounts for such Business Segment
during such period.

                  1.2.     ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. Whenever the term "Borrowers" or the term "Parent" is used in
respect of a financial covenant or a related definition, it shall be understood
to mean Parent and its Subsidiaries on a consolidated basis unless the context
clearly requires otherwise.

                  1.3.     CODE. Any terms used in this Agreement that are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.

                  1.4.     CONSTRUCTION. Unless the context of this Agreement or
any other Loan Document clearly requires otherwise, references to the plural
include the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in the other Loan
Documents to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to the
repayment in full of the Obligations shall mean the repayment in full in cash of
all Obligations other than contingent indemnification Obligations and other than
any Bank Product Obligations that, at such time, are allowed by the applicable
Bank Product Provider to remain outstanding and are not required to be repaid or
cash collateralized pursuant to the provisions of this Agreement. Any reference
herein to any Person shall be construed to include such Person's successors and
assigns. Any requirement of a writing contained herein or in the other Loan
Documents shall be satisfied by the transmission of a Record and any Record
transmitted shall constitute a representation and warranty as to the accuracy
and completeness of the information contained therein.

                  1.5.     SCHEDULES AND EXHIBITS. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.

                                     - 38 -

<PAGE>

         2.       LOAN AND TERMS OF PAYMENT.

                  2.1.     REVOLVER ADVANCES.

                           (a)      Subject to the terms and conditions of this
Agreement, and during the term of this Agreement, each Lender with a Revolver
Commitment agrees (severally, not jointly or jointly and severally) to make
advances ("Advances") to Borrowers in an amount at any one time outstanding not
to exceed such Lender's Pro Rata Share of an amount equal to the lesser of (i)
the Maximum Revolver Amount less the Letter of Credit Usage, or (ii) the
Borrowing Base less the Letter of Credit Usage.

                           (b)      Anything to the contrary in this Section 2.1
notwithstanding, Agent shall have the right to establish reserves in such
amounts, and with respect to such matters, as Agent in its Permitted Discretion
shall deem necessary or appropriate, against the Borrowing Base, including
reserves with respect to (i) sums that the Loan Parties are required to pay
(such as taxes, assessments, insurance premiums, or, in the case of leased
assets, rents or other amounts payable under such leases) and has failed to pay
under any Section of this Agreement or any other Loan Document, (ii) amounts
owing by the Loan Parties or their Subsidiaries to any Person to the extent
secured by a Lien on, or trust over, any of the Collateral (other than any
existing Permitted Lien set forth on Schedule P-1 which is specifically
identified thereon as entitled to have priority over the Collateral Agent's
Liens), which Lien or trust, in the Permitted Discretion of Agent likely would
have a priority superior to the Collateral Agent's Liens (such as Liens or
trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral, and (iii) any deterioration in the financial condition or credit
quality of Barnes and Noble or Borders, or any other major customer.

                           (c)      The Lenders with Revolver Commitments shall
have no obligation to make additional Advances hereunder to the extent such
additional Advances would cause the Revolver Usage to exceed the Maximum
Revolver Amount.

                           (d)      Amounts borrowed pursuant to this Section
2.1 may be repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.

                  2.2.     TERM LOAN. Subject to the terms and conditions of
this Agreement, on the Closing Date each Lender with a Term Loan Commitment
agrees (severally, not jointly or jointly and severally) to make term loans
(collectively, the "Term Loan") to Borrowers in an amount equal to such Lender's
Pro Rata Share of the Term Loan Amount. The Term Loan shall be repaid in 60
consecutive installments, each in the amount of $83,333 and due and payable on
the first day of each month, commencing on December 1, 2003. The outstanding
unpaid principal balance and all accrued and unpaid interest under the Term Loan
shall be due and payable on the date of termination of this Agreement, whether
by its terms, by prepayment, or by acceleration. All amounts outstanding under
the Term Loan shall constitute Obligations. Borrowers may, at any time, prepay
all or a portion of the Term Loan, subject to the payment of the Applicable
Prepayment Premium to the extent required by Section 3.6. Each prepayment

                                     - 39 -
<PAGE>

shall be applied against the remaining installments of principal due on the Term
Loan in the inverse order of maturity.

                  2.3.     BORROWING PROCEDURES AND SETTLEMENTS.

                           (a)      PROCEDURE FOR BORROWING. Each Borrowing
shall be made by an irrevocable written request by an Authorized Person
delivered to Agent (which notice must be received by Agent no later than 10:00
a.m. (California time) on the Business Day prior to the date that is the
requested Funding Date specifying (i) the amount of such Borrowing, and (ii) the
requested Funding Date, which shall be a Business Day; provided, however, that
in the case of a request for Swing Loan in an amount of $4,500,000, or less,
such notice will be timely received if it is received by Agent no later than
10:00 a.m. (California time) on the Business Day that is the requested Funding
Date). At Agent's election, in lieu of delivering the above-described written
request, any Authorized Person may give Agent telephonic notice of such request
by the required time. In such circumstances, Borrowers agree that any such
telephonic notice will be confirmed in writing within 24 hours of the giving of
such notice and the failure to provide such written confirmation shall not
affect the validity of the request.

                           (b)      AGENT'S ELECTION. Promptly after receipt of
a request for a Borrowing pursuant to Section 2.3(a), Agent shall elect, in its
discretion, (i) to have the terms of Section 2.3(c) apply to such requested
Borrowing, or (ii) if the Borrowing is for an Advance, to request Swing Lender
to make a Swing Loan pursuant to the terms of Section 2.3(d) in the amount of
the requested Borrowing; provided, however, that if Swing Lender declines in its
sole discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall
elect to have the terms of Section 2.3(c) apply to such requested Borrowing.

                           (c)      MAKING OF LOANS.

                           (i)      In the event that Agent shall elect to have
         the terms of this Section 2.3(c) apply to a requested Borrowing as
         described in Section 2.3(b), then promptly after receipt of a request
         for a Borrowing pursuant to Section 2.3(a), Agent shall notify the
         Lenders, not later than 1:00 p.m. (California time) on the Business Day
         immediately preceding the Funding Date applicable thereto, by telecopy,
         telephone, or other similar form of transmission, of the requested
         Borrowing. Each Lender shall make the amount of such Lender's Pro Rata
         Share of the requested Borrowing available to Agent in immediately
         available funds, to Agent's Account, not later than 10:00 a.m.
         (California time) on the Funding Date applicable thereto. After Agent's
         receipt of the proceeds of such Advances (or the Term Loan, as
         applicable), Agent shall make the proceeds thereof available to
         Administrative Borrower on the applicable Funding Date by transferring
         immediately available funds equal to such proceeds received by Agent to
         Administrative Borrower's Designated Account; provided, however, that,
         subject to the provisions of Section 2.3(i), Agent shall not request
         any Lender to make, and no Lender shall have the obligation to make,
         any Advance (or its portion of the Term Loan) if Agent shall have
         actual knowledge that (1) one or more of the applicable conditions
         precedent set forth in Section 3 will not be satisfied on the requested
         Funding Date for the applicable Borrowing unless such condition has
         been waived, or (2) the requested Borrowing would exceed the
         Availability on such Funding Date.

                                      -40-
<PAGE>

                           (ii)     Unless Agent receives notice from a Lender
         on or prior to the Closing Date or, with respect to any Borrowing after
         the Closing Date, prior to 9:00 a.m. (California time) on the date of
         such Borrowing, that such Lender will not make available as and when
         required hereunder to Agent for the account of Borrowers the amount of
         that Lender's Pro Rata Share of the Borrowing, Agent may assume that
         each Lender has made or will make such amount available to Agent in
         immediately available funds on the Funding Date and Agent may (but
         shall not be so required), in reliance upon such assumption, make
         available to Borrowers on such date a corresponding amount. If and to
         the extent any Lender shall not have made its full amount available to
         Agent in immediately available funds and Agent in such circumstances
         has made available to Borrowers such amount, that Lender shall on the
         Business Day following such Funding Date make such amount available to
         Agent, together with interest at the Defaulting Lender Rate for each
         day during such period. A notice submitted by Agent to any Lender with
         respect to amounts owing under this subsection shall be conclusive,
         absent manifest error. If such amount is so made available, such
         payment to Agent shall constitute such Lender's Advance (or portion of
         the Term Loan, as applicable) on the date of Borrowing for all purposes
         of this Agreement. If such amount made available by Agent to Borrowers
         is not made available to Agent by such Lender on the Business Day
         following the Funding Date, Agent will notify Administrative Borrower
         of such failure to fund and, upon demand by Agent, Borrowers shall pay
         such amount to Agent for Agent's account, together with interest
         thereon for each day elapsed since the date of such Borrowing, at a
         rate per annum equal to the interest rate applicable at the time to the
         Advances (or portion of the Term Loan, as applicable) composing such
         Borrowing. The failure of any Lender to make any Advance (or portion of
         the Term Loan, as applicable) on any Funding Date shall not relieve any
         other Lender of any obligation hereunder to make an Advance (or portion
         of the Term Loan, as applicable) on such Funding Date, but no Lender
         shall be responsible for the failure of any other Lender to make the
         Advance to be made by such other Lender on any Funding Date.

                           (iii)    Agent shall not be obligated to transfer to
         a Defaulting Lender any payments made by Borrowers to Agent for the
         Defaulting Lender's benefit, and, in the absence of such transfer to
         the Defaulting Lender, Agent shall transfer any such payments to each
         other non-Defaulting Lender member of the Lender Group ratably in
         accordance with their Commitments (but only to the extent that such
         Defaulting Lender's Advance was funded by the other members of the
         Lender Group) or, if so directed by Administrative Borrower and if no
         Default or Event of Default had occurred and is continuing (and to the
         extent such Defaulting Lender's Advance was not funded by the Lender
         Group), retain same to be re-advanced to Borrowers as if such
         Defaulting Lender had made Advances to Borrowers. Subject to the
         foregoing, Agent may hold and, in its Permitted Discretion, re-lend to
         Borrowers for the account of such Defaulting Lender the amount of all
         such payments received and retained by Agent for the account of such
         Defaulting Lender. Solely for the purposes of voting or consenting to
         matters with respect to the Loan Documents, such Defaulting Lender
         shall be deemed not to be a "Lender" and such Lender's Commitment shall
         be deemed to be zero. This Section shall remain effective with respect
         to such Lender until (x) the Obligations under this Agreement shall
         have been declared or shall have become immediately due and payable,
         (y) the non-Defaulting Lenders, Agent, and Administrative Borrower
         shall have waived

                                      -41-
<PAGE>

         such Defaulting Lender's default in writing, or (z) the Defaulting
         Lender makes its Pro Rata Share of the applicable Advance and pays to
         Agent all amounts owing by Defaulting Lender in respect thereof. The
         operation of this Section shall not be construed to increase or
         otherwise affect the Commitment of any Lender, to relieve or excuse the
         performance by such Defaulting Lender or any other Lender of its duties
         and obligations hereunder, or to relieve or excuse the performance by
         Borrowers of their duties and obligations hereunder to Agent or to the
         Lenders other than such Defaulting Lender. Any such failure to fund by
         any Defaulting Lender shall constitute a material breach by such
         Defaulting Lender of this Agreement and shall entitle Administrative
         Borrower at its option, upon written notice to Agent, to arrange for a
         substitute Lender to assume the Commitment of such Defaulting Lender,
         such substitute Lender to be acceptable to Agent. In connection with
         the arrangement of such a substitute Lender, the Defaulting Lender
         shall have no right to refuse to be replaced hereunder, and agrees to
         execute and deliver a completed form of Assignment and Acceptance in
         favor of the substitute Lender (and agrees that it shall be deemed to
         have executed and delivered such document if it fails to do so) subject
         only to being repaid its share of the outstanding Obligations (other
         than Bank Product Obligations, but including an assumption of its Pro
         Rata Share of the Risk Participation Liability) without any premium or
         penalty of any kind whatsoever; provided however, that any such
         assumption of the Commitment of such Defaulting Lender shall not be
         deemed to constitute a waiver of any of the Lender Groups' or
         Borrowers' rights or remedies against any such Defaulting Lender
         arising out of or in relation to such failure to fund.

                           (d)      MAKING OF SWING LOANS.

                           (i)      In the event Agent shall elect, with the
         consent of Swing Lender, as a Lender, to have the terms of this Section
         2.3(d) apply to a requested Borrowing as described in Section 2.3(b),
         Swing Lender as a Lender shall make such Advance in the amount of such
         Borrowing (any such Advance made solely by Swing Lender as a Lender
         pursuant to this Section 2.3(d) being referred to as a "Swing Loan" and
         such Advances being referred to collectively as "Swing Loans")
         available to Borrowers on the Funding Date applicable thereto by
         transferring immediately available funds to Administrative Borrower's
         Designated Account. Each Swing Loan shall be deemed to be an Advance
         hereunder and shall be subject to all the terms and conditions
         applicable to other Advances, except that no such Swing Loan shall be
         eligible to be a LIBOR Rate Loan and all payments on any Swing Loan
         shall be payable to Swing Lender as a Lender solely for its own account
         (and for the account of the holder of any participation interest with
         respect to such Swing Loan). Subject to the provisions of Section
         2.3(i), Agent shall not request Swing Lender as a Lender to make, and
         Swing Lender as a Lender shall not make, any Swing Loan if Agent has
         actual knowledge that (i) one or more of the applicable conditions
         precedent set forth in Section 3 will not be satisfied on the requested
         Funding Date for the applicable Borrowing unless such condition has
         been waived, or (ii) the requested Borrowing would exceed the
         Availability on such Funding Date. Swing Lender as a Lender shall not
         otherwise be required to determine whether the applicable conditions
         precedent set forth in Section 3 have been satisfied on the Funding
         Date applicable thereto prior to making, in its sole discretion, any
         Swing Loan.

                                      -42-
<PAGE>

                           (ii)     The Swing Loans shall be secured by the
         Collateral Agent's Liens, constitute Obligations hereunder, and bear
         interest at the rate applicable from time to time to Advances that are
         Base Rate Loans.

                           (e)      AGENT ADVANCES.

                           (i)      Agent hereby is authorized by Borrowers and
         the Lenders, from time to time in Agent's sole discretion, (1) after
         the occurrence and during the continuance of a Default or an Event of
         Default, or (2) at any time that any of the other applicable conditions
         precedent set forth in Section 3 have not been satisfied, to make
         Advances to Borrowers on behalf of the Lenders that Agent, in its
         Permitted Discretion deems necessary or desirable (A) to preserve or
         protect the Collateral, or any portion thereof, (B) to enhance the
         likelihood of repayment of the Obligations (other than the Bank Product
         Obligations), or (C) to pay any other amount chargeable to Borrowers
         pursuant to the terms of this Agreement, including Lender Group
         Expenses and the costs, fees, and expenses described in Section 10 (any
         of the Advances described in this Section 2.3(e) shall be referred to
         as "Agent Advances"). Each Agent Advance shall be deemed to be an
         Advance hereunder, except that no such Agent Advance shall be eligible
         to be a LIBOR Rate Loan and all payments thereon shall be payable to
         Agent solely for its own account.

                           (ii)     The Agent Advances shall be repayable on
         demand, secured by the Collateral Agent's Liens granted to Agent under
         the Loan Documents, constitute Obligations hereunder, and bear interest
         at the rate applicable from time to time to Advances that are Base Rate
         Loans.

                           (f)      SETTLEMENT. It is agreed that each Lender's
funded portion of the Advances is intended by the Lenders to equal, at all
times, such Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of or enforceable by Borrowers) that in
order to facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Advances, the Swing Loans, and the
Agent Advances shall take place on a periodic basis in accordance with the
following provisions:

                           (i)      Agent shall request settlement
         ("Settlement") with the Lenders on a weekly basis, or on a more
         frequent basis if so determined by Agent, (1) on behalf of Swing
         Lender, with respect to each outstanding Swing Loan, (2) for itself,
         with respect to each Agent Advance, and (3) with respect to Borrowers'
         or their Subsidiaries' Collections received, as to each by notifying
         the Lenders by telecopy, telephone, or other similar form of
         transmission, of such requested Settlement, no later than 2:00 p.m.
         (California time) on the Business Day immediately prior to the date of
         such requested Settlement (the date of such requested Settlement being
         the "Settlement Date"). Such notice of a Settlement Date shall include
         a summary statement of the amount of outstanding Advances, Swing Loans,
         and Agent Advances for the period since the prior Settlement Date.
         Subject to the terms and conditions contained herein (including Section
         2.3(c)(iii)): (y) if a Lender's balance of the Advances (including
         Swing Loans and Agent Advances) exceeds such Lender's Pro Rata Share of
         the Advances (including Swing Loans and

                                      -43-
<PAGE>

         Agent Advances) as of a Settlement Date, then Agent shall, by no later
         than 12:00 p.m. (California time) on the Settlement Date, transfer in
         immediately available funds to a Deposit Account of such Lender (as
         such Lender may designate), an amount such that each such Lender shall,
         upon receipt of such amount, have as of the Settlement Date, its Pro
         Rata Share of the Advances (including Swing Loans and Agent Advances),
         and (z) if a Lender's balance of the Advances (including Swing Loans
         and Agent Advances) is less than such Lender's Pro Rata Share of the
         Advances (including Swing Loans and Agent Advances) as of a Settlement
         Date, such Lender shall no later than 12:00 p.m. (California time) on
         the Settlement Date transfer in immediately available funds to the
         Agent's Account, an amount such that each such Lender shall, upon
         transfer of such amount, have as of the Settlement Date, its Pro Rata
         Share of the Advances (including Swing Loans and Agent Advances). Such
         amounts made available to Agent under clause (z) of the immediately
         preceding sentence shall be applied against the amounts of the
         applicable Swing Loans or Agent Advances and, together with the portion
         of such Swing Loans or Agent Advances representing Swing Lender's Pro
         Rata Share thereof, shall constitute Advances of such Lenders. If any
         such amount is not made available to Agent by any Lender on the
         Settlement Date applicable thereto to the extent required by the terms
         hereof, Agent shall be entitled to recover for its account such amount
         on demand from such Lender together with interest thereon at the
         Defaulting Lender Rate.

                           (ii)     In determining whether a Lender's balance of
         the Advances, Swing Loans, and Agent Advances is less than, equal to,
         or greater than such Lender's Pro Rata Share of the Advances, Swing
         Loans, and Agent Advances as of a Settlement Date, Agent shall, as part
         of the relevant Settlement, apply to such balance the portion of
         payments actually received in good funds by Agent with respect to
         principal, interest, fees payable by Borrowers and allocable to the
         Lenders hereunder, and proceeds of Collateral. To the extent that a net
         amount is owed to any such Lender after such application, such net
         amount shall be distributed by Agent to that Lender as part of such
         next Settlement.

                           (iii)    Between Settlement Dates, Agent, to the
         extent no Agent Advances or Swing Loans are outstanding, may pay over
         to Swing Lender any payments received by Agent, that in accordance with
         the terms of this Agreement would be applied to the reduction of the
         Advances, for application to Swing Lender's Pro Rata Share of the
         Advances. If, as of any Settlement Date, Collections of Borrowers or
         their Subsidiaries received since the then immediately preceding
         Settlement Date have been applied to Swing Lender's Pro Rata Share of
         the Advances other than to Swing Loans, as provided for in the previous
         sentence, Swing Lender shall pay to Agent for the accounts of the
         Lenders, and Agent shall pay to the Lenders, to be applied to the
         outstanding Advances of such Lenders, an amount such that each Lender
         shall, upon receipt of such amount, have, as of such Settlement Date,
         its Pro Rata Share of the Advances. During the period between
         Settlement Dates, Swing Lender with respect to Swing Loans, Agent with
         respect to Agent Advances, and each Lender (subject to the effect of
         letter agreements between Agent and individual Lenders) with respect to
         the Advances other than Swing Loans and Agent Advances, shall be
         entitled to interest at the applicable rate or rates payable under this
         Agreement on the daily amount of funds employed by Swing Lender, Agent,
         or the Lenders, as applicable.

                                      -44-
<PAGE>

                           (g)      NOTATION. Agent shall record on its books
the principal amount of the Advances (or portion of the Term Loan, as
applicable) owing to each Lender, including the Swing Loans owing to Swing
Lender, and Agent Advances owing to Agent, and the interests therein of each
Lender, from time to time and such records shall, absent manifest error,
conclusively be presumed to be correct and accurate. In addition, each Lender is
authorized, at such Lender's option, to note the date and amount of each payment
or prepayment of principal of such Lender's Advances in its books and records,
including computer records.

                           (h)      LENDERS' FAILURE TO PERFORM. All Advances
(other than Swing Loans and Agent Advances) shall be made by the Lenders
contemporaneously and in accordance with their Pro Rata Shares. It is understood
that (i) no Lender shall be responsible for any failure by any other Lender to
perform its obligation to make any Advance (or other extension of credit)
hereunder, nor shall any Commitment of any Lender be increased or decreased as a
result of any failure by any other Lender to perform its obligations hereunder,
and (ii) no failure by any Lender to perform its obligations hereunder shall
excuse any other Lender from its obligations hereunder.

                           (i)      OPTIONAL OVERADVANCES. Any contrary
provision of this Agreement notwithstanding, the Lenders hereby authorize Agent
or Swing Lender, as applicable, and Agent or Swing Lender, as applicable, may,
but is not obligated to, knowingly and intentionally, continue to make Advances
(including Swing Loans) to Borrowers notwithstanding that an Overadvance exists
or thereby would be created, so long as (i) after giving effect to such Advances
(including Swing Loans), the outstanding Revolver Usage does not exceed the
Borrowing Base by more than $4,500,000, (ii) after giving effect to such
Advances (including Swing Loans), the outstanding Revolver Usage (except for and
excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses) does not exceed the Maximum Revolver Amount, and (iii) at the
time of the making of any such Advance (including any Swing Loan), Agent does
not believe, in good faith, that the Overadvance created by such Advance will be
outstanding for more than 90 days. The foregoing provisions are for the
exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended
to benefit Borrowers in any way. The Advances and Swing Loans, as applicable,
that are made pursuant to this Section 2.3(i) shall be subject to the same terms
and conditions as any other Advance or Swing Loan, as applicable, except that
they shall not be eligible for the LIBOR Option and the rate of interest
applicable thereto shall be the rate applicable to Advances that are Base Rate
Loans under Section 2.6(c) hereof without regard to the presence or absence of a
Default or Event of Default.

                                    (A)      In the event Agent obtains actual
                  knowledge that the Revolver Usage exceeds the amounts
                  permitted by the preceding paragraph, regardless of the amount
                  of, or reason for, such excess, Agent shall notify the Lenders
                  as soon as practicable (and prior to making any (or any
                  additional) intentional Overadvances (except for and excluding
                  amounts charged to the Loan Account for interest, fees, or
                  Lender Group Expenses) unless Agent determines that prior
                  notice would result in imminent harm to the Collateral or its
                  value), and the Lenders with Revolver Commitments thereupon
                  shall, together with Agent, jointly determine the terms of
                  arrangements that shall be implemented with Borrowers intended
                  to reduce, within a reasonable time, the outstanding principal

                                      -45-
<PAGE>

                  amount of the Advances to Borrowers to an amount permitted by
                  the preceding paragraph. In the event Agent or any Lender
                  disagrees over the terms of reduction or repayment of any
                  Overadvance, the terms of reduction or repayment thereof shall
                  be implemented according to the determination of the Required
                  Lenders.

                                    (B)      Each Lender with a Revolver
                  Commitment shall be obligated to settle with Agent as provided
                  in Section 2.3(f) for the amount of such Lender's Pro Rata
                  Share of any unintentional Overadvances by Agent reported to
                  such Lender, any intentional Overadvances made as permitted
                  under this Section 2.3(i), and any Overadvances resulting from
                  the charging to the Loan Account of interest, fees, or Lender
                  Group Expenses.

                  2.4.     PAYMENTS.

                           (a)      PAYMENTS BY BORROWERS.

                           (i)      Except as otherwise expressly provided
         herein, all payments by Borrowers shall be made to Agent's Account for
         the account of the Lender Group and shall be made in immediately
         available funds, no later than 11:00 a.m. (California time) on the date
         specified herein. Any payment received by Agent later than 11:00 a.m.
         (California time), shall be deemed to have been received on the
         following Business Day and any applicable interest or fee shall
         continue to accrue until such following Business Day.

                           (ii)     Unless Agent receives notice from
         Administrative Borrower prior to the date on which any payment is due
         to the Lenders that Borrowers will not make such payment in full as and
         when required, Agent may assume that Borrowers have made (or will make)
         such payment in full to Agent on such date in immediately available
         funds and Agent may (but shall not be so required), in reliance upon
         such assumption, distribute to each Lender on such due date an amount
         equal to the amount then due such Lender. If and to the extent
         Borrowers do not make such payment in full to Agent on the date when
         due, each Lender severally shall repay to Agent on demand such amount
         distributed to such Lender, together with interest thereon at the
         Defaulting Lender Rate for each day from the date such amount is
         distributed to such Lender until the date repaid.

                           (b)      APPORTIONMENT AND APPLICATION.

                           (i)      Except as otherwise provided with respect to
         Defaulting Lenders and except as otherwise provided in the Loan
         Documents (including letter agreements between Agent and individual
         Lenders), aggregate principal and interest payments shall be
         apportioned ratably among the Lenders (according to the unpaid
         principal balance of the Obligations to which such payments relate held
         by each Lender) and payments of fees and expenses (other than fees or
         expenses that are for Agent's separate account, after giving effect to
         any letter agreements between Agent and individual Lenders) shall be
         apportioned ratably among the Lenders having a Pro Rata Share of the
         type of Commitment or Obligation to which a particular fee relates.
         Except as otherwise

                                      -46-
<PAGE>

         specifically provided in Section 2.4(c), all payments shall be remitted
         to Agent and all such payments, and all proceeds of Collateral received
         by Agent, shall be applied as follows:

                                    (A)      first, to pay any Lender Group
                  Expenses then due to Agent under the Loan Documents, until
                  paid in full,

                                    (B)      second, to pay any Lender Group
                  Expenses then due to the Lenders under the Loan Documents, on
                  a ratable basis, until paid in full,

                                    (C)      third, to pay any fees then due to
                  Agent (for its separate accounts, after giving effect to any
                  letter agreements between Agent and the individual Lenders)
                  under the Loan Documents until paid in full,

                                    (D)      fourth, to pay any fees then due to
                  any or all of the Lenders (after giving effect to any letter
                  agreements between Agent and individual Lenders) under the
                  Loan Documents, on a ratable basis, until paid in full,

                                    (E)      fifth, to pay interest due in
                  respect of all Agent Advances, until paid in full,

                                    (F)      sixth, ratably to pay interest due
                  in respect of the Advances (other than Agent Advances), the
                  Swing Loans, and the Term Loan until paid in full,

                                    (G)      seventh, to pay the principal of
                  all Agent Advances until paid in full,

                                    (H)      eighth, ratably to pay all
                  principal amounts then due and payable (other than as a result
                  of an acceleration thereof) with respect to the Term Loan
                  until paid in full,

                                    (I)      ninth, to pay the principal of all
                  Swing Loans until paid in full,

                                    (J)      tenth, so long as no Event of
                  Default has occurred and is continuing, and at Agent's
                  election (which election Agent agrees will not be made if an
                  Overadvance would be created thereby), to pay amounts then due
                  and owing by Administrative Borrower or its Subsidiaries in
                  respect of Bank Products, until paid in full,

                                    (K)      eleventh, so long as no Event of
                  Default has occurred and is continuing, to pay the principal
                  of all Advances until paid in full,

                                    (L)      twelfth, if an Event of Default has
                  occurred and is continuing, ratably (i) to pay the principal
                  of all Advances until paid in full, (ii) to

                                      -47-
<PAGE>

                  Agent, to be held by Agent, for the ratable benefit of Issuing
                  Lender and those Lenders having a Revolver Commitment, as cash
                  collateral in an amount up to 105% of the then extant Letter
                  of Credit Usage until paid in full, and (iii) to Agent, to be
                  held by Agent, for the benefit of the Bank Product Providers,
                  as cash collateral in an amount up to the amount of the Bank
                  Product Reserve established prior to the occurrence of, and
                  not in contemplation of, the subject Event of Default until
                  Administrative Borrower's and its Subsidiaries' obligations in
                  respect of the then extant Bank Products have been paid in
                  full or the cash collateral amount has been exhausted,

                                    (M)      thirteenth, if an Event of Default
                  has occurred and is continuing, to pay the outstanding
                  principal balance of the Term Loan (in the inverse order of
                  the maturity of the installments due thereunder) until the
                  Term Loan is paid in full,

                                    (N)      fourteenth, if an Event of Default
                  has occurred and is continuing, to pay any other Obligations
                  (including the provision of amounts to Agent, to be held by
                  Agent, for the benefit of the Bank Product Providers, as cash
                  collateral in an amount up to the amount determined by Agent
                  in its Permitted Discretion as the amount necessary to secure
                  Administrative Borrower's and its Subsidiaries' obligations in
                  respect of the then extant Bank Products), and

                                    (O)      fifteenth, to Borrowers (to be
                  wired to the Designated Account) or such other Person entitled
                  thereto under applicable law.

                           (ii)     Agent promptly shall distribute to each
         Lender, pursuant to the applicable wire instructions received from each
         Lender in writing, such funds as it may be entitled to receive, subject
         to a Settlement delay as provided in Section 2.3(f).

                           (iii)    In each instance, so long as no Event of
         Default has occurred and is continuing, this Section 2.4(b) shall not
         be deemed to apply to any payment by Borrowers specified by Borrowers
         to be for the payment of specific Obligations then due and payable (or
         prepayable) under any provision of this Agreement.

                           (iv)     For purposes of the foregoing, "paid in
         full" means payment of all amounts owing under the Loan Documents
         according to the terms thereof, including loan fees, service fees,
         professional fees, interest (and specifically including interest
         accrued after the commencement of any Insolvency Proceeding), default
         interest, interest on interest, and expense reimbursements, whether or
         not any of the foregoing would be or is allowed or disallowed in whole
         or in part in any Insolvency Proceeding.

                           (v)      In the event of a direct conflict between
         the priority provisions of this Section 2.4 and other provisions
         contained in any other Loan Document, it is the intention of the
         parties hereto that such priority provisions in such documents shall be
         read together and construed, to the fullest extent possible, to be in
         concert with each other. In the event of any actual, irreconcilable
         conflict that cannot be resolved as aforesaid, the terms and provisions
         of this Section 2.4 shall control and govern.

                                      -48-
<PAGE>

                           (c)      MANDATORY PREPAYMENTS.

                           (i)      If on any day the sum of the Revolver Usage
         and the Letter of Credit Usage exceeds the Borrowing Base, Borrowers
         shall immediately pay to Agent an amount equal to such excess to be
         applied to the outstanding principal of the Advances and thereafter to
         be held as cash collateral for any issued and outstanding Letters of
         Credit.

                           (ii)     If on any day the Revolver Commitment is
         terminated or reduced to zero in accordance with this Agreement,
         Borrowers shall immediately repay in full the Term Loan.

                           (iii)    If at any time the outstanding principal
         amount of the Term Loan exceeds the Term Loan Amount, Borrowers shall
         immediately pay to Agent an amount equal to such excess, to be applied
         to the principal installments of the Term Loan in the inverse order of
         maturity. Agent shall have the right to have the Eligible Real Property
         Collateral and the Eligible Equipment reappraised by a qualified
         appraisal company selected by Agent in its Permitted Discretion from
         time to time after the Closing Date for the purposes of the definition
         of "Term Loan Amount" and this Section 2.4(c)(iii); provided, that
         Borrowers shall only be obligated to pay for fees, charges and expenses
         incurred in connection with such appraisals of the Eligible Real
         Property Collateral and Eligible Equipment to the extent provided in
         Section 2.11(c).

                           (iv)     If at any time the aggregate amount of the
         WFF Debt exceeds WFF Availability, the Borrowers shall immediately pay
         to Agent an amount equal to such excess to be applied, first, to the
         outstanding principal of the Advances, second, to the principal
         installments of the Term Loan in the inverse order of maturity, and
         thereafter to be held as cash collateral for any issued and outstanding
         Letters of Credit. Agent shall have the right to have the Enterprise
         Value of the Loan Parties reevaluated by a qualified valuation company
         selected by Agent in its Permitted Discretion from time to time after
         the Closing Date for the purposes of the definition of "WFF
         Availability" and this Section 2.4(c)(iv); provided, that Borrowers
         shall only be obligated to pay for fees, charges and expenses incurred
         in connection with such valuation to the extent provided in Section
         2.11(c).

                           (v)      Immediately upon any sale or disposition by
         any Loan Party or its Subsidiaries of property or assets (other than
         (x) a Permitted Disposition described in clause (b), (c), (d) or (e) of
         the definition of such term or (y) the DEYCO Sale) or the receipt by
         any Loan Party of the proceeds of any insurance policy with respect to
         Inventory or condemnation awards with respect to Inventory, Borrowers
         shall prepay the outstanding principal amount of the Term Loan and the
         Advances in accordance with Section 2.4(d) (and the Borrowers may
         prepay the Term Loan B to the extent permitted under Sections 2.4(d)
         and 7.7(a)) in an amount equal to 100% of the Net Cash Proceeds or the
         insurance or condemnation proceeds received by such Person in
         connection with such sales or dispositions or such casualty or
         condemnation event to the extent that the aggregate amount of Net Cash
         Proceeds received by all Loan Parties and their Subsidiaries (and not
         paid to Agent as a prepayment of the Term Loan and the Advances)

                                      -49-
<PAGE>

         for all such sales or dispositions shall exceed $250,000 since the
         Closing Date. Nothing contained in this subclause (v) shall permit any
         Loan Party or any of its Subsidiaries to sell or otherwise dispose of
         any property or assets other than in accordance with Section 7.4.

                           (vi)     Immediately upon the consummation of the
         DEYCO Sale, Borrowers shall prepay the outstanding principal amount of
         the Term Loan and the Advances in accordance with Section 2.4(d) in an
         amount equal to 100% of the Net Cash Proceeds received by any Loan
         Party or any of its Subsidiaries in connection with such sale. Nothing
         contained in this subclause (vi) shall permit any Loan Party or any of
         its Subsidiaries to consummate the DEYCO Sale other than in accordance
         with Section 7.4.

                           (vii)    Upon the receipt by any Loan Party or any of
         its Subsidiaries of any Extraordinary Receipts, Borrowers shall prepay
         the outstanding principal amount of the Term Loan and the Advances in
         accordance with Section 2.4(d) (and the Borrowers may prepay the Term
         Loan B to the extent permitted under Sections 2.4(d) and 7.7(a)) in an
         amount equal to 100% of such Extraordinary Receipts, net of any
         reasonable expenses incurred in collecting such Extraordinary Receipts.

                           (viii)   Upon the receipt by any Loan Party or any of
         its Subsidiaries of any proceeds of the Specified Tax Refund, Borrowers
         shall prepay the outstanding principal of the Term Loan and the
         Advances in accordance with Section 2.4(d) below in an amount equal to
         100% of such tax refund, net of any reasonable expenses incurred in
         collecting such tax refund.

                           (ix)     Within ten (10) Business Days of delivery to
         the Agent of each of the audited annual financial statements pursuant
         to Section 6.3(b) for an Fiscal Year of the Parent or, if such
         financial statements are not delivered to the Agent on the date such
         statements are required to be delivered pursuant to Section 6.3(b), ten
         (10) Business Days after the date such statements are required to be
         delivered to Agent pursuant to Section 6.3(b), Borrowers shall pay to
         Agent an amount equal to the product of (x) the Applicable Excess Cash
         Flow Percentage for such Fiscal Year, times (y) the Excess Cash Flow
         for the Fiscal Year covered by such financial statements, to be applied
         to the Term Loan in accordance with Section 2.4(d) (and to the extent
         permitted under Sections 2.4(d) and 7.7(a), at the request of the
         Borrowers, to the Term Loan B).

                           (x)      Upon the sale or issuance by any Loan Party
         or any of its Subsidiaries of any shares of its Stock, the Borrowers
         shall prepay the outstanding principal amount of the Term Loan and the
         Advances in accordance with Section 2.4(d) (and the Borrowers may
         prepay the Term Loan B to the extent permitted under Sections 2.4(d)
         and 7.7(a)) in an amount equal to 100% of the Net Cash Proceeds
         received by such Person in connection therewith. The provisions of this
         subsection (x) shall not be deemed to be implied consent to any such
         issuance, incurrence or sale otherwise prohibited by the terms and
         conditions of this Agreement.

                                      -50-
<PAGE>

                           (d)      APPLICATION OF PAYMENTS.

                           (i)      Each prepayment pursuant to subsections
         (c)(v), (c)(vii) and (c)(x) above shall be applied, first, to the Term
         Loan, and second, to the extent not permitted to be paid to the Term
         Loan B under Section 7.7(a), or not paid to the Term Loan B, to the
         Advances and thereafter, shall be held as cash collateral for any
         issued and outstanding Letters of Credit.

                           (ii)     Each prepayment pursuant to subsection
         (c)(vi) above in connection with the DEYCO Sale shall be applied as
         follows: (A) an amount equal to the book value of all Accounts included
         in such sale or, if greater, the amount of Advances and Letters of
         Credit supported by such assets determined using the effective advance
         rate under the Borrowing Base against such Accounts (determined at the
         time of such sale) shall be applied to the Advances until paid in full,
         (B) remaining Net Cash Proceeds of up to $1,000,000 shall be applied
         first, to the Term Loan until paid in full, and second, to the
         Advances, and (C) all remaining Net Cash Proceeds shall be applied to
         the Advances and thereafter, shall be held as cash collateral for any
         issued and outstanding Letters of Credit.

                           (iii)    Each prepayment pursuant to subsection
         (c)(viii) above in connection with the Specified Tax Refund shall be
         applied as follows: (A) an amount equal to $750,000 of such proceeds
         shall be applied to the Term Loan until paid in full, and (B) all
         remaining proceeds of the Specified Tax Refund shall be applied to the
         Advances.

                           (iv)     Each prepayment pursuant to Section (c)(ix)
         above shall be applied to the Term Loan until paid in full.

                           (v)      Each such prepayment of the Term Loan shall
         be applied against the remaining installments of principal of the Term
         Loan in the inverse order of maturity.

                  2.5.     OVERADVANCES. If, at any time or for any reason, the
amount of Obligations (other than Bank Product Obligations) owed by Borrowers to
the Lender Group pursuant to Section 2.1 or Section 2.12 is greater than either
the Dollar or percentage limitations set forth in Section 2.1 or Section 2.12,
as applicable (an "Overadvance"), Borrowers immediately shall pay to Agent, in
cash, the amount of such excess, which amount shall be used by Agent to reduce
the Obligations in accordance with the priorities set forth in Section 2.4(b).
In addition, Borrowers hereby promise to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full as and when
due and payable under the terms of this Agreement and the other Loan Documents.

                  2.6.     INTEREST RATES AND LETTER OF CREDIT FEE: RATES,
PAYMENTS, AND CALCULATIONS.

                           (a)      INTEREST RATES. Except as provided in clause
(c) below, all Obligations (except for undrawn Letters of Credit and except for
Bank Product Obligations) that have been charged to the Loan Account pursuant to
the terms hereof shall bear interest on the Daily Balance thereof as follows (i)
if the relevant Obligation is an Advance that is a LIBOR

                                      -51-
<PAGE>

Rate Loan, at a per annum rate equal to the LIBOR Rate plus the applicable LIBOR
Rate Margin, (ii) if the relevant Obligation is a portion of the Term Loan, at a
per annum rate equal to the Base Rate plus the Base Rate Term Loan Margin, and
(iii) otherwise, at a per annum rate equal to the Base Rate plus the applicable
Base Rate Margin.

                           (b)      LETTER OF CREDIT FEE. Borrowers shall pay
Agent (for the ratable benefit of the Lenders with a Revolver Commitment,
subject to any letter agreement between Agent and individual Lenders), a Letter
of Credit fee (in addition to the charges, commissions, fees, and costs set
forth in Section 2.12(e)) which shall accrue at a rate per annum equal to the
applicable LIBOR Rate Margin times the Daily Balance of the undrawn amount of
all outstanding Letters of Credit.

                           (c)      DEFAULT RATE. Upon the occurrence and during
the continuation of an Event of Default (and at the election of Agent or the
Required Lenders),

                           (i)      all Obligations (except for undrawn Letters
         of Credit and except for Bank Product Obligations) that have been
         charged to the Loan Account pursuant to the terms hereof shall bear
         interest on the Daily Balance thereof at a per annum rate equal to 4
         percentage points above the per annum rate otherwise applicable
         hereunder, and

                           (ii)     the Letter of Credit fee provided for above
         shall be increased to 4 percentage points above the per annum rate
         otherwise applicable hereunder.

                           (d)      PAYMENT. Except as provided to the contrary
in Section 2.12(a), interest, Letter of Credit fees, and all other fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
at any time that Obligations or Commitments are outstanding. Borrowers hereby
authorize Agent, from time to time, without prior notice to Borrowers, to charge
such interest and fees, all Lender Group Expenses (as and when incurred), the
charges, commissions, fees, and costs provided for in Section 2.12(e) (as and
when accrued or incurred), the fees and costs provided for in Section 2.11 (as
and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including the amounts due and payable with
respect to the Term Loan and including any amounts due and payable to the Bank
Product Providers in respect of Bank Products up to the amount of the then
extant Bank Product Reserve) to Borrowers' Loan Account, which amounts
thereafter shall constitute Advances hereunder and shall accrue interest at the
rate then applicable to Advances hereunder. Any interest not paid when due shall
be compounded by being charged to Borrowers' Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans hereunder.

                           (e)      COMPUTATION. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a 360 day
year for the actual number of days elapsed. In the event the Base Rate is
changed from time to time hereafter, the rates of interest hereunder based upon
the Base Rate automatically and immediately shall be increased or decreased by
an amount equal to such change in the Base Rate.

                           (f)      INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL
RATE. In no event shall the interest rate or rates payable under this Agreement,
plus any other amounts paid in

                                      -52-
<PAGE>

connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.

                  2.7.     CASH MANAGEMENT.

                           (a)      Borrowers shall and shall cause each of
their Subsidiaries to (i) establish and maintain cash management services of a
type and on terms satisfactory to Agent at one or more of the banks set forth on
Schedule 2.7(a) (each a "Cash Management Bank"), and shall request in writing
and otherwise take such reasonable steps to ensure that all of their and their
Subsidiaries' Account Debtors forward payment of the amounts owed by them
directly to such Cash Management Bank, or to Borrowers for deposit in accordance
with Section 2.7(a)(ii), and (ii) deposit or cause to be deposited promptly, and
in any event no later than the first Business Day after the date of receipt
thereof, all of their Collections (including those sent directly by their
Account Debtors to a Cash Management Bank) into a bank account in Collateral
Agent's name (a "Cash Management Account") at one of the Cash Management Banks.

                           (b)      Each Cash Management Bank shall establish
and maintain Cash Management Agreements with Agent and Borrowers, in form and
substance acceptable to Agent. Each such Cash Management Agreement shall
provide, among other things, that (i) all items of payment deposited in such
Cash Management Account and proceeds thereof are held by such Cash Management
Bank as agent or bailee-in-possession for Collateral Agent, (ii) the Cash
Management Bank has no rights of setoff or recoupment or any other claim against
the applicable Cash Management Account, other than for payment of its service
fees and other charges directly related to the administration of such Cash
Management Account and for returned checks or other items of payment, and (iii)
except as provided in Section 2.7(f) below, it immediately will forward by daily
sweep all amounts in the applicable Cash Management Account to the Agent's
Account.

                           (c)      So long as no Default or Event of Default
has occurred and is continuing, Administrative Borrower may amend Schedule
2.7(a) or (b) to add or replace a Cash Management Account Bank or Cash
Management Account; provided, however, that (i) such prospective Cash Management
Bank shall be satisfactory to Agent and Agent shall have consented in writing in
advance to the opening of such Cash Management Account with the prospective Cash
Management Bank, and (ii) prior to the time of the opening of such Cash
Management Account, a Borrower or a Subsidiary of a Borrower, as applicable, and
such prospective Cash Management Bank shall have executed and delivered to Agent
a Cash Management Agreement. A Borrowers or a Subsidiary of a Borrower, as
applicable shall close any of their Cash Management Accounts (and establish
replacement cash management accounts in accordance with the foregoing sentence)
promptly and in any event within 30 days of notice from Agent that the
creditworthiness of any Cash Management Bank is no longer acceptable in

                                      -53-
<PAGE>

Agent's reasonable judgment, or as promptly as practicable and in any event
within 60 days of notice from Agent that the operating performance, funds
transfer, or availability procedures or performance of the Cash Management Bank
with respect to Cash Management Accounts or Agent's liability under any Cash
Management Agreement with such Cash Management Bank is no longer acceptable in
Agent's reasonable judgment.

                           (d)      The Cash Management Accounts shall be cash
collateral accounts, with all cash, checks and similar items of payment in such
accounts securing payment of the Obligations, and in which Borrowers hereby
grant a Lien to Collateral Agent.

                           (e)      Each of Canadian Guarantors shall (i)
establish and maintain one or more depository accounts, under the dominion and
control of Collateral Agent pursuant to a Control Agreement among Collateral
Agent, such Canadian Guarantor, and the applicable Canadian financial
institution, in form and substance satisfactory to Agent, in respect of its
Collections and (ii) instruct all of its Account Debtors to remit all such
Collections to such depository accounts. Each of the Canadian Guarantors shall
at all times deposit all Collections into such accounts that are received by it
from any source promptly, and in any event no later than the first Business Day,
after the date of receipt thereof.

                           (f)      So long as no Event of Default shall have
occurred and be continuing, each Canadian Guarantor may use the funds on deposit
in its foreign bank accounts for its working capital purposes. During the
continuance of an Event of Default, Collateral Agent shall have the right to
convert all non-Dollar denominated balances in each Canadian Guarantor's foreign
bank accounts into Dollars (at Borrowers' sole expense) and cause all amounts in
such accounts to be wired into a DDA or other account subject to a Control
Agreement and then wired from such DDA to a Cash Management Account. The
arrangements contemplated in Section 2.7(e) and this Section 2.7(f) shall not be
modified by any Loan Party without the prior written consent of Agent.

                  2.8.     CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any
payment item by Agent (whether from transfers to Agent by the Cash Management
Banks pursuant to the Cash Management Agreements or otherwise) shall not be
considered a payment on account unless such payment item is a wire transfer of
immediately available federal funds made to the Agent's Account or unless and
until such payment item is honored when presented for payment. Should any
payment item not be honored when presented for payment, then Borrowers shall be
deemed not to have made such payment and interest shall be calculated
accordingly. Anything to the contrary contained herein notwithstanding, any
payment item shall be deemed received by Agent only if it is received into the
Agent's Account on a Business Day on or before 11:00 a.m. (California time). If
any payment item is received into the Agent's Account on a non-Business Day or
after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have
been received by Agent as of the opening of business on the immediately
following Business Day. From and after the Closing Date, Agent shall be entitled
to charge Borrowers for one (1) Business Day of 'clearance' or 'float' at the
rate then applicable under Section 2.6 to Advances that are Base Rate Loans on
all Collections that are received by Borrowers and their Subsidiaries
(regardless of whether forwarded by the Cash Management Banks to Agent). This
across-the-board one (1) Business Day clearance or float charge on all
Collections of Borrowers and their Subsidiaries is acknowledged by the parties
to constitute an integral aspect of the pricing of the

                                      -54-
<PAGE>

financing of Borrowers and shall apply irrespective of whether or not there are
any outstanding monetary Obligations; the effect of such clearance or float
charge being the equivalent of charging interest on such Collections through the
completion of a period ending one (1) Business Day after the receipt thereof.
The parties acknowledge and agree that the economic benefit of the foregoing
provisions of this Section 2.8 shall be for the exclusive benefit of Agent.

                  2.9.     DESIGNATED ACCOUNT. Agent is authorized to make the
Advances and the Term Loan, and Issuing Lender is authorized to issue the
Letters of Credit, under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person, or
without instructions if pursuant to Section 2.6(d). Administrative Borrower
agrees to establish and maintain the Designated Account with the Designated
Account Bank for the purpose of receiving the proceeds of the Advances requested
by Borrowers and made by Agent or the Lenders hereunder. Unless otherwise agreed
by Agent and Administrative Borrower, any Advance, Agent Advance, or Swing Loan
requested by Borrowers and made by Agent or the Lenders hereunder shall be made
to the Designated Account.

