Document:

Exhibit 10.12.5

 

Execution Copy

 

AMENDMENT NO. 5 TO CREDIT AGREEMENT

 

This Amendment No. 5 to
Credit Agreement (this “Agreement”)
dated as of April 30, 2008, is made by and among WALTER
INDUSTRIES, INC., a Delaware corporation (the “Borrower”), BANK OF AMERICA, N.A., a national banking association
organized and existing under the laws of the United States (“Bank of America”), in
its capacity as administrative agent for the Lenders (as defined in the Credit
Agreement (as defined below)) (in such capacity, the “Administrative Agent”),
and each of the Lenders signatory hereto, and each of the Guarantors (as
defined in the Credit Agreement) signatory hereto.

 

W I T N E S S E T H:

 

WHEREAS,
the Borrower, the Administrative Agent and the Lenders have entered into that
certain Credit Agreement dated as of October 3, 2005 (as amended by
Amendment No. 1 to Credit Agreement and Waiver dated as of January 24,
2006, as further amended by Amendment No. 2 to Credit Agreement and Waiver
dated as of February 14, 2006, as further amended by Amendment No. 3
to Credit Agreement dated as of September 14, 2006, as further amended by
Amendment No. 4 to Credit Agreement dated as of October 9, 2007, as
hereby amended and as from time to time hereafter further amended, modified,
supplemented, restated, or amended and restated, the “Credit Agreement”;
the capitalized terms used in this Agreement not otherwise defined herein shall
have the respective meanings given thereto in the Credit Agreement), pursuant
to which the Lenders have made available to the Borrower a term loan facility
and a revolving credit facility, including a letter of credit facility and a
swing line facility; and

 

WHEREAS,
each of the Guarantors has entered into a Guaranty pursuant to which it has
guaranteed certain or all of the obligations of the Borrower under the Credit
Agreement and the other Loan Documents; and

 

WHEREAS,
the Borrower has requested that the Administrative Agent and the Lenders agree
to amend certain terms of the Credit Agreement, which the Administrative Agent
and the Lenders party hereto are willing to do on the terms and conditions
contained in this Agreement;

 

NOW,
THEREFORE, in consideration of the premises and
further valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 

1.             Amendments to Credit Agreement.  Subject to the terms and conditions set forth
herein, the Credit Agreement, including all schedules and exhibits thereto, is
hereby amended such that, after giving effect to all such amendments, it shall
read in its entirety as attached hereto as Exhibit A.

 

2.             Effectiveness; Conditions
Precedent.  The effectiveness of this
Agreement and the amendment to the Credit Agreement provided in Paragraph 1
hereof are subject to the satisfaction of each the following conditions
precedent:

 

 

(a)           The Administrative Agent shall have received each of the
following fees, documents or instruments in form and substance reasonably
acceptable to the Administrative Agent:

 

(i)            counterparts of this Agreement, duly executed by the
Borrower, the Administrative Agent, each Guarantor and the Required Lenders,
which counterparts may be delivered by telefacsimile or other electronic means
(including .pdf), but such delivery will be promptly followed by the delivery
of four (4) original signature pages by each Person party hereto
unless waived by the Administrative Agent;

 

(ii)           an amendment fee payable to each Lender that executes this
Agreement by 5:00 p.m. EST on April 28, 2008, such amendment fee for each Lender’s own
account, in an amount equal to (a) for each such Revolving Lender,
twenty-five basis points (25 “bps”) multiplied  by such Revolving
Lender’s Revolving Credit Commitment immediately prior to the effective date of
this Agreement and (b) for each Term Loan Lender, twenty-five basis points
(25 “bps”) multiplied  by such Term Loan Lender’s Outstanding
Amount with respect to the Term Loan immediately prior to the effective date of
this Agreement;

 

(iii)          evidence satisfactory
to the Administrative Agent that the
Mortgage Warehouse Facility has been or concurrently with the date hereof is
being terminated and all Liens securing obligations under the Mortgage
Warehouse Facility have been or concurrently with the date hereof are being
released; and

 

(iv)          such other assurances, certificates, documents, consents or
opinions as the Administrative Agent reasonably may require.

 

(b)           All fees and expenses payable to the
Administrative Agent and the Lenders (including the reasonable fees and
expenses of counsel to the Administrative Agent) shall have been paid in full
(without prejudice to final settling of accounts for such fees and expenses).

 

3.             Consent of the
Guarantors.  Each Guarantor hereby
consents, acknowledges and agrees to the amendment and other matters set forth
herein and hereby confirms and ratifies in all respects the Guaranty to which
such Guarantor is a party  (including
without limitation the continuation of such Guarantor’s payment and performance
obligations thereunder upon and after the effectiveness of this Agreement
and the amendment contemplated hereby) and the
enforceability of such Guaranty against such Guarantor in accordance with its
terms.

 

4.             Representations
and Warranties.  In order to induce
the Administrative Agent and the Lenders to enter into this Agreement, the
Borrower represents and warrants to the Administrative Agent and the Lenders as
follows:

 

(a)           The representations and warranties
made by the Borrower  in Article VI
of the Credit Agreement and in each of the other Loan Documents to which it is
a party are 

 

2

 

true and correct in all
material respects on and as of the date hereof, except to the extent that such
representations and warranties expressly relate to an earlier date;

 

(b)           The Persons appearing as Guarantors
on the signature pages to this Agreement constitute all Persons who are
required to be Guarantors pursuant to the terms of the Credit Agreement and the
other Loan Documents, including without limitation all Persons who became
Subsidiaries or were otherwise required to become Guarantors after the Closing
Date, and each of such Persons has become and remains a party to a Guaranty as
a Guarantor;

 

(c)           This Agreement has been duly
authorized, executed and delivered by the Borrower and Guarantors party hereto
and constitutes a legal, valid and binding obligation of such parties; and

 

(d)           After giving effect to this
Agreement, no Default or Event of Default has occurred and is continuing.

 

5.             Post-Effectiveness
Obligations.  The Borrower hereby
agrees to deliver, or cause to be delivered, to the Administrative Agent on or
before May 30, 2008
fully-executed amendments to each Mineral Rights Mortgage, each amendment in
form and substance acceptable to the Administrative Agent, along with such
other assurances, certificates, documents, consents or opinions as the
Administrative Agent or the Required Lenders may reasonably require.  The Administrative Agent may, but shall not
be obligated to, extend the time (if applicable) for the satisfaction of any of
the requirements set forth herein by up to thirty (30) days in its sole
discretion.

 

The Borrower
hereby acknowledges and agrees that the failure to satisfy any of the
requirements set forth in this Section 5 within the time provided
therefor (including any extension granted by the Administrative Agent) shall
constitute a default hereunder and an additional Event of Default under the
Credit Agreement for all purposes, and, without limiting the foregoing, all
rights, powers, remedies and restrictions, including restrictions on extensions
of credit, under the Loan Documents resulting from an Event of Default shall be
applicable.

 

6.             Entire Agreement.  This Agreement, together with all the Loan
Documents (collectively, the “Relevant Documents”), sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relating to such subject matter. 
No promise, condition, representation or warranty, express or implied,
not set forth in the Relevant Documents shall bind any party hereto, and no
such party has relied on any such promise, condition, representation or
warranty.  Each of the parties hereto
acknowledges that, except as otherwise expressly stated in the Relevant
Documents, no representations, warranties or commitments, express or implied,
have been made by any party to the other in relation to the subject matter
hereof or thereof.  None of the terms or
conditions of this Agreement may be changed, modified, waived or canceled
orally or otherwise, except in writing and in accordance with Section 11.01
of the Credit Agreement.

 

7.             Full Force and
Effect of Agreement.  Except as
hereby specifically amended, 

 

3

 

modified or supplemented, the Credit
Agreement and all other Loan Documents are hereby confirmed and ratified in all
respects and shall be and remain in full force and effect according to their
respective terms.

 

8.             Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.  Delivery of an
executed counterpart of a signature page of this Agreement by telecopy or
other electronic means (including .pdf) shall be effective as delivery of a
manually executed counterpart of this Agreement.

 

9.             Governing Law.  This Agreement shall in all respects be
governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts executed and to be performed entirely within such
State, and shall be further subject to the provisions of Sections 11.14
and 11.15 of the Credit Agreement.

 

10.           Enforceability.  Should any one or more of the provisions of
this Agreement be determined to be illegal or unenforceable as to one or more
of the parties hereto, all other provisions nevertheless shall remain effective
and binding on the parties hereto.

 

11.           References.  All references in any of the Loan Documents
to the “Credit Agreement” shall mean the Credit Agreement, as amended hereby.

 

12.           Successors and
Assigns.  This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Administrative Agent
and each of the Guarantors and Lenders, and their respective successors, legal
representatives, and assignees to the extent such assignees are permitted
assignees as provided in Section 11.06 of the Credit Agreement.

 

[Signature pages omitted.]

 

4

 

Exhibit A

 

 

	
   

  	
  Published Deal CUSIP Number:

  	
  93317LAD8

  
	
   

  	
  Published Revolver CUSIP Number:

  	
  93317LAE6

  
	
   

  	
  Published Term CUSIP Number:

  	
  93317LAF3

  

 

CREDIT AGREEMENT

 

Dated as of October 3, 2005

 

among

 

WALTER INDUSTRIES, INC.,

as the Borrower,

 

BANK OF AMERICA, N.A.,

as Administrative Agent, Swing Line Lender,

L/C Issuer and a Lender,

 

SUNTRUST BANK,

as Syndication Agent and as a Lender,

 

CALYON NEW YORK BRANCH,

as Documentation Agent,

 

and

 

The Other Lenders Party Hereto

 

BANC OF AMERICA SECURITIES LLC,

and

SUNTRUST ROBINSON HUMPHREY, INC.,

as

Joint Lead Arrangers

 

BANC OF AMERICA SECURITIES LLC,

as Sole Book Manager

 

 

 

TABLE
OF CONTENTS

 

	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I.

  	
   

  	
   

  
	
  DEFINITIONS AND ACCOUNTING TERMS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.01

  	
  Defined Terms

  	
   

  	
  1

  
	
  1.02

  	
  Other Interpretive Provisions

  	
   

  	
  39

  
	
  1.03

  	
  Accounting Terms

  	
   

  	
  40

  
	
  1.04

  	
  Rounding

  	
   

  	
  41

  
	
  1.05

  	
  Times of Day

  	
   

  	
  41

  
	
  1.06

  	
  Letter of Credit Amounts

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II.

  	
   

  	
   

  
	
  THE COMMITMENTS AND CREDIT
  EXTENSIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.01

  	
  Term Loan

  	
   

  	
  41

  
	
  2.02

  	
  Revolving Loans

  	
   

  	
  42

  
	
  2.03

  	
  Borrowings, Conversions and Continuations of Committed Loans

  	
   

  	
  43

  
	
  2.04

  	
  Letters of Credit and Bankers’ Acceptances

  	
   

  	
  44

  
	
  2.05

  	
  Swing Line Loans

  	
   

  	
  54

  
	
  2.06

  	
  Prepayments

  	
   

  	
  57

  
	
  2.07

  	
  Termination or Reduction of Commitments

  	
   

  	
  61

  
	
  2.08

  	
  Repayment of Loans

  	
   

  	
  62

  
	
  2.09

  	
  Interest

  	
   

  	
  63

  
	
  2.10

  	
  Fees

  	
   

  	
  63

  
	
  2.11

  	
  Computation of Interest and Fees

  	
   

  	
  64

  
	
  2.12

  	
  Evidence of Debt

  	
   

  	
  64

  
	
  2.13

  	
  Payments Generally; Administrative Agent’s Clawback

  	
   

  	
  65

  
	
  2.14

  	
  Sharing of Payments by Lenders

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III.

  	
   

  	
   

  
	
  SECURITY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  3.01

  	
  Security

  	
   

  	
  68

  
	
  3.02

  	
  Further Assurances

  	
   

  	
  68

  
	
  3.03

  	
  Information Regarding Collateral

  	
   

  	
  70

  

 

 

	
  ARTICLE IV.

  	
   

  	
   

  
	
  TAXES, YIELD PROTECTION AND
  ILLEGALITY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.01

  	
  Taxes

  	
   

  	
  70

  
	
  4.02

  	
  Illegality

  	
   

  	
  72

  
	
  4.03

  	
  Inability to Determine Rates

  	
   

  	
  73

  
	
  4.04

  	
  Increased Costs; Reserves on Eurodollar Rate Loans

  	
   

  	
  73

  
	
  4.05

  	
  Compensation for Losses

  	
   

  	
  75

  
	
  4.06

  	
  Mitigation Obligations; Replacement of Lenders

  	
   

  	
  75

  
	
  4.07

  	
  Survival

  	
   

  	
  76

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V.

  	
   

  	
   

  
	
  CONDITIONS PRECEDENT TO CREDIT
  EXTENSIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  5.01

  	
  Conditions of Initial Credit Extension

  	
   

  	
  76

  
	
  5.02

  	
  Conditions to all Credit Extensions

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI.

  	
   

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  6.01

  	
  Existence, Qualification and Power; Compliance with Laws

  	
   

  	
  80

  
	
  6.02

  	
  Authorization; No Contravention

  	
   

  	
  80

  
	
  6.03

  	
  Governmental Authorization; Other Consents

  	
   

  	
  81

  
	
  6.04

  	
  Binding Effect

  	
   

  	
  81

  
	
  6.05

  	
  Financial Statements; No Material Adverse Effect

  	
   

  	
  81

  
	
  6.06

  	
  Litigation

  	
   

  	
  82

  
	
  6.07

  	
  No Default

  	
   

  	
  82

  
	
  6.08

  	
  Ownership of Property; Liens

  	
   

  	
  82

  
	
  6.09

  	
  Environmental Compliance

  	
   

  	
  82

  
	
  6.10

  	
  Insurance

  	
   

  	
  82

  
	
  6.11

  	
  Taxes

  	
   

  	
  82

  
	
  6.12

  	
  ERISA Compliance

  	
   

  	
  83

  
	
  6.13

  	
  Subsidiaries; Equity Interests

  	
   

  	
  83

  
	
  6.14

  	
  Margin Regulations; Investment Company Act

  	
   

  	
  83

  
	
  6.15

  	
  Disclosure

  	
   

  	
  84

  
	
  6.16

  	
  Compliance with Laws

  	
   

  	
  84

  
	
  6.17

  	
  Intellectual Property; Licenses, Etc

  	
   

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII.

  	
   

  	
   

  
	
  AFFIRMATIVE COVENANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  7.01

  	
  Financial Statements

  	
   

  	
  85

  

 

ii

 

	
  7.02

  	
  Certificates; Other Information

  	
   

  	
  86

  
	
  7.03

  	
  Notices

  	
   

  	
  88

  
	
  7.04

  	
  Payment of Obligations

  	
   

  	
  88

  
	
  7.05

  	
  Preservation of Existence, Etc

  	
   

  	
  88

  
	
  7.06

  	
  Maintenance of Properties

  	
   

  	
  89

  
	
  7.07

  	
  Maintenance of Insurance

  	
   

  	
  89

  
	
  7.08

  	
  Compliance with Laws

  	
   

  	
  90

  
	
  7.09

  	
  Books and Records

  	
   

  	
  90

  
	
  7.10

  	
  Inspection Rights

  	
   

  	
  90

  
	
  7.11

  	
  Use of Proceeds

  	
   

  	
  90

  
	
  7.12

  	
  New Subsidiaries, Pledgors and Real Property

  	
   

  	
  90

  
	
  7.13

  	
  [Intentionally Omitted]

  	
   

  	
  92

  
	
  7.14

  	
  Compliance with ERISA

  	
   

  	
  92

  
	
  7.15

  	
  Further Assurances

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII.

  	
   

  	
   

  
	
  NEGATIVE COVENANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  8.01

  	
  Liens

  	
   

  	
  93

  
	
  8.02

  	
  Investments

  	
   

  	
  94

  
	
  8.03

  	
  Indebtedness

  	
   

  	
  97

  
	
  8.04

  	
  Fundamental Changes

  	
   

  	
  99

  
	
  8.05

  	
  Dispositions

  	
   

  	
  100

  
	
  8.06

  	
  Restricted Payments

  	
   

  	
  101

  
	
  8.07

  	
  Change in Nature of Business

  	
   

  	
  102

  
	
  8.08

  	
  Transactions with Affiliates

  	
   

  	
  102

  
	
  8.09

  	
  Burdensome Agreements

  	
   

  	
  102

  
	
  8.10

  	
  Use of Proceeds

  	
   

  	
  103

  
	
  8.11

  	
  Prepayment of Indebtedness; Amendment to Material Agreements

  	
   

  	
  103

  
	
  8.12

  	
  Financial Covenants

  	
   

  	
  104

  
	
  8.13

  	
  Acquisitions

  	
   

  	
  105

  
	
  8.14

  	
  Creation of New Subsidiaries

  	
   

  	
  107

  
	
  8.15

  	
  Mid-State Homes, Walter Mortgage Company, Mid-State Capital, Non-Core
  Subsidiaries, New Holdco and Mueller Water Products; Residual Beneficial
  Interests

  	
   

  	
  107

  

 

iii

 

	
  8.16

  	
  Cash of Mid-State Holdings, Mid-State Homes and Mid-State Capital

  	
   

  	
  108

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX.

  	
   

  	
   

  
	
  EVENTS OF DEFAULT AND REMEDIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  9.01

  	
  Events of Default

  	
   

  	
  108

  
	
  9.02

  	
  Remedies Upon Event of Default

  	
   

  	
  110

  
	
  9.03

  	
  Application of Funds

  	
   

  	
  111

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X.

  	
   

  	
   

  
	
  ADMINISTRATIVE AGENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  10.01

  	
  Appointment and Authority

  	
   

  	
  112

  
	
  10.02

  	
  Rights as a Lender

  	
   

  	
  112

  
	
  10.03

  	
  Exculpatory Provisions

  	
   

  	
  112

  
	
  10.04

  	
  Reliance by Administrative Agent

  	
   

  	
  113

  
	
  10.05

  	
  Delegation of Duties

  	
   

  	
  113

  
	
  10.06

  	
  Resignation of Administrative Agent

  	
   

  	
  114

  
	
  10.07

  	
  Non-Reliance on Administrative Agent and Other Lenders

  	
   

  	
  115

  
	
  10.08

  	
  No Other Duties, Etc

  	
   

  	
  115

  
	
  10.09

  	
  Administrative Agent May File Proofs of Claim

  	
   

  	
  115

  
	
  10.10

  	
  Collateral and Guaranty Matters

  	
   

  	
  116

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI.

  	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  11.01

  	
  Amendments, Etc

  	
   

  	
  116

  
	
  11.02

  	
  Notices; Effectiveness; Electronic Communication

  	
   

  	
  118

  
	
  11.03

  	
  No Waiver; Cumulative Remedies

  	
   

  	
  120

  
	
  11.04

  	
  Expenses; Indemnity; Damage Waiver

  	
   

  	
  120

  
	
  11.05

  	
  Payments Set Aside

  	
   

  	
  122

  
	
  11.06

  	
  Successors and Assigns

  	
   

  	
  123

  
	
  11.07

  	
  Treatment of Certain Information; Confidentiality

  	
   

  	
  127

  
	
  11.08

  	
  Right of Setoff

  	
   

  	
  128

  
	
  11.09

  	
  Interest Rate Limitation

  	
   

  	
  128

  
	
  11.10

  	
  Counterparts; Integration; Effectiveness

  	
   

  	
  128

  
	
  11.11

  	
  Survival of Representations and Warranties

  	
   

  	
  129

  
	
  11.12

  	
  Severability

  	
   

  	
  129

  
	
  11.13

  	
  Replacement of Lenders

  	
   

  	
  129

  

 

iv

 

	
  11.14

  	
  Governing Law; Jurisdiction; Etc

  	
   

  	
  130

  
	
  11.15

  	
  Waiver of Jury Trial

  	
   

  	
  131

  
	
  11.16

  	
  USA PATRIOT Act Notice

  	
   

  	
  131

  
	
  11.17

  	
  No Fiduciary Relationship

  	
   

  	
  131

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNATURES

  	
   

  	
  S-1

  

 

v

 

SCHEDULES

 

	
  1.01(a)

  	
   

  	
  Unrestricted Subsidiaries

  
	
  2.01

  	
   

  	
  Commitments and Pro Rata Shares

  
	
  3.01

  	
   

  	
  Mortgaged Real Property

  
	
  3.03

  	
   

  	
  Information Regarding Collateral

  
	
  5.01

  	
   

  	
  Good Standing and Foreign Qualification Jurisdictions

  
	
  6.06

  	
   

  	
  Litigation

  
	
  6.09

  	
   

  	
  Environmental Matters

  
	
  6.11

  	
   

  	
  Proposed Tax Assessments

  
	
  6.13(a)

  	
   

  	
  Subsidiaries

  
	
  6.13(b)

  	
   

  	
  Other Equity Investments

  
	
  8.01

  	
   

  	
  Existing Liens

  
	
  8.03

  	
   

  	
  Existing Indebtedness

  
	
  11.02

  	
   

  	
  Administrative Agent’s Office; Certain Addresses for Notices

  
	
  11.06

  	
   

  	
  Processing and Recordation Fees

  

 

EXHIBITS

 

	
   

  	
   

  	
  Form of

  
	
   

  	
   

  	
   

  
	
  A-1

  	
   

  	
  Revolving Loan Notice

  
	
  A-2

  	
   

  	
  Term Loan Interest Rate Selection Notice

  
	
  B

  	
   

  	
  Swing Line Loan Notice

  
	
  C-1

  	
   

  	
  Term Loan Note

  
	
  C-2

  	
   

  	
  Revolving Loan Note

  
	
  D-1

  	
   

  	
  Compliance Certificate

  
	
  D-2

  	
   

  	
  Pro Forma Effect Compliance Certificate

  
	
  E

  	
   

  	
  Assignment and Assumption

  
	
  F

  	
   

  	
  Guaranty Agreement

  
	
  G

  	
   

  	
  Opinion Matters

  
	
  H

  	
   

  	
  Guaranty Agreement (Mid-State Homes)

  
	
  I

  	
   

  	
  Security Agreement

  
	
  J

  	
   

  	
  Mortgage

  

 

vi

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is
entered into as of October 3, 2005  among
WALTER INDUSTRIES, INC., a
Delaware corporation (the “Borrower”),
each lender from time to time party hereto (collectively, the “Lenders” and
individually, a “Lender”),
and BANK OF AMERICA, N.A., as
Administrative Agent, Swing Line Lender and L/C Issuer.

 

The Borrower has
requested that the Lenders provide a revolving credit facility and a term loan
facility, and the Lenders are willing to do so on the terms and conditions set
forth herein.

 

In consideration of the
mutual covenants and agreements herein contained, the parties hereto covenant
and agree as follows:

 

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

 

1.01        Defined Terms. 
As used in this Agreement, the following terms shall have the meanings
set forth below:

 

“Acceptance Credit”
means a commercial Letter of Credit in which the L/C Issuer engages with the
beneficiary of such Letter of Credit to accept a time draft.

 

“Acceptance Documents”
means such general acceptance agreements, applications, certificates and other
documents as the L/C Issuer may require in connection with the creation of
Bankers’ Acceptances.

 

“Acquisition” means
the acquisition of (i) a controlling equity or other ownership interest in
another Person (including the purchase of an option, warrant or convertible or
similar type security to acquire such a controlling interest at the time it
becomes exercisable by the holder thereof), whether by purchase of such equity
or other ownership interest or upon exercise of an option or warrant for, or
conversion of securities into, such equity or other ownership interest, or (ii) assets
of another Person which constitute all or substantially all of the assets of
such Person or of a line or lines of business conducted by such Person; provided,
however, that an acquisition of Third Party Mortgage Accounts by a Loan
Party shall not be considered an “Acquisition” for purposes of this Agreement.

 

“Adjusted Consolidated Leverage Ratio”
means, as of any date of determination, the ratio of (a) Consolidated
Funded Indebtedness as of such date less the Adjusted Cash Balance as of such
date to (b) Consolidated EBITDA for the Four-Quarter Period most recently
ended for which the Borrower has delivered financial statements pursuant to Section 7.01(a) or
(b).

 

“Adjusted Cash Balance”
means, as of any date of measurement thereof, the amount by which the cash on
the balance sheet of the Borrower and its Restricted Subsidiaries on such date
day exceeds $50,000,000.

 

“Administrative Agent”
means Bank of America in its capacity as administrative agent under any of the
Loan Documents, or any successor administrative agent.

 

 

“Administrative Agent’s Office”
means the Administrative Agent’s address and, as appropriate, account as set
forth on Schedule 11.02, or such other address or account as the
Administrative Agent may from time to time notify to the Borrower and the
Lenders.

 

“Administrative Questionnaire”
means an Administrative Questionnaire in a form supplied by the Administrative
Agent.

 

“Affiliate” means,
with respect to any Person, another Person that directly, or indirectly through
one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.

 

“Agency Fee Letter”
means the letter agreement, dated as of June 17, 2005, executed by and
between the Borrower and the Administrative Agent.

 

“Aggregate Acquisition Amount”
has the meaning specified in Section 8.13.

 

“Aggregate Commitments”
means, as at any date of determination thereof, the sum of (a) the
Aggregate Revolving Credit Commitments at such date, plus (b) the
Outstanding Amount with respect to the Term Loan Facility at such date.

 

“Aggregate Credit Exposures”
means, as at any date of determination thereof, the sum of (i) the unused
portion of the Aggregate Revolving Credit Commitments then in effect, plus
(ii) the Total Outstandings at such time.

 

“Aggregate Revolving Credit
Commitments” means, as at any date of determination thereof, the
sum of all Revolving Credit Commitments of all Lenders at such date.

 

“Agreement” means this
Credit Agreement.

 

“Amendment No. 5 Engagement
Letter” means the letter agreement, dated as of April 11,
2008, among the Borrower, the Administrative Agent, SunTrust Bank, Calyon New
York Branch and the Arrangers.

 

“Amendment No. 5 Effective Date”
means April 30, 2008.

 

2

 

“Applicable Rate”
means, from time to time, with respect to the Term Loan, Commitment Fee,
Revolving Loans, Swing Line Loans and Letter of Credit - BA Fees, the following
percentages per annum, based upon the Adjusted Consolidated Leverage Ratio as
set forth in the most recent Compliance Certificate received by the
Administrative Agent pursuant to Section 7.02(b):

 

	
   

  	
   

  	
   

  	
   

  	
  Term Loans

  	
   

  	
  Revolving Loans, Swing Line Loans

   and Letter of Credit – BA Fees

  	
   

  	
   

  	
   

  
	
  Pricing 

  Level

  	
   

  	
  Adjusted 

  Consolidated Leverage 

  Ratio

  	
   

  	
  Base Rate 

  Loans

  	
   

  	
  Eurodollar 

  Rate Loans

  	
   

  	
  Base Rate

   Loans

  	
   

  	
  Eurodollar Rate 

  Loans and Letter of 

  Credit - BA Fees

  	
   

  	
  Commitment

   Fee

  	
   

  
	
  1

  	
   

  	
  Greater than or equal to
  2.00 to 1.00

  	
   

  	
  2.00

  	
  %

  	
  3.00

  	
  %

  	
  2.00

  	
  %

  	
  3.00

  	
  %

  	
  0.500

  	
  %

  
	
  2

  	
   

  	
  Less than 2.00 to 1.00 but
  greater than or equal to 1.00 to 1.00

  	
   

  	
  1.50

  	
  %

  	
  2.50

  	
  %

  	
  1.50

  	
  %

  	
  2.50

  	
  %

  	
  0.450

  	
  %

  
	
  3

  	
   

  	
  Less than 1.00 to 1.00

  	
   

  	
  1.25

  	
  %

  	
  2.25

  	
  %

  	
  1.00

  	
  %

  	
  2.00

  	
  %

  	
  0.400

  	
  %

  

 

Any increase or decrease
in the Applicable Rate with respect to Revolving Loans, Swing Line Loans, Term
Loans (including Segments thereof) and Letter of Credit - BA Fees resulting
from a change in the Adjusted Consolidated Leverage Ratio shall become
effective as of the first Business Day immediately following the date a
Compliance Certificate is delivered pursuant to Section 7.02(b); provided,
however, that if a Compliance Certificate is not delivered when due in
accordance with Section 7.02(b), then Pricing Level 1 shall apply
thereto as of the first Business Day after the date on which such Compliance
Certificate was required to have been delivered until the Business Day
following the date the appropriate certificate is so delivered.  Subject to the proviso in the preceding
sentence, from the Amendment No. 5 Effective Date to the Business Day
following the date the Compliance Certificate for the fiscal period ending June 30,
2008 is delivered or is required to be delivered (whichever shall first occur),
the Applicable Rate with respect to the Term Loan (including Segments thereof),
Commitment Fee, Revolving Loans, Swing Line Loans and Letter of Credit - BA
Fees shall be Pricing Level 1.

 

“Approved Fund” means
any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

 

“Arrangers” means, (a) as
of the Closing Date through but not including the Amendment No. 5
Effective Date, BAS and Morgan Stanley, each in its capacity as a joint lead
arranger, and (b) as of the Amendment No. 5 Effective Date, BAS and
STRH, each in its capacity as a joint lead arranger.

 

“Assignee Group” means
two or more Eligible Assignees that are Affiliates of one another or two or
more Approved Funds managed by the same investment advisor.

 

3

 

“Assignment and Assumption”
means an assignment and assumption entered into by a Lender and an Eligible
Assignee (with the consent of any party whose consent is required by Section 11.06(b)),
and accepted by the Administrative Agent, in substantially the form of Exhibit E
or any other form approved by the Administrative Agent.

 

“Attributable Indebtedness”
means, on any date, (a) in respect of any capital lease of any Person, the
capitalized amount thereof that would appear on a balance sheet of such Person
prepared as of such date in accordance with GAAP, and (b) in respect of
any Synthetic Lease Obligation, the capitalized amount of the remaining lease
payments under the relevant lease that would appear on a balance sheet of such
Person prepared as of such date in accordance with GAAP if such lease were
accounted for as a capital lease.

 

“Audited Financial Statements”
means the audited consolidated balance sheet of the Borrower and its
Non-Mueller Subsidiaries (but including US Pipe) for the fiscal year ended December 31,
2004, and the related consolidated statements of income or operations, retained
earnings and cash flows for such fiscal year of the Borrower and its
Non-Mueller Subsidiaries (but including US Pipe), including the notes thereto.

 

“Auditor” has the
meaning specified in Section 7.01(a).

 

“Availability Period”
means the period from and including the Closing Date to the earliest of (a) the
Revolving Credit Maturity Date, (b) the date of termination of the
Aggregate Revolving Credit Commitments pursuant to Section 2.07(b),
and (c) the date of termination of the commitment of each Lender to make
Loans and of the obligation of the L/C Issuer to make L/C - BA Credit
Extensions pursuant to Section 9.02.

 

“Bank of America”
means Bank of America, N.A. and its successors.

 

“Bankers’ Acceptance”
or “BA”
means a time draft, drawn by the beneficiary under an Acceptance Credit and
accepted by the L/C Issuer upon presentation of documents by the beneficiary of
an Acceptance Credit pursuant to Section 2.04 hereof, in the
standard form for bankers’ acceptances of 
the L/C Issuer.

 

“BAS” means Banc of
America Securities LLC.

 

“Base Rate” means for any
day a fluctuating rate per annum equal to the higher of (a) the Federal
Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect
for such day as publicly announced from time to time by Bank of America as its “prime
rate.”  The “prime rate” is a rate set by
Bank of America based upon various factors including Bank of America’s costs
and desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at, above, or
below such announced rate.  Any change in
such rate announced by Bank of America shall take effect at the opening of
business on the day specified in the public announcement of such change.

 

“Base Rate Loan” means
a Loan (including a Segment) that bears interest based on the Base Rate.

 

“Base Rate Revolving Loan”
means a Revolving Loan that is a Base Rate Loan.

 

4

 

“Base Rate Segment”
means a Segment bearing interest or to bear interest at the Base Rate.

 

“Book Manager” means
BAS, in its capacity as sole book manager.

 

“Borrower” has the
meaning specified in the introductory paragraph hereto.

 

“Borrower Account Transfer Agreement”
means, individually or collectively as the context may indicate and as in
effect at any date of determination thereof, (a) either of the Existing
Borrower Account Transfer Agreements, or (b) one or more other similar
agreements acceptable to the Administrative Agent in its reasonable discretion
and serving substantially the same purpose on substantially the same terms as
the Existing Borrower Account Transfer Agreements with respect to a
then-existing Mortgage Warehouse Facility, but in no event on any terms less
favorable in any material respect, in the reasonable judgment of the
Administrative Agent, to the Administrative Agent and the Lenders than those
terms in the Existing Borrower Account Transfer Agreements on the Closing Date.

 

“Borrower Materials”
has the meaning specified in Section 7.02.

 

“Borrowing” means any
of (i) the advance of the Term Loan pursuant to Section 2.01, (ii) a
Revolving Borrowing, or (iii) a Swing Line Borrowing, as the context may
require.

 

“Business Day” means
any day other than a Saturday, Sunday or other day on which commercial banks
are authorized to close under the Laws of, or are in fact closed in, the state
where the Administrative Agent’s Office is located and, if such day relates to
any Eurodollar Rate Loan, means any such day on which dealings in Dollar
deposits are conducted by and between banks in the London interbank eurodollar
market.

 

“Cardem” means Cardem
Insurance Co., Ltd., a Bermuda corporation and a wholly owned Subsidiary of the
Borrower.

 

“Cash Collateralize”
has the meaning specified in Section 2.04(g).

 

“Cash Equivalents”
means any of the following types of property, to the extent owned by the
Borrower or any of its Non-Mueller Subsidiaries free and clear of all Liens
(other than Liens created under the Security Instruments):

 

(a)           cash,
denominated in U.S. Dollars or in a currency other than U.S. Dollars that is
freely transferable or convertible into U.S. Dollars;

 

(b)           readily
marketable direct obligations of the government of the United States or any
agency or instrumentality thereof, or obligations the timely payment of
principal and interest on which are fully and unconditionally guaranteed by the
government of the United States or any state or municipality thereof, in each
case so long as such obligation has an investment grade rating by S&P and
Moody’s;

 

(c)           commercial
paper rated at least P-1 (or the then equivalent grade) by Moody’s and A-1 (or
the then equivalent grade) by S&P, or carrying an equivalent rating 

 

5

 

by
a nationally recognized rating agency if at any time neither Moody’s and
S&P shall be rating such obligations, provided that up to 25% of the
aggregate amount of Investments in Cash Equivalents pursuant to this subpart
(c) of the definition thereof may be in commercial paper that is rated
(I) at least P-1 (or the then equivalent grade) by Moody’s and at least
A-2 (or the then equivalent grade) by S&P, or (II) at least P-2 (or
the then equivalent grade) by Moody’s and at least A-1 (or the then equivalent
grade) by S&P;

 

(d)           insured
certificates of deposit or bankers’ acceptances of, or time deposits with any
Lender or with any commercial bank that (i) is a member of the Federal
Reserve System, (ii) issues (or the parent of which issues) commercial
paper rated as described in the first portion of clause (c) above
(without regard to the proviso), (iii) is organized under the laws of the
United States or of any state thereof and (iv) has combined capital and
surplus of at least $250,000,000, provided that no more than 25% of the
aggregate amount of Investments in Cash Equivalents pursuant to this subpart
(d) of the definition thereof may be in such items with a maturity
longer than one year;

 

(e)           readily
marketable general obligations of any corporation organized under the laws of
any state of the United States of America, payable in the United States of
America, expressed to mature not later than twelve months following the date of
issuance thereof and rated A or better by S&P or A2 or better by Moody’s;
and

 

(f)            readily
marketable shares of investment companies or money market funds that, in each
case, invest solely in the foregoing Investments described in clauses (a) through
(e) above.

 

“Cash Income Taxes”
means, with respect to the Borrower and its Restricted Subsidiaries on a
consolidated basis, for any period the aggregate amount of all payments in
respect of income taxes made in cash by the Borrower and its Restricted
Subsidiaries to any applicable Governmental Authority during such period, after
giving effect, to the extent available, to the application of net operating
losses available to the Borrower and its Restricted Subsidiaries, but excluding
in each case any payment of taxes imposed on New Holdco and its Subsidiaries
and their properties, income or assets and paid by the Borrower or any
Non-Mueller Subsidiary pursuant to any Tax Sharing Agreement.

 

“Change in Law” means
the occurrence, after the date of this Agreement, of any of the following: (a) the
adoption or taking effect of any law, rule, regulation or treaty, (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the
making or issuance of any request, guideline or directive (whether or not
having the force of law) by any Governmental Authority.

 

“Change of Control”
means an event or series of events by which:

 

(a)           any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act, but excluding any employee benefit plan of such person or its
subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan) becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a person or group shall be 

 

6

 

deemed
to have “beneficial ownership” of all securities that such person or group has
the right to acquire (such right, an “option right”), whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of 33-1/3%  or more of
the equity securities of the Borrower entitled to vote for members of the board
of directors or equivalent governing body of the Borrower on a fully-diluted
basis (and taking into account all such securities that such person or group
has the right to acquire pursuant to any option right); or

 

(b)           during
any period of 24 consecutive months, a majority of the members of the board of
directors or other equivalent governing body of the Borrower cease to be
composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the
time of such election or nomination at least a majority of that board or
equivalent governing body or (iii) whose election or nomination to that
board or other equivalent governing body was approved by individuals referred
to in clauses (i) and (ii) above constituting at the
time of such election or nomination at least a majority of that board or
equivalent governing body (excluding, in the case of both clause (ii) and
clause (iii), any individual whose initial nomination for, or assumption
of office as, a member of that board or equivalent governing body occurs as a
result of an actual or threatened solicitation of proxies or consents for the
election or removal of one or more directors by any person or group other than
a solicitation for the election of one or more directors by or on behalf of the
board of directors).

 

“Closing Date” means October 3,
2005.

 

“Coal” means all of
the coal owned, leased or subject to mineral rights owned or leased by any Coal
Mining Entity and (i) located on, under, or within, or (ii) produced
and severed from, the properties owned or leased by any such Coal Mining
Entity.

 

“Coal Mining Entities”
means individually or collectively as the context may indicate, Jim Walter
Resources, Inc. and its Subsidiaries, along with any successor entity that
at any time after the Closing Date operates any of the mines operated by Jim
Walter Resources, Inc. or any of its Subsidiaries as of the Closing Date.

 

“Code” means the
Internal Revenue Code of 1986.

 

“Collateral” means,
collectively, all personal and real property (including mineral rights) of the
Borrower, any Non-Mueller Subsidiary or any other Person in which the
Administrative Agent or any Lender is granted a Lien under any Security
Instrument as security for all or any portion of the Obligations or any other
obligation arising under any Loan Document.

 

“Commitment Fee” has
the meaning specified in Section 2.10(a).

 

“Compliance Certificate”
means a certificate substantially in the form of Exhibit D-1.

 

“Consolidated Capital Expenditures”
means, with respect to the Borrower and its Restricted Subsidiaries on a
consolidated basis, for any period the sum of (without duplication) 

 

7

 

(i) all
expenditures (whether paid in cash or accrued as liabilities) by the Borrower
or any Restricted Subsidiary during such period for items that would be
classified as “property, plant or equipment” or comparable items on the
consolidated balance sheet of the Borrower and its Restricted Subsidiaries,
including without limitation all transactional costs incurred in connection
with such expenditures provided the same have been capitalized (but excluding
the amount of any Consolidated Capital Expenditures paid for with proceeds of
property insurance or casualty insurance as evidenced in writing and submitted
to the Administrative Agent together with any Compliance Certificate delivered
pursuant to Section 7.02(b)), and (ii) any portion of the
purchase price of an Acquisition which is accounted for as a capital
expenditure.

 

“Consolidated Cash Interest Charges”
means, for any period, for the Borrower and its Restricted Subsidiaries on a
consolidated basis, that portion of Consolidated Interest Charges paid or
payable in cash during such period, but excluding prepayments or similar premiums
paid in cash in connection with any prepayment, repurchase or redemption of
Consolidated Funded Indebtedness.

 

“Consolidated Current Assets”
means, with respect to the Borrower and its Non-Mueller Subsidiaries on a
consolidated basis, all assets (other than cash, restricted cash and cash
equivalents) that are expected to be realized in cash, sold in the ordinary
course of business, or consumed within one year or which would be classified as
a current asset.

 

“Consolidated Current Liabilities”
means, with respect to the Borrower and its Non-Mueller Subsidiaries on a
consolidated basis, all liabilities that by their terms are payable within one
year, but excluding in all cases Indebtedness of the Borrower and its
Non-Mueller Subsidiaries and accrued interest related to MSH Trusts.

 

“Consolidated EBITDA”
means, for any period and in each case without duplication, with respect to the
Borrower and its Non-Mueller Subsidiaries, on a consolidated basis determined
in accordance with GAAP, an amount equal to:

 

	
   

  	
   

  	
  (a)

  	
   

  	
  Consolidated
  Net Income for such period,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (b)

  	
   

  	
  Consolidated
  Interest Charges for such period, to the extent deducted in computing
  Consolidated Net Income,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (c)

  	
   

  	
  the
  provision for federal, state, local and foreign income taxes payable for such
  period, to the extent deducted in computing Consolidated Net Income (but
  excluding therefrom any provision for taxes imposed on New Holdco and its
  Subsidiaries or their properties, income or assets and paid or payable by the
  Borrower or any Non-Mueller Subsidiary pursuant to any Tax Sharing
  Agreement),

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (d)

  	
   

  	
  depreciation
  and depletion expense and all other non-cash charges and expenses, to the
  extent deducted in computing Consolidated Net Income,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (e)

  	
   

  	
  amortization
  expense, to the extent deducted in computing Consolidated Net Income,

  

 

8

 

	
  minus

  	
   

  	
  (f)

  	
   

  	
  the
  gain (or plus the loss or any associated write-down of assets) (net of
  any tax effect) resulting from the sale of any capital assets other than in
  the ordinary course of business to the extent added (deducted) in computing
  Consolidated Net Income,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  minus

  	
   

  	
  (g)

  	
   

  	
  extraordinary
  nonrecurring after-tax gains (or plus extraordinary nonrecurring
  non-cash after-tax losses) to the extent added (deducted) in computing
  Consolidated Net Income,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  minus

  	
   

  	
  (h)

  	
   

  	
  any
  gain resulting from any write-up of assets to the extent added in computing
  Consolidated Net Income,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (i)

  	
   

  	
  cash
  restructuring charges not to exceed $10,000,000 in the aggregate from the
  Closing Date, to the extent deducted in computing Consolidated Net Income

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (j)

  	
   

  	
  any
  non-cash expense arising from other postemployment benefits to the extent
  deducted in computing Consolidated Net Income,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (k)

  	
   

  	
  non-cash
  charges resulting from the application of Statement of Financial Accounting
  Standards No. 142, to the extent deducted in computing Consolidated Net
  Income,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  minus

  	
   

  	
  (l)

  	
   

  	
  any
  cash expenditure made in connection with other postemployment benefits to the
  extent such expenditures are not deducted in computing Consolidated Net
  Income,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (m)

  	
   

  	
  expenses
  incurred in connection with the Transaction to the extent deducted in
  computing Net Income, not more than $10,000,000 of which shall be in cash,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (n)

  	
   

  	
  up
  to $20,000,000 of expenses incurred in connection with events related to
  Hurricane Katrina and Hurricane Rita,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (o)

  	
   

  	
  any
  amounts representing mark-to-market losses (or minus mark-to-market
  gains) that must be recognized currently in Consolidated Net Income under
  Financial Accounting Standards Board Statement 133, and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  plus

  	
   

  	
  (p)

  	
   

  	
  for
  each Four-Quarter Period ending June 30, 2008, September 30, 2008,
  December 31, 2008 and March 31, 2009, a one-time charge not to
  exceed $17,000,000 in each such Four-Quarter Period for the cash settlement
  of securitization hedge agreements settled on or about April 1, 2008;

  

 

provided, however, (i) Consolidated
EBITDA shall be decreased by the amount of any cash expenditures in such period
related to non-cash charges added back to Consolidated Net Income in computing
Consolidated EBITDA during any prior periods and (ii) notwithstanding
anything to the contrary in this definition, Consolidated EBITDA shall not be
increased by adding to Consolidated Net Income any amount representing the
minority interest of a Person other than 

 

9

 

the Borrower or a
Non-Mueller Subsidiary in any joint venture whose results of operations are consolidated
with the Borrower’s in accordance with GAAP.

 

“Consolidated Fixed Charge Coverage
Ratio” means, as of any date of determination, the ratio of (i) Consolidated
EBITDA for the Four-Quarter Period ending on such date minus (without
duplication) Cash Income Taxes for such period to (ii) Consolidated
Fixed Charges for such period.

 

“Consolidated Fixed Charges”
means, with respect to the Borrower and its Restricted Subsidiaries for any
period ending on the date of computation thereof, the sum of, without
duplication, (i) Consolidated Cash Interest Charges, (ii) Restricted
Payments (but excluding those Restricted Payments made to repurchase, redeem or
acquire shares of the capital stock of the Borrower permitted under Section 8.06),
and (iii) Consolidated Principal Payments, all determined on a
consolidated basis in accordance with GAAP (except Consolidated Principal
Payments with respect to Attributable Indebtedness shall be included in any
event).

 

“Consolidated Funded Indebtedness”
means, as of any date of determination, for the Borrower and its Restricted
Subsidiaries on a consolidated basis, the sum of (a) the outstanding
principal amount of all obligations, whether current or long-term, for borrowed
money (including Obligations hereunder) and all obligations evidenced by bonds,
debentures, notes, loan agreements or other similar instruments (but excluding
Indebtedness permitted by Section 8.03(g), (h) or (i)),
(b) all purchase money Indebtedness, (c) all direct obligations
arising under standby and commercial letters of credit (excluding the undrawn
amount thereof), bankers’ acceptances (including all BAs hereunder), bank
guaranties (excluding the amounts available thereunder as to which demand for
payment has not yet been made), surety bonds (excluding the amounts available
thereunder as to which demand for payment has not yet been made) and similar
instruments, (d) all obligations in respect of the deferred purchase price
of property or services (other than trade accounts payable in the ordinary
course of business), (e) Attributable Indebtedness in respect of capital
leases and Synthetic Lease Obligations, (f) without duplication, all
Guarantees with respect to outstanding Indebtedness of the types specified in clauses
(a) through (e) above of Persons other than the Borrower
or any Restricted Subsidiary, and (g) all Indebtedness of the types
referred to in clauses (a) through (f) above of any
partnership or joint venture (other than a joint venture that is itself a
corporation or limited liability company) in which the Borrower or a Restricted
Subsidiary is a general partner or joint venturer, to the extent such
Indebtedness is recourse to the Borrower or such Restricted Subsidiary.

 

“Consolidated Interest Charges”
means, for any period, for the Borrower and its Restricted Subsidiaries on a
consolidated basis, the sum of the following (without duplication), in each
case net of interest income earned (without duplication) on cash balances or
under Swap Contracts hedging against, or otherwise entered into to manage risks
relating to, fluctuations in interest rates to the extent such interest income
is included in the calculation of Consolidated Net Income: (a) all
interest, (b) the current amortized portion of premium payments, debt
discount, fees (including fees payable in respect of Swap Contracts hedging
against, or otherwise entered into to manage risks relating to, fluctuations in
interest rates), charges and related expenses of the Borrower and its
Restricted Subsidiaries in connection with borrowed money (including
capitalized interest) or in connection with the deferred purchase price of
assets, in each case to the extent treated as interest in accordance with GAAP,
(c) the portion of rent expense of the 

 

10

 

Borrower and its
Restricted Subsidiaries with respect to such period under capital leases that
is treated as interest in accordance with GAAP, and (d) the amount of
payments in respect of Synthetic Lease Obligations that are in the nature of
interest.

 

“Consolidated Leverage Ratio”
means, as of any date of determination, the ratio of (a) Consolidated
Funded Indebtedness as of such date to (b) Consolidated EBITDA for the
Four-Quarter Period most recently ended for which the Borrower has delivered
financial statements pursuant to Section 7.01(a) or (b).

 

“Consolidated Net Income”
means, for any period, for the Borrower and its Non-Mueller Subsidiaries on a
consolidated basis, the net income after taxation of the Borrower and its
Non-Mueller Subsidiaries for that period.

 

“Consolidated Principal Payments”
means, at any date of measurement thereof, payments of Consolidated Funded
Indebtedness that were scheduled to be made (including adjustments for any
mandatory prepayments previously made) during the Four-Quarter Period ending on
the date of measurement thereof.

 

“Consolidated Senior Secured
Indebtedness” means, as of any date of determination, all
Consolidated Funded Indebtedness that, as of such date, is secured by any Lien
on any asset or property of the Borrower or any of its Non-Mueller
Subsidiaries.

 

“Consolidated Senior Secured Leverage
Ratio” means, as of any date of determination, the ratio of (a) Consolidated
Senior Secured Indebtedness as of such date to (b) Consolidated
EBITDA for the Four-Quarter Period most recently ended for which the Borrower
has delivered financial statements pursuant to Section 7.01(a) or
(b).

 

“Consolidated Senior Secured Leverage
Ratio Step Down Date” has the meaning specified in Section 8.12.

 

“Consolidated Total Assets”
means, as of any date on which the amount thereof is to be determined, the net
book value of all assets of the Borrower and its Restricted Subsidiaries as
determined on a consolidated basis.

 

“Consolidated Working Capital”
means, as of any date on which the amount thereof is to be determined, the
excess of Consolidated Current Assets over Consolidated Current Liabilities.

 

“Contractual Obligation”
means, as to any Person, any provision of any security issued by such Person or
of any agreement, instrument or other undertaking to which such Person is a
party or by which it or any of its property is bound.

 

“Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have
meanings correlative thereto.  Without
limiting the generality of the foregoing, a Person shall be deemed to be
Controlled by another Person if such other Person possesses, directly or
indirectly, power to vote 10% or more of the securities having ordinary voting
power for the election of directors, managing general partners or the
equivalent.

 

11

 

“Convertible
Notes” means Indebtedness of the Borrower in the form of notes
issued by the Borrower on or about April 13, 2004 that (i) is
subordinated in payment to the Obligations hereunder and (ii) is
convertible into common equity of the Borrower.

 

“Core Business”
means any material line of business conducted by the Borrower and its
Non-Mueller Subsidiaries as of the Closing Date and any business substantially
related or incidental thereto.

 

“Cost of
Acquisition” means, with respect to any Acquisition, as at the
date of entering into any agreement therefor, the sum of the following (without
duplication):  (i) the amount of any
cash and fair market value of other property (excluding the value of any
capital stock, warrants or options to acquire capital stock of the Borrower or
any Non-Mueller Subsidiary and the unpaid principal amount of any debt
instrument) given as consideration, (ii) the amount (determined by using
the face amount or the amount payable at maturity, whichever is greater) of any
Indebtedness incurred, assumed or acquired by the Borrower or any Non-Mueller
Subsidiary in connection with such Acquisition, and (iii) all additional
purchase price amounts in the form of earnouts and other contingent obligations
that are to be paid in cash and that should be recorded on the financial
statements of the Borrower and its Non-Mueller Subsidiaries in accordance with
GAAP, (iv) all amounts paid in cash in respect of covenants not to
compete, and consulting agreements that should be recorded on financial
statements of the Borrower and its Non-Mueller Subsidiaries in accordance with
GAAP, (v) the aggregate fair market value of all other consideration given
by the Borrower or any Non-Mueller Subsidiary in connection with such
Acquisition (but excluding the value of any capital stock, warrants or options
to acquire capital stock of the Borrower or any Non-Mueller Subsidiary), and (vi) out-of-pocket
transaction costs for the services and expenses of attorneys, accountants and
other consultants incurred in effecting such transaction, and other similar
transaction costs so incurred and capitalized in accordance with GAAP.

 

“Credit
Extension” means each of the following: (a) a Borrowing and
(b) an L/C – BA Credit Extension.

 

“Debtor Relief
Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

“Default”
means any event or condition that constitutes an Event of Default or that, with
the giving of any notice, the passage of time, or both, would be an Event of
Default.

 

“Default Rate”
means an interest rate equal to (a) the Base Rate plus (b) the
Applicable Rate with respect to Base Rate Loans plus (c) 2% per
annum; provided, however, that (i) with respect to a
Eurodollar Rate Loan, until the end of the Interest Period during which the
Default Rate is first applicable, the Default Rate shall be an interest rate
equal to the interest rate (including any Applicable Rate) otherwise applicable
to such Eurodollar Rate Loan plus 2% per annum, and thereafter as set
forth in the portion of this sentence preceding this proviso, and (ii) with
respect to Letter of Credit – BA Fees, the Default Rate shall equal the Letter
of Credit – BA 

 

12

 

Fee, then in effect plus 2% per annum, in each
case to the fullest extent permitted by applicable Laws.

 

“Defaulting
Lender” means any Lender that (a) has failed to fund any
portion of the Revolving Loans, participations in L/C Obligations or
participations in Swing Line Loans required to be funded by it hereunder within
one Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Administrative Agent or any other Lender
any other amount required to be paid by it hereunder within one Business Day of
the date when due, unless the subject of a good faith dispute, or (c) has
been deemed insolvent or become the subject of a bankruptcy or insolvency
proceeding.

 

“Direct Foreign
Subsidiary” means a Non-Mueller Subsidiary other than a Domestic
Subsidiary a majority of whose Voting Securities, or a majority of whose
Subsidiary Securities, are owned by the Borrower or a Domestic Subsidiary.

 

“Disposition”
or “Dispose”
means the sale, transfer, license, lease or other disposition (including any
sale and leaseback transaction, and including any Qualified Homebuilding
Transaction) of any property by any Person, including any sale, assignment,
transfer or other disposal, with or without recourse, of any notes or accounts
receivable or any rights and claims associated therewith.

 

“Dividend
Distribution” means the distribution by Mueller Group to Mueller
Water Products, and the further distribution by Mueller Water Products to New
Holdco of a dividend on or prior to the Closing Date of not less than
$400,000,000.

 

“Documentation
Agent” means Calyon New York Branch, in its capacity as
documentation agent.

 

“Dollar”
and “$”
mean lawful money of the United States.

 

“Domestic
Subsidiary” means any Non-Mueller Subsidiary that is organized
under the laws of any political subdivision of the United States (but excluding
any territory or possession thereof).

 

“Eligible
Assignee” means (a) a Lender; (b) an Affiliate of a
Lender; (c) an Approved Fund; and (d) any other Person (other than a
natural person) approved by (i) the Administrative Agent and, in the case
of any assignment of a Revolving Credit Commitment, the L/C Issuer and the
Swing Line Lender, and (ii) unless an Event of Default has occurred and is
continuing, the Borrower (each such approval not to be unreasonably withheld or
delayed); provided that notwithstanding the foregoing, “Eligible
Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or
Subsidiaries.

 

“Entity
Conversion” means, individually or collectively as the context
may indicate, the conversion under the general corporate law of the state of
Delaware or Alabama, as applicable, of (a) United States Pipe and Foundry
Company, Inc., an Alabama corporation, into United States Pipe and
Foundry, LLC, an Alabama limited liability company, (b) Mueller Water
Products, Inc, a Delaware corporation, into Mueller Water Products, LLC, a
Delaware limited 

 

13

 

liability company, and (c) Mueller Group, Inc.,
a Delaware corporation, into Mueller Group, LLC, a Delaware limited liability
company.

 

“Environmental
Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.

 

“Environmental
Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation,
fines, penalties or indemnities), of the Borrower, any other Loan Party or any
of their respective Non-Mueller Subsidiaries directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
release or threatened release of any Hazardous Materials into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to
which liability is assumed or imposed with respect to any of the foregoing.

 

“Equity
Interests” means, with respect to any Person, all of the shares
of capital stock of (or other ownership or profit interests in) such Person,
all of the warrants, options or other rights for the purchase or acquisition
from such Person of shares of capital stock of (or other ownership or profit
interests in) such Person, and all of the other ownership or profit interests
in such Person (including partnership, member or trust interests therein),
whether voting or nonvoting, and whether or not such shares, warrants, options,
rights or other interests are outstanding on any date of determination.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate”
means any trade or business (whether or not incorporated) under common control
with the Borrower within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

 

“ERISA Event”
means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan
is in reorganization; (d) the filing by the Borrower or any ERISA
Affiliate or the PBGC of a notice of intent to terminate, the treatment by the
PBGC of a Pension Plan amendment as a termination under Sections 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability under 

 

14

 

Title IV of ERISA, other than for PBGC premiums due
but not delinquent under Section 4007 of ERISA, upon the Borrower or any
ERISA Affiliate.

 

“Eurodollar Rate”
means, for any Interest Period with respect to a Eurodollar Rate Loan, the rate
per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as designated by the Administrative Agent from time to
time) at approximately 11:00 a.m., London time, two Business Days prior to
the commencement of such Interest Period, for Dollar deposits (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest
Period.  If such rate is not available at
such time for any reason, then the “Eurodollar Rate” for such Interest Period
shall be the rate per annum determined by the Administrative Agent to be the
rate at which deposits in Dollars for delivery on the first day of such
Interest Period in same day funds in the approximate amount of the Eurodollar
Rate Loan being made, continued or converted by Bank of America and with a term
equivalent to such Interest Period would be offered by Bank of America’s London
Branch to major banks in the London interbank eurodollar market at their
request at approximately 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period.

 

“Eurodollar Rate
Loan” means a Loan (including a Segment) that bears interest at
a rate based on the Eurodollar Rate.

 

“Eurodollar Rate
Segment” means a Segment bearing interest or to bear interest at
the Eurodollar Rate.

 

“Event of
Default” has the meaning specified in Section 9.01.

 

“Excess Cash
Flow” means, with respect to the Borrower and its Non-Mueller
Subsidiaries on a consolidated basis for any fiscal year, the following:

 

(a)           Consolidated EBITDA
for such period (but adjusted to include the effect of cash losses or gains
added or deducted pursuant to part (f) or part (g) of
the definition of Consolidated EBITDA),

 

minus

 

(b)           the sum of (i) the
change in Consolidated Working Capital as at the end of such fiscal year; plus
(ii) Consolidated Capital Expenditures paid in cash during such period; plus
(iii) Consolidated Cash Interest Charges for such period; plus (iv) taxes
paid in cash for such period and added in the calculation of Consolidated
EBITDA pursuant to part  (c) of the definition thereof;  plus (v) the aggregate amount
of all scheduled payments of Consolidated Funded Indebtedness made during such
period; plus (vi) the aggregate amount of any optional prepayments
of the Term Loan made by the Borrower pursuant to Section 2.06(a) hereof
during such period; plus (vii) the aggregate amount of any required
prepayments of the Term Loan made by the Borrower pursuant to Section 2.06(d) hereof
during such period; plus (viii) Restricted Payments in the nature
of ordinary quarterly dividends made in cash during such period; plus (ix) Transaction
expenses paid in cash during such period and added in the calculation of
Consolidated EBITDA pursuant to part (m) of the definition thereof;
and plus (x) expenses related to 

 

15

 

Hurricane
Katrina or Hurricane Rita paid in cash for such period and added in the
calculation of Consolidated EBITDA pursuant to part (n) of the
definition thereof.

 

“Exchange Act”
means the Securities Exchange Act of 1934 and the regulations promulgated
thereunder.

 

“Excluded Taxes”
means, with respect to the Administrative Agent, any Lender, the L/C Issuer or
any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) taxes imposed on or measured by
its overall net income (however denominated), and franchise taxes imposed on it
(in lieu of net income taxes), by the jurisdiction (or any political
subdivision thereof) under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its applicable Lending Office is located, (b) any branch profits taxes
imposed by the United States or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 11.13), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party hereto (or designates a new Lending Office) or is attributable to such
Foreign Lender’s failure or inability (other than as a result of a Change in
Law) to comply with Section 4.01(e), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to Section 4.01(a).

 

“Existing
Borrower Account Transfer Agreement” means, individually or
collectively as the context may indicate, each of (a) that certain
Borrower Account Transfer Agreement dated as of November 19, 2004 by and
between Mid-State Homes and Mid-State Homes Trust IX, and (b) that certain
Borrower Account Transfer Agreement dated as of February 4, 2005 by and
between Mid-State Homes and Mid-State Trust XIV.

 

“Existing Credit
Agreement” means that certain Credit Agreement dated as of April 17,
2003 among the Borrower, Bank of America, as agent, and a syndicate of lenders,
as amended through the Closing Date.

 

“Existing
Mortgage Warehouse Facility” means, individually or collectively
as the context may indicate, each of (a) that certain Amended and Restated
Variable Funding Loan Agreement dated as of November 19, 2004 by and among
YC Susi Trust (successor by assignment from Enterprise Funding Corporation), Atlantic
Asset Securitization Corp., Mid-State Trust IX, Wachovia Bank, National
Association, Bank of America, N.A. and Calyon New York Branch, and (b) that
certain Variable Funding Loan Agreement dated as of February 4, 2005 by an
among Three Pillars Funding LLC, Mid-State Trust XIV, Wachovia Bank, National
Association and SunTrust Capital Markets, Inc.