                  2.10.    MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF
OBLIGATIONS. Agent shall maintain an account on its books in the name of
Borrowers (the "Loan Account") on which Borrowers will be charged with the Term
Loan, all Advances (including Agent Advances and Swing Loans) made by Agent,
Swing Lender, or the Lenders to Borrowers or for Borrowers' account, the Letters
of Credit issued by Issuing Lender for Borrowers' account, and with all other
payment Obligations hereunder or under the other Loan Documents (except for Bank
Product Obligations), including, accrued interest, fees and expenses, and Lender
Group Expenses. In accordance with Section 2.8, the Loan Account will be
credited with all payments received by Agent from Borrowers or for Borrowers'
account, including all amounts received in the Agent's Account from any Cash
Management Bank. Agent shall render statements regarding the Loan Account to
Administrative Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements, absent manifest error, shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrowers and the Lender Group unless, within 30 days after receipt thereof by
Administrative Borrower, Administrative Borrower shall deliver to Agent written
objection thereto describing the error or errors contained in any such
statements.

                  2.11.    FEES. Borrowers shall pay to Agent the following fees
and charges, which fees and charges shall be non-refundable when paid
(irrespective of whether this Agreement is terminated thereafter) and shall be
apportioned among the Lenders in accordance with the terms of letter agreements
between Agent and individual Lenders:

                           (a)      UNUSED LINE FEE. On the first day of each
month during the term of this Agreement, an unused line fee in the amount equal
to 0.25% per annum times the result of (i) the Maximum Revolver Amount, less
(ii) the sum of (A) the average Daily Balance of Advances that were outstanding
during the immediately preceding month, plus (B) the average Daily Balance of
the Letter of Credit Usage during the immediately preceding month,

                           (b)      FEE LETTER FEES. As and when due and payable
under the terms of the Fee Letter, the fees set forth in the Fee Letter, and

                                      -55-
<PAGE>

                           (c)      AUDIT, APPRAISAL, AND VALUATION CHARGES.
Audit, appraisal, and valuation fees and charges as follows (i) a fee of $850
per day, per auditor, plus out-of-pocket expenses for each financial audit of
Borrower performed by personnel employed by Agent, (ii) a fee of $850 per day,
per applicable individual, plus out-of-pocket expenses for the establishment of
electronic collateral reporting systems, (iii) a fee of $1,500 per day per
appraiser, plus out-of-pocket expenses, for each appraisal of the Collateral, or
any portion thereof, performed by personnel employed by Agent, and (iv) the
actual charges paid or incurred by Agent if it elects to employ the services of
one or more third Persons to perform financial audits of Borrowers or their
Subsidiaries, to establish electronic collateral reporting systems, to appraise
the Collateral, or any portion thereof, or to assess Borrowers' and their
Subsidiaries' business valuation, provided that, in the absence of a continuing
Event of Default, the Borrowers shall not be required to pay for more than (i)
four financial audits of the Loan Parties in any Fiscal Year of the Parent, (ii)
one appraisal of the Real Property Collateral in any Fiscal Year of the Parent,
(iii) one appraisal of the Eligible Equipment in any Fiscal Year of the Parent,
and (iv) one determination of the Loan Parties' Enterprise Value in any Fiscal
Year of the Parent.

                  2.12.    LETTERS OF CREDIT.

                           (a)      Subject to the terms and conditions of this
Agreement, the Issuing Lender agrees to issue letters of credit for the account
of Borrowers (each, an "L/C") or to purchase participations or execute
indemnities or reimbursement obligations (each such undertaking, an "L/C
Undertaking") with respect to letters of credit issued by an Underlying Issuer
(as of the Closing Date, the prospective Underlying Issuer is to be Wells Fargo)
for the account of Borrowers. To request the issuance of an L/C or an L/C
Undertaking (or the amendment, renewal, or extension of an outstanding L/C or
L/C Undertaking), Administrative Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have been
approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in
advance of the requested date of issuance, amendment, renewal, or extension) a
notice requesting the issuance of an L/C or L/C Undertaking, or identifying the
L/C or L/C Undertaking to be amended, renewed, or extended, the date of
issuance, amendment, renewal, or extension, the date on which such L/C or L/C
Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name
and address of the beneficiary thereof (or of the Underlying Letter of Credit,
as applicable), and such other information as shall be necessary to prepare,
amend, renew, or extend such L/C or L/C Undertaking. If requested by the Issuing
Lender, Borrowers also shall be an applicant under the application with respect
to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking. The Issuing Lender shall have no obligation to issue a Letter of
Credit if any of the following would result after giving effect to the requested
Letter of Credit:

                           (i)      the Letter of Credit Usage would exceed the
         Borrowing Base less the then extant amount of outstanding Advances, or

                           (ii)     the Letter of Credit Usage would exceed
         $10,000,000, or

                           (iii)    the Letter of Credit Usage would exceed the
         Maximum Revolver Amount less the then extant amount of outstanding
         Advances.

                                      -56-
<PAGE>

Borrowers and the Lender Group acknowledge and agree that certain Underlying
Letters of Credit may be issued to support letters of credit that already are
outstanding as of the Closing Date. Each Letter of Credit (and corresponding
Underlying Letter of Credit) shall be in form and substance acceptable to the
Issuing Lender (in the exercise of its Permitted Discretion), including the
requirement that the amounts payable thereunder must be payable in Dollars. If
Issuing Lender is obligated to advance funds under a Letter of Credit, Borrowers
immediately shall reimburse such L/C Disbursement to Issuing Lender by paying to
Agent an amount equal to such L/C Disbursement not later than 11:00 a.m.,
California time, on the date that such L/C Disbursement is made, if
Administrative Borrower shall have received written or telephonic notice of such
L/C Disbursement prior to 10:00 a.m., California time, on such date, or, if such
notice has not been received by Administrative Borrower prior to such time on
such date, then not later than 11:00 a.m., California time, on (i) the Business
Day that Administrative Borrower receives such notice, if such notice is
received prior to 10:00 a.m., California time, on the date of receipt, and, in
the absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to Advances that are Base Rate Loans
under Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance
hereunder, Borrowers' obligation to reimburse such L/C Disbursement shall be
discharged and replaced by the resulting Advance. Promptly following receipt by
Agent of any payment from Borrowers pursuant to this paragraph, Agent shall
distribute such payment to the Issuing Lender or, to the extent that Lenders
have made payments pursuant to Section 2.12(c) to reimburse the Issuing Lender,
then to such Lenders and the Issuing Lender as their interest may appear.

                           (b)      Promptly following receipt of a notice of
L/C Disbursement pursuant to Section 2.12(a), each Lender with a Revolver
Commitment agrees to fund its Pro Rata Share of any Advance deemed made pursuant
to the foregoing subsection on the same terms and conditions as if Borrowers had
requested such Advance and Agent shall promptly pay to Issuing Lender the
amounts so received by it from the Lenders. By the issuance of a Letter of
Credit (or an amendment to a Letter of Credit increasing the amount thereof) and
without any further action on the part of the Issuing Lender or the Lenders with
Revolver Commitment, the Issuing Lender shall be deemed to have granted to each
Lender with a Revolver Commitment, and each Lender with a Revolver Commitment
shall be deemed to have purchased, a participation in each Letter of Credit, in
an amount equal to its Pro Rata Share of the Risk Participation Liability of
such Letter of Credit, and each such Lender agrees to pay to Agent, for the
account of the Issuing Lender, such Lender's Pro Rata Share of any payments made
by the Issuing Lender under such Letter of Credit. In consideration and in
furtherance of the foregoing, each Lender with a Revolver Commitment hereby
absolutely and unconditionally agrees to pay to Agent, for the account of the
Issuing Lender, such Lender's Pro Rata Share of each L/C Disbursement made by
the Issuing Lender and not reimbursed by Borrowers on the date due as provided
in clause (a) of this Section, or of any reimbursement payment required to be
refunded to Borrowers for any reason. Each Lender with a Revolver Commitment
acknowledges and agrees that its obligation to deliver to Agent, for the account
of the Issuing Lender, an amount equal to its respective Pro Rata Share of each
L/C Disbursement made by the Issuing Lender pursuant to this Section 2.12(b)
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or Default
or the failure to satisfy any condition set forth in Section 3 hereof. If any
such Lender fails to make available to Agent the amount of such Lender's Pro
Rata Share of each L/C Disbursement made

                                      -57-
<PAGE>

by the Issuing Lender in respect of such Letter of Credit as provided in this
Section, such Lender shall be deemed to be a Defaulting Lender and Agent (for
the account of the Issuing Lender) shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the Defaulting Lender
Rate until paid in full.

                           (c)      Each Borrower hereby agrees to indemnify,
save, defend, and hold the Lender Group harmless from any loss, cost, expense,
or liability, and reasonable attorneys fees incurred by the Lender Group arising
out of or in connection with any Letter of Credit; provided, however, that no
Borrower shall be obligated hereunder to indemnify for any loss, cost, expense,
or liability to the extent that it is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group. Each
Borrower agrees to be bound by the Underlying Issuer's regulations and
interpretations of any Underlying Letter of Credit or by Issuing Lender's
interpretations of any L/C issued by Issuing Lender to or for such Borrower's
account, even though this interpretation may be different from such Borrower's
own, and each Borrower understands and agrees that the Lender Group shall not be
liable for any error, negligence, or mistake, whether of omission or commission,
in following Borrowers' instructions or those contained in the Letter of Credit
or any modifications, amendments, or supplements thereto. Each Borrower
understands that the L/C Undertakings may require Issuing Lender to indemnify
the Underlying Issuer for certain costs or liabilities arising out of claims by
Borrowers against such Underlying Issuer. Each Borrower hereby agrees to
indemnify, save, defend, and hold the Lender Group harmless with respect to any
loss, cost, expense (including reasonable attorneys fees), or liability incurred
by the Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; provided, however, that no Borrower
shall be obligated hereunder to indemnify for any loss, cost, expense, or
liability to the extent that it is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group.

                           (d)      Each Borrower hereby authorizes and directs
any Underlying Issuer to deliver to the Issuing Lender all instruments,
documents, and other writings and property received by such Underlying Issuer
pursuant to such Underlying Letter of Credit and to accept and rely upon the
Issuing Lender's instructions with respect to all matters arising in connection
with such Underlying Letter of Credit and the related application.

                           (e)      Any and all charges, commissions, fees, and
costs incurred by the Issuing Lender relating to Underlying Letters of Credit
shall be Lender Group Expenses for purposes of this Agreement and immediately
shall be reimbursable by Borrowers to Agent for the account of the Issuing
Lender; it being acknowledged and agreed by each Borrower that, as of the
Closing Date, the usage charge imposed by the prospective Underlying Issuer is
..825% per annum times the face amount of each Underlying Letter of Credit, that
such issuance charge may be changed from time to time, and that the Underlying
Issuer also imposes a schedule of charges for amendments, extensions, drawings,
and renewals.

                           (f)      If by reason of (i) any change after the
Closing Date in any applicable law, treaty, rule, or regulation or any change in
the interpretation or application thereof by any Governmental Authority, or (ii)
compliance by the Underlying Issuer or the Lender Group with any direction,
request, or requirement (irrespective of whether having the

                                      -58-
<PAGE>

force of law) of any Governmental Authority or monetary authority including,
Regulation D of the Federal Reserve Board as from time to time in effect (and
any successor thereto):

                           (i)      any reserve, deposit, or similar requirement
         is or shall be imposed or modified in respect of any Letter of Credit
         issued hereunder, or

                           (ii)     there shall be imposed on the Underlying
         Issuer or the Lender Group any other condition regarding any Underlying
         Letter of Credit or any Letter of Credit issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such amounts
as Agent may specify to be necessary to compensate the Lender Group for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate then
applicable to Base Rate Loans hereunder. The determination by Agent of any
amount due pursuant to this Section, as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.

                  2.13.    LIBOR OPTION.

                           (a)      INTEREST AND INTEREST PAYMENT DATES. In lieu
of having interest charged at the rate based upon the Base Rate, Borrowers shall
have the option (the "LIBOR Option") to have interest on all or a portion of the
Advances be charged at a rate of interest based upon the LIBOR Rate. Interest on
LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the
Interest Period applicable thereto, (ii) the occurrence of an Event of Default
in consequence of which the Required Lenders or Agent on behalf thereof have
elected to accelerate the maturity of all or any portion of the Obligations, or
(iii) termination of this Agreement pursuant to the terms hereof. On the last
day of each applicable Interest Period, unless Administrative Borrower properly
has exercised the LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to the rate of
interest then applicable to Base Rate Loans of the same type hereunder. At any
time that an Event of Default has occurred and is continuing, Borrowers no
longer shall have the option to request that Advances bear interest at the LIBOR
Rate and Agent shall have the right to convert the interest rate on all
outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans
hereunder.

                           (b)      LIBOR ELECTION.

                           (i)      Administrative Borrower may, at any time and
         from time to time, so long as no Event of Default has occurred and is
         continuing, elect to exercise the LIBOR Option by notifying Agent prior
         to 11:00 a.m. (California time) at least 3 Business Days prior to the
         commencement of the proposed Interest Period (the "LIBOR Deadline").
         Notice of Administrative Borrower's election of the LIBOR Option for a

                                      -59-
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         permitted portion of the Advances and an Interest Period pursuant to
         this Section shall be made by delivery to Agent of a LIBOR Notice
         received by Agent before the LIBOR Deadline, or by telephonic notice
         received by Agent before the LIBOR Deadline (to be confirmed by
         delivery to Agent of a LIBOR Notice received by Agent prior to 5:00
         p.m. (California time) on the same day). Promptly upon its receipt of
         each such LIBOR Notice, Agent shall provide a copy thereof to each of
         the Lenders having a Revolver Commitment.

                           (ii)     Each LIBOR Notice shall be irrevocable and
         binding on Borrowers. In connection with each LIBOR Rate Loan, each
         Borrower shall indemnify, defend, and hold Agent and the Lenders
         harmless against any loss, cost, or expense incurred by Agent or any
         Lender as a result of (a) the payment of any principal of any LIBOR
         Rate Loan other than on the last day of an Interest Period applicable
         thereto (including as a result of an Event of Default), (b) the
         conversion of any LIBOR Rate Loan other than on the last day of the
         Interest Period applicable thereto, or (c) the failure to borrow,
         convert, continue or prepay any LIBOR Rate Loan on the date specified
         in any LIBOR Notice delivered pursuant hereto (such losses, costs, and
         expenses, collectively, "Funding Losses"). Funding Losses shall, with
         respect to Agent or any Lender, be deemed to equal the amount
         determined by Agent or such Lender to be the excess, if any, of (i) the
         amount of interest that would have accrued on the principal amount of
         such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate
         that would have been applicable thereto, for the period from the date
         of such event to the last day of the then current Interest Period
         therefor (or, in the case of a failure to borrow, convert or continue,
         for the period that would have been the Interest Period therefor),
         minus (ii) the amount of interest that would accrue on such principal
         amount for such period at the interest rate which Agent or such Lender
         would be offered were it to be offered, at the commencement of such
         period, Dollar deposits of a comparable amount and period in the London
         interbank market. A certificate of Agent or a Lender delivered to
         Administrative Borrower setting forth any amount or amounts that Agent
         or such Lender is entitled to receive pursuant to this Section 2.13
         shall be conclusive absent manifest error.

                           (iii)    Borrowers shall have not more than 7 LIBOR
         Rate Loans in effect at any given time. Borrowers only may exercise the
         LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral
         multiples of $500,000 in excess thereof.

                           (c)      PREPAYMENTS. Borrowers may prepay LIBOR Rate
Loans at any time; provided, however, that in the event that LIBOR Rate Loans
are prepaid on any date that is not the last day of the Interest Period
applicable thereto, including as a result of any automatic prepayment through
the required application by Agent of proceeds of Borrowers' and their
Subsidiaries' Collections in accordance with Section 2.4(b) or for any other
reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders
and their Participants harmless against any and all Funding Losses in accordance
with clause (b) above.

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                           (d)      SPECIAL PROVISIONS APPLICABLE TO LIBOR RATE.

                           (i)      The LIBOR Rate may be adjusted by Agent with
         respect to any Lender on a prospective basis to take into account any
         additional or increased costs to such Lender of maintaining or
         obtaining any eurodollar deposits or increased costs due to changes in
         applicable law occurring subsequent to the commencement of the then
         applicable Interest Period, including changes in tax laws (except
         changes of general applicability in corporate income tax laws) and
         changes in the reserve requirements imposed by the Board of Governors
         of the Federal Reserve System (or any successor), excluding the Reserve
         Percentage, which additional or increased costs would increase the cost
         of funding loans bearing interest at the LIBOR Rate. In any such event,
         the affected Lender shall give Administrative Borrower and Agent notice
         of such a determination and adjustment and Agent promptly shall
         transmit the notice to each other Lender and, upon its receipt of the
         notice from the affected Lender, Administrative Borrower may, by notice
         to such affected Lender (y) require such Lender to furnish to
         Administrative Borrower a statement setting forth the basis for
         adjusting such LIBOR Rate and the method for determining the amount of
         such adjustment, or (z) repay the LIBOR Rate Loans with respect to
         which such adjustment is made (together with any amounts due under
         clause (b)(ii) above).

                           (ii)     In the event that any change in market
         conditions or any law, regulation, treaty, or directive, or any change
         therein or in the interpretation of application thereof, shall at any
         time after the date hereof, in the reasonable opinion of any Lender,
         make it unlawful or impractical for such Lender to fund or maintain
         LIBOR Advances or to continue such funding or maintaining, or to
         determine or charge interest rates at the LIBOR Rate, such Lender shall
         give notice of such changed circumstances to Agent and Administrative
         Borrower and Agent promptly shall transmit the notice to each other
         Lender and (y) in the case of any LIBOR Rate Loans of such Lender that
         are outstanding, the date specified in such Lender's notice shall be
         deemed to be the last day of the Interest Period of such LIBOR Rate
         Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter
         shall accrue interest at the rate then applicable to Base Rate Loans,
         and (z) Borrowers shall not be entitled to elect the LIBOR Option until
         such Lender determines that it would no longer be unlawful or
         impractical to do so.

                           (e)      NO REQUIREMENT OF MATCHED FUNDING. Anything
to the contrary contained herein notwithstanding, neither Agent, nor any Lender,
nor any of their Participants, is required actually to acquire eurodollar
deposits to fund or otherwise match fund any Obligation as to which interest
accrues at the LIBOR Rate. The provisions of this Section shall apply as if each
Lender or its Participants had match funded any Obligation as to which interest
is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest
Period in the amount of the LIBOR Rate Loans.

                  2.14.    CAPITAL REQUIREMENTS. If, after the date hereof, any
Lender determines that (i) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for banks or bank holding
companies, or any change in the interpretation or application thereof by any
Governmental Authority charged with the administration thereof, or (ii)
compliance by such Lender or its parent bank holding company with any guideline,
request

                                      -61-
<PAGE>

or directive of any such entity regarding capital adequacy (whether or not
having the force of law), has the effect of reducing the return on such Lender's
or such holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof. Following receipt
of such notice, Borrowers agree to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined, payable
within 90 days after presentation by such Lender of a statement in the amount
and setting forth in reasonable detail such Lender's calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error). In determining such amount, such
Lender may use any reasonable averaging and attribution methods.

                  2.15.    JOINT AND SEVERAL LIABILITY OF BORROWERS.

                           (a)      Each Borrower is accepting joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Agent and the Lenders under this
Agreement, for the mutual benefit, directly and indirectly, of each Borrower and
in consideration of the undertakings of the other Borrowers to accept joint and
several liability for the Obligations.

                           (b)      Each Borrower, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Borrowers, with respect to
the payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this Section 2.15), it being the
intention of the parties hereto that all the Obligations shall be the joint and
several obligations of each Person composing Borrowers without preferences or
distinction among them.

                           (c)      If and to the extent that any of Borrowers
shall fail to make any payment with respect to any of the Obligations as and
when due or to perform any of the Obligations in accordance with the terms
thereof, then in each such event the other Persons composing Borrowers will make
such payment with respect to, or perform, such Obligation.

                           (d)      The Obligations of each Person composing
Borrowers under the provisions of this Section 2.15 constitute the absolute and
unconditional, full recourse Obligations of each Person composing Borrowers
enforceable against each such Borrower to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Agreement or any other circumstances whatsoever.

                           (e)      Except as otherwise expressly provided in
this Agreement, each Person composing Borrowers hereby waives notice of
acceptance of its joint and several liability, notice of any Advances or Letters
of Credit issued under or pursuant to this Agreement, notice of the occurrence
of any Default, Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by Agent or Lenders
under or in respect of any of the Obligations, any requirement of diligence or
to mitigate damages and,

                                      -62-
<PAGE>

generally, to the extent permitted by applicable law, all demands, notices and
other formalities of every kind in connection with this Agreement (except as
otherwise provided in this Agreement). Each Person composing Borrowers hereby
assents to, and waives notice of, any extension or postponement of the time for
the payment of any of the Obligations, the acceptance of any payment of any of
the Obligations, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by Agent or Lenders at any time or times
in respect of any default by any Person composing Borrowers in the performance
or satisfaction of any term, covenant, condition or provision of this Agreement,
any and all other indulgences whatsoever by Agent or Lenders in respect of any
of the Obligations, and the taking, addition, substitution or release, in whole
or in part, at any time or times, of any security for any of the Obligations or
the addition, substitution or release, in whole or in part, of any Person
composing Borrowers. Without limiting the generality of the foregoing, each
Borrower assents to any other action or delay in acting or failure to act on the
part of any Agent or Lender with respect to the failure by any Person composing
Borrowers to comply with any of its respective Obligations, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations thereunder,
which might, but for the provisions of this Section 2.15 afford grounds for
terminating, discharging or relieving any Person composing Borrowers, in whole
or in part, from any of its Obligations under this Section 2.15, it being the
intention of each Person composing Borrowers that, so long as any of the
Obligations hereunder remain unsatisfied, the Obligations of such Person
composing Borrowers under this Section 2.15 shall not be discharged except by
performance and then only to the extent of such performance. The Obligations of
each Person composing Borrowers under this Section 2.15 shall not be diminished
or rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Person
composing Borrowers or any Agent or Lender. The joint and several liability of
the Persons composing Borrowers hereunder shall continue in full force and
effect notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, constitution or place of formation of any of the Persons
composing Borrowers or any Agent or Lender.

                           (f)      Each Person composing Borrowers represents
and warrants to Agent and Lenders that such Borrower is currently informed of
the financial condition of Borrowers and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Each Person composing Borrowers further represents and warrants to
Agent and Lenders that such Borrower has read and understands the terms and
conditions of the Loan Documents. Each Person composing Borrowers hereby
covenants that such Borrower will continue to keep informed of Borrowers'
financial condition, the financial condition of other guarantors, if any, and of
all other circumstances which bear upon the risk of nonpayment or nonperformance
of the Obligations.

                           (g)      Each of the Persons composing Borrowers
waives all rights and defenses arising out of an election of remedies by the
Agent or any Lender, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the Agent's or such Lender's rights of subrogation and
reimbursement against such Borrower by the operation of Section 580(d) of the
California Code of Civil Procedure or otherwise.

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<PAGE>

                           (h)      Each of the Persons composing Borrowers
waives all rights and defenses that such Borrower may have because the
Obligations are secured by Real Property. This means, among other things:

                           (i)      Agent and Lenders may collect from such
         Borrower without first foreclosing on any Real or Personal Property
         Collateral pledged by Borrowers.

                           (ii)     If Agent or any Lender forecloses on any
         Real Property Collateral pledged by Borrowers:

                                    A.       The amount of the Obligations may
                           be reduced only by the price for which that
                           collateral is sold at the foreclosure sale, even if
                           the collateral is worth more than the sale price.

                                    B.       Agent and Lenders may collect from
                           such Borrower even if Agent or Lenders, by
                           foreclosing on the Real Property Collateral, has
                           destroyed any right such Borrower may have to collect
                           from the other Borrowers.

This is an unconditional and irrevocable waiver of any rights and defenses such
Borrower may have because the Obligations are secured by Real Property. These
rights and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d or 726 of the California Code of Civil
Procedure.

                           (i)      The provisions of this Section 2.15 are made
for the benefit of the Agent, the Lenders and their respective successors and
assigns, and may be enforced by it or them from time to time against any or all
of the Persons composing Borrowers as often as occasion therefor may arise and
without requirement on the part of any such Agent, Lender, successor or assign
first to marshal any of its or their claims or to exercise any of its or their
rights against any of the other Persons composing Borrowers or to exhaust any
remedies available to it or them against any of the other Persons composing
Borrowers or to resort to any other source or means of obtaining payment of any
of the Obligations hereunder or to elect any other remedy. The provisions of
this Section 2.15 shall remain in effect until all of the Obligations shall have
been paid in full or otherwise fully satisfied. If at any time, any payment, or
any part thereof, made in respect of any of the Obligations, is rescinded or
must otherwise be restored or returned by any Agent or Lender upon the
insolvency, bankruptcy or reorganization of any of the Persons composing
Borrowers, or otherwise, the provisions of this Section 2.15 will forthwith be
reinstated in effect, as though such payment had not been made.

                           (j)      Each of the Persons composing Borrowers
hereby agrees that it will not enforce any of its rights of contribution or
subrogation against the other Persons composing Borrowers with respect to any
liability incurred by it hereunder or under any of the other Loan Documents, any
payments made by it to the Agent or the Lenders with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against any other Borrower with respect to any payments to any Agent or
Lender hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without

                                      -64-
<PAGE>

limitation as to any increases in the Obligations arising hereunder or
thereunder, to the prior payment in full in cash of the Obligations and, in the
event of any insolvency, bankruptcy, receivership, liquidation, reorganization
or other similar proceeding under the laws of any jurisdiction relating to any
Borrower, its debts or its assets, whether voluntary or involuntary, all such
Obligations shall be paid in full in cash before any payment or distribution of
any character, whether in cash, securities or other property, shall be made to
any other Borrower therefor.

                           (k)      Each of the Persons composing Borrowers
hereby agrees that, after the occurrence and during the continuance of any
Default or Event of Default, the payment of any amounts due with respect to the
indebtedness owing by any Borrower to any other Borrower is hereby subordinated
to the prior payment in full in cash of the Obligations. Each Borrower hereby
agrees that after the occurrence and during the continuance of any Default or
Event of Default, such Borrower will not demand, sue for or otherwise attempt to
collect any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected, enforced and
received by such Borrower as trustee for the Agent, and such Borrower shall
deliver any such amounts to Agent for application to the Obligations in
accordance with Section 2.4(b).

         3.       CONDITIONS; TERM OF AGREEMENT.

                  3.1.     CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF
CREDIT. The obligation of the Lender Group (or any member thereof) to make the
initial Advance (or otherwise to extend any initial credit provided for
hereunder), is subject to the fulfillment, to the satisfaction of Agent, of each
of the conditions precedent set forth below:

                           (a)      the Closing Date shall occur on or before
October 31, 2003;

                           (b)      Agent shall have received (i) the UCC Filing
Authorization Letter, duly executed by each Loan Party, (ii) a statutory lien
search authorization form in respect of Canadian statutory liens against the
Canadian Guarantors, (iii) satisfactory evidence of the filing of all UCC and
PPSA financing statements in such office or offices as may be necessary or, in
the opinion of Agent, desirable to perfect the security interests purported to
be created by each applicable Loan Document, and (iv) the results of its UCC,
PPSA, judgment and tax lien searches, which searches shall not have revealed any
Liens on the assets or properties of the Loan Parties other than Permitted Liens
and Liens to be terminated on the Closing Date;

                           (c)      Agent shall have received each of the
following documents, in form and substance satisfactory to Agent, duly executed,
and each such document shall be in full force and effect:

                           (i)      the Cash Management Agreements,

                           (ii)     the Control Agreements,

                           (iii)    the Copyright Security Agreement,

                           (iv)     the Disbursement Letter,

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<PAGE>

                           (v)      the Due Diligence Certificate,

                           (vi)     the Fee Letter,

                           (vii)    the Canadian Documents, together with (A)
         all certificates representing the shares of Stock pledged thereunder,
         as well as Stock powers with respect thereto endorsed in blank, and (B)
         all promissory notes pledged thereunder, as well as allonges thereto or
         other appropriate transfer certificates endorsed in blank,

                           (viii)   the Validity and Support Guaranty,

                           (ix)     the Intercompany Subordination Agreement,

                           (x)      the Mortgages,

                           (xi)     the Flow of Funds Agreement,

                           (xii)    the Patent Security Agreement,

                           (xiii)   each Pay-Off Letter, together with UCC and
         PPSA termination statements and other documentation evidencing the
         termination by Existing Lenders of their respective Liens in and to the
         properties and assets of Borrowers and their Subsidiaries (or written
         authorization of the Existing Lenders for the Collateral Agent to file
         such UCC and PPSA termination statements),

                           (xiv)    the Pledge Agreement, together with (i) all
         certificates representing the shares of Stock pledged thereunder, as
         well as Stock powers with respect thereto endorsed in blank, and (ii)
         all promissory notes pledged thereunder, together with an allonge for
         each promissory note (or the written agreement of the Existing Lenders
         to deliver such Stock certificates and promissory notes to the
         Collateral Agent within one Business Day of the Closing Date, subject
         to such other terms and conditions as the Collateral Agent may
         reasonably require),

                           (xv)     the Trademark Security Agreement,

                           (xvi)    the Security Agreement;

                           (xvii)   the Contribution Agreement; and

                           (xviii)  the Intercreditor and Collateral Agency
                                    Agreement.

                           (d)      Agent shall have received a certificate from
the Secretary of each Borrower attesting to the resolutions of such Borrower's
Board of Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which such Borrower is a party and
authorizing specific officers of such Borrower to execute the same;

                                      -66-
<PAGE>

                           (e)      Agent shall have received copies of each
Borrower's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Borrower;

                           (f)      Agent shall have received a certificate of
status with respect to each Borrower, dated within 10 days of the Closing Date,
such certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction;

                           (g)      Agent shall have received certificates of
status with respect to each Borrower, each dated as of a date acceptable to
Agent, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of such Borrower) in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that such Borrower is in good
standing in such jurisdictions;

                           (h)      Agent shall have received a certificate from
the Secretary of each Guarantor attesting to the resolutions of such Guarantor's
Board of Directors authorizing its execution, delivery, and performance of the
Loan Documents to which such Guarantor is a party and authorizing specific
officers of such Guarantor to execute the same;

                           (i)      Collateral Agent shall have received copies
of each Guarantor's Governing Documents, as amended, modified, or supplemented
to the Closing Date, certified by the Secretary of such Guarantor;

                           (j)      Collateral Agent shall have received a
certificate of status with respect to each Guarantor, dated within 10 days of
the Closing Date, such certificate to be issued by the appropriate officer of
the jurisdiction of organization of such Guarantor, which certificate shall
indicate that such Guarantor is in good standing in such jurisdiction;

                           (k)      Agent shall have received certificates of
status with respect to each Guarantor, each dated as of a date acceptable to
Agent, such certificates to be issued by the appropriate officer of the
jurisdictions (other than the jurisdiction of organization of such Guarantor) in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that such Guarantor is in good
standing in such jurisdictions;

                           (l)      Collateral Agent shall have received a
certificate of insurance, together with the endorsements thereto, as are
required by Section 6.8, the form and substance of which shall be satisfactory
to Agent;

                           (m)      Collateral Agent shall have received (i)
Collateral Access Agreements with respect to the Leased Real Property where the
Loan Parties' Eligible Equipment or books and records are maintained (other than
the Florida Headquarters), except to the extent Agent has established a Rent
Reserve against the Borrowing Base for such Leased Real Property location, and
(ii) a Collateral Access Agreement executed by the owner of the Loan Parties'
Florida Headquarters;

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                           (n)      Agent shall have received opinions of
Borrowers' and Guarantors' counsel in form and substance satisfactory to Agent;

                           (o)      Agent shall have received satisfactory
evidence (including a certificate of the chief financial officer of Parent) that
all tax returns required to be filed by Borrowers and their Subsidiaries have
been timely filed and all taxes upon Borrowers and their Subsidiaries or their
properties, assets, income, and franchises (including Real Property taxes, sales
taxes, payroll taxes and excise taxes) have been paid prior to delinquency,
except such taxes that are the subject of a Permitted Protest or otherwise
permitted to remain unpaid under Section 6.7;

                           (p)      after giving effect to (i) the initial
extensions of credit hereunder and the payment of all fees and expenses required
to be paid by Borrowers on the Closing Date under this Agreement or the other
Loan Documents, and (ii) the extension of the Term Loan B and the payment of all
fees and expenses required to be paid by Borrowers on the Closing Date under the
Term Loan B Loan Agreement (and the other Term Loan B Loan Documents), (A) the
Borrowers shall have the Required Availability and (B) the Senior Debt Ratio
shall not exceed 3.5 to 1.0.

                           (q)      Agent shall have completed its business,
legal, and collateral due diligence, including (i) a collateral audit and review
of Borrowers' books and records and verification of Borrowers' representations
and warranties to the Lender Group, the results of which shall be satisfactory
to Agent (such audit and review to be comprised of both a prospect audit and a
takeover audit, and to include, but not be limited to, customer verifications,
cash testing, and machinery and equipment verification), (ii) review and
satisfaction with a disaster recovery plan for IPD, and review and satisfaction
with a Phase I and Phase II Environmental Assessment Study from environmental
consultants acceptable to Agent for the Quincy, Illinois facility owned by Huck
Quincy and the Philadelphia, Pennsylvania facility owned by Source-Yeager
Industries, Inc.;

                           (r)      Agent shall have received completed
reference checks with respect to Loan Parties' senior management, the results of
which are satisfactory to Agent in its sole discretion;

                           (s)      Agent shall have (i) received an appraisal
of the Net Liquidation Percentage applicable to Borrowers' and their
Subsidiaries' Equipment, the results of which shall be satisfactory to Agent,
and (ii) engaged Crowe Chizek and Company LLP to determine the Enterprise Value
of the Loan Parties in accordance with Section 3.2(d);

                           (t)      Agent shall have received Borrowers' Closing
Date Business Plan;

                           (u)      Borrowers shall have paid all Lender Group
Expenses incurred in connection with the transactions evidenced by this
Agreement;

                           (v)      Agent shall have received (i) appraisals of
the Real Property Collateral set forth in Part I of Schedule R-1 satisfactory to
Agent, and (ii) mortgagee title insurance policies (or marked commitments to
issue the same) for such Real Property Collateral issued by a title insurance
company satisfactory to Agent (each a "Mortgage Policy" and,

                                      -68-
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collectively, the "Mortgage Policies") in amounts satisfactory to Agent assuring
Agent that the Mortgages on such Real Property Collateral are valid and
enforceable first priority mortgage Liens on such Real Property Collateral free
and clear of all defects and encumbrances except Permitted Liens, and the
Mortgage Policies otherwise shall be in form and substance satisfactory to Agent
(the Real Property Collateral referred to in this Section 3.1(v) is referred to
herein as the "Eligible Real Property Collateral";

                           (w)      Agent shall have received a phase-I
environmental report and a real estate survey with respect to each parcel
composing the Eligible Real Property Collateral; the environmental consultants
and surveyors retained for such reports or surveys, the scope of the reports or
surveys, and the results thereof shall be acceptable to Agent;

                           (x)      Agent shall have received copies of each of
(A) the existing collective bargaining agreements, and (B) all Material
Contracts together with a certificate of the Secretary of Administrative Loan
Party certifying each such document as being a true, correct, and complete copy
thereof;

                           (y)      Borrowers and each of their Subsidiaries
shall have received all licenses, approvals or evidence of other actions
required by any Governmental Authority in connection with the execution and
delivery by Borrowers or their Subsidiaries of the Loan Document or with the
consummation of the transactions contemplated thereby;

                           (z)      the Agent shall have received copies of the
Term Loan B Loan Agreement and all other Term Loan B Loan Documents, each of
which shall be in form and substance satisfactory to Agent together with a
certificate of the Secretary of the Administrative Borrower certifying each such
document as being a true, correct, and complete copy thereof;

                           (aa)     Borrowers shall have obtained the key man
life insurance policies required pursuant to Section 6.8(d) and shall have
furnished Collateral Agent with an "Absolute Assignment" for each such policy in
accordance with such Section 6.8(d);

                           (bb)     the Agent shall have received by wire
transfer of immediately available funds any Qualified Cash necessary for
Borrowers to have the Required Availability in accordance with subsection (p)
above;

                           (cc)     the Loan Parties shall have executed Agent's
standard form authorizing Agent to publish a tombstone advertisement with
respect to this transaction; and

                           (dd)     all other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and substance satisfactory
to Agent.

                                      -69-
<PAGE>

                  3.2.     CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF
CREDIT. The obligation of the Lender Group (or any member thereof) to continue
to make Advances (or otherwise extend credit hereunder) is subject to the
fulfillment, on or before the date applicable thereto, of each of the conditions
subsequent set forth below (the failure by Borrowers to so perform or cause to
be performed constituting an Event of Default):

                           (a)      within 30 days of the Closing Date, deliver
to Agent certified copies of the policies of insurance, together with the
endorsements thereto, as are required by Section 6.8, the form and substance of
which shall be satisfactory to Agent and its counsel,

                           (b)      the Borrowers will use their best efforts to
assist Agent with the syndication of no less than $20,000,000 of the Total
Commitment (the "Syndicated Amount"); the Borrowers acknowledge and agree that
Agent shall have the right, after consultation with the Administrative Borrower,
to alter the interest rates and fees payable with respect to the Syndicated
Amount in order to assist in a successful syndication of such portion of the
Total Commitment,

                           (c)      at least 60 days prior to the expiration of
the collective bargaining agreement referred to in Section 3.1(x), a
satisfactory update of the negotiations for a new collective bargaining
agreement or of alternate plans for continued operation,

                           (d)      within 45 days of the Closing Date, deliver
to Agent a determination of the Enterprise Value of the Parent and its
Subsidiaries, the results of which shall be satisfactory to Agent, such
valuation to be performed by Crowe Chizek and Company LLP,

                           (e)      within 30 days of the Closing Date, Agent
shall have received the results of litigation searches with respect to the Loan
Parties specified in Schedule L-2 for the jurisdictions specified in such
Schedule,

                           (f)      not later than 90 days following the Closing
Date, Borrowers shall (i) cause Universal Circulation Services Inc. to be merged
with and into another Loan Party or dissolved and wound up and (ii) deliver to
Agent evidence satisfactory to the Agent that such requirement has been timely
satisfied,

                           (g)      not later than 30 days following the Closing
Date, Borrowers shall cause to be delivered to Agent UCC searches from the
Secretary of State of California and the Secretary of State of Nevada with
respect to Primary News which reflect that each UCC-1 naming Imperial Bank as
secured party has been terminated or has lapsed without being continued,

                           (h)      within 45 days of the Closing Date, Agent
shall have received the results of the Canadian statutory lien searches,

                           (i)      within 30 days of the Closing Date, the Loan
Parties shall have implemented the electronic reporting system described in
Section 6.2g,

                           (j)      within 30 days of the Closing Date, Agent
shall have received a zoning compliance letter (the "Zoning Letter") for the
property located at 2001 West Erie

                                      -70-
<PAGE>

Avenue, Philadelphia, Pennsylvania, issued by the applicable municipality where
such property is located and in the event the Zoning Letter discloses that such
property is not in compliance with any applicable zoning laws, regulations,
ordinances and/or rules, Borrowers will use commercially reasonable efforts to
cure and correct any such non-compliance with any applicable zoning laws,
regulations, ordinances or rules to the reasonable satisfaction of Agent,

                           (k)      within 30 days of the Closing Date, Agent
shall have received Cash Management Agreements for the Deposit Accounts of the
Canadian Guarantors,

                           (l)      within 30 days of the Closing Date, use
commercially reasonable efforts to provide Agent with a representative sample,
reasonably acceptable to Agent, of the contracts between the retailers and the
publishers related to the In-Store Services/Claiming Accounts arising under the
retail display payment claiming business of US Marketing Services,

                           (m)      not later than November 3, 2003, deliver to
the Collateral Agent Cash Management Agreements executed by Wachovia Bank,
National Association for account no. 2000020370747 and account no. 2000020370750
maintained at such bank,

                           (n)      Borrowers shall use their reasonable efforts
to deliver a fully executed Validity and Support Agreement signed by James R.
Gillis, and

                           (o)      Borrowers shall deliver to Agent executed
originals of the other Validity and Support Agreements, in the form previously
negotiated, not later than November 5, 2003.

                  3.3.     CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make any Advances
hereunder at any time (or to extend any other credit hereunder) shall be subject
to the following conditions precedent:

                           (a)      the representations and warranties contained
in this Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the date of such extension of credit, as though
made on and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);

                           (b)      no Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit, nor shall
either result from the making thereof;

                           (c)      no injunction, writ, restraining order, or
other order of any nature restricting or prohibiting, directly or indirectly,
the extending of such credit shall have been issued and remain in force by any
Governmental Authority against any Borrower, Agent, any Lender, or any of their
Affiliates; and

                           (d)      no Material Adverse Change shall have
occurred.

                  3.4.     TERM. This Agreement shall continue in full force and
effect for a term ending on October 30, 2006 (the "Maturity Date"). The
foregoing notwithstanding, the Lender Group, upon the election of the Required
Lenders, shall have the right to terminate its obligations

                                      -71-
<PAGE>

under this Agreement immediately and without notice upon the occurrence and
during the continuation of an Event of Default.

                  3.5.     EFFECT OF TERMINATION. On the date of termination of
this Agreement, all Obligations (including contingent reimbursement obligations
of Borrowers with respect to any outstanding Letters of Credit and including all
Bank Products Obligations) immediately shall become due and payable without
notice or demand (including (a) either (i) providing cash collateral to be held
by Agent for the benefit of those Lenders with a Revolver Commitment in an
amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to the Issuing Lender, and (b)
providing cash collateral (in an amount determined by Agent as sufficient to
satisfy the reasonably estimated credit exposure) to be held by Agent for the
benefit of the Bank Product Providers with respect to the then extant Bank
Products Obligations). No termination of this Agreement, however, shall relieve
or discharge Borrowers or their Subsidiaries of their duties, Obligations, or
covenants hereunder and the Collateral Agent's Liens in the Collateral shall
remain in effect until all Obligations have been paid in full and the Lender
Group's obligations to provide additional credit hereunder have been terminated.
When this Agreement has been terminated and all of the Obligations have been
paid in full and the Lender Group's obligations to provide additional credit
under the Loan Documents have been terminated irrevocably, Agent will, at
Borrowers' sole expense, execute and deliver any UCC or PPSA termination
statements, lien releases, mortgage releases, re-assignments of trademarks,
discharges of security interests, and other similar discharge or release
documents (and, if applicable, in recordable form) as are reasonably necessary
to release, as of record, the Collateral Agent's Liens and all notices of
security interests and liens previously filed by Agent with respect to the
Obligations.

                  3.6.     EARLY TERMINATION BY BORROWERS. Borrowers have the
option, at any time upon 90 days prior written notice by Administrative Borrower
to Agent, to terminate this Agreement by paying to Agent, in cash, the
Obligations (including (a) either (i) providing cash collateral to be held by
Agent for the benefit of those Lenders with a Revolver Commitment in an amount
equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the
original Letters of Credit to be returned to the Issuing Lender, and (b)
providing cash collateral (in an amount determined by Agent as sufficient to
satisfy the reasonably estimated credit exposure) to be held by Agent for the
benefit of the Bank Product Providers with respect to the then extant Bank
Products Obligations), in full, together with the Applicable Prepayment Premium
(to be allocated based upon letter agreements between Agent and individual
Lenders). If Administrative Borrower has sent a notice of termination pursuant
to the provisions of this Section, then the Commitments shall terminate and
Borrowers shall be obligated to repay the Obligations (including (a) either (i)
providing cash collateral to be held by Agent for the benefit of those Lenders
with a Revolver Commitment in an amount equal to 105% of the then extant Letter
of Credit Usage, or (ii) causing the original Letters of Credit to be returned
to the Issuing Lender, and (b) providing cash collateral (in an amount
determined by Agent as sufficient to satisfy the reasonably estimated credit
exposure) to be held by Agent for the benefit of the Bank Product Providers with
respect to the then extant Bank Products Obligations), in full, together with
the Applicable Prepayment Premium, on the date set forth as the date of
termination of this Agreement in such notice. In the event of the termination of
this Agreement and repayment of the Obligations at any time prior to the
Maturity Date, for any other reason, including (a) termination upon the election
of the Required Lenders to terminate after the occurrence and

                                      -72-
<PAGE>

during the continuation of an Event of Default, (b) foreclosure and sale of
Collateral, (c) sale of the Collateral in any Insolvency Proceeding, or (d)
restructure, reorganization or compromise of the Obligations by the confirmation
of a plan of reorganization, or any other plan of compromise, restructure, or
arrangement in any Insolvency Proceeding, then, in view of the impracticability
and extreme difficulty of ascertaining the actual amount of damages to the
Lender Group or profits lost by the Lender Group as a result of such early
termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of the Lender Group,
Borrowers shall pay the Applicable Prepayment Premium to Agent (to be allocated
based upon letter agreements between Agent and individual Lenders), measured as
of the date of such termination. Anything to the contrary notwithstanding, the
Applicable Prepayment Premium shall not be payable if the Obligations are paid
in full and this Agreement is terminated within 5 Business Days of a demand for
payment by the Lenders under Section 2.14.

         4.       [INTENTIONALLY OMITTED.]

         5.       REPRESENTATIONS AND WARRANTIES.

                  In order to induce the Lender Group to enter into this
Agreement, each Loan Party makes the following representations and warranties to
the Lender Group which shall be true, correct, and complete, in all material
respects, as of the date hereof, and shall be true, correct, and complete, in
all material respects, as of the Closing Date, and at and as of the date of the
making of each Advance (or other extension of credit) made thereafter, as though
made on and as of the date of such Advance (or other extension of credit)
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:

                  5.1.     NO ENCUMBRANCES. Each Loan Party and its Subsidiaries
has good and indefeasible title to their personal property assets and good and
marketable title to their Real Property, in each case, free and clear of Liens
except for Permitted Liens.

                  5.2.     ELIGIBLE ACCOUNTS. The Eligible Accounts are bona
fide existing payment obligations of Account Debtors created by the sale and
delivery of Inventory or the rendition of services to such Account Debtors in
the ordinary course of Loan Parties' business, owed to Eligible Loan Parties
without any known defenses, disputes, offsets, counterclaims, or rights of
return or cancellation. As to each Account that is identified by Administrative
Borrower as an Eligible Account in a borrowing base report submitted to Agent,
such Account is not excluded as ineligible by virtue of one or more of the
excluding criteria set forth in the definition of Eligible Accounts.

                  5.3.     BUSINESS SEGMENTS. Schedule S-1 accurately sets forth
each Business Segment of the Loan Parties and the Subsidiaries of Parent
included in each such Business Segment as of the Closing Date.

                  5.4.     ELIGIBLE EQUIPMENT. All of the Eligible Equipment is
used or held for use in Loan Parties' business and is fit for such purposes. As
to each item of Equipment that is identified from time to time by Administrative
Borrower as Eligible Equipment, such Equipment

                                      -73-
<PAGE>

is not excluded as ineligible by virtue of one or more of the excluding criteria
set forth in the definition of Eligible Equipment.

                  5.5.     LOCATION OF INVENTORY AND EQUIPMENT. The Inventory
and Equipment of Borrowers and their Subsidiaries are located only at, or
in-transit between, the locations identified on Schedule 5.5 (as such Schedule
may be updated pursuant to Section 6.9), and the Equipment of the Loan Parties
are not stored with a bailee, warehouseman, or similar party.

                  5.6.     INVENTORY RECORDS. Each Loan Party keeps correct,
accurate and reasonably detailed records of its and its Subsidiaries' Inventory
and the book value thereof.

                  5.7.     STATE OF INCORPORATION; LOCATION OF CHIEF EXECUTIVE
OFFICE; FEIN; ORGANIZATIONAL ID NUMBER; COMMERCIAL TORT CLAIMS.

                           (a)      The jurisdiction of organization of each
Loan Party is set forth on Schedule 5.7(a).

                           (b)      The chief executive office of each Loan
Party is located at the address indicated on Schedule 5.7(b) (as such Schedule
may be updated pursuant to Section 6.9).

                           (c)      Each Loan Party's FEIN and organizational
identification number, if any, are identified on Schedule 5.7(c).

                           (d)      As of the Closing Date, Loan Parties and
their Subsidiaries do not hold any commercial tort claims, except as set forth
on Schedule 5.7(d).

                  5.8.     DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.

                           (a)      Each Loan Party is duly organized and
existing and in good standing under the laws of the jurisdiction of its
organization and qualified to do business in any state where the failure to be
so qualified reasonably could be expected to have a Material Adverse Change.