 

“Existing
Mueller Credit Agreement” means that certain Second Amended and
Restated Credit Agreement dated as of April 23, 2004 among Mueller Group,
Credit Suisse First Boston, acting through its Cayman Islands Branch, as
administrative agent, and a syndicate of lenders, as amended through the
Closing Date.

 

16

 

“Facility
Termination Date” means the date as of which all of the
following shall have occurred:  (a) the
Borrower shall have permanently terminated the Revolving Credit Facility and
the Term Loan Facility by final payment in full of all Outstanding Amounts,
together with all accrued and unpaid interest and fees thereon, other than (i) the
undrawn portion of Letters of Credit, (ii) the aggregate face amount of
all outstanding Bankers’ Acceptances and (iii) all fees relating to any
Letters of Credit accruing after such date (which fees shall be payable solely
for the account of the L/C Issuer and shall be computed (based on interest
rates and the Applicable Rate then in effect) on such undrawn amounts to the
respective expiry dates of the Letters of Credit), in each case as have been
fully Cash Collateralized or as to which other arrangements with respect
thereto satisfactory to the Administrative Agent and the L/C Issuer shall have
been made, (b) the Aggregate Revolving Credit Commitments, if any, shall
have terminated or expired, (c) the obligations and liabilities of the
Borrower and each other Loan Party under all Related Credit Arrangements shall
have been fully, finally and irrevocably paid and satisfied in full and the
Related Credit Arrangements shall have expired or been terminated, or other
arrangements satisfactory to the counterparties shall have been made with
respect thereto, and (d) each Guarantor shall have fully, finally and
irrevocably paid and satisfied in full its respective obligations and
liabilities arising under the Loan Documents, (except for future obligations
consisting of continuing indemnities and other contingent Obligations of the
Borrower or any Loan Party that may be owing to the Administrative Agent or any
of its Related Parties or any Lender pursuant to the Loan Documents and expressly
survive termination of this Agreement).

 

“Federal Funds
Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if no such rate is so published on such
next succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
charged to Bank of America on such day on such transactions as determined by
the Administrative Agent.

 

“Foreign Lender”
means any Lender that is organized under the laws of a jurisdiction other than
that in which the Borrower is resident for tax purposes.  For purposes of this definition, the United
States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.

 

“Four-Quarter
Period” means a period of four full consecutive fiscal quarters
of the Borrower and its Non-Mueller Subsidiaries, taken together as one
accounting period.

 

“FRB”
means the Board of Governors of the Federal Reserve System of the United
States.

 

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

 

17

 

“GAAP”
means generally accepted accounting principles in the United States set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

“Governmental
Authority” means the government of the United States or any
other nation, or of any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central
bank or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government (including
any supra-national bodies such as the European Union or the European Central
Bank).

 

“Granting Lender”
has the meaning specified in Section 11.06(h).

 

“Guarantee”
means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or
services for the purpose of assuring the obligee in respect of such
Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity or level
of income or cash flow of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (iv) entered into
for the purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such Person securing any Indebtedness or other obligation
of any other Person, whether or not such Indebtedness or other obligation is
assumed by such Person (or any right, contingent or otherwise, of any holder of
such Indebtedness to obtain any such Lien). 
The amount of any Guarantee shall be deemed to be an amount equal to the
stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a
corresponding meaning.

 

“Guarantors”
means, collectively, all Restricted Subsidiaries of the Borrower executing a
Guaranty on the Closing Date and all other Subsidiaries that are at any time
after the Closing Date required to enter into a Guaranty Joinder Agreement
pursuant to Section 7.12.

 

“Guaranty”
means, collectively, the Subsidiary Guaranty and the Mid-State Homes Guaranty.

 

“Guaranty
Joinder Agreement” means each Guaranty Joinder Agreement,
substantially in the form thereof attached to the Subsidiary Guaranty, executed
and delivered by a Guarantor 

 

18

 

to the Administrative Agent pursuant to Section 7.12,
as amended, modified, supplemented or amended and restated.

 

“Hazardous
Materials” means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos-containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

 

“Homebuilding
Assets” means, individually or collectively, the MSH Trusts and
all interests therein retained or acquired by the Borrower or any Non-Mueller
Subsidiary, Mortgage Accounts, Third Party Mortgage Accounts, the assets of and
Equity Interests in JWH Holding Company, LLC or any direct or indirect
Subsidiary of JWH Holding Company, LLC, tracts of land relating solely to the
homebuilding business of the Borrower,
and, if applicable, the Equity Interests in any QHT Interim Entity.

 

“Honor Date”
has the meaning set forth in Section 2.04(c).

 

“Indebtedness”
means, as to any Person at a particular time, without duplication, all of the
following, whether or not included as indebtedness or liabilities in accordance
with GAAP:

 

(a)           all obligations of
such Person for borrowed money and all obligations of such Person evidenced by
bonds, debentures, notes, loan agreements or other similar instruments;

 

(b)           all direct or
contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties,
surety bonds and similar instruments;

 

(c)           net obligations of
such Person under any Swap Contract;

 

(d)           all obligations of
such Person to pay the deferred purchase price of property or services (other
than trade accounts payable in the ordinary course of business);

 

(e)           indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)            capital leases and
Synthetic Lease Obligations; and

 

(g)           all Guarantees of
such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture (other than a joint
venture that is itself a corporation or limited liability company) in which
such Person is a general partner or a joint venturer, to the extent such
Indebtedness is recourse to such Person. 
The amount of any net obligation under any Swap 

 

19

 

Contract on any date shall be deemed to be the Swap
Termination Value thereof as of such date. 
The amount of any capital lease or Synthetic Lease Obligation as of any
date shall be deemed to be the amount of Attributable Indebtedness in respect
thereof as of such date.

 

“Indemnified
Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees”
has the meaning specified in Section 11.04(b).

 

“Indenture”
means any Indenture or similar document pursuant to which any of the Mortgage
Backed Securities or any Indebtedness permitted by Section 8.03(g)(i) or
(iii) is issued.

 

“Information”
has the meaning specified in Section 11.07.

 

“Interest
Payment Date” means, (a) as to any Eurodollar Rate Loan,
the last day of the relevant Interest Period, any date that such Loan is
prepaid or converted, in whole or in part, and the Revolving Credit Maturity
Date or the Term Loan Maturity Date, as applicable; provided, however,
that if any Interest Period for a Eurodollar Rate Loan exceeds three months,
the respective dates that fall every three months after the beginning of such
Interest Period shall also be Interest Payment Dates; and (b) as to any
Base Rate Loan (including a Swing Line Loan), (i) the fifteenth (or the
next Business Day after the fifteenth, if the fifteenth is not a Business Day)
of each January, April, July and October with respect to interest
accrued through the last day of each fiscal quarter of the Borrower ending
immediately prior to such date, and (ii) the Revolving Credit Maturity
Date or the Term Loan Maturity Date, as applicable, with respect to interest
accrued through such date; provided, further, that interest
accruing at the Default Rate shall be payable from time to time upon demand of
the Administrative Agent.

 

“Interest Period”
means, as to each Eurodollar Rate Loan, the period commencing on the date such
Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar
Rate Loan and ending, in each case, on the date one, two, three or six months
thereafter, as selected by the Borrower in its Revolving Loan Notice or Term
Loan Interest Rate Selection Notice; provided that:

 

(i)            any Interest Period
that would otherwise 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;

 

(ii)           any Interest Period
that begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of the calendar month
at the end of such Interest Period; and

 

(iii)          no Interest Period
shall extend beyond (a) with respect to Revolving Loans, the Revolving
Credit Maturity Date, and (b) with respect to the Term Loan, the date set
forth in part (a) of the definition of the Term Loan Maturity Date.

 

20

 

“Investment”
means, as to any Person, any direct or indirect acquisition or investment by
such Person, whether by means of (a) the purchase or other acquisition of
capital stock or other securities of another Person, (b) a loan, advance
or capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or equity participation or interest in,
another Person, including any partnership or joint venture interest in such
other Person and any arrangement pursuant to which the investor Guarantees
Indebtedness of such other Person, (c) the purchase or other acquisition
(in one transaction or a series of transactions) of assets of another Person
that constitute a business unit, or (d) the purchase of land and related
infrastructure improvements.  For
purposes of covenant compliance, the amount of any Investment shall be the
amount actually invested, without adjustment for subsequent increases or decreases
in the value of such Investment.

 

“IP Rights”
has the meaning set forth in Section 6.17.

 

“IRS”
means the United States Internal Revenue Service.

 

“ISP”
means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).

 

“Issuer
Documents” means with respect to any Letter of Credit or
Acceptance Credit, the Letter of Credit Application, and any other document,
agreement and instrument entered into by the L/C Issuer and the Borrower (or
any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of
Credit or Acceptance Credit.

 

“Joinder
Agreements” means, collectively, Guaranty Joinder Agreements,
the Pledge Joinder Agreements and the Security Joinder Agreements.

 

“Joint Fee
Letter” means the letter agreement, dated as of June 17,
2005, among the Borrower, the Administrative Agent and the Arrangers.

 

“Laws”
means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or
administration thereof by any Governmental Authority charged with the enforcement,
interpretation or administration thereof, and all applicable administrative
orders, directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, in each case whether or not having
the force of law.

 

“L/C – BA
Advance” means, with respect to each Revolving Lender, such
Revolving Lender’s funding of its participation in any L/C – BA Borrowing in
accordance with its Pro Rata Revolving Share.

 

“L/C – BA
Borrowing” means an extension of credit resulting from (i) a
drawing under any Letter of Credit (other than an Acceptance Credit) or (ii) a
payment of a Bankers’ Acceptance upon presentation, in each case which has not
been reimbursed on the date when made or refinanced as a Revolving Borrowing.

 

21

 

“L/C – BA Credit
Extension” means, with respect to any Letter of Credit or
Bankers’ Acceptance, the issuance thereof or extension of the expiry date
thereof, or the renewal or increase of the amount thereof.

 

“L/C – BA
Obligations” means, as at any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit, plus the
sum of the maximum aggregate amount which is, or at any time thereafter may
become, payable by the L/C Issuers under all then outstanding Bankers’
Acceptances, plus the aggregate of all Unreimbursed Amounts, including all L/C –
BA Borrowings.  For purposes of computing
the amount available to be drawn under any Letter of Credit, the amount of such
Letter of Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any
date of determination a Letter of Credit has expired by its terms but any
amount may still be drawn thereunder by reason of the operation of Rule 3.14
of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.

 

“L/C Issuer”
means each of Bank of America and SunTrust Bank, each in its capacity as an
issuer of Letters of Credit and Bankers’ Acceptances  hereunder, or any successor issuer of Letters of Credit and
Bankers’ Acceptances  hereunder.  At any time there is more than one L/C
Issuer, all singular references to the L/C Issuer shall mean any L/C Issuer,
either L/C Issuer, each L/C Issuer, the L/C Issuer that has issued the
applicable Letter of Credit, or both L/C Issuers, as the context may require.

 

“Lender”
has the meaning specified in the introductory paragraph hereto and, as the
context requires, includes the L/C Issuer and the Swing Line Lender.

 

“Lending Office”
means, as to any Lender, the office or offices of such Lender described as such
in such Lender’s Administrative Questionnaire, or such other office or offices
as a Lender may from time to time notify the Borrower and the Administrative
Agent.

 

“Letter of
Credit” means any letter of credit issued hereunder.  A Letter of Credit may be a commercial letter
of credit (including an Acceptance Credit) or a standby letter of credit.

 

“Letter of
Credit Application” means an application and agreement for the
issuance or amendment of a Letter of Credit in the form from time to time in
use by the L/C Issuer and, in the case of any Acceptance Credit, shall include
the related Acceptance Documents.

 

“Letter of
Credit – BA Expiration Date” means the day that is seven days
prior to the Revolving Credit Maturity Date then in effect (or, if such day is
not a Business Day, the next preceding Business Day).

 

“Letter of
Credit – BA Fees” means, collectively or individually as the
context may indicate, the fees with respect to Letters of Credit described in Sections
2.04(i)(i) and (ii).

 

“Letter of
Credit – BA Sublimit” means an amount equal to the lesser of (a) $100,000,000
and (b) the Aggregate Revolving Credit Commitments.  The Letter of Credit – BA Sublimit is part
of, and not in addition to, the Aggregate Revolving Credit Commitments.

 

22

 

“Lien”
means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or
other security interest or preferential arrangement in the nature of a security
interest of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).

 

“Loan”
means an extension of credit by a Lender to the Borrower under Article II
in the form of a Revolving Loan, a Term Loan or a Swing Line Loan, including
any Segment.

 

“Loan Documents”
means this Agreement, each Note, each Guaranty (including each Guaranty Joinder
Agreement), each Security Instrument, each Revolving Loan Notice, each Term
Loan Interest Rate Selection Notice, each Issuer Document and each Compliance
Certificate, and all other instruments and documents heretofore or hereafter
executed or delivered to or in favor of any Lender or the Administrative Agent
in connection with the Loans made and transactions contemplated by this
Agreement.

 

“Loan Parties”
means, collectively, the Borrower, each Guarantor and each other Person
providing Collateral pursuant to any Security Instrument.

 

“Material
Adverse Effect” means (a) a material adverse change in, or
a material adverse effect upon, the operations, business, assets, properties,
liabilities (actual or contingent), condition (financial or otherwise) or
prospects of the Borrower and its Non-Mueller
Subsidiaries taken as a whole; (b) a material impairment of the
ability of any Loan Party to perform its obligations under any Loan Document to
which it is a party; or (c) a material adverse effect upon the legality,
validity, binding effect or enforceability against any Loan Party of any Loan
Document to which it is a party.

 

“Material
Subsidiary” means, as of any date of determination thereof (and,
as of the Closing Date, giving effect to the US Pipe Contribution), each direct
or indirect Restricted Subsidiary of the Borrower that (i) has total
assets (including Equity Interests in other Subsidiaries) of equal to or
greater than 3% of Consolidated Total Assets (calculated as of the most recent
fiscal period with respect to which the Administrative Agent shall have
received financial statements required to be delivered pursuant to Sections
7.01(a) or (b) (the “Required Financial Information”)), or (ii) has
revenues equal to or greater than 3% of the total revenues (on a consolidated
basis) of the Borrower and its Restricted Subsidiaries (calculated for the most
recent period for which the Administrative Agent has received the Required
Financial Information); provided, however, that notwithstanding
the foregoing, the term “Material Subsidiaries” shall mean Restricted
Subsidiaries of the Borrower that together have assets equal to not less than
90% of Consolidated Total Assets (calculated as described above) and revenues
of not less than 90% of the total revenues of the Borrower and its Restricted
Subsidiaries (calculated as described above).

 

“Maximum
Restricted Payment Amount” means, with respect to any fiscal
year of the Borrower, $25,000,000 plus 50% of Consolidated Net Income
for the immediately preceding fiscal year (without carrying forward any amount
from a prior fiscal year).

 

23

 

“Merger”
means the acquisition by the Borrower of all of the issued and outstanding
capital stock of Mueller Water Products by means of the merger of Mueller Water
Products with and into JW MergerCo, Inc., a Delaware corporation and a
direct Subsidiary of New Holdco prior to giving effect to the Merger, with
Mueller Water Products being the surviving entity of such merger.

 

“Merger
Agreement” means that certain Agreement and Plan of Merger dated
as of June 17, 2005 by and among Mueller Water Products, the Borrower, JW
MergerCo, Inc. and DLJ Merchant Banking II, Inc., as the Stockholders’
Representative (including all schedules and exhibits thereto and the Disclosure
Letter (as defined therein)).

 

“Merger
Documents” means, individually or collectively as the context
may indicate, (a) the Merger Agreement, (b) the Escrow Agreement (as
defined in the Merger Agreement), (c) the Voting Agreement (as defined in
the Merger Agreement) and (d) each other material agreement, instrument
and document relating to the Merger.

 

“Mid-State
Capital” means Mid-State Capital Corporation, a Delaware
corporation.

 

“Mid-State
Holdings” means Mid-State Holdings Corporation, a Delaware
corporation.

 

“Mid-State Homes”
means Mid-State Homes, Inc., a Florida corporation.

 

“Mid-State Homes
Guaranty” means that certain Guaranty Agreement (Mid-State Homes
and Walter Mortgage) dated as of the date hereof by each of Mid-State Homes and
Walter Mortgage Company in favor of the Administrative Agent (on behalf of the
Secured Parties) substantially in the form of Exhibit H.

 

“Mine”
means any excavation or opening into the earth now and hereafter made from
which Coal is or can be extracted on or from any of the properties owned or
leased by any Loan Party, together with all appurtenances, fixtures,
structures, improvements, and all tangible property of whatsoever kind or
nature in connection therewith.

 

“Mineral Rights
Mortgage” means, individually or collectively as the context may
indicate, those mortgages, leasehold mortgages, deeds of trust, leasehold deeds
of trust, deeds to secure debt, leasehold deeds to secure debt and comparable
real estate Lien documents delivered on or after the Closing Date to the
Administrative Agent with respect to any Mortgaged Coal Property.

 

“Moody’s”
means Moody’s Investors Service, Inc. and any successor thereto.

 

“Morgan Stanley”
means Morgan Stanley Senior Funding, Inc. and its successors.

 

“Mortgage”
means, individually or collectively as the context may indicate, those
mortgages, deeds of trust, deeds to secure debt and comparable real estate Lien
documents delivered on or after the Closing Date to the Administrative Agent
with respect to any Mortgaged Fee Property, substantially in the form attached
hereto as Exhibit J.

 

24

 

“Mortgage
Accounts” means certain building and installment contracts and
related mortgages and instruments originated by Jim Walter Homes, Inc.,
Neatherlin Homes, Inc., Dream Homes, Inc., Dream Homes USA, Inc.,
Crestline Homes, Inc. and notes and mortgages and related instruments originated
by Walter Mortgage Company, each a Non-Mueller Subsidiary of the Borrower.

 

“Mortgage-Backed
Securities” means, collectively, (i) the Asset Backed Notes
issued by Mid-State Trust IV, a Delaware business trust established by
Mid-State Homes, having an aggregate principal amount outstanding as of December 31,
2004 of approximately $322,357,000, (iii) the Asset Backed Notes issued by
Mid-State Trust VI, a Delaware business trust established by Mid-State Homes,
having an aggregate principal amount outstanding as of December 31, 2004
of approximately $148,366,000, (iv) the Asset Backed Notes issued by
Mid-State Trust VII, a Delaware business trust established by Mid-State Homes,
having an aggregate principal amount outstanding as of December 31, 2004 of
approximately $167,525,000, (v) the Asset Backed Notes issued by Mid-State
Trust VIII, a Delaware business trust established by Mid-State Homes, having an
aggregate principal amount outstanding as of December 31, 2004 of
approximately $214,994,000, (vi) the Asset Backed Notes issued by
Mid-State Trust X, a Delaware business trust established by Mid-State Homes,
having an aggregate principal amount outstanding as of December 31, 2004
of approximately $292,178,000, (vii) the Asset Backed Notes issued by Mid-State
Trust XI, a Delaware business trust established by Mid-State Homes, having an
aggregate principal amount outstanding as of December 31, 2004 of
approximately $257,086,000, and (viii) the Asset Backed Notes issued by
Mid-State Capital Corporation 2004-1 Trust, a Delaware business trust
established by Mid-State Capital, having an aggregate principal amount
outstanding as of December 31, 2004 of approximately $374,347,000.

 

“Mortgage
Warehouse Facility” means, individually or collectively as the
context may indicate and as in effect at any date of determination thereof, (a) either
of the Existing Mortgage Warehouse Facilities and/or (b) another credit
facility (or facilities, on a combined basis, if more than one) acceptable to
the Administrative Agent in its reasonable discretion for the warehousing of
mortgages that provides financing to Mid-State Trust IX, Mid-State Trust XIV or
another MSH Trust established for such purpose, and that otherwise serves
substantially the same purpose on substantially the same terms as the Existing
Mortgage Warehouse Facilities, but in no event on any terms less favorable in
any material respect, in the reasonable judgment of the Administrative Agent,
to the Administrative Agent and the Lenders than those terms in the Existing
Mortgage Warehouse Facilities on the Closing Date.

 

“Mortgaged Coal
Property” means, collectively, the leasehold or other rights of
the Borrower or any Guarantor or any other Person, as applicable, to mine or
otherwise extract coal on certain real property as may be granted to the
Administrative Agent on the Closing Date or from time to time thereafter in
accordance with the terms of this Agreement pursuant to a Mineral Rights
Mortgage, it being understood that some parcels of real property may constitute
both Mortgaged Coal Property and Mortgaged Fee Property.

 

“Mortgaged Coal
Property Support Documents” shall mean, for each Mortgaged Coal
Property, (i) the Title Policy pertaining thereto, if determined to be
necessary by the Administrative Agent, (ii) such lessor’s estoppel, waiver
and consent certificates as the Administrative Agent may reasonably require and
the Borrower can deliver using its best efforts 

 

25

 

(which shall not require
the expenditure of cash or the making of any material concessions under the
relevant lease unless the Administrative Agent reasonably determines that such
Mortgaged Coal Property constitutes a material part of the overall Coal
Collateral for the Obligations and the obtaining of such consent is necessary
for the effective grant of a first-priority, perfected mortgage on such
Mortgaged Coal Property) and subordination, nondisturbance and attornment
agreements as the Administrative Agent may reasonably require and the Borrower
can deliver using its best efforts (which shall not require the expenditure of
cash or the making of any material concessions under the relevant lease), (iii) such
opinions of local counsel with respect to the Mineral Rights Mortgages, as
applicable, as the Administrative Agent may reasonably require, and (iv) such
other documentation as the Administrative Agent may reasonably require, in each
case as shall be in form and substance reasonably acceptable to the
Administrative Agent.

 

“Mortgaged Fee
Property” means, collectively, the fee interests of the Borrower
or any Guarantor, as applicable, in such real property, improvements, fixtures
and other items of real and personal property related thereto (and the products
and proceeds thereof) as may be granted to the Administrative Agent on the
Closing Date or from time to time thereafter in accordance with the terms of
this Agreement pursuant to a Mortgage.

 

“Mortgaged
Property Support Documents” shall mean, for each Mortgaged Fee
Property, (i) the Title Policy pertaining thereto, (ii) such surveys
and flood hazard certifications thereof as the Administrative Agent may require
prepared by recognized experts in their respective fields selected by the
Borrower and reasonably satisfactory to the Administrative Agent provided
that if the Title Policy for any Mortgaged Fee Property does not contain a
blanket survey exception and contains survey coverage and survey related
endorsements which are reasonably acceptable to the Administrative Agent, then
no survey shall be required for such Mortgaged Fee Property, (iii) as to
the Mortgaged Properties located in a flood hazard area, such flood hazard
insurance as the Administrative Agent may require, (iv) such lessee’s
affidavits as the Administrative Agent may reasonably require with respect to
any such property leased to a third party, (v) such opinions of local
counsel with respect to the Mortgages, as applicable, as the Administrative
Agent may reasonably require, and (vi) such other documentation as the
Administrative Agent may reasonably require, in each case as shall be in form
and substance reasonably acceptable to the Administrative Agent.

 

“MSH Trusts”
means, collectively, each of the Mid-State Trust II, Mid-State Trust III,
Mid-State Trust IV, Mid-State Trust VI, Mid-State Trust VII, Mid-State Trust
VIII, Mid-State Trust X, Mid-State Trust XI and Mid-State Capital Corporation
2004-1 Trust entities referred to in the definition of “Mortgaged-Backed
Securities,” Mid-State Trust V, Mid-State Trust IX and Mid-State Trust XIV, and
any other special purpose entity in which Mid-State Homes and/or Walter
Mortgage Company and/or Mid-State Capital shall own all of the equity or
residual beneficial interest created and operated solely for the purpose of
issuing asset-backed securities permitted by Section 8.03(g)(iii) or
8.03(i).

 

“Mueller Group”
means Mueller Group, LLC, a Delaware limited liability company, as successor to
Mueller Group, Inc., a Delaware corporation, as a result of the Entity
Conversion.

 

26

 

“Mueller Group
Notes” means those 10% senior subordinated notes due 2012 issued
by Mueller Group pursuant to that certain Indenture dated as of April 23,
2004 by and among Mueller Group, as issuer, certain subsidiaries of Mueller
Group as guarantors thereunder, and Law Debenture Trust Company of New York, as
trustee.

 

“Mueller Group
Second Lien Notes” means those second priority senior secured
floating rate notes due 2011 issued by Mueller Group pursuant to that certain
Indenture dated as of April 23, 2004 by and among Mueller Group, as
issuer, certain subsidiaries of Mueller Group as guarantors thereunder, and Law
Debenture Trust Company of New York, as trustee.

 

“Mueller Water
Products” means Mueller Water Products, LLC, a Delaware limited
liability company, as successor to Mueller Water Products, Inc., a
Delaware corporation, as a result of the Entity Conversion.

 

“Mueller Water
Products Notes” means those 14.75% senior discount notes due
2014 issued by Mueller Water Products pursuant to that certain Indenture dated
as of April 29, 2004 by and between Mueller Water Products (f/k/a Mueller
Holdings (N.A.), Inc.), as issuer, and Law Debenture Trust Company of New
York, as trustee.

 

“Multiemployer
Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of
ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to
make contributions, or during the preceding five plan years, has made or been
obligated to make contributions.

 

“Net Cash Proceeds”
means:

 

(a)           with respect to the
sale of any asset by the Borrower or any Restricted Subsidiary, the excess, if
any, of (i) the sum of cash and cash equivalents received in connection
with such sale (including any cash received by way of deferred payment pursuant
to, or by monetization of, a note receivable or otherwise, but only as and when
so received) over (ii) the sum of (A) the principal amount of any
Indebtedness that is secured by such asset and that is required to be repaid in
connection with the sale thereof (other than Indebtedness under the Loan
Documents and Indebtedness owing to the Borrower or any Restricted Subsidiary),
(B) the out-of-pocket expenses incurred by the Borrower or any Restricted
Subsidiary in connection with such sale, including any brokerage commissions,
underwriting fees and discount, legal fees, finder’s fees and other similar
fees and commissions, (C) taxes paid or reasonably estimated to be payable
by the Borrower or any Restricted Subsidiary in connection with the relevant
asset sale, and (D) the amount of any reasonable reserve required to be
established in accordance with GAAP against liabilities (other than taxes
deducted pursuant to (C) above) to the extent such reserves are (I) associated
with the assets that are the object of such sale and (II) retained by the
Borrower or any Restricted Subsidiary; provided that the amount of any
subsequent reduction of any reserve provided for in clause (D) above
(other than in connection with a payment in respect of such liability) shall (X) be
deemed to be Net Cash Proceeds of such asset sale occurring on the date of such
reduction, and (Y) immediately be applied to the prepayment of Loans in
accordance with Section 2.06(d);

 

27

 

(b)           with respect to the
public and private issuance of any Indebtedness by the Borrower or any
Restricted Subsidiary, the excess of (i) the sum of the cash and cash
equivalents received in connection with such issuance over (ii) the sum of
(A) the underwriting discounts and commissions, and all legal, accounting,
printing, rating agency, banking, title and recording fees and expenses and
other out-of-pocket expenses, incurred by the Borrower or such Restricted
Subsidiary in connection with such issuance, and (B) all taxes required to
be paid or accrued as a consequence of such issuance; and

 

(c)           with respect to the
sale or issuance of any Equity Interest by the Borrower or any Restricted
Subsidiary or any Permitted Securities Transaction described in part (b),
(c) or (d) of the definition thereof, the excess of (i) the
sum of the cash and cash equivalents received in connection with such sale or
issuance over (ii) the sum of (A) the underwriting discounts
and commissions, and all legal, accounting, printing, banking and other
out-of-pocket expenses, incurred by the Borrower, such Restricted Subsidiary or
New Holdco in connection with such issuance or sale, and (B) all taxes
required to be paid or accrued as a consequence of such issuance or sale.

 

“New Holdco”
means Mueller Holding Company, Inc., a Delaware corporation.

 

“Non-Core
Subsidiaries” means, individually or collectively as the context
may indicate, (a) Best Insurors, Inc., (b) Cardem and (c) Sloss
Industries Corporation and its Subsidiaries.

 

“Non-Mueller
Subsidiaries” means those Subsidiaries of the Borrower other
than New Holdco and its Subsidiaries (after giving effect to the Transactions).

 

“Notes”
means, collectively, the Revolving Loan Notes and the Term Loan Notes.

 

“Obligations”
means all advances to, and debts, liabilities, obligations, covenants and
duties of, any Loan Party arising under any Loan Document or otherwise with
respect to any Loan, Letter of Credit or Bankers’ Acceptance, or arising under
any Related Credit Arrangement, in each case whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising and including interest and fees
that accrue after the commencement by or against any Loan Party or any Affiliate
thereof of any proceeding under any Debtor Relief Laws naming such Person as
the debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding.

 

“Organization
Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with
respect to any limited liability company, the certificate or articles of
formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

28

 

“Other Taxes”
means all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made
hereunder or under any other Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement or any other Loan
Document.

 

“Outstanding
Amount” means (i) with respect to the Term Loan on any
date, the aggregate outstanding principal amount thereof after giving effect to
the Borrowing of the Term Loan on the Closing Date, and any prepayments or
repayments of the Term Loan (or any Segment) occurring on such date, (ii) with
respect to Revolving Loans on any date, the aggregate outstanding principal
amount thereof after giving effect to any Revolving Borrowings and any
prepayments or repayments of Revolving Loans occurring on such date; (iii) with
respect to Swing Line Loans on any date, the aggregate outstanding principal amount
thereof after giving effect to any borrowings and prepayments or repayments of
Swing Line Loans occurring on such date; and (iv) with respect to any L/C –
BA Obligations on any date, the amount of such L/C – BA Obligations on such
date after giving effect to any L/C – BA Credit Extension occurring on such
date and any other changes in the aggregate amount of the L/C – BA Obligations
as of such date, including as a result of any reimbursements of amounts paid
under Bankers’ Acceptances or outstanding unpaid drawings under any Letters of
Credit or any reductions in the maximum amount available for drawing under
Letters of Credit taking effect on such date.

 

“Participant”
has the meaning specified in Section 11.06(d).

 

“Payment Date
Statement” means the notification Mid-State Homes and/or
Mid-State Capital receives from the relevant Trustee for each MSH Trust for any
relevant period indicating, among other items, MSH Trust collections and
distributions during such period, or any such similar statement serving the
same purpose and providing substantially the same information in substantially
the same detail.

 

“PBGC”
means the Pension Benefit Guaranty Corporation.

 

“Pension Plan”
means any “employee pension benefit plan” (as such term is defined in Section 3(2) of
ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
and is sponsored or maintained by the Borrower or any ERISA Affiliate or to
which the Borrower or any ERISA Affiliate contributes or has an obligation to
contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the immediately preceding five
plan years.

 

“Permitted
Securities Transaction” means any of (a) a Restricted
Payment by the Borrower to its shareholders of all or any portion of the Equity
Interests of New Holdco owned by the Borrower and made in compliance with Section 8.06(e),
(b) an initial public offering of Equity Interests of New Holdco, (c) a
secondary public offering of Equity Interests of New Holdco, (d)  the
Disposition for fair market value by the Borrower of any of its Equity
Interests of New Holdco (other than pursuant to a Restricted Payment described
in subpart (a) of this definition), so long as in the case of any transaction
or combination of transactions permitted by subparts (b), (c) and/or (d) of
this definition, the prepayment of the Term Loan required by Section 2.06(d)(vi) is
made within the time provided after the occurrence of such Permitted Securities
Transaction.

 

29

 

“Person”
means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, Governmental Authority or other
entity.

 

“Plan”
means any “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) established by the Borrower or, with respect to any such plan that is
subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.

 

“Platform”
has the meaning specified in Section 7.02.

 

“Pledge
Agreement” means that certain Securities Pledge Agreement dated
as of the date hereof among the Borrower, certain Guarantors and the
Administrative Agent, as supplemented from time to time by the execution and
delivery of Pledge Joinder Agreements pursuant to Sections 3.01 and 7.12,
as the same may be otherwise supplemented (including by Pledge Agreement
Supplement).

 

“Pledge
Agreement Supplement” means the Pledge Agreement Supplement in
the form affixed as an exhibit to the Pledge Agreement.

 

“Pledged
Interests” means, in each case excluding the Voting Securities
and Subsidiary Securities of any Unrestricted Subsidiary (other than Mid-State
Capital and New Holdco), (i) the Subsidiary Securities of each of the
existing or hereafter organized or acquired Domestic Subsidiaries of the
Borrower and Direct Foreign Subsidiaries of the Borrower that at any time are
on Schedule I to the Pledge Agreement (or any similar schedule serving
the same purpose in the Pledge Agreement); (ii) all of the Subsidiary
Securities of each of the existing or hereafter organized or acquired Domestic
Subsidiaries of the Borrower that is a Material Subsidiary; (iii) all of
the Subsidiary Securities of New Holdco; and (iv) 65% of the Voting
Securities (or if the relevant Person shall own less than 65% of such Voting
Securities, then 100% of the Voting Securities owned by such Person) and 100%
of the nonvoting Subsidiary Securities of each of the existing or hereafter
organized or acquired Direct Foreign Subsidiaries of the Borrower that is a
Material Subsidiary.

 

“Pledge Joinder
Agreement” means each Pledge Joinder Agreement, substantially in
the form thereof attached to the Pledge Agreement, executed and delivered by a
Guarantor to the Administrative Agent pursuant to Section 7.12.

 

“Pro Forma
Effect  Compliance
Certificate” means a certificate substantially in the form of Exhibit D-2.

 

“Pro Rata
Revolving Share” means, with respect to each Revolving Lender at
any time, a fraction (expressed as a percentage, carried out to the ninth
decimal place), the numerator of which is the amount of the Revolving Credit
Commitment of such Revolving Lender at such time and the denominator of which
is the amount of the Aggregate Revolving Credit Commitments at such time; provided
that if the Aggregate Revolving Credit Commitments have been terminated at such
time, then the Pro Rata Revolving Share of each Revolving Lender shall be the
Pro Rata Revolving Share of such Revolving Lender immediately prior to such
termination and after giving effect to any subsequent assignments made pursuant
to Section 11.06.  The Pro
Rata Revolving Share of each Revolving Lender as of the Amendment No. 5
Effective Date is set forth opposite the name of such Revolving Lender on Schedule
2.01 or in 

 

30

 

the Assignment and Assumption pursuant to which such
Revolving Lender becomes a party hereto, as applicable.

 

“Pro Rata Term
Share” means, with respect to each Term Loan Lender, the
percentage (carried out to the ninth decimal place) of the principal amount of
the Term Loan funded by such Term Loan Lender. 
The initial Pro Rata Term Share of each Term Loan Lender as of the
Closing Date is set forth opposite the name of such Term Loan Lender on Schedule
2.01 or in the Assignment and Assumption pursuant to which such Term Loan
Lender becomes a party hereto, as applicable.

 

“Put Backstop
Commitment Letter” means that certain commitment letter dated as
of June 17, 2005 by and among the Borrower, Banc of America Bridge LLC,
Banc of America Securities LLC and Morgan Stanley Senior Funding, Inc.
regarding the commitments for the Put Backstop Facilities.

 

“Put Backstop
Commitment Letter Amendment” means that certain Letter Amendment
to the Commitment Letter dated as of the Closing Date by and among the
Borrower, Banc of America Bridge LLC, Banc of America Securities LLC and Morgan
Stanley Senior Funding, Inc. extending one element of the termination of
the commitments under the Put Backstop Commitment Letter for the Put Backstop
Facilities to a date that is not earlier than the date that is 60 days after
the Closing Date.

 

“Put Backstop
Facilities” means, individually or collectively as the context
may indicate, each of (a) a senior subordinated bridge facility of Mueller
Group entered into, if at all, within 60 days after the Closing Date in an
aggregate principal amount of not less than $320,000,000 for the purpose of
providing liquidity in the event that more than $25,000,000 of the existing
Mueller Group Notes are tendered in response to an offer to repurchase such
notes as a result of the consummation of the Merger, and (b) a senior
bridge facility of Mueller Water Products entered into, if at all, within 60
days after the Closing Date in an aggregate principal amount of not less than
$145,000,000 for the purpose of providing liquidity in the event that more than
$25,000,000 of the Mueller Water Products Notes are tendered in response to an
offer to repurchase such notes as a result of the consummation of the Merger.

 

“QHT Interim
Entity” means one or more direct or indirect Subsidiaries of the
Borrower formed and utilized solely for the purpose of consummating a Qualified
Homebuilding Transaction or for holding and operating Homebuilding Assets for a
period no longer than reasonably necessary under the circumstances to
facilitate the consummation of a Qualified Homebuilding Transaction.

 

“Qualified
Homebuilding Transaction” or “QHT” means a Disposition by the Borrower
or applicable Subsidiaries (including for purposes of this definition by way of
Restricted Payment) of any of the Homebuilding Assets through one or more
transactions (including, without limitation, any sale, transfer, license, lease
or other disposition) or through the distribution to the Borrower’s shareholders
of Equity Interests in any of the Homebuilding Assets (including, without
limitation, investments in any such QHT in an amount not to exceed, in the
aggregate for all QHTs, $35,000,000), but excluding any Disposition described
in Section 8.05(f)(i).

 

31

 

“Register”
has the meaning specified in Section 11.06(c).

 

“Registered
Public Accounting Firm” has the meaning specified in the
Securities Laws and shall be independent of the Borrower as prescribed in the
Securities Laws.

 

“Related Credit
Arrangements” means, collectively, Related Swap Contracts and
Related Treasury Management Arrangements.

 

“Related Parties”
means, with respect to any Person, such Person’s Affiliates and the partners,
directors, trustees, officers, employees, agents and advisors of such Person
and of such Person’s Affiliates.

 

“Related Swap
Contract” means all Swap Contracts that are entered into or
maintained with a Lender or Affiliate of a Lender that are not prohibited by
the express terms of the Loan Documents.

 

“Related
Treasury Management Arrangements” means all arrangements for the
delivery of treasury management services to or for the benefit of any Loan
Party which are entered into or maintained with a Lender or Affiliate of a
Lender and which are not prohibited by the express terms of the Loan Documents.

 

“Remaining
Equity Prepayment Percentage” has the meaning specified in Section 2.06(d)(iii).

 

“Replacement
Mueller Facilities” means the senior, secured credit facilities
of Mueller Group pursuant to that certain Credit Agreement dated as of the
Closing Date by and among Mueller Group, Bank of America, as administrative
agent, Morgan Stanley, as syndication agent, and the lenders from time to time
party thereto, which such facilities refinance the Existing Mueller Credit
Agreement, and any other senior credit facility that may from time to time
replace or refinance the facilities provided by such Credit Agreement.

 

“Reportable
Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

 

“Request for
Credit Extension” means (a) with respect to a Borrowing,
conversion or continuation of Revolving Loans, a Revolving Loan Notice, (b) with
respect to a conversion or continuation of Segments, a Term Loan Interest Rate
Selection Notice, (c) with respect to an L/C - BA Credit Extension, a
Letter of Credit Application, and (d) with respect to a Swing Line Loan, a
Swing Line Loan Notice.

 

“Required ECF
Prepayment Percentage” has the meaning specified in Section 2.06(d)(iv).

 

“Required Equity
Prepayment Percentage” has the meaning specified in Section 2.06(d)(iii).

 

“Required
Lenders” means, as of any date of determination, Lenders having
more than 50% of the Aggregate Commitments or, if the commitment of each Lender
to make Loans and 

 

32

 

the obligation of the L/C Issuers to make L/C – BA
Credit Extensions have been terminated pursuant to Section 9.02,
Lenders holding in the aggregate more than 50% of the Total Outstandings (with
the aggregate amount of each Lender’s risk participation and funded
participation in L/C – BA Obligations and Swing Line Loans being deemed “held”
by such Lender for purposes of this definition); provided that any
Revolving Credit Commitment of, and the portion of the Total Outstandings held
or deemed held by, any Defaulting Lender shall be excluded for purposes of
making a determination of Required Lenders.

 

“Required
Revolving Lenders” means, as of any date of determination,
Revolving Lenders having more than 50% of the Aggregate Revolving Credit
Commitments and Outstanding Amount (including risk participations in Letters of
Credit and Swing Line Loans) under the Revolving Credit Facility; provided
that the Revolving Credit Commitment of, and the portion of the Outstanding
Amount (including risk participations in Letters of Credit and Swing Line
Loans) under the Revolving Credit Facility held or deemed held by, any
Defaulting Lender shall be excluded for purposes of making a determination of Required
Revolving Lenders.

 

“Required Term
Loan Lenders” means, as of any date of determination, Term Loan
Lenders having more than 50% of the Outstanding Amount of the Term Loan; provided
that the Outstanding Amount of the Term Loan held or deemed held by any
Defaulting Lender shall be excluded for purposes of making a determination of
Required Term Loan Lenders.

 

“Responsible
Officer” means, with respect to each Loan Party, the chief
executive officer, president, chief financial officer, treasurer, controller or
assistant treasurer of such Loan Party. 
Any document delivered hereunder that is signed by a Responsible Officer
of a Loan Party shall be conclusively presumed to have been authorized by all
necessary corporate, partnership and/or other action on the part of such Loan
Party and such Responsible Officer shall be conclusively presumed to have acted
on behalf of such Loan Party.

 

“Restricted
Payment” means any dividend or other distribution (whether in
cash, securities or other property) with respect to any capital stock or other
Equity Interest of the Borrower or any Non-Mueller Subsidiary, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such capital stock or other
Equity Interest, or on account of any return of capital to the Borrower’s
stockholders, partners or members (or the equivalent Person thereof).

 

“Restricted
Subsidiaries” means all Subsidiaries of the Borrower other than
the Unrestricted Subsidiaries.

 

“Revolving
Borrowing” means a borrowing consisting of simultaneous
Revolving Loans of the same Type and, in the case of Eurodollar Rate Loans,
having the same Interest Period, made by each of the Revolving Lenders pursuant
to Section 2.02.

 

“Revolving
Credit Commitment” means, as to each Revolving Lender, its
obligation to (a) make Revolving Loans to the Borrower pursuant to Section 2.02,
(b) purchase participations in L/C - BA Obligations, and (c) purchase
participations in Swing Line Loans, in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such 

 

33

 

Revolving Lender’s name on Schedule 2.01 or in
the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable, as such amount may be adjusted from time to time in
accordance with this Agreement.

 

“Revolving
Credit Facility” means the facility described in Sections
2.02, 2.04 and 2.05 providing for Revolving Loans, Swing Line
Loans, Letters of Credit and BAs to or for the benefit of the Borrower by the
Revolving Lenders, Swing Line Lender and L/C Issuer, as the case may be, in the
maximum aggregate principal amount at any time outstanding of $475,000,000, as
adjusted from time to time pursuant to the terms of this Agreement.

 

“Revolving
Credit Maturity Date” means October 4, 2010.

 

“Revolving
Lender” means each Lender that has a Revolving Credit Commitment
or, following termination of the Revolving Credit Commitments, has Revolving
Loans outstanding or participations in an outstanding Letter of Credit, Bankers’
Acceptance or Swing Line Loan.

 

“Revolving Loan”
means a Base Rate Loan or a Eurodollar Rate Loan made to the Borrower by a
Revolving Lender in accordance with its Pro Rata Revolving Share pursuant to Section 2.02,
except as otherwise provided herein.

 

“Revolving Loan
Note” means a promissory note made by the Borrower in favor of a
Revolving Lender evidencing Revolving Loans made by such Revolving Lender,
substantially in the form of Exhibit C-2.

 

“Revolving Loan
Notice” means a notice of (a) a Revolving Borrowing, (b) a
conversion of Revolving Loans from one Type to the other, or (c) a
continuation of Eurodollar Rate Loans, pursuant to Section 2.03(a),
which, if in writing, shall be substantially in the form of Exhibit A-1.

 

“S&P”
means Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc. and any successor thereto.

 

“Sarbanes-Oxley”
means the Sarbanes-Oxley Act of 2002.

 

“SEC”
means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.

 

“Secured Parties”
means, collectively, with respect to each of the Security Instruments, the
Administrative Agent, the Lenders and such other Persons for whose benefit the
Lien thereunder is conferred, as therein provided.

 

“Securities Laws”
means the Securities Act of 1933, the Exchange Act, Sarbanes-Oxley and the
applicable accounting and auditing principles, rules, standards and practices
promulgated, approved or incorporated by the SEC or the Public Company
Accounting Oversight Board, as each of the foregoing may be amended and in
effect on any applicable date hereunder.

 

“Security
Agreement” means the Security Agreement dated as of the date
hereof by the Borrower and one or more of the Guarantors to the Administrative
Agent for the benefit of the 

 

34

 

Secured Parties, substantially in the form of Exhibit I,
as supplemented from time to time by the execution and delivery of Security
Joinder Agreements pursuant to Section 7.12.

 

“Security
Instruments” means, collectively or individually as the context
may indicate, the Security Agreement (including the Security Joinder
Agreements), the Pledge Agreement (including the Pledge Joinder Agreements and
the Pledge Agreement Supplements), each Mortgage, each Mineral Rights Mortgage,
each Title Policy and each other Mortgaged Property Support Document and all
other agreements (including control agreements), instruments and other
documents, whether now existing or hereafter in effect, pursuant to which the
Borrower or any Restricted Subsidiary or other Person shall grant or convey to
the Administrative Agent or the Lenders a Lien in, or any other Person shall
acknowledge any such Lien in, property as security for all or any portion of
the Obligations or any other obligation under any Loan Document, as any of them
may be reinstated from time to time in accordance with the terms hereof and
thereof.

 

“Security
Joinder Agreement” means each Security Joinder Agreement,
substantially in the form thereof attached to the Security Agreement, executed
and delivered by a Guarantor or any other Person to the Administrative Agent
pursuant to Section 7.12.

 

“Segment”
means a portion of any Term Loan (or all thereof) with respect to which a
particular interest rate is (or is proposed to be) applicable.

 

“Senior Credit
Facility” means, collectively, the Term Loan Facility and the
Revolving Credit Facility.

 

“Serviced
Mortgage Accounts” means mortgage loans that are originated and
serviced by Persons other than the Borrower or a Subsidiary and with respect to
which Walter Mortgage Company, Walter Mortgage Servicing and/or Mid-State
Homes, each a Subsidiary of the Borrower, is providing property monitoring,
inspection, default mitigation and/or “Real Estate Owned” management services.

 

“Solvent”
means, when used with respect to any Person, that at the time of determination:

 

(a)           the fair value of
its assets (both at fair valuation and at present fair saleable value on an
orderly basis) is in excess of the total amount of its liabilities, including
contingent obligations; and

 

(b)           it is then able and
expects to be able to pay its debts as they mature; and

 

(c)           it has capital
sufficient to carry on its business as conducted and as proposed to be
conducted.

 

“SPC”
has the meaning specified in Section 11.06(h).

 

“STRH”
means SunTrust Robinson Humphrey, Inc. and its successors.

 

“Subordinated
New Holdco Note” means that certain 9% Subordinated Note due
2013 by New Holdco in favor of Mueller Group representing a subordinated loan
from Mueller Group 

 

35

 

to New Holdco in an initial principal amount of
$20,000,000, and including a subordinated guarantee by the Borrower of the
obligations of New Holdco thereunder.

 

“Subsidiary”
of a Person means a corporation, partnership, joint venture, limited liability
company or other business entity of which a majority of the shares of
securities or other interests having ordinary voting power for the election of
directors or other governing body (other than securities or interests having
such power only by reason of the happening of a contingency) are at the time
beneficially owned, or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries, or both, by such
Person.  Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of the Borrower and shall include, without
limitation, the Unrestricted Subsidiaries.

 

“Subsidiary
Guaranty” means that certain Guaranty Agreement dated as of the
date hereof among the Guarantors (other than Mid-State Homes and Walter
Mortgage Company) and the Administrative Agent (on behalf of the Lenders)
substantially in the form of Exhibit F, as supplemented from time
to time by the execution and delivery of Guaranty Joinder Agreements pursuant
to Section 7.12, as from time to time the same may be otherwise
supplemented or amended, modified, amended and restated or replaced.

 

“Subsidiary
Securities” means the Equity Interests issued by or in any
Subsidiary, whether or not constituting a “security” under Article 8 of
the Uniform Commercial Code as in effect in any jurisdiction.

 

“Swap Contract”
means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forward bond index transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all
transactions of any kind, and the related confirmations, which are subject to
the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master
agreement (any such master agreement, together with any related schedules, a “Master Agreement”),
including any such obligations or liabilities under any Master Agreement.

 

“Swap
Termination Value” means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or
after the date such Swap Contracts have been closed out and termination value(s) determined
in accordance therewith, such termination value(s), and (b) for any date
prior to the date referenced in clause (a), the amount(s) determined as
the mark-to-market value(s) for such Swap Contracts, as determined based
upon one or more mid-market or 

 

36

 

other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include a Lender or any
Affiliate of a Lender).

 

“Swing Line”
means the revolving credit facility made available by the Swing Line Lender
pursuant to Section 2.05.

 

“Swing Line
Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.05.

 

“Swing Line
Lender” means Bank of America in its capacity as provider of
Swing Line Loans, or any successor swing line lender hereunder.

 

“Swing Line Loan”
has the meaning specified in Section 2.05(a).

 

“Swing Line Loan
Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.05(b),
which, if in writing, shall be substantially in the form of Exhibit B.

 

“Swing Line
Sublimit” means an amount equal to the lesser of (a) $15,000,000
and (b) the Aggregate Revolving Credit Commitments.  The Swing Line Sublimit is part of, and not
in addition to, the Aggregate Revolving Credit Commitments.

 

“Syndication
Agent” means SunTrust Bank in its capacity as syndication agent
under any of the Loan Documents, or any successor syndication agent.

 

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

 

“Tax Sharing
Agreement” means that (a) certain Tax Sharing Agreement
dated as of the Closing Date by and between New Holdco and the Borrower
relating to the Borrower’s payment of taxes imposed on New Holdco and its
Subsidiaries and their properties, income or assets and (b) any other tax
sharing or similar agreement by and between the Borrower and any Person in
connection with a Qualified Homebuilding Transaction.

 

“Taxes”
means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

 

“Term Loan”
means the loans made pursuant to the Term Loan Facility in accordance with Section 2.01.

 

“Term Loan
Facility” means the facility described in Section 2.01
providing for an advance of the Term Loan to the Borrower by the Term Loan
Lenders in the original principal amount of $450,000,000, subject to
adjustments as herein provided.

 

37

 

“Term Loan
Interest Rate Selection Notice” means the written notice
delivered by a Responsible Officer of the Borrower in connection with the
election of a subsequent Interest Period for any Eurodollar Rate Segment or the
conversion of any Eurodollar Rate Segment into a Base Rate Segment or the
conversion of any Base Rate Segment into a Eurodollar Rate Segment, which, if
in writing, shall be substantially in the form of Exhibit A-2.

 

“Term Loan
Lender” means each Lender that has a portion of the Term Loan
outstanding under the Term Loan Facility.

 

“Term Loan
Maturity Date” means (a) October 3, 2012, or (b) such
earlier date upon which the Outstanding Amounts under the Term Loan Facility,
including all accrued and unpaid interest, are paid in full in accordance with the
terms hereof.

 

“Term Loan Note”
means a promissory note made by the Borrower in favor of a Term Loan Lender
evidencing the portion of the Term Loan made by such Term Loan Lender,
substantially in the form of Exhibit C-1.

 

“Third Party
Mortgage Accounts” means certain building and installment
contracts or loans and related mortgages and instruments that (a) are
originated by Persons other than the Borrower or a Non-Mueller Subsidiary, (b) constitute
first mortgages on single-family residential real property, and (c) are
acquired by Walter Mortgage Company, Mid-State Homes or Mid-State Capital, each
a Non-Mueller Subsidiary of the Borrower.

 

“Title Policy”
means an ALTA mortgagee title policy insuring the first lien priority of a
Mortgage or Mineral Rights Mortgage, and in each case reflecting only such
Liens as are permitted under Section 8.01(a), (c), (d),
(g) or (i) or which are otherwise acceptable to the
Administrative Agent, together in each case with all endorsements reasonably
requested by the Administrative Agent.

 

“Total
Outstandings” means the aggregate Outstanding Amount of all
Loans and all L/C - BA Obligations.

 

“Total Revolving
Outstandings” means the aggregate Outstanding Amount of all
Revolving Loans, Swing Line Loans and L/C - BA Obligations.

 

“Transactions”
means, individually or collectively as the context may indicate, (a) the
creation of New Holdco and the transfer of the Equity Interests of US Pipe and
of JW MergerCo, Inc. thereto, (b) the Merger, (c) the US Pipe
Contribution, (d) the receipt by New Holdco of the Dividend Distribution, (e) the
entering into by New Holdco and the Borrower (as guarantor) of, and the receipt
by New Holdco of the proceeds from, the Subordinated New Holdco Note, (f) the
entering into and funding of the Replacement Mueller Facilities and the related
repayment and retirement of the Existing Mueller Credit Agreement, (g) the
consummation of each of the Entity Conversions, and (h) the entering into
of the Put Backstop Commitment Letter Amendment.

 

“Type”
means with respect to (i) a Revolving Loan, its character as a Base Rate
Loan or a Eurodollar Rate Loan, and (ii) a Segment, its character as a
Base Rate Segment or a Eurodollar Rate Segment.

 

38

 

“Unfunded
Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of
that Pension Plan’s assets, determined at the end of each immediately preceding
plan year that this Agreement is in effect in accordance with the assumptions
used for funding the Pension Plan pursuant to Section 412 of the Code for
the applicable plan year.

 

“United States”
and “U.S.”
mean the United States of America.

 

“Unreimbursed
Amount” has the meaning specified in Section 2.04(c)(i).

 

“Unrestricted
Subsidiaries” means (a) the entities identified on Schedule
1.01(a) hereto, (b) each MSH Trust created after the Closing
Date, (c) New Holdco and each of its Subsidiaries, (d) Mid-State
Capital, but only so long as it is a special purpose entity that is prohibited
by its Organization Documents and/or applicable Laws from being a Guarantor,
and 100% of its Equity Interests are owned by Mid-State Holdings and constitute
Pledged Interests pledged by Mid-State Holdings to the Administrative Agent for
the benefit of the Lenders, and (e) any other Subsidiary that is a special
purpose entity serving substantially the same function as Mid-State Capital
with respect to the MSH Trusts.

 

“US Pipe”
means United States Pipe and Foundry Company, LLC, an Alabama limited liability
company, as successor to United States Pipe and Foundry Company, Inc., an
Alabama corporation, as a result of the Entity Conversion.

 

“US Pipe
Contribution” means the contribution by the Borrower of 100% of
the Equity Interests of US Pipe to New Holdco, for further distribution to
Mueller Water Products and for further contribution to Mueller Group, such that
after giving effect to all such contributions, US Pipe is a wholly-owned direct
Subsidiary of Mueller Group.

 

“Voting Securities”
means shares of capital stock issued by a corporation, or equivalent interests
in any other Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even if the right so to vote has
been suspended by the happening of such a contingency.

 

“Walter Mortgage
Company” means Walter Mortgage Company, a Delaware corporation.

 

“Walter Mortgage
Servicing” means Walter Mortgage Servicing, Inc., a Florida
corporation.

 

1.02        Other Interpretive Provisions. 
With reference to this Agreement and each other Loan Document, unless
otherwise specified herein or in such other Loan Document:

 

(a)           The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation.”  The word “will”
shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any
definition of or reference to any agreement, instrument or other 

 

39

 

document (including any
Organization Document) other than the Merger Agreement shall be construed as
referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on
such amendments, supplements or modifications set forth herein or in any other
Loan Document), (ii) any reference herein to any Person shall be construed
to include such Person’s successors and assigns, (iii) the words “herein,”
“hereof” and “hereunder,” and words of similar import when used
in any Loan Document, shall be construed to refer to such Loan Document in its
entirety and not to any particular provision thereof, (iv) all references
in a Loan Document to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
the Loan Document in which such references appear, (v) any reference to
any law shall include all statutory and regulatory provisions consolidating,
amending, replacing or interpreting such law and any reference to any law or
regulation shall, unless otherwise specified, refer to such law or regulation
as amended, modified or supplemented from time to time, and (vi) the words
“asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.

 

(b)           In the computation of periods of time
from a specified date to a later specified date, the word “from” means “from
and including;” the words “to” and “until” each mean “to
but excluding;” and the word “through” means “to and including.”

 

(c)           Section headings herein and in
the other Loan Documents are included for convenience of reference only and
shall not affect the interpretation of this Agreement or any other Loan
Document.

 

1.03        Accounting Terms.  (a) Generally.  All accounting terms not specifically or
completely defined herein shall be construed in conformity with, and all
financial data (including financial ratios and other financial calculations)
required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to
time, applied in a manner consistent with that used in preparing the Audited
Financial Statements, except as otherwise specifically prescribed
herein.

 

(b)           Changes in GAAP.  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in any
Loan Document, and either the Borrower or the Required Lenders shall so
request, the Administrative Agent, the Lenders and the Borrower shall negotiate
in good faith to amend such ratio or requirement to preserve the original
intent thereof in light of such change in GAAP (subject to the approval of the
Required Lenders); provided  that, until so amended, (i) such
ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and (ii) the Borrower shall provide to the
Administrative Agent and the Lenders financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting
forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.

 

(c)           All defined terms used in the
calculation of the financial covenants set forth in Section 8.12
hereof (including Consolidated Capital Expenditures in the case of any
Disposition, but excluding Consolidated Capital Expenditures in the case of any
Acquisition) shall be 

 

40

 

calculated on an
historical pro forma basis giving effect (by inclusion or exclusion, as
applicable), during any period of measurement that includes the Merger or any
Acquisition permitted by Section 8.13 or the US Pipe Contribution
or any Disposition permitted by Section 8.05(g), to the actual
historical results of the Person so acquired or disposed.

 

(d)           For the avoidance of doubt, the term “the
Borrower and its Restricted Subsidiaries” as used in the defined terms used in
the calculation of the financial covenants set forth in Section 8.12
hereof shall not include any consolidation of the assets, liabilities or
results of operations of the Unrestricted Subsidiaries in the assets,
liabilities or results of the Borrower or any Restricted Subsidiary.

 

(e)           Consolidation of Variable Interest
Entities.  Except as expressly
provided otherwise herein, all references herein to consolidated financial
statements of the Borrower and its Subsidiaries or to the determination of any
amount for the Borrower and its Subsidiaries on a consolidated basis or any
similar reference shall, in each case, be deemed to include each variable interest
entity that the Borrower is required to consolidate pursuant to FASB
Interpretation No. 46 – Consolidation of Variable Interest Entities:  an interpretation of ARB No. 51 (January 2003)
as if such variable interest entity were a Subsidiary as defined herein.

 

1.04        Rounding. 
Any financial ratios required to be maintained by the Borrower pursuant
to this Agreement shall be calculated by dividing the appropriate component by
the other component, carrying the result to one place more than the number of
places by which such ratio is expressed herein and rounding the result up or
down to the nearest number (with a rounding-up if there is no nearest number).

 

1.05        Times of Day. 
Unless otherwise specified, all references herein to times of day shall
be references to Eastern time (daylight or standard, as applicable).

 

1.06        Letter of Credit Amounts. 
Unless otherwise specified herein, the amount of a Letter of Credit at
any time shall be deemed to be the stated amount of such Letter of Credit in
effect at such time; provided, however, that with respect to any
Letter of Credit that, by its terms or the terms of any Issuer Document related
thereto, provides for one or more automatic increases in the stated amount
thereof, the amount of such Letter of Credit shall be deemed to be the maximum
stated amount of such Letter of Credit after giving effect to all such
increases, whether or not such maximum stated amount is in effect at such time.

 

ARTICLE
II.

THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01        Term Loan.

 

(a)           Subject to the terms and conditions
of this Agreement, each Term Loan Lender severally agrees to make an advance of
its Pro Rata Term Share of the Term Loan to the Borrower on the Closing Date,
and from the Closing Date to the Term Loan Maturity Date, convert and continue
Segments from time to time in accordance with the terms hereof.  The principal amount of each Segment of the
Term Loan outstanding hereunder from time to time shall bear interest and the
Term Loan shall be repayable as herein provided.  No amount of the Term Loan repaid or prepaid
by the Borrower may be reborrowed hereunder, and no subsequent 

 

41

 

advance under the Term
Loan Facility shall be allowed after the initial such advance of the Term Loan
on the Closing Date.  Segments of the
Term Loan may be Base Rate Segments or Eurodollar Rate Segments at the Borrower’s
election, as provided herein.