                           (b)      Set forth on Schedule 5.8(b), is a complete
and accurate description of the authorized capital Stock of each Loan Party, by
class, and, as of the Closing Date, a description of the number of shares of
each such class that are issued and outstanding. Other than as described on
Schedule 5.8(b), there are no subscriptions, options, warrants, or calls
relating to any shares of each Loan Party's capital Stock, including any right
of conversion or exchange under any outstanding security or other instrument. No
Loan Party is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital Stock or any security
convertible into or exchangeable for any of its capital Stock.

                  5.9.     DUE AUTHORIZATION; NO CONFLICT.

                           (a)      As to each Borrower, the execution,
delivery, and performance by such Borrower of this Agreement and the other Loan
Documents to which it is a party have been duly authorized by all necessary
action on the part of such Borrower.

                                      -74-
<PAGE>

                           (b)      As to each Borrower, the execution,
delivery, and performance by such Borrower of this Agreement and the other Loan
Documents to which it is a party do not and will not (i) violate any provision
of federal, state, or local law or regulation applicable to any Borrower, the
Governing Documents of any Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on any Borrower, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation of any Borrower, (iii)
result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of Borrower, other than Permitted
Liens, or (iv) require any approval of any Borrower's interestholders or any
approval or consent of any Person under any material contractual obligation of
any Borrower, other than consents or approvals that have been obtained and that
are still in force and effect.

                           (c)      Other than the filing of financing
statements, the recordation of the Mortgages and the filing of a notice on form
8-K with the SEC regarding this transaction, the execution, delivery, and
performance by each Borrower of this Agreement and the other Loan Documents to
which such Borrower is a party do not and will not require any registration
with, consent, or approval of, or notice to, or other action with or by, any
Governmental Authority, other than consents or approvals that have been obtained
and that are still in force and effect.

                           (d)      As to each Borrower, this Agreement and the
other Loan Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
will be the legally valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.

                           (e)      The Collateral Agent's Liens are validly
created, perfected, and first priority Liens, subject only to Permitted Liens

                           (f)      The execution, delivery, and performance by
each Guarantor of the Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of such Guarantor.

                           (g)      The execution, delivery, and performance by
each Guarantor of the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
applicable to such Guarantor, the Governing Documents of such Guarantor, or any
order, judgment, or decree of any court or other Governmental Authority binding
on such Guarantor, (ii) conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under any material
contractual obligation of such Guarantor, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of such Guarantor, other than Permitted Liens, or (iv) require any
approval of such Guarantor's interestholders or any approval or consent of any
Person under any material contractual obligation of such Guarantor, other than
consents or approvals that have been obtained and that are still in force and
effect.

                                      -75-
<PAGE>

                           (h)      Other than the filing of financing
statements and the recordation of the Mortgages, the execution, delivery, and
performance by each Guarantor of the Loan Documents to which such Guarantor is a
party do not and will not require any registration with, consent, or approval
of, or notice to, or other action with or by, any Governmental Authority, other
than consents or approvals that have been obtained and that are still in force
and effect.

                           (i)      The Loan Documents to which each Guarantor
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by such Guarantor will be the legally valid and binding
obligations of such Guarantor, enforceable against such Guarantor in accordance
with their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.

                  5.10.    LITIGATION. Other than those matters disclosed on
Schedule 5.10, there are no actions, suits, or proceedings pending or, to the
best knowledge of Borrowers, threatened against Loan Parties, or any of their
Subsidiaries, as applicable, except for (a) matters that are fully covered by
insurance (subject to customary deductibles), (b) matters that if decided
adversely to any Loan Party could not reasonably be expected to result in
liability to the Loan Parties of $500,000 in the aggregate for all such matters,
and (c) matters arising after the Closing Date that, if decided adversely to
Loan Parties, or any of their Subsidiaries, as applicable, reasonably could not
be expected to result in a Material Adverse Change.

                  5.11.    NO MATERIAL ADVERSE CHANGE. All financial statements
relating to Loan Parties and their Subsidiaries that have been delivered by Loan
Parties to the Lender Group have been prepared in accordance with GAAP (except,
in the case of unaudited financial statements, for the lack of footnotes and
being subject to year-end audit adjustments) and present fairly in all material
respects, Loan Parties' and their Subsidiaries' financial condition as of the
date thereof and results of operations for the period then ended. There has not
been a Material Adverse Change with respect to Loan Parties and their
Subsidiaries since the date of the latest financial statements submitted to the
Lender Group on or before the Closing Date.

                  5.12.    FRAUDULENT TRANSFER.

                           (a)      Each Loan Party and each Subsidiary of a
Borrower is Solvent.

                           (b)      No transfer of property is being made by any
Loan Party or any Subsidiary of a Loan Party and no obligation is being incurred
by any Loan Party or any Subsidiary of a Loan Party in connection with the
transactions contemplated by this Agreement or the other Loan Documents with the
intent to hinder, delay, or defraud either present or future creditors of Loan
Parties or their Subsidiaries.

                  5.13.    EMPLOYEE BENEFITS.

                           (a)      None of Loan Parties, any of their
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan, other than those listed on Schedule 5.13.

                                      -76-
<PAGE>

                           (b)      Each Loan Party, each of its Subsidiaries
and each ERISA Affiliate have satisfied the minimum funding standards of ERISA
and the IRC with respect to each Benefit Plan to which it is obligated to
contribute.

                           (c)      No ERISA Event has occurred nor has any
other event occurred that may result in an ERISA Event that reasonably could be
expected to result in a Material Adverse Change.

                           (d)      No Loan Party or its Subsidiaries or any
ERISA Affiliate is required to provide security to any Benefit Plan under
Section 401(a)(29) of the IRC.

                           (e)      Except as set forth in Schedule 5.13, no
Canadian Guarantor, has, or is subject to, any present or future obligation or
liability under, any pension plan, deferred compensation plan, retirement income
plan, stock option or stock purchase plan, profit sharing plan, bonus plan or
policy, employee group insurance plan, program policy or practice, formal or
informal, with respect to its employees.

                           (f)      All obligations regarding the Employee Plans
have been satisfied, there are no outstanding defaults or violations by any part
to any Employee Plan and no taxes, penalties or fees are owing or eligible under
any of the Employee Plans.

                           (g)      Except as disclosed in Schedule 5.13, each
Employee Plan is fully funded or fully insured on both an ongoing and solvency
basis pursuant to the actuarial assumptions and methodology set out in Schedule
5.13.

                           (h)      Except as disclosed in Schedule 5.13, none
of the Employee Plans provides benefits to retired employees or to the
beneficiaries or dependents of retired employees.

                  5.14.    ENVIRONMENTAL CONDITION. Except as set forth on
Schedule 5.14, (a) to any Loan Party's knowledge, none of Loan Parties' or their
Subsidiaries' properties or assets has ever been used by Loan Parties, their
Subsidiaries, or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such production, storage, handling, treatment, release or transport was in
violation, in any material respect, of applicable Environmental Law, (b) to any
Loan Party's knowledge, none of Loan Parties' nor their Subsidiaries' properties
or assets has ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, (c)
none of Loan Parties nor any of their Subsidiaries have received notice that a
Lien arising under any Environmental Law has attached to any revenues or to any
Real Property owned or operated by Loan Parties or their Subsidiaries, and (d)
none of Loan Parties nor any of their Subsidiaries have received a summons,
citation, order, notice, notice of Environmental Action, or directive from the
Environmental Protection Agency or any other Governmental Authority concerning
any action or omission by any Loan Party or any Subsidiary of a Loan Party
resulting in the releasing or disposing of Hazardous Materials into the
environment.

                  5.15.    BROKERAGE FEES. Loan Parties and their Subsidiaries
have not utilized the services of any broker or finder in connection with
obtaining financing from the Lender Group under this Agreement and no brokerage
commission or finders fee is payable by Loan Parties or their Subsidiaries in
connection herewith.

                                      -77-
<PAGE>

                  5.16.    INTELLECTUAL PROPERTY. Each Loan Party and each
Subsidiary of a Loan Party owns, or holds licenses in, all trademarks, trade
names, copyrights, patents, patent rights, and licenses that are necessary to
the conduct of its business as currently conducted. Attached hereto as Schedule
5.16 (as updated from time to time) is a true, correct, and complete listing of
all material patents, patent applications, trademarks, trademark applications,
copyrights, and copyright registrations as to which each Loan Party or one of
its Subsidiaries is the owner or is an exclusive licensee.

                  5.17.    LEASES. Loan Parties and their Subsidiaries enjoy
peaceful and undisturbed possession under all leases material to their business
and to which they are parties or under which they are operating. All of such
leases are valid and subsisting and no material default by Loan Parties or their
Subsidiaries exists under any of them.

                  5.18.    DDAs. Set forth on Schedule 5.18 are all of Loan
Parties' and their Subsidiaries' Deposit Accounts and Securities Accounts,
including, with respect to each bank or securities intermediary (i) the name and
address of such Person, and (ii) the account numbers of the Deposit Accounts or
Securities Accounts maintained with such Person.

                  5.19.    COMPLETE DISCLOSURE. All factual information (taken
as a whole) furnished by or on behalf of Loan Parties or their Subsidiaries in
writing to Agent or any Lender (including all information contained in the
Schedules hereto or in the other Loan Documents) for purposes of or in
connection with this Agreement, the other Loan Documents or any transaction
contemplated herein or therein is, and all other such factual information (taken
as a whole) hereafter furnished by or on behalf of Loan Parties or their
Subsidiaries in writing to the Agent or any Lender will be, true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make
such information (taken as a whole) not misleading in any material respect at
such time in light of the circumstances under which such information was
provided. On the Closing Date, the Closing Date Business Plan represents, and as
of the date on which any other Projections are delivered to Agent, such
additional Projections represent Loan Parties' good faith best estimate of their
and their Subsidiaries' future performance for the periods covered thereby.

                  5.20.    INDEBTEDNESS. Set forth on Schedule 5.20 is a true
and complete list of all Indebtedness of each Loan Party outstanding immediately
prior to the Closing Date that is to remain outstanding after the Closing Date
and the aggregate principal amount of such Indebtedness as of the Closing Date
and the principal terms thereof (interest rate, amortization schedule and term)
are accurately set forth in such Schedule.

                  5.21.    REGULATION U. None of the Loan Parties is nor will be
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations T, U or X of the Board
of Governors of the Federal Reserve System), and no proceeds of any Advance or
the Term Loan (or other extension of credit hereunder) will be used to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.

                  5.22.    PERMITS, ETC. Each Loan Party has, and is in
compliance with, all permits, licenses, franchises, authorizations, approvals,
entitlements and accreditations required

                                      -78-
<PAGE>

for such Person lawfully to own, lease, manage or operate, or to acquire, each
business and the Real Property currently owned, leased, managed or operated, or
to be acquired, by such Person except for such permits, licenses, franchises,
authorizations, approvals, entitlements and accreditations the absence of which
could not reasonably be expected to result in a Material Adverse Change. No
condition exists or event has occurred which, in itself or with the giving of
notice or lapse of time or both, would result in the suspension, revocation,
impairment, forfeiture or non-renewal of any such permit, license, franchises,
authorization, approval, entitlement or accreditation, and to Loan Parties'
knowledge, there is no claim that any thereof is not in full force and effect.

                  5.23.    MATERIAL CONTRACTS. Set forth on Schedule 5.23 is a
complete and accurate list as of the Closing Date of all Material Contracts of
the Loan Parties, showing the parties and subject matter thereof and amendments
and modifications thereto. Each such Material Contract (i) is in full force and
effect and is binding upon and enforceable against each Loan Party that is a
party thereto and, to Loan Parties' knowledge, all other parties thereto in
accordance with its terms, (ii) has not been otherwise amended or modified, and
(iii) is not in default due to the action of any Loan Party or, to Loan Parties'
knowledge, any other party thereto, except for such defaults that could not
reasonably be expected to result in a Material Adverse Change.

                  5.24.    EMPLOYEE AND LABOR MATTERS. Except in each case where
any such matter could not reasonably be expected to result in a Material Adverse
Change, there is (a) no unfair labor practice complaint pending or, to Loan
Parties' knowledge, threatened against any Loan Party before any Governmental
Authority and no grievance or arbitration proceeding pending or threatened
against any Loan Party which arises out of or under any collective bargaining
agreement, (b) no strike, labor dispute, slowdown, stoppage or similar action or
grievance pending or, to the best knowledge of Loan Parties, threatened against
any Loan Party and (c) no union representation question existing with respect to
the employees of any Loan Party and no union organizing activity taking place
with respect to any of the employees of any of them. Neither any Loan Party nor
any ERISA Affiliate of any Loan Party has incurred any liability or obligation
under the Worker Adjustment and Retraining Notification Act ("WARN") or similar
state law, which remains unpaid or unsatisfied. The hours worked and payments
made to employees of each Loan Party have not been in violation of the Fair
Labor Standards Act or any other applicable legal requirements. All material
payments due from any Loan Party on account of workers compensation, wages and
employee health and welfare insurance and other benefits have been paid or
accrued as a liability on the books of such Loan Party.

                  5.25.    CUSTOMERS AND SUPPLIERS. There exists no actual or,
to Loan Parties' knowledge, threatened termination, cancellation or limitation
of, or modification to or change in, the business relationship between (a) any
Loan Party, on the one hand, and any customer or any group thereof, on the other
hand or (b) any Loan Party, on the one hand, and any supplier thereof or
distributor therefor, on the other hand, which termination, cancellation,
limitation, modification or change in any such case could, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Change.

                  5.26.    PAYMENTS TO EMPLOYEES AND OTHER. Each Canadian
Guarantor has paid or accrued as a liability on the books of such Canadian
Guarantor, all material payments due

                                      -79-
<PAGE>

from any Canadian Guarantor to any employee, independent contractor or
Governmental Authority on account of workers' compensation, wages or other
compensation and, as applicable, employee health and welfare insurance and other
benefits.

                  5.27.    WITHHOLDINGS AND REMITTANCES. Each Canadian Guarantor
has withheld from each payment made to any of its present or former employees,
officers and directors, and to all persons who are non-residents of Canada for
the purposes of the Canadian Income Tax Act all amounts required by law to be
withheld, including without limitation all payroll deductions required to be
withheld, and furthermore, has remitted such withheld amounts within the
prescribed periods to the appropriate Governmental Authority. Each Canadian
Guarantor has remitted all Canada pension Plan contributions, provincial pension
plan contributions, employment insurance premiums, employer health taxes and
other taxes payable by it in respect of its employees and has remitted such
amounts to the proper Governmental Authority within the time required under the
applicable law.

         6.       AFFIRMATIVE COVENANTS.

                  Each Loan Party covenants and agrees that, until termination
of all of the Commitments and payment in full of the Obligations, each Loan
Party shall and shall cause each of its respective Subsidiaries to do all of the
following:

                  6.1.     ACCOUNTING SYSTEM. Maintain a system of accounting
that enables Loan Parties to produce financial statements in accordance with
GAAP and maintain records pertaining to the Collateral that contain information
as from time to time reasonably may be requested by Agent. Loan Parties also
shall keep an inventory reporting system that shows all additions, sales,
claims, returns, and allowances with respect to their and their Subsidiaries'
Inventory.

                  6.2.     COLLATERAL REPORTING. Provide Agent (and if so
requested by Agent, with copies for each Lender) with the following documents at
the following times in form satisfactory to Agent:

Daily                      (a)    a collection journal,

                                      -80-

<PAGE>

Weekly                     (b)    a sales journal and credit register since the
                                  last such schedule, a report regarding credit
                                  memoranda that have been issued since the last
                                  such report, and a calculation of the
                                  Borrowing Base as of such date,

                           (c)    notice of all claims, offsets, or disputes
                                  asserted by Account Debtors with respect to
                                  Loan Parties' and their Subsidiaries'
                                  Accounts,

                           (d)    a roll-forward calculation of the Borrowing
                                  Base, provided that with respect to Eligible
                                  Accounts owing by Canadian Account Debtors,
                                  such calculations may, at the option of the
                                  Administrative Borrower, be updated on only a
                                  monthly basis, and

                           (e)    a detailed transaction register for cash,
                                  sales and credits by Business Segment,

Monthly (not later than    (f)    a detailed aging, by total, of the Accounts of
the 15th day of each              Loan Parties, together with a reconciliation
month, except that the            to the calculation of the Borrowing Base
first such report shall           previously provided to Agent (including detail
be delivered not later            regarding those Accounts of Loan Parties that
than November 20, 2003)           are not Eligible Accounts), as well as a
                                  roll-forward,

                           (g)    a summary aging, by vendor, of Loan Parties'
                                  and their Subsidiaries' accounts payable and
                                  any book overdraft, together with a report of
                                  accrued expenses and general ledger
                                  reconciliation

                           (h)    a detailed report regarding Loan Parties' and
                                  their Subsidiaries' cash and Cash Equivalents
                                  including an indication of which amounts
                                  constitute Qualified Cash,

                           (i)    a calculation of Dilution, by Business
                                  Segment, for the month most recently ended and
                                  for the three and twelve month periods then
                                  ended,

                           (j)    a calculation of average Excess Availability
                                  for the three-month period then ended,

                           (k)    a month-end gross Accounts to net Accounts
                                  report for the In-Store Services/Wire Business
                                  Segment of the Loan Parties,

                           (l)    a gross receivables aging by job for the
                                  In-Store Services/Wire Business Segment of the
                                  Loan Parties, and

                           (m)    a copy of the report submitted to the issuer
                                  of the Loan Parties' credit insurance policy,
                                  including an aging of foreign customers'
                                  receivables, and including applicable customer
                                  credit insurance limits and limits by country,

                                      -81-

<PAGE>

Quarterly                  (n)    a detailed list of each Loan Party's and each
                                  Subsidiary of a Loan Party's customers,

                           (o)    a summary Inventory report of the Loan Parties
                                  by location,

                           (p)    a report regarding each Loan Party's and each
                                  Subsidiary of a Loan Party's accrued, but
                                  unpaid, ad valorem taxes, and

                           (q)    a listing of all new customer or supplier
                                  contracts executed by any Loan Party during
                                  the prior quarter,

Upon request by Agent      (r)    copies of invoices in connection with Loan
                                  Parties' and their Subsidiaries' Accounts,
                                  credit memos, remittance advices, deposit
                                  slips, shipping and delivery documents in
                                  connection with Loan Parties' and their
                                  Subsidiaries' Accounts and, for Equipment
                                  acquired by Loan Parties or their
                                  Subsidiaries, purchase orders and invoices,

                           (s)    contract reporting in respect of the Wood
                                  Manufacturing Business Segment,

                           (t)    a report in form and substance satisfactory to
                                  the Agent on historical sale-through rates for
                                  the Fulfillment Business Segment, and

                           (u)    such other reports as to the Collateral or the
                                  financial condition of Loan Parties and their
                                  Subsidiaries, as Agent may request.

In addition, each Borrower agrees to cooperate fully with Agent to facilitate
and implement a system of electronic collateral reporting in order to provide
electronic reporting of each of the items set forth above.

                  6.3.     FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver
to Agent, with copies to each Lender:

                           (a)      as soon as available, but in any event
within 30 days (45 days in the case of a month that is the end of one of
Parent's fiscal quarters) after the end of each month during each of Parent's
Fiscal Years,

                           (i)      a company prepared balance sheet, income
         statement, and statement of cash flow covering Parent's and its
         Subsidiaries' operations during such period, on both a consolidated and
         consolidating basis and by Business Segment,

                           (ii)     a certificate signed by the chief financial
         officer of Parent to the effect that:

                                             (A)  the financial statements
                  delivered hereunder have been prepared in accordance with GAAP
                  (except for the lack of footnotes and

                                      -82-

<PAGE>

                  being subject to year-end audit adjustments) and fairly
                  present in all material respects the financial condition of
                  Parent and its Subsidiaries,

                                             (B)  the representations and
                  warranties of Loan Parties contained in this Agreement and the
                  other Loan Documents are true and correct in all material
                  respects on and as of the date of such certificate, as though
                  made on and as of such date (except to the extent that such
                  representations and warranties relate solely to an earlier
                  date), and

                                             (C)  there does not exist any
                  condition or event that constitutes a Default or Event of
                  Default (or, to the extent of any non-compliance, describing
                  such non-compliance as to which he or she may have knowledge
                  and what action Borrowers have taken, are taking, or propose
                  to take with respect thereto),

                           (iii)    for each month that is the date on which a
         financial covenant in Section 7.18 is to be tested, a Compliance
         Certificate demonstrating, in reasonable detail, compliance at the end
         of such period with the applicable financial covenants contained in
         Section 7.18, and

                           (iv)     a general ledger reconciliation,

                           (b)      as soon as available, but in any event
within 90 days after the end of each of Parent's Fiscal Years,

                           (i)      financial statements of Parent and its
         Subsidiaries for each such Fiscal Year, on both a consolidated and
         consolidating basis and by Business Segment, audited by independent
         certified public accountants reasonably acceptable to Agent (it being
         understood that such audit may be performed and presented on a
         consolidated basis only) and certified, without any qualifications, by
         such accountants to have been prepared in accordance with GAAP (such
         audited financial statements to include a balance sheet, income
         statement, and statement of cash flow and, if prepared, such
         accountants' letter to management), and

                           (ii)     a certificate of such accountants addressed
         to Agent and the Lenders stating that such accountants do not have
         knowledge of the existence of any Default or Event of Default under
         Section 7.18,

                           (c)      as soon as available, but in any event
within 30 days prior to the start of each of Parent's Fiscal Years, copies of
Loan Parties' Projections, in form and substance (including as to scope and
underlying assumptions) satisfactory to Agent, in its sole discretion, for the
forthcoming 3 years, year by year, and for the forthcoming Fiscal Year, month by
month, on both a consolidated and consolidating basis and by Business Segment,
certified by the chief financial officer of Parent as being such officer's good
faith best estimate of the financial performance of Parent and its Subsidiaries
during the period covered thereby,

                                      -83-

<PAGE>

                           (d)      if and when filed by any Loan Party,

                           (i)      10-Q quarterly reports, Form 10-K annual
         reports, and Form 8-K current reports,

                           (ii)     any other filings made by any Loan Party
         with the SEC,

                           (iii)    copies of Loan Parties' federal income tax
         returns, and any amendments thereto, filed with the Internal Revenue
         Service, and

                           (iv)     any other information that is provided by
         Parent to its shareholders generally,

                           (e)      if and when filed by any Loan Party or any
Subsidiary of a Loan Party and as requested by Agent, satisfactory evidence of
payment of applicable excise taxes in each jurisdiction in which (i) any Loan
Party or any Subsidiary of a Loan Party conducts business or is required to pay
any such excise tax, (ii) where any Loan Party's or any Subsidiary of a Loan
Party's failure to pay any such applicable excise tax would result in a Lien on
the properties or assets of such Loan Party or such Subsidiary, or (iii) where
any Loan Party's or any Subsidiary of a Loan Party's failure to pay any such
applicable excise tax reasonably could be expected to result in a Material
Adverse Change,

                           (f)      as soon as a Borrower has knowledge of any
event or condition that constitutes a Default or an Event of Default, notice
thereof and a statement of the curative action that Loan Parties propose to take
with respect thereto,

                           (g)      promptly after the commencement thereof, but
in any event within 5 days after the service of process with respect thereto on
any Loan Party or any Subsidiary of a Loan Party, notice of all actions, suits,
or proceedings brought by or against any Loan Party or any Subsidiary of a Loan
Party before any Governmental Authority which, if determined adversely to such
Loan Party or such Subsidiary, reasonably could be expected to result in a
Material Adverse Change,

                           (h)      (i) promptly and in any event (A) within 10
days after any Loan Party or any ERISA Affiliate thereof knows or has reason to
know that any Termination Event described in clause (i) of the definition of
Termination Event with respect to any Benefit Plan has occurred, (B) within 10
days after any Loan Party or any ERISA Affiliate thereof knows or has reason to
know that any other Termination Event with respect to any Benefit Plan has
occurred, or (C) within 10 days after any Loan Party or any ERISA Affiliate
thereof knows or has reason to know that an accumulated funding deficiency has
been incurred or an application has been made to the Secretary of the Treasury
for a waiver or modification of the minimum funding standard (including
installment payments) or an extension of any amortization period under Section
412 of the IRC or the equivalent provision under any federal, state, local or
foreign counterparts or equivalents thereof with respect to a Benefit Plan, a
statement of an Authorized Person setting forth the details of such occurrence
and the action, if any, which such Loan Party or such ERISA Affiliate propose to
take with respect thereto, (ii) promptly and in any event within 3 days after
receipt thereof by any Loan Party or any ERISA Affiliate thereof from the PBGC,
copies of each notice received by any Loan Party or any ERISA Affiliate thereof
of the

                                      -84-

<PAGE>

PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan, (iii) promptly and in any event within 10 days after the
filing thereof with the Internal Revenue Service if requested by Agent, copies
of each Schedule B (Actuarial Information) or the federal, state, local or
foreign equivalent thereof to the annual report (Form 5500 Series) or the
federal, state, local or foreign equivalent thereof with respect to each Benefit
Plan and Multiemployer Plan, (iv) promptly and in any event within 10 days after
any Loan Party or any ERISA Affiliate thereof knows or has reason to know that a
required installment within the meaning of Section 412 of the IRC or the
equivalent provision under any federal, state, local or foreign counterparts or
equivalents thereof has not been made when due with respect to a Benefit Plan,
(v) promptly and in any event within 3 days after receipt thereof by any Loan
Party or any ERISA Affiliate thereof from a sponsor of a Multiemployer Plan or
from the PBGC, a copy of each notice received by any Loan Party or any ERISA
Affiliate thereof concerning the imposition or amount of withdrawal liability
under Section 4202 of ERISA or the equivalent provision under any federal,
state, local or foreign counterparts or equivalents thereof or indicating that
such Multiemployer Plan may enter reorganization status under Section 4241 of
ERISA or the equivalent provision under any federal, state, local or foreign
counterparts or equivalents thereof, and (vi) promptly and in any event within
10 days after any Loan Party or any ERISA Affiliate thereof send notice of a
plant closing or mass layoff (as defined in the Worker Adjustment and Retraining
Notification Act) to employees, copies of each such notice sent by any Loan
Party or any ERISA Affiliate thereof,

                           (i)      immediately upon obtaining knowledge
thereof, notice of the termination of any customer contract or any Material
Contract or any material changes in the terms of any such contract or any
Material Contract, provided that in the case of customer contracts that are not
Material Contracts, this Section 6.3(i) shall not apply to the extent that (i)
any such contract both (A) generated gross revenue of less than $250,000 for the
most recently completed Fiscal Year of the Parent and (B) has a remaining term
of more than one year or (ii) any such contract both (A) generated gross revenue
of less than $500,000 for the most recently completed Fiscal Year of the Parent
and (B) has a remaining term of less than one year,

                           (j)      concurrently with delivery to or receipt
from the Term Loan B Agent or any Term Loan B Lender, a copy of each notice,
demand, report, statement or other document delivered to or received from the
Term Loan B Agent or any Term Loan B Lender (unless otherwise required to be
delivered hereunder), and

                           (k)      upon the request of Agent, any other report
reasonably requested relating to the financial condition of Loan Parties or
their Subsidiaries.

In addition to the financial statements referred to above, Loan Parties agree to
deliver financial statements prepared on both a consolidated and consolidating
basis and agree that no Subsidiary of Parent will have a Fiscal Year different
from that of Parent, provided that each of IPD, Huck NC and Huck Quincy may have
the Fiscal Year specified in the definition of such term. Loan Parties agree to
cooperate with Agent to allow Agent to consult with their independent certified
public accountants if Agent reasonably requests the right to do so and that, in
such connection, their independent certified public accountants are authorized
to communicate with Agent and to release to Agent whatever financial information
concerning Loan Parties or their Subsidiaries that Agent reasonably may request.

                                      -85-

<PAGE>

                  6.4.     GUARANTOR REPORTS. Cause each Guarantor to deliver
its annual financial statements at the time when Parent provides its audited
financial statements to Agent, but only to the extent such Guarantor's financial
statements are not consolidated with Parent's financial statements, and copies
of all federal income tax returns as soon as the same are available and in any
event no later than 30 days after the same are required to be filed by law.

                  6.5.     RETURNS. Cause returns and allowances as between Loan
Parties and their Subsidiaries and their Account Debtors, to be on the same
basis and in accordance with the usual customary practices of Loan Parties and
their Subsidiaries, as they exist at the time of the execution and delivery of
this Agreement.

                  6.6.     MAINTENANCE OF PROPERTIES. Maintain and preserve all
of their properties which are necessary or useful in the proper conduct to their
business in good working order and condition, ordinary wear and tear excepted,
and comply at all times with the provisions of all leases to which it is a party
as lessee, so as to prevent any loss or forfeiture thereof or thereunder.

                  6.7.     TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Loan Parties, their Subsidiaries, or any of their respective assets to
be paid in full, before delinquency or before the expiration of any extension
period, except to the extent that (i) the validity of such assessment or tax
shall be the subject of a Permitted Protest or (ii) the aggregate amount payable
for all such assessments and taxes does not exceed $100,000. Loan Parties will
and will cause their Subsidiaries to make timely payment or deposit of all tax
payments and withholding taxes required of them by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
provincial and federal income taxes, and will, upon request, furnish Agent with
proof satisfactory to Agent indicating that the applicable Loan Party or
Subsidiary of a Loan Party has made such payments or deposits.

                  6.8.     INSURANCE.

                           (a)      At Loan Parties' expense, maintain insurance
respecting their and their Subsidiaries' assets wherever located, covering loss
or damage by fire, theft, explosion, and all other hazards and risks as
ordinarily are insured against by other Persons engaged in the same or similar
businesses. Loan Parties also shall maintain business interruption, public
liability, and product liability insurance, as well as insurance against
larceny, embezzlement, and criminal misappropriation. All such policies of
insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Agent. Loan Parties shall deliver copies of all such
policies to Agent with a satisfactory lender's loss payable endorsement naming
Agent as sole loss payee or additional insured, as appropriate. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Agent in the event of cancellation
of the policy for any reason whatsoever.

                           (b)      Administrative Borrower shall give
Collateral Agent prompt notice of any loss covered by such insurance. Collateral
Agent shall have the exclusive right to adjust any losses claimed under any such
insurance policies in excess of $100,000 (or in any amount after the occurrence
and during the continuation of an Event of Default), without any liability to
Loan Parties whatsoever in respect of such adjustments. Any monies received as
payment for

                                      -86-

<PAGE>

any loss under any insurance policy mentioned above (other than liability
insurance policies) or as payment of any award or compensation for condemnation
or taking by eminent domain, shall be paid over to Collateral Agent to be
applied at the option of the Required Lenders either to the prepayment of the
Obligations or shall be disbursed to Administrative Borrower under staged
payment terms reasonably satisfactory to the Required Lenders for application to
the cost of repairs, replacements, or restorations. Any such repairs,
replacements, or restorations shall be effected with reasonable promptness and
shall be of a value at least equal to the value of the items or property
destroyed prior to such damage or destruction.

                           (c)      Loan Parties shall not, and shall not suffer
or permit their Subsidiaries to, take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 6.8, unless Collateral Agent is included thereon as named insured
with the loss payable to Collateral Agent under a lender's loss payable
endorsement or its equivalent. Administrative Borrower immediately shall notify
Collateral Agent whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and copies of such policies promptly shall be provided to Collateral Agent.

                           (d)      At Borrowers' expense, maintain key man life
insurance policies with respect to the following individuals and in the
following amounts:

<TABLE>
<CAPTION>
      Name                               Amount
      ----                               ------
<S>                                    <C>
S. Leslie Flegel                       $1,000,000

Jim Gillis                             $1,000,000
</TABLE>

Borrowers shall furnish Collateral Agent with an "Absolute Assignment" of each
such key man life insurance policy, shall record each such "Absolute Assignment"
with the issuer of the respective policy, and shall furnish proof of such
issuer's acceptance of such assignment. All proceeds payable under such key man
life insurance policies shall be payable to Collateral Agent to be applied on
account of the Obligations in accordance with Section 2.4(b).

                  6.9.     LOCATION OF INVENTORY AND EQUIPMENT. Keep Loan
Parties' and their Subsidiaries' Inventory and Equipment only at the locations
identified on Schedule 5.5 and their chief executive offices only at the
locations identified on Schedule 5.7(b); provided, however, that Administrative
Borrower may amend Schedule 5.5 and Schedule 5.7 so long as such amendment
occurs by written notice to Agent not less than 30 days prior to the date on
which such Inventory or Equipment is moved to such new location or such chief
executive office is relocated, so long as such new location is within the
continental United States, and so long as, at the time of such written
notification, the applicable Loan Party provides Collateral Agent a Collateral
Access Agreement for each Leased Real Property used in the manufacturing,
warehousing and distribution operations of the Loan Parties.

                  6.10.    COMPLIANCE WITH LAWS. Comply with the requirements of
all applicable laws, rules, regulations, and orders of any Governmental
Authority, including the Fair Labor

                                      -87-

<PAGE>

Standards Act and the Americans With Disabilities Act, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change.

                  6.11.    LEASES. Pay when due all rents and other amounts
payable under any leases to which any Loan Party or any Subsidiary of a Loan
Party is a party or by which any Loan Party's or any Subsidiary of a Loan
Party's properties and assets are bound, unless (a) such payments are the
subject of a Permitted Protest or (b) such location is not the corporate
headquarters of the Loan Parties or a location where any books or records with
respect to Collateral or any Collateral with a fair market value of more than
$200,000 is located and the failure to make such payment could not reasonably be
expected to result in a Material Adverse Change.

                  6.12.    EXISTENCE. At all times preserve and keep in full
force and effect each Loan Party's and each Subsidiary of a Loan Party's valid
existence and good standing and any rights and franchises material to their
businesses, except as otherwise permitted under Section 7.3.

                  6.13.    ENVIRONMENTAL.

                           (a)      (i) Keep any property either owned or
operated by any Loan Party or any Subsidiary of a Loan Party free of any
Environmental Liens or post bonds or other financial assurances sufficient to
satisfy the obligations or liability evidenced by such Environmental Liens, (ii)
comply, in all material respects, with Environmental Laws and provide to Agent
documentation of such compliance which Agent reasonably requests, (iii) promptly
notify Agent of any release of a Hazardous Material of any reportable quantity
from or onto property owned or operated by any Loan Party or any Subsidiary of a
Loan Party and take and complete any Remedial Actions required to abate said
release or otherwise to come into compliance with applicable Environmental Law,
and permit Collateral Agent (at the direction of Agent) to participate in the
resolution thereof if so requested by Collateral Agent, in accordance with
subsection (b) below, (iv) promptly, but in any event within 5 days of its
receipt thereof, provide Agent with written notice of any of the following: (A)
notice that an Environmental Lien has been filed against any of the real or
personal property of any Loan Party or any Subsidiary of a Loan Party, (B)
commencement of any Environmental Action or notice that an Environmental Action
will be filed against any Loan Party or any Subsidiary of a Loan Party, and (C)
notice of a violation, citation, or other administrative order which reasonably
could be expected to result in a Material Adverse Change.

                           (b)      Collateral Agent may join and participate
in, as a party if the Collateral Agent so determines, any legal or
administrative proceeding or action concerning the Real Property or any portion
thereof under any Environmental Law, if, in the Agent's reasonable judgment, the
interests of the Lenders shall not be adequately protected by Borrowers;
provided, however, that the Collateral Agent shall not participate in day-to-day
decision making with respect to environmental compliance. Borrowers shall pay or
reimburse Agent and/or Collateral Agent on demand for all reasonable sums
advanced and reasonable expenses incurred (including reasonable attorneys' fees
and disbursements but excluding internal overhead, administrative and similar
costs of the Lenders) by the Lenders in connection with any such action or
proceeding.

                                      -88-

<PAGE>

                           (c)      Upon reasonable prior written notice and at
the direction of Agent, the Collateral Agent shall have the right, except as
otherwise provided under Leases, at all reasonable times during normal business
hours to enter upon and inspect all or any portion of the Real Property,
provided that such inspections shall not unreasonably interfere with the
operation or the tenants, residents or occupants of the Real Property. The
inspection rights granted to the Collateral Agent in this subsection shall be in
addition to, and not in limitation of, any other inspection rights granted to
the Agent in this Agreement, and shall expressly include the right (if the Agent
reasonably suspects that Remedial Action may be required) to conduct soil
borings, establish ground water monitoring wells and conduct other customary
environmental test, assessments and audits.

                  6.14.    DISCLOSURE UPDATES. Promptly and in no event later
than 5 Business Days after obtaining knowledge thereof, notify Agent if any
written information, exhibit, or report furnished to the Lender Group contained
any untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made. The foregoing to the contrary notwithstanding,
any notification pursuant to the foregoing provision will not cure or remedy the
effect of the prior untrue statement of a material fact or omission of any
material fact nor shall any such notification have the affect of amending or
modifying this Agreement or any of the Schedules hereto.

                  6.15.    FORMATION OF SUBSIDIARIES. At the time that any
Borrower or any Guarantor forms any direct or indirect Subsidiary or acquires
any direct or indirect Subsidiary after the Closing Date, such Borrower or such
Guarantor shall (a) cause such new Subsidiary to provide to Agent a joinder to
this Agreement and a Security Agreement, together with such other guaranty and
security documents (including Mortgages with respect to any Real Property of
such new Subsidiary), as well as appropriate UCC-1 financing statements and PPSA
registration statements (and with respect to all property subject to a Mortgage,
fixture filings), all in form and substance satisfactory to Agent (including
being sufficient to grant Collateral Agent a first priority Lien (subject to
Permitted Liens) in and to the assets of such newly formed or acquired
Subsidiary), (b) provide to Collateral Agent a pledge agreement and appropriate
certificates and powers or UCC-1 financing statements or PPSA registration
statements, hypothecating all of the direct or beneficial ownership interest in
such new Subsidiary, in form and substance satisfactory to Agent, and (c)
provide to Agent all other documentation, including one or more opinions of
counsel satisfactory to Agent, which in its opinion is appropriate with respect
to the execution and delivery of the applicable documentation referred to above
(including policies of title insurance or other documentation with respect to
all property subject to a Mortgage). Any document, agreement, or instrument
executed or issued pursuant to this Section 6.15 shall be a Loan Document.

                  6.16.    Program Contracts.

                           (a)      On and after the Closing Date, when entering
into agreements with its customers for the programs described in clause (i) of
the definition of "Program Contracts", utilize Program Contracts that contain
the security interest language specified in Exhibit P-1, with such changes as
are acceptable to Agent, provided that it shall not be a breach of this Section
6.16(a) if contracts generating net revenues in an aggregate amount not
exceeding

                                      -89-

<PAGE>

$500,000 in any Fiscal Year do not contain the security interest language
specified in Exhibit P-1 or other language acceptable to Agent.

                           (b)      On and after the Closing Date, when entering
into agreements with its customers for the programs described in clause (ii) of
the definition of "Program Contracts", utilize Program Contracts that contain
the bill and hold language specified in Exhibit P-1, with such changes as are
acceptable to Agent, provided that it shall not be a breach of this Section
6.16(b) if contracts generating net revenues in an aggregate amount not
exceeding $500,000 in any Fiscal Year do not contain the bill and hold language
specified in Exhibit P-1 or other language acceptable to Agent.

         7.       NEGATIVE COVENANTS.

                  Each Loan Party covenants and agrees that, until termination
of all of the Commitments and payment in full of the Obligations, such Loan
Party will not and will not permit any of its Subsidiaries to do any of the
following:

                  7.1.     INDEBTEDNESS. Create, incur, assume, suffer to exist,
guarantee, or otherwise become or remain, directly or indirectly, liable with
respect to any Indebtedness, except:

                           (a)      Indebtedness evidenced by this Agreement and
the other Loan Documents, together with Indebtedness owed to Underlying Issuers
with respect to Underlying Letters of Credit;

                           (b)      Indebtedness set forth on Schedule 5.20;

                           (c)      Permitted Purchase Money Indebtedness;

                           (d)      refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such refinancings, renewals, or extensions do
not, in Agent's judgment, materially impair the prospects of repayment of the
Obligations by Loan Parties or materially impair Loan Parties' creditworthiness,
(ii) such refinancings, renewals, or extensions do not result in an increase in
the then extant principal amount of, or interest rate with respect to, the
Indebtedness so refinanced, renewed, or extended or add one or more Loan Parties
as liable with respect thereto if such additional Loan Parties were not liable
with respect to the original Indebtedness, (iii) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or
restrictive to the applicable Loan Party, (iv) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment or in lien
priority to the Obligations, then the terms and conditions of the refinancing,
renewal, or extension Indebtedness must be include subordination terms and
conditions that are at least as favorable to the Lender Group as those that were
applicable to the refinanced, renewed, or extended Indebtedness, and (v) the
Indebtedness that is refinanced, renewed, or extended is not recourse to any
Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended;

                                      -90-

<PAGE>

                           (e)      endorsement of instruments or other payment
items for deposit; and

                           (f)      Indebtedness composing Permitted
Investments;

                           (g)      Indebtedness under the Term Loan B Loan
Agreement in an aggregate principal amount not to exceed $15,000,000, less any
portion of the Term Loan B which has been repaid, whether at scheduled maturity,
required or voluntary prepayment or otherwise;

                           (h)      Subordinated Indebtedness; and

                           (i)      other unsecured Indebtedness in an aggregate
principal amount outstanding at any time not to exceed $500,000.

                  7.2.     LIENS. Create, incur, assume, or suffer to exist,
directly or indirectly, any Lien on or with respect to any of its assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced,
renewed, or extended under Section 7.1(d) and so long as the replacement Liens
only encumber those assets that secured the refinanced, renewed, or extended
Indebtedness).

                  7.3.     RESTRICTIONS ON FUNDAMENTAL CHANGES.

                           (a)      Enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its Stock except (i) for a
Permitted Acquisition and (ii) so long as no Default or Event of Default shall
have occurred and be continuing or would result therefrom, upon the not less
than 30 days prior written notice to Agent, the merger or consolidation of any
Guarantor with or into another Loan Party, or of any Borrower (other than
Parent, IPD or US Marketing) with or into another Borrower.

                           (b)      Liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), provided that, so long as no Default or
Event of Default shall have occurred and be continuing or would result
therefrom, upon not less than 30 days prior written notice to Agent, any
Borrower (other than Parent, IPD or US Marketing) and any Guarantor may dissolve
itself so long as all of its assets are transferred to a Borrower (if the
dissolving entity is a Borrower) or a Guarantor, in each case subject to the
Lien of the Collateral Agent.

                           (c)      Convey, sell, lease, license, assign,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its assets.

                  7.4.     DISPOSAL OF ASSETS. Other than Permitted
Dispositions, convey, sell, lease, license, assign, transfer, or otherwise
dispose of any of the assets of any Loan Party or any Subsidiary of a Loan
Party, provided that, so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, upon not less than 30 days
prior written notice to Agent, the Loan Parties may sell all or substantially
all of the assets or Stock of DEYCO pursuant to the terms of the DEYCO Letter of
Intent for a purchase price payable in

                                      -91-

<PAGE>

cash (the "DEYCO Sale"), provided further that the Net Cash Proceeds of the
DEYCO Sale are paid to Agent in accordance with Section 2.4(c)(vi).

                  7.5.     CHANGE NAME. Change any Loan Party's or any
Subsidiary of a Loan Party's name, FEIN, organizational identification number,
state of organization, or organizational identity; provided, however, that a
Loan Party or a Subsidiary of a Loan Party may change its name upon at least 30
days prior written notice by Administrative Borrower to Agent of such change and
so long as, at the time of such written notification, such Loan Party or such
Subsidiary provides any financing statements necessary to perfect and continue
perfected Collateral Agent's Liens.

                  7.6.     NATURE OF BUSINESS. Make any change in the principal
nature of their business.

                  7.7.     PREPAYMENTS AND AMENDMENTS. Except in connection with
a refinancing permitted by Section 7.1(d),

                           (a)      prepay, redeem, defease, purchase, or
otherwise acquire or make any payment with respect to the principal of the Term
Loan B, provided that (i) in the case of any mandatory prepayment of the Term
Loan B from Excess Cash Flow, the Loan Parties may prepay all or any portion of
the Term Loan B so long as immediately before and after giving effect to such
payment, no Event of Default shall have occurred and be continuing, (ii) the
Loan Parties may prepay up to $2,500,000 of the principal amount of the Term
Loan B so long as (A) the Term Loan has been repaid in full, (B) the In-Store
Services Subline Amount has been reduced to $17,500,000 or a lesser amount in
accordance with the definition for such term, (C) (x) average Excess
Availability is at least $10,000,000 for the 30 consecutive day period
immediately prior to the date of such prepayment and (y) Excess Availability is
at least $10,000,000 immediately after giving effect to such prepayment, and (D)
immediately before and immediately after giving effect to such prepayment, no
Event of Default shall have occurred and be continuing, and (iii) in all other
cases, the Loan Parties may prepay all or any portion of the principal amount of
the Term Loan B so long as (A) the Term Loan has been repaid in full, (B) the
In-Store Services Subline Amount has been reduced to $12,500,000 or a lesser
amount in accordance with the definition for such term, (C) (x) average Excess
Availability is at least $10,000,000 for the 30 consecutive day period
immediately prior to the date of such prepayment and (y) Excess Availability is
at least $10,000,000 immediately after giving effect to such prepayment, and (D)
immediately before and immediately after giving effect to such prepayment, no
Event of Default shall have occurred and be continuing,

                           (b)      prepay, redeem, defease, purchase, or
otherwise acquire any Indebtedness of any Loan Party or any subsidiary of a Loan
Party (other than the Term Loan B), other than the Obligations in accordance
with this Agreement, provided that the Loan Parties may prepay in full the Myco
IRB in an aggregate amount not to exceed $4,277,672, so long as (i) the Letter
of Credit issued on the Closing Date in the amount of $4,277,671.65, naming Bank
of America, N.A. as beneficiary, and issued for the purpose of securing letter
of credit no. 3022930 dated February 8, 2000, issued by Bank of America, N.A. in
connection with the Myco IRB, or (ii) any Letter of Credit issued in replace of
the Letter of Credit described in clause (i),

                                      -92-

<PAGE>

shall be returned for cancellation, on terms and conditions acceptable to Agent,
in connection with such payment,

                           (c)      directly or indirectly, amend, modify,
alter, increase, or change any of the terms or conditions of any agreement,
instrument, document, indenture, or other writing evidencing or concerning
Indebtedness permitted under Section 7.1(b) or (c), or

                           (d)      to the extent prohibited by the
Intercreditor and Collateral Agency Agreement, directly or indirectly, amend,
modify, alter, increase, or change any of the terms or conditions of any
agreement, instrument, document, indenture, or other writing evidencing or
concerning Indebtedness permitted under Section 7.1(g).

                  7.8.     CHANGE OF CONTROL. Cause, permit, or suffer, directly
or indirectly, any Change of Control.

                  7.9.     CONSIGNMENTS. Other than for the Fulfillment Business
Segments, consign any of their Inventory or sell any of their Inventory on bill
and hold, sale or return, sale on approval, or other conditional terms of sale,
provided that bill and hold sales may be made in compliance with Section
6.16(b).

                  7.10.    DISTRIBUTIONS. Other than distributions or
declaration and payment of dividends by a Loan Party to another Loan Party, make
any distribution or declare or pay any dividends (in cash or other property,
other than common Stock) on, or purchase, acquire, redeem, or retire any of any
Loan Party's Stock, of any class, whether now or hereafter outstanding.

                  7.11.    ACCOUNTING METHODS. Modify or change their Fiscal
Year or their method of accounting (other than as may be required to conform to
GAAP) or enter into, modify, or terminate any agreement currently existing, or
at any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of Loan Parties' or their
Subsidiaries' accounting records without said accounting firm or service bureau
agreeing to provide Agent information regarding Loan Parties' and their
Subsidiaries' financial condition.

                  7.12.    INVESTMENTS. Except for Permitted Investments and
Permitted Acquisitions, directly or indirectly, enter into any Acquisition, or
make or acquire any Investment, or incur any liabilities (including contingent
obligations) for or in connection with any Investment; provided, however, that
Administrative Borrower and its Subsidiaries shall not have Permitted
Investments (other than in the Cash Management Accounts) in Deposit Accounts or
Securities Accounts in an aggregate amount in excess of $50,000 outstanding at
any one time unless Administrative Borrower or its Subsidiary, as applicable,
and the applicable securities intermediary or bank have entered into Control
Agreements or similar arrangements governing such Permitted Investments in order
to perfect (and further establish) the Collateral Agent's Liens in such
Permitted Investments. Subject to the foregoing proviso, Loan Parties shall not,
and shall not permit their Subsidiaries to, establish or maintain any Deposit
Account or Securities Account unless Agent shall have received a Control
Agreement in respect of such Deposit Account or Securities Account.

                  7.13.    TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any transaction with any Affiliate of any Loan
Party except for transactions that are in

                                      -93-

<PAGE>

the ordinary course of Loan Parties' business, upon fair and reasonable terms,
that are fully disclosed to Agent, and that are no less favorable to Loan
Parties than would be obtained in an arm's length transaction with a
non-Affiliate.

                  7.14.    SUSPENSION. Suspend or go out of a substantial
portion of their business, other than in connection with a sale or other
disposition permitted under Section 7.4 or a transaction described in and
permitted by Section 7.3.

                  7.15.    [INTENTIONALLY OMITTED].

                  7.16.    USE OF PROCEEDS. Use the proceeds of the Advances and
the Term Loan for any purpose other than (a) on the Closing Date, (i) to repay
in full the outstanding principal, accrued interest, and accrued fees and
expenses owing to Existing Lenders, and (ii) to pay transactional fees, costs,
and expenses incurred in connection with this Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes.

                  7.17.    EQUIPMENT WITH BAILEES. Store the Equipment of Loan
         Parties or their Subsidiaries at any time now or hereafter with a
         bailee, warehouseman, or similar party without Agent's prior written
         consent.

                  7.18.    FINANCIAL COVENANTS.

                           (a)      Fail to maintain or achieve:

                           (i)      MINIMUM EBITDA. EBITDA, measured on a
month-end basis for the applicable period set forth below of at least the
applicable amount set forth below opposite such period:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
         Applicable Period                            Applicable Amount
-----------------------------------------------------------------------
<S>                                                   <C>
For the three months ended 10/31/03                      $ 5,700,000
-----------------------------------------------------------------------
For the four months ended 11/30/03                       $ 6,725,000
-----------------------------------------------------------------------
For the five months ended 12/31/03                       $ 7,450,000
-----------------------------------------------------------------------
For the six months ended 1/31/04                         $ 9,720,000
-----------------------------------------------------------------------
For the seven months ended 2/28/04                       $10,860,000
-----------------------------------------------------------------------
For the eight months ended 3/31/04                       $12,000,000
-----------------------------------------------------------------------
For the nine months ended 4/30/04                        $14,055,000
-----------------------------------------------------------------------
For the ten months ended 5/31/04                         $16,585,000
-----------------------------------------------------------------------
For the eleven months ended 6/30/04                      $17,120,000
-----------------------------------------------------------------------
For the twelve months ended 7/31/04                      $19,625,000
-----------------------------------------------------------------------
</TABLE>

                                      -94-

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
         Applicable Period                            Applicable Amount
-----------------------------------------------------------------------
<S>                                                   <C>
For the twelve months ended 8/31/04                      $20,130,000
-----------------------------------------------------------------------
For the twelve months ended 9/30/04                      $20,635,000
-----------------------------------------------------------------------
For the twelve months ended 10/31/04                     $20,410,000
-----------------------------------------------------------------------
For the twelve months ended 11/30/04                     $21,165,000
-----------------------------------------------------------------------
For the twelve months ended 12/31/04                     $22,215,000
-----------------------------------------------------------------------
For the twelve months ended 1/31/05                      $22,495,000
-----------------------------------------------------------------------
For the twelve months ended 2/28/05                      $22,835,000
-----------------------------------------------------------------------
For the twelve months ended 3/31/05 and                  $23,000,000
for each twelve month period thereafter
-----------------------------------------------------------------------
</TABLE>

                           (ii)     FIXED CHARGE COVERAGE RATIO. A Fixed Charge
Coverage Ratio, measured on a month-end basis for the applicable period set
forth below, of at least the required amount set forth below opposite such
period:

<TABLE>
<CAPTION>
----------------------------------------------------------------------
          Applicable Period                           Applicable Ratio
----------------------------------------------------------------------
<S>                                                   <C>
For the three months ended 10/31/03                      4.0 to 1.0
----------------------------------------------------------------------
For the four months ended 11/30/03                       3.3 to 1.0
----------------------------------------------------------------------
For the five months ended 12/31/03                       2.8 to 1.0
----------------------------------------------------------------------
For the six months ended 1/31/04                         2.9 to 1.0
----------------------------------------------------------------------
For the seven months ended 2/28/04                       2.7 to 1.0
----------------------------------------------------------------------
For the eight months ended 3/31/04                       2.6 to 1.0
----------------------------------------------------------------------
For the nine months ended 4/30/04                        2.7 to 1.0
----------------------------------------------------------------------
For the ten months ended 5/31/04                         2.1 to 1.0
----------------------------------------------------------------------
For the eleven months ended 6/30/04                      2.0 to 1.0
----------------------------------------------------------------------
For the twelve months ended 7/31/04                      2.1 to 1.0
----------------------------------------------------------------------
For the twelve months ended 8/31/04                      2.1 to 1.0
----------------------------------------------------------------------
For the twelve months ended 9/30/04                      2.2 to 1.0
----------------------------------------------------------------------
For the twelve months ended 10/31/04                     2.1 to 1.0
----------------------------------------------------------------------
For the twelve months ended 11/30/04                     2.1 to 1.0
----------------------------------------------------------------------
For the twelve months ended 12/31/04                     2.2 to 1.0
----------------------------------------------------------------------
For the twelve months ended 1/31/05                      2.3 to 1.0
----------------------------------------------------------------------
</TABLE>

                                      -95-

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------
          Applicable Period                           Applicable Ratio
----------------------------------------------------------------------
<S>                                                   <C>
For the twelve months ended 2/28/05                      2.3 to 1.0
----------------------------------------------------------------------
For the twelve months ended 3/31/05                      2.3 to 1.0
----------------------------------------------------------------------
For the twelve months ended 4/30/05                      2.3 to 1.0
----------------------------------------------------------------------
For the twelve months ended 5/31/05                      2.3 to 1.0
----------------------------------------------------------------------
For the twelve months ended 6/30/05                      2.4 to 1.0
----------------------------------------------------------------------
For the twelve months ended 7/31/05                      2.4 to 1.0
----------------------------------------------------------------------
For the twelve months ended 8/31/05                      2.4 to 1.0
----------------------------------------------------------------------
For the twelve months ended 9/30/05                      2.5 to 1.0
----------------------------------------------------------------------
For the twelve months ended 10/31/05 and                 2.5 to 1.0
each twelve month period thereafter
----------------------------------------------------------------------
</TABLE>

                           (b)      Permit:

                           (i)      SENIOR DEBT RATIO. The Senior Debt Ratio at
any time during the applicable period set forth below to exceed the applicable
ratio set forth below opposite such period:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
         Applicable Period                               Applicable Ratio
-------------------------------------------------------------------------
<S>                                                      <C>
At any time on and after November 30, 2003                  3.25 to 1.0
and to and including May 31, 2004
-------------------------------------------------------------------------
At any time after May 31, 2004 and prior to November         3.0 to 1.0
30, 2004
-------------------------------------------------------------------------
At any time on and after November 30, 2004                   2.7 to 1.0
-------------------------------------------------------------------------
</TABLE>

                           (ii)     WFF DEBT RATIO. The WFF Debt Ratio at any
time during the applicable period set forth below to exceed the applicable ratio
set forth below opposite such period:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
          Applicable Period                            Applicable Ratio
-----------------------------------------------------------------------
<S>                                                    <C>
At any time on or prior to April 30, 2004                2.75 to 1.0
-----------------------------------------------------------------------
At any time after April 30, 2004 and on or prior to       2.5 to 1.0
October 31, 2004
-----------------------------------------------------------------------
</TABLE>

                                      -96-

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
          Applicable Period                            Applicable Ratio
-----------------------------------------------------------------------
<S>                                                    <C>
At any time after October 31, 2004 and on or prior to     2.3 to 1.0
December 31, 2004
-----------------------------------------------------------------------
At any time after December 31, 2004                       2.1 to 1.0
-----------------------------------------------------------------------
</TABLE>

                           (c)      Make:

                           (i)      CAPITAL EXPENDITURES. Capital expenditures
(excluding expenditures made for Permitted Acquisitions) in any Fiscal Year in
excess of the amount set forth in the following table for the applicable period:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Six Month Period ending                                      Fiscal Year 2006 and
  ending January 31,                                           each Fiscal Year
         2004                     Fiscal Year 2005                Thereafter
---------------------------------------------------------------------------------
<S>                               <C>                        <C>
   $1,500,000                        $2,800,000                 $3,400,000
---------------------------------------------------------------------------------
</TABLE>

                  7.19.    BUSINESS SEGMENTS. Make any changes with respect to
the Business Segments of the Loan Parties, and the identities of the
Subsidiaries included in each such Business Segment, from the structure set
forth in Schedule S-1.

         8.       EVENTS OF DEFAULT.

                  Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:

                  8.1.     If Loan Parties fail to pay when due and payable or
when declared due and payable, all or any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due the
Lender Group, reimbursement of Lender Group Expenses, or other amounts
constituting Obligations);

                  8.2.     If any Loan Party:

                           (a)      fails to perform, keep, or observe any term,
provision, covenant, or agreement contained in Sections 2.7, 3.2, 6.7, 6.8,
6.10, 6.12, 6.15, 6.16 and 7.1 through 7.19 of this Agreement;

                           (b)      fails or neglects to perform, keep, or
observe any term, provision, covenant, or agreement contained in 6.2, 6.3, 6.5,
6.6, 6.9, 6.11, and 6.14 of this Agreement and such failure continues for a
period of 5 Business Days; or

                                      -97-

<PAGE>

                           (c)      fails or neglects to perform, keep, or
observe any other term, provision, covenant, or agreement contained in this
Agreement, or in any of the other Loan Documents (giving effect to any grace
periods, cure periods, or required notices, if any, expressly provided for in
such Loan Documents); in each case, other than any such term, provision,
covenant, or agreement that is the subject of another provision of this Section
8 (in which event such other provision of this Section 8 shall govern), and such
failure continues for a period of 10 Business Days;

provided that, during any period of time that any such failure or neglect
referred to in this paragraph exists, even if such failure or neglect is not yet
an Event of Default, Lenders shall be relieved of their obligation to extend
credit hereunder

                  8.3.     If any material portion of any Loan Party's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;

                  8.4.     If an Insolvency Proceeding is commenced by any Loan
Party or any Subsidiary of a Loan Party;

                  8.5.     If an Insolvency Proceeding is commenced against any
Loan Party or any Subsidiary of a Loan Party, and any of the following events
occur: (a) the applicable Loan Party or Subsidiary consents to the institution
of the Insolvency Proceeding against it, (b) the petition commencing the
Insolvency Proceeding is not timely controverted; provided, however, that,
during the pendency of such period, each member of the Lender Group shall be
relieved of its obligations to extend credit hereunder, (c) the petition
commencing the Insolvency Proceeding is not dismissed within 45 calendar days of
the date of the filing thereof; provided, however, that, during the pendency of
such period, each member of the Lender Group shall be relieved of its obligation
to extend credit hereunder, (d) an interim trustee is appointed to take
possession of all or any substantial portion of the properties or assets of, or
to operate all or any substantial portion of the business of, any Loan Party or
any Subsidiary of a Loan Party, or (e) an order for relief shall have been
entered therein;

                  8.6.     If any Loan Party or any Subsidiary of a Loan Party
is enjoined, restrained, or in any way prevented by court order from continuing
to conduct all or any material part of its business affairs;

                  8.7.     (a) If a notice of Lien is filed of record with
respect to a Loan Party's assets or any of its Subsidiaries' assets by the
United States or any department, agency, or instrumentality thereof (a "Federal
Lien"), or by any state, county, municipal, or governmental agency and such
state, county, municipal, or governmental agency Lien has priority over the
Liens of the Collateral Agent in and to the Collateral or any portion thereof (a
"Non-Federal Priority Lien"); or

                           (b) If a notice of Lien is filed of record with
respect to a Loan Party' assets or any of its Subsidiaries' assets by any state,
county, municipal, or governmental agency that is not a Non-Federal Priority
Lien (a "Non-Federal Non-Priority Lien"); provided, however, that, if the
aggregate amount claimed with respect to any such Non-Federal Non-Priority
Liens,

                                      -98-

<PAGE>

or combination thereof, is less than $100,000, an Event of Default shall not
occur under this subsection if the claims that are the subject of such Liens are
the subject of Permitted Protests and if the Liens are released, discharged, or
bonded against within 30 days of each such Lien first being filed of record or,
if earlier, at least 5 days prior to the date on which assets that are subject
to such Liens are subject to being sold or forfeited and, in any such case,
Lender shall have the absolute right to establish and maintain a reserve against
the Borrowing Base and the Maximum Revolver Amount in an amount equal to the
aggregate amount of the underlying claims (determined by Agent, in its Permitted
Discretion, and irrespective of any Permitted Protests with respect thereto and
including any penalties or interest that are estimated by Agent, in its
Permitted Discretion, to arise in connection therewith);

                  8.8.     If a judgment or other claim becomes a Lien or
encumbrance upon any material portion of any Loan Party's or any Subsidiary of a
Loan Party's properties or assets;

                  8.9.     (i) If a Term Loan B Event of Default shall occur, or
(ii) if there is a default in any other material agreement to which any Loan
Party or any Subsidiary of a Loan Party is a party and, in the case of this
clause (ii), such default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by the other party thereto, irrespective
of whether exercised, to accelerate the maturity of the applicable Loan Party's
or Subsidiary's obligations thereunder, or to terminate such agreement;

                  8.10.    If any Loan Party or any Subsidiary of a Loan Party
makes any payment on account of Indebtedness that has been contractually
subordinated in right of payment to the payment of the Obligations, except to
the extent such payment is permitted by the terms of the subordination
provisions applicable to such Indebtedness;

                  8.11.    If any material misstatement or misrepresentation
exists now or hereafter in any warranty, representation, statement, or Record
made to the Lender Group by any Loan Party, any Subsidiary of a Loan Party, or
any officer, employee, agent, or director of any Loan Party or any Subsidiary of
a Loan Party;

                  8.12.    If the obligation of any Guarantor under any Guaranty
is limited or terminated by operation of law or by such Guarantor thereunder
except in connection with a transaction permitted under Section 7.3;

                  8.13.    If this Agreement or any other Loan Document that
purports to create a Lien, shall, for any reason, fail or cease to create a
valid and perfected and, except to the extent permitted by the terms hereof or
thereof, first priority Lien on or security interest in the Collateral covered
hereby or thereby;

                  8.14.    Any provision of any Loan Document shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Loan Party or any Subsidiary of
a Loan Party, or a proceeding shall be commenced by any Loan Party or any
Subsidiary of a Loan Party, or by any Governmental Authority having jurisdiction
over any Loan Party or any Subsidiary of a Loan Party, seeking to establish the
invalidity or unenforceability thereof, or any Loan Party or any Subsidiary of a
Loan Party shall deny that it has any liability or obligation purported to be
created under any Loan Document,

                                      -99-

<PAGE>

                  8.15.    If any Loan Party or any of its Subsidiaries or any
of their ERISA Affiliates shall have made a complete or partial withdrawal from
a Multiemployer Plan, and, as a result of such complete or partial withdrawal,
such Loan Party or any of its Subsidiaries or such ERISA Affiliate incurs a
withdrawal liability in an annual amount exceeding $50,000; or a Multiemployer
Plan enters reorganization status under Section 4241 of ERISA, and, as a result
thereof, a Loan Party's or such Subsidiary's, or such ERISA Affiliate's annual
contribution requirement with respect to such Multiemployer Plan increases in an
annual amount exceeding $50,000; or

                  8.16.    If any Termination Event with respect to any Benefit
Plan shall have occurred, and, 30 days thereafter, (i) such Termination Event
(if correctable) shall not have been corrected, and (ii) the then current value
of such Benefit Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Benefit Plan by more than $50,000 (or, in the
case of a Termination Event involving liability under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971
or 4975 of the Code, the liability is in excess of such amount).

         9.       THE LENDER GROUP'S RIGHTS AND REMEDIES.

                  9.1.     RIGHTS AND REMEDIES. Upon the occurrence, and during
the continuation, of an Event of Default, the Required Lenders (at their
election but without notice of their election and without demand) may authorize
and instruct Agent to do any one or more of the following on behalf of the
Lender Group (and Agent, acting upon the instructions of the Required Lenders,
shall do the same on behalf of the Lender Group), all of which are authorized by
Borrowers:

                           (a)      Declare all Obligations, whether evidenced
by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;

                           (b)      Cease advancing money or extending credit to
or for the benefit of Borrowers under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrowers and the Lender Group;

                           (c)      Terminate this Agreement and any of the
other Loan Documents as to any future liability or obligation of the Lender
Group, but without affecting any of the Collateral Agent's Liens in the
Collateral and without affecting the Obligations; and

                           (d)      The Lender Group shall have all other rights
and remedies available to it at law or in equity pursuant to any other Loan
Documents; provided, however, that upon the occurrence of any Event of Default
described in Section 8.4 or Section 8.5, in addition to the remedies set forth
above, without any notice to Loan Parties or any other Person or any act by the
Lender Group, the Commitments shall automatically terminate and the Obligations
then outstanding, together with all accrued and unpaid interest thereon, and all
fees and all other amounts due under this Agreement and the other Loan
Documents, shall automatically and immediately become due and payable, without
presentment, demand, protest, or notice of any kind, all of which are expressly
waived by Loan Parties.

                                     -100-

<PAGE>

                  9.2.     REMEDIES CUMULATIVE. The rights and remedies of the
Lender Group under this Agreement, the other Loan Documents, and all other
agreements shall be cumulative. The Lender Group shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by the Lender Group of one right or remedy shall be deemed
an election, and no waiver by the Lender Group of any Event of Default shall be
deemed a continuing waiver. No delay by the Lender Group shall constitute a
waiver, election, or acquiescence by it.

         10.      TAXES AND EXPENSES.

                  If any Loan Party fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its Permitted
Discretion and without prior notice to any Loan Party, may do any or all of the
following: (a) make payment of the same or any part thereof, (b) set up such
reserves in Borrowers' Loan Account as Agent deems necessary to protect the
Lender Group from the exposure created by such failure, or (c) in the case of
the failure to comply with Section 6.8 hereof, obtain and maintain insurance
policies of the type described in Section 6.8 and take any action with respect
to such policies as Agent deems prudent. Any such amounts paid by Agent shall
constitute Lender Group Expenses and any such payments shall not constitute an
agreement by the Lender Group to make similar payments in the future or a waiver
by the Lender Group of any Event of Default under this Agreement. Agent need not
inquire as to, or contest the validity of, any such expense, tax, or Lien and
the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.

         11.      WAIVERS; INDEMNIFICATION.

                  11.1.    DEMAND; PROTEST; ETC. Each Loan Party waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which any such Loan Party may in any way be liable.

                  11.2.    THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Each
Loan Party hereby agrees that: (a) so long as the Lender Group complies with its
obligations, if any, under the Code, Agent shall not in any way or manner be
liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss
or damage thereto occurring or arising in any manner or fashion from any cause,
(iii) any diminution in the value thereof, or (iv) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all
risk of loss, damage, or destruction of the Collateral shall be borne by Loan
Parties.

                  11.3.    INDEMNIFICATION. Each Loan Party shall pay,
indemnify, defend, and hold the Agent-Related Persons, the Lender-Related
Persons, and each Participant (each, an "Indemnified Person") harmless (to the
fullest extent permitted by law) from and against any and all claims, demands,
suits, actions, investigations, proceedings, and damages, and all reasonable
attorneys fees and disbursements and other costs and expenses actually incurred
in connection

                                     -101-

<PAGE>

therewith (as and when they are incurred and irrespective of whether suit is
brought), at any time asserted against, imposed upon, or incurred by any of them
(a) in connection with or as a result of or related to the execution, delivery,
enforcement, performance, or administration (including any restructuring or
workout with respect hereto) of this Agreement, any of the other Loan Documents,
or the transactions contemplated hereby or thereby or the monitoring of Loan
Parties' compliance with the terms of the Loan Documents, and (b) with respect
to any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event, or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). The foregoing to the
contrary notwithstanding, Loan Parties shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Loan Parties were required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Loan Parties with respect thereto. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR
ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY
OTHER PERSON.

                  11.4.    ENVIRONMENTAL INDEMNITY. Without limiting Section
11.3 hereof, each Borrower shall pay, indemnify, defend, and hold harmless each
Indemnified Person against any and all Environmental Liabilities and Costs and
all other claims, demands, penalties, fines, liability (including strict
liability), losses, damages, costs and expenses (including reasonable legal fees
and expenses, consultant fees and laboratory fees), arising out of (a) any
releases or threatened releases of any Hazardous Materials (i) at any property
presently or formerly owned or operated by any Loan Party or any Subsidiary of a
Loan Party, or any predecessor in interest, or (ii) generated and disposed of by
a Loan Party or any Subsidiary of a Loan Party, or any predecessor in interest;
(b) any violations of Environmental Laws; (c) any Environmental Action relating
to a Loan Party or any Subsidiary of a Loan Party, or any predecessor in
interest; (d) any personal injury (including wrongful death) or property damage
(real or personal) arising out of exposure to Hazardous Materials used, handled,
generated, transported or disposed by a Loan Party or any Subsidiary of a Loan
Party, or any predecessor in interest; and (e) any breach of any warranty or
representation regarding environmental matters made by the Loan Parties in any
Loan Document.

         12.      NOTICES.

                  Unless otherwise provided in this Agreement, all notices or
demands by Loan Parties or Agent to the other relating to this Agreement or any
other Loan Document shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified mail
(postage prepaid, return receipt requested), overnight courier, electronic mail
(at

                                     -102-

<PAGE>

such email addresses as Administrative Borrower or Agent, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Loan
Parties in care of Administrative Borrower or to Agent, as the case may be, at
its address set forth below:

         If to Administrative Borrower:     SOURCE INTERLINK COMPANIES, INC.
                                            27500 Riverview Center Blvd.
                                            Suite 400
                                            Bonita Springs, Florida
                                            Attn:   Marc Fierman
                                            Fax No. 239-949-7689

         with copies to:                    Tripp Scott, P.A.
                                            AutoNation Tower
                                            110 S.E. 6th Street, 15th Floor
                                            Fort Lauderdale, Florida 33301
                                            Attn:   Garry W. Johnson, Esq.
                                            Fax No. 954-761-8475
         If to Agent or
         Collateral Agent:                  WELLS FARGO FOOTHILL, INC.
                                            1000 Abernathy Road, Suite 1450
                                            Atlanta, Georgia 30328
                                            Attn:   Business Finance Manager
                                            Fax No. 770-508-1375

         with copies to:                    SCHULTE ROTH & ZABEL LLP
                                            919 Third Avenue
                                            New York, New York 10022
                                            Attn:   Frederic L. Ragucci, Esq.
                                            Fax No. 212-593-5955

                  Agent and Administrative Borrower may change the address at
which they are to receive notices hereunder, by notice in writing in the
foregoing manner given to the other party. All notices or demands sent in
accordance with this Section 12, other than notices by Agent in connection with
enforcement rights against the Collateral under the provisions of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3
Business Days after the deposit thereof in the mail. Each Loan Party
acknowledges and agrees that notices sent by the Lender Group in connection with
the exercise of enforcement rights against Collateral under the provisions of
the Code shall be deemed sent when deposited in the mail or personally
delivered, or, where permitted by law, transmitted by telefacsimile or any other
method set forth above.

         13.      CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

                  (a)      THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN

                                     -103-

<PAGE>

ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                  (b)      THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF NEW YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. LOAN PARTIES AND
THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
13(b).

                  (c)      LOAN PARTIES AND THE LENDER GROUP HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. LOAN PARTIES AND THE LENDER GROUP
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.

         14.      ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

                  14.1.    ASSIGNMENTS AND PARTICIPATIONS.

                           (a)      Any Lender may assign and delegate to one or
more assignees (each an "Assignee") that are Eligible Transferees all, or any
ratable part of all, of the Obligations, the Commitments and the other rights
and obligations of such Lender hereunder and under the other Loan Documents, in
a minimum amount of $5,000,000; provided, however, that Borrowers and Agent may
continue to deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses, and related information with
respect to the Assignee, have been given to Administrative Borrower and Agent by
such Lender and the Assignee, (ii) such Lender and its Assignee have delivered
to Administrative Borrower and Agent an Assignment

                                     -104-

<PAGE>

and Acceptance, and (iii) the assignor Lender or Assignee has paid to Agent for
Agent's separate account a processing fee in the amount of $5,000. Anything
contained herein to the contrary notwithstanding, the payment of any fees shall
not be required and the Assignee need not be an Eligible Transferee if such
assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan
portfolio of the assigning Lender.

                           (b)      From and after the date that Agent notifies
the assignor Lender (with a copy to Administrative Borrower) that it has
received an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) 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 and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except with respect to Section 11.3 hereof)
and be released from any future obligations under this Agreement (and in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement and the other
Loan Documents, such Lender shall cease to be a party hereto and thereto), and
such assignment shall effect a novation between Borrowers and the Assignee;
provided, however, that nothing contained herein shall release any assigning
Lender from obligations that survive the termination of this Agreement,
including such assigning Lender's obligations under Article 16 and Section 17.8
of this Agreement.

                           (c)      By executing and delivering an Assignment
and Acceptance, the assigning Lender thereunder and the Assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(1) other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document furnished pursuant hereto, (2) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrowers or the performance or observance by Borrowers
of any of their obligations under this Agreement or any other Loan Document
furnished pursuant hereto, (3) such Assignee confirms that it has received a
copy of this Agreement, together with such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance, (4) such Assignee will, independently and
without reliance upon Agent, such assigning Lender or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement, (5) such Assignee appoints and authorizes Agent to take
such actions and to exercise such powers under this Agreement as are delegated
to Agent, by the terms hereof, together with such powers as are reasonably
incidental thereto, and (6) such Assignee agrees that it will perform all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.

                           (d)      Immediately upon Agent's receipt of the
required processing fee payment and the fully executed Assignment and
Acceptance, this Agreement shall be deemed to

                                     -105-

<PAGE>

be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.

                           (e)      Any Lender may at any time, with the written
consent of Agent, sell to one or more commercial banks, financial institutions,
or other Persons not Affiliates of such Lender (a "Participant") participating
interests in its Obligations, the Commitment, and the other rights and interests
of that Lender (the "Originating Lender") hereunder and under the other Loan
Documents (provided that no written consent of Agent shall be required in
connection with any sale of any such participating interests by a Lender to an
Eligible Transferee); provided, however, that (i) the Originating Lender shall
remain a "Lender" for all purposes of this Agreement and the other Loan
Documents and the Participant receiving the participating interest in the
Obligations, the Commitments, and the other rights and interests of the
Originating Lender hereunder shall not constitute a "Lender" hereunder or under
the other Loan Documents and the Originating Lender's obligations under this
Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrowers,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating, (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or substantially all of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender, or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums; and (v) all amounts payable by Borrowers hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any rights under this Agreement or
the other Loan Documents or any direct rights as to the other Lenders, Agent,
Borrowers, the Collections of Borrowers or their Subsidiaries, the Collateral,
or otherwise in respect of the Obligations. No Participant shall have the right
to participate directly in the making of decisions by the Lenders among
themselves.

                           (f)      In connection with any such assignment or
participation or proposed assignment or participation, a Lender may, subject to
the provisions of Section 17.8, disclose all documents and information which it
now or hereafter may have relating to Borrowers and their Subsidiaries and their
respective businesses.

                                     -106-

<PAGE>

                           (g)      Any other provision in this Agreement
notwithstanding, any Lender may at any time create a security interest in, or
pledge, all or any portion of its rights under and interest in this Agreement in
favor of any Federal Reserve Bank in accordance with Regulation A of the Federal
Reserve Bank or U.S. Treasury Regulation 31 CFR Section 203.24, and such Federal
Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.

                  14.2.    SUCCESSORS. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrowers may not assign this Agreement or any rights or
duties hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void ab initio. No consent to assignment by the
Lenders shall release any Borrower from its Obligations. A Lender may assign
this Agreement and the other Loan Documents and its rights and duties hereunder
and thereunder pursuant to Section 14.1 hereof and, except as expressly required
pursuant to Section 14.1 hereof, no consent or approval by any Borrower is
required in connection with any such assignment.

         15.      AMENDMENTS; WAIVERS.

                  15.1.    AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Loan Parties therefrom, shall be effective unless
the same shall be in writing and signed by the Required Lenders (or by Agent at
the written request of the Required Lenders) and Administrative Borrower (on
behalf of all Loan Parties) and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all of the Lenders affected thereby and
Administrative Borrower (on behalf of all Loan Parties) and acknowledged by
Agent, do any of the following:

                           (a)      increase or extend any Commitment of any
Lender,

                           (b)      postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees, or other amounts due hereunder or under any other Loan Document,

                           (c)      reduce the principal of, or the rate of
interest on, any loan or other extension of credit hereunder, or reduce any fees
or other amounts payable hereunder or under any other Loan Document,

                           (d)      change the percentage of the Commitments
that is required to take any action hereunder,

                           (e)      amend or modify this Section or any
provision of the Agreement providing for consent or other action by all Lenders,

                           (f)      release Collateral other than as permitted
by Section 16.12,

                           (g)      change the definition of "Required Lenders"
or "Pro Rata Share",

                                     -107-

<PAGE>

                           (h)      contractually subordinate any of the
Collateral Agent's Liens,

                           (i)      release any Borrower or Guarantor from any
obligation for the payment of money, or

                           (j)      change the definition of Borrowing Base or
the definitions of Eligible Accounts, Eligible Equipment, Eligible Real Property
Collateral, Maximum Revolver Amount, Term Loan Amount or WFF Availability or
change Section 2.1(b); or

                           (k)      amend any of the provisions of Section 16.

and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect
the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of, or
with respect to, any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Loan Parties, shall not require
consent by or the agreement of Loan Parties.

                  15.2.    REPLACEMENT OF HOLDOUT LENDER. If any action to be
taken by the Lender Group or Agent hereunder requires the unanimous consent,
authorization, or agreement of all Lenders, and a Lender ("Holdout Lender")
fails to give its consent, authorization, or agreement, then Agent, upon at
least 5 Business Days prior irrevocable notice to the Holdout Lender, may
permanently replace the Holdout Lender with one or more substitute Lenders
(each, a "Replacement Lender"), and the Holdout Lender shall have not right to
refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall
specify an effective date for such replacement, which date shall not be later
than 15 Business Days after the date such notice is given.

                  Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance. The replacement of any Holdout Lender shall be
made in accordance with the terms of Section 14.1. Until such time as the
Replacement Lenders shall have acquired all of the Obligations, the Commitments,
and the other rights and obligations of the Holdout Lender hereunder and under
the other Loan Documents, the Holdout Lender shall remain obligated to make the
Holdout Lender's Pro Rata Share of Advances and to purchase a participation in
each Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit.

                  15.3.    NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent
or any Lender to exercise any right, remedy, or option under this Agreement or,
any other Loan Document, or

                                     -108-

<PAGE>

delay by Agent or any Lender in exercising the same, will operate as a waiver
thereof. No waiver by Agent or any Lender will be effective unless it is in
writing, and then only to the extent specifically stated. No waiver by Agent or
any Lender on any occasion shall affect or diminish Agent's and each Lender's
rights thereafter to require strict performance by Loan Parties of any provision
of this Agreement. Agent's and each Lender's rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right or
remedy that Agent or any Lender may have.

         16.      AGENT; THE LENDER GROUP.

                  16.1.    APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender
hereby designates and appoints WFF as its representative under this Agreement
and the other Loan Documents and each Lender hereby irrevocably authorizes Agent
to execute and deliver each of the other Loan Documents on its behalf and to
take such other action on its behalf under the provisions of this Agreement and
each other Loan Document and to exercise such powers and perform such duties as
are expressly delegated to Agent by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Agent agrees to act as such on the express conditions contained in this Section
16. The provisions of this Section 16 (other than the proviso to Section
16.11(d)) are solely for the benefit of Agent, and the Lenders, and Loan Parties
and their Subsidiaries shall have no rights as a third party beneficiary of any
of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that WFF is
merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Collateral,
the Collections of Loan Parties and their Subsidiaries, and related matters, (b)
execute or file any and all financing or similar statements or notices,
amendments, renewals, supplements, documents, instruments, proofs of claim,
notices and other written agreements with respect to the Loan Documents, (c)
make Advances, for itself or on behalf of Lenders as provided in the Loan
Documents, (d) exclusively receive, apply, and distribute the Collections of
Loan Parties and their Subsidiaries as provided in the Loan Documents, (e) open
and maintain such bank accounts and cash management accounts as Agent deems
necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes with respect to the Collateral and the Collections of Loan
Parties and their Subsidiaries, (f) perform, exercise, and enforce any and all
other rights and remedies of the Lender Group with respect to Loan Parties, the
Obligations, the Collateral, the Collections of Loan Parties and their
Subsidiaries, or otherwise related to any of same as

                                     -109-

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provided in the Loan Documents, and (g) incur and pay such Lender Group Expenses
as Agent may deem necessary or appropriate for the performance and fulfillment
of its functions and powers pursuant to the Loan Documents.

                  16.2.    DELEGATION OF DUTIES. Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Agent shall not be responsible
for the negligence or misconduct of any agent or attorney-in-fact that it
selects as long as such selection was made without gross negligence or willful
misconduct.

                  16.3.    LIABILITY OF AGENT. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by any Loan Party or any
Subsidiary or Affiliate of any Loan Party, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
any Loan Party or any other party to any Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the Books or properties of
Loan Parties or the books or records or properties of any of Loan Parties'
Subsidiaries or Affiliates.

                  16.4.    RELIANCE BY AGENT. Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrowers or counsel to any Lender), independent accountants and other
experts selected by Agent. Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless Agent
shall first receive such advice or concurrence of the Lenders as it deems
appropriate and until such instructions are received, Agent shall act, or
refrain from acting, as it deems advisable. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by the Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the requisite Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.

                  16.5.    NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment of principal,
interest, fees, and expenses required to be paid to

                                     -110-

<PAGE>

Agent for the account of the Lenders and, except with respect to Events of
Default of which Agent has actual knowledge, unless Agent shall have received
written notice from a Lender or Administrative Borrower referring to this
Agreement, describing such Default or Event of Default, and stating that such
notice is a "notice of default." Agent promptly will notify the Lenders of its
receipt of any such notice or of any Event of Default of which Agent has actual
knowledge. If any Lender obtains actual knowledge of any Event of Default, such
Lender promptly shall notify the other Lenders and Agent of such Event of
Default. Each Lender shall be solely responsible for giving any notices to its
Participants, if any. Subject to Section 16.4, Agent shall take such action with
respect to such Default or Event of Default as may be requested by the Required
Lenders in accordance with Section 9; provided, however, that unless and until
Agent has received any such request, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.

                  16.6.    CREDIT DECISION. Each Lender acknowledges that none
of the Agent-Related Persons has made any representation or warranty to it, and
that no act by Agent hereinafter taken, including any review of the affairs of
Loan Parties and their Subsidiaries or Affiliates, shall be deemed to constitute
any representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Loan Parties and any other Person party to a Loan Document,
and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Loan Parties. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Loan Parties and any other Person party to a Loan Document.
Except for notices, reports, and other documents expressly herein required to be
furnished to the Lenders by Agent, Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Loan Parties and any other Person party to a
Loan Document that may come into the possession of any of the Agent-Related
Persons.

                  16.7.    COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur
and pay Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, attorneys
fees and expenses, fees and expenses of financial accountants, advisors,
consultants, and appraisers, costs of collection by outside collection agencies,
auctioneer fees and expenses, and costs of security guards or insurance premiums
paid to maintain the Collateral, whether or not Loan Parties are obligated to
reimburse Agent or Lenders for such expenses pursuant to the Loan Agreement or
otherwise. Agent is authorized and directed to deduct and retain sufficient
amounts from the Collections of Loan Parties and their Subsidiaries received by
Agent to reimburse Agent for such out-of-pocket costs and

                                     -111-

<PAGE>

expenses prior to the distribution of any amounts to Lenders. In the event Agent
is not reimbursed for such costs and expenses from the Collections of Loan
Parties and their Subsidiaries received by Agent, each Lender hereby agrees that
it is and shall be obligated to pay to or reimburse Agent for the amount of such
Lender's Pro Rata Share thereof. Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of Loan
Parties and without limiting the obligation of Loan Parties to do so), according
to their Pro Rata Shares, from and against any and all Indemnified Liabilities;
provided, however, that no Lender shall be liable for the payment to any
Agent-Related Person of any portion of such Indemnified Liabilities resulting
solely from such Person's gross negligence or willful misconduct nor shall any
Lender be liable for the obligations of any Defaulting Lender in failing to make
an Advance or other extension of credit hereunder. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for such Lender's Pro
Rata Share of any costs or out-of-pocket expenses (including attorneys,
accountants, advisors, and consultants fees and expenses) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment, or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Agent is not
reimbursed for such expenses by or on behalf of Loan Parties. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.

                  16.8.    AGENT IN INDIVIDUAL CAPACITY. WFF and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory, underwriting, or other business with Borrowers and
their Subsidiaries and Affiliates and any other Person party to any Loan
Documents as though WFF were not Agent hereunder, and, in each case, without
notice to or consent of the other members of the Lender Group. The other members
of the Lender Group acknowledge that, pursuant to such activities, WFF or its
Affiliates may receive information regarding Loan Parties or their Affiliates
and any other Person party to any Loan Documents that is subject to
confidentiality obligations in favor of Loan Parties or such other Person and
that prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver Agent will use its reasonable best
efforts to obtain), Agent shall not be under any obligation to provide such
information to them. The terms "Lender" and "Lenders" include WFF in its
individual capacity.

                  16.9.    SUCCESSOR AGENT. Agent may resign as Agent upon 45
days notice to the Lenders. If Agent resigns under this Agreement, the Required
Lenders shall appoint a successor Agent for the Lenders. If no successor Agent
is appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. In any
such event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers, and duties of the
retiring Agent and the term "Agent" shall mean such successor Agent and the
retiring Agent's appointment, powers, and duties as Agent shall be terminated.
After any

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<PAGE>

retiring Agent's resignation hereunder as Agent, the provisions of this Section
16 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.

                  16.10.   LENDER IN INDIVIDUAL CAPACITY. Any Lender and its
respective Affiliates may make loans to, issue letters of credit for the account
of, accept deposits from, acquire equity interests in and generally engage in
any kind of banking, trust, financial advisory, underwriting or other business
with Loan Parties and their Subsidiaries and Affiliates and any other Person
(other than the Lender Group) party to any Loan Documents as though such Lender
were not a Lender hereunder without notice to or consent of the other members of
the Lender Group. The other members of the Lender Group acknowledge that,
pursuant to such activities, such Lender and its respective Affiliates may
receive information regarding Loan Parties or their Affiliates and any other
Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Loan Parties or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.

                  16.11.   WITHHOLDING TAXES.

                           (a)      If any Lender is a "foreign person" within
the meaning of the IRC and such Lender claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees
with and in favor of Agent and Borrowers, to deliver to Agent and Administrative
Borrower:

                           (i)      if such Lender claims an exemption from
         withholding tax pursuant to its portfolio interest exception, (A) a
         statement of the Lender, signed under penalty of perjury, that it is
         not a (I) a "bank" as described in Section 881(c)(3)(A) of the IRC,
         (II) a 10% shareholder of a Borrower (within the meaning of Section
         871(h)(3)(B) of the IRC), or (III) a controlled foreign corporation
         related to a Borrower within the meaning of Section 864(d)(4) of the
         IRC, and (B) a properly completed and executed IRS Form W-8BEN, before
         the first payment of any interest under this Agreement and at any other
         time reasonably requested by Agent or Administrative Borrower;

                           (ii)     if such Lender claims an exemption from, or
         a reduction of, withholding tax under a United States tax treaty,
         properly completed and executed IRS Form W-8BEN before the first
         payment of any interest under this Agreement and at any other time
         reasonably requested by Agent or Administrative Borrower;

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<PAGE>

                           (iii)    if such Lender claims that interest paid
         under this Agreement is exempt from United States withholding tax
         because it is effectively connected with a United States trade or
         business of such Lender, two properly completed and executed copies of
         IRS Form W-8ECI before the first payment of any interest is due under
         this Agreement and at any other time reasonably requested by Agent or
         Administrative Borrower;

                           (iv)     such other form or forms as may be required
         under the IRC or other laws of the United States as a condition to
         exemption from, or reduction of, United States withholding tax.

Such Lender agrees promptly to notify Agent and Administrative Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.

                           (b)      If any Lender claims exemption from, or
reduction of, withholding tax under a United States tax treaty by providing IRS
Form W-8BEN and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of Borrowers to such Lender,
such Lender agrees to notify Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of Borrowers to such Lender. To the
extent of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN
as no longer valid.

                           (c)      If any Lender is entitled to a reduction in
the applicable withholding tax, Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to Agent, then Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.

                           (d)      If the IRS or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that Agent
did not properly withhold tax from amounts paid to or for the account of any
Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify and hold
Agent harmless for all amounts paid, directly or indirectly, by Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to Agent under this Section, together
with all costs and expenses (including attorneys fees and expenses). The
obligation of the Lenders under this subsection shall survive the payment of all
Obligations and the resignation or replacement of Agent.

                           (e)      All payments made by Borrowers hereunder or
under any note or other Loan Document will be made without setoff, counterclaim,
or other defense, except as required by applicable law other than for Taxes (as
defined below). All such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or hereafter
imposed by any jurisdiction (other than the United States) or by any political
subdivision or

                                     -114-

<PAGE>

taxing authority thereof or therein (other than of the United States) with
respect to such payments (but excluding, any tax imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (i) measured
by or based on the net income or net profits of a Lender, or (ii) to the extent
that such tax results from a change in the circumstances of the Lender,
including a change in the residence, place of organization, or principal place
of business of the Lender, or a change in the branch or lending office of the
Lender participating in the transactions set forth herein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as "Taxes"). If any Taxes are so levied or imposed,
each Borrower agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement or under any note, including any amount paid pursuant to this Section
16.11(e) after withholding or deduction for or on account of any Taxes, will not
be less than the amount provided for herein; provided, however, that Borrowers
shall not be required to increase any such amounts payable to Agent or any
Lender (i) that is not organized under the laws of the United States, if such
Person fails to comply with the other requirements of this Section 16.11, or
(ii) if the increase in such amount payable results from Agent's or such
Lender's own willful misconduct or gross negligence. Borrowers will furnish to
Agent as promptly as possible after the date the payment of any Taxes is due
pursuant to applicable law certified copies of tax receipts evidencing such
payment by Borrowers.

                  16.12.   COLLATERAL MATTERS.

                           (a)      The Lenders hereby irrevocably authorize
Agent, at its option and in its sole discretion, to release or authorize the
release of any Lien on any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by Loan Parties of all
Obligations, (ii) constituting property being sold or disposed of if a release
is required or desirable in connection therewith and if Administrative Borrower
certifies to Agent that the sale or disposition is permitted under Section 7.4
of this Agreement or the other Loan Documents (and Agent may rely conclusively
on any such certificate, without further inquiry), (iii) constituting property
in which no Loan Party or its Subsidiaries owned any interest at the time the
Collateral Agent's Lien was granted nor at any time thereafter, or (iv)
constituting property leased to a Loan Party or its Subsidiaries under a lease
that has expired or is terminated in a transaction permitted under this
Agreement. Except as provided above, Agent will not execute and deliver or
authorize any release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon
request by Agent or Administrative Borrower at any time, the Lenders will
confirm in writing Agent's authority to release any such Liens on particular
types or items of Collateral pursuant to this Section 16.12; provided, however,
that (1) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent's opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2) such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
Loan Parties in respect of) all interests retained by Loan Parties, including,
the proceeds of any sale, all of which shall continue to constitute part of the
Collateral.

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<PAGE>

                           (b)      Agent shall have no obligation whatsoever to
any of the Lenders to assure that the Collateral exists or is owned by Borrowers
or is cared for, protected, or insured or has been encumbered, or that the
Collateral Agent's Liens have been properly or sufficiently or lawfully created,
perfected, protected, or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.

                  16.13.   RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF
PAYMENTS.

                           (a)      Each of the Lenders agrees that it shall
not, without the express written consent of Agent, and that it shall, to the
extent it is lawfully entitled to do so, upon the written request of Agent, set
off against the Obligations, any amounts owing by such Lender to Loan Parties or
any deposit accounts of Loan Parties now or hereafter maintained with such
Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so in writing by Agent, take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings,
to foreclose any Lien on, or otherwise enforce any security interest in, any of
the Collateral.

                           (b)      If, at any time or times any Lender shall
receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations, except for any such
proceeds or payments received by such Lender from Agent pursuant to the terms of
this Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall (1) turn
the same over to Agent, in kind, and with such endorsements as may be required
to negotiate the same to Agent, or in immediately available funds, as
applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or
(2) purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among the Lenders in accordance
with their Pro Rata Shares; provided, however, that to the extent that such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment.

                  16.14.   AGENCY FOR PERFECTION. Agent hereby appoints each
other Lender as its agent (and each Lender hereby accepts such appointment) for
the purpose of perfecting the Collateral Agent's Liens in assets which, in
accordance with Article 9 of the Code can be perfected only by possession or
control. Should any Lender obtain possession or control of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent's request

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<PAGE>

therefor shall deliver possession or control of such Collateral to Collateral
Agent or in accordance with Agent's instructions.

                  16.15.   PAYMENTS BY AGENT TO THE LENDERS. All payments to be
made by Agent to the Lenders shall be made by bank wire transfer of immediately
available funds pursuant to such wire transfer instructions as each party may
designate for itself by written notice to Agent. Concurrently with each such
payment, Agent shall identify whether such payment (or any portion thereof)
represents principal, premium, or interest of the Obligations.

                  16.16.   CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS.
Each member of the Lender Group authorizes and directs Agent and/or Collateral
Agent, as applicable, to enter into this Agreement, the Intercreditor and
Collateral Agency Agreement and the other Loan Documents. Each member of the
Lender Group agrees that any action taken by Agent and/or Collateral Agent in
accordance with the terms of this Agreement, the Intercreditor and Collateral
Agency Agreement and the other Loan Documents relating to the Collateral and the
exercise by Agent and/or Collateral Agent of its powers set forth therein or
herein, together with such other powers that are reasonably incidental thereto,
shall be binding upon all of the Lenders.

                  16.17.   FIELD AUDITS AND EXAMINATION REPORTS;
CONFIDENTIALITY; DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By
becoming a party to this Agreement, each Lender:

                           (a)      is deemed to have requested that Agent
furnish such Lender, promptly after it becomes available, a copy of each field
audit or examination report (each a "Report" and collectively, "Reports")
prepared by Agent, and Agent shall so furnish each Lender with such Reports,

                           (b)      expressly agrees and acknowledges that Agent
does not (i) make any representation or warranty as to the accuracy of any
Report, and (ii) shall not be liable for any information contained in any
Report,

                           (c)      expressly agrees and acknowledges that the
Reports are not comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific information
regarding Loan Parties and will rely significantly upon the Books, as well as on
representations of Loan Parties' personnel,

                           (d)      agrees to keep all Reports and other
material, non-public information regarding Loan Parties and their Subsidiaries
and their operations, assets, and existing and contemplated business plans in a
confidential manner in accordance with Section 17.8, and

                           (e)      without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or fail to take or any conclusion the indemnifying
Lender may reach or draw from any Report in connection with any loans or other
credit accommodations that the indemnifying Lender has made or may make to Loan
Parties, or the indemnifying Lender's participation in, or the indemnifying
Lender's

                                     -117-

<PAGE>

purchase of, a loan or loans of Borrowers; and (ii) to pay and protect, and
indemnify, defend and hold Agent, and any such other Lender preparing a Report
harmless from and against, the claims, actions, proceedings, damages, costs,
expenses, and other amounts (including, attorneys fees and costs) incurred by
Agent and any such other Lender preparing a Report as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender.

In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Loan Parties to Agent that has not been contemporaneously
provided by Loan Parties to such Lender, and, upon receipt of such request,
Agent shall provide a copy of same to such Lender, (y) to the extent that Agent
is entitled, under any provision of the Loan Documents, to request additional
reports or information from Loan Parties, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender's
notice to Agent, whereupon Agent promptly shall request of Administrative
Borrower the additional reports or information reasonably specified by such
Lender, and, upon receipt thereof from Administrative Borrower, Agent promptly
shall provide a copy of same to such Lender, and (z) any time that Agent renders
to Administrative Borrower a statement regarding the Loan Account, Agent shall
send a copy of such statement to each Lender.

                  16.18.   SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding
that certain of the Loan Documents now or hereafter may have been or will be
executed only by or in favor of Agent in its capacity as such, and not by or in
favor of the Lenders, any and all obligations on the part of Agent (if any) to
make any credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section 16.7, no member of the Lender Group shall
have any liability for the acts or any other member of the Lender Group. No
Lender shall be responsible to any Borrower or any other Person for any failure
by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.