 

(b)           Not later than 1:00 P.M. New
York time, on the Closing Date, each Term Loan Lender shall, pursuant to the
terms and subject to the conditions of this Agreement, make the amount of its
Pro Rata Term Share of the Term Loan available by wire transfer to the
Administrative Agent.  Such wire transfer
shall be directed to the Administrative Agent at the Administrative Agent’s
Office and shall be in the form of same day funds in Dollars.  The amount so received by the Administrative
Agent shall, subject to the terms and conditions of this Agreement, including
without limitation the satisfaction of all applicable conditions in Sections
5.01 and 5.02, be made available to the Borrower by delivery of the
proceeds thereof as shall be directed by the Responsible Officer of the
Borrower and reasonably acceptable to the Administrative Agent.  The initial Borrowing of the Term Loan may be
a Eurodollar Rate Segment, a Base Rate Segment, or both; provided that
if the Borrower desires that any portion of the initial Borrowing of the Term
Loan is advanced as a Eurodollar Rate Segment, the Administrative Agent shall
make such Borrowing as a Eurodollar Rate Segment only if, not later than three
Business Days prior to the date that is then anticipated to be the Closing
Date, the Administrative Agent has received from the Borrower a Term Loan
Interest Rate Selection Notice with respect thereto, together with the Borrower’s
written acknowledgement in form and substance satisfactory to the
Administrative Agent that the provisions of Section 4.05 hereof
shall apply to any failure by the Borrower to borrow on the date set forth in
such Term Loan Interest Rate Selection notice any or all of the amounts
specified in such Term Loan Interest Rate Selection Notice.

 

2.02        Revolving Loans. 
Subject to the terms and conditions set forth herein, each Revolving
Lender severally agrees to make, convert and continue Revolving Loans to the
Borrower from time to time, on any Business Day during the Availability Period,
in an aggregate amount not to exceed at any time outstanding the amount of such
Revolving Lender’s Revolving Credit Commitment; provided, however,
that after giving effect to any Revolving Borrowing, (i) the Total
Revolving Outstandings shall not exceed the Aggregate Revolving Credit
Commitments, and (ii) the aggregate Outstanding Amount of the Revolving
Loans of any Revolving Lender, plus such Lender’s Pro Rata Revolving
Share of the Outstanding Amount of all L/C - BA Obligations, plus such
Lender’s Pro Rata Revolving Share of the Outstanding Amount of all Swing Line
Loans shall not exceed such Lender’s Revolving Credit Commitment.  Within the limits of each Revolving Lender’s
Revolving Credit Commitment, and subject to the other terms and conditions
hereof, the Borrower may borrow under this Section 2.02, prepay
under Section 2.06, and reborrow under this Section 2.02.  Revolving Loans may be Base Rate Loans or
Eurodollar Rate Loans, as further provided herein.  On the Amendment No. 5 Effective Date,
the Aggregate Revolving Credit Commitments shall be increased from $225,000,000
to $475,000,000, and the Pro Rata Revolving Shares of each Revolving Lender
shall be as set forth opposite the name of such Revolving Lender on Schedule
2.01.  The Borrower shall prepay any
Revolving Loans outstanding on the Amendment No. 5 Effective Date (and pay
any amounts owing under Section 4.05) to the extent necessary to
keep the outstanding Revolving Loans ratable with any revised Pro Rata
Revolving Shares of the Revolving Lenders after giving effect to such increase
in the Aggregate Revolving Credit Commitments, provided that, after
giving effect to the increase in the Aggregate Revolving Credit Commitments,
the aggregate 

 

42

 

Outstanding Amount of the
Revolving Loans of any Revolving Lender, plus such Lender’s Pro Rata
Revolving Share of the Outstanding Amount of all L/C - BA Obligations, plus
such Lender’s Pro Rata Revolving Share of the Outstanding Amount of all Swing
Line Loans shall not exceed such Lender’s Revolving Credit Commitment.

 

2.03        Borrowings, Conversions and
Continuations of Committed Loans.

 

(a)           Each Revolving Borrowing, each
conversion of Revolving Loans or Segments of the Term Loan from one Type to the
other, and each continuation of Eurodollar Rate Loans shall be made upon the
Borrower’s irrevocable notice to the Administrative Agent, which may be given
by telephone.  Each such notice must be
received by the Administrative Agent not later than 11:00 a.m. (i) three
Business Days prior to the requested date of any Borrowing of, conversion to or
continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate
Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing
of Base Rate Loans.  Each telephonic
notice by the Borrower pursuant to this Section 2.03(a) must
be confirmed promptly by delivery to the Administrative Agent of a written
Revolving Loan Notice (as to Revolving Borrowings) or Term Loan Interest Rate
Selection Notice, appropriately completed and signed by a Responsible Officer
of the Borrower (unless such Revolving Loan Notice is being delivered by a
Swing Line Lender pursuant to Section 2.05(c) or by the
Administrative Agent on behalf of the L/C Issuer pursuant to Section 2.04(c)(i));
provided that the lack of such prompt confirmation shall not affect the
conclusiveness or binding effect of such telephonic notice.  Each Borrowing of, conversion to or
continuation of Eurodollar Rate Loans shall be in a principal amount of
$5,000,000 or a whole multiple of $1,000,000 in excess thereof.  Except as provided in Sections 2.04(c) and
2.05(c), each Borrowing of or conversion to Base Rate Loans shall be in
a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof.  Each Revolving Loan Notice and
Term Loan Interest Rate Selection Notice (whether telephonic or written) shall
specify (i) whether the Borrower is requesting a Revolving Borrowing
(applicable to Revolving Loan Notices only), a conversion of Revolving Loans
from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the
requested date of the Borrowing, conversion or continuation, as the case may be
(which shall be a Business Day), (iii) the principal amount of Revolving
Loans to be borrowed, converted or continued, (iv) the Type of Revolving
Loans to be borrowed or to which existing Revolving Loans are to be converted,
and (v) if applicable, the duration of the Interest Period with respect
thereto.  Each written Revolving Loan
Notice shall be substantially in the form of Exhibit A-1 attached
hereto, and each written Term Loan Interest Rate Selection Notice shall be substantially
in the form of Exhibit A-2 attached hereto.  If the Borrower fails to specify a Type of
Revolving Loans in a Revolving Loan Notice or if the Borrower fails to give a
timely notice requesting a conversion or continuation of Loans, then the applicable
Loans shall, subject to the last sentence of this Section 2.03(a),
be made as, or continued as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate
Loans shall be effective as of the last day of the Interest Period then in effect
with respect to the applicable Eurodollar Rate Loans.  If the Borrower requests a Borrowing of,
conversion to, or continuation of Eurodollar Rate Loans in any such Revolving
Loan Notice or Term Loan Interest Rate Selection Notice, but fails to specify an
Interest Period, it will be deemed to have specified an Interest Period of one
month.

 

(b)           Following receipt of a Revolving Loan
Notice, the Administrative Agent shall promptly notify each applicable Lender
of its Pro Rata Revolving Share of the applicable 

 

43

 

Revolving Loans, and if
no timely notice of a conversion or continuation is provided by the Borrower,
the Administrative Agent shall notify each applicable Lender of the details of
any automatic conversion to Base Rate Loans described in the preceding
subsection.  In the case of a Revolving
Borrowing, each applicable Lender shall make the amount of its Revolving Loan
available to the Administrative Agent in immediately available funds at the
Administrative Agent’s Office not later than 1:00 p.m. on the Business Day
specified in the applicable Revolving Loan Notice.  Upon satisfaction of the applicable
conditions set forth in Section 5.02 (and, if such Borrowing is the
initial Credit Extension, Section 5.01), the Administrative Agent
shall make all funds so received available to the Borrower in like funds as
received by the Administrative Agent either by (i) crediting the account
of the Borrower on the books of Bank of America with the amount of such funds
or (ii) wire transfer of such funds, in each case in accordance with
instructions provided to (and reasonably acceptable to) the Administrative
Agent by the Borrower; provided, however, that if, on the date the Revolving
Loan Notice with respect to such Borrowing is given by the Borrower, there are
Swing Line Loans or L/C Borrowings outstanding, then the proceeds of such
Borrowing shall be applied, first, to the payment in full of any such
L/C Borrowings, second, to the payment in full of any such Swing Line
Loans, and third, to the Borrower as provided above.

 

(c)           Except as otherwise provided herein,
a Eurodollar Rate Loan may be continued or converted only on the last day of an
Interest Period for such Eurodollar Rate Loan. 
During the existence of a Default, no Loans may be requested as,
converted to or continued as Eurodollar Rate Loans without the consent of the
Required Revolving Lenders or the Required Term Loan Lenders, as applicable.

 

(d)           The Administrative Agent shall
promptly notify the Borrower and the applicable Lenders of the interest rate
applicable to any Interest Period for Eurodollar Rate Loans upon determination
of such interest rate.  The determination
of the Eurodollar Rate by the Administrative Agent shall be conclusive in the
absence of manifest error.  At any time
that Base Rate Loans are outstanding, the Administrative Agent shall notify the
Borrower and the Lenders of any change in Bank of America’s prime rate used in
determining the Base Rate promptly following the public announcement of such
change.

 

(e)           After giving effect to all
Borrowings, all conversions of Loans from one Type to the other, and all
continuations of Loans as the same Type, there shall not at any time be more
than (a) five Interest Periods in effect with respect to the Term Loan and
(b) ten Interest Periods in effect with respect to the Revolving Credit
Facility.

 

2.04        Letters of Credit and Bankers’
Acceptances.

 

(a)           The Letter of Credit – BA Commitment.

 

(i)            Subject to the terms and conditions
set forth herein, (A) the L/C Issuer agrees, in reliance upon the
agreements of the Revolving Lenders set forth in this Section 2.04,
(1) from time to time on any Business Day during the period from the
Closing Date until the earlier to occur of the Letter of Credit - BA Expiration
Date or the termination of the Availability Period, to issue Letters of Credit
for the account of the Borrower or the Borrower and a Restricted Subsidiary,
and to amend Letters of Credit previously issued 

 

44

 

by it, in accordance with subsection (b) below,
(2) to honor drafts under the Letters of Credit; and (3) with respect
to Acceptance Credits, to create Bankers’ Acceptances in accordance with the
terms thereof and hereof, and (B) the Revolving Lenders severally agree to
participate in Letters of Credit and Bankers’ Acceptances issued for the
account of the Borrower or the Borrower and a Restricted Subsidiary and any
drawings thereunder; provided that the L/C Issuer shall not be obligated
to make any L/C – BA Credit Extension with respect to any Letter of Credit, and
no Revolving Lender shall be obligated to participate in any Letter of Credit
if (A) as of the date of such L/C - BA Credit Extension, (x) the
Total Revolving Outstandings would exceed the Aggregate Revolving Credit
Commitments, (y) the aggregate Outstanding Amount of the Revolving Loans
of any Revolving Lender, plus such Revolving Lender’s Pro Rata Revolving
Share of the Outstanding Amount of all L/C - BA Obligations, plus such
Revolving Lender’s Pro Rata Revolving Share of the Outstanding Amount of all
Swing Line Loans would exceed such Revolving Lender’s Revolving Credit
Commitment, or (z) the Outstanding Amount of the L/C - BA Obligations
would exceed the Letter of Credit - BA Sublimit, or (B) as to Acceptance
Credits, the Bankers’ Acceptance created or to be created thereunder shall not
be an eligible bankers’ acceptance under Section 13 of the Federal Reserve
Act (12 U.S.C. § 372).  Each request by
the Borrower for the issuance or amendment of a Letter of Credit shall be
deemed to be a representation by the Borrower that the L/C – BA Credit
Extension so requested complies with the conditions set forth in the proviso to
the preceding sentence.  Within the
foregoing limits, and subject to the terms and conditions hereof, the Borrower’s
ability to obtain Letters of Credit shall be fully revolving, and accordingly
the Borrower may, during the foregoing period, obtain Letters of Credit to
replace Letters of Credit that have expired or that have been drawn upon and
reimbursed.

 

(ii)           The L/C Issuer shall not issue any
Letter of Credit, if:

 

(A)          subject to Section 2.04(b)(iii),
the expiry date of such requested Letter of Credit would occur (i) as to
standby Letters of Credit, more than twelve months after the date of issuance
or last renewal, and (ii) as to commercial Letters of Credit, later than
the earlier of (1) 180 days after the date of issuance thereof and (2) 60
days before the Letter of Credit - BA Expiration Date, unless in each case the
Required Revolving Lenders have approved such expiry date;

 

(B)           the maturity date of any Bankers’
Acceptance issued under any such requested Acceptance Credit would occur
earlier than 30 or later than 120 days from date of issuance and in any event
later than 60 days before the Letter of Credit - BA Expiration Date, unless the
Required Revolving Lenders have approved such expiry date;

 

(C)           the expiry date of such requested
Letter of Credit, or the maturity date of any Bankers’ Acceptance issued under
such requested Letter of Credit, would occur after the Letter of Credit - BA
Expiration Date, unless all the Revolving Lenders have approved such expiry
date;

 

45

 

(iii)          The L/C Issuer shall not
be under any obligation to issue any Letter of Credit if:

 

(A)          any order, judgment or
decree of any Governmental Authority or arbitrator shall by its terms purport
to enjoin or restrain the L/C Issuer from issuing such Letter of Credit or any
related Bankers’ Acceptance, or any Law applicable to the L/C Issuer or any
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or
request that the L/C Issuer refrain from, the issuance of letters of credit or
related bankers’ acceptances generally or such Letter of Credit or any related
Bankers’ Acceptance in particular or shall impose upon the L/C Issuer with
respect to such Letter of Credit or related Bankers’ Acceptance any
restriction, reserve or capital requirement (for which the L/C Issuer is not
otherwise compensated hereunder) not in effect on the Closing Date, or shall
impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not
applicable on the Closing Date and which the L/C Issuer in good faith deems
material to it;

 

(B)           the issuance of such
Letter of Credit or any related Bankers’ Acceptance would violate one or more
policies of the L/C Issuer, or the creation of any related Bankers’ Acceptance
would cause the L/C Issuer to exceed the maximum amount of outstanding bankers’
acceptances permitted by applicable Law;

 

(C)           except as otherwise
agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit or
related Bankers’ Acceptance is in an initial amount less than $100,000, in the
case of a commercial Letter of Credit, or $500,000, in the case of a standby
Letter of Credit, or is to be denominated in a currency other than Dollars; or

 

(D)          a default of any
Revolving Lender’s obligations to fund under Section 2.04(c) exists
or any Revolving Lender is at such time a Defaulting Lender hereunder, unless
the L/C Issuer has entered into satisfactory arrangements with the Borrower or
such Revolving Lender to eliminate the L/C Issuer’s risk with respect to such
Revolving Lender.

 

(iv)          The L/C Issuer shall not
amend any Letter of Credit or Bankers’ Acceptance if the L/C Issuer would not
be permitted at such time to issue such Letter of Credit or Bankers’ Acceptance
in its amended form under the terms hereof.

 

(v)           The L/C Issuer shall be
under no obligation to amend any Letter of Credit or Bankers’ Acceptance if (A) the
L/C Issuer would have no obligation at such time to issue such Letter of Credit
or Bankers’ Acceptance in its amended form under the terms hereof, or (B) the
beneficiary of such Letter of Credit or Bankers’ Acceptance does not accept the
proposed amendment to such Letter of Credit or Bankers’ Acceptance.

 

46

 

(vi)          The L/C
Issuer shall act on behalf of the Revolving Lenders with respect to any Letters
of Credit or Bankers’ Acceptance issued by it and the documents associated
therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided
to the Administrative Agent in Article X with respect to any acts
taken or omissions suffered by the L/C Issuer in connection with Letters of
Credit and Bankers’ Acceptances issued by it or proposed to be issued by it and
Issuer Documents pertaining to such Letters of Credit and Bankers’ Acceptances
as fully as if the term “Administrative Agent” as used in Article X
included the L/C Issuer with respect to such acts or omissions, and (B) as
additionally provided herein with respect to the L/C Issuer.

 

(b)           Procedures
for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of
Credit.

 

(i)            Each Letter of Credit
shall be issued or amended, as the case may be, upon the request of the
Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent)
in the form of a Letter of Credit Application, appropriately completed and
signed by a Responsible Officer of the Borrower  and, if applicable, of the applicable Restricted
Subsidiary.  Such Letter of Credit
Application must be received by the L/C Issuer and the Administrative Agent not
later than 11:00 a.m. at least two Business Days (or such later date and
time as the Administrative Agent and the L/C Issuer may agree in a particular
instance in its sole discretion) prior to the proposed issuance date or date of
amendment, as the case may be.  In the
case of a request for an initial issuance of a Letter of Credit, such Letter of
Credit Application shall specify in form and detail satisfactory to the L/C
Issuer: (A) the proposed issuance date of the requested Letter of Credit
(which shall be a Business Day); (B) the amount thereof; (C) the
expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the
documents to be presented by such beneficiary in case of any drawing or
presentation thereunder; (F) the full text of any certificate to be
presented by such beneficiary in case of any drawing or presentation
thereunder; and (G) such other matters as the L/C Issuer may require.  In the case of a request for an amendment of
any outstanding Letter of Credit, such Letter of Credit Application shall
specify in form and detail satisfactory to the L/C Issuer (A) the Letter
of Credit to be amended; (B) the proposed date of amendment thereof (which
shall be a Business Day); (C) the nature of the proposed amendment; and (D) such
other matters as the L/C Issuer may require. 
Additionally, the Borrower shall furnish to the L/C Issuer and the
Administrative Agent such other documents and information pertaining to such
requested Letter of Credit issuance or amendment, including any Issuer
Documents, as the L/C Issuer or the Administrative Agent may require.

 

(ii)           Promptly after receipt
of any Letter of Credit Application, the L/C Issuer will confirm with the
Administrative Agent (by telephone or in writing) that the Administrative Agent
has received a copy of such Letter of Credit Application from the Borrower and,
if not, the L/C Issuer will provide the Administrative Agent with a copy
thereof.  Unless the L/C Issuer has
received written notice from any Lender, the Administrative Agent or any Loan
Party, at least one Business Day prior to the requested date of issuance or
amendment of the applicable Letter of Credit, that one or more applicable
conditions contained in Article V shall not then be satisfied,
then, subject to the terms and conditions hereof, the L/C Issuer shall, on the
requested date, issue a Letter 

 

47

 

of Credit for the account of the Borrower or the
Borrower and the applicable Restricted Subsidiary or enter into the applicable
amendment, as the case may be, in each case in accordance with the L/C Issuer’s
usual and customary business practices. 
Immediately upon the issuance of each Letter of Credit, each Revolving
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees
to, purchase from the L/C Issuer a risk participation in such Letter of Credit
in an amount equal to the product of such Revolving Lender’s Pro Rata Revolving
Share times the amount of such Letter of Credit.  Immediately upon the creation of each Bankers’
Acceptance, each Revolving Lender shall be deemed to, and hereby irrevocably
and unconditionally agrees to, purchase from the L/C Issuer a risk
participation in such Bankers’ Acceptance in an amount equal to the product of
such Revolving Lender’s Pro Rata Revolving Share times the amount of
such Bankers’ Acceptance.

 

(iii)          If the Borrower so
requests in any applicable Letter of Credit Application, the L/C Issuer may, in
its sole and absolute discretion, agree to issue a Letter of Credit other than
a commercial Letter of Credit that has automatic extension provisions (each, an
“Auto-Extension Letter
of Credit”); provided that any such Auto-Extension Letter
of Credit must permit the L/C Issuer to prevent any such extension at least
once in each twelve-month period (commencing with the date of issuance of such
Letter of Credit) by giving prior notice to the beneficiary thereof not later
than a day (the “Non-Extension
Notice Date”) in each such twelve-month period to be agreed upon
at the time such Letter of Credit is issued. 
Unless otherwise directed by the L/C Issuer, the Borrower shall not be
required to make a specific request to the L/C Issuer for any such
extension.  Once an Auto-Extension Letter
of Credit has been issued, the Revolving Lenders shall be deemed to have
authorized (but may not require) the L/C Issuer to permit the extension of such
Letter of Credit at any time to an expiry date not later than the Letter of
Credit - BA Expiration Date; provided, however, that the L/C Issuer shall not permit
any such extension if (A) the L/C Issuer has determined that it would not
be permitted, or would have no obligation, at such time to issue such Letter of
Credit in its revised form (as extended) under the terms hereof (by reason of
the provisions clause (ii) or (iii) of Section 2.04(a) or
otherwise), or (B) it has received notice (which may be by telephone or in
writing) on or before the day that is five Business Days before the
Non-Extension Notice Date (1) from the Administrative Agent that the
Required Revolving Lenders have elected not to permit such extension or (2) from
the Administrative Agent, any Revolving Lender or the Borrower that one or more
of the applicable conditions specified in Section 5.02 is not then
satisfied, and in each such case directing the L/C Issuer not to permit such
extension.

 

(iv)          Promptly after its
delivery of any Letter of Credit or any amendment to a Letter of Credit to an
advising bank with respect thereto or to the beneficiary thereof, the L/C
Issuer will also deliver to the Borrower and the Administrative Agent a true
and complete copy of such Letter of Credit or amendment.

 

(c)           Drawings and
Reimbursements; Funding of Participations.

 

(i)            Upon receipt from the
beneficiary of any Letter of Credit of any notice of a drawing or, with respect
to any Acceptance Credit, presentation of documents under 

 

48

 

such Letter of Credit, or any presentation for payment
of a Bankers’ Acceptance, the L/C Issuer shall notify the Borrower and the
Administrative Agent thereof.  Not later
than 11:00 a.m. on the date of any payment by the L/C Issuer under a
Letter of Credit or Bankers’ Acceptance (each such date, an “Honor Date”), the
Borrower shall reimburse the L/C Issuer through the Administrative Agent in an
amount equal to the amount of such drawing or Bankers’ Acceptance, as
applicable.  If the Borrower fails so to
reimburse the L/C Issuer by such time, the Administrative Agent shall promptly
notify each Revolving Lender of the Honor Date, the amount of the unreimbursed
drawing or payment (the “Unreimbursed Amount”), and the amount of such
Revolving Lender’s Pro Rata Revolving Share thereof.  In such event, the Borrower shall be deemed
to have requested a Revolving Borrowing of Base Rate Loans to be disbursed on
the Honor Date in an amount equal to the Unreimbursed Amount, without regard to
the minimum and multiples specified in Section 2.03 for the
principal amount of Base Rate Loans, but subject to the amount of the
unutilized portion of the Aggregate Revolving Credit Commitments and the
conditions set forth in Section 5.02 (other than the delivery of a
Revolving Loan Notice).  Any notice given
by the L/C Issuer or the Administrative Agent pursuant to this Section 2.04(c)(i) may
be given by telephone if immediately confirmed in writing; provided that
the lack of such an immediate confirmation shall not affect the conclusiveness
or binding effect of such notice.

 

(ii)           Each Revolving Lender
shall upon any notice pursuant to Section 2.04(c)(i) make
funds available to the Administrative Agent for the account of the L/C Issuer
at the Administrative Agent’s Office in an amount equal to its Pro Rata
Revolving Share of the Unreimbursed Amount not later than 1:00 p.m. on the
Business Day specified in such notice by the Administrative Agent, whereupon,
subject to the provisions of Section 2.04(c)(iii), each Revolving
Lender that so makes funds available shall be deemed to have made a Base Rate
Revolving Loan to the Borrower in such amount. 
The Administrative Agent shall remit the funds so received to the L/C
Issuer.

 

(iii)          With respect to any
Unreimbursed Amount that is not fully refinanced by a Revolving Borrowing of
Base Rate Loans because the conditions set forth in Section 5.02
cannot be satisfied or for any other reason, the Borrower shall be deemed to
have incurred from the L/C Issuer an L/C – BA Borrowing in the amount of the
Unreimbursed Amount that is not so refinanced, which L/C – BA Borrowing shall
be due and payable on demand (together with interest) and shall bear interest
at the Default Rate.  In such event, each
Revolving Lender’s payment to the Administrative Agent for the account of the
L/C Issuer pursuant to Section 2.04(c)(ii) shall be deemed
payment in respect of its participation in such L/C – BA Borrowing and shall
constitute an L/C - BA Advance from such Revolving Lender in satisfaction of
its participation obligation under this Section 2.04.

 

(iv)          Until each Revolving
Lender funds its Revolving Loan or L/C - BA Advance pursuant to this Section 2.04(c) to
reimburse the L/C Issuer for any amount drawn under any Letter of Credit or
payments made on any Bankers’ Acceptance, interest in respect of such Revolving
Lender’s Pro Rata Revolving Share of such amount shall be solely for the
account of the L/C Issuer.

 

49

 

(v)           Each Revolving Lender’s
obligation to make Revolving Loans or L/C - BA Advances to reimburse the L/C
Issuer for amounts drawn under Letters of Credit and payments made on Bankers’
Acceptances, as contemplated by this Section 2.04(c), shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any set-off, counterclaim, recoupment, defense or other
right which such Revolving Lender may have against the L/C Issuer, the Borrower
or any other Person for any reason whatsoever; (B) the occurrence or
continuance of a Default, or (C) any other occurrence, event or condition,
whether or not similar to any of the foregoing; provided, however,
that each Revolving Lender’s obligation to make Revolving Loans pursuant to
this Section 2.04(c) is subject to the conditions set forth in
Section 5.02 (other than delivery by the Borrower of a Revolving Loan
Notice).  No such making of an L/C - BA
Advance shall relieve or otherwise impair the obligation of the Borrower to
reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer
under any Letter of Credit or Bankers’ Acceptance, together with interest as
provided herein.

 

(vi)          If any Revolving Lender
fails to make available to the Administrative Agent for the account of the L/C
Issuer any amount required to be paid by such Revolving Lender pursuant to the
foregoing provisions of this Section 2.04(c) by the time
specified in Section 2.04(c)(ii), the L/C Issuer shall be entitled
to recover from such Revolving Lender (acting through the Administrative
Agent), on demand, such amount with interest thereon for the period from the
date such payment is required to the date on which such payment is immediately
available to the L/C Issuer at a rate per annum equal to the greater of the
Federal Funds Rate and a rate determined by the L/C Issuer in accordance with
banking industry rules on interbank compensation.  A certificate of the L/C Issuer submitted to
any Revolving Lender (through the Administrative Agent) with respect to any
amounts owing under this clause (vi) shall be conclusive absent manifest
error.

 

(d)           Repayment of
Participations.

 

(i)            At any time after the
L/C Issuer has made a payment under any Letter of Credit or Bankers’ Acceptance
and has received from any Revolving Lender such Revolving Lender’s L/C - BA
Advance in respect of such payment in accordance with Section 2.04(c),
if the Administrative Agent receives for the account of the L/C Issuer any
payment in respect of the related Unreimbursed Amount or interest thereon
(whether directly from the Borrower or otherwise, including proceeds of Cash
Collateral applied thereto by the Administrative Agent), the Administrative
Agent will distribute to such Revolving Lender its Pro Rata Revolving Share
thereof (appropriately adjusted, in the case of interest payments, to reflect
the period of time during which such Revolving Lender’s L/C - BA Advance was
outstanding) in the same funds as those received by the Administrative Agent.

 

(ii)           If any payment received
by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(i) is
required to be returned under any of the circumstances described in Section 11.05
(including pursuant to any settlement entered into by the L/C Issuer in its
discretion), each Revolving Lender shall pay to the Administrative Agent for
the account of the L/C Issuer its Pro Rata Revolving Share 

 

50

 

thereof on demand of the Administrative Agent, plus
interest thereon from the date of such demand to the date such amount is
returned by such Revolving Lender, at a rate per annum equal to the Federal Funds
Rate from time to time in effect.  The
obligations of the Revolving Lenders under this clause shall survive the
payment in full of the Obligations and the termination of this Agreement.

 

(e)           Obligations Absolute.  The obligation of the Borrower to reimburse
the L/C Issuer for each drawing under each Letter of Credit and each payment
under any Bankers’ Acceptance, and to repay each L/C – BA Borrowing shall be
absolute, unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including
the following:

 

(i)            any lack of validity
or enforceability of such Letter of Credit or Bankers’ Acceptance, this
Agreement, or any other agreement or instrument relating thereto;

 

(ii)           the existence of any
claim, counterclaim, set-off, defense or other right that the Borrower or any
Subsidiary may have at any time against any beneficiary or any transferee of
such Letter of Credit or Bankers’ Acceptance (or any Person for whom any such
beneficiary or any such transferee may be acting), the L/C Issuer or any other
Person, whether in connection with this Agreement, the transactions
contemplated hereby or by such Letter of Credit or Bankers’ Acceptance or any
agreement or instrument relating thereto, or any unrelated transaction;

 

(iii)          any  draft,  demand,  certificate  or  other  document  or  endorsement  presented  under  or  in  connection  with  such  Letter  of  Credit  or  Bankers’  Acceptance  proving  to  be  forged,  fraudulent,  invalid  or  insufficient  in  any  respect  or  any  statement  therein  being  untrue  or  inaccurate  in  any  respect;  or  any  loss  or  delay  in  the  transmission  or  otherwise  of  any  document  required  in  order  to  make  a  drawing  under  such  Letter  of  Credit  or  obtain  payment  under  any  Bankers’  Acceptance  ;

 

(iv)          any payment by the L/C
Issuer under such Letter of Credit or Bankers’ Acceptance against presentation
of a draft or certificate that does not strictly comply with the terms of such
Letter of Credit, or any payment made by the L/C Issuer under such Letter of
Credit or Bankers’ Acceptance to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of such Letter of Credit or Bankers’ Acceptance, including
any arising in connection with any proceeding under any Debtor Relief Law; or

 

(v)           any other circumstance
or happening whatsoever, whether or not similar to any of the foregoing,
including any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or any Subsidiary.

 

The Borrower shall promptly examine a copy of each Letter of Credit and
each amendment thereto, and each Bankers’ Acceptance, that is delivered to it
and, in the event of any claim of noncompliance with the Borrower’s
instructions or other irregularity, the Borrower will immediately notify the
L/C Issuer.  The Borrower shall be
conclusively deemed to have waived 

 

51

 

any such claim against the L/C Issuer and its
correspondents unless such notice is given as aforesaid.