         17.      GENERAL PROVISIONS.

                  17.1.    EFFECTIVENESS. This Agreement shall be binding and
deemed effective when executed by Loan Parties, Agent, and each Lender whose
signature is provided for on the signature pages hereof.

                  17.2.    SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each Section applies equally to this entire
Agreement.

                                     -118-

<PAGE>

                  17.3.    INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against the
Lender Group or Loan Parties, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to accomplish fairly the purposes and intentions of all parties
hereto.

                  17.4.    SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.

                  17.5.    AMENDMENTS IN WRITING. This Agreement only can be
amended by a writing in accordance with Section 15.1.

                  17.6.    COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
an original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Loan
Document mutatis mutandis.

                  17.7.    REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by any Borrower or Guarantor or the
transfer to the Lender Group of any property should for any reason subsequently
be declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
the Lender Group is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that the Lender
Group is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrowers or Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.

                  17.8.    CONFIDENTIALITY. The Agent and the Lenders each
individually (and not jointly or jointly and severally) agree that material,
non-public information regarding Borrowers and their Subsidiaries, their
operations, assets, and existing and contemplated business plans shall be
treated by Agent and the Lenders in a confidential manner, and shall not be
disclosed by Agent and the Lenders to Persons who are not parties to this
Agreement, except: (a) to attorneys for and other advisors, accountants,
auditors, and consultants to any member of the Lender Group, (b) to Subsidiaries
and Affiliates of any member of the Lender Group (including the Bank Product
Providers), provided that any such Subsidiary or Affiliate shall have agreed to
receive such information hereunder subject to the terms of this Section 17.8,
(c) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation, (d) as may be

                                     -119-

<PAGE>

agreed to in advance by Administrative Borrower or its Subsidiaries or as
requested or required by any Governmental Authority pursuant to any subpoena or
other legal process, (e) as to any such information that is or becomes generally
available to the public (other than as a result of prohibited disclosure by
Agent or the Lenders), (f) in connection with any assignment, prospective
assignment, sale, prospective sale, participation or prospective participations,
or pledge or prospective pledge of any Lender's interest under this Agreement,
provided that any such assignee, prospective assignee, purchaser, prospective
purchaser, participant, prospective participant, pledgee, or prospective pledgee
shall have agreed in writing to receive such information hereunder subject to
the terms of this Section, and (g) in connection with any litigation or other
adversary proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties under
this Agreement or the other Loan Documents. The provisions of this Section 17.8
shall survive for 2 years after the payment in full of the Obligations. Anything
contained herein or in any other Loan Document to the contrary notwithstanding,
the obligations of confidentiality contained herein and therein, as they relate
to the transactions contemplated hereby, shall not apply to the federal tax
structure or federal tax treatment of such transactions, and each party hereto
(and any employee, representative, or agent of any party hereto) may disclose to
any and all Persons, without limitation of any kind, the federal tax structure
and federal tax treatment of such transactions (including all written materials
related to such tax structure and tax treatment). The preceding sentence is
intended to cause the transactions contemplated hereby to not be treated as
having been offered under conditions of confidentiality for purposes of Section
1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the IRC, and shall be construed in a manner
consistent with such purpose. In addition, each party hereto acknowledges that
it has no proprietary or exclusive rights to the tax structure of the
transactions contemplated hereby or any tax matter or tax idea related thereto.

                  17.9.    INTEGRATION. This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, before the date hereof.

                  17.10.   PARENT AS AGENT FOR BORROWERS. Each Borrower hereby
irrevocably appoints Parent as the borrowing agent and attorney-in-fact for all
Borrowers (the "Administrative Borrower") which appointment shall remain in full
force and effect unless and until Agent shall have received prior written notice
signed by each Borrower that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower. Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (i) to provide
Agent with all notices with respect to Advances and Letters of Credit obtained
for the benefit of any Borrower and all other notices and instructions under
this Agreement and (ii) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances and Letters of Credit and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes of this Agreement. It is understood that the handling of the Loan
Account and Collateral of Borrowers in a combined fashion, as more fully set
forth herein, is done solely as an accommodation to Borrowers in order to
utilize the collective borrowing powers of Borrowers in the most efficient and
economical manner and at their request, and that Lender Group shall not incur
liability to any Borrower as a result hereof. Each Borrower expects to derive
benefit, directly or indirectly, from the handling of the Loan

                                     -120-

<PAGE>

Account and the Collateral in a combined fashion since the successful operation
of each Borrower is dependent on the continued successful performance of the
integrated group. To induce the Lender Group to do so, and in consideration
thereof, each Borrower hereby jointly and severally agrees to indemnify each
member of the Lender Group and hold each member of the Lender Group harmless
against any and all liability, expense, loss or claim of damage or injury, made
against the Lender Group by any Borrower or by any third party whosoever,
arising from or incurred by reason of (a) the handling of the Loan Account and
Collateral of Borrowers as herein provided, (b) the Lender Group's relying on
any instructions of the Administrative Borrower, or (c) any other action taken
by the Lender Group hereunder or under the other Loan Documents, except that
Borrowers will have no liability to the relevant Agent-Related Person or
Lender-Related Person under this Section 17.9 with respect to any liability that
has been finally determined by a court of competent jurisdiction to have
resulted solely from the gross negligence or willful misconduct of such
Agent-Related Person or Lender-Related Person, as the case may be.

         18.      GUARANTY.

                  18.1.    GUARANTY; LIMITATION OF LIABILITY. Each Guarantor
hereby unconditionally and irrevocably jointly and severally guarantees the
punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all Obligations of Borrowers now or hereafter existing under any
Loan Document, whether for principal, interest fees, expenses or otherwise (such
obligations, to the extent not paid by Borrowers, being the "Guaranteed
Obligations"), and agrees to pay any and all reasonable expenses (including
reasonable counsel fees and expenses) incurred by Agent and Lenders in enforcing
any rights under the guaranty set forth in this Section 18. Without limiting the
generality of the foregoing, the Guarantors' liability shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
Borrowers to Lenders under any Loan Document but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving Borrower.

                  18.2.    GUARANTY ABSOLUTE. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of Lenders
with respect thereto. The obligations of each Guarantor under this Section 18
are independent of the Guaranteed Obligations, and a separate action or actions
may be brought and prosecuted against each Guarantor to enforce such
obligations, irrespective of whether any action is brought against any Borrower
or whether any Borrower is joined in any such action or actions. The liability
of each Guarantor under this Section 18 shall be irrevocable, absolute and
unconditional irrespective of, and each Guarantor hereby irrevocably waives any
defenses it may now or hereafter have in any way relating to, any or all of the
following:

                           (a)      any lack of validity or enforceability of
any Loan Document or any agreement or instrument relating thereto;

                           (b)      any change in the time, manner or place of
payment of, or in any other term of, all or any of the Guaranteed Obligations,
or any other amendment or waiver of or any consent to departure from any Loan
Document, including, without limitation, any increase in

                                     -121-

<PAGE>

the Guaranteed Obligations resulting from the extension of additional credit to
any Borrower or otherwise;

                           (c)      any taking, exchange, release or
non-perfection of any Collateral, or any taking, release or amendment or waiver
of or consent to departure from any other guaranty, for all or any of the
Guaranteed Obligations;

                           (d)      any change, restructuring or termination of
the corporate structure or existence of any Borrower or Guarantor; or

                           (e)      any other circumstance (including, without
limitation, any statute of limitations) or any existence of or reliance on any
representation by Lenders that might otherwise constitute a defense available
to, or a discharge of, any Guarantor, any Borrower or any other guarantor or
surety.

This Section 18 shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by Lenders or any other Person, all as though such
payment had not been made.

                  18.3.    WAIVER. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Section 18 and any requirement that Collateral
Agent, Agent or Lenders exhaust any right or take any action against Borrowers
or any other Person or any Collateral. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 18 is
knowingly made in contemplation of such benefits. Each Guarantor hereby waives
any right to revoke this Section 18, and acknowledges that this Section 18 is
continuing in nature and applies to all Guaranteed Obligations, whether existing
now or in the future.

                  18.4.    CONTINUING GUARANTY; ASSIGNMENTS. This Section 18 is
a continuing guaranty and shall (a) remain in full force and effect until the
later of the cash payment in full of the Guaranteed Obligations (other than
indemnification obligations as to which no claim has been made) and all other
amounts payable under this Section 18 and the Maturity Date, (b) be binding upon
each Guarantor, their respective successors and assigns and (c) inure to the
benefit of and be enforceable by Agent and Lenders and its successors, pledgees,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), any Lender may pledge, assign or otherwise transfer all or any portion of
its rights and obligations under this Agreement (including, without limitation,
all or any portion of its loans owing to it and any note held by it) to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted such Lender herein or otherwise, in each
case as provided in Section 14.1.

                  18.5.    SUBROGATION. No Guarantor will exercise any rights
that it may now or hereafter acquire against any Borrower or any other insider
guarantor that arise from the existence, payment, performance or enforcement of
such Guarantor's obligations under this Section 18, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of
Lenders

                                     -122-

<PAGE>

against any Borrower or any other insider guarantor or any Collateral, whether
or not such claim, remedy or right arises in equity or under contract, statute
or common law, including, without limitation, the right to take or receive from
any Borrower or any other insider guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security solely
on account of such claim, remedy or right, unless and until all of the
Guaranteed Obligations and all other amounts payable under this Section 18 shall
have been paid in full in cash and this Agreement shall have terminated. If any
amount shall be paid to any Guarantor in violation of the immediately preceding
sentence at any time prior to the later of the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Section 18 and
the termination of this Agreement, such amount shall be held in trust for the
benefit of Lenders and shall forthwith be paid to Agent to be credited and
applied to the Guaranteed Obligations and all other amounts payable under this
Section 18, whether matured or unmatured, in accordance with the terms of this
Agreement, or to be held as collateral for any Guaranteed Obligations or other
amounts payable under this Section 18 thereafter arising. If (i) any Guarantor
shall make payment to Lenders of all or any part of the Guaranteed Obligations,
(ii) all of the Guaranteed Obligations and all other amounts payable under this
Section 18 shall be paid in full in cash and (iii) this Agreement has
terminated, Lenders will, at such Guarantor's request and expense, execute and
deliver to such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
such Guarantor of an interest in the Guaranteed Obligations resulting from such
payment by such Guarantor.

                  18.6.    JOINT AND SEVERAL OBLIGATIONS. All of the Guaranteed
Obligations of the Guarantors hereunder and the other Loan Documents are joint
and several. Lenders may, in their sole and absolute discretion, enforce the
provisions hereof against any of the Guarantors, and shall not be required to
proceed against all Guarantors jointly or seek payment from the Guarantors
ratably.

                  18.7.    JUDGMENT CURRENCY. The specification under this
Agreement of US Dollars and payment in New York City is of the essence. Each
Guarantor's obligations hereunder and under the other Loan Documents to make
payments in US Dollars shall not be discharged or satisfied by any tender or
recovery pursuant to any judgment expressed in or converted into any currency
other than US Dollars, except to the extent that such tender or recovery results
in the effective receipt by Lender Group and Agent of the full amount of US
Dollars expressed to be payable to the Agent and Lender Group under this
Agreement or the other Loan Documents. If, for the purpose of obtaining or
enforcing judgment in any court, it is necessary to convert into or from any
currency other than US Dollars (such other currency being hereinafter referred
to as the "Judgment Currency") an amount due in US Dollars, the rate of exchange
used shall be that at which Lender Group or Agent could, in accordance with
normal banking procedures, purchase US Dollars with the Judgment Currency on the
Business Day preceding that on which final judgment is given. The obligation of
each Guarantor in respect of any such sum due from it to Lender Group or Agent
hereunder shall, notwithstanding any judgment in such Judgment Currency, be
discharged only to the extent that, on the Business Day immediately following
the date on which Lender Group or Agent receives any sum adjudged to be so due
in the Judgment Currency, Lender Group or Agent may, in accordance with normal
banking procedures, purchase US Dollars with the Judgment Currency. If the US
Dollars so purchased are less than the sum originally due to Agent or Lender
Group in US Dollars, each

                                     -123-

<PAGE>

Guarantor agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify Lender Group and the Agent against such loss, and if the
US Dollars so purchased exceed the sum originally due to Lender Group or the
Agents in US Dollars, the applicable Lender and Agent severally agree to remit
to such Guarantor such excess.

                  18.8.    CONFLICTS. Solely with respect to the Canadian
Guarantors, this Section 18 is intended to supplement, but not replace or amend,
the Canadian Guaranty, and in the case of any conflict or inconsistency between
any terms of this Section 18, on the one hand, and the Canadian Guaranty, on the
other hand, then the terms of the Canadian Guaranty shall be controlling.

                           [Signature page to follow.]

                                     -124-

<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.

                           BORROWERS:

                           SOURCE INTERLINK COMPANIES, INC.
                           a Missouri Corporation

                           SOURCE U.S. MARKETING SERVICES, INC.
                           a Delaware corporation

                           BRAND MANUFACTURING CORP.
                           a New York corporation

                           SOURCE - MYCO, INC.
                           a Delaware corporation

                           SOURCE - YEAGER INDUSTRIES, INC.
                           a Delaware corporation

                           SOURCE - HUCK STORE FIXTURE COMPANY
                           a Delaware corporation

                           HUCK STORE FIXTURE COMPANY OF NORTH
                           CAROLINA
                           a North Carolina corporation

                           INTERNATIONAL PERIODICAL DISTRIBUTORS,
                           INC.
                           a Nevada corporation

                           SOURCE INTERLINK INTERNATIONAL INC.
                           a Delaware corporation

                           DAVID E. YOUNG, INC.
                           a New York corporation

                           By: /s/ Marc Fierman
                               -------------------------------
                               Title: Authorized Signatory

<PAGE>

                           GUARANTORS:

                           THE SOURCE-CANADA CORP.
                           an Ontario corporation

                           SOURCE INTERLINK CANADA INC.
                           a British Columbia corporation

                           SOURCE - CHESTNUT DISPLAY SYSTEMS, INC.
                           a Delaware corporation

                           T.C.E. CORPORATION
                           a Delaware corporation

                           VAIL COMPANIES, INC.
                           a Delaware corporation

                           THE INTERLINK COMPANIES, INC.
                           a Delaware corporation

                           UNIVERSAL CIRCULATION SERVICES, INC.
                           a California corporation

                           By: /s/ Marc Fierman
                               ---------------------------------
                               Title: Authorized Signatory

                                      -2-

<PAGE>

                           WELLS FARGO FOOTHILL, INC.,
                           a California corporation, as Agent and as a Lender

                           By: /s/ Phyliss Hasen
                               -------------------------------
                               Name: Phyliss Hasen
                               Title: Vice President

                                      -3-exv10wa

 

Exhibit 10(a)

EXECUTION COPY

AMENDED AND RESTATED PROGRAM AGREEMENT

by and between

SEARS, ROEBUCK AND CO.,

SEARS INTELLECTUAL PROPERTY MANAGEMENT COMPANY

and

CITIBANK (USA) N.A.

Dated as of July 15, 2003,

Amended and Restated as of November 3, 2003

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION
	 	 	 	 
	 	1.1	 	 	Definitions
	 	 	2	 
	 	1.2	 	 	Construction
	 	 	16	 
	 	 	 	 	 	 	ARTICLE II

THE PROGRAM
	 	 	 	 
	 	2.1	 	 	Establishing the Program
	 	 	16	 
	 	2.2	 	 	Financial Products Delayed Closing
	 	 	17	 
	 	2.3	 	 	Exclusivity
	 	 	17	 
	 	2.4	 	 	Transfer of Program Assets
	 	 	18	 
	 	 	 	 	 	 	ARTICLE III

PROGRAM COMMITTEE
	 	 	 	 
	 	3.1	 	 	Program Committee
	 	 	18	 
	 	3.2	 	 	Program Considerations
	 	 	19	 
	 	3.3	 	 	Responsibilities of Program Committee
	 	 	19	 
	 	3.4	 	 	Program Committee Procedures
	 	 	20	 
	 	3.5	 	 	Executive Committee
	 	 	21	 
	 	3.6	 	 	Committee Deadlocks
	 	 	21	 
	 	 	 	 	 	 	ARTICLE IV

MARKETING
	 	 	 	 
	 	4.1	 	 	Business Plan
	 	 	22	 
	 	4.2	 	 	Marketing Plan Development
	 	 	22	 
	 	4.3	 	 	Solicitation Materials
	 	 	23	 
	 	4.4	 	 	Additional Marketing to Cardholders and Financial Products Customers
	 	 	23	 
	 	4.5	 	 	Additional Products and Enhancements
	 	 	25	 
	 	4.6	 	 	Customer Information
	 	 	27	 
	 	4.7	 	 	Joint Marketing
	 	 	29	 
	 	 	 	 	 	 	 	ARTICLE V

ACCOUNT CREATION AND ADMINISTRATION
	 	 	 	 
	 	5.1	 	 	Terms
	 	 	29	 
	 	5.2	 	 	Origination Criteria; Premier Program
	 	 	30	 
	 	5.3	 	 	Program Costs
	 	 	31	 
	 	5.4	 	 	Ownership of Accounts and Financial Products Accounts
	 	 	31	 
	 	5.5	 	 	Documentation
	 	 	31	 

i

 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	 	 	

	 	5.6	 	 	Servicing
	 	 	32	 
	 	5.7	 	 	Service Standards; Service Goals
	 	 	33	 
	 	 	 	 	 	 	ARTICLE VI

INTELLECTUAL PROPERTY
	 	 	 	 
	 	6.1	 	 	Use of Sears Licensed Marks
	 	 	34	 
	 	6.2	 	 	Covenant Not to Sue; License
	 	 	34	 
	 	6.3	 	 	Purchaser License Grant
	 	 	34	 
	 	6.4	 	 	Changes to Trademark Usage
	 	 	35	 
	 	6.5	 	 	Infringement Proceedings
	 	 	35	 
	 	6.6	 	 	Purchaser Ownership Rights
	 	 	35	 
	 	6.7	 	 	Establishment of New Intellectual Property Rights
	 	 	35	 
	 	6.8	 	 	Effect of Termination or Expiration of Agreement
	 	 	36	 
	 	6.9	 	 	Mandatory Usage of Sears Licensed Marks
	 	 	36	 
	 	6.10	 	 	Affinity Patents
	 	 	36	 
	 	 	 	 	 	 	ARTICLE VII

CERTAIN ARRANGEMENTS
	 	 	 	 
	 	7.1	 	 	Sears Fees
	 	 	37	 
	 	7.2	 	 	In-Store Payments Contribution
	 	 	37	 
	 	7.3	 	 	Merchant Discount
	 	 	37	 
	 	7.4	 	 	Over-Limit Fees
	 	 	37	 
	 	7.5	 	 	Special Credit Card Programs
	 	 	37	 
	 	7.6	 	 	Customer Value Propositions
	 	 	38	 
	 	7.7	 	 	Promotional Cards
	 	 	38	 
	 	7.8	 	 	Set Off Right
	 	 	38	 
	 	 	 	 	 	ARTICLE VIII

ADDITIONAL COVENANTS
	 	 	 	 
	 	8.1	 	 	Compliance with Law; Policies
	 	 	39	 
	 	8.2	 	 	Cardholder Surveys
	 	 	39	 
	 	8.3	 	 	Reports; Monitoring Rights
	 	 	39	 
	 	8.4	 	 	Systems Interface; Mail Forwarding
	 	 	40	 
	 	8.5	 	 	Acquiring New Business
	 	 	40	 
	 	8.6	 	 	Disposition of Stores
	 	 	41	 
	 	8.7	 	 	Responsibilities of Sears
	 	 	43	 
	 	8.8	 	 	Reserves
	 	 	43	 
	 	8.9	 	 	Change in Sears’ Condition
	 	 	44	 
	 	 	 	 	 	 	ARTICLE IX

CONFIDENTIALITY
	 	 	 	 
	 	9.1	 	 	Confidential Information
	 	 	45	 
	 	9.2	 	 	Protection of Confidential Information
	 	 	45	 
	 	9.3	 	 	Confidentiality of Cardholder Information
	 	 	46	 

ii

 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	 	 	

	 	9.4	 	 	Permissible Disclosures
	 	 	46	 
	 	9.5	 	 	Perfection
	 	 	47	 
	 	 	 	 	 	 	 	ARTICLE X

REPRESENTATIONS AND WARRANTIES
	 	 	 	 
	 	10.1	 	 	Representations and Warranties of Purchaser
	 	 	47	 
	 	10.2	 	 	Representations and Warranties of Sears
	 	 	48	 
	 	 	 	 	 	 	ARTICLE XI

INDEMNIFICATION
	 	 	 	 
	 	11.1	 	 	By Sears
	 	 	49	 
	 	11.2	 	 	By Purchaser
	 	 	50	 
	 	11.3	 	 	Procedures for Indemnification
	 	 	51	 
	 	 	 	 	 	 	ARTICLE XII

MERCHANT PROCEDURES
	 	 	 	 
	 	12.1	 	 	Extension of Credit; Stores to Honor Sears Proprietary Card
	 	 	53	 
	 	12.2	 	 	Partner Merchants
	 	 	53	 
	 	12.3	 	 	In-Store Payments
	 	 	53	 
	 	 	 	 	 	ARTICLE XIII

TERM AND TERMINATION
	 	 	 	 
	 	13.1	 	 	Initial Term and Renewal; Proration
	 	 	54	 
	 	13.2	 	 	Termination by Sears
	 	 	54	 
	 	13.3	 	 	Termination by Purchaser
	 	 	55	 
	 	13.4	 	 	Effective Termination Date; Effect of Notice of Termination or Non-Renewal
	 	 	56	 
	 	13.5	 	 	Repurchase of Assets Upon Termination or Expiration
	 	 	57	 
	 	13.6	 	 	Treatment of Assets Upon Termination
	 	 	60	 
	 	13.7	 	 	Other Termination Provisions
	 	 	60	 
	 	13.8	 	 	Survival
	 	 	61	 
	 	 	 	 	 	 	ARTICLE XIV

GENERAL
	 	 	 	 
	 	14.1	 	 	Successors and Assigns
	 	 	61	 
	 	14.2	 	 	Entire Agreement
	 	 	61	 
	 	14.3	 	 	Relationship of the Parties
	 	 	61	 
	 	14.4	 	 	Force Majeure
	 	 	61	 
	 	14.5	 	 	Books and Records
	 	 	62	 
	 	14.6	 	 	Public Announcements
	 	 	62	 
	 	14.7	 	 	Audits
	 	 	62	 
	 	14.8	 	 	Assignment; Delegation of Services
	 	 	62	 
	 	14.9	 	 	Change in Law; Severability
	 	 	63	 

iii

 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	 	 	

	 	14.10	 	 	Survival
	 	 	63	 
	 	14.11	 	 	Expenses
	 	 	63	 
	 	14.12	 	 	Amendment and Waiver
	 	 	64	 
	 	14.13	 	 	Remedies; Specific Performance
	 	 	64	 
	 	14.14	 	 	Table of Contents; Headings
	 	 	64	 
	 	14.15	 	 	Limitation on Rights of Others
	 	 	64	 
	 	14.16	 	 	Counterparts; Effectiveness
	 	 	64	 
	 	14.17	 	 	Payment Terms; Initial Periods
	 	 	64	 
	 	14.18	 	 	Drafting
	 	 	65	 
	 	14.19	 	 	Governing Law
	 	 	65	 
	 	14.20	 	 	Waiver of Jury Trial
	 	 	65	 
	 	14.21	 	 	Jurisdiction; Consent to Service of Process
	 	 	65	 
	 	14.22	 	 	Notices
	 	 	66	 
	 	14.23	 	 	Escalation
	 	 	67	 
	 	14.24	 	 	Binding Arbitration
	 	 	67	 
	 	14.25	 	 	Taxes
	 	 	69	 

SCHEDULES

	 	 	 
	Schedule 3.1	 	
Initial Membership of Program Committee
	Schedule 3.5	 	
Initial Membership of Executive Committee
	Schedule 4.1	 	
Form of Business Plan
	Schedule 4.2	 	
Form of Marketing Plan
	Schedule 6.3	 	
Licensed Purchaser Marks
	Schedule 7.1	 	
Certain Purchaser Payments
	Schedule 13.5(c)	 	
Appraisal Assumptions

EXHIBITS

	 	 	 
	Exhibit A	 	
Sears Credit Cards
	Exhibit B	 	
Financial Products
	Exhibit C	 	
Sears Stores
	Exhibit D	 	
Partner Merchants
	Exhibit E	 	
Service Standards
	Exhibit F	 	
Premier Program
	Exhibit G	 	
Customer Value Propositions
	Exhibit H	 	
Special Credit Card Programs and POS Incentives
	Exhibit I	 	
Form of Merchant Agreement
	Exhibit J	 	
Zero Percent Financing
	Exhibit K	 	
Calculation of Payment Amounts
	Exhibit L	 	
Service Goals

iv

 

AMENDED AND RESTATED PROGRAM AGREEMENT

     AMENDED AND RESTATED PROGRAM AGREEMENT, dated as of July 15, 2003 (this
“Agreement”), effective as of the Effective Date, by and among Sears, Roebuck
and Co., a New York corporation (“Sears”), Sears Intellectual Property
Management Company, a Delaware corporation and wholly-owned subsidiary of Sears
(“Sears IP Sub”), and Citibank (USA) N.A., a national banking association
(“Purchaser”).

RECITALS

     WHEREAS, Sears is, among other things, (i) engaged in the business of
selling merchandise and services through retail stores, catalogs and by other
means; and (ii) directly and indirectly through certain of its subsidiaries
engaged in the credit card business;

     WHEREAS, Citicorp, Sears and certain affiliates of Sears have entered into
the Purchase, Sale and Servicing Transfer Agreement, dated as of even date
hereof (the “Purchase Agreement”), pursuant to which Citicorp has agreed to
acquire from Sears and its Subsidiaries, and Sears and its Subsidiaries have
agreed to sell to Citicorp, certain assets and liabilities associated with
Sears’ existing credit card and financial products business, on the terms and
subject to the conditions of the Purchase Agreement;

     WHEREAS, the execution of this Agreement is a condition to the
consummation of the transactions contemplated by the Purchase Agreement;

     WHEREAS, each of Sears and Purchaser desires to enter into a relationship
for, among other things, the issuance of Sears proprietary cards and general
purpose credit cards, the issuance of existing credit and financial and new
credit and financial products to be developed with Purchaser, the processing
and servicing of the related accounts and the conduct of related marketing
activities, and amounts payable hereunder are attributable to such
relationship;

     WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Sears and Purchaser are entering into a merchant agreement, which
contains terms relating to authorizations, settlement procedures, merchandise
returns, chargebacks and other operating procedures with respect to the program
established hereunder, on the terms and subject to the conditions set forth in
such merchant agreement;

     WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Sears, one of its subsidiaries and Purchaser are entering into a
licensing agreement pursuant to which Purchaser will receive a license to use
certain Sears trademarks on credit cards and financial products in connection
with the program established hereunder, on the terms and subject to the
conditions set forth in such licensing agreement; and

     WHEREAS, the parties entered into this Agreement as of July 15, 2003 and
agreed to amend and restate this Agreement in its entirety as of November 3,
2003.

 

 

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

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

     1.1 Definitions.

     “Account” means any account under which a purchase, cash advance,
convenience check or balance transfer transaction may be or has been made by or
to a Person (or any Person authorized by such Person) pursuant to an Account
Agreement established by Purchaser in accordance with this Agreement or any
account that is an Acquired Account, and includes (i) all of the Account
Documentation related to the account; and (ii) any and all other rights,
remedies, benefits, interests and titles, whether legal or equitable, to which
Purchaser may now or at any time hereafter be entitled in respect of the
foregoing.

     “Account Agreement” means an account agreement (including related
disclosures) between the Purchaser (including an assignee of Sears or an
Affiliate of Sears under the Purchase Agreement) and a Cardholder governing the
terms and conditions of an Account, as such agreement may be amended, modified
or otherwise changed from time to time (including pursuant to change of terms
notices).

     “Account Application” means a credit application submitted in order to
establish an Account.

     “Account Documentation” means any and all documentation relating to an
Account, however stored or kept, including Account Applications, Account
Agreements, charge slips, related billing statements, card carriers and
statement envelopes, and any other written or electronic documentation relating
to a specific Account (other than Credit Policy or Financial Services Policy).

     “Accounts Receivable” means all amounts owing on an Account, including
principal balances from outstanding purchases, balance transfers, convenience
checks, cash advances, accrued finance charges (whether billed or unbilled),
late charges and any other charges and fees assessed on the Account, less any
payments and credits received in respect of the Account as of the close of
business on any Business Day.

     “Acquired Account” means a Sears’ Credit Card account in existence as of
the Effective Date and acquired by Purchaser under the Purchase Agreement.

     “Additional Products” has the meaning set forth in Section 4.5.

     “Affiliate” of any Person means any other Person that directly or
indirectly controls, is controlled by or is under common control with, such
Person. The

-2-

 

term “control” (including its correlative meanings “controlled by”
and “under common control with”) means possession, directly or indirectly, of
the power to direct or cause the direction of management or policies (whether
through ownership of securities, partnership or other ownership interests, by
contract or otherwise); provided, that neither Sears Canada nor Sears Mexico
shall be considered an Affiliate of Sears for purposes of this Agreement.

     “Affinity Patents” has the meaning assigned to such term in Section
4.24(d)(1) of the Seller Disclosure Schedule to the Purchase Agreement.

     “Agreement” has the meaning set forth in the preamble hereto.

     “Attributable Assets” has the meaning set forth in Section 8.6(a).

     “Bankruptcy Event” means, with respect to any Person, the occurrence or
existence of any of the following events or conditions: such Person (i)
becomes insolvent or fails, is unable or admits in writing its inability to
generally to pay its debts as they become due; (ii) makes a general assignment,
arrangement or composition with or for the benefit of its creditors; (iii)
institutes or has instituted against it an insolvency or bankruptcy case or
proceeding or any other relief under any bankruptcy or insolvency law or other
similar law affecting creditors’ rights or a petition is presented, filed or
commenced for its winding up or liquidation and any such case, proceeding or
petition instituted or presented against it (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or the making of
an order for its winding up or liquidation or (B) is not dismissed or
discharged in each case within 60 days of the institution or presentation
thereof; (iv) has a resolution passed for its winding-up or liquidation or for
the presentation, filing or commencement of any petition, case or proceeding
described in clauses (i) to (iii) above; (v) seeks or becomes subject to the
appointment of an administrator, receiver, conservator, trustee, custodian or
other similar official for it or for all or substantially all its assets
(regardless of how brief such appointment may be, or whether any obligations
are promptly assumed by another entity or whether any other event described in
this clause (v) has occurred and is continuing); (vi) any event occurs with
respect to it that, under the applicable Law of any jurisdiction, has an
analogous effect to any of the events specified in clauses (i) through (v)
above; or (vii) takes any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts or events specified in
clauses (i) through (vi) above.

     “Business Day” means any day other than a Saturday, Sunday or a day on
which banking institutions in Illinois, New York or South Dakota are authorized
or obligated by law or executive order to be closed.

     “Business Plan” has the meaning set forth in Section 4.1.

     “Card Association” means MasterCard International, Inc. or any successor
thereto as of the date hereof, and, in the case of any Additional Products, any
other applicable card association (e.g., Visa International Inc. or Visa U.S.A.
Inc.).

     “Cardholder” means the authorized holder of a Sears Credit Card.

-3-

 

     “Cardholder Information” means the Cardholder List and all information
with respect to Cardholders and Financial Products Customers processed by, or
maintained on, the information systems operated by or on behalf of Sears,
Purchaser or their respective Affiliates or agents or otherwise in their
possession, including Transaction Data; provided, that nothing herein shall
affect the ownership rights of Sears in connection with Retained Interests
under the Purchase Agreement.

     “Cardholder List” means any list (whether in hard copy, magnetic tape
format or other form) identifying Cardholders and Financial Products Customers,
including any list of the names, addresses, telephone numbers, social security
numbers and other personally-identifiable information of any or all Cardholders
and Financial Products Customers.

     “Chairman” has the meaning set forth in Section 14.24(b).

     “Change in Law” means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any Law that occurs on or
after the Effective Date.

     “Citigroup” means Citigroup Inc. and, unless such Person becomes such
through a Combination, any Successor to Citigroup Inc. that continues to own
all or substantially all of the assets of Citigroup Inc.

     “Claim” has the meaning set forth in Section 11.1(g).

     “Closed Stores” has the meaning set forth in Section 8.6(a)(ii).

     “Closing” has the meaning assigned to such term under the Purchase
Agreement.

     “Clubs and Services” means the products and related services set forth on
Exhibit B and labeled “Clubs and Services, as may be modified from time to time
in accordance with the Program Related Agreements.

     “Co-Branded Account” means an Account originated under this Agreement, or
an Acquired Account, with respect to a Sears Co-Branded Card.

     “Combination” means

     (i)  a transaction or a series of related transactions in which a Person or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange
Act) of (A) 50% or more of either the then outstanding shares of common
stock (the “Outstanding Common Stock”) of the applicable party hereto or the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors (the “Outstanding Voting
Securities”) of the applicable party hereto or (B) more than 50% of the
consolidated assets of the applicable party hereto as of its most recent
available consolidated balance sheet; or

-4-

 

     (ii)  a purchase, sale, reorganization, merger, consolidation or similar
transaction (each a “Business Combination”) involving a party hereto unless,
following such Business Combination, all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Common Stock and Outstanding Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, all of the
Outstanding Common Stock and Outstanding Voting Securities, as the case may be,
of the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
applicable party or all or substantially all of the applicable party’s assets,
either directly or through one or more subsidiaries).

     “Combination Conflicting Agreement” has the meaning set forth in Section
13.2(d).

     “Combination Termination Premium Amount” has the meaning set forth in
Exhibit K.

     “Combining Person” has the meaning set forth in Section 13.2(d).

     “Competing Product” has the meaning set forth in Section 2.3(a).

     “Confidential Information” has the meaning set forth in Section 9.1.

     “Conflicting Agreement” has the meaning set forth in Section 8.5(a).

     “Cost” means Purchaser’s actual direct cost and an allocation of the local
unit, but not corporate, overhead directly relating to the applicable services
being provided.

     “CPI” means the Consumer Price Index for All Urban Consumers (CPI-U) for
the U.S. City Average for All Items, as published by the United States
Department of Labor Bureau of Labor Statistics, or any successor organization.

     “CPR” has the meaning set forth in Section 14.24(a).

     “Credit Card” means a credit card pursuant to which card the holder or
authorized user may purchase goods and services, obtain cash advances or
convenience checks, and transfer balances through open-ended revolving credit,
commonly known as a credit, store or charge card; provided, that the term does
not include (i) any debit card that does not provide the holder with the
ability to obtain credit other than through an overdraft line; (ii) any card
commonly known as a smart card or stored value card that
does not provide the holder with the ability to obtain credit other than
through an overdraft line; (iii) any secured card, including a card that is
secured by a Lien on real property or on improvements or on fixtures on real
property, or by a deposit; (iv) any card issued to the holder of a securities
brokerage account that allows the holder to obtain credit through a margin
account; (v) any gift card; or (vi) any other electronic or digital cash card
or account that does not provide the holder thereof the ability to obtain
credit other than through an overdraft line. No card will be considered a
“Credit Card” solely

-5-

 

because such card allows the holder to access a line of
credit tied to a deposit account for overdraft protection.

     “Credit Policy” means the collective practices, policies and procedures
regarding underwriting and account management, including (i) origination of
Accounts and extension of credit (including underwriting, collections and fraud
criteria), Credit Limit assignments, credit terms, annual percentage rates,
fees, and all other terms of the Account Agreements; and (ii) and portfolio
management terms.

     “Credit Limit” means, at any time, the maximum amount of credit last
disclosed to a Cardholder and that will be extended to such Cardholder under an
Account, as established in accordance with the Credit Policy.

     “Credit Protection Products” means the products set forth on Exhibit B and
labeled “Credit Protection Products,” as may be modified from time to time, in
accordance with the Program Related Agreements.

     “Credit Sales Contraction” has the meaning set forth in Section 8.9.

     “Customer Value Propositions” means the programs for each Sears
Proprietary Card and Sears Co-Branded Card set forth on Exhibit G, as may be
amended in accordance with the Marketing Plan.

     “De Minimis Difference” has the meaning set forth in Section 13.5(c).

     “Decline” has the meaning set forth in Section 4.5(d).

     “Disposed Stores” has the meaning set forth in Section 8.6(a)(i).

     “Dispute” has the meaning set forth in Section 14.24(a).

     “Effective Date” means the Closing Date under the Purchase Agreement.

     “Exchange Act” means Securities Exchange Act of 1934, as amended.

     “Executive Committee” has the meaning set forth in Section 3.5.

     “Financial Products” means the Credit Protection Products, Life and Health
Insurance Products, Property and Casualty Insurance Products, Clubs and
Services and any Additional Product designated as Financial Products pursuant
to Section 4.5(a).

     “Financial Products Agreement” means the contract between a Financial
Products Customer and the Purchaser or any of its Affiliates or third party
providers, as provider of the Financial Products.

     “Financial Products Customer” means a holder of any Financial Product.

     “Financial Products Documentation” means any and all documentation
relating to a Financial Product account, however stored or kept, including the
Financial

-6-

 

Products Agreements and any other written or electronic information
relating to a Financial Product account.

     “Financial Products Policy” means Purchaser’s practices, policies and
procedures regarding the Financial Products, as the case may be.

     “Fixed Charge Ratio” means a numerator of EBITDA (as hereinafter defined)
and a denominator of the Interest for a trailing 12-month period measured
quarterly. As used in this agreement, EBITDA means, for any period for Sears
and its Subsidiaries on a consolidated basis, net income (or net loss) plus, to
the extent the following are included as subtractions from the calculation of
net income (or net loss), the sum of (a) interest expense, (b) income tax
expense, (c) depreciation expense, (d) amortization expense and (e)
extraordinary non-cash losses and any other non-cash charges (other than
reserves in respect of credit card accounts receivable), (f) minority interest
less, to the extent included in the calculation of net income (or net loss),
the sum of (a) any extraordinary, unusual or non-recurring income or gains
(including gains on the sales of assets outside of the ordinary course of
business) and (b) any other non-cash income, in each case determined in
accordance with Generally Accepted Accounting Principles (“GAAP”) for such
period; “Interest” means, for any period, the interest payable on, and
amortization of debt discount in respect of, all debt during such period, as
determined in accordance with GAAP.

     “General Conditions” means adverse developments that do not
disproportionately affect Sears with respect to (i) general economic, business
or environmental conditions; (ii) economic, business or financial conditions
generally affecting the retail industry; or (iii) consumer confidence and
spending.

     “General Financial Services Products” means any financial services or
products (excluding New Payment Cards and Credit Cards), deposit products,
insurance products and services, credit protection products, investment and
securities products, services and membership clubs; for the avoidance of doubt,
ATM machines (and any successor concept) shall not be considered General
Financial Services Products hereunder.

     “General Purpose Credit Cards” means Credit Cards that may be used to
purchase goods and services from providers of goods and services in general (as
distinguished from Credit Cards that may only be used to make purchases from
one Person or category of Persons), and shall expressly exclude proprietary and
other enterprise-specific credit cards (such as the Sears Proprietary Cards).

     “Governmental Authority” means any federal, state or local domestic,
foreign or supranational governmental, regulatory or self-regulatory authority,
agency, court, tribunal, commission or other entity.

     “Hardline Decline Amount” has the meaning set forth in Exhibit K.

-7-

 

     “Home Improvement Account” means the Home Improvement Account offered by
Sears to finance qualified products and services, as further described on
Exhibit B.

     “In-Store Payment” means a payment on or related to an Account made by a
Cardholder (or any Person acting on behalf of such Cardholder) at a Store.

     “Indemnified Party” has the meaning set forth in Section 11.3(a)(i).

     “Indemnifying Party” has the meaning set forth in Section 11.3(a)(i).

     “Independent Appraiser” means a nationally recognized investment banking
firm or firm of independent certified public accountants of recognized standing
that is experienced in the business of appraising Credit Card businesses or
receivables, and that is not an Affiliate of Sears or Purchaser, as applicable,
or either party’s principal auditor.

     “Initial Expiration Date” has the meaning set forth in Section 13.1.

     “Intellectual Property” means all (i) copyrights, whether or not
registered, and registrations and applications for registration thereof; (ii)
Patents; (iii) Marks; (iv) common law and statutory trade secrets, inventions,
whether or not patentable and whether or not reduced to practice; (v) technical
and business information, including know-how, manufacturing and production
processes and techniques, research and development information, technical data,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, whether or
not confidential; (vi) Software; (vii) all licenses (including Software
licenses, other than licenses for standard, readily-available Software
programs) relating to the foregoing; and (viii) all rights to sue or recover
and retain damages and costs and attorneys’ fees for past, present, and future
infringement or breach on any of the foregoing.

     “Interchange Fees” means the interchange fees or interchange reimbursement
fees paid or payable to the Purchaser by the Card Association with respect to
the Accounts, in the Purchaser’s capacity as a Credit Card issuer, and in
connection with Cardholder usage of the Accounts.

     “Jointly Developed Intellectual Property” has the meaning set forth in
Section 6.7(c).

     “Law” means, with respect to any Person, any law (including common law),
ordinance, judgment, order, decree, injunction, permit, stock exchange
regulation,
statute, treaty, rule or regulation, regulatory bulletins or guidance,
regulatory examination, order or recommendation, or determination of (or an
agreement with) an arbitrator, a Governmental Authority or Card Association;
provided, however, that any regulatory recommendation, bulletin or guidance
received by Purchaser shall be considered Law hereunder only if Purchaser
adopts, and certifies to Sears that it has adopted, the same position with
respect to each of its other proprietary card programs and

-8-

 

General Purpose
Credit Card programs that are similarly impacted by such regulatory
recommendation, bulletin or guidance or to which such regulatory
recommendation, bulletin or guidance could similarly be applied.

     “Licensed Purchaser Marks” has the meaning set forth in Section 6.3.

     “Licensed Territory” means the United States of America, including its
territories and protectorates.

     “Licensing Agreement” means the Licensing Agreement by and between Sears,
Sears IP Sub and Purchaser, to be entered into at the Closing.

     “Lien” means, with respect to any property, any lien, security interest,
mortgage, pledge, hypothecation, charge, claim, option, title defect,
restriction or encumbrance relating to that property, of any nature whatsoever,
whether consensual, statutory or otherwise, including the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property.

     “Life and Health Insurance Products” means the products set forth on
Exhibit B and labeled “Life and Health Insurance Products,” as may be modified
from time to time, in accordance with the Program Related Agreements.

     “Losses” means all out-of-pocket costs, damages, judgments, penalties,
fines, losses and expenses, including reasonable attorneys’ fees, disbursements
and court costs; provided, that “Losses” shall not include special, indirect,
punitive or incidental damages or damages for lost profits or any other
consequential damages or damages based on multiples or similar valuation
techniques.

     “Major Service Event” means any Major Service event identified as such in
the Service Goals on Exhibit L.

     “Mark” means any name, brand, mark, common law or other trademark, service
mark, trade dress, trade name, business name, slogan, logo, Internet domain
name, or other indicia of origin, whether or not registered, including all
common law rights, and registrations and applications for registrations
thereof, and all goodwill associated with any of the foregoing.

     “Marketing Budget” has the meaning set forth in Section 4.2(d).

     “Marketing Plan” has the meaning set forth in Section 4.2(a).

     “Merchandise” means (i) those goods, including accessories, delivery
services, protection agreements, gift cards, gift certificates and shipping and
handling, sold or charged from time to time after the Effective Date at retail
by Sears, its Affiliates, Third Party Sears Merchants and Stores; and (ii)
Services.

     “Merchandise Decline Amount” has the meaning set forth in Exhibit K.

-9-

 

     “Merchant Agreement” means the Merchant Agreement, dated as of the
Effective Date, by and between Sears and Purchaser, in the form attached as
Exhibit I.

     “Merchant Discount” means a discount rate generally applied against
settlements due to merchants for transactions with respect to the use of a
Credit Card, which includes the Interchange Fee as well as any other
transaction fees.

     “Metropolitan Statistical Area” means a metropolitan statistical area as
defined by the U.S. Office of Management and Budget and announced in an OMB
Bulletin.

     “Minimum Repurchase Price” means an amount in U.S. dollars equal to the
face value of the Accounts Receivable constituting Sears Repurchase Assets plus
(A) the Combination Termination Premium Amount, in the event Sears terminates
this Agreement pursuant to Section 13.2(d) and exercises the Repurchase Option;
or (B) the Premium Amount, in all cases other than that described in (A).

     “Negotiation Period” has the meaning set forth in Section 8.9.

     “New Business” has the meaning set forth in Section 8.5(a).

     “New Intellectual Property” has the meaning set forth in Section 6.7.

     “New Payment Cards” means any payment card, other than a Credit Card, that
may be used to purchase Merchandise, (e.g., debit cards).

     “New Portfolio” has the meaning set forth in Section 8.5(a).

     “Partner Merchants” means the Third Party Sears Merchants and the Third
Party Non-Sears Merchants.

     “Patents” means patents, patent applications, provisional applications,
including reissues, divisions, continuations, continuations-in-part, extensions
and reexaminations thereof, and all improvements thereto.

     “Person” means any individual, firm, company, corporation, unincorporated
association, partnership, trust or other entity.

     “POS Incentives” means the program described on Exhibit H.

     “Post-Termination Period” has the meaning set forth in Section 13.6(b).

     “Premier Program” means the program described on Exhibit F.

     “Premium Amount” has the meaning set forth in Exhibit K.

     “Product Confirmation Notice” has the meaning set forth in Section 4.5(b).

-10-

 

     “Program” has the meaning set forth in Section 2.1.

     “Program Committee” has the meaning set forth in Section 3.1.

     “Program Period” has the meaning set forth in Section 4.2(a).

     “Program Plans and Policies” means the (i) Marketing Plan; (ii) Credit
Policy; (iii) Servicing Policy; and (iv) Financial Products Policy.

     “Program Products” means, as of any date, the then-existing Sears
Proprietary Cards, Sears Co-Branded Cards, Financial Products and any
Additional Products that have been approved in accordance with this Agreement.

     “Program Related Agreements” means this Agreement, the Licensing Agreement
and the Merchant Agreement.

     “Property and Casualty Insurance Products” means the products set forth on
Exhibit B and labeled “Property and Casualty Products,” as may be modified from
time to time in accordance with the Program Related Agreements.

     “Proprietary Account” means an Account originated under this Agreement, or
an Acquired Account, with respect to a Sears Proprietary Card.

     “Prospect Data” has the meaning set forth in Section 4.6(a).

     “Purchase Agreement” has the meaning set forth in the recitals hereto.

     “Purchaser” has the meaning set forth in the preamble hereto.

     “Purchaser Material Adverse Effect” means any change, event or effect that
is, or would reasonably be expected to be, individually or in the aggregate,
materially adverse to (i) the business, assets, financial condition, or results
of operations of Purchaser (which shall include Citigroup’s failure to maintain
a senior unsecured long-term debt rating of at least BBB+ from Standard &
Poor’s Ratings Services and at least Baa1 from Moody’s Investors Service,
Inc.); or (ii) the ability of Purchaser to consummate the transactions
contemplated by, or to perform its obligations under, the Program Related
Agreements.

     “Purchaser Notices” has the meaning set forth in Section 4.4(a).

     “Purchaser Policy” has the meaning set forth in Section 4.6(b).

     “Renewal Termination Date” has the meaning set forth in Section 13.4(b).

     “Repurchase Agreement” has the meaning set forth in Section 13.5(d).

     “Repurchase Closing Date” has the meaning set forth in Section 13.5(d).

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     “Repurchase Option” means Sears’ option to purchase the Sears Repurchase
Assets, as set forth in Section 13.5(a).

     “Repurchase Price” has the meaning set forth in Section 13.5(c).

     “Rules” has the meaning set forth in Section 14.24(a).

     “Sales Contraction Amount” has the meaning set forth in Exhibit K.

     “Sales Taxes” has the meaning set forth in Section 14.25.

     “Sears” has the meaning set forth in the preamble hereto.

     “Sears ‘868 Patent” means U.S. Patent Application Serial Number
09/713,868, entitled “Methods and Apparatus for Allowing Internet Based
Purchases Based On Temporary Credit Card Number,” and all patents, reissues,
reexaminations, divisions, continuations, continuations-in-part, extensions, or
renewals of the foregoing, as well as patents issuing from later filed
reissues, reexaminations, divisionals, continuations, continuations-in-part,
extensions, or renewals thereof, including all U.S. and non-U.S. counterparts
of the foregoing.

     “Sears Billing Messages” has the meaning set forth in Section 4.4(c).

     “Sears Card” means the Sears Card, also known as the “Sears Blue Card,”
which is the primary proprietary card for purchases of Merchandise issued to
Sears Customers, as further described on Exhibit A.

     “Sears Canada” means Sears Canada, Inc.

     “Sears Card Events” means sales promotion events during which Sears offers
discounts on credit purchases available only to customers with a Sears Credit
Card (e.g., 10% off all purchases using a Sears Credit Card).

     “Sears Charge PLUS” means the Sears Charge PLUS account, which is offered
to qualified customers making high-dollar value purchases of specified
products, as further described on Exhibit A.

     “Sears Co-Branded Card” means the Sears Gold MasterCard, Sears Premier
Gold MasterCard and The Great Indoors MasterCard, in each case issued pursuant
to an Account; provided, that “Sears Co-Branded Card” shall include any
additional credit card that may, from time to time, be an Additional Product
that is
designated by Sears and Purchaser as a “Sears Co-Branded Card” pursuant to
Section 4.5(a).

     “Sears Commercial One Business Account” means the Sears Commercial One
Business Account and similar and related programs offered by Sears, which are
designed for business owners, home builders, contractors and property managers,
as further described on Exhibit A.

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     “Sears Covered Party” means any of (i) Sears, its Subsidiaries, Third
Party Sears Merchants and (ii) those Third Party Non-Sears Merchants that are
such as of the Effective Date.

     “Sears Credit Card” means a Sears Proprietary Card or a Sears Co-Branded
Card.

     “Sears Customers” means customers of Sears, any of its Subsidiaries or
Third Party Sears Merchants.

     “Sears Fees” has the meaning set forth in Section 7.1.

     “Sears Gold MasterCard” means the Sears’ Gold MasterCard, which is the
primary General Purpose Credit Card offered by Sears, as further described on
Exhibit A.

     “Sears IP Sub” has the meaning set forth in the preamble hereto.

     “Sears Licensed Marks” has the meaning set forth in the Licensing
Agreement.

     “Sears Merchandise Sales” has the meaning set forth in Section 8.9.

     “Sears Mexico” means Sears Roebuck de Mexico S.A., de C.V.

     “Sears Premier Card” means Sears’ Premier Card, which is offered to Sears
Customers meeting certain credit and Sears spending-level qualifications, as
further described on Exhibit A.

     “Sears Premier Gold MasterCard” means Sears’ Premier Gold MasterCard,
which is offered to Sears Customers meeting certain credit and Sears
spending-level qualifications, as further described on Exhibit A.

     “Sears Policy” has the meaning set forth in Section 4.6(a).

     “Sears Proprietary Card” means the Sears Card, Sears Premier Card, Sears
Charge PLUS, Home Improvement Account, Sears Commercial One Business Account
and Sears Puerto Rico Card, in each case issued pursuant to an Account;
provided, that “Sears Proprietary Card” shall also include any additional
Credit Card that may, from time to time, be an Additional Product that is
designated by Sears and Purchaser as a “Sears Proprietary Card” pursuant to
Section 4.5(a).

     “Sears Puerto Rico Card” means the proprietary card issued by Sears
Roebuck de Puerto Rico, Inc., as further described on Exhibit A.

     “Sears Repurchase Assets” has the meaning set forth in Section 13.5(a).

     “Sears Solo Mailings” has the meaning set forth in Section 4.4(b).

     “Sears Statement Inserts” has the meaning set forth in Section 4.4(a).

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     “Senior Officers” has the meaning set forth in Section 14.23(a).

     “Service Goals” means the standards and goals applicable to the provision
or performance of the Program that are set forth on Exhibit L.

     “Service Standards” means the quality and service standards, respectively,
applicable to the provision or performance of the Servicing Policy, that are
set forth on Exhibit E.

     “Services” means work or labor to be performed by or on behalf of Sears,
its Affiliates, or Third Party Sears Merchants or other designated agents for
the benefit of a Sears Customer in the ordinary course of business. Such work
or labor may include Merchandise used or to be used in the performance of such
work or labor.

     “Servicing Policy” means the collective practices, policies and procedures
regarding servicing of Accounts (including customer service, billing and other
activities, but excluding the Credit Policy), as the same may from time to time
be in effect.

     “Significant Sales Contraction” has the meaning set forth in Section 8.9.

     “Software” means computer software, including all programs and
applications (whether in object code, source code or other form) and
documentation related thereto.

     “Sold Area Stores” has the meaning set forth in Section 8.6(a).

     “Sold Chain Stores” has the meaning set forth in Section 8.6(a).

     “Solicitation Materials” means the advertisements, brochures,
applications, marketing materials, telemarketing scripts, Internet writings and
other written or recorded materials relating to the Program, including point of
sale displays, television advertisements, radio advertisements, Internet
advertisements and other advertisements for such Program, the Sears Credit
Cards or Financial Products in any media, and any other solicitation materials
sent to Cardholders, Financial Products Customers or other Persons relating to
the Program.

     “Special Credit Card Programs” means (a) the following plans offered by
Sears and its Affiliates on the date hereof: (i) Zero Percent Financing; (ii)
Sears Card
Events; and (iii) POS Incentives; and (b) any other future programs that
are approved in accordance with Section 7.5(d).

     “Stores” means the retail stores included within Sears’ retail and related
Services or corporate segments from time to time, the formats of which as of
the date hereof are set forth on Exhibit C, subject to Section 8.5, including
any additional retail store format or concepts hereafter implemented by Sears.
The term “retail stores” above shall also include any location or operation
that sells Merchandise by mail order or over the telephone or Internet
(including through third party Internet portals to which one or

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more of the
aforementioned Stores operated by Sears are linked), including sears.com and
landsend.com.

     “Subsidiary” of any Person means any other Person (i) more than 50% of
whose outstanding shares or securities (representing the right to vote for the
election of directors or other managing authority) are beneficially owned; or
(ii) that does not have outstanding shares or securities (as may be the case in
a partnership, joint venture or unincorporated association), but more than 50%
of whose ownership interest representing the right to make decisions for such
other Person is now or hereafter beneficially owned, directly or indirectly, by
such Person, but such other Person shall be deemed to be a Subsidiary only so
long as such beneficial ownership or control exists; provided, however, that
(x) neither Sears Canada nor Sears Mexico shall be considered a Subsidiary of
Sears for purposes of this Agreement; and (y) Lands’ End Inc. shall be
considered a Subsidiary of Sears for purposes of this Agreement.

     “Successor” means, with respect to any party, any successor, transferee or
assignee, including any surviving or resulting corporation in a merger or
consolidation or any receiver, debtor in possession, trustee, conservator or
similar Person with respect to such party or such party’s assets.

     “Term” means the initial term and any renewal term, subject to earlier
termination under Section 13.2, 13.3 or 8.9 or extension under Section 13.6.

     “Termination Date” has the meaning set forth in Section 13.4(a).

     “The Great Indoors MasterCard” means Sears’ The Great Indoors MasterCard,
which is issued to customers of The Great Indoors stores, as further described
on Exhibit A.

     “Third Party Non-Sears Merchants” means merchants that accept a Sears
Proprietary Card for purchases of goods and services offered by such merchants
and who are not licensees of the Sears name in connection with the sale of
their goods and services; the list of such Persons as of the date hereof is set
forth on Exhibit D, under the caption “Third Party Non-Sears Merchants.”

     “Third Party Sears Merchants” means dealer stores, franchisees, licensees
and lessees of Sears and other merchants, in each case who accept a Sears
Proprietary Card for purchases of goods and services offered by such Persons
and who are licensees of the Sears name in connection with the sale of their
goods and services; the list of such
Persons as of the date hereof is set forth on Exhibit D, under the caption
“Third Party Sears Merchants.”

     “Transaction Data” means Account or Cardholder identification and
transaction and experience information with regard to each purchase charged by
a Cardholder using his or her Sears Credit Card.

     “Transition Services Agreement” means the Transition Services Agreement by
and between Sears and Purchaser, to be entered into at the Closing.

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     “Transfer” means any transfer, sale, assignment, conveyance, issuance,
license, sublicense or other disposal or delivery, including by merger,
consolidation, dividend or distribution, whether made directly or indirectly,
voluntarily or involuntarily, absolutely or conditionally, or by operation of
law or otherwise.

     “Vendor” has the meaning set forth in Section 14.25.

     “Written Notice” has the meaning set forth in Section 4.5(b).

     “Zero Percent Financing” means the promotional credit offer under which
purchases of Merchandise may be financed at 0% interest, subject to any
applicable terms of the offer, consistent with Sears’ current practices.

     1.2 Construction. References in this Agreement to any gender include
references to all genders, and references in this Agreement to the singular
include references to the plural and vice versa. Unless the context otherwise
requires, the term “party” when used in this Agreement means a party to this
Agreement and references to “a party” or the “other party” shall, when
referring to Sears or Sears IP Sub, be deemed to be references to Sears and
Sears IP Sub collectively. References in this Agreement to a party or other
Person include their respective Successors and assigns. The words “include,”
“includes” and “including” when used in this Agreement shall be deemed to be
followed by the phrase “without limitation.” Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, this Agreement. Unless the context otherwise requires, the
words “hereof,” “hereby” and “herein” and words of similar meaning when used in
this Agreement refer to this Agreement in its entirety and not to any
particular Article, Section or provision of this Agreement.

ARTICLE II

THE PROGRAM

     2.1 Establishing the Program. Sears and Purchaser hereby establish a
program (the “Program”), on the terms and conditions set forth in the Program
Related Agreements, pursuant to which (i)
Purchaser shall offer, issue and service, and Sears shall accept, and
cause its Affiliates and Third Party Sears Merchants, and use its reasonable
best efforts to cause the Third Party Non-Sears Merchants, to accept, as
payment for Merchandise, Sears Credit Cards in compliance with the purchase
authorization and other operating procedures set forth in the Merchant
Agreement; (ii) Purchaser shall offer, provide and service Financial Products;
and (iii) Purchaser shall offer, provide and service any Additional Products,
in each case to Sears Customers, Cardholders and Financial Products Customers.
All Acquired Accounts and Financial Products being provided by Sears as of the
Effective Date are deemed provided under the Program. Purchaser will continue
to provide the Sears Credit Cards and to provide or offer Financial Products on
terms substantially similar to the current terms of such products and programs
(including as modified by the Program Related Agreements), unless and

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until
such terms are modified or superseded in accordance with the Program Related
Agreements.

     2.2 Financial Products Delayed Closing. In the event a Financial Products
Delayed Closing (as defined in the Purchase Agreement) occurs pursuant to the
Purchase Agreement, the Financial Products constituting the FP Delayed Closing
Assets (as defined in the Purchase Agreement) shall be part of the Program as
of the Financial Products Delayed Closing, subject to Section 3.7 of the
Purchase Agreement.

     2.3 Exclusivity. (a) Unless Purchaser agrees otherwise in writing or as
contemplated by Sections 8.5 or 4.5(b), (c) or (d), or Article XIII during the
Term, Sears and its Affiliates shall not by themselves or in conjunction with
others, directly or indirectly (i) offer, issue or market, or enter into
agreements to offer, issue or market, any Credit Card and, subject to Section
4.5(c), any New Payment Cards (together, a “Competing Product”); (ii) license
or use, or allow others to license or use, the Sears Licensed Marks or any
confusingly similar mark, for marketing of any Competing Product; or (iii)
sell, rent or otherwise make available, or allow others to sell, rent or
otherwise make available, any data on Sears Customers or Sears Cardholder
Information for marketing, issuance or offering of any Competing Product;
provided, however, that, nothing herein shall prohibit Sears and its Affiliates
from engaging in any of the following activities: (i) providing credit to
Merchandise vendors; (ii) accepting third party Internet payment services;
(iii) entering into or maintaining agreements for a Sears company purchasing
card (including fleet cards), including pursuant to (A) the Sears corporate
employee purchasing card currently issued by Bank One Corporation and (B) the
fleet card currently issued by the General Electric Corporation; (iv) offering
or accepting the NTB card currently issued by Purchaser; and (v) entering into
agreements to provide payroll and reimbursement cards for Sears employees.
Notwithstanding anything to the contrary contained herein, there shall be no
limit on the ability of Sears or its Affiliates to (A) partner with any Person
with respect to redemption of such Person’s rewards program points for
Merchandise; (B) accept (x) any General Purpose Credit Card, (y) any other
credit card product so long as such other credit product is accepted for
payment by 50 or more unaffiliated Persons or (z) any other payment product
that is not a credit product (e.g., debit card, stored value card), in each
case as a means of payment for Merchandise and in each case to display, in a
manner consistent with industry standard, logos for the foregoing; (C) offer or
accept in any way
any gift card; (D) offer for sale as Merchandise any non-Sears-branded
third-party card or product (e.g., prepaid phone cards) that is generally sold
at retail and that does not have a credit feature; (E) accept in-Store payments
on the Discover card; (F) own shares of Sears Canada, or own shares or other
equity interest in any other Person that offers a Competing Product; provided,
that such shares or other equity interest, taken together, represent less than
25% of the voting power of such Person; provided, further that Sears does not
otherwise control such other Person and that Sears did not make the investment
primarily to circumvent the requirements herein; (G) operate any asset existing
on the Effective Date that is not a Purchased Interest under the Purchase
Agreement; or (H) any marketing in connection with any of the activities
permitted under (A)-(G) above.

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     (b)  Unless Sears agrees otherwise in writing, Purchaser and its Affiliates
shall not, (i) directly or indirectly target Sears Customers or solicit
Cardholders or Financial Products Customers for any product (including any
Credit Cards, General Financial Services Products or retail merchandise and
services not provided by Sears and its Affiliates) that is not a Program
Product; (ii) use any Cardholder Information, or any other information obtained
from Sears or its Affiliates in connection with the Program, for any purpose
other than to carry out its obligations in connection with the Program, or as
otherwise permitted herein, and shall not use such information to engage in any
marketing efforts; provided, however, that nothing in this Agreement shall
prevent Purchaser from generating statistical information that does not
identify individual Cardholders or Financial Products Customers nor is used to
assist a competitor of Sears. Nothing in this Section 2.3(b) shall be deemed
to prohibit or otherwise preclude Purchaser from conducting general
solicitations irrespective of whether such general solicitations may include
Sears Customers, Cardholders or Financial Products Customers; provided, that
the fact that any such included Persons are Sears Customers, Cardholders or
Financial Products Customers shall not be a criteria for inclusion in such
general solicitations.

     2.4 Transfer of Program Assets. Unless Sears agrees otherwise in
writing, Purchaser shall not Transfer or agree to Transfer to any third party
all or any portion of the assets that constitute the Sears Repurchase Assets at
any given time; provided, however, that, nothing contained in this Section 2.4
shall or shall be deemed to preclude Purchaser from (i) transferring any Sears
Repurchase Assets to a wholly-owned Subsidiary of Citigroup; provided, however,
in such case that such Subsidiary is reasonably capable of performing the
obligations of Purchaser hereunder; provided, further, that Purchaser shall
remain obligated and liable to Sears without diminution of such obligation or
liability (or the other party’s rights or benefits) by virtue of such
assignment and references to Purchaser hereunder shall include such assignee or
(ii) transferring any portion of Accounts or Accounts Receivable in connection
with a secured financing transaction contemplated under Section 13.5(e).

ARTICLE III

PROGRAM COMMITTEE

     3.1 Program Committee. The ongoing operations of the Program shall be
reviewed by a Program Committee (the “Program Committee”), whose decisions (on
matters on which the Program Committee has authority to act) shall be binding
on Purchaser and Sears. The Program Committee shall consist of six members,
with three members appointed by each of Sears and Purchaser and reasonably
acceptable to the other. Each party shall have the right to remove or replace
its appointees for any reason at any time, and to fill any vacancy with respect
to any of its appointees. The Program Committee may appoint one or more
subcommittees and special committees to assume specific responsibilities. The
initial membership of the Program Committee is set forth on Schedule 3.1.

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     3.2 Program Considerations. The Program Committee shall, in undertaking
its responsibilities hereunder, consider the following:

     (a)  increasing the overall level of customer satisfaction experienced by
Cardholders;

     (b)  creating a successful, growing proprietary card program and a
successful, growing co-branded card program;

     (c)  increasing Sears Credit Card penetration and credit share among Sears
Customers;

     (d)  providing a high-level brand experience and quality of service for
Cardholders and Sears Customers;

     (e)  supporting Sears’ efforts to increase sales of Merchandise and to
increase the level of credit sales and overall profitability with respect
thereto;

     (f)  providing credit to Sears Customers at approval and authorization
rates and on terms consistent with the Service Goals;

     (g)  expanding credit reach to Sears’ multi-cultural customers; and

     (h)  working together to develop new and enhanced products and programs
that combine the services and capabilities of both Purchaser and Sears so as to
increase profitability for each of the parties.

     3.3 Responsibilities of Program Committee. The Program Committee shall
have primary responsibility for reviewing the ongoing operation of the Program
and for any other item that, pursuant to any express provision of the Program
Related Agreements, requires its action, including:

     (a)  Monthly review of the ongoing operation of the Program, including:

               (i) significant changes to Account Documentation;

               (ii) new Account approval and authorization rates;

               (iii) monitoring actual marketing results as compared to milestones and
expectations;

               (iv) monitoring competitive activities;

               (v) identifying the implications of market trends;

               (vi) sponsoring improvement opportunities;

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               (vii) resolving issues between Sears and Purchaser relating to the
Program;

               (viii) discussing major systems projects, including changes to Sears’
point of sale systems;

               (ix) evaluating results of credit promotions;

               (x) monitoring Purchaser’s performance relative to the Service Standards,
credit sales volume and credit penetration;

               (xi) monitoring to make sure that all electronic interfaces (e.g., web
site design, electronic communication) with Cardholders and Financial Products
Customers are consistent with the principles of the Program Related Agreements;
and

               (xii) monitoring Purchaser’s systems reliability;

     (b)  Establishment by November 1 of each year, of the next calendar year’s
schedule of monthly meetings;

     (c)  Adoption of the Marketing Plan in accordance with Section 4.2 and
reviewing and approving changes thereto;

     (d)  Adoption of the Business Plan in accordance with Section 4.1 and
approving changes thereto;

     (e)  Approving Additional Products or enhancements to Program Products
proposed to be offered in accordance with Section 4.5, and setting any special
rules for the inclusion of such products in the Sears Repurchase Assets or any
other terms of such products (including purchase rights under Section 8.6 and
13.5);

     (f)  Resolving any dispute between the parties as to what constitutes a
successor Financial Product for purposes of Section 4.5(b);

     (g)  Evaluating product development; and

     (h)  Reviewing and monitoring Sears’ and Purchaser’s activities in support
of the Program.

     3.4 Program Committee Procedures. The Program Committee shall hold
regular monthly meetings. Special meetings may be held when scheduled by a
prior act of the Program Committee or when called by delivery of at least five
Business Days’ prior written notice by either party (which written notice may
be waived by written notice of all members of the Program Committee). Any such
notice must specify the purpose, time and place of the special meeting.
Meetings shall preferably be held in person or but may also be held by
telephone or video conference call. Meetings in person shall alternate between
locations in the cities where Sears’ and Purchaser’s headquarters are located,
or at another location agreed to by Sears and Purchaser. The members of the

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Program Committee shall appoint an acting chairman and adopt such other rules
for the conduct of meetings as are agreed upon from time to time. The
representatives of each of Sears and Purchaser shall be entitled, collectively,
to one vote with respect to all matters to be voted upon by such committee.
Any one of the representatives of Sears and of Purchaser may cast the vote
allocated to the entity or entities represented by them, in the manner
determined by such representatives. The presence of one representative of each
party shall constitute a quorum for meetings of the Program Committee. Any
matter requiring approval of the Program Committee shall require the
affirmative vote of the authorized representatives of each of the parties
represented on the Program Committee. The Program Committee shall keep written
records of all matters discussed and approved by it, which shall be reviewed
and approved by a designated representative of each of the parties.
Notwithstanding anything to the contrary contained herein, Purchaser and Sears
shall cause their appointed members to vote in accordance with such party’s
obligations under the Program Related Agreements.

     3.5 Executive Committee. The strategic direction of the Program shall be
subject to the review of an executive committee (the “Executive Committee”).
The Executive Committee shall be responsible for (i) periodically reviewing the
Program; (ii) setting and reviewing strategy for the Program; (iii) overseeing
competitive positioning of Program information systems support and strategy;
(iv) reviewing fundamental changes in the operation of the Program; and (v) all
other matters that the parties agree should be reviewed by the Executive
Committee. The Executive Committee shall consist of six members, with three
members appointed by each of Sears and Purchaser and reasonably acceptable to
each other. Each party shall have the right to remove or replace its
appointees for any reason and at any time, and to fill any vacancy with respect
to its appointees. The initial Executive Committee for the Program is set
forth on Schedule 3.5. The Executive Committee shall meet (in person or by
telephone or video conference) quarterly or at such other intervals and at
places as may be decided by the members of the Executive Committee; provided,
that either Sears or Purchaser may call a meeting of the Executive Committee by
delivery of at least 30 Business Days’ prior written notice to the other party
(which written notice may be waived by written agreement of all members of the
Executive Committee) containing the purpose, time and place of the
meeting. The members of the Executive Committee shall appoint an acting
chairman and adopt such other rules for the conduct of meetings as are agreed
upon from time to time. The Executive Committee shall be subject, mutatis
mutandis, to the same voting and records provisions of the Program Committee
set forth in Section 3.4 above.

     3.6 Committee Deadlocks. If the Program Committee is unable to reach
agreement on any matter that requires its approval, either Purchaser or Sears
may refer the matter to the Executive Committee for further consideration. If
the Executive Committee cannot resolve a matter (whether referred to it by the
Program Committee under this Section 3.6 or subject to its authority under
Section 3.5), either Purchaser or Sears may refer the matter for further
consideration in accordance with Section 14.23. Until any such disagreement
with respect to the Program Plans and Policies or the Business Plan is
resolved, Sears and Purchaser shall continue to conduct their activities in
conformity with the then-existing Program Plans and Policies or Business Plan,
as applicable.

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ARTICLE IV

MARKETING

     4.1 Business Plan. No later than September 30 of each year, Sears and
Purchaser shall jointly develop an eighteen-month marketing plan (the “Business
Plan”) for the Program, in substantially the form set forth on Schedule 4.1 or
such other form as may be approved by the Program Committee, which shall in
each case describe strategies for growth of the Program and include detailed
projected financial statements, capital expenditures and systems improvement
plans and the historical and projected funding needs for the Program (including
the Marketing Budget), and shall include any potential impact on Sears’ point
of sale systems.

     4.2 Marketing Plan Development. (a) For each six-month period
commencing on January 1 and July 1 during the Term (each, a “Program Period”),
Purchaser and Sears shall jointly develop a marketing plan (addressing the
subject matter set forth on, and in substantially the form of, Schedule 4.2)
containing their agreements relating to the marketing of the Program in that
Program Period (a “Marketing Plan”). The Marketing Plan for each six-month
period shall be approved by the Program Committee no later than three months
prior to the start of such Program Period. The Marketing Plan shall be
consistent with the Premier Program marketing principles in accordance with
Section 5.2. The Marketing Plan shall be the responsibility of the Program
Committee, which shall assess the success of the Marketing Plan at its monthly
meetings and shall agree to such changes to the Marketing Plan throughout the
remainder of the Program Period that the Program Committee agrees may be
necessary or desirable.

     (b)  Subject to Section 4.4 hereof, Sears and Purchaser shall conduct their
marketing activities in conformity with Sears’ existing marketing practices
until a Marketing Plan is adopted and such existing Sears marketing practices,
as adjusted pursuant to the Program Related Agreements, are superseded.

     (c)  The Marketing Plan shall contain the details of the Program marketing
to be conducted during the relevant Program Period, including the parties’
respective plans regarding the contemplated frequency, timing, size and methods
of marketing to be conducted and their respective objectives and commitments
with respect to generating new Accounts and Financial Product sales through the
various distribution channels envisioned by the Marketing Plan. Sears and
Purchaser shall conduct marketing to generate Accounts and Financial Products
sales in accordance with the Marketing Plan, to promote usage of the Accounts
and generate Program credit sales, and to drive increased sales of Merchandise
and credit share. Each Marketing Plan shall also, among other things, contain
details relating to (i) the desired distribution of Accounts between
Proprietary Accounts and Co-Branded Accounts, including any decision to market
the Sears Proprietary Card to holders of the Sears Co-Branded Card or
vice-versa, including through substitution campaigns and “companion cards”
campaigns (each of which shall not be undertaken unless approved by the Program
Committee) and all marketing efforts in furtherance thereof; (ii) the marketing
of Financial Products; and (iii) any proposed enhancements or other changes to
the Customer Value Propositions.

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     (d)  Each Marketing Plan shall also contain Purchaser’s marketing budget
for such Program Period (the “Marketing Budget”), including for the items
described in Section 4.5(a). Purchaser’s minimum commitment for each Program
Period to promote and market the Program (which shall not include the financial
obligations of Purchaser that are separately identified in this Agreement,
e.g., the Customer Value Propositions or Sears Fees), along with Purchaser’s
minimum commitment to fund the purchase of Merchandise in connection with the
Customer Value Propositions, shall be set forth in the applicable Marketing
Budget, and shall generally be consistent with Sears’ current levels as set
forth on Schedule 4.2. Purchaser and Sears shall mutually agree upon a
schedule for replacing card plastics with respect to all Sears Credit Cards as
part of the Marketing Budget. The Marketing Budget shall be used solely in
connection with the Program and Sears retail and related promotions. All
communications with Sears Customers will be coordinated with Sears in the
context of Sears marketing communication plans with respect to such customers.

     4.3 Solicitation Materials. All Solicitation Materials shall prominently
display Sears Licensed Marks (or, in the case of non-written Solicitation
Materials, shall identify Sears) in the manner provided in the then-current
Marketing Plan, and may include such endorsements by Sears as Sears shall
approve. However, no Solicitation Materials will indicate or imply that
Purchaser is not the sole owner of the Accounts Receivables generated through
the use of Accounts, or that the parties to the Cardholder Agreement are other
than the Cardholder and Purchaser. All Solicitation Materials shall be jointly
reviewed and approved in writing by the parties, except that Purchaser shall
have the right, at its sole discretion, to determine matters relating to
compliance with applicable Law.

     4.4 Additional Marketing to Cardholders and Financial Products Customers.
(a) Sears may advertise and promote Sears and Merchandise by including
promotional materials regarding Sears or such Merchandise in the Account and
Financial Product billing statements (the “Sears Statement Inserts”), and shall
pay Purchaser’s Cost to produce such Sears Statement Inserts. Purchaser shall
make available to Sears for such solicitation purposes 83% (rounded to the
nearest whole insert) of the space available for Statement Inserts in each
billing statement, with the remaining space being available for Purchaser’s
promotion of the Program, which materials shall be subject to the approval of
Sears (such approval not to be unreasonably withheld), unless Sears and
Purchaser agree otherwise; provided, however, that any Credit Card disclosures,
notices, and other information required by Law (as reasonably determined by
Purchaser) or Purchaser Policy (collectively, the “Purchaser Notices”) shall
have first priority, and the Sears Statement Inserts permitted pursuant to this
Section 4.4(a) shall be assigned priority second to such Purchaser Notices.
Sears shall conform to all customary standards and requirements of Purchaser in
connection with the size and weight requirements for Sears Statement Inserts.
Sears shall retain all revenue it receives from the Sears Statement Inserts.
Notwithstanding the foregoing, Purchaser shall not be required to add
additional Sears Statement Inserts that would require additional mail postage,
unless Sears agrees to assume the costs related to such additional postage.

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     (b)  Sears may, at its own expense, send individual pieces of direct mail
(“Sears Solo Mailings”) to Cardholders or Financial Products Customers to
promote Merchandise. Subject to applicable Law and Purchaser Policy, Purchaser
shall, for the purpose of conducting a Sears Solo Mailing, provide a current
list of Cardholders or Financial Products Customers to Sears, or to a mail
house or agent designated by Sears, in electronic form or such other standard
format as Sears may reasonably request.

     (c)  For all Accounts and Financial Products, Sears shall have access to,
and may use 93% of the space that is reasonably available on the billing
statements and billing envelopes, including the space on the billing envelope
that is commonly referred to as the “bangtail” (which Purchaser shall include
on all billing envelopes) to advertise and promote Merchandise (“Sears Billing
Messages”), and shall pay Purchaser’s actual direct cost (without any
allocation of overhead) to produce the “bangtail;” provided, however, that
Purchaser Notices (and, with respect to billing statements, Purchaser Notices
and Purchaser’s collection notices) shall have first priority, and the Sears
Billing Messages permitted pursuant to this Section 4.4(c) shall be assigned
priority second to such Purchaser Notices. In the event Purchaser issues any
electronic billing statements for Sears Credit Cards, the parties agree that
Sears shall have relative access (as among Sears, Purchaser and other parties),
if any, comparable to that set forth in Sections 4.4(a) and (c) above.

     (d)  Purchaser shall cooperate with Sears to make available to Sears,
consistent with Sears’ current practices, taped, live and VRU interface
promotional messages regarding Sears Merchandise in call center communications
with Cardholders and Financial Products Customers to promote in-Store special
sales and marketing
events, and Sears and Purchaser shall cooperate to train Purchaser’s
personnel in connection therewith.

     (e)  In the event that Sears is not permitted, under applicable Law or
Purchaser Policy, to receive information with respect to Cardholders or
Financial Products Customers as contemplated hereunder for any marketing
purposes, Purchaser shall, subject to applicable Law and Purchaser Policy,
either provide such information to a mail house or agent designated by Sears,
in electronic form or such other standard format as Sears may reasonably
request or conduct such mailing as directed by Sears on Sears’ behalf, and
Sears shall reimburse Purchaser for its Costs associated with such mailings.
With respect to any information under this Agreement that is licensed or
otherwise provided by Purchaser to Sears, Purchaser will, at Sears’ request,
feed such data directly into Sears’ Leveraging Customer Information database
(or a successor system designated by Sears), or provide such data in another
standard format reasonably acceptable to both parties.

     (f)  Notwithstanding anything to the contrary contained herein, Purchaser
may provide Sears with proposals for alternative Sears Statement Inserts and
Sears Billing Messages, and Sears shall reasonably consider such proposals in
light of the relative costs and benefits to Purchaser and Sears of existing
inserts and messages, as compared to such alternative inserts and messages.

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     4.5 Additional Products and Enhancements. (a) At the request of
Purchaser or Sears, the parties shall cooperate in good faith, through the
Program Committee, to research, evaluate and design (i) new (i.e., other than
existing Program Products) Credit Cards, General Financial Services Products or
New Payment Cards to be offered to Cardholders or other Sears Customers by or
through Purchaser (“Additional Products”) including the following possible
products: (A) home equity products; (B) credit products using Sears’ brands
other than the Sears Licensed Marks; (C) installment loans; (D) prepaid and
secured cards; (E) wealth accumulation products; (F) savings and deposit
products; (G) debt suspension products; and (H) debit products; and (ii)
enhancements to the Program Products. Each Marketing Budget shall include the
amount to be spent to research and evaluate possible Additional Products and
enhancements to the Program Products during the Program Period with which such
Marketing Budget is associated. All such proposals for Additional Products and
enhancements, and related research, studies, reports and surveys, shall be
evaluated by the Program Committee in order to identify a reasonable allocation
of the risks, costs and benefits of the Additional Products and enhancements to
the Program Products between Sears and Purchaser. In the event an Additional
Product is approved in accordance with Section 3.3, Sears and Purchaser shall
designate whether such Additional Product is a “Sears Proprietary Card,” a
“Sears Co-Branded Card” or a “Financial Product,” if applicable, and shall
amend the Program Related Agreements (including any Exhibits or Schedules
thereto) and the Licensing Agreement, if necessary, to provide for such
Additional Product, including with respect to additional payments to be made to
Sears under Article VII. Sears shall cooperate with Purchaser to maximize
marketing opportunities for Additional Products using the resources of its
Stores and personnel.

     (b)  In the event that Sears proposes an Additional Product that is not
covered by the exceptions to the exclusivity provisions of Section 2.3(a) (such
proposal to be made in writing to the Program Committee) and is not an
unsecured revolving Credit Card or a successor Financial Product (any dispute
over whether a product is a successor product shall be resolved by the Program
Committee) and subject to Section 4.5(c) below, and Purchaser (including
through its representatives on the Program Committee or Executive Committee)
declines to provide such proposed Additional Product within 45 days of such
proposal, Sears shall have the right to provide such proposed Additional
Product to Sears Customers, Cardholders and Financial Products Customers by
itself or through third parties outside the Program (which, for the avoidance
of doubt, shall not be deemed to violate any provision of the Program Related
Agreements); provided, however, that if Sears proposes to provide such
Additional Products through a third party, Sears shall request a written offer
describing in reasonable detail the terms upon which such third party would
provide such proposed Additional Product. Sears shall promptly deliver such
written terms to Purchaser (“Written Notice”). Purchaser may, within 45 days
of receipt of such Written Notice, elect to be the exclusive provider of the
proposed Additional Products on terms no less favorable in the aggregate than
those set forth in the written offer of such third party. Upon delivery by
Purchaser of a written notice to Sears that Purchaser will provide the
Additional Products on terms that, in the reasonable judgment of Sears, are no
less favorable in the aggregate than those contained in the Written Notice (a
“Product Confirmation Notice”), Purchaser shall be the exclusive provider of
the proposed Additional Products on terms are set forth in

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the Product Confirmation Notice. If Purchaser does not deliver a Product Confirmation
Notice within such 45-day period, Sears may engage the third party to provide
the proposed Additional Products on terms no less favorable than those set
forth in the Written Notice. Any change in the material terms set forth in any
Written Notice that is unfavorable to Sears shall be deemed a new offer subject
to acceptance by Purchaser in accordance with this Section 4.5(b).
Notwithstanding anything to the contrary contained herein, upon Sears’ written
request, Purchaser will, subject to the terms hereof, consent to use Sears Life
Insurance Company to underwrite and issue any proposed Additional Products that
are insurance products and that Sears Life Insurance Company is authorized by
applicable Law to underwrite and issue, that were declined by Purchaser in
accordance with this Section 4.5(b). Purchaser’s consent will not be
unreasonably withheld, but will be subject to the following conditions: (i)
Sears will be responsible for the selection of the company which will reinsure
the risks and administer such Additional Products, subject to Purchaser’s
consent, which shall not be unreasonably withheld or delayed; (ii) The
reinsuring and administering company must be rated A- or above by A.M. Best
Company; (iii) The administration and reinsurance in connection with such
Additional Products will be under terms and conditions reasonably satisfactory
to Purchaser and documented in agreements reasonably satisfactory to Purchaser
(taking into account industry standards) and (iv) for the avoidance of doubt,
Purchaser may withhold its consent if Purchaser reasonably determines that the
issuance of any Additional Product would likely result in undue regulatory or
reputational risk to Purchaser or its Affiliates.

     (c)  In the event that Sears, during the first five years after the
Effective Date, seeks to introduce a New Payment Card, Purchaser shall provide
such New Payment Card on terms to be negotiated between the parties. Sears
acknowledges that such terms shall take into account the impact of such New
Payment Card on Purchaser’s earnings from existing Sears Credit Cards, and
shall be set at a rate such that Purchaser’s earnings are not adversely
impacted in material respects by the introduction of the New Payment Card. In
the event that Sears seeks to introduce a New Payment Card after the first five
years after the Effective Date, then such New Payment Card shall be treated as
an Additional Product in accordance with Section 4.5(b) above.

     (d)  Sears may, by itself or through a third party, offer a source of
credit, including through the issuance of Credit Cards, to those Sears
Customers whose application for credit have been declined by Purchaser or who
are otherwise not eligible for credit under the Credit Policy (each, a
“Decline”); provided, however, that any such offer may only be made to a Person
after such Person has become a Decline. Sears shall (i) only use the Sears
brand in connection with such source of credit in a manner that would not be
reasonably expected to create consumer confusion between such product and Sears
Credit Cards; and (ii) shall not promote such products in the Stores. Sears
agrees that applications for such alternative credit product shall be separate
from the applications for Sears Credit Cards, and shall only be accessible or
distributed to Declines. In the event Sears elects to offer such source of
credit, Sears and Purchaser shall cooperate to establish a mechanism,
consistent with Law, for Purchaser to promptly provide to Sears or a designated
third party all information necessary to provide such source of credit.

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     4.6 Customer Information. (a) Subject to applicable Law and to Sears’
or Lands’ End Inc.’s then-current policies regarding protection and use of
customer information (the “Sears Policy”), Sears shall make available, on a
monthly basis, at Purchaser’s request and reimbursement of Sears’ reasonable
data processing expense, information, including the names and addresses,
telephone numbers and, as available, other information, (including e-mail
addresses), of Sears Customers who are not Cardholders or Financial Products
Customers, in electronic or another standard format and, subject to such
criteria as may be mutually agreed upon, for purposes of soliciting such Sears
Customers for Sears Credit Cards and Financial Products (“Prospect Data”).
Notwithstanding any other provisions hereof, under no circumstances shall Sears
be obligated to take any action, including providing any information, if such
action would be contrary to applicable Law or to Sears Policy. Purchaser
agrees that any solicitations conducted using Prospect Data shall be performed
in all respects in accordance with Law, the Sears Policy and the Licensing
Agreement. The Prospect Data made available to Purchaser under this Section
4.6(a) shall remain the property of Sears, and Purchaser shall have no right to
use such information, except as expressly set forth in this Agreement.

     (b)  Consistent with applicable Law, Purchaser’s then-current policies and
procedures, including Purchaser’s policies regarding the protection and use of
customer information (“Purchaser Policy”) and third party contract
restrictions, Purchaser shall conduct for Sears in each calendar year three
Merchandise marketing programs using Purchaser’s customer database and Sears
shall pay Purchaser’s Cost; provided, that Sears may request a reasonable
number of test marketing efforts in connection therewith. Subject to Section 4.6(d) and (e), any data made available by Purchaser
under this Section 4.6(b) shall remain the property of Purchaser, and Sears
shall have no right to use such information, except as expressly set forth in
this Agreement.

     (c)  Purchaser shall be the sole and exclusive owner of:

          (i) any credit bureau report obtained by or on behalf of Purchaser
pertaining to a Cardholder, any credit scoring and decision information, any
analyses of credit quality and credit risk, analyses prepared for the purpose
of fraud or suspicious activity monitoring or any other similar analyses
prepared by or on behalf of Purchaser and maintained in Purchaser’s credit file
pertaining to a Cardholder;

          (ii) (A) all Transaction Data (other than Transaction Data arising out of
Merchandise transactions, which shall be subject to Section 4.6(d)) and all
other information (other than Cardholder names, addresses and telephone
numbers, which shall be subject to Section 4.6(e)) included within Cardholder
Information (other than Retained Interests under the Purchase Agreement) and
(B) all information collected by or on behalf of Purchaser in connection with
Account Applications or applications for Financial Products; provided, that in
no event shall Purchaser utilize such information for a purpose that would
reasonably be expected to have a material adverse effect on the

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Program, in connection with any activity inconsistent with Section 2.3(b) hereof, or in any
manner that competes directly with the marketing or sale of Merchandise.
Purchaser hereby grants a non-exclusive, non-transferable, non-sublicensable
right and license to Sears and its Subsidiaries to use the information
described in this Section 4.6(c)(ii) in compliance with applicable Law and
Purchaser Policy; provided, further, that in no event shall Sears or its
Subsidiaries utilize such information for a purpose that would reasonably be
expected to have a material adverse effect on the Program, in connection with
any activity inconsistent with Section 2.3 hereof or in any manner that
competes directly with Purchaser’s or its Subsidiaries’ General Financial
Services Products or Credit Card products; provided, that Sears may share the
information described in this Section 4.6(c)(ii) with Partner Merchants if and
only to the extent permitted by Law; and

          (iii) any other information collected by or on behalf of Purchaser,
whether from a Cardholder or Financial Products Customer or from any other
Person unless Purchaser and Sears agree in good faith that the collection, use
and distribution of such information by Sears and its Affiliates would be
inconsistent with the parties’ intent that neither Purchaser nor Sears be
deemed to be a “consumer reporting agency” within the meaning of Section 603 of
the Fair Credit Reporting Act (15 U.S.C. § 1681a(d)).

Purchaser shall use the information described in this Section 4.6(c) only in
accordance with the terms and conditions of this Agreement consistent with Law
and Sears Policy.

     (d)  Sears and Purchaser shall jointly own all Transaction Data arising out
of Merchandise transactions; provided, that in no event shall either party
utilize such information for a purpose that would reasonably be expected to
have a material adverse effect on the Program, in connection with any activity
inconsistent with Section 2.3 hereof or in any manner that, with respect to use
by Sears, competes directly with Purchaser’s or its Affiliates’ General
Financial Services Products or Credit Card products and, with respect to use by
Purchaser, the sale of Merchandise.

     (e)  Subject to applicable Law, Cardholder names, addresses and telephone
numbers shall be owned jointly and equally by Purchaser and Sears; provided,
that in no event shall either party utilize such information for a purpose that
would reasonably be expected to have a material adverse effect on the Program,
in connection with any activity inconsistent with Section 2.3 hereof or in any
manner that, with respect to use by Purchaser, competes directly with Sears’
marketing and sale of Merchandise and, with respect to use by Sears, competes
directly with Purchaser’s and its Subsidiaries’ and Affiliates’ products and
services.

     (f)  The parties agree that, consistent with applicable Law, Purchaser
shall, from time to time, provide such notices to Cardholders and Financial
Products Customers as shall be necessary so that Cardholder Information may be
shared between and among Sears and its Affiliates and Purchaser and its
Affiliates, as set forth in this Agreement and Purchaser Policy. Neither Sears
nor Purchaser shall make or permit any unauthorized disclosure or use of any
personal information of individual Cardholders or Financial Products Customers,
other than as contemplated by this Agreement and in

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compliance with applicable
Law. Each of Sears and Purchaser shall be responsible for complying with all
financial privacy Laws applicable to its activities in relation to the conduct
of the Program, and each party shall bear its own costs of such compliance.

     (g)  Sears shall, in compliance with applicable Law, promptly provide to
Purchaser a complete list of any Persons who have requested to be on Sears’ “do
not call” and/or “do not mail” lists (or other similar lists), and Purchaser
shall promptly comply with such requests with respect to its solicitation of
Sears Credit Cards and Financial Products. Purchaser shall provide to Sears a
complete list of any Cardholders or Financial Products Customers who have
requested to be on Purchaser’s “do not call” or “do not mail” lists (or other
similar lists) in connection with their Cardholder relationship with Purchaser
and Sears shall promptly comply with such requests with respect to its
telemarketing and other solicitations.

     (h)  [reserved]

     (i)  Sears and Purchaser may request the other to forward any information
to which it is entitled hereunder to a third party processor that is bound by
confidentiality and information privacy agreements no less stringent than those
set forth among the parties and that acts under a written agreement to
distribute such information at the request of Sears or Purchaser, as the case
may be.

     (j)  Nothing in this Agreement shall prohibit Purchaser or its Affiliates
from using Cardholder Information in connection with the marketing, pricing or
placement of any secured financing transaction contemplated under Section
13.5(e), including in any offering document relating thereto, any exhibits,
amendments, attachments or supplements thereto, and other materials to be
delivered to prospective investors or creditors in such financing transactions.

     4.7 Joint Marketing. Purchaser shall cooperate in good faith with Sears
to develop joint marketing opportunities to market Merchandise to customers of
Purchaser and its Affiliates.

ARTICLE V

ACCOUNT CREATION AND ADMINISTRATION

     5.1 Terms. (a) Each of Sears and Purchaser may propose amendments to,
or modifications of, any provision of the Servicing Policy and Service
Standards but neither party shall be required to agree to such amendments
(except to the extent otherwise required by the Program Related Agreements).
At its monthly meetings, the Program Committee shall review all amendments or
modifications of the Servicing Policy and Service Standards proposed during the
preceding month and shall direct that the relevant policy and standards be
updated to reflect any such changes that are approved in accordance with
Section 3.3.

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     (b)  Purchaser shall have the sole and exclusive right to set, maintain,
and modify the terms of the Credit Policy and the Financial Products Policy;
provided, that Purchaser shall take into consideration Section 3.2 in
establishing or changing any such Credit Policy or Financial Products Policy.
Prior to making such amendments or modifications, Purchaser shall notify Sears
and, upon Sears’ request, review with the Program Committee any proposed
amendments to, or modifications of, any material terms of the Credit Policy or
Financial Product Policy; provided, that Purchaser shall retain ultimate
control over the Credit Policy and Financial Products Policy. Notwithstanding
the foregoing, purchase transactions shall not be declined solely because the
purchase of protection agreements, extended warranty protection, maintenance
agreements, or similar products would cause an over-limit condition on an
Account,

     (c)  Purchaser shall make available to Sears current copies of the Credit
Policy, Financial Products Policy or Servicing Policy upon Sears’ request, and
shall cooperate in good faith with Sears to address any concerns Sears may have
with respect to the Financial Products Policy or Servicing Policy, taking into
account all relevant aspects of the Program, including customer satisfaction
results.

     5.2 Origination Criteria; Premier Program. (a) Purchaser shall accept
or reject any application for an Account based solely upon application of the
then-current Credit Policy. Upon satisfaction by an applicant of the
applicable credit criteria set forth in the Credit Policy, Purchaser shall promptly establish a Co-Branded Account or
a Proprietary Account, as applicable, for such applicant and issue a Sears
Proprietary Card or Sears Co-Branded Card, as applicable, to such applicant.
Purchaser also shall issue a renewal Sears Credit Card to each Cardholder at
each scheduled Sears Credit Card renewal date (or earlier, at the direction of
Sears, if the Cardholder qualifies for an upgrade to the Premier Program), in
accordance with the then-current Credit Policy.

     (b)  Purchaser shall accept or reject any application for a Financial
Product based solely upon application of the then-current Financial Products
Policy. Upon satisfaction by an applicant of the applicable criteria set forth
in the Financial Products Policy, Purchaser shall issue the applicable
Financial Product to such qualifying applicant. Purchaser also shall issue a
renewal Financial Product at each scheduled Financial Product renewal date, in
accordance with the then-current Financial Products Policy.

     (c) Subject to Section 5.2(d), Sears shall determine the Sears
spending-level and other qualifications that a Cardholder must achieve and
maintain for membership in the Premier Program. Notwithstanding anything to
the contrary contained herein, but subject to Section 5.2(d), Sears shall
retain control over the marketing policies (including the promotional calendar)
relating to the Premier Program. Notwithstanding anything to the contrary
contained in Section 4.6, Sears shall provide criteria to Purchaser, and
request that Purchaser use such criteria to identify those Cardholders who are
eligible for the Premier Program (or a replacement program); provided, that the
criteria provided by Sears shall be selected so as to prevent Purchaser from
being deemed a “consumer reporting agency” within the meaning of Section 603 of
the Fair Credit Reporting Act (15 U.S.C. § 1681a(d)).

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     (d)  Notwithstanding anything to the contrary contained herein, Sears shall
(i) continue to provide the Premier Program or another comparable preferred
customer program; (ii) not materially reduce the value of the Premier Program
or such other program to Sears Cardholders compared to such value as of the
date hereof; and (iii) maintain responsibility for administrative and retail
costs (e.g., the cost of any promotions mailed to Premier Program members)
incurred in connection with the Premier Program, except as is Purchaser’s
responsibility with respect to all Sears Credit Cards (e.g., issuing plastics)
or as otherwise assumed by Purchaser pursuant to the Marketing Budget;
provided, that nothing herein shall grant any Credit Policy decision authority
to Sears with respect to the Premier Program.

     5.3 Program Costs. Except as otherwise provided in this Agreement or in
the Marketing Plan, Purchaser shall be responsible for all costs related to
opening and operating the Accounts and Financial Products accounts, including
marketing the cost of store signage and communications (such marketing, signage
and communications costs to be at the levels set forth in the Marketing Plan),
credit bureau costs, pre-screening and post-screening costs, credit
authorization costs, Credit Card production costs, processing, servicing,
administration, billing and collection costs and the cost of funding the
Accounts Receivables.

     5.4 Ownership of Accounts and Financial Products Accounts. (a)
Purchaser shall own all Accounts and shall extend credit with respect to all
such Accounts, and Sears shall not be considered a creditor with respect to any
such Account for any purpose whatsoever. Purchaser will cause the terms of the
Accounts, Financial Products, Cardholder Agreements and Financial Products
Agreements and all other documents, Solicitation Materials, Credit Cards and
agreements prepared by or on behalf of Purchaser that are mailed or supplied to
the general public, customers, applicants, Cardholders and Financial Products
Customers in connection with the Program to comply with all applicable Law.
All aspects of the operation of the Program by Purchaser, including Account
solicitation, acquisition, administration, servicing and debt collection, will
comply with all applicable Law. Purchaser shall be responsible for all credit
and fraud and other losses on such Accounts, except to the extent subject to
chargeback pursuant to the Merchant Agreement. Purchaser may cancel or suspend
credit privileges of any Cardholder if Purchaser determines such action is
warranted in accordance with the Credit Policy.