 

(f)            Role of L/C Issuer.  Each
Lender and the Borrower agree that, in paying any drawing under a Letter of
Credit or making any payment under a Bankers’ Acceptance, the L/C Issuer shall
not have any responsibility to obtain any document (other than any sight draft,
certificates and documents expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.  None of the L/C Issuer, the Administrative
Agent, any of their respective Related Parties nor any correspondent, participant
or assignee of the L/C Issuer shall be liable to any Lender for (i) any
action taken or omitted in connection herewith at the request or with the
approval of the Lenders, the Revolving Lenders, the Required Lenders or the
Required Revolving Lenders, as applicable; (ii) any action taken or
omitted in the absence of gross negligence or willful misconduct; or (iii) the
due execution, effectiveness, validity or enforceability of any document or
instrument related to any Letter of Credit, Bankers’ Acceptance or Issuer
Document.  The Borrower hereby assumes
all risks of the acts or omissions of any beneficiary or transferee with
respect to its use of any Letter of Credit or Bankers’ Acceptance; provided,
however, that this assumption is not intended to, and shall not,
preclude the Borrower’s pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuer, the Administrative
Agent, any of their respective Related Parties, nor any correspondent,
participant or assignee of the L/C Issuer, shall be liable or responsible for
any of the matters described in clauses (i) through (v) of
Section 2.04(e); provided, however, that anything in
such clauses to the contrary notwithstanding, the Borrower may have a claim
against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to
the extent, but only to the extent, of any direct, as opposed to consequential
or exemplary, damages suffered by the Borrower which the Borrower proves were
caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C
Issuer’s willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and certificate(s) strictly
complying with the terms and conditions of a Letter of Credit or to honor any
Bankers’ Acceptance presented for payment in strict compliance with its terms
and conditions.  In furtherance and not
in limitation of the foregoing, the L/C Issuer may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary, and the L/C Issuer
shall not be responsible for the validity or sufficiency of any instrument
endorsing, transferring or assigning or purporting to endorse, transfer or
assign a Letter of Credit or Bankers’ Acceptance or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.

 

(g)           Cash Collateral.  Upon the request of the Administrative Agent,
(i) if the L/C Issuer has honored any full or partial drawing request
under any Letter of Credit or made any payment under any Bankers’ Acceptance
and such drawing has resulted in an L/C – BA Borrowing, or (ii) if, as of
the Letter of Credit - BA Expiration Date, any Letter of Credit for any reason
remains outstanding and partially or wholly undrawn, any Bankers’ Acceptance
for any reason remains outstanding, or any L/C – BA Obligation for any reason
remains outstanding, then in each such case the Borrower shall immediately Cash
Collateralize the then Outstanding Amount of all L/C - BA Obligations (in an
amount equal to such Outstanding Amount determined as of the date of such L/C
Borrowing or the Letter of Credit - BA Expiration Date, as 

 

52

 

the case may be).  Sections 2.06 and 9.02(c) set
forth certain additional requirements to deliver Cash Collateral
hereunder.  For purposes hereof, “Cash Collateralize”
means to pledge and deposit with or deliver to the Administrative Agent, for
the benefit of the L/C Issuer and the Revolving Lenders, as collateral for the
L/C - BA Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the Administrative Agent
and the L/C Issuer (which documents are hereby consented to by the Revolving
Lenders).  Derivatives of such term have
corresponding meanings.  The Borrower
hereby grants to the Administrative Agent, for the benefit of the L/C Issuer
and the Revolving  Lenders, a
security interest in all such cash, deposit accounts and all balances therein
and all proceeds of the foregoing.  Cash
collateral shall be maintained in blocked, non-interest bearing deposit
accounts at Bank of America.

 

(h)           Applicability of ISP
and UCP.  Unless otherwise expressly
agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued, (i) the
rules of the ISP shall apply to each standby Letter of Credit, and (ii) the
rules of the Uniform Customs and Practice for Documentary Credits, as most
recently published by the International Chamber of Commerce at the time of
issuance shall apply to each commercial Letter of Credit.

 

(i)            Letter of Credit –
BA Fees.  Subject to the provisions
of the last sentence of this subsection (i), the Borrower shall pay to the
Administrative Agent for the account of each Revolving Lender in accordance
with its Pro Rata Revolving Share (i) a Letter of Credit – BA Fee for each
commercial Letter of Credit and each Bankers’ Acceptance equal to 50% of the Applicable
Rate times the daily maximum amount available to be drawn under such
Letter of Credit (whether or not such maximum amount is then in effect under
such Letter of Credit) or the maximum stated amount of such Bankers’
Acceptance, as the case may be, and (ii) a Letter of Credit – BA Fee for
each standby Letter of Credit equal to the Applicable Rate times the
daily maximum amount available to be drawn under such Letter of Credit (whether
or not such maximum amount is then in effect under such Letter of Credit).  For purposes of computing the daily amount
available to be drawn under any Letter of Credit, the amount of such Letter of
Credit shall be determined in accordance with Section 1.06.  Such Letter of Credit – BA Fees shall be
computed on a quarterly basis in arrears. 
Such Letter of Credit – BA Fees accrued through the last day of each
fiscal quarter of the Borrower and shall be due and payable on the fifteenth
(or the next Business Day after the fifteenth, if the fifteenth is not a
Business Day) of each January, April, July and October, commencing with
the first such date to occur after the issuance of such Letter of Credit or
Bankers’ Acceptance (as the case may be), on the Letter of Credit - BA
Expiration Date and thereafter on demand. 
If there is any change in the Applicable Rate during any quarter, the
daily maximum amount of each Letter of Credit and Bankers’ Acceptance shall be
computed and multiplied by the Applicable Rate separately for each period
during such quarter that such Applicable Rate was in effect.  At all times that the Default Rate shall be
applicable to any Loans pursuant to Section 2.09(b), the Letter of
Credit – BA Fees payable under this subsection (i) shall accrue and be
payable at the Default Rate.

 

(j)            Fronting Fee and Documentary
and Processing Charges Payable to L/C Issuer.  The Borrower shall pay directly to the L/C
Issuer for its own account a fronting fee with respect to each Letter of Credit
and each Bankers’ Acceptance issued by the L/C Issuer in the amount of 0.125%
times the daily maximum amount available to be drawn under such Letter of
Credit (whether or not such maximum amount is then in effect under such Letter
of Credit) or the 

 

53

 

maximum stated amount of
such Bankers’ Acceptance, as the case may be. 
Such fronting fees shall be computed on a quarterly basis in
arrears.  Such fronting fee shall accrue
through the last day of each fiscal quarter of the Borrower and shall be due
and payable on the fifteenth (or the next Business Day after the fifteenth, if
the fifteenth is not a Business Day) of each January, April, July and
October, commencing with the first such date to occur after the issuance of
such Letter of Credit or Bankers’ Acceptance, as applicable, on the Letter of
Credit - BA Expiration Date and thereafter on demand.  For purposes of computing the daily amount
available to be drawn under any Letter of Credit, the amount of such Letter of
Credit shall be determined in accordance with Section 1.06.  In addition, the Borrower shall pay directly
to the L/C Issuer for its own account the customary issuance, presentation,
amendment and other processing fees, and other standard costs and charges, of
the L/C Issuer relating to letters of credit and bankers’ acceptances issued by
it as from time to time in effect.  Such
customary fees and standard costs and charges are due and payable on demand and
are nonrefundable.

 

(k)           Conflict with Issuer
Documents.  In the event of any
conflict between the terms hereof and the terms of any Issuer Document, the
terms hereof shall control.

 

(l)            Letters of Credit
Issued for Restricted Subsidiaries. 
Notwithstanding that a Letter of Credit or Bankers’ Acceptance issued or
outstanding hereunder is in support of any obligations of, or is for the
account of, a Restricted Subsidiary, the Borrower shall be obligated to
reimburse the L/C Issuer hereunder for any and all drawings under such Letter
of Credit.  The Borrower hereby
acknowledges that the issuance of Letters of Credit and/or Bankers’ Acceptances
for the account of Restricted Subsidiaries inures to the benefit of the
Borrower, and that the Borrower’s business derives substantial benefits from
the businesses of such Restricted Subsidiaries.

 

2.05        Swing Line Loans.

 

(a)           The Swing Line.  Subject to the terms and conditions set forth
herein, the Swing Line Lender agrees, in reliance upon the agreements of the
other Lenders set forth in this Section 2.05, to make loans (each
such loan, a “Swing Line Loan”) in Dollars to the Borrower from time to
time on any Business Day during the Availability Period in an aggregate amount
not to exceed at any time outstanding the amount of the Swing Line Sublimit,
notwithstanding the fact that such Swing Line Loans, when aggregated with the
Pro Rata Revolving Share of the Outstanding Amount of Revolving Loans and L/C -
BA Obligations of the Revolving Lender acting as Swing Line Lender, may exceed
the amount of such Revolving Lender’s Revolving Credit Commitment; provided,
however, that after giving effect to any Swing Line Loan, (i) the
Total Revolving Outstandings shall not exceed the Aggregate Revolving Credit
Commitments, and (ii) the aggregate Outstanding Amount of the Revolving
Loans of any Revolving Lender, plus such Revolving Lender’s Pro Rata Revolving
Share of the Outstanding Amount of all L/C - BA Obligations, plus such
Revolving Lender’s Pro Rata Revolving Share of the Outstanding Amount of all
Swing Line Loans shall not exceed such Revolving Lender’s Revolving Credit
Commitment, and provided, further, that the Borrower shall not
use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line
Loan.  Within the foregoing limits, and
subject to the other terms and conditions hereof, the Borrower may borrow under
this Section 2.05, prepay under Section 2.06, and
reborrow under this Section 2.05. 
Each Swing Line Loan shall be a Base Rate Revolving Loan.  Immediately upon the making of a Swing Line
Loan, each 

 

54

 

Revolving Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
the Swing Line Lender a risk participation in such Swing Line Loan in an amount
equal to the product of such Revolving Lender’s Pro Rata Revolving Share times
the amount of such Swing Line Loan.

 

(b)           Borrowing Procedures.  Each Swing Line Borrowing shall be made upon
the Borrower’s irrevocable notice to the Swing Line Lender and the
Administrative Agent, which may be given by telephone. Each such notice must be
received by the Swing Line Lender and the Administrative Agent not later than
2:00 p.m. on the requested borrowing date, and shall specify (i) the
amount to be borrowed, which shall be a minimum of $500,000 and integral
multiples of $100,000 in excess thereof, and (ii) the requested borrowing
date, which shall be a Business Day. 
Each such telephonic notice must be confirmed promptly by delivery to
the Swing Line Lender and the Administrative Agent of a written Swing Line Loan
Notice, appropriately completed and signed by a Responsible Officer of the
Borrower.  Promptly after receipt by the
Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line
Lender will confirm with the Administrative Agent (by telephone or in writing)
that the Administrative Agent has also received such Swing Line Loan Notice
and, if not, the Swing Line Lender will notify the Administrative Agent (by
telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received notice
(by telephone or in writing) from the Administrative Agent (including at the
request of any Lender) prior to 3:00 p.m. on the date of the proposed
Swing Line Borrowing (A) directing the Swing Line Lender not to make such
Swing Line Loan as a result of the limitations set forth in the proviso to the
first sentence of Section 2.05(a), or (B) that one or more of
the applicable conditions specified in Article V is not then
satisfied, then, subject to the terms and conditions hereof, the Swing Line
Lender will, not later than 3:00 p.m. on the borrowing date specified in
such Swing Line Loan Notice, make the amount of its Swing Line Loan available
to the Borrower at its office by crediting the account of the Borrower on the
books of the Swing Line Lender in immediately available funds.

 

(c)           Refinancing of Swing
Line Loans.

 

(i)            The Swing Line Lender
at any time in its sole and absolute discretion may request, on behalf of the
Borrower (which hereby irrevocably authorizes the Swing Line Lender to so
request on its behalf), that each Revolving Lender make a Base Rate Revolving
Loan in an amount equal to such Revolving Lender’s Pro Rata Revolving Share of
the amount of Swing Line Loans then outstanding.  Such request shall be made in writing (which
written request shall be deemed to be a Revolving Loan Notice for purposes
hereof) and in accordance with the requirements of Section 2.03,
without regard to the minimum and multiples specified therein for the principal
amount of Base Rate Loans, but subject to the unutilized portion of the
Aggregate Revolving Credit Commitments and the conditions set forth in Section 5.02.  The Swing Line Lender shall furnish the
Borrower with a copy of the applicable Revolving Loan Notice promptly after
delivering such notice to the Administrative Agent.  Each Revolving Lender shall make an amount
equal to its Pro Rata Revolving Share of the amount specified in such Revolving
Loan Notice available to the Administrative Agent in immediately available
funds for the account of the Swing Line Lender at the Administrative Agent’s
Office not later than 1:00 p.m. on the day specified in such Revolving
Loan Notice, whereupon, subject to Section 2.05(c)(ii), each
Revolving Lender that so makes funds available shall 

 

55

 

be deemed to have made a Base Rate Revolving Loan to
the Borrower in such amount.  The
Administrative Agent shall remit the funds so received to the Swing Line
Lender.

 

(ii)           If for any reason any
Swing Line Loan cannot be refinanced by such a Revolving Borrowing in accordance
with Section 2.05(c)(i), the request for Base Rate Revolving Loans
submitted by the Swing Line Lender as set forth herein shall be deemed to be a
request by the Swing Line Lender that each of the Revolving Lenders fund its
risk participation in the relevant Swing Line Loan and each Revolving Lender’s
payment to the Administrative Agent for the account of the Swing Line Lender
pursuant to Section 2.05(c)(i) shall be deemed payment in
respect of such participation.

 

(iii)          If any Revolving Lender
fails to make available to the Administrative Agent for the account of the
Swing Line Lender any amount required to be paid by such Revolving Lender
pursuant to the foregoing provisions of this Section 2.05(c) by
the time specified in Section 2.05(c)(i), the Swing Line Lender
shall be entitled to recover from such Revolving Lender (acting through the
Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
is immediately available to the Swing Line Lender at a rate per annum equal to
the greater of the Federal Funds Rate and a rate determined by the Swing Line
Lender in accordance with banking industry rules on interbank
compensation.  A certificate of the Swing
Line Lender submitted to any Revolving Lender (through the Administrative
Agent) with respect to any amounts owing under this clause (iii) shall be
conclusive absent manifest error.

 

(iv)          Each Revolving Lender’s
obligation to make Revolving Loans or to purchase and fund risk participations
in Swing Line Loans pursuant to this Section 2.05(c) shall be
absolute and unconditional and shall not be affected by any circumstance,
including (A) any set-off, counterclaim, recoupment, defense or other
right which such Revolving Lender may have against the Swing Line Lender, the
Borrower or any other Person for any reason whatsoever, (B) the occurrence
or continuance of a Default, or (C) any other occurrence, event or
condition, whether or not similar to any of the foregoing; provided, however,
that each Revolving Lender’s obligation to make Revolving Loans pursuant to
this Section 2.05(c) is subject to the conditions set forth in
Section 5.02.  No such
funding of risk participations shall relieve or otherwise impair the obligation
of the Borrower to repay Swing Line Loans, together with interest as provided
herein.

 

(d)           Repayment of
Participations.

 

(i)            At any time after any
Revolving Lender has purchased and funded a risk participation in a Swing Line
Loan, if the Swing Line Lender receives any payment on account of such Swing
Line Loan, the Swing Line Lender will distribute to such Revolving Lender its
Pro Rata Revolving Share of such payment (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Revolving
Lender’s risk participation was funded) in the same funds as those received by
the Swing Line Lender.

 

56

 

(ii)           If any payment received
by the Swing Line Lender in respect of principal or interest on any Swing Line
Loan is required to be returned by the Swing Line Lender under any of the
circumstances described in Section 11.05 (including pursuant to any
settlement entered into by the Swing Line Lender in its discretion), each
Revolving Lender shall pay to the Swing Line Lender its Pro Rata Revolving
Share thereof on demand of the Administrative Agent, plus interest thereon from
the date of such demand to the date such amount is returned, at a rate per
annum equal to the Federal Funds Rate. 
The Administrative Agent will make such demand upon the request of the
Swing Line Lender.  The obligations of
the Lenders under this clause shall survive the payment in full of the
Obligations and the termination of this Agreement.

 

(e)           Interest for Account
of Swing Line Lender.  The Swing Line
Lender shall be responsible for invoicing the Borrower for interest on the
Swing Line Loans.  Until each Revolving
Lender funds its Base Rate Revolving Loan or risk participation pursuant to
this Section 2.05 to refinance such Lender’s Pro Rata Revolving
Share of any Swing Line Loan, interest in respect of such Pro Rata Revolving
Share shall be solely for the account of the Swing Line Lender.

 

(f)            Payments Directly
to Swing Line Lender.  The Borrower
shall make all payments of principal and interest in respect of the Swing Line
Loans directly to the Swing Line Lender.

 

2.06        Prepayments.

 

(a)           The Borrower may, upon
notice to the Administrative Agent, at any time or from time to time
voluntarily prepay Loans under the Revolving Credit Facility or the Term Loan
Facility in whole or in part without premium or penalty; provided that (i) such
notice must be received by the Administrative Agent not later than 11:00 a.m.
(A) three Business Days prior to any date of prepayment of Eurodollar Rate
Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any
prepayment of Eurodollar Rate Loans under any such credit facility shall be in
a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof; and (iii) any prepayment of Base Rate Loans under any such credit
facility shall be in a principal amount of $5,000,000 or a whole multiple of
$1,000,000 in excess thereof or, in each case, the entire principal amount
thereof then outstanding.  Each such
notice shall specify the date and amount of such prepayment, the credit
facility to which the prepayment is to be applied, and the Type(s) of
Loans to be prepaid.  Prepayments of the
Term Loan shall be applied pro rata to remaining installments of the scheduled
amortization of the Term Loan Facility. 
The Administrative Agent will promptly notify each applicable Lender of
its receipt of each such notice, and of the amount of such Lender’s ratable
share of such prepayment.  If such notice
is given by the Borrower, the Borrower shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein.  Any prepayment of a
Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount
prepaid, together with any additional amounts required pursuant to Section 4.05.  Each such prepayment shall be applied to the
Loans of the applicable Lenders in accordance with their Pro Rata Revolving
Shares and Pro Rata Term Shares, as applicable.

 

(b)           The Borrower may, upon
notice to the Swing Line Lender (with a copy to the Administrative Agent), at
any time or from time to time, voluntarily prepay Swing Line Loans in 

 

57

 

whole or in part without
premium or penalty; provided that (i) such notice must be received
by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m.
on the date of the prepayment, and (ii) any such prepayment shall be in a
minimum principal amount of $500,000 or a whole multiple of $100,000 in excess
thereof.  Each such notice shall specify
the date and amount of such prepayment. 
If such notice is given by the Borrower, the Borrower shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein.

 

(c)           If for any reason the
Total Revolving Outstandings at any time exceed the Aggregate Revolving Credit
Commitments then in effect, the Borrower shall immediately prepay Revolving
Loans and/or Swing Line Loans and/or Cash Collateralize the L/C - BA
Obligations in an aggregate amount equal to such excess; provided, however,
that the Borrower shall not be required to Cash Collateralize the L/C - BA
Obligations pursuant to this Section 2.06(c) unless after the
prepayment in full of the Revolving Loans and Swing Line Loans, the Total
Revolving Outstandings exceed the Aggregate Revolving Credit Commitments then
in effect.

 

(d)           In addition to any
required payments of principal of the Term Loan and any optional payments of
principal of the Term Loan and the Revolving Loans effected under subsection
(a) above, the Borrower shall make the following required prepayments,
and the Aggregate Revolving Credit Commitments shall be automatically and
permanently reduced as applicable, each such payment to be made to the
Administrative Agent for the benefit of the applicable Lenders, and each
reduction effected, within the time period specified below:

 

(i)            At any time after the
aggregate Net Cash Proceeds from all issuances of Indebtedness permitted by Section 8.03(i) and
all Dispositions permitted by Section 8.05(f)(i) after the
Closing Date has reached $75,000,000, the Borrower shall make, or shall cause
each applicable Restricted Subsidiary to make, a prepayment of the Outstanding
Amount of the Term Loan in an amount equal to one hundred percent (100%) of any
further Net Cash Proceeds (including any portion of the Net Cash Proceeds
thereof that causes the aggregate Net Cash Proceeds to exceed the $75,000,000
threshold) of (A) each private or public issuance of Indebtedness of the
Borrower or any Restricted Subsidiary permitted by Section 8.03(i),
and (B) each Disposition permitted by Section 8.05(f)(i).  Each such prepayment will be made within ten (10) Business
Days of receipt of such Net Cash Proceeds and upon not less than five (5) Business
Days’ prior written notice to the Administrative Agent, which notice shall
include a certificate of a Responsible Officer of the Borrower setting forth in
reasonable detail the calculations utilized in computing the Net Cash Proceeds
of such issuance or Disposition.

 

(ii)           The Borrower shall
make, or shall cause each applicable Restricted Subsidiary to make, a prepayment
of the Outstanding Amount of the Term Loan (A) in an amount equal to one
hundred percent (100%) of the Net Cash Proceeds of each private or public
issuance of Indebtedness of the Borrower or any Restricted Subsidiary other
than Indebtedness permitted under Section 8.03, and (B) in an
amount equal to one hundred percent (100%) of the Net Cash Proceeds of each
private or public issuance of Indebtedness of the Borrower or any Restricted
Subsidiary permitted by Section 8.03(l), but excluding any Net Cash
Proceeds used or to be used, in the good faith judgment of the Administrative
Agent, for the purpose of financing one or more Acquisitions or 

 

58

 

Restricted Payments permitted hereunder; provided,
however, if the Term Loan Facility is or has been paid in full, then at
all times that the Aggregate Revolving Credit Commitments exceed $225,000,000,
the Aggregate Revolving Credit Commitments shall be automatically and
permanently reduced by an amount equal to fifty percent (50%) of any Net Cash
Proceeds otherwise not used, or not required to have been used, as applicable,
to prepay the Outstanding Amount of the Term Loan as required hereunder.  Each prepayment of the Term Loan and each
reduction to the Aggregate Revolving Credit Commitments required to be made
pursuant to this Section 2.06(d)(ii) shall be made within ten (10) Business
Days of receipt of such Net Cash Proceeds and upon not less than five (5) Business
Days’ prior written notice to the Administrative Agent, which notice shall
include a certificate of a Responsible Officer of the Borrower setting forth in
reasonable detail the calculations utilized in computing the Net Cash Proceeds
of such issuance; provided that despite the application of this Section 2.06(d)(ii) to
any issuance of Indebtedness that is not otherwise permitted under this
Agreement, nothing in this Section 2.06(d)(ii) shall be deemed
to permit any Indebtedness not expressly permitted under this Agreement or to
constitute a waiver or cure of any Default or Event of Default that arises as a
result of the incurrence of Indebtedness that is not permitted under this
Agreement.

 

(iii)          (A) The Borrower
shall make, or shall cause each applicable Restricted Subsidiary to make, a
prepayment of the Outstanding Amount of the Term Loan in an amount equal to the
Required Equity Prepayment Percentage (defined below) of the Net Cash Proceeds
of each private or public issuance of Equity Interests of the Borrower or any
Restricted Subsidiary, and (B) at all times that the Aggregate Revolving
Credit Commitments exceed $225,000,000, the Aggregate Revolving Credit
Commitments shall be automatically and permanently reduced by an amount equal
to the Remaining Equity Prepayment Percentage (defined below) of the Net Cash
Proceeds of each private or public issuance of Equity Interests of the Borrower
or any Restricted Subsidiary.  Each
prepayment of the Term Loan and each reduction to the Aggregate Revolving
Credit Commitments required to be made pursuant to this Section 2.06(d)(iii) will
be made within ten (10) Business Days of receipt of such Net Cash Proceeds
and upon not less than five (5) Business Days’ prior written notice to the
Administrative Agent, which notice shall include a certificate of a Responsible
Officer of the Borrower setting forth in reasonable detail the calculations
utilized in computing the Net Cash Proceeds of such issuance.  Notwithstanding the application of this Section 2.06(d)(iii) to
any issuance of Equity Interests that is not otherwise permitted under this
Agreement, nothing in this Section 2.06(d)(iii) shall be
deemed to permit any issuance of Equity Interests of the Borrower or any
Restricted Subsidiary not expressly permitted under this Agreement or to
constitute a waiver or cure of any Default or Event of Default that arises as a
result of the issuance of any such Equity Interest that is not permitted under
this Agreement.  For purposes of this Section 2.06(d)(iii),
the term “Required
Equity Prepayment Percentage” means 50%, provided that
such prepayment shall only be required to be made at the 50% level to the
extent that the amount of Consolidated Senior Secured Indebtedness, as reduced
by giving effect to such prepayment at the 50% level, would result in a
Consolidated Senior Secured Leverage Ratio greater than or equal to 2.00 to
1.00, and shall thereafter be made by substituting “25%” for “50%”, provided
further that if the Required Equity Prepayment Percentage is 25%
(including as applied to a portion of a 

 

59

 

prepayment for which the 50% rate applied to the first
portion) then such prepayment shall only be required to be made at the 25%
level to the extent that the amount of Consolidated Senior Secured
Indebtedness, as reduced by giving effect to such prepayment at the 25% level,
would result in a Consolidated Senior Secured Leverage Ratio greater than or
equal to 1.00 to 1.00, and shall thereafter be made by substituting “0%” for “25%”.  Additionally, for purposes of this Section 2.06(d)(iii),
the term “Remaining
Equity Prepayment Percentage” means a percentage equal to the product of (x) 100% minus the
Required Equity Prepayment Percentage otherwise in effect for any such
prepayment of the Term Loan under this Section 2.06(d)(iii) multiplied
by (y) fifty percent (50%).

 

(iv)          Within ten Business Days
after financial statements have been delivered pursuant to Section 7.01(a) and
the related Compliance Certificate has been delivered pursuant to Section 7.02(b),
the Borrower shall make a prepayment of the Outstanding Amount of the Term Loan
in an amount equal to the Required ECF Prepayment Percentage (defined below) of
Excess Cash Flow for the fiscal year covered by such financial statements; provided
that for the fiscal year of the Borrower ending December 31, 2005, the
prepayment required by this Section 2.06(d)(iv) will be equal
to the Required Prepayment Percentage of the ratable portion of Excess Cash
Flow for such fiscal year from the Closing Date to December 31, 2005, with
Excess Cash Flow (and the elements thereof) being calculated pro forma for the
US Pipe Contribution in accordance with Section 1.03(c).  For purposes of this Section 2.06(d)(iv),
the term “Required ECF
Prepayment Percentage” means 75%, provided that such
prepayment shall only be required to be made at the 75% level to the extent
that the amount of Consolidated Senior Secured Indebtedness, as reduced by
giving effect to such prepayment at the 75% level, would result in a
Consolidated Senior Secured Leverage Ratio greater than or equal to 2.00 to
1.00, and shall thereafter be made by substituting “50%” for “75%”, provided
further that if the Required ECF Prepayment Percentage is 50% then such
prepayment shall only be required to be made at the 50% level to the extent that
the amount of Consolidated Senior Secured Indebtedness, as reduced by giving
effect to such prepayment at the 50% level, would result in a Consolidated
Senior Secured Leverage Ratio greater than or equal to 1.00 to 1.00, and shall
thereafter be made by substituting “0%” for “50%”.

 

(v)           In the event that the
aggregate Net Cash Proceeds from a Disposition of any single Non-Core
Subsidiary, whether in one or a series of related transactions, permitted by Section 8.05(g)(ii)(A) exceeds
$25,000,000, the Borrower shall make, or shall cause each applicable Restricted
Subsidiary to make, a prepayment in an amount equal to one hundred percent
(100%) of any further Net Cash Proceeds (including any portion of the Net Cash
Proceeds thereof that causes the aggregate Net Cash Proceeds to exceed the
$25,000,000 threshold) from each such Disposition.  Each such prepayment will be made within ten (10) Business
Days of receipt of such Net Cash Proceeds and upon not less than five (5) Business
Days’ prior written notice to the Administrative Agent, which notice shall
include a certificate of a Responsible Officer of the Borrower setting forth in
reasonable detail the calculations utilized in computing the Net Cash Proceeds
of such Disposition.

 

60

 

(vi)          In the event that there
shall occur any Permitted Securities Transaction described in parts (b),
(c) and/or (d) of the definition thereof, the Borrower
shall make, or shall cause each applicable Restricted Subsidiary to make, a prepayment
in an amount equal to one hundred percent (100%) of the Net Cash Proceeds from
each such Permitted Securities Transaction (or combination thereof occurring
substantially simultaneously) received by the Borrower, but in any event in an
amount not less than fifty percent (50%) of the aggregate Net Cash Proceeds
from such Permitted Securities Transaction(s). 
Each such prepayment will be made within ten (10) Business Days of
receipt of such Net Cash Proceeds and upon not less than five (5) Business
Days’ prior written notice to the Administrative Agent, which notice shall
include a certificate of a Responsible Officer of the Borrower setting forth in
reasonable detail the calculations utilized in computing the Net Cash Proceeds
of such Permitted Securities Transaction(s).

 

(vii)         The Borrower shall make,
or shall cause each applicable Restricted Subsidiary to make, a prepayment of
the Outstanding Amount of the Term Loan in an amount equal to one hundred
percent (100%) of any Net Cash Proceeds received pursuant to each Disposition
permitted by Section 8.05(i). 
Each such prepayment will be made within ten (10) Business Days of
receipt of such Net Cash Proceeds and upon not less than five (5) Business
Days’ prior written notice to the Administrative Agent, which notice shall
include a certificate of a Responsible Officer of the Borrower setting forth in
reasonable detail the calculations utilized in computing the Net Cash Proceeds
of such Disposition.

 

Each prepayment of the Term Loan required under Section 2.06(d) shall
be applied pro rata to remaining installments of the scheduled amortization of
the Term Loan Facility (including the scheduled payment of all remaining
Outstanding Amounts of the Term Loan on the Term Loan Maturity Date).  Each permanent reduction in the Aggregate
Revolving Credit Commitments made under Section 2.06(d)(ii) or
(iii) shall be in the respective amounts as provided therein with
corresponding permanent reductions in each Revolving Lender’s Revolving Credit
Commitment according to its Pro Rata Revolving Share until the Aggregate
Revolving Credit Commitments do not exceed $225,000,000; provided, however,
that no such permanent reductions to the Aggregate Revolving Credit Commitments
pursuant to this Section 2.06(d) shall reduce the Aggregate
Revolving Credit Commitments to an amount less than $225,000,000.

 

(e)           Any prepayment of a
Eurodollar Rate Loan under this Section 2.06 shall be accompanied
by all accrued interest thereon, together with any additional amounts required
pursuant to Section 4.05. 
Each prepayment under this Section 2.06 shall be applied to
the Loans of the applicable Lenders in accordance with their Pro Rata Term
Shares or Pro Rata Revolving Shares, as applicable.

 

2.07        Termination or Reduction
of Commitments.

 

(a)           If the Aggregate
Revolving Credit Commitments exceed $225,000,000, the Aggregate Revolving
Credit Commitments shall be automatically and permanently reduced in an amount
equal to one hundred percent (100%) of the Net Cash Proceeds of each private or
public issuance of Indebtedness of the Borrower or any Restricted Subsidiary
permitted by Section 8.03(g) that is issued after the
Amendment No. 5 Effective Date but before the first Qualified 

 

61

 

Homebuilding Transaction;
provided, however, that no such permanent reductions to the
Aggregate Revolving Credit Commitments pursuant to this Section 2.07(a) shall
reduce the Aggregate Revolving Credit Commitments to an amount less than
$225,000,000.  Each reduction to the
Aggregate Revolving Credit Commitments shall be made within ten (10) Business
Days of receipt of such Net Cash Proceeds and upon not less than five (5) Business
Days’ prior written notice to the Administrative Agent, which notice shall
include a certificate of a Responsible Officer of the Borrower setting forth in
reasonable detail the calculations utilized in computing the Net Cash Proceeds
of such issuance.