     (b)  Purchaser shall own all Financial Products accounts and shall be
responsible for all risk and loss associated with Financial Products accounts.

     5.5 Documentation. Account Documentation and Financial Products
Documentation shall be customized for the Program, as specified in the
Marketing Plan. Purchaser will prepare and provide to each Cardholder and
Financial Products Customer an Account Agreement or Financial Products
Agreement, as applicable, and disclosure statement and such other notices or
documents related to such Account or Financial Product as are required from
time to time under applicable Law, and shall provide appropriate disclosure
language for inclusion on the Solicitation Materials. Purchaser shall be
responsible for ensuring that the Account Documentation and Financial Products

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Documentation comply with applicable Law. Within 180 days following the
Effective Date, Purchaser shall mail to Cardholders and Financial Products
Customers notices indicating that Purchaser is the owner of the Acquired
Accounts and Financial Products accounts. Sears shall cooperate in good faith
with Purchaser to enable Purchaser to prepare, print and mail such notices to
Cardholders and Financial Product Customers.

     5.6 Servicing. (a) The Servicing Policy shall set forth functions and
services that Purchaser shall perform in order to achieve results substantially
similar to those results set forth on Exhibits E and L.

     (b)  Purchaser shall assign such trained personnel as are necessary or
appropriate for servicing the Accounts and Financial Products accounts in
accordance with this Section 5.6, and shall dedicate a majority of all customer
service and Store relations personnel to the exclusive servicing of the Program
(but all excluded from Sears competitors) and house such personnel in
segregated space and/or facilities. These personnel shall be trained to work
collaboratively with Sears, including Sears in-Store employees. Purchaser
shall have a dedicated management organization and leadership structure
specifically designed to support the Program, and Purchaser shall provide
dedicated personnel resources in the areas of finance, marketing, risk,
decision management and overall Program management, in each case as Purchaser
deems reasonably necessary. Purchaser shall maintain adequate computer and
communications systems and other equipment and facilities necessary or
appropriate for servicing the Accounts and Financial Products accounts in
accordance therewith. Without limiting Section 14.8(c), Purchaser shall not
outsource any customer service or Store relations personnel to a third party
located outside North America without Sears’ prior written consent.

     (c) Purchaser shall maintain a disaster recovery plan, which shall be
tested regularly by Purchaser, as well as systems, equipment, facilities and
trained personnel, that shall enable it to service the Accounts and Financial
Products continuously through a disaster. Sears shall have the right to
review, upon request, a current copy of Purchaser’s disaster recovery plan and
the results of Purchaser’s tests of such plan. Sears acknowledges and agrees
that Purchaser may make changes to its disaster recovery plan from time to time
without Sears’ consent; provided, that such changes do not materially decrease
the level of protection offered by the disaster recovery plan. Purchaser shall
permit Sears to review any updated, revised, amended or restated disaster
recovery plan as soon as it becomes available. If Sears identifies a potential
disaster that Purchaser’s disaster recovery plan does not reasonably
anticipate, such potential disaster shall be considered by the Program
Committee and, if applicable, the Program Committee shall recommend an
appropriate course of action. The performance of such tests and the resolution
of any issues or problems identified in such test shall be performed at the
sole discretion (as to timing) and expense of Purchaser. Each of Sears and
Purchaser shall maintain information security policies and procedures that
include administrative, technical and physical safeguards designed to (i)
ensure the security and confidentiality of Confidential Information; (ii)
protect against anticipated threats or hazards to the security or integrity of
such Confidential Information; and (iii) protect against unauthorized access
to, or use of, such Confidential Information.

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     (d)  Purchaser shall, at its expense, provide appropriate mechanisms for
both pre-approved and non-pre-screened application processing at the point of
sale for Sears Customers. Sears shall provide to Purchaser such cooperation
and assistance as Purchaser may reasonably require for the provision of such
mechanisms. All Store signage and communications, including design and
placement thereof, shall become property of and shall be controlled by Sears,
subject to reasonable direction of Purchaser; provided, that Purchaser shall
have the right to make any determination it deems necessary to comply with
applicable Law, and Sears shall abide by such determination. The level of
funding of Store signage and communications relating to the Program shall
initially be consistent with Sears’ current practices, and thereafter subject
to the Marketing Plan.

     (e)  Each party shall be responsible for regular costs arising out of or in
connection with training its employees for purposes of the Program. Sears
shall incorporate ongoing training in connection with the Program (the content
of which will be developed under the guidance of the Program Committee),
substantially in the manner, terms and frequency currently being provided with
respect to Sears employees. If and to the extent that any action of a party in accordance with the terms of this
Agreement requires or results in the other party incurring or being required to
incur significant training costs (other than due to changes in applicable Law),
the parties, working through the Program Committee, shall reach a mutually
agreeable allocation of such training costs.

     (f)  Purchaser shall use reasonable best efforts to create a seamless
continuation, after the Effective Date, of Sears’ Internet sites related to the
Sears Credit Cards (e.g., searscard.com) or successor sites, so as to permit
Cardholders and Financial Products Customers to obtain current Account activity
and to use the other features currently being provided to Cardholders and
Financial Products Customers on Sears’ Internet sites. Sears shall continue to
operate and design the sears.com Internet site and shall provide a link on the
sears.com site to the searscard.com Internet site. Purchaser shall make
available to Cardholders and Financial Products Customers at all times at least
as much on-line Account information and management capability as made generally
available to its other proprietary card or General Purpose Credit Card
programs. Purchaser shall be responsible for the expenses associated with
providing the foregoing. Purchaser and Sears further agree to use their
reasonable best efforts to transfer the operations and maintenance of the
searscard.com Internet site (other than ownership of the searscard.com Internet
domain name, which shall be licensed to Purchaser under the Licensing
Agreement), from Sears to Purchaser as soon as practicable after the Effective
Date with the same level of functionality existing as of the Effective Date.

     5.7 Service Standards; Service Goals. The parties shall be bound by the
Service Standards and Service Goals set forth on Exhibit E and Exhibit L,
respectively.

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ARTICLE VI

INTELLECTUAL PROPERTY

     6.1 Use of Sears Licensed Marks. Pursuant to the Licensing Agreement,
and on the terms and subject to the conditions therein set forth, Sears IP Sub
is granting Purchaser certain rights to use the Sears Licensed Marks in
connection with Financial Products, Sears Credit Cards, the solicitation of new
Accounts and Financial Products accounts and any uses related to the foregoing.
Purchaser acknowledges that it is not acquiring any right, title or interest
in the Sears Licensed Marks except a limited license as expressly provided in
the Licensing Agreement, subject to the conditions thereof.

     6.2 Covenant Not to Sue; License. Sears agrees that it shall not enforce
any Patents it owns or controls against Purchaser, or any Person acting on
Purchaser’s behalf (in accordance with this Agreement) where any such party is
acting pursuant to the Program Related Agreements. The foregoing does not
represent an acknowledgement by Purchaser that any Patents of Sears is valid or
that Purchaser requires a license to any Patents of Sears. In the event that Purchaser determines that it requires a license to the
Sears ‘868 Patent for use outside the Program, Sears will license the Sears
‘868 Patent to Purchaser on reasonable terms (including license fees) to be
negotiated by Sears and Purchaser.

     6.3 Purchaser License Grant. Subject to the terms and conditions of this
Agreement and applicable Law, Purchaser grants to Sears a personal,
royalty-free, non-transferable, non-assignable, non-exclusive limited license,
in the Licensed Territory, to use the trademarks and service marks of Purchaser
set forth on Schedule 6.3 (the “Licensed Purchaser Marks”) solely (i) on
Solicitation Materials prepared by Sears, to the extent required for promoting
the Program and soliciting new Accounts and Financial Product accounts; (ii) in
the form and manner in which Purchaser provides the Licensed Purchaser Marks to
Sears; and (iii) as Purchaser approves in advance in writing. Purchaser shall
respond promptly to all requests for Licensed Purchaser Marks approval,
provided, that Purchaser’s failure to provide a prompt response to any such
request shall not be deemed (A) a breach of this Agreement and (B) a consent
for Sears to use the Licensed Purchaser Marks as requested. To assure the use
and maintenance of high standards of quality, workmanship, style and appearance
and the proper use of the Licensed Purchaser Marks, Sears shall adhere to
Purchaser’s written guidelines with respect to all Solicitation Materials
prepared by Sears that contain Licensed Purchaser Marks. Sears agrees to
provide Purchaser, from time to time and upon Purchaser’s request, with a
reasonable number of samples of any Solicitation Materials publicly
disseminated or intended for public dissemination by Sears or its Subsidiaries
which utilize the Licensed Purchaser Marks. If Purchaser determines, after
reviewing the proposed Solicitation Materials bearing Licensed Purchaser Marks,
that it disapproves of such materials, Purchaser shall so advise Sears, and
such materials shall not be printed or used, as the case may be, until
appropriate corrective action is taken to the reasonable satisfaction of
Purchaser. After any Solicitation Materials have been approved by Purchaser
pursuant to this Section 6.3, Sears shall not change such materials without

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Purchaser’s prior written approval. The foregoing license grant is personal to
Sears, and Sears may not assign, transfer or sublicense any rights in or to the
Licensed Purchaser Marks in any manner. Sears acknowledges that it is not
acquiring any right, title or interest in the Licensed Purchaser Marks except a
limited license as expressly provided in this Agreement, subject to the
conditions hereof. All rights in or to the Licensed Purchaser Marks are
expressly reserved by Purchaser.

     6.4 Changes to Trademark Usage. In the event that Purchaser notifies
Sears in writing that it disapproves of any particular use of the Licensed
Purchaser Marks that had previously been approved, Sears shall, in Purchaser’s
discretion, either (i) phase out such usage in the ordinary course of business;
or (ii) promptly cease such usage or otherwise cure such disapproved use;
provided, that Purchaser (x) sets forth, with specificity, a good faith
reasonable basis for such disapproval; and (y) agrees to reimburse Sears for
the reasonable replacement costs, if any, of such affected materials.

     6.5 Infringement Proceedings. Sears shall promptly notify Purchaser of
any unauthorized use of, or claims of infringement against, the Licensed Purchaser Marks. Purchaser shall have
the sole right and discretion to bring or defend against proceedings alleging
infringement or dilution of or by its Marks or other Intellectual Property, or
unfair competition related thereto, pursuant to this Agreement; provided,
however, that Sears agrees to provide Purchaser with its reasonable cooperation
and assistance with respect to any such proceedings.

     6.6 Purchaser Ownership Rights. Sears acknowledges and agrees that,
except for the limited license set forth in Section 6.3, nothing contained in
this Agreement shall be construed as granting to Sears, by implication,
estoppel or otherwise, any right, title or interest in and to (a) the Licensed
Purchaser Marks; and (b) any and all other Intellectual Property of Purchaser.
Sears shall not take any actions inconsistent with the foregoing.

     6.7 Establishment of New Intellectual Property Rights. Each of the
parties acknowledges that any other party may create and establish (or have
created and established for it) new Intellectual Property rights in connection
with the Program (“New Intellectual Property”), and agree as follows:

     (a)  To the extent that Sears creates New Intellectual Property, Sears
shall own all rights established during the Term, shall be responsible for
making all filings and taking all other actions necessary to protect such New
Intellectual Property and shall be deemed to have granted to Purchaser a
non-exclusive, royalty-free non-assignable license in the Licensed Territory to
use such New Intellectual Property solely in connection with the Program, and
to allow any party to whom services may be delegated under this Agreement to do
so.

     (b)  To the extent that Purchaser creates New Intellectual Property,
Purchaser shall own all rights established during the Term, shall be
responsible for making all filings and taking all other actions necessary to
protect such New Intellectual Property and shall be deemed to have granted to
Sears a non-exclusive, royalty-free non-

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assignable license in the Licensed
Territory to use such New Intellectual Property solely in connection with the
Program, and to allow any party to whom services may be delegated under this
Agreement to do so.

     (c)  Any proposal for the joint development by the parties of any New
Intellectual Property for the Program shall be approved of in advance by the
Program Committee. Unless otherwise agreed in writing by the parties, the
Program Committee shall also determine in advance the respective rights of the
parties with respect to such New Intellectual Property, and may determine that
any New Intellectual Property jointly developed by Purchaser and Sears in
connection with the Program shall be owned jointly and equally by Purchaser and
Sears (“Jointly Developed Intellectual Property”). Any filings or other
actions necessary to protect such Jointly Developed Intellectual Property shall
be filed jointly by Purchaser and Sears, and shall identify both such parties
as the owners. Purchaser and Sears shall cooperate fully, and cause their
employees to cooperate fully, with each other in the filing of any such filings
or actions and, except as may be otherwise agreed by the parties in writing,
shall share equally all costs and expenses relating to any such filings or actions approved by the parties.
In the event that either Purchaser or Sears (or Sears IP Sub) declines to fund
its portion of the costs incurred in connection with any such filings or other
actions, the other party may proceed on its own with such filings or other
actions, and will own the resulting intellectual property as New Intellectual
Property subject to this Section 6.7.

     (d)  No party shall be deemed to have established any rights in any Marks
of the other party, or in any Marks that contain Intellectual Property of the
other party, and any newly-created Intellectual Property rights (including the
Jointly Developed Intellectual Property) shall be deemed to have been
established only in newly-created material independent of the other party’s
Marks. Furthermore, no party shall attempt to register any Intellectual
Property containing another party’s Intellectual Property.

     6.8 Effect of Termination or Expiration of Agreement. Unless determined
otherwise by the Program Committee in accordance with Section 6.7, upon the
expiration or termination of this Agreement, the party that created New
Intellectual Property shall remain the owner thereof, and Sears or its assignee
shall, upon the exercise of the Repurchase Option, have a right to receive a
perpetual, non-exclusive royalty-free license to such New Intellectual
Property.

     6.9 Mandatory Usage of Sears Licensed Marks. Purchaser shall use the
Sears Licensed Marks on all Sears Credit Card plastics and in all Solicitation
Materials, Account Documentation and Financial Products Documentation and other
written and oral correspondence with respect to Sears Credit Cards and
Financial Products (other than materials Purchaser uses in connection with its
Credit Card programs generally, including statements of Purchaser Policy), and
such use shall be in accordance with the specifications set forth in the
then-current Marketing Plan and in conformity with the terms of the Licensing
Agreement.

     6.10 Affinity Patents. Notwithstanding anything to the contrary contained
herein, if Purchaser determines in its reasonable judgment that any of the

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services provided by Purchaser or its Affiliates to Sears Credit Card
applicants under this Agreement are reasonably likely to infringe the Affinity
Patents, Purchaser or its Affiliates may, in its sole discretion, either: (i)
modify or replace the affected services so that they do not infringe the
Affinity Patents; or (ii) to the extent that modifying or replacing the
affected services is not commercially reasonable, discontinue the relevant
portion of the affected services; provided, however, that Purchaser shall
provide substantially the same (or a greater) level of functionality to Sears
Credit Card applicants that Purchaser provides to Credit Card applicants under
any of Purchaser’s other proprietary card programs and General Purpose Credit
Card programs, unless Purchaser is prohibited by a third party contract from
providing such functionality to Sears Credit Card applicants.

ARTICLE VII

CERTAIN ARRANGEMENTS

     7.1 Sears Fees. In consideration of the services to be rendered by Sears
in connection with the performance of its obligations under the Program
Agreement within the parameters of Schedule 7.1, Purchaser or its Affiliates
will pay to Sears or, at the direction of Sears, a Subsidiary of Sears, the
respective amounts set forth on Schedule 7.1 with respect to the Co-Branded
Accounts, Proprietary Accounts and Financial Products accounts (collectively,
“Sears Fees”); provided, that successor Financial Products shall be treated as
Financial Products for purposes hereunder. The Program Committee shall
annually review the amount of all payments to Sears under this Agreement that
are not based on sales or percentage of sales in good faith to determine
whether such payments should be increased to reflect inflation or other
factors, taking into account the economic terms and nature of the Program and
the relationship between the parties, but in no event shall the parties fail to
raise such payments in an amount that reflects the CPI increase for such year.

     7.2 In-Store Payments Contribution. No later than fifteen days after the
end of each calendar month, Sears shall present to Purchaser a statement
containing the number of In-Store Payments accepted by Sears and its Affiliates
during that month, and Purchaser shall pay to Sears, no later than ten days
after receipt of such statement, an In-Store Payment contribution calculated in
accordance with Exhibit K.

     7.3 Merchant Discount. The Merchant Discount in any given month shall be
calculated in accordance with Exhibit K.

     7.4 Over-Limit Fees. Over-limit fees shall be calculated in accordance
with Exhibit K.

     7.5 Special Credit Card Programs. Sears and Purchaser agree as follows
with respect to the Special Credit Card Programs:

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     (a)  Zero Percent Financing. Sears may, at its sole discretion, continue
to offer Zero Percent Financing promotions to Sears Customers, and Purchaser
shall support such programs, in accordance with Exhibit J.

     (b)  Sears Card Events. For so long as Sears shall continue to offer a
minimum of four Sears Card Events per year, Purchaser shall be responsible for
all promotional and marketing costs, including advertising, incurred by Sears
in connection with such Sears Card Events, in accordance with Schedule 7.1.
Sears shall present an invoice for such promotional and marketing costs,
together with reasonable supporting detail, after each Sears Card Event, and
Purchaser or its Affiliates shall pay the invoiced amounts to Sears no later than fifteen days following the receipt of such
invoice. Sears may propose to Purchaser alternative ways to spend the
marketing funds allocated by Purchaser to Sears Card Events.

     (c)  POS Incentives. The parties may provide POS Incentives in accordance
with Exhibit K.

     (d)  Future Programs. The parties may mutually agree in writing to change
existing or to offer new Special Credit Card Programs on terms mutually
agreeable to the parties.

     7.6 Customer Value Propositions. Purchaser shall be responsible for and
shall fund the Customer Value Propositions; provided, that Purchaser shall not
include any merchant (other than any merchant that is included as of the
Effective Date) that competes with the sale of Merchandise as a redemption
partner under the Customer Value Propositions without the prior approval of
Sears. Purchaser shall honor all existing obligations under Customer Value
Propositions, including any rewards earned by Cardholders prior to the
Effective Date.

     7.7 Promotional Cards. Sears may, from time to time, ask Purchaser to
manufacture and provide promotional cards bearing the Sears Licensed Marks,
such as the Sears Gift Card, the Craftsman Card and the Associate Discount
Card, and Purchaser shall manufacture and provide such promotional cards and be
entitled to reimbursement of its Cost to manufacture and provide such
promotional cards.

     7.8 Set Off Right. All undisputed amounts due from one party to the
other under this Agreement, the Licensing Agreement or the Merchant Agreement
may be set off against undisputed amounts due from the other party; provided,
however, that offset against amounts owing under Section 3.2 of the Merchant
Agreement are limited to 5% of each day’s in-store Sears Credit Card purchases
and in no case shall be in the aggregate for any 12-month period greater than
5% of the amount of annual in-store Sears Credit Card purchases as of the last
date such amount was measured. Any such offset shall be accompanied by a
written statement specifying the offset and how it was determined.

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ARTICLE VIII

ADDITIONAL COVENANTS

     8.1 Compliance with Law; Policies. Each of Purchaser, Sears and Sears IP
Sub shall comply with all applicable Law and the Program Plans and Policies in
connection with the Program and the performance of each of its obligations
hereunder.

     8.2 Cardholder Surveys. As of the Effective Date, Purchaser shall, at its
expense, continue to perform and provide to Sears the Cardholder and Financial
Products surveys used by Sears as of the Effective Date. Following the
Effective Date, Purchaser may elect to migrate to different survey formats
(which shall continue to be provided to Sears), so long as such new surveys
provide Sears with a substantially similar level of information with respect to
Cardholders and Financial Products Customers. In the event Sears identifies
any material information that is not included in Purchaser’s survey, Purchaser
shall, to the extent reasonably practicable, include such information in future
surveys, unless the inclusion of such information is inconsistent with the
nature of the parties’ relationship under the Program. Consistent with the
results of the first six months of Cardholder surveys, the Program Committee
may establish minimum standards of Cardholder satisfaction to be incorporated
into the Service Standards. Purchaser shall make available to Sears such
surveys and all associated working papers promptly following completion
thereof. Nothing herein shall affect Sears’ right to conduct its own surveys
of Cardholders or Financial Products Customers, at Sears’ cost. Sears may also
perform credit research on behalf of Purchaser, as may be agreed by the parties
from time to time.

     8.3 Reports; Monitoring Rights. (a) As of the Effective Date, Purchaser
shall, at its expense, continue to produce and provide to Sears the reports
with respect to profitability, other performance metrics and the operations of
the Program used by Sears as of the Effective Date. Following the Effective
Date, Purchaser may elect to migrate to different report formats (which shall
continue to be provided to Sears), so long as such new reports provide Sears
with a substantially similar level of information with respect to
profitability, other performance metrics and the operations of the Program. In
addition to the reports described above, Purchaser shall also provide to Sears
any customized reports reasonably requested by Sears from time to time. In the
event Sears identifies any material information that is not included in
Purchaser’s standard reports, Purchaser shall, to the extent reasonably
practicable, include such information in future reports, unless the inclusion
of such information is inconsistent with the nature of the parties’
relationship under the Program.

     (b)  Sears may, from time to time, have a reasonable number of its
employees or representatives present at the offices of Purchaser at which
services hereunder are provided to monitor Purchaser’s activities with respect
to the Program, including through monitoring of phone conversations between
Purchaser’s employees and Cardholders and Financial Products Customers, and
Purchaser shall also grant Sears remote access to perform such monitoring at
Sears’ request; provided, that any such activity by Sears shall be subject to,
and conducted in compliance with, applicable Law

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and Purchaser Policy, and
shall be conducted in a manner that shall not unreasonably impede Purchaser’s
ordinary course of business Purchaser’s ability to meet its obligations
hereunder.

     8.4 Systems Interface; Mail Forwarding.

     (a)  Purchaser and Sears shall use all reasonable best efforts to establish
and maintain appropriate interfaces between their respective marketing,
administrative, data and customer information, authorization, point of sale,
application processing, financial, technical support and other systems,
including systems maintained by third party providers on behalf of a party
hereto, in order to facilitate the efficient performance by Sears and Purchaser
of their respective obligations under the Program Related Agreements.

     (b)  Any correspondence received by either party that is intended for the
other party shall promptly be forwarded via U.S. mail to the address designated
in writing by such other party; provided, however, that Sears shall use its
reasonable best efforts to forward any Sears Credit Card payments or
correspondence pertaining to a billing dispute received by Sears to Purchaser,
at Purchaser’s cost, via overnight courier, within three Business Days of
receipt. In addition, the parties shall mutually agree upon a call handoff
procedure for any calls received by either party that are intended for the
other party.

     8.5 Acquiring New Business. (a) In the event that Sears or its
Subsidiaries acquires, directly or through merger, acquisition or other
combination or similar event, from third parties any retail business, including
for purposes of this Section 8.5, Sears Canada, Sears Mexico, and any other
retail business in Canada or Mexico that would be a “Store” hereunder (each, a
“New Business”) and any associated proprietary or other credit card accounts
and accounts receivable (that would be covered by the definition of Accounts
Receivable had they been issued hereunder) including any associated program
rights whether it has a program in-house or with a third party (a “New
Portfolio”), Sears shall (i) use reasonable best efforts to offer or cause to
be offered to Purchaser the opportunity to participate in the related
due-diligence process for purposes of assisting in development of an
appropriate valuation for the New Portfolio; and (ii) permit Purchaser to make,
no later than 10 Business Days prior to the time Sears is required to make an
offer with respect to the New Portfolio, an offer to purchase the New Portfolio
and add the New Portfolio to the Program. Unless the New Business is subject
to an agreement that would prohibit such actions or that would prohibit the
addition of the New Portfolio to the Program (a “Conflicting Agreement”), Sears
may accept or reject such offer in its commercially reasonable discretion. If
the New Business is subject to a Conflicting Agreement, Section 8.5(c) shall
govern. If Sears accepts such offer, Sears shall convey or cause to be
conveyed to Purchaser, either simultaneously with or promptly following the
closing of the acquisition of the New Business or the acceptance of such offer,
the New Portfolio, in exchange for payment by Purchaser to Sears of the
agreed-upon amount and on such other terms as agreed between Sears and
Purchaser and such New Business and New Portfolio shall be subject to the
Program. For the avoidance of doubt, in the event the New Business does not
have a New Portfolio,

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any applicable products with respect to such New Business
shall be treated as Additional Products.

     (b)  If Purchaser elects not to make an offer under Section 8.5(a), or if
Sears rejects such offer, Sears (or an affiliate of Sears or a third party
designated by Sears) shall have the right to sell to a third party or retain
the New Portfolio and, in either case, to operate and service the New Portfolio outside the Program (which,
for the avoidance of doubt, shall not be deemed to violate any provision of the
Program Related Agreements), subject to this Section 8.5(b); provided, however,
that if Sears intends to sell the New Portfolio to a third party, Sears shall
request a written offer describing the premium amount proposed to be paid for
the New Portfolio and the present value of the payments expected in connection
with the program agreement related thereto. Sears shall promptly deliver such
written offer to Purchaser. Purchaser may, within 45 days of receipt of such
written notice, elect to purchase the New Portfolio and include the New
Portfolio in the Program on terms no less favorable in the aggregate than those
set forth in the written offer of such third party described above. Upon
delivery by Purchaser of a written notice to Sears that Purchaser elects to
purchase the New Portfolio and add it to the Program on terms that, in the
reasonable judgment of Sears, are no less favorable in the aggregate than those
contained in the written notice, Sears shall sell such New Portfolio to
Purchaser, and Purchaser shall add it to the Program. If Purchaser does not
deliver its written notice to purchase the New Portfolio within such 45-day
period, Sears may engage a third party to purchase the New Portfolio and to
service the New Portfolio outside the Program on terms no less favorable than
those set forth in the written notice provided above. Any change that is
unfavorable to Sears in the material terms of any written notice provided to
Purchaser shall be deemed a new offer subject to acceptance by Purchaser in
accordance with this Section 8.5(b).

     (c)  If Purchaser and Sears agree to add the New Portfolio to the Program,
but the New Business is subject to a Conflicting Agreement, Sears shall use its
best efforts to terminate such Conflicting Agreement as soon as practicable,
including by either (A) terminating such Conflicting Agreement prior to its
scheduled expiration without a breach (at Purchaser’s option and expense
(including through the payment of any termination fees or liabilities),
including, at Purchaser’s option, as part of an offer by Purchaser to purchase
the New Portfolio); or (B) providing notice of non-renewal of such Conflicting
Agreement. In the event such Conflicting Agreement cannot be terminated as set
forth above, the New Portfolio shall remain outside the Program. At such time
as the Conflicting Agreement is no longer in effect (but subject to any terms
of such agreement), Section 8.5(a) shall apply.

     (d)  For the avoidance of doubt, the provisions of this Section 8.5 are not
intended to affect any party’s termination rights under this Agreement.

     8.6 Disposition of Stores. (a) Sears and its Affiliates shall have the
right at any time and from time to time to:

          (i) (A) sell an existing chain or other group of separately identifiable
Stores, including through the sale of a division or Subsidiary of Sears (“Sold

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          Chain Stores”), or (B) sell all Stores within a Metropolitan Statistical Area,
whether individually or in a group, including through the sale of a division or
Subsidiary of Sears (“Sold Area Stores” and together with the Sold Chain
Stores, “Disposed Stores”). In connection with any such disposition, Sears or
its designee shall have the right, at its election, exercisable no later than
30 days following the transaction by which the Stores are disposed, to purchase from Purchaser, upon at least twenty Business
Days’ written notice, (x) in the case of Sold Chain Stores, the Sears
Proprietary Cards branded with the Marks of the Sold Chain Stores (provided,
that such Marks are not successor Marks to “Sears”) and all Accounts and
associated Accounts Receivables that are attributable to such Sears Proprietary
Cards; and (y) in the case of Sold Chain Stores or Sold Area Stores, any other
Accounts for which at least 90% of the purchase activity (measured by the
number of transactions in the preceding twelve months) is attributable to such
Sold Chain Stores or to such Sold Area Stores, as applicable, along with the
associated Accounts Receivable (collectively, the “Attributable Assets”), at a
price equal to the fair market value of such Attributable Assets as determined
by Sears and Purchaser and, in the event such parties are unable to agree, the
fair market value shall be determined pursuant to the appraisal procedures set
forth in Section 13.5, mutatis mutandis (but not employing the concept of
Minimum Repurchase Price); and

          (ii) close or sell one or more existing Stores other than as described
above in (i), in Sears’ sole discretion.

     (b)  Disposed Stores shall no longer be “Stores” subject to the Program,
and the purchaser of the Disposed Stores shall have the right to offer any
product, including Credit Cards, to the customers of such Disposed Stores. Any
purchaser of Disposed Stores as contemplated by this Section may, but shall not
be required to, contract with Purchaser for continued servicing of the
Attributable Assets on mutually agreeable terms.

     (c)  Upon a purchase of Attributable Assets by a third party pursuant to
Section 8.6(a), Purchaser’s rights to use Cardholder Information for such
Accounts and the Cardholders associated therewith shall cease.

     (d)  In the event Sears does not exercise its purchase right under Section
8.6(a)(i), Purchaser may convert such Accounts to a different product that has
a brand that does not compete with Sears. In the event Sears closes or sells
(other than as contemplated under Section 8.6(a)(i)) one or more, but not all,
existing Stores, Purchaser may convert any Account to a new product that has a
brand that does not compete with Sears, if (i) 90% of the purchase activity
(measured by the number of transactions in the preceding twelve months) on such
Account is attributable to such closed or sold stores; and (ii) (A) such
Account has had six transactions during the twelve-month period prior to such
closing or sale and is inactive for the six month period following such closing
or sale or (B) such Account has had fewer than six transactions during the
twelve month period prior to such closing or sale and is inactive for the
twelve month period following such closing or sale. In the event Sears closes
all Stores in a Metropolitan Statistical Area, Purchaser may convert any
Account attributable to such closed stores, with a

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 billing addresses in such
Metropolitan Statistical Area, to a new product which has a brand that does not
compete with Sears.

     (e)  Notwithstanding anything to the contrary contained in this Section
8.6, nothing contained this Section 8.6 shall or shall be deemed to preclude
Purchaser from (i) transferring any Sears Repurchase Assets to a wholly-owned
Subsidiary of Citigroup; provided, however, in such case that such Subsidiary is
reasonably capable of performing the obligations of Purchaser hereunder;
provided, further, that Purchaser shall remain obligated and liable to Sears
without diminution of such obligation or liability (or the other party’s rights
or benefits) by virtue of such assignment and references to Purchaser hereunder
shall include such assignee or (ii) transferring any portion of Accounts or
Accounts Receivable in connection with a secured financing transaction
contemplated under Section 13.5(e).

     8.7 Responsibilities of Sears. In addition to its obligations
specifically identified elsewhere in this Agreement, Sears agrees that, during
the Term of this Agreement, it will:

     (a)  continue to (i) have its Store employees market and support the
Program; and (ii) train its Store employees, at levels consistent with Sears’
current practices, except as otherwise contemplated by the Program Related
Agreements or as decided by the Program Committee;

     (b)  market, support and promote the Program to Stores and Partner
Merchants;

     (c)  maintain, invest in and improve on its point-of-sale systems and
equipment necessary to support the Program in accordance with Section 3.2;

     (d)  promptly refer to Purchaser any customer complaints regarding a Sears
Credit Card; and

     (e)  comply with all Laws applicable to Sears under this Agreement.

     8.8 Reserves. If Sears (i) fails to maintain a senior unsecured
long-term debt rating of at least B+ from Standard & Poor’s Ratings and B1 from
Moody’s Investors Service at a time when such ratings for Sears are being
published; (ii) fails to maintain a Fixed Charge Ratio of at least 2.0x for two
consecutive calendar quarters; or (iii) allows a violation of a material
covenant in any bank credit agreement of Sears to remain uncured for 90 days,
then Purchaser may establish reserves on its books that shall be funded by
Sears for Sears’ contingent liabilities relating to the performance of its
duties under the Program (i.e., non-delivery of Merchandise, timely processing
of In-Store Payments, warranty obligations, credit returns, chargebacks or
other such similar obligations under the Program), which reserve shall not
exceed 2.5% of the amount of annual in-store Sears Credit Card purchases as of
the last date such amount was measured. Purchaser may access and use such
reserves at its discretion to discharge Sears’ obligations under the Program.
At Sears’ option, it may satisfy the reserve obligation by delivery to
Purchaser of an irrevocable standby letter of credit in favor of

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Purchaser from
a financial institution other than Citigroup that is at least rated A by
Standard & Poor’s Ratings and at least A2 from Moody’s Investors Service. In
the event a reserve has been established pursuant to this Section 8.8, Sears
may, upon notice to Purchaser that none of the conditions identified in (i)
through (iii) above have existed for a period of 120 consecutive days, request,
and Purchaser shall not unreasonably withhold its consent to, the elimination of the reserve or
return of the letter of credit, as applicable. Sears shall, within 45 days of
the end of each calendar quarter, provide Purchaser with a certificate stating
whether Sears is in compliance with its obligations under this Section 8.8.

     8.9 Change in Sears’ Condition. In the event that (i) Merchandise sales
measured during any twelve-month period from those Stores and Third Party Sears
Merchant stores that are substantially similar in format or concept to the
Stores and Third Party Sears Merchant stores that existed as of the Effective
Date (“Sears Merchandise Sales”) are less than the Merchandise Decline Amount;
or (ii) that portion of Sears Merchandise Sales representing sales of hard-line
goods (e.g., appliances, tools, electronics, furniture), measured during any
twelve-month period (“Sears Hard Line Sales”), are less than the Hardline
Decline Amount, in either case for reasons other than General Conditions (the
occurrence of either or both events, a “Significant Sales Contraction”) and
that portion of Sears Merchandise Sales that were charged on a Sears Credit
Card are less than the Sales Contraction Amount during the same twelve-month
period (“Credit Sales Contraction”), then Purchaser may give notice to Sears of
Purchaser’s desire to negotiate in good faith modifications to the terms of
this Agreement, with the specific goal of modifying this Agreement such that
Purchaser earns additional profits representing what it would have earned on
the smaller of (A) the Merchandise Decline Amount less the Sears Merchandise
Sales and (B) Hardline Decline Amount less the Sears Hard-Line Sales, assuming
for purposes of such calculation that the Significant Sales Contraction had not
occurred, and covering the time period beginning on the later of the date of
the beginning of such Significant Sales Contraction and the date of the
beginning of such Credit Sales Contraction, and ending on the date when such
Significant Sales Contraction is no longer occurring or such Credit Sales
Contraction is no longer occurring (such beginning and ending times being
deemed to occur at the beginning or the end, respectively, of the month in
which such condition is met). Purchaser shall specify the date on which the
negotiations shall begin, which date shall be not less than ten nor more than
30 Business Days after the date on which such notice is given, and Purchaser
and Sears shall have 180 calendar days to negotiate mutually agreeable changes
to this Agreement (the “Negotiation Period”). During negotiations, the parties
will take into account trends, and shall take into account the possibility that
the conditions in the next sentence have been met. In the event that the
Significant Sales Contraction and Credit Sales Contraction described above have
been reversed, and remain so for a period of six months or more, Sears may
request that Purchaser engage in good faith renegotiation of the previously
negotiated terms, taking into account Sears performance under this provision.
Concurrent with the delivery of the notice by Purchaser to Sears, Purchaser’s
obligation to pay the amounts under the caption “Growth Incentives” on Schedule
7.1 shall cease, unless and until such time as the parties agree upon changes
to this Agreement. If Purchaser and Sears are unable to agree on changes to
this Agreement before the end of the Negotiation Period, the Agreement shall

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terminate at the end of the Negotiation Period and Sears shall have the right,
by election within 120 days after termination, to acquire the Sears Repurchase
Assets in accordance with Article XIII. If Sears does not exercise its
Repurchase Option under this Section 8.9, the Sears Repurchase Assets shall be
treated as specified in 13.6(b). The parties agree that failure, after
good-faith negotiation, to reach agreement during the Negotiation Period shall not be
subject to arbitration under Section 14.24 in lieu of the termination set forth
in this Section 8.9.

ARTICLE IX

CONFIDENTIALITY

     9.1 Confidential Information. During the Term and after its expiration
or termination, except as expressly set forth in this Agreement, all materials
and information supplied by Sears or Purchaser, or their respective Affiliates
or representatives, to the other (or their Affiliates or representatives), or
observed or otherwise obtained by one such party, in the course of the
negotiation of this Agreement and each party’s performance of its obligations
hereunder, including information concerning the content and/or conduct of any
aspect of the respective businesses of Purchaser or Sears, a party’s assets,
properties, operations, business strategic objectives, methods of operation,
marketing plans or techniques, technological specifications and developments,
employee and business relationships, customer lists, Cardholder Information,
Credit Policy and each party’s financial results and the terms of this
Agreement are confidential and proprietary to the disclosing party
(collectively, the “Confidential Information”). Confidential Information does
not include any information that (a) was known to the receiving party at the
time of disclosure or was developed independently by such party without
violating the terms hereof; (b) is generally available to and known by the
public at the time of disclosure (other than as a result of a disclosure
directly or indirectly by the party or parties restricted from disclosing such
information under this Section 9.1); (c) is in the public domain at the time of
disclosure or becomes part of the public domain after disclosure (other than as
a result of disclosure directly or indirectly by the party or parties
restricted from disclosing such information under this Section 9.1); or (d) is
disclosed to the receiving party by a third party that is not prohibited by Law
or agreement from disclosing the same.

     9.2 Protection of Confidential Information. Confidential Information
shall be used by each of Sears and Purchaser, and their respective Affiliates,
solely in the performance of its obligations or the exercise of its rights
pursuant to this Agreement. In connection with actions taken by Purchaser or
Sears as part of the Program, either Purchaser or Sears may disclose to their
permitted contractors any of the Confidential Information that is reasonably
necessary for such permitted contractors to perform their duties with respect
to the Program; provided, however, that Purchaser or Sears, as applicable,
shall first have required their respective permitted contractors to sign a
confidentiality agreement in form and substance reasonably suited to
implementing the purposes of this Section 9.2. Each party shall be responsible
for causing its permitted contractors to maintain the confidentiality of the
Confidential Information. Each party

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shall receive Confidential Information in
confidence and shall not disclose Confidential Information to any third party,
except that nothing in this Section 9.2 shall prohibit Purchaser or Sears from
disclosing the Confidential Information (i) to its respective accountants,
independent auditors or attorneys as necessary to execute their professional
responsibilities, or to federal, state or other regulatory authorities having
jurisdiction over Purchaser or Sears, as applicable, as required by law,
regulation or order having the force of law; (ii) to those of its respective
employees, officers, directors, or, subject to the requirement of an executed
confidentiality agreement as described above, contractors who reasonably
require access to such Confidential Information to carry out the purposes of
this Agreement; (iii) in response to interrogatories, subpoenas, civil
investigative demands, applicable laws or compulsory process, provided, that
the disclosing party shall provide notice of such intended disclosure to the
other party and afford the other party an opportunity to intervene in such
process in order to request confidential treatment of such information; and
(iv) as agreed upon in writing by the other party, or as otherwise authorized
by this Agreement. Each of Sears and Purchaser shall take all reasonable steps
and implement appropriate measures consistent with applicable Law to safeguard
Confidential Information that is disclosed to it and its Affiliates or
representatives and to ensure that no unauthorized Person shall have access to
any Confidential Information. Each party shall promptly report to the other
party any unauthorized disclosure or use of any Confidential Information of the
other party of which it becomes aware. Upon request or the expiration or
termination of this Agreement, except as expressly set forth in this Agreement,
each party shall return to the other party all of the other party’s
Confidential Information that is in its possession or control. No disclosure
by a party hereto of such party’s Confidential Information shall constitute a
grant to the other party of any interest or right whatsoever in such
Confidential Information, which shall remain the sole property of the
disclosing party.

     9.3 Confidentiality of Cardholder Information. During the Term and after
the expiration or termination of this Agreement, except as otherwise provided
herein, Purchaser shall not (i) transfer, sell or disclose to any other Person,
any Cardholder Information or any other data on Sears Customers learned by
Purchaser as a result of the Program, except to any of Purchaser’s Affiliates,
or in connection with cross-marketing or other activities permitted under this
Agreement; or (ii) use or permit the use of all or a portion of any Cardholder
Information or such customer data for any purpose other than to carry out its
obligations or to exercise its rights under the Program Related Agreements or
the Purchase Agreement.

     9.4 Permissible Disclosures. This Article IX shall not restrict (i) the
disclosure by Purchaser of information relating to its relationship with a
Cardholder to a credit reporting agency (consistent with applicable Law); (ii)
the disclosure by Purchaser of information to any Credit Card processor or by
Purchaser or Sears to any other subcontractor or vendor who requires such
information in order to carry out its duties in relation to the Program; (iii)
the disclosure of information by Purchaser or Sears to their respective
auditors or to regulators; or (iv) the disclosure contemplated by Section
4.6(f) or 13.5(a), subject, in each such case, to appropriate confidentiality
restrictions no less restrictive than those contained in this Article IX.
Notwithstanding anything to the contrary herein, any party to this Agreement
(and any Affiliate, employee, representative

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or other agent of such party) may
disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure (each as defined in Treasury Regulation
Section 1.6011-4) of the transactions contemplated by this Agreement and all
materials of any kind (including opinions or other tax analyses) that are
provided to it relating to such tax treatment and tax structure (but no other
details regarding matters covered by this Agreement, including the identities
of the parties).

     9.5 Perfection. Notwithstanding anything to the contrary contained
herein, Purchaser may file any documents that Purchaser reasonably deems
necessary to perfect Purchaser’s ownership of the Accounts. Sears shall
cooperate with Purchaser in connection with any such filings.

ARTICLE X

REPRESENTATIONS AND WARRANTIES

     10.1 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants the following as of the date hereof:

     (a)  Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the United States, and is in
compliance with its articles of incorporation and bylaws. Purchaser is a
member in good standing of the Card Association.

     (b)  Capacity; Authority; Validity. Purchaser has all necessary corporate
power and authority to enter into this Agreement and to perform all of the
obligations to be performed by it under this Agreement. This Agreement and the
consummation by Purchaser of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Purchaser, and this Agreement has been duly executed and delivered by
Purchaser, constitutes the valid and binding obligation of Purchaser and is
enforceable in accordance with its terms.

     (c)  Conflicts; Defaults. Neither the execution and delivery of this
Agreement by Purchaser, nor the consummation of the transactions contemplated
herein by Purchaser, shall (i) conflict with, result in the breach of,
constitute a default under or accelerate the performance required by, the terms
of any contract, instrument or commitment to which Purchaser is a party or by
which Purchaser is bound; (ii) violate the certificate of incorporation,
bylaws, or any other equivalent organizational document of Purchaser; or (iii)
require any consent or approval under any judgment, order, writ, decree, permit
or license to which Purchaser is a party or by which it is bound, other than,
in the case of (i) above, breaches, defaults or accelerations that would not
prevent or reasonably be expected to prevent Purchaser from executing this
Agreement or impact Purchaser’s compliance with the terms of this Agreement.
Purchaser is not subject to any agreement (x) requiring fundamental changes in
the operation of the Program; and (y) with any Governmental Authority that
would prevent the consummation of the
transactions contemplated by, or its ongoing performance of, the Program
Related Agreements.

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     (d) Litigation. There is no claim, litigation, proceeding, arbitration,
investigation or material controversy pending before any Governmental Authority
to which Purchaser is a party and by which it is bound, that would reasonably
be expected to prevent Purchaser’s compliance with the terms of this Agreement.

     (e) No Consents, Etc. No consent of any Person (including any stockholder
or creditor of Purchaser) and no consent, license, permit, approval,
authorization or exemption by notice of, report to or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution or delivery of this Agreement by Purchaser, the validity of this
Agreement with respect to Purchaser, the enforceability of this Agreement
against Purchaser, the consummation by Purchaser of the transactions
contemplated hereby or the performance by Purchaser of its obligations
hereunder.

     (f) Sharing of Cardholder and Other Information. The current policies of
Purchaser permit Purchaser to enter into the covenants contained in the Program
Related Agreements that relate to the sharing of Cardholder Information or any
other data on Purchaser’s customers.

     10.2 Representations and Warranties of Sears. Each of Sears and Sears IP
Sub, respectively, hereby represent and warrant the following as of the date
hereof with respect to itself:

     (a) Organization. Sears is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York, and is in
compliance with its articles of incorporation and bylaws. Sears IP Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and is in compliance with its articles of
incorporation and bylaws.

     (b) Capacity; Authority; Validity. Each of Sears and Sears IP Sub has all
necessary power and authority to enter into this Agreement and to perform all
of the obligations to be performed by it under this Agreement. This Agreement
and the consummation by Sears and Sears IP Sub of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of Sears and Sears IP Sub, and this Agreement has been duly
executed and delivered by Sears and Sears IP Sub, constitutes the valid and
binding obligation of Sears and Sears IP Sub and is enforceable in accordance
with its terms.

     (c) Conflicts; Defaults. Neither the execution and delivery of this
Agreement by Sears and Sears IP Sub, nor the consummation of the transactions
contemplated herein by Sears and Sears IP Sub, shall (i) conflict with, result
in the breach of, constitute a default under or accelerate the performance
required by the terms of any contract, instrument or commitment to which Sears
or Sears IP Sub is a party or by which
Sears or Sears IP Sub is bound; (ii) violate the certificate of
incorporation, bylaws, or any other equivalent organizational document of
Sears or Sears IP Sub; or (iii) require any consent or approval under any
judgment, order, writ, decree, permit or license to which Sears or Sears IP Sub
is a party or by which Sears and Sears IP Sub is bound, other than,

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in the case
of (i) above, breaches, defaults or accelerations that would not prevent or
reasonably be expected to prevent Sears or Sears IP Sub from executing this
Agreement or impact Sears’ or Sears IP Sub’s compliance with the terms of this
Agreement. Neither Sears nor Sears IP Sub is subject to any agreement (x)
requiring fundamental changes in the operation of the Program; and (y) with any
Governmental Authority that would prevent the consummation of the transactions
contemplated by, or its ongoing performance of, the Program Related Agreements.

     (d) Litigation. There is no claim, litigation, proceeding, arbitration,
investigation or material controversy pending before any Governmental Authority
to which Sears or Sears IP Sub is a party and by which it is bound, that would
reasonably be expected to prevent Sears and Sears IP Sub’s compliance with the
terms of this Agreement.

     (e) No Consents, Etc. No consent of any person (including, without
limitation, any stockholder or creditor of Sears or Sears IP Sub) and no
consent, license, permit, approval, authorization or exemption by notice of,
report to or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution or delivery of this
Agreement by Sears and Sears IP Sub, the validity of this Agreement with
respect to Sears and Sears IP Sub, the enforceability of this Agreement against
Sears and Sears IP Sub, the consummation by Sears and Sears IP Sub of the
transactions contemplated hereby, or the performance by Sears and Sears IP Sub
of its obligations hereunder.

     (f) Intellectual Property Rights. Sears and its Subsidiaries own the
Sears Licensed Marks and have the authority to grant the license to Purchaser
pursuant to the Licensing Agreement to use the Sears Licensed Marks. The use
by Purchaser of the Sears Licensed Marks in the Licensed Territory during the
term of the Licensing Agreement, as set forth therein, will not dilute those
Marks and will not infringe on the Intellectual Property rights of any third
party or any right of privacy.

     (g) Sharing of Cardholder and Other Information. The current policies of
Sears permit Sears to enter into the covenants contained in the Program Related
Agreements that relate to the sharing of Cardholder Information or any other
data on Sears Customers.