 

(b)           The Aggregate Revolving
Credit Commitments shall be automatically and permanently reduced so that, to
the extent necessary to effect any permanent reduction hereunder, the Aggregate
Revolving Credit Commitments do not exceed the following amounts on the
following dates: (i) on March 31, 2009, the Aggregate Revolving
Credit Commitments shall not exceed $400,000,000; (ii) on June 30,
2009, the Aggregate Revolving Credit Commitments shall not exceed $350,000,000;
(iii) on September 30, 2009, the Aggregate Revolving Credit
Commitments shall not exceed $300,000,000; and (iv) on December 31,
2009, the Aggregate Revolving Credit Commitments shall not exceed $250,000,000.

 

(c)           In addition to any
required permanent reductions of the Aggregate Revolving Credit Commitments
effected under Section 2.06(d), Section 2.07(a) or
Section 2.07(b), the Borrower may, upon notice to the
Administrative Agent, terminate the Aggregate Revolving Credit Commitments, or
from time to time permanently reduce the Aggregate Revolving Credit
Commitments; provided that (i) any such notice shall be received by
the Administrative Agent not later than 11:00 a.m. five Business Days
prior to the date of termination or reduction, (ii) any such partial
reduction shall be in an aggregate amount of $5,000,000 or any whole multiple
of $1,000,000 in excess thereof, or the entire remaining Aggregate Revolving
Credit Commitments, (iii) the Borrower shall not terminate or reduce the
Aggregate Revolving Credit Commitments if, after giving effect thereto and to
any concurrent prepayments hereunder, the Total Revolving Outstandings would
exceed the Aggregate Revolving Credit Commitments, and (iv) if, after
giving effect to any reduction of the Aggregate Revolving Credit Commitments,
the Letter of Credit - BA Sublimit or the Swing Line Sublimit exceeds the
amount of the Aggregate Revolving Credit Commitments, such sublimit shall be
automatically reduced by the amount of such excess.

 

(d)           The Administrative
Agent will promptly notify the Lenders of any such notice of any such
termination or reduction of the Aggregate Revolving Credit Commitments pursuant
to Section 2.06(d) or this Section 2.07.  Any reduction of the Aggregate Revolving
Credit Commitments pursuant to Section 2.06(d) or this Section 2.07
shall be applied to the Revolving Credit Commitment of each Revolving Lender
according to its Pro Rata Revolving Share. 
Any Commitment Fees accrued prior to effective date of any termination
of the Aggregate Revolving Credit Commitments shall be paid on the effective
date of such termination.

 

2.08        Repayment of Loans.

 

(a)           The Borrower shall
repay to the Revolving Lenders on the Revolving Credit Maturity Date the
aggregate principal amount of Revolving Loans outstanding on such date.

 

62

 

(b)           The Borrower shall
repay each Swing Line Loan on the earlier to occur of (i) the date ten
Business Days after such Loan is made and (ii) the Revolving Credit
Maturity Date.

 

(c)           The Borrower shall
repay the principal amount of the Term Loan in twenty-seven (27) consecutive
quarterly installments equal to $1,125,000 on the last Business Day of each
March, June, September and December, commencing on December 31, 2005,
and in a final installment equal to the aggregate Outstanding Amount of the
Term Loan on the Term Loan Maturity Date, in each case subject to adjustments
for prepayments made pursuant to Section 2.06.

 

2.09        Interest.

 

(a)           Subject to the
provisions of subsection (b) below, (i) each Eurodollar Rate Loan
shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to the Eurodollar Rate for such
Interest Period plus the Applicable Rate; (ii) each Base Rate Loan
shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Base Rate plus
the Applicable Rate; and (iii) each Swing Line Loan shall bear interest on
the outstanding principal amount thereof from the applicable borrowing date at
a rate per annum equal to the Base Rate plus the Applicable Rate.

 

(b)           If any amount payable
by the Borrower under any Loan Document is not paid when due (without regard to
any applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws. 
Furthermore, while any Event of Default exists, the Borrower shall pay
interest, at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws, on the
principal amount of all (a) outstanding Obligations under the Revolving
Credit Facility upon the affirmative vote of the Required Revolving Lenders, (b) outstanding
Obligations under the Term Loan Facility upon the affirmative vote of the
Required Term Loan Lenders and (c) other Obligations hereunder upon the
affirmative vote of the Required Lenders. 
Accrued and unpaid interest on past due amounts (including interest on
past due interest) shall be due and payable upon demand.

 

(c)           Interest on each Loan
shall be due and payable in arrears on each Interest Payment Date applicable
thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable
in accordance with the terms hereof before and after judgment, and before and
after the commencement of any proceeding under any Debtor Relief Law.

 

2.10        Fees.  In addition to
certain fees described in subsections (i) and (j) of Section 2.04:

 

(a)           Commitment Fee.  The Borrower shall pay to the Administrative
Agent for the account of each Revolving Lender in accordance with its Pro Rata
Revolving Share, a commitment fee (the “Commitment Fee”) equal to the Applicable Rate
times the actual daily amount by which the Aggregate Revolving Credit
Commitments exceed the sum of (i) the 

 

63

 

Outstanding Amount of
Revolving Loans and (ii) the Outstanding Amount of L/C - BA
Obligations.  The Commitment Fee shall
accrue at all times during the Availability Period, including at any time
during which one or more of the conditions in Article V is not met,
and the amount accrued through the end of each fiscal quarter of the Borrower
shall be due and payable in arrears on the fifteenth (or the next Business Day
after the fifteenth, if the fifteenth is not a Business Day) of each January,
April, July and October, and on the Revolving Credit Maturity Date.  The Commitment Fee shall be calculated
quarterly in arrears, and if there is any change in the Applicable Rate during any
quarter, the actual daily amount shall be computed and multiplied by the
Applicable Rate separately for each period during such quarter that such
Applicable Rate was in effect.

 

(b)           Other Fees.  The Borrower shall pay to the Arrangers, the
Administrative Agent and each of the Lenders, for their own respective
accounts, such fees as shall have been separately agreed upon in writing
(including in the Joint Fee Letter, the Agency Fee Letter and the Amendment No. 5
Engagement Letter, as applicable) in the amounts and at the times so specified,
including an annual administrative fee payable to the Administrative
Agent.  Such fees shall be fully earned
when paid and shall not be refundable for any reason whatsoever.

 

2.11        Computation of Interest and Fees.  All computations of interest for Base Rate
Loans when the Base Rate is determined by Bank of America’s “prime rate” shall
be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed.  All other
computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more fees or interest, as applicable,
being paid than if computed on the basis of a 365-day year).  Interest shall accrue on each Loan for the
day on which the Loan is made, and shall not accrue on a Loan, or any portion
thereof, for the day on which the Loan or such portion is paid, provided that
any Loan that is repaid on the same day on which it is made shall, subject to Section 2.13(a),
bear interest for one day.  Each
determination by the Administrative Agent of an interest rate or fee hereunder
shall be conclusive and binding for all purposes, absent manifest error.

 

2.12        Evidence of Debt.

 

(a)           The Credit Extensions
made by each Lender shall be evidenced by one or more accounts or records
maintained by such Lender and by the Administrative Agent in the ordinary
course of business.  The accounts or
records maintained by the Administrative Agent and each Lender shall be conclusive
absent manifest error of the amount of the Credit Extensions made by the
Lenders to the Borrower and the interest and payments thereon.  Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of the
Borrower hereunder to pay any amount owing with respect to the
Obligations.  In the event of any
conflict between the accounts and records maintained by any Lender and the
accounts and records of the Administrative Agent in respect of such matters,
the accounts and records of the Administrative Agent shall control in the
absence of manifest error.  Upon the
request of any Lender made through the Administrative Agent, the Borrower shall
execute and deliver to such Lender (through the Administrative Agent) a Note,
which shall evidence such Lender’s Loans in addition to such accounts or
records.  Each Lender may attach
schedules to its Note and endorse thereon the date, Type (if applicable),
amount and maturity of its Loans and payments with respect thereto.

 

64

 

(b)           In addition to the
accounts and records referred to in subsection (a), each Lender and the
Administrative Agent shall maintain in accordance with its usual practice
accounts or records evidencing the purchases and sales by such Lender of
participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the
accounts and records maintained by the Administrative Agent and the accounts
and records of any Lender in respect of such matters, the accounts and records
of the Administrative Agent shall control in the absence of manifest error.

 

(c)           Entries made in good
faith by the Administrative Agent in the Register pursuant to Section 2.12(b),
and by each Lender in its account or accounts pursuant to Section 2.12(a),
shall be prima facie evidence of the amount of principal and interest due and
payable or to become due and payable from the Borrower to, in the case of the
Register, each Lender and, in the case of such account or accounts, such
Lender, under this Agreement and the other Loan Documents, absent manifest
error; provided that the failure of the Administrative Agent or any
Lender to make an entry, or any finding that any entry is incorrect, in the
Register or such account or accounts shall not limit or otherwise affect the
Obligations.

 

2.13        Payments Generally;
Administrative Agent’s Clawback.

 

(a)           General.  All payments to be made by the Borrower shall
be made without condition or deduction for any counterclaim, defense,
recoupment or setoff.  Except as otherwise
expressly provided herein, all payments by the Borrower hereunder shall be made
to the Administrative Agent, for the account of the respective Lenders to which
such payment is owed, at the Administrative Agent’s Office in Dollars and in
immediately available funds not later than 2:00 p.m. on the date specified
herein.  The Administrative Agent will
promptly distribute to such Lender its ratable share (or other applicable share
as provided herein) of such payment in like funds as received by wire transfer
to such Lender’s Lending Office.  All
payments received by the Administrative Agent after 2:00 p.m. shall be
deemed received on the next succeeding Business Day and any applicable interest
or fee shall continue to accrue.  If any
payment to be made by the Borrower shall come due on a day other than a
Business Day, payment shall be made on the next following Business Day, and
such extension of time shall be reflected in computing interest or fees, as the
case may be.

 

(b)           (i)  Funding by
Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have
received notice from a Lender prior to the proposed date of any Borrowing of
Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans,
prior to 12:00 noon on the date of such Borrowing) that such Lender will not
make available to the Administrative Agent such Lender’s share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with Section 2.03 (or,
in the case of a Borrowing of Base Rate Loans, that such Lender has made such
share available in accordance with and at the time required by Section 2.03)
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount.  In such event, if
a Lender has not in fact made its share of the applicable Borrowing available
to the Administrative Agent, then the applicable Lender and the Borrower
severally agree to pay to the Administrative Agent forthwith on demand such
corresponding amount in immediately available funds with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at (A) in
the case of 

 

65

 

a payment to be made by
such Lender, the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on
interbank compensation and (B) in the case of a payment to be made by the
Borrower, the interest rate applicable to Base Rate Loans; provided that
the Administrative Agent agrees that it shall first make a request (which
request may be telephonic) for payment from such applicable Lender before
making a request with respect thereto to the Borrower.  If the Borrower and such Lender shall pay
such interest to the Administrative Agent for the same or an overlapping
period, the Administrative Agent shall promptly remit to the Borrower the
amount of such interest paid by the Borrower for such period.  If such Lender pays its share of the
applicable Borrowing to the Administrative Agent, then the amount so paid shall
constitute such Lender’s Revolving Loan or Pro Rata Term Share of the Term
Loan, as applicable, included in such Borrowing.  Any payment by the Borrower shall be without
prejudice to any claim the Borrower may have against a Lender that shall have
failed to make such payment to the Administrative Agent.

 

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

 

A notice of the Administrative Agent to any Lender or the Borrower with
respect to any amount owing under this subsection (b) shall be conclusive,
absent manifest error.

 

(c)           Failure to Satisfy
Conditions Precedent.  If any Lender
makes available to the Administrative Agent funds for any Loan to be made by
such Lender as provided in the foregoing provisions of this Article II,
and such funds are not made available to the Borrower by the Administrative
Agent because the conditions to the applicable Credit Extension set forth in Article V
are not satisfied or waived in accordance with the terms hereof, the
Administrative Agent shall return such funds (in like funds as received from
such Lender) to such Lender, without interest.

 

(d)           Obligations of
Lenders Several.  The obligations of
the Lenders hereunder to make Revolving Loans, to fund their respective Pro
Rata Term Shares of the Term Loan, to fund participations in Letters of Credit
and Swing Line Loans and to make payments pursuant to Section 11.04(c) are
several and not joint.  The failure of
any Lender to make any Revolving Loan, to fund its Pro Rata Term Share of the
Term Loan, to fund any participation in Letters of Credit and Swing Line Loans
or to make any payment under Section 11.04(c) on any date 

 

66

 

required hereunder shall
not relieve any other Lender of its corresponding obligation to do so on such
date, and no Lender shall be responsible for the failure of any other Lender to
so make its Revolving Loan, to fund its Pro Rata Term Share of the Term Loan,
to purchase its participations in Letters of Credit and Swing Line Loans or to
make its payment under Section 11.04(c).

 

(e)           Funding Source.  Nothing herein shall be deemed to obligate
any Lender to obtain the funds for any Loan in any particular place or manner
or to constitute a representation by any Lender that it has obtained or will
obtain the funds for any Loan in any particular place or manner.

 

2.14        Sharing of Payments by Lenders.  If any Lender shall, by exercising any right
of setoff or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of the Revolving Loans or the portion of the
Term Loan made by it, or the participations in L/C – BA Obligations or in Swing
Line Loans held by it resulting in such Lender’s receiving payment of a
proportion of the aggregate amount of such Loans or participations and accrued
interest thereon greater than its ratable share thereof as provided herein,
then the Lender receiving such greater proportion shall (a) notify the
Administrative Agent of such fact, and (b) purchase (for cash at face
value) participations in the applicable Revolving Loans and/or portion of the
Term Loan made by it and/or subparticipations in the participations in L/C – BA
Obligations or Swing Line Loans of the other Lenders, as the case may be, or
make such other adjustments as shall be equitable, so that the benefit of all
such payments shall be shared by the applicable Lenders ratably in accordance
with the aggregate amount of principal of and accrued interest on their
respective Revolving Loans, portion of the Term Loan and/or other amounts owing
them, provided that:

 

(i)            if any such
participations or subparticipations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and

 

(ii)           the provisions of this Section shall
not be construed to apply to (x) any payment made by the Borrower pursuant
to and in accordance with the express terms of this Agreement or (y) any
payment obtained by a Lender as consideration for the assignment of or sale of
a participation in any of its Revolving Loans, portion of the Term Loan or
subparticipations in L/C – BA Obligations or Swing Line Loans to any assignee
or participant, other than to the Borrower or any Subsidiary thereof (as to
which the provisions of this Section shall apply).

 

The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.

 

67

 

ARTICLE
III.

SECURITY

 

3.01        Security.  As security
for the full and timely payment and performance of all Obligations, the
Borrower shall, and shall cause all other Loan Parties to, on or before the
Closing Date, do or cause to be done all things necessary in the opinion of the
Administrative Agent and its counsel to grant to the Administrative Agent for
the benefit of the Secured Parties a duly perfected first priority security
interest in all Collateral subject to no prior Lien or other encumbrance or restriction
on transfer, except as expressly permitted hereunder.  Without limiting the foregoing, on the
Closing Date the Borrower shall deliver, and shall cause each Guarantor (other
than, solely with respect to the Security Agreement, Mid-State Homes and Walter
Mortgage Company) to deliver, to the Administrative Agent, in form and
substance reasonably acceptable to the Administrative Agent, (a) if such
party has rights in any Pledged Interests (i) the Pledge Agreement which
shall pledge all of the Pledged Interests held by such party to the
Administrative Agent for the benefit of the Secured Parties, and (ii) if
such Pledged Interests are in the form of certificated securities, such
certificated securities, together with undated stock powers or other appropriate
transfer documents indorsed in blank pertaining thereto, (b) the Security
Agreement, which shall pledge to the Administrative Agent for the benefit of
the Secured Parties certain personal property of the Borrower and the
Guarantors more particularly described therein, (c) if such party has a
fee interest in any of the real property set forth on Schedule 3.01, a
Mortgage with respect thereto and such Mortgaged Property Support Documents as
the Administrative Agent may request, (d) if such party has any leasehold
interest in, or other grant of, mineral rights relating to the Coal mining or
natural gas operations of any Coal Mining Entity, a Mineral Rights Mortgage
with respect thereto and such Mortgaged Coal Property Support Documents as the
Administrative Agent may request, (e) Uniform Commercial Code financing
statements in form, substance and number as requested by the Administrative
Agent, reflecting the Lien in favor of the Secured Parties on the Pledged
Interests and all other Collateral, and shall take such further action and
deliver or cause to be delivered such further documents as required by the
Security Instruments or otherwise as the Administrative Agent may request to
effect the transactions contemplated by this Article III.  The Borrower shall also, and shall cause each
Guarantor, to pledge to the Administrative Agent for the benefit of the Secured
Parties (and as appropriate to reaffirm its prior pledge of) all of the Pledged
Interests acquired or created after the Closing Date and held by such party, or
otherwise acquired by such party and not theretofore pledged to the
Administrative Agent for the benefit of the Secured Parties, and to deliver to
the Administrative Agent all of the documents and instruments in connection
therewith as are required pursuant to the terms of Section 7.12 and
of the Security Instruments.

 

3.02        Further Assurances.

 

(a)           At the request of the
Administrative Agent, the Borrower will or will cause all other Loan Parties,
as the case may be, from time to time to execute, by its duly authorized
officers, alone or with the Administrative Agent, any certificate, instrument,
financing statement, control agreement, statement or document, or to procure
any such certificate, instrument, statement or document, or to take such other
action (and pay all connected costs) which the Administrative Agent reasonably
deems necessary from time to time to create, continue or preserve the liens and
security interests in Collateral (and the perfection and priority thereof) of
the Administrative Agent contemplated hereby and by the other Loan Documents
and 

 

68

 

specifically including
all Collateral acquired by the Borrower or other Loan Party after the Closing
Date.

 

(b)           Without limiting the
generality of the foregoing subsection (a), in the event that the Borrower or
any Loan Party (or any Domestic Subsidiary that is required to be a Loan Party
pursuant to the terms of this Agreement) shall acquire (including as a result
of the creation or acquisition of a Restricted Subsidiary or an existing
Subsidiary becoming a Restricted Subsidiary, in each case in accordance with
the terms of this Agreement) any fee interest in real property having a fair
market value as determined in good faith by the Administrative Agent or the
Borrower in excess of $10,000,000 in the aggregate, the Borrower or the
applicable Domestic Subsidiary shall, promptly after such acquisition, execute
and deliver to the Administrative Agent a Mortgage in favor of the Administrative
Agent, as mortgagee for the ratable benefit of the Lenders, and provide the
Administrative Agent with evidence of the completion (or reasonably
satisfactory arrangements for the completion) of all recordings and filings of
such Mortgage as may be necessary or, in the reasonable opinion of the
Administrative Agent, desirable to effectively create a valid, perfected, first
priority Lien, subject to Liens permitted by Section 8.01(a), (c),
(d), (g), (h) or (i), against the properties
purported to be covered thereby, including evidence of the payment of any
filing or recordation fees or taxes, and deliver to the Administrative Agent
such Mortgaged Property Support Documents as the Administrative Agent may
request with respect to the property purported to be covered by such Mortgage;

 

(c)           Without limiting the
generality of the foregoing subsection (a), in the event that the Borrower or
any other Loan Party (or any Domestic Subsidiary that is required to be a Loan
Party pursuant to the terms of this Agreement) shall acquire (including as a
result of the creation or acquisition of a Restricted Subsidiary or an existing
Subsidiary becoming a Restricted Subsidiary, in each case in accordance with
the terms of this Agreement) any fee, leasehold or grantee interest in any
mineral rights relating or adjacent to the Coal or natural gas operations of
any Coal Mining Entity or otherwise acquired for the commercial value of such
mineral rights, the Borrower shall or shall cause the applicable Domestic
Subsidiary to, promptly after such acquisition, (i) notify the
Administrative Agent of such acquisition and provide to the Administrative
Agent the location, acreage, facility size and use of such real property or
mineral rights interest, (ii) if requested by the Administrative Agent,
execute and deliver to the Administrative Agent a Mineral Rights Mortgage in
favor of the Administrative Agent, as mortgagee for the ratable benefit of the
Lenders, and provide the Administrative Agent with evidence of the completion
(or reasonably satisfactory arrangements for the completion) of all recordings
and filings of such Mineral Rights Mortgage as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable to effectively create
a valid, perfected, first priority Lien, subject to Liens permitted by Section 8.01(a),
(c), (d), (g), (h) or (i), against the
properties and interests purported to be covered thereby, including evidence of
the payment of any filing or recordation fees or taxes, and deliver to the
Administrative Agent such Mortgaged Coal Property Support Documents as the
Administrative Agent may request with respect to the property purported to be
covered by such Mineral Rights Mortgage;

 

(d)           Without limiting the
generality of the foregoing subsection (a), prior to entering into any new
lease of real property or renewing any existing lease of real property
following the Closing Date, the Borrower shall, and shall cause each of its
Domestic Subsidiaries that are or are required to be Loan Parties to, use its (and
their) best efforts (which shall not require the 

 

69

 

expenditure of cash or
the making of any material concessions under the relevant lease) to deliver to
the Administrative Agent a waiver, in form and substance reasonably
satisfactory to the Administrative Agent, executed by the lessor of any real
property that is to be leased by the Borrower or such Domestic Subsidiary for a
term in excess of one year in any state which by statute grants such lessor a “landlord’s”
(or similar) Lien which is superior to the Administrative Agent’s, to the
extent the value of any personal property of the Borrower and its Domestic
Subsidiaries that are Restricted Subsidiaries held or to be held at such leased
property exceeds (or it is anticipated that the value of such personal property
will, at any point in time during the term of such leasehold term, exceed)
$12,000,000.

 

(e)           The Administrative
Agent is hereby irrevocably authorized to execute (if necessary) and file or cause
to be filed, with or if permitted by applicable law without the signature of
the Borrower or any Loan Party appearing thereon, all Uniform Commercial Code
financing statements reflecting the Borrower or any other Loan Party as “debtor”
and the Administrative Agent as “secured party”, and continuations thereof and
amendments thereto, as the Administrative Agent reasonably deems necessary or
advisable to give effect to the transactions contemplated hereby and by the
other Loan Documents.

 

3.03        Information Regarding Collateral.  The Borrower represents, warrants and
covenants that (a) the chief executive office of the Borrower and each
other Person providing Collateral pursuant to a Security Instrument (each, a “Grantor”) at the
Closing Date is located at the address or addresses specified on Schedule
3.03, and (b) Schedule 3.03 contains a true and complete list
of (i) the exact legal name, jurisdiction of formation, and address within
the United States of each Grantor and of each other Person that has effected
any merger or consolidation with a Grantor or contributed or transferred to a
Grantor any property constituting Collateral at any time since January 1,
2000 (excluding Persons making sales in the ordinary course of their businesses
to a Grantor of property constituting inventory in the hands of such seller), (ii) the
exact legal name, jurisdiction of formation, jurisdiction identification
number, and each location of the chief executive office of each Grantor at any
time since January 1, 2000, (iii) each location within the United
States in which material goods constituting Collateral are or have been located
since April 17, 2003 (together with the name of each owner of the property
located at such address if not the applicable Grantor, and a summary description
of the relationship between the applicable Grantor and such Person), and (iv) each
trade name, trademark or other trade style used by any Grantor since April 17,
2003 and the purposes for which it was used. 
The Borrower shall not change, and shall not permit any other Grantor to
change, its name, jurisdiction of formation (whether by reincorporation, merger
or otherwise), the location of its chief executive office or any location
specified in clause (b)(iii) of the immediately preceding sentence, or use
or permit any other Grantor to use, any additional trade name, trademark or
other trade style, except upon giving not less than thirty (30) days’ prior
written notice to the Agent and taking or causing to be taken all such action
at Borrower’s or such other Grantor’s expense as may be reasonably requested by
the Administrative Agent to perfect or maintain the perfection of the Lien of
the Administrative Agent in Collateral.

 

70

 

ARTICLE
IV.

TAXES, YIELD PROTECTION AND ILLEGALITY

 

4.01        Taxes.

 

(a)           Payments Free of
Taxes.  Any and all payments by or on
account of any obligation of the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without reduction or withholding for
any Indemnified Taxes or Other Taxes, provided that if the Borrower
shall be required by applicable law to deduct any Indemnified Taxes (including
any Other Taxes) from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the
Administrative Agent, Lender or L/C Issuer, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall timely pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

 

(b)           Payment of Other
Taxes by the Borrower.  Without
limiting the provisions of subsection (a) above, the Borrower shall timely
pay any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.

 

(c)           Indemnification by
the Borrower.  The Borrower shall
indemnify the Administrative Agent, each Lender and the L/C Issuer, within 30
days after demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section) paid by the
Administrative Agent, such Lender or the L/C Issuer, as the case may be, and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the
amount of such payment or liability delivered to the Borrower by a Lender or
the L/C Issuer (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the L/C
Issuer, shall be conclusive absent manifest error.

 

(d)           Evidence of Payments.  As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment or other evidence of such payment reasonably satisfactory to the
Administrative Agent.

 

(e)           Status of Lenders.  Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the
jurisdiction in which the Borrower is resident for tax purposes, or any treaty
to which such jurisdiction is a party, with respect to payments hereunder or
under any other Loan Document shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation prescribed by applicable law as will
permit such payments to be made without withholding or at a reduced rate of
withholding.  In addition, any Lender, if
requested by the Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.

 

71

 

Without limiting the generality of the foregoing, in the event that the
Borrower is resident for tax purposes in the United States, any Foreign Lender
shall deliver to the Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the request of the Borrower or the Administrative Agent,
but only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:

 

(i)            duly completed copies
of Internal Revenue Service Form W-8BEN claiming eligibility for benefits
of an income tax treaty to which the United States is a party,

 

(ii)           duly completed copies
of Internal Revenue Service Form W-8ECI,

 

(iii)          in the case of a Foreign
Lender claiming the benefits of the exemption for portfolio interest under
section 881(c) of the Code, (x) a certificate to the effect that such
Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of
the Code, (B) a “10 percent shareholder” of the Borrower within the
meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled
foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly
completed copies of  Internal Revenue
Service Form W-8BEN, or

 

(iv)          any other form
prescribed by applicable law as a basis for claiming exemption from or a reduction
in United States Federal withholding tax duly completed together with such
supplementary documentation as may be prescribed by applicable law to permit
the Borrower to determine the withholding or deduction required to be made.

 

(f)            Treatment of Certain
Refunds.  If the Administrative
Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section, it shall pay to the Borrower an
amount equal to such refund (but only to the extent of indemnity payments made,
or additional amounts paid, by the Borrower under this Section with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent, such Lender or the L/C
Issuer, as the case may be, and without interest (other than any interest paid
by the relevant Governmental Authority with respect to such refund), provided
that the Borrower, upon the request of the Administrative Agent, such Lender or
the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent, such Lender or the L/C Issuer in the
event the Administrative Agent, such Lender or the L/C Issuer is required to
repay such refund to such Governmental Authority.  This subsection shall not be construed to require
the Administrative Agent, any Lender or the L/C Issuer to make available its
tax returns (or any other information relating to its taxes that it deems
confidential) to the Borrower or any other Person.

 

4.02        Illegality.  If any
Lender determines that any Law has made it unlawful, or that any Governmental
Authority has asserted that it is unlawful, for any Lender or its applicable
Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine
or charge 

 

72

 

interest rates based upon
the Eurodollar Rate, or any Governmental Authority has imposed material
restrictions on the authority of such Lender to purchase or sell, or to take
deposits of, Dollars in the London interbank market, then, on notice thereof by
such Lender to the Borrower through the Administrative Agent, any obligation of
such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate
Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the
Administrative Agent and the Borrower that the circumstances giving rise to
such determination no longer exist.  Upon
receipt of such notice, the Borrower shall, upon demand from such Lender (with
a copy to the Administrative Agent), prepay or, if applicable, convert all
Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day
of the Interest Period therefor, if such Lender may lawfully continue to
maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender
may not lawfully continue to maintain such Eurodollar Rate Loans.  Upon any such prepayment or conversion, the
Borrower shall also pay accrued interest on the amount so prepaid or converted.

 

4.03        Inability to Determine Rates. 
If the Required Lenders determine that for any reason in connection with
any request for a Eurodollar Rate Loan or a conversion to or continuation
thereof that (a) Dollar deposits are not being offered to banks in the
London interbank eurodollar market for the applicable amount and Interest
Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do
not exist for determining the Eurodollar Rate for any requested Interest Period
with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar
Rate for any requested Interest Period with respect to a proposed Eurodollar
Rate Loan does not adequately and fairly reflect the cost to such Lenders of
funding such Loan, the Administrative Agent will promptly so notify the
Borrower and each Lender.  Thereafter,
the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall
be suspended until the Administrative Agent (upon the instruction of the
Required Lenders) revokes such notice. 
Upon receipt of such notice, the Borrower may revoke any pending request
for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or,
failing that, will be deemed to have converted such request into a request for
a Borrowing of Base Rate Loans in the amount specified therein.

 

4.04        Increased Costs; Reserves on Eurodollar Rate Loans.

 

(a)           Increased Costs
Generally.  If any Change in Law
shall:

 

(i)            impose, modify or deem
applicable any reserve, special deposit, compulsory loan, insurance charge or
similar requirement against assets of, deposits with or for the account of, or
credit extended or participated in by, any Lender (except any reserve
requirement contemplated by Section 4.04(e)) or the L/C Issuer;

 

(ii)           subject any Lender or
the L/C Issuer to any tax of any kind whatsoever with respect to this
Agreement, any Letter of Credit, any Bankers’ Acceptance, any participation in
a Letter of Credit or a Bankers’ Acceptance, or any Eurodollar Rate Loan made
by it, or change the basis of taxation of payments to such Lender or the L/C
Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered
by Section 4.01 and the imposition of, or any change in the rate
of, any Excluded Tax payable by such Lender or the L/C Issuer); or

 

73

 

(iii)          impose on any Lender or
the L/C Issuer or the London interbank market any other condition, cost or
expense affecting this Agreement or Eurodollar Rate Loans made by such Lender
or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any Eurodollar Rate Loan (or of
maintaining its obligation to make any such Loan), or to increase the cost to
such Lender or the L/C Issuer of participating in, issuing or maintaining any
Letter of Credit or Bankers’ Acceptance (or of maintaining its obligation to
participate in or to issue any Letter of Credit or Bankers’ Acceptance), or to
reduce the amount of any sum received or receivable by such Lender or the L/C
Issuer hereunder (whether of principal, interest or any other amount) then,
upon request of such Lender or the L/C Issuer, the Borrower will pay to such
Lender or the L/C Issuer, as the case may be, such additional amount or amounts
as will compensate such Lender or the L/C Issuer, as the case may be, for such
additional costs incurred or reduction suffered.