ARTICLE XI

INDEMNIFICATION

     11.1 By Sears. Sears shall be liable to and shall indemnify, defend and
hold harmless, Purchaser and its Affiliates and their
respective directors, officers, employees and permitted assigns from and
against any Losses arising out of, connected with or resulting from the
following, to the extent not caused by any act or omission of Purchaser or its
Affiliates:

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     (a) any Merchandise of a Sears Covered Party (including any product
liability or warranty claim with respect thereto), whether or not the purchase
of which was financed by an Account;

     (b) the sale of any Merchandise of a Sears Covered Party, including any
and all advertising, promotions, marketing programs or documents for such
Merchandise;

     (c) any misrepresentation or unauthorized representation to third parties
by employees of Sears or its Affiliates or Sears Covered Party made in
connection with the Program;

     (d) any act, or omission where there was a duty to act, by Sears, its
Affiliates or Sears Covered Party or their respective employees, officers,
directors, shareholders or agents hired by either Sears or any of its
Affiliates, relating to an Account or any Accounts Receivable relating thereto;

     (e) any material breach by Sears or its Affiliates of a covenant,
representation or warranty herein, in the Merchant Agreement or the Licensing
Agreement;

     (f) the failure of Sears, its Subsidiaries, Affiliates or Sears Covered
Party to comply with applicable Law; or

     (g) any third party claim, action, suit or proceeding (“Claim”) arising
out of or relating to any infringement, inducement of infringement, dilution,
misappropriation or other violation of any third party Intellectual Property
arising from (A) the materials or directions provided by Sears in connection
with the Program, unless (i) such Claim arises from any action of Sears taken
at Purchaser’s direction; (ii) Purchaser modified the materials provided by
Sears without Sears’ prior written consent; or (iii) Purchaser failed to follow
Sears’ instructions with respect to the materials provided by Sears or (B)
services provided by Sears in connection with the Program.

     11.2 By Purchaser. Purchaser shall be liable to and shall indemnify,
defend and hold harmless Sears, and its Subsidiaries and Affiliates and their
respective directors, officers and employees and permitted assigns from and
against any Losses arising out of, connected with or resulting from following,
to the extent not caused by any act or omission of Sears or its Affiliates:

     (a) any products and services offered by Purchaser and its Subsidiaries
and Affiliates;

     (b) any act or omission where there was a duty to act, by Purchaser or its
Affiliates or any of their respective employees, officers, directors,
shareholders or
agents hired by Purchaser or its Affiliates relating to an Account or an
Accounts Receivable;

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     (c) any misrepresentation or unauthorized representation to third parties
by employees of Purchaser or its Affiliates made in connection with the
Program;

     (d) any material breach by Purchaser or its Affiliates of a covenant,
representation or warranty herein or in the Merchant Agreement or the Licensing
Agreement;

     (e) the failure of Purchaser or its Affiliates to comply with any Laws
applicable to Purchaser or its Affiliates; or

     (f) any third party Claim arising out of or relating to any infringement,
inducement of infringement, dilution, misappropriation or other violation of
any third party Intellectual Property arising from (A) the materials provided
by Purchaser in connection with the Program, unless (i) such Claim arises from
any action of Purchaser taken at Sears’ direction; (ii) Sears modified the
materials provided by Purchaser without Purchaser’s prior written consent; or
(iii) Sears failed to follow Purchaser’s instructions with respect to the
materials provided by Purchaser, (B) services provided by Purchaser in
connection with the Program or (C) the use by Sears of the Licensed Purchaser
Marks.

     11.3 Procedures for Indemnification. (a) (i) In the event any claim is
made, any suit or action is commenced, or any knowledge is received of a state
of facts that, if not corrected, would give rise to a right of indemnification
of a party hereunder (“Indemnified Party”) by the other party (“Indemnifying
Party”), the Indemnified Party will give written notice to the Indemnifying
Party as promptly as practicable, but, in the case of lawsuit, in no event
later than the time necessary to enable the Indemnifying Party to file a timely
answer to the complaint; provided that failure to give timely notice shall not
relieve the Indemnifying Party of its obligations hereunder except to the
extent it is actually prejudiced thereby. Such written notice shall describe
such claim in reasonable detail including the sections of this Agreement which
form the basis for such claim. The Indemnified Party shall make available to
the Indemnifying Party and its counsel and accountants at reasonable times and
for reasonable periods, during normal business hours, all books and records of
the Indemnified Party relating to any such possible claim for indemnification,
and each party hereunder will render to the other such assistance as it may
reasonably require of the other (at the expense of the party requesting
assistance) in order to insure prompt and adequate defense of any suit, claim
or proceeding based upon a state of facts that may give rise to a right of
indemnification hereunder.

          (ii) Notwithstanding the foregoing, in the event that any party becomes
aware of any actual or threatened infringement of any of the Sears Licensed
Marks or the Licensed Purchaser Marks, such party shall promptly notify in
writing the owner of such Intellectual Property. As among the parties hereto,
such owner shall then have the sole and exclusive right, but not the
obligation, to initiate action in order to remedy the infringement at its
expense and to retain any recovery therefrom. Upon the
Mark owner’s request, the other parties hereto shall cooperate with such
owner in connection with such action, but at the expense of such owner.

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     (b) Subject to the terms hereof, the Indemnifying Party shall have the
right to defend, or to direct the defense of, any such suit, claim or
proceeding. The Indemnifying Party shall notify the Indemnified Party via
facsimile transmission, with a copy by mail, within thirty days (or sooner, if
the nature of the claim so requires) of having been notified pursuant to
Section 11.3(a), whether the Indemnifying Party elects to employ counsel and
assume the defense of any such claim, suit or action. If the Indemnifying
Party does not timely notify the Indemnified Party of its election to assume
the defense (after a second notice has been given any time within or after the
time period described above), the Indemnifying Party shall be bound by any
determination in such suit, claim or proceeding or any compromise or settlement
effected by the Indemnified Party, provided that the Indemnified Party shall
not compromise or settle a suit, claim or proceeding that includes an admission
of liability of the Indemnifying Party or seeks any material non-monetary
relief, without the written consent of the Indemnifying Party, which shall not
be unreasonably withheld. The Indemnifying Party shall institute and maintain
any such defense diligently and reasonably and shall keep the Indemnified Party
fully advised of the status thereof. The Indemnified Party shall have the
right to employ its own counsel if the Indemnifying Party so elects to assume
such defense, but the fees and expenses of such counsel shall be at the
Indemnified Party’s expense, unless (i) the employment of such counsel shall
have been authorized in writing by the Indemnifying Party; (ii) such
Indemnified Party shall have reasonably concluded that the interests of such
parties are conflicting such that it would be inappropriate for the same
counsel to represent both parties (in which case the Indemnifying Party shall
not have the right to direct the defense of such action on behalf of the
Indemnified Party); or (iii) the Indemnifying Party shall not have employed
counsel to take charge of the defense of such action within a reasonable time
after electing to assume the defense thereof, and in any of such events such
reasonable fees and expenses shall be borne by the Indemnifying Party.

     (c) The Indemnifying Party shall have the right to compromise and settle
any suit, claim or proceeding in the name of the Indemnified Party; provided,
however, that the Indemnifying Party shall not compromise or settle a suit,
claim or proceeding (i) unless it indemnifies the Indemnified Party for all
Losses arising out of or relating thereto and (ii) that includes an admission
of liability of the Indemnified Party or seeks any material non-monetary
relief, without the written consent of the Indemnified Party, which consent
shall not be unreasonably withheld. Any final judgment or decree entered in
any claim, suit or action for which the Indemnifying Party did not assume the
defense in accordance herewith shall be deemed to have been consented to by,
and shall (subject to the other provisions hereof) be binding upon, the
Indemnifying Party as fully as if the Indemnifying Party had assumed the
defense thereof and a final judgment or decree had been entered in such claim,
suit or action, or with regard to such claim, suit or action by a court of
competent jurisdiction for the amount of such settlement, compromise, judgment
or decree. The Indemnifying Party shall be subrogated to any claims or rights
of the Indemnified Party as against any other persons with respect to any
amount paid by the Indemnifying Party under this Article XI.

     (d) Amounts owing under this Article XI shall be paid promptly upon
written demand for indemnification containing in reasonable detail the facts
giving rise to such liability; provided, however, that, if the Indemnifying
Party notifies the Indemnified

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Party within 30 days of receipt of such demand
that it disputes its obligations to indemnify and the parties are not otherwise
able to reach agreement after completing the escalation provisions set forth in
Section 14.23, the controversy shall be settled by binding arbitration pursuant
to the provisions of Section 14.24.

     (e) The terms of this Article XI shall survive the termination of this
Agreement.

ARTICLE XII

MERCHANT PROCEDURES

     12.1 Extension of Credit; Stores to Honor Sears Proprietary Card. Subject
to (i) the Credit Limits applicable to each Account, (ii) the terms and
conditions in the Account Agreement and (iii) the Credit Policy, Purchaser
shall extend credit to holders of a Sears Credit Card in amounts set forth as
the total for any purchase(s) reflected in Transaction Data received by
Purchaser.

     12.2 Partner Merchants. (a) Each of Sears and Purchaser shall use its
reasonable best efforts to have Purchaser and the Partner Merchants enter into
merchant processing agreements substantially in a form reasonably agreed by
Sears and Purchaser, as soon as reasonably practicable following the Effective
Date, with Sears having the primary responsibility for contacting the Partner
Merchants and forwarding the form of agreement. Sears and Purchaser shall
cooperate in good faith to transition merchant processing with respect to
Partner Merchants away from Sears, provided that Purchaser shall not be
responsible for the payment of any merchant transaction fees.

     (b) Sears shall guarantee the obligations of the Third Party Sears
Merchants.

     (c) Sears may in its sole discretion add additional Third Party Sears
Merchants to the Program on then-current Program terms.

     (d) Additional Third Party Non-Sears Merchants may be added to the Program
on terms that are mutually agreed to by the parties hereto acting through the
Program Committee.

     12.3 In-Store Payments. The parties shall continue to support In-Store
Payments. If Sears or its Affiliates shall receive any In-Store Payments,
Sears shall, directly or through its Affiliates, be deemed to hold such
In-Store Payments in trust for Purchaser until such payments are either
delivered to Purchaser or applied to reduce amounts payable by Purchaser
to Sears pursuant to the Merchant Agreement. Sears shall give or cause to be
given to each Person making an In-Store Payment a receipt for such payment.
In-Store Payments shall be credited to the Account of the relevant Cardholder
as of the date of actual receipt by Sears or its Affiliates. In the event that
In-Store Payments received by Sears and its Affiliates and creditable to
Purchaser pursuant to the Merchant Agreement on any Business Day exceed amounts
payable by Purchaser to

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Sears on such Business Day, Sears shall be required to
remit such excess to Purchaser no later than two Business Days thereafter or,
if earlier, the date on which the Settlement Amounts (as defined in the
Merchant Agreement) with respect to sales of Merchandise made on the same day
that the In-Store Payment is received are paid to Sears under the Merchant
Agreement. In the event that In-Store Payments paid by check are returned for
insufficient funds, Purchaser will promptly reimburse Sears for the amount of
any returned checks, any bank or other third party fees associated therewith,
and any third party fees incurred by Sears in representing checks for payment;
provided, however, that Sears shall comply with Purchaser’s reasonable
instructions regarding the processing of such returned checks.

     12.4 Payments at Stores in Canada. To the extent a Sears Credit Card is
accepted as payment for merchandise or services at Sears stores located in
Canada, such transaction must be presented to Purchaser in U.S. Dollars. Sears
shall perform all currency conversion in accordance with applicable Law and the
terms of the applicable Account Agreements.

ARTICLE XIII

TERM AND TERMINATION

     13.1 Initial Term and Renewal; Proration. The initial term of this
Agreement shall commence on the Effective Date, and shall continue, unless
sooner terminated pursuant to Section 8.9, 13.2 or 13.3, until the tenth
anniversary of the Effective Date (the “Initial Expiration Date”). This
Agreement shall automatically renew for additional, successive seven-year terms
unless either Sears or Purchaser delivers written notice of its election not to
renew at least 24 months prior to (i) with respect to the initial term, the
Initial Expiration Date; or (ii) with respect to any renewal term, the
expiration date of such renewal term. The expiration or termination of this
Agreement shall not terminate, affect or impair any rights, obligations or
liabilities of a party hereto that may accrue prior to such expiration or
termination or that, under the terms of this Agreement, continue after such
expiration or termination. If the commencement, expiration or any earlier
termination of this Agreement causes this Agreement to be in effect for any
period less than a full calendar year, the financial obligations of the parties
under this Agreement shall be prorated for that period of time that is less
than a full calendar year.

     13.2 Termination by Sears. Sears may terminate this Agreement at any
time upon the occurrence of any of the following events, by delivery of written
notice of termination to Purchaser:

     (a) after a Bankruptcy Event with respect to Purchaser has occurred;

     (b) after Purchaser fails to perform any of its material obligations or
breaches any of its material covenants hereunder or in the Licensing Agreement
or Merchant Agreement in any material respect, and such failure or breach shall
have continued unremedied for 90 days after delivery of written notice from
Sears of its

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intention to terminate this Agreement absent remedy of such
failure or breach within 90 days;

     (c) after a Purchaser Material Adverse Effect has occurred;

     (d) immediately prior to the time that Sears engages in a Combination with
another Person (“Combining Person”) (but subject to the consummation of such
Combination) that is subject to an agreement that would, if such Combination
were consummated, prohibit the continuation of this Agreement following the
Combination (“Combination Conflicting Agreement”); provided, that Sears has
used best efforts to cause the Combining Person to (i) terminate such
Combination Conflicting Agreement without a breach thereof, at Purchaser’s
option and expense (including through the payment of any termination fees or
liabilities); and (ii) amend such Combination Conflicting Agreement so that it
is no longer a Combination Conflicting Agreement; provided, that in the event
Sears elects to terminate this Agreement under this Section 13.2(d) but elects
not to exercise the Repurchase Option, it shall, within 30 Business Days of
such election, pay to Purchaser the Combination Termination Premium Amount;

     (e) Purchaser is no longer a wholly-owned Subsidiary of Citigroup,
Purchaser Transfers all or substantially all of its assets to a Person that is
not a wholly-owned subsidiary of Citigroup, or Citigroup Transfers all or
substantially all of the assets of the credit card business operated by it and
its Subsidiaries to a third party that is not a wholly-owned Subsidiary of
Citigroup;

     (f) upon termination of the Purchase Agreement prior to the Closing;

     (g) upon the occurrence of a Major Service Event;

     (h) Purchaser fails to pay any amount owing under the Merchant Agreement
(taking into account any permitted set-off payments) to Sears when due (except
to the extent Purchaser is disputing such amount in good faith), and such
failure to pay remains unremedied for two Business Days after delivery by Sears
of a written demand therefor to Purchaser; or

     (i) upon mutual agreement with Purchaser.

     13.3 Termination by Purchaser. Purchaser may terminate this Agreement at
any time upon the occurrence of any of the following events, by delivery of
written notice of termination to Sears:

     (a) after a Bankruptcy Event with respect to Sears has occurred;

     (b) after Sears fails to perform any of its material obligations or
breaches any of its material covenants hereunder or in the Licensing Agreement
or Merchant Agreement in any material respect, and such failure or breach shall
have continued unremedied for 90 days after delivery of written notice from
Purchaser of its intention to terminate absent remedy of such failure or breach
within 90 days;

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     (c) after any material adverse change or effect on Sears, including as a
result of a material permanent deterioration in Sears financial condition
following the Effective Date, that is reasonably expected to have a material
adverse impact on Sears’ retail profile, Purchaser or the Program, other than
any change or effect arising from General Conditions;

     (d) upon termination of the Purchase Agreement prior to the Closing; or

     (e) upon mutual agreement with Sears.

     13.4 Effective Termination Date; Effect of Notice of Termination or
Non-Renewal. (a) Effective Termination Date. The effective termination date
of this Agreement (the “Termination Date”) shall be (i) in the event a notice
of non-renewal is delivered pursuant to Section 13.1, the expiration date of
the then-current term; (ii) in the event a notice of termination is delivered
pursuant to Section 13.2 or 13.3 (other than pursuant to Section 13.2(a) or
13.3(a)), the date specified in such notice, which shall not be less than 90
days after the date notice of termination is received by the non-terminating
party; and (iii) upon the occurrence of any event described in Sections 8.9
(that require termination), 13.2(a) or 13.3(a), immediately without requirement
of any notice.

     (b) Continuing Performance. Subject to Section 13.6, Sears and Purchaser
shall continue to perform their respective obligations under this Agreement
through the later of the Termination Date or, if Sears has elected to exercise
its Repurchase Option, the closing of the Repurchase Option (the “Renewal
Termination Date”). During the period between (A) notice of termination or the
date that is one year following non-renewal notice, as applicable; and (B) the
later of the Termination Date or, if applicable, the Renewal Termination Date,
(i) Purchaser shall have no new obligation to spend any additional amounts
under the Marketing Plan or the Marketing Budget, other than existing
requirements that cannot be terminated without a loss of service or value to
Cardholders or Financial Products Customers and Sears’ obligations hereunder
shall be reduced accordingly; (ii) neither Sears nor Purchaser shall solicit
any Cardholders or any individual on the Cardholder List for any Credit Card
(other than a Sears Credit Card) to replace a Sears Credit Card; and (iii)
Sears and Purchaser shall mutually agree on all customer communications
relating to termination of this Agreement; provided that Sears may not withhold
its consent from any communications that Purchaser may be required by Law to
make to Cardholders.

     (c) Provision of Information. Upon notice of termination or non-renewal,
and upon request by Sears, Purchaser shall disclose to Sears, or any Person
designated by Sears, information concerning the Accounts, excluding the terms
of this Agreement (other than the provisions of Article XIII relating to the
Repurchase Option), for purposes of determining whether to exercise the
Repurchase Option and, upon exercise, for purposes of effectuating such
exercise; provided that Sears shall first have obtained a written
confidentiality agreement from each such Person in form and substance similar
to the Confidentiality Agreement (as defined in the Purchase

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Agreement).
Purchaser shall cooperate with Sears and any such Person(s) in providing
information concerning the assets, including the Accounts, that are included in
the Sears Repurchase Assets.

     13.5 Repurchase of Assets Upon Termination or Expiration.

     (a) Repurchase Option. Upon any delivery of a notice of non-renewal
pursuant to Section 13.1, or upon delivery of notice of termination of this
Agreement pursuant to Section 13.2 or 13.3 or upon termination under Section
8.9, other than a notice of non-renewal delivered by Sears prior to the Initial
Expiration Date, Sears shall have the option to purchase, or arrange for the
purchase by another Person, from Purchaser (A) all (but not less than all) of
the Accounts, along with all (but not less than all) of the Accounts
Receivables originated under such Accounts (other than Accounts that have been
charged-off, or have had electronic notice of bankruptcy or notice of fraud
given), together with all related Account Documentation and other data, books
and records and Cardholder Information that is in existence as of the date of
such purchase; (B) subject to Section 3.3(e), all (but not less than all) of
the Financial Products, together with all related Financial Products
Documentation and other data, books and records and Cardholder Information that
is in existence as of the date of such purchase (including, at Sears’ option,
the stock of Sears Life Insurance Company); and (C) all (but not less than all)
other assets, if any, including real property, equipment, furniture, fixtures
and other tangible personal property that are primarily used in connection with
the Program, as determined by Purchaser (collectively, the “Sears Repurchase
Assets”), on the terms and conditions set forth in this Article XIII.

     (b) Repurchase Notice. Simultaneously with the delivery by Sears to
Purchaser of a notice of non-renewal or termination for which Sears has a
Repurchase Option, or within 180 days (or 120 days under Section 8.9) after
delivery by Purchaser to Sears of a notice of non-renewal or termination for
which Sears has a Repurchase Option, whichever is applicable, Sears shall
notify Purchaser of whether it shall exercise the Repurchase Option. If Sears
fails to timely deliver notice of exercise of the Repurchase Option to
Purchaser, Sears shall be deemed to have elected not to exercise the Repurchase
Option. Any notice of exercise of the Repurchase Option shall include the name
of an Independent Appraiser selected by Sears.

     (c) Repurchase Price Determination. The purchase price (“Repurchase
Price”) for the Sears Repurchase Assets will be determined in accordance with
this Section 13.5(c). In the event the Agreement terminates pursuant to
Sections
13.3(a) or (b) or 13.2(d) during the first ten years of the Term, the
Repurchase Price will be equal to the greater of (x) the fair market value of
the Sears Repurchase Assets (determined in accordance with the procedures
outlined below); and (y) the Minimum Repurchase Price, each determined as of
the Repurchase Closing Date. In all other cases, the Repurchase Price will be
equal to the fair market value of the Sears Repurchase Assets (determined in
accordance with the procedures outlined below), determined as of the Repurchase
Closing Date. Upon receipt of notice of Sears’ election to exercise the
Repurchase Option, Purchaser shall also nominate an Independent Appraiser and
provide written notice of such nomination to Sears within 30 days of receipt of
the exercise notice

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from Sears. Within fifteen days of the receipt of such
nomination by the other party, each of Sears and Purchaser shall advise the
other party that they either accept or challenge the other party’s selection of
Independent Appraiser. In the event that either party objects to the
Independent Appraiser nominated by the other party, the parties will negotiate
in good faith to resolve such difference promptly and, in the event that no
resolution is obtained within fifteen days after the date of notice of any
objection to any nominated Independent Appraiser is given, either party may
initiate arbitration proceedings pursuant to Section 14.24 herein. If both of
the nominated Independent Appraisers are acceptable, each of Sears and
Purchaser shall promptly retain their respective nominated Independent
Appraisers and provide such information to both Independent Appraisers as is
necessary to permit each of the Independent Appraisers to provide a valuation
of the Sears Repurchase Assets no later than a date selected by the parties for
such purpose (which date will be not later than 45 days after the date on which
the parties have agreed on the designation of the Independent Appraisers);
provided, that the information provided to both Independent Appraisers shall be
identical. Such appraisals shall be performed on the basis of the assumptions
set forth in Schedule 13.5(c). The fair market value shall be the average of
the valuations received from the Independent Appraisers, and such averaged
valuation shall not be subject to Section 14.24 and shall be final and binding
on the parties and enforceable in any court having jurisdiction, unless the
valuations made by the two Independent Appraisers differ by more than an amount
equal to 2.5% of the lesser of the two valuations (such difference, “De Minimis
Difference”). If the valuations made by the two Independent Appraisers differ
by more than a De Minimis Difference, such Independent Appraisers will jointly
select a third Independent Appraiser of recognized standing and experience in
valuing credit card portfolios, who shall be retained jointly and compensated
jointly and equally by Sears and Purchaser. If the two Independent Appraisers
fail to jointly agree on a third Independent Appraiser within fifteen days of
the receipt by both parties of the evaluation of the other party’s Independent
Appraiser, at the request of any party, such Independent Appraiser shall be
selected by the CPR within fifteen days of such request. Such third
Independent Appraiser will provide a valuation of the Sears Repurchase Assets
as of the appraisal date selected by the parties (as described above) using the
same information that was made available to the initial two Independent
Appraisers, and based upon the assumptions set forth in Schedule 13.5(c). If
(i) the initial valuations delivered by the initial two Independent Appraisers
differ by an amount equal to or less than 4% of the lesser of the two initial
valuations; and (ii) the valuation delivered by the third Independent Appraiser
is between the two initial valuations delivered by the initial two Independent
Appraisers or differs from either of such valuations by any amount equal to or
less than a De
Minimis Difference, the fair market value will be the average of the three
appraisals, and such averaged valuation shall be final and binding on the
parties and enforceable in any court having jurisdiction. If (i) the initial
valuations delivered by the initial two Independent Appraisers differ by an
amount equal to or less than 4% of the lesser of the two initial valuations and
the third appraisal is not between the two initial valuations delivered by the
initial two Independent Appraisers and differs from both of such valuations by
an amount greater than a De Minimis Difference; or (ii) the valuations
delivered by the initial two Independent Appraisers differ by an amount greater
than 4% of the lesser of the two initial valuations as of the appraisal date,
the fair market value

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will be the average of the two valuations received from
any two of the three Independent Appraisers that are closest in amount to each
other, and the third valuation will be disregarded, and such averaged valuation
shall not be subject to Section 14.24 and be final and binding on the parties
and enforceable in any court having jurisdiction. The expenses of any
Independent Appraiser nominated by Sears shall be borne by Sears and the
expense of any Independent Appraiser nominated by Purchaser shall be borne by
Purchaser.

     (d) Repurchase Agreement. After the purchase price for the Sears
Repurchase Assets is established, Purchaser and Sears shall cooperate to
negotiate in good faith a definitive purchase agreement (the “Repurchase
Agreement”) upon terms, including conditions, representations, warranties and
indemnities, that are customary and where applicable, substantially similar to
the Purchase Agreement. Purchaser shall not unreasonably withhold or delay its
execution of the Repurchase Agreement or any other documents necessary to
effectuate such sale. The parties to the Repurchase Agreement shall use all
reasonable best efforts to ensure that the closing date for such purchase (the
“Repurchase Closing Date”) occurs as promptly as reasonably practicable
following the execution thereof; provided, that the Repurchase Option shall
expire in the event that the Repurchase Closing Date does not occur on or prior
to the later of (A) eighteen months from the date of the Repurchase Agreement
or (B) the Termination Date. Any buyer acting on behalf of Sears in the
exercise of the Repurchase Option shall be bound by this subsection as if it
were Sears.

     (e) Treatment of Securitized Assets. In the event that Purchaser has
securitized or participated any of the Accounts, or the Accounts Receivables
included therein, that are included in the Sears Repurchase Assets, the parties
will cooperate to transfer such assets, or Purchaser’s interest in and
servicing rights with respect to such assets, to Sears or its assignee on
reasonable terms under a Repurchase Agreement, and the manner and terms of such
transfer shall be taken into account in the determination of fair market value
in connection with the determination of the Repurchase Price.

     (f) Orderly Transfer. Purchaser shall use all reasonable best efforts to
assist Sears or its assignee to convert the processing and servicing of the
Sears Repurchase Assets to Sears, its assignee or its processor, as the case
may be, as soon as practicable after the Repurchase Closing Date. The parties
to the Repurchase Agreement shall negotiate and enter into a transition
services agreement, substantially in the form of the Transition Services
Agreement, for Purchaser to service the Accounts until the
conversion date occurs and for a period of up to one year at its election,
any other services that may be reasonably necessary in connection with the
Repurchase Agreement.

     (g) Solicitation. Without the prior written consent of Purchaser, Sears
shall not, and shall cause its respective Affiliates not to, during the Term
and for a period of one year from the expiration of the Term, and provided that
no Repurchase Option has been exercised pursuant to Section 13.5 hereof,
solicit, hire or cause to be solicited for employment (other than pursuant to
any general circulation not specifically targeted to the employees of
Purchaser), any individual who is an employee of Purchaser. Notwithstanding
anything contained in this Section 13.5 to the contrary, Sears and its

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Affiliates shall not be prohibited from soliciting for employment or hiring
employee of Purchaser who have been terminated by Purchaser, and the parties
agree that, upon exercise by Sears of a Repurchase Option, Sears may extend
offers of employment to employees of Purchaser who are primarily dedicated to
the Program.

     13.6 Treatment of Assets Upon Termination. (a) If Sears purchases, or
arranges for the purchase of, the Sears Repurchase Assets, and the Repurchase
Closing Date is to occur after the original date of expiration or termination
of this Agreement, this Agreement shall be extended and shall remain in full
force and effect until the Repurchase Closing Date; provided, that, commencing
on the date of termination or expiration of the Agreement, (i) neither
Purchaser (nor any Affiliate thereof or any third party on Purchaser’s behalf)
shall solicit any Cardholder or Financial Products Customer for any products,
including Credit Cards or General Financial Services Products; and (ii)
Purchaser shall thereafter have no rights to use any Cardholder Information,
Confidential Information or any other information supplied by Sears with
respect to the Program or this Agreement, except to perform any obligations
with respect to the servicing of the Accounts and Financial Product accounts as
contemplated hereby.

     (b) In the event Sears does not purchase or arrange for the purchase of
the Sears Repurchase Assets in accordance with this Agreement, from the date of
termination or expiration of this Agreement, (i) Purchaser shall, within 180
days, cease to use the Sears Licensed Marks and shall not claim any right,
title, or interest in or to the Sears Licensed Marks granted pursuant to this
Agreement and the Licensing Agreement; (ii) Purchaser shall, within 180 days
following such date (the “Post-Termination Period”), reissue at its expense new
card plastics not bearing any Sears Licensed Marks for Accounts and shall
substitute or cancel the Sears Proprietary Cards; (iii) during and after the
Post-Termination Period, Purchaser shall not market the Program (provided,
however, that Purchaser may conclude any solicitation that is required by
applicable Law), and (iv) during and after the Post-Termination Period, (i) if
substantially all Stores are no longer generally open to the public, Purchaser
may treat the Accounts in any manner that it determines or (ii) in any other
case, Purchaser may treat the Accounts in any manner it determines, but for
four years following the termination or expiration of this Agreement, Purchaser
shall have no right to use, or to permit an Affiliate or third party to use,
any Cardholder Information or other information supplied by Sears with respect
to the Program or this Agreement to market or promote a Credit Card or other
General
Financial Services Product to Cardholders together with a third party that
offers the same categories of goods and services as Sears.

     13.7 Other Termination Provisions. If this Agreement terminates for any
reason:

     (a) For the avoidance of doubt, it is understood that Sears shall be free
to issue, by itself or through others, the Sears Credit Cards or any other
Credit Cards, including Credit Cards bearing Sears Licensed Marks.

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     (b) At the request of either Sears or Purchaser, the other party shall
reasonably cooperate with such requesting party, at such requesting party’s
expense, to the extent necessary to satisfy any Law applicable to such
requesting party.

     (c) Sears and Purchaser shall mutually agree on all communications to
Cardholders notifying them of the termination of the Program.

     13.8 Survival. The terms of Articles IX, X, XI and XIV, Sections 6.8,
8.1, 13.4, 13.5(a), (e), (f) and (g), 13.6, 13.7 and 13.8 shall survive the
expiration or termination of this Agreement.

ARTICLE XIV

GENERAL

     14.1 Successors and Assigns. All terms and provisions of this Agreement
will be binding upon and will inure to the benefit of the parties and their
respective permitted Successors and assigns. If Sears conveys, transfers or
otherwise disposes of (whether in one or in a series of transactions) all or
substantially all of its assets, Sears shall assign to the acquirer, and shall
require such acquirer to unconditionally assume, this Agreement in accordance
with its terms, unless acquirer has a Conflicting Agreement; provided that, if
there shall be more than one acquirer, such acquirer that would upon
consummation of the dispositions hold the largest portion of such disposed
assets shall be the acquirer for purposes of this sentence.

     14.2 Entire Agreement. The Program Related Agreements, together with the
Purchase Agreement, and the Transition Services Agreement, embody the entire
understanding of the parties, and there are no further or other agreements or
understandings, written or oral, in effect between the parties, relating to the
subject matter of this Agreement.

     14.3 Relationship of the Parties. The parties agree that in performing
their responsibilities pursuant to this Agreement they are in the position of
independent contractors. This Agreement is not intended to create, nor does it
create and shall not be construed to create, a relationship of partners or
joint venturers, fiduciaries or any association for profit
between and among Purchaser and Sears or any of their respective
Affiliates. None of the parties shall take any action to circumvent its
obligations under this Agreement or with the primary purpose of depriving the
other parties of their rights hereunder.

     14.4 Force Majeure. Subject to Section 5.6(c), in the event that a party
fails to perform its obligations under this Agreement in whole or in part as a
consequence of events beyond its reasonable control (including acts of God,
fire, explosion, accident, floods, embargoes, epidemics, war, acts of
terrorism, nuclear disaster or riot), such failure to perform shall not be
considered a breach of this Agreement during the period of such disability;
provided that, such period shall be no longer than 30 days. In the event of
any force majeure occurrence as set forth in this Section 14.4, the disabled
party shall use its

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best efforts to meet its obligations as set forth in this
Agreement. The disabled party shall promptly and in writing advise the other
party if it is unable to perform due to a force majeure event, the expected
duration of such inability to perform and of any developments (or changes
therein) that appear likely to affect the ability of that party to perform any
of its obligations hereunder in whole or in part. During the period when the
disabled party is unable to perform its obligations hereunder, the other party
shall not be required to perform any of its obligations that cannot be
performed as a result of the disabled party’s nonperformance due to force
majeure.

     14.5 Books and Records. Each of Sears and Purchaser shall maintain books
of account and records, in accordance with its standard practices and
procedures, of all transactions arising in connection with its obligations
pursuant to this Agreement for a period of five years from expiration or
earlier termination. In addition to, and notwithstanding the foregoing, to the
extent Sears or Purchaser has possession of any records required to be
maintained by the other party pursuant to applicable Law, the party with
possession shall maintain such records in such form and for such time periods
as are provided for in such Law. Each such party shall furnish to the other
party all such information concerning transactions the requesting party may
reasonably request; provided, however, that no party shall be required to
divulge any records to the extent prohibited by applicable Law.

     14.6 Public Announcements. From the date hereof until 30 days after the
termination of this Agreement, Sears and Purchaser (i) will consult with each
other before issuing, or permitting any agent or Affiliate to issue, any press
releases or otherwise making or permitting any agent or Affiliate to make, any
public statements with respect to the Program, this Agreement, the Licensing
Agreement or the transactions contemplated hereby and thereby and (ii) will
not, except as may be required by Law or stock exchange rule, issue any such
public statement without the prior written consent of the other party (which
consent may not be unreasonably withheld).

     14.7 Audits. (a) From time to time during the Term, upon reasonable
notice by Sears, Purchaser will allow Sears or a third party, selected by Sears
and reasonably acceptable to Purchaser, to perform, at times and in a manner
that does not unreasonably disrupt the operations of Purchaser, an audit to
review any aspect of Purchaser’s operation of the Program, including to
determine whether Purchaser is in compliance with all of its obligations
contained in this Agreement.

     (b) From time to time during the Term, upon reasonable notice by
Purchaser, Sears will allow Purchaser or a third party, selected by Purchaser
and reasonably acceptable to Sears, to perform, at times and in a manner that
does not unreasonably disrupt the operations of Sears, an audit to determine
whether Sears is in compliance with all of its obligations contained in this
Agreement.

     14.8 Assignment; Delegation of Services. (a) Other than as set forth in
Article XIII and Section 14.1, a party hereto shall not Transfer this Agreement
or any of its rights hereunder without the prior written consent of the other
party hereto (which consent may be withheld in such other party’s sole
discretion), and any such purported

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Transfer without such consent shall be
void; provided, however, that Purchaser may Transfer this Agreement, and all of
the rights and obligations contained herein (including licenses granted herein,
notwithstanding any contrary limitation on sub-license rights), in whole or in
part, to a wholly-owned Subsidiary of Citigroup upon notice to Sears but
without Sears’ consent, and Sears may Transfer this Agreement and all of the
rights and obligations contained herein, in whole or in part, to a wholly-owned
Subsidiary, provided, however, in each such case that such Subsidiary is
reasonably capable of performing the obligations of Purchaser or Sears, as
applicable, hereunder; provided, further, that the Transferring party shall
remain obligated and liable to the other party without diminution of such
obligation or liability (or the other party’s rights or benefits) by virtue of
such Transfer and references to Purchaser or Sears, as applicable, hereunder
shall include such Transferee.

     (b) Either Sears or Purchaser may delegate the performance of the services
required to be performed by it hereunder to a wholly-owned Subsidiary (or, in
the case of Purchaser, a wholly-owned Subsidiary of Citigroup); provided that
the assigning party shall remain obligated and liable to the other party for
the provision of such services without diminution of such obligation or
liability (or the other party’s rights or benefits) by virtue of such
arrangement .

     (c) Either Sears or Purchaser may outsource the services required to be
performed by it hereunder to a third party; provided, that Purchaser shall not
outsource any customer service or Store relations personnel to a third party
without Sears’ prior written consent.

     14.9 Change in Law; Severability. If a Change in Law is applicable to
any provision of this Agreement, the parties will perform such terms to the
maximum extent permitted under Law. If any provision of this Agreement or the
application of any such provision is invalid, illegal or unenforceable in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or invalidate or render unenforceable
such provision in any other jurisdiction. To the extent permitted by
applicable Law, the parties waive any provision of Law that renders any
provision of this Agreement invalid, illegal or unenforceable in any respect.
The parties shall, to the extent lawful and practicable, use their reasonable
best efforts to enter into arrangements to reinstate the intended benefits, net
of the intended burdens, of any such provision held invalid, illegal or
unenforceable.

     14.10 Survival. Except as may otherwise be specifically provided in this
Agreement, all covenants, agreements, representations and warranties of the
parties made in or pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
thereby and, subject to Section 13.8, shall terminate upon and as of the
expiration or other termination of this Agreement.

     14.11 Expenses. Except as is otherwise specifically provided in this
Agreement, each party shall pay its own costs and expenses in connection with
this

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Agreement and the transactions contemplated hereby, including all
regulatory fees, attorneys’ fees, accounting fees and other expenses.

     14.12 Amendment and Waiver. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by each party hereto. Any
failure of a party to comply with any obligation, covenant, agreement or
condition contained in this Agreement may be waived by the party entitled to
the benefits thereof only by a written instrument duly executed and delivered
by the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure of compliance.

     14.13 Remedies; Specific Performance. (a) The rights and remedies of
the parties under this Agreement are cumulative and are not exclusive of any
rights or remedies that the parties would otherwise have under this Agreement
or otherwise.

     (b) The parties hereto acknowledge that money damages are not an adequate
remedy for violations of this Agreement and that any party hereto may, in its
sole discretion, apply to the court set forth in Section 14.21(a) for specific
performance, or injunctive, or such other relief as such court may deem just
and proper, in order to enforce this Agreement or prevent any violation
thereof, and to the extent permitted by applicable Law, each party hereto
waives any objection to the imposition of such relief and any requirement for
the provision of financial assurances as a condition to the granting of such
relief.

     (c) In no event will any party to this Agreement be liable to another
party thereto for special, indirect, punitive or incidental damages, lost
profits, lost savings or any other consequential damages, even if such party
has been advised of the possibility of such damages.

     14.14 Table of Contents; Headings. The Table of Contents and Article and
Section headings of this Agreement are for convenience of reference only and
shall not affect the construction of or be taken into consideration in
interpreting this Agreement.

     14.15 Limitation on Rights of Others. Nothing in this Agreement, whether
express or implied, shall give or be construed to give any Person (other than
the parties thereto and their permitted Successors and assigns) any legal or
equitable right, remedy or claim under or in respect of this Agreement, unless
such Person is expressly stated in this Agreement to be entitled to any such
right, remedy or claim.

     14.16 Counterparts; Effectiveness. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same contract.

     14.17 Payment Terms; Initial Periods. (a) The payment of any Sears Fees
(and any other payment hereunder made by Purchaser to Sears) shall be made

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without any deduction or withholding for tax or otherwise, except as required
by Law (provided, however, that to the extent that any deduction or withholding
is required as a result of any action taken by Purchaser after the Closing,
Purchaser shall pay to Sears such additional amount as shall make Sears whole
for such deduction or withholding), and shall be made by wire transfer in
lawful money of the United States, immediately available funds. Any payment
hereunder that is due on a day that is not a Business Day shall be payable on
the next succeeding Business Day.

     (b) Where this Agreement requires performance or payments to be measured
as of calendar measurement periods (e.g., calendar months or quarters) and the
Effective Date falls prior to the commencement of such period, the period
between the Effective Date and the commencement of such initial calendar period
shall be added to such initial calendar period and any requirements therewith
shall be extended on a pro rata basis.

     14.18 Drafting. Each party acknowledges that its legal counsel
participated in the drafting of this Agreement. The parties hereby agree that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement to
favor one party over any other.

     14.19 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal Laws of the State of Delaware,
without regard to the conflict of laws principles of such state.

     14.20 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.

     14.21 Jurisdiction; Consent to Service of Process. (a) Each party to
this Agreement hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of any state or federal court
sitting in Wilmington, Delaware, and any appellate court from any such court,
in any suit, action or proceeding arising out of or relating to preliminary or
provisional relief to prevent irreparable harm in accordance with this
Agreement, or to compel arbitration in accordance with Section 14.24 hereof or
for recognition or enforcement of any arbitral award resulting from any such
arbitration proceeding, or disputes regarding Intellectual Property arising
exclusively under Article VI, and each party hereby irrevocably and
unconditionally agrees that all claims in respect of any such suit, action or
proceeding may be heard and determined in such Delaware state court or, to the
extent permitted by Law, by removal or otherwise, in such federal court.

     (b) Each party to this Agreement hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, (i) any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding in any state or federal court sitting in the City of
Wilmington, (ii) the defense

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of an inconvenient forum to the maintenance of
such suit, action or proceeding in any such court and (iii) the right to
object, with respect to such suit, action or proceeding, that such court does
not have jurisdiction over such party.

     (c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for the giving of notices pursuant to such
agreement or instrument. Nothing in this Section 14.21 shall affect the right
of any party to such agreement or instrument to serve process in any other
manner permitted by Law.

     14.22 Notices. All notices and other communications to be given to any
party under this Agreement shall be in writing and any notice shall be deemed
given when delivered by hand, courier or overnight delivery service or three
days after being mailed by certified or registered mail, return receipt
requested, with appropriate postage prepaid, or when received in the form of a
facsimile, and shall be directed to the address or facsimile number of such
party specified below (or at such other address or facsimile number as such
party shall designate by like notice):

	 	(a)	 	If to Sears or Sears IP Sub:

	 		 	Sears, Roebuck and Co.

3333 Beverly Road

Hoffman Estates, Illinois 60179

Attention: General Counsel

Fax No.: (847) 286-2471

	 		 	With a copy to:

	 		 	Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attention:    Andrew R. Brownstein

          
           Craig M. Wasserman

Fax No.:       (212) 403-2000

	 	(b)	 	If to the Purchaser:

	 		 	Citibank USA, N.A.

701 E. 60th North

Sioux Falls, South Dakota 57105

Attn: General Counsel

Fax No.: (605) 330-6745

	 		 	with a copy to:

	 		 	Citicorp Credit Services, Inc. (USA)

Four Parkway North

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	 		 	Deerfield, IL 60015

Attn: General Manager

Fax No.: (847) 579-3259

	 		 	with a copy to:

	 		 	Citigroup Inc.

Corporate Law Department

425 Park Avenue, 2nd Fl.

New York, New York 10043

Attn:      Associate General Counsel

                Mergers & Acquisitions

Fax No.:  (212) 793-2402

	 		 	With a copy to:

	 		 	Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036

Attention:      Eric Friedman, Esq.

                        Stuart D. Levi, Esq.

Fax No.:         (212) 735-2000

     14.23 Escalation. Upon the occurrence of any event that, pursuant to the
express provisions of this Agreement, is subject to the escalation provisions
set out in this Section 14.23, or upon the occurrence of any other material
dispute under this Agreement by written notice to the other party (with Sears
and Sears IP Sub being considered one party for purposes of this Section), the
following procedures shall apply:

     (a) The parties will attempt to resolve the subject of the escalation
promptly by negotiations between the Chief Financial Officer of Sears and the
Chief Executive Officer of Purchaser’s credit card business (collectively, the
“Senior Officers”). The Senior Officers will meet in person or by telephone
within ten Business Days after the notice of the dispute and attempt in good
faith to resolve the subject matter of the escalation.

     (b) In the event the Senior Officers do not resolve the dispute within 30
Business Days from receipt of notice of a dispute (which time period may be
extended by written agreement of the Senior Officers), either party may refer
the dispute to arbitration in accordance with Section 14.24.

     14.24 Binding Arbitration. (a) Except for Intellectual Property
disputes arising exclusively under Article VI, which are to be resolved in a
Delaware court pursuant to Section 14.21 herein, and except as set forth in the
last sentence of Section

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8.9, any controversy, dispute or claim (whether lying
in contract or tort) between or among the parties arising out of or related to
this Agreement or the breach, termination or validity thereof (“Dispute”)
including those set forth in Section 14.23 above, shall, after the expiration
of the time period set forth in Section 14.23(b), if applicable, at the request
of any party (with Sears and Sears IP Sub being considered one party for
purposes of this Section) be submitted to arbitration in accordance with the
CPR Rules for Non-Administered Arbitration (the “Rules”) of the CPR Institute
for Dispute Resolution (the “CPR”) then in effect, except as modified herein,
by notifying the other parties of its election to arbitrate such controversy,
dispute or claim in accordance with the Rules.

     (b) Each Dispute submitted by a party to arbitration shall be heard by an
arbitration panel composed of three neutral and impartial arbitrators, each of
whom shall have relevant business experience or be otherwise experienced to
judge such dispute or claim. Sears and Purchaser shall each appoint one such
arbitrator within fifteen days after the receipt by the respondent of the
notice of arbitration. If either party fails to appoint its arbitrator within
such fifteen-day period, any party may apply to the CPR to appoint an
arbitrator on behalf of the party that has failed to appoint its arbitrator.
The two arbitrators appointed by or on behalf of (as the case may be) the
parties shall jointly appoint a third arbitrator, who shall chair the
arbitration panel (the “Chairman”). If the
arbitrators appointed by or on behalf of the parties do not agree on a
Chairman within fifteen days after the latter of the two arbitrators appointed
by or on behalf of the parties has been appointed, the Chairman shall, at the
request of either party, be appointed by the CPR. Any Chairman appointed by
the CPR shall be a retired judge or an attorney admitted to practice for at
least fifteen years with experience in the arbitration of complex commercial
cases. If for any reason an arbitrator is unable to perform his or her
function, he or she shall be replaced and a substitute shall be appointed in
the same manner as the arbitrator replaced was appointed.

     (c) Except as otherwise stated herein, arbitration proceedings shall be
conducted in accordance with the procedures of the CPR. In any arbitration
proceeding hereunder (i) proceedings shall, unless otherwise agreed by the
parties, be held in Chicago, Illinois; (ii) the arbitration panel shall have no
power to award punitive damages and shall be bound by all statutes of
limitation that would otherwise be applicable in a judicial action brought by a
party; and (iii) the decision of a majority of the arbitrators (or the Chairman
if there is no such majority) shall be final and binding on the parties and
shall be enforceable in any court of competent jurisdiction. The parties
hereby waive any rights to appeal or to review of such decision by any court or
tribunal and also waive any objections to such enforcement.

     (d) Notice preliminary to, in conjunction with, or incident to any
arbitration proceeding may be sent to the parties by registered or certified
mail (return receipt requested) at the address set forth in Section 14.22 and
personal service is hereby waived. The arbitrators may award recovery of all
costs and fees incurred in connection with the arbitration and the proceeding,
and obtaining any judgment related thereto, of each Dispute (including
reasonable attorney’s fees and expenses and arbitrators’ fees and expenses and
court costs, in each case, with respect to such disputed matter) to the party
that substantially prevails in the arbitration proceeding with respect to such
Dispute.

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     (e) No provision of this Section 14.24 shall limit the right of any party
to this Agreement to exercise self-help remedies, or obtaining provisional,
remedies from a court of competent jurisdiction before the appointment of the
arbitral tribunal. The exercise of a remedy does not waive the right of either
party to resort to arbitration. Without prejudice to such provisional remedies
as may be available under the jurisdiction of a court, the arbitral tribunal
shall have full authority to grant provisional remedies and to direct the
parties to request that any court modify or vacate any temporary or preliminary
relief issued by such court, and to award damages for the failure of any party
to respect the arbitral tribunal’s orders to that effect.

     14.25 Taxes. Each provider of services under this Agreement (a “Vendor”)
shall invoice (by jurisdiction) the recipient of such services for any sales,
use or similar gross receipts-based taxes imposed against or upon such services
(“Sales Taxes”). In addition to any amounts otherwise payable pursuant to this
Agreement, the recipient of the aforementioned services shall be responsible
for any such Sales Taxes and shall either (i) remit such Sales Taxes to Vendor
(and Vendor shall remit the amounts so received from the recipient of such
services to the applicable taxing authority) or (ii) provide Vendor with a
certificate or other acceptable proof evidencing an exemption from liability
for such Sales Taxes.

* * * * *

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     IN WITNESS WHEREOF, this Agreement has been executed on behalf of each of
the parties hereto as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	SEARS, ROEBUCK AND CO
	 	 	 	 	 	 	 
	 	 	By	 	/s/ Paul J. Liska
	 	 	 	 	

	 	 	 	 	Name:
	 	Paul J. Liska
	 	 	 	 	Title:
	 	President, Credit and Financial
Products
	 	 	 	 	 	 	 
	 	 	SEARS INTELLECTUAL PROPERTY

MANAGEMENT COMPANY
	 	 	 	 	 	 	 
	 	 	By	 	/s/ Andrew R. Ginger
	 	 	 	 	

	 	 	 	 	Name:
	 	Andrew R. Ginger
	 	 	 	 	Title:	 	President
	 	 	 	 	 	 	 
	 	 	CITIBANK (USA) N.A
	 	 	 	 	 	 	 
	 	 	By	 	/s/ Douglas C. Morrison
	 	 	 	 	

	 	 	 	 	Name:
	 	Douglas C. Morrisson
	 	 	 	 	Title:	 	Vice President

Citicards
Chief Financial Officer/O&T
Finance

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