 

(b)           Capital Requirements.  If any Lender or the L/C Issuer determines
that any Change in Law affecting such Lender or the L/C Issuer or any Lending
Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if
any, regarding capital requirements has or would have the effect of reducing
the rate of return on such Lender’s or the L/C Issuer’s capital or on the
capital of such Lender’s or the L/C Issuer’s holding company, if any, as a
consequence of this Agreement, the Revolving Credit Commitments of such Lender
or the Loans made by, or participations in Letters of Credit or Bankers’
Acceptances held by, such Lender, or the Letters of Credit or Bankers’
Acceptances issued by the L/C Issuer, to a level below that which such Lender
or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could
have achieved but for such Change in Law (taking into consideration such Lender’s
or the L/C Issuer’s policies and the policies of such Lender’s or the L/C
Issuer’s holding company with respect to capital adequacy), then from time to
time pursuant to subsection (c) below the Borrower will pay to such Lender
or the L/C Issuer, as the case may be, such additional amount or amounts as
will compensate such Lender or the L/C Issuer or such Lender’s or the L/C
Issuer’s holding company for any such reduction suffered.

 

(c)           Certificates for
Reimbursement.  A certificate of a
Lender or the L/C Issuer setting forth the amount or amounts necessary to
compensate such Lender or the L/C Issuer or its holding company, as the case
may be, as specified in subsection (a) or (b) of this Section and
delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay such Lender or the L/C
Issuer, as the case may be, the amount shown as due on any such certificate
within 10 Business Days after receipt thereof.

 

(d)           Delay in Requests.  Failure or delay on the part of any Lender or
the L/C Issuer to demand compensation pursuant to the foregoing provisions of
this Section shall not constitute a waiver of such Lender’s or the L/C
Issuer’s right to demand such compensation, provided that the Borrower
shall not be required to compensate a Lender or the L/C Issuer pursuant to the
foregoing provisions of this Section for any increased costs incurred or
reductions suffered more than six months prior to the date that such Lender or
the L/C Issuer, as the case may be, notifies the Borrower of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or the
L/C Issuer’s intention to claim compensation therefor (except that, if the
Change 

 

74

 

in Law giving rise to
such increased costs or reductions is retroactive, then the six-month period
referred to above shall be extended to include the period of retroactive effect
thereof).

 

(e)           Reserves on
Eurodollar Rate Loans.  The Borrower
shall pay to each Lender, as long as such Lender shall be required to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”),
additional interest on the unpaid principal amount of each Eurodollar Rate Loan
equal to the actual costs of such reserves allocated to such Loan by such
Lender (as determined by such Lender in good faith, which determination shall
be conclusive), which shall be due and payable on each date on which interest
is payable on such Loan, provided the Borrower shall have received at
least 10 days’ prior notice (with a copy to the Administrative Agent) of such
additional interest from such Lender.  If
a Lender fails to give notice 10 days prior to the relevant Interest Payment
Date, such additional interest shall be due and payable 10 days from receipt of
such notice.

 

4.05        Compensation for Losses. 
Upon demand of any Lender (with a copy to the Administrative Agent) from
time to time, the Borrower shall promptly compensate such Lender for and hold
such Lender harmless from any loss, cost or expense incurred by it as a result
of:

 

(a)           any continuation,
conversion, payment or prepayment of any Loan other than a Base Rate Loan on a
day other than the last day of the Interest Period for such Loan (whether
voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)           any failure by the
Borrower (for a reason other than the failure of such Lender to make a Loan) to
prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the
date or in the amount notified by the Borrower; or

 

(c)           any assignment of a
Eurodollar Rate Loan on a day other than the last day of the Interest Period
therefor as a result of a request by the Borrower pursuant to Section 11.13;

 

including any loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain such Loan or from fees payable
to terminate the deposits from which such funds were obtained.  The Borrower shall also pay any customary
administrative fees charged by such Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrower to the
Lenders under this Section 4.05, each Lender shall be deemed to
have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for
such Loan by a matching deposit or other borrowing in the London interbank
eurodollar market for a comparable amount and for a comparable period, whether
or not such Eurodollar Rate Loan was in fact so funded.

 

4.06        Mitigation Obligations;
Replacement of Lenders.

 

(a)           Designation of a
Different Lending Office.  If any
Lender requests compensation under Section 4.04, or the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 4.01,
or if any Lender gives a notice pursuant to Section 4.02, then such
Lender shall use reasonable efforts to designate a different Lending Office for
funding or booking its Loans hereunder or to assign its 

 

75

 

rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 4.01 or 4.04,
as the case may be, in the future, or eliminate the need for the notice
pursuant to Section 4.02, as applicable, and (ii) in each
case, would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

 

(b)           Replacement of
Lenders.  If any Lender requests
compensation under Section 4.04, or if the Borrower is required to
pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 4.01, the Borrower may
replace such Lender in accordance with Section 11.13.

 

4.07        Survival.  All of the
Borrower’s obligations under this Article IV shall survive
termination of the Aggregate Commitments and repayment of all other Obligations
hereunder.

 

ARTICLE
V.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

5.01        Conditions of Initial Credit Extension.  The obligation of the L/C Issuer and each
Lender to make its initial Credit Extension hereunder is subject to
satisfaction of the following conditions precedent:

 

(a)           The Administrative
Agent’s receipt of the following, each of which shall be originals or
facsimiles (followed promptly by originals) unless otherwise specified, each
properly executed by a Responsible Officer of the signing Loan Party, each
dated the Closing Date (or, in the case of certificates of governmental
officials, a recent date before the Closing Date) and each in form and
substance satisfactory to the Administrative Agent and its legal counsel:

 

(i)            executed counterparts
of this Agreement, each of the Security Instruments, the Subsidiary Guaranty
and the Mid-State Homes Guaranty, sufficient in number for distribution to the
Administrative Agent, each Lender and the Borrower;

 

(ii)           Revolving Loan Notes
executed by the Borrower in favor of each Revolving Lender requesting such a
Note;

 

(iii)          Term Loan Notes executed
by the Borrower in favor of each Term Loan Lender requesting such a Note;

 

(iv)          such certificates of
resolutions or other action, incumbency certificates (including specimen
signatures), and/or other certificates of Responsible Officers of each Loan
Party as the Administrative Agent may require evidencing the identity, authority
and capacity of each Responsible Officer thereof authorized to act as a
Responsible Officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party;

 

(v)           such documents and
certifications as the Administrative Agent may reasonably require to evidence
that each Loan Party is duly organized or formed, and that 

 

76

 

each of the Borrower and each Guarantor is validly
existing, in good standing and qualified to engage in business in (A) its
jurisdiction of formation and (B) in Alabama if the Borrower or such Loan
Party is formed in a jurisdiction other than Alabama but has assets or
operations in Alabama, including in each such case certified copies of each
Loan Party’s Organization Documents, shareholders’ agreements, certificates of
good standing and/or qualification to engage in business;

 

(vi)          a favorable opinion of
Simpson Thacher & Bartlett LLP, counsel to the Loan Parties, and
appropriate local counsel to the Loan Parties, each addressed to the
Administrative Agent and each Lender, as to the matters set forth in Exhibit G
and such other matters concerning the Loan Parties and the Loan Documents as
the Required Lenders may reasonably request;

 

(vii)         a certificate of a
Responsible Officer of the Borrower either (A) identifying all consents,
licenses and approvals required in connection with the execution, delivery and
performance by each Loan Party and the validity against each such Loan Party of
the Loan Documents to which it is a party, and stating that such consents,
licenses and approvals shall be in full force and effect, and attaching true
and correct copies thereof or (B) stating that no such consents, licenses
or approvals are so required;

 

(viii)        a certificate signed by a
Responsible Officer of the Borrower certifying:

 

(A)          that the conditions
specified in Sections 5.02(a) and (b) have been
satisfied,

 

(B)           as to the matters
described in Section 5.01(d);

 

(C)           that none of the Merger
Documents (including any condition to consummation of the Merger) has been
altered, amended, waived or otherwise changed or supplemented since their
execution on June 17, 2005, in any respect materially adverse to the
Lenders, except to the extent agreed to by prior written consent of the
Arrangers, which consent shall not be unreasonably withheld;

 

(D)          that the Merger has been
consummated prior to, or is being consummated substantially simultaneously
with, the Closing Date, in accordance with the terms of the Merger Documents
(only as amended, altered, waived or otherwise changed in compliance with
subpart (D) above);

 

(E)           that there has been no
material adverse change in the facts and information regarding the Loan Parties
as represented to date;

 

(ix)           evidence satisfactory
to the Arrangers of the consummation, prior to or substantially simultaneously
with the occurrence of the Closing Date, of each of the following, in each case
in compliance with all applicable laws and regulations, with the receipt of all
necessary material governmental, shareholder and third party consents
(including Hart-Scott-Rodino clearance) and approvals:  (A) the creation of New Holdco and the
transfer of the Equity Interests of US Pipe and of JW MergerCo thereto, such
that after giving effect thereto (but prior to giving effect to the Merger and
to the US Pipe 

 

77

 

Contribution) New Holdco is a direct subsidiary of the
Borrower and JW MergerCo, Inc. and US Pipe are direct Subsidiaries of New
Holdco, (B) the Entity Conversions, including the filing of any
certificates of conversion required or requested by the Administrative Agent, (C) the
US Pipe Contribution in accordance with the terms of, and such that after
giving effect thereto US Pipe is a “Restricted Subsidiary” under, the
Indentures for both the Mueller Water Products Notes and the Mueller Group
Notes, and otherwise on terms and conditions reasonably satisfactory to the
Arrangers, (D) the receipt by New Holdco of not less than $400,000,000 of
net proceeds from the Dividend Distribution and of not less than $20,000,000 of
net proceeds from the Subordinated New Holdco Note, and the application of all
such proceeds as consideration for the Merger, (E) the refinancing (in an
amount sufficient, inter alia, to support the tender, defeasance or
satisfaction and discharge of the Mueller Group Second Lien Notes), termination
and payment in full of all obligations outstanding under the Existing Mueller
Credit Agreement with the Replacement Mueller Facilities, and (F) the Put
Backstop Commitment Letter Amendment;

 

(x)            a certificate signed
by the Chief Financial Officer of the Borrower certifying that after giving
effect to the entering into of the Loan Documents, the termination of the
Existing Credit Agreement, and the consummation of all of the Transactions, the
Borrower and its Subsidiaries, measured on a consolidated basis, are Solvent;

 

(xi)           evidence satisfactory
to the Arrangers that the Existing Credit Agreement has been or concurrently
with the Closing Date is being terminated and all Liens securing obligations
under the Existing Credit Agreement have been or concurrently with the Closing
Date are being released;

 

(xii)          evidence that all
insurance required to be maintained pursuant to the Loan Documents has been obtained
and is in effect;

 

(xiii)         an initial Revolving Loan
Notice, if any;

 

(xiv)        an initial Term Loan
Interest Rate Selection Notice, if any;

 

(xv)         delivery of Uniform
Commercial Code financing statements suitable in form and substance for filing
in all places required by applicable law to perfect the Liens of the
Administrative Agent under the Security Instruments as a first priority Lien as
to items of Collateral in which a security interest may be perfected by the
filing of financing statements, and such other documents and/or evidence of
other actions as may be reasonably necessary under applicable law to perfect
the Liens of the Administrative Agent under such Security Instruments as a
first priority Lien in and to such other Collateral as the Administrative Agent
may require, including without limitation the delivery by the Borrower of all
certificates evidencing Pledged Interests, accompanied in each case by duly
executed stock powers (or other appropriate transfer documents) in blank
affixed thereto;

 

78

 

(xvi)        Mineral Rights Mortgages
and such Mortgaged Coal Property Support Documents as the Administrative Agent
may request with respect to each lease or other grant of mineral rights as to
which the Borrower or a Guarantor is a lessee or grantee, with such exceptions
as are agreed by the Arrangers;

 

(xvii)       with respect to those
parcels of real property set forth on Schedule 3.01, a Mortgage and such
Mortgaged Property Support Documents as the Administrative Agent may request;

 

(xviii)      Uniform Commercial Code
search results showing only those Liens as are acceptable to the Lenders;

 

(xix)         such other assurances,
certificates, documents, consents or opinions as the Administrative Agent, the
L/C Issuer, the Swing Line Lender or the Required Lenders may reasonably
require.

 

(b)           Any fees required to be
paid on or before the Closing Date shall have been paid.

 

(c)           Unless waived by the
Administrative Agent, the Borrower shall have paid all reasonable fees, charges
and disbursements of counsel to the Administrative Agent to the extent invoiced
prior to or on the Closing Date, plus such additional amounts of such
reasonable fees, charges and disbursements as shall constitute its reasonable
estimate of such reasonable fees, charges and disbursements incurred or to be
incurred by it through the closing proceedings (provided that such estimate
shall not thereafter preclude a final settling of accounts between the Borrower
and the Administrative Agent).

 

(d)           The Administrative
Agent shall be satisfied that after giving effect to the initial Credit
Extension hereunder, the remaining amount available to be drawn under the
Revolving Credit Facility shall not be less than $112,500,000.

 

Without limiting the generality of the provisions of Section 10.04,
for purposes of determining compliance with the conditions specified in this Section 5.01,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.

 

5.02        Conditions to all Credit Extensions.  The obligation of each Lender to honor any
Request for Credit Extension (other than a Revolving Loan Notice or Term Loan
Interest Rate Selection Notice requesting only a conversion of Revolving Loans
or Segments, as applicable, to the other Type or a continuation of Eurodollar
Rate Loans or Eurodollar Rate Segments, as applicable) is subject to the
following conditions precedent:

 

(a)           The representations and
warranties of the Borrower and each other Loan Party contained in Article VI
or any other Loan Document, or which are contained in any document furnished at
any time under or in connection herewith or therewith, shall be true and
correct on and as of the date of such Credit Extension, except to the extent that
such representations and warranties specifically refer to an earlier date, in
which case they shall be true and correct as of 

 

79

 

such earlier date, and
except that for purposes of this Section 5.02, the representations
and warranties contained in subsections (a) and (b) of Section 6.05
shall be deemed to refer to the most recent statements furnished pursuant to
clauses (a) and (b), respectively, of Section 7.01.

 

(b)           No Default or Event of
Default shall have occurred and be continuing, or would result from such
proposed Credit Extension or from the application of the proceeds thereof.

 

(c)           The Administrative
Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have
received a Request for Credit Extension in accordance with the requirements
hereof.

 

(d)           No limitation exists on
any Borrowing or Credit Extension contained in Article II.

 

Each Request for Credit Extension (other than a Revolving Loan Notice
or Term Loan Interest Rate Selection Notice requesting only a conversion of
Revolving Loans or Segments, as applicable, to the other Type or a continuation
of Eurodollar Rate Loans or Eurodollar Rate Segments, as applicable) submitted
by the Borrower shall be deemed to be a representation and warranty that the
conditions specified in Sections 5.02(a) and (b) have
been satisfied on and as of the date of the applicable Credit Extension.

 

ARTICLE
VI.

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the Administrative Agent and
the Lenders that:

 

6.01        Existence, Qualification and Power; Compliance with Laws.  Each Loan Party (a) is a corporation,
partnership or limited liability company duly organized or formed, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation, organization or formation, (b) has all requisite power and
authority and all requisite governmental licenses, authorizations, consents and
approvals to (i) own or lease its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Loan Documents to which it is a
party and to consummate the Transactions, (c) is duly qualified and is
licensed and in good standing under the Laws of each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification or license, and (d) is in compliance with all
Laws; except in each case referred to in clause (b)(i), (c) or (d), to the
extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect.

 

6.02        Authorization; No Contravention.  The execution, delivery and performance by
each Loan Party of each Loan Document to which such Person is party, and the
consummation of the Transactions, have been duly authorized by all necessary
corporate or other organizational action, and do not and will not (a) contravene
the terms of the Organization Documents of any such Person or of any Person
whose Equity Interests are being pledged; (b) conflict with or result in
any breach or contravention of, or the creation of any Lien under (i) any
Contractual Obligation to which such Person or any Person whose Equity
Interests are being pledged is a party or (ii) any order, injunction, writ
or decree of any Governmental Authority or any arbitral award to which such
Person or its property is subject; or (c) violate any Law.

 

80

 

6.03        Governmental Authorization; Other Consents.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Loan Document or the
consummation of the Transactions.

 

6.04        Binding Effect.  This
Agreement has been, and each other Loan Document, when delivered hereunder, will
have been, duly executed and delivered by each Loan Party that is party
thereto.  This Agreement constitutes, and
each other Loan Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable against each Loan Party that
is party thereto in accordance with its terms.

 

6.05        Financial Statements; No
Material Adverse Effect.

 

(a)           The Audited Financial
Statements and the related consolidating balance sheets and financial
statements of the Borrower and its Subsidiaries (i) were prepared in
accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein; (ii) fairly present
the financial condition of the Borrower and its Subsidiaries (or, with respect
to the consolidating financial statements, of the Borrower or the applicable
Subsidiary) as of the date thereof and its or their results of operations for
the period covered thereby in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein; and (iii) show all material indebtedness and other liabilities,
direct or contingent, of the Borrower and its Subsidiaries (or, with respect to
the consolidating financial statements, of the Borrower or the applicable
Subsidiary) as of the date thereof, including liabilities for taxes, material
commitments and Indebtedness.

 

(b)           The unaudited
consolidated balance sheet of the Borrower and its Subsidiaries dated as of June 30,
2005, the related consolidated statements of income or operations, shareholders’
equity and cash flows for the fiscal quarter ended on that date, and the
related consolidating balance sheets and financial statements of the Borrower
and its Subsidiaries (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein, and (ii) fairly present the financial condition
of the Borrower and its Subsidiaries (or, with respect to the consolidating
financial statements, of the Borrower or the applicable Subsidiary) as of the
date thereof and its or their results of operations for the period covered
thereby, subject, in the case of clauses (i) and (ii), to the absence of
footnotes and to normal year-end audit adjustments.

 

(c)           Since the date of the
most recent audited financial statements delivered pursuant to Section 7.01(a),
there has been no event or circumstance, either individually or in the
aggregate, that has had or could reasonably be expected to have a Material
Adverse Effect.

 

(d)           The
Borrower and its Non-Mueller  Subsidiaries,
on a consolidated basis, have no material indebtedness or other liabilities,
direct or contingent, including liabilities for taxes, material commitments and
Indebtedness, except to the extent (i) set forth in the financial
statements most recently delivered pursuant to Section 7.01(a) or
(b), (ii) set forth on Schedule 8.03, or (iii) incurred
since the date referred to in subsection (i) hereof in accordance
with the terms of this Agreement and the other Loan Documents.

 

81

 

6.06        Litigation.  Except as
specifically disclosed in Schedule 6.06, there are no actions, suits,
proceedings, claims or disputes pending or, to the knowledge of the Borrower
after due investigation, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, by or against the Borrower or
any of its Non-Mueller  Subsidiaries
or against any of their properties or revenues that (a) purport to affect
or pertain to this Agreement or any other Loan Document, or any of the
transactions contemplated hereby, or (b) either individually or in the
aggregate, if determined adversely, could reasonably be expected to have a
Material Adverse Effect.

 

6.07        No Default.  Neither the
Borrower nor any Non-Mueller Subsidiary is in default under or with respect to
any Contractual Obligation that could, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or
would result from the consummation of the transactions contemplated by this
Agreement or any other Loan Document.

 

6.08        Ownership of Property; Liens. 
Each of the Borrower and each Non-Mueller Subsidiary has good record and
marketable title in fee simple to, or valid leasehold interests in, all real
property (including mineral rights and interests) necessary or used in the
ordinary conduct of its business, except for such defects in title as could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.  The property of
the Borrower and its Non-Mueller  Subsidiaries
is subject to no Liens, other than Liens permitted by Section 8.01.

 

6.09        Environmental Compliance. 
The Borrower and its Restricted Subsidiaries conduct in the ordinary
course of business a review of the effect of existing Environmental Laws and
claims alleging potential liability or responsibility for violation of any
Environmental Law on their respective businesses, operations and properties,
and as a result thereof the Borrower has reasonably concluded that, except as
specifically disclosed in Schedule 6.09, such Environmental Laws and
claims could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

 

6.10        Insurance.  The
properties of the Borrower and its Non-Mueller
Subsidiaries are insured with financially sound and reputable
insurance companies in such amounts, with such deductibles and covering such
risks as are customarily carried by companies engaged in similar businesses and
owning similar properties in localities where the Borrower or the applicable
Non-Mueller  Subsidiary operates,
none of which insurance shall be provided by any Subsidiary or any other Affiliate
of the Borrower.

 

6.11        Taxes.  The Borrower and
its Non-Mueller  Subsidiaries have
filed all Federal, state and other material tax returns and reports required to
be filed (including any such requirement arising under any Tax Sharing
Agreement), and have paid all Federal, state and other material taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets (or on New Holdco and its Subsidiaries or
their properties, income or assets to the extent required to be paid by the
Borrower or any Non-Mueller Subsidiary pursuant to any Tax Sharing Agreement)
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings diligently conducted and for which adequate reserves
have been provided in accordance with GAAP. 
Except as 

 

82

 

specifically described on
Schedule 6.11 hereto, there is no proposed tax assessment against the
Borrower or any Non-Mueller  Subsidiary
that would, if made, have a Material Adverse Effect.  Neither any Loan Party nor any Non-Mueller  Subsidiary thereof is party to any tax
sharing agreement other than any Tax Sharing Agreement.

 

6.12        ERISA Compliance.

 

(a)           Each Plan is in
compliance in all material respects with the applicable provisions of ERISA,
the Code and other Federal or state Laws. 
Each Plan that is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the IRS or an
application for such a letter is currently being processed by the IRS with
respect thereto or an application for such a letter will be filed within twelve
months of the first Plan year for a newly adopted Plan and, to the best
knowledge of the Borrower, nothing has occurred which would reasonably be
expected to prevent, or cause the loss of, such qualification.  The Borrower and each ERISA Affiliate have
made all required contributions to each Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.

 

(b)           There are no pending
or, to the best knowledge of the Borrower, threatened claims, actions or
lawsuits, or action by any Governmental Authority, with respect to any Plan
that could reasonably be expected to have a Material Adverse Effect.  Neither the Borrower nor any ERISA Affiliate
has engaged in a non-exempt prohibited transaction or violation of the
fiduciary responsibility rules described in section 4975 of the Code or Part 4
of Title I of ERISA with respect to any Plan that has resulted or could
reasonably be expected to result in a Material Adverse Effect.

 

(c)           (i) No ERISA Event
has occurred for which any liability remains unsatisfied or is reasonably
expected to occur; (ii) except to the extent it could reasonably be
expected to have  a Material Adverse
Effect, no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any material liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums or contributions due and not delinquent under
Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any material liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would reasonably be expected to result in such liability) under
Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) to
the knowledge of the Borrower, neither the Borrower nor any ERISA Affiliate has
engaged in a transaction that could be subject to Sections 4069 or 4212(c) of
ERISA.

 

6.13        Subsidiaries; Equity Interests.  The
Borrower (a) has no Subsidiaries other than those specifically disclosed
in Schedule 6.13(a) or created or acquired in compliance with Section 7.12,
(b) has no equity investments in any other corporation or entity other
than those specifically disclosed Schedule 6.13(b) or made after
the Closing Date in compliance with this Agreement and the other Loan
Documents.

 

83

 

6.14        Margin Regulations;
Investment Company Act.

 

(a)           The Borrower is not
engaged and will not engage, principally or as one of its important activities,
in the business of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the FRB), or extending credit for the purpose of
purchasing or carrying margin stock.

 

(b)           None of the Borrower,
any Person Controlling the Borrower, or any Subsidiary is or is required to be
registered as an “investment company” under the Investment Company Act of 1940.

 

6.15        Disclosure.  The
Borrower has disclosed to the Administrative Agent and the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Non-Mueller  Subsidiaries is
subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect.  No report, financial statement,
certificate or other information furnished (whether in writing or orally) by or
on behalf of any Loan Party to the Administrative Agent or any Lender in
connection with the transactions contemplated hereby and the negotiation of
this Agreement or delivered hereunder or under any other Loan Document (in each
case, as modified or supplemented by other information so furnished) contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided that, with respect to projected
financial information, the Borrower represents only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.

 

6.16        Compliance with Laws. 
Each of the Borrower and each Non-Mueller Subsidiary is in compliance in
all material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its properties, except in such
instances in which (a) such requirement of Law or order, writ, injunction
or decree is being contested in good faith by appropriate proceedings
diligently conducted or (b) the failure to comply therewith, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

 

6.17        Intellectual Property; Licenses, Etc.  The Borrower and its Non-Mueller Subsidiaries
own, or possess the right to use, all of the trademarks, service marks, trade
names, copyrights, patents, patent rights, franchises, licenses and other
intellectual property rights (collectively, “IP Rights”) that are reasonably
necessary for the operation of their respective businesses, without known
conflict with the IP Rights of any other Person, except to the extent any
failure so to own or possess the right to use could not reasonably be expected
to have a Material Adverse Effect.  To
the knowledge of the Borrower, the operation by the Borrower and its
Non-Mueller Subsidiaries of their respective businesses does not infringe upon
any IP Rights held by any other Person.

 

ARTICLE
VII.

AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Revolving Credit Commitment
hereunder, any Loan or other Obligation hereunder shall remain unpaid or
unsatisfied, or any Letter of Credit or Bankers’ Acceptance shall remain
outstanding, the Borrower shall, and shall (except in the case 

 

84

 

of the covenants set
forth in Sections 7.01, 7.02, 7.03 and 7.11) cause
each Non-Mueller Subsidiary to:

 

7.01        Financial Statements.  Deliver
to the Administrative Agent and each Lender:

 

(a)           as soon as available,
but in any event within 90 days after the end of each fiscal year of the
Borrower (or if earlier, 15 days after the date required to be filed with the
SEC (without giving effect to any extension permitted by the SEC)), a
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such fiscal year, and the related consolidated
and consolidating statements of income or operations, consolidated shareholders’
equity and cash flows for such fiscal year, setting forth (except with respect
to the consolidating balance sheet and related consolidating statements) in
each case in comparative form the figures for the previous fiscal year, all in
reasonable detail and prepared in accordance with GAAP, and (except with
respect to the consolidating balance sheet and related consolidating statements)
audited and accompanied by (i) a report and opinion of a Registered Public
Accounting Firm of nationally recognized standing reasonably acceptable to the
Administrative Agent (the “Auditor”),
which report and opinion shall be prepared in accordance with audit standards
of the Public Company Accounting Oversight Board and applicable Securities Laws
and shall not be subject to any “going concern” or like qualification or
exception or any qualification or exception as to the scope of such audit or
with respect to the absence of material misstatement and (ii) so long as
required by applicable Securities Laws, the report(s) of management on the
Borrower’s internal control over financial reporting pursuant to Items 308(a) and
308(c) of Regulation S-K promulgated under the Exchange Act, the Auditor’s
attestation report on management’s assessment of the Borrower’s internal
control over financial reporting as filed with the SEC on Form 10-K for
the Borrower, and an independent assessment by the Auditor as to the
effectiveness of the Borrower’s internal control over financial reporting as
required by Auditing Standard No. 2 of the Public Company Accounting
Oversight Board, and such consolidating statements to be certified by a
Responsible Officer of the Borrower to the effect that such statements are
fairly stated in all material respects when considered in relation to the
consolidated financial statements of the Borrower and its Subsidiaries;

 

(b)           as soon as available,
but in any event within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower (or if earlier, five Business Days
after the date required to be filed with the SEC (without giving effect to any
extension permitted by the SEC)), a consolidated and consolidating balance
sheet of the Borrower and its Subsidiaries as at the end of such fiscal
quarter, and the related consolidated and consolidating statements of income or
operations, consolidated shareholders’ equity and cash flows for such fiscal
quarter and for the portion of the Borrower’s fiscal year then ended, setting
forth (except with respect to the consolidating balance sheet and related
consolidating statements) in each case in comparative form the figures for the
corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year, all in reasonable detail and certified by
a Responsible Officer of the Borrower as fairly presenting the financial
condition, results of operations, consolidated shareholders’ equity and cash
flows of the Borrower and its Subsidiaries in accordance with GAAP, subject
only to normal year-end audit adjustments and the absence of footnotes;

 

85

 

As to any information contained in materials furnished pursuant to Section 7.02(e),
the Borrower shall not be separately required to furnish such information under
clause (a) or (b) above, but the foregoing shall not be in derogation
of the obligation of the Borrower to furnish the information and materials
described in subsections (a) and (b) above at the times
specified therein.

 

7.02        Certificates; Other Information.  Deliver to the Administrative Agent and each
Lender, in form and detail satisfactory to the Administrative Agent and the
Required Lenders:

 

(a)           concurrently with the
delivery of the financial statements referred to in Section 7.01(a),
a certificate of its independent certified public accountants certifying such
financial statements and stating that in making the examination necessary
therefor no knowledge was obtained of any Default or, if any such Default shall
exist, stating the nature and status of such event;

 

(b)           concurrently with the
delivery of the financial statements referred to in Sections 7.01(a) and
(b), a duly completed Compliance Certificate signed by a Responsible
Officer of the Borrower;

 

(c)           promptly after any
request by the Administrative Agent, copies of any detailed audit reports,
management letters or recommendations submitted to the board of directors (or
the audit committee of the board of directors) of the Borrower by independent
accountants in connection with the accounts or books of the Borrower or any
Subsidiary, or any audit of any of them;

 

(d)           promptly
after any request by the Administrative Agent, documents and other information
supporting the calculation of any defined term used in the computation in any
Compliance Certificate of the financial covenants set forth in Section 8.12;

 

(e)           promptly
after the same are available, copies of each annual report, proxy or financial
statement sent to the stockholders of the Borrower, and copies of all annual,
regular, periodic and special reports and registration statements which the
Borrower may file or be required to file with the SEC under Section 13 or
15(d) of the Exchange Act, and not otherwise required to be delivered to
the Administrative Agent pursuant hereto;

 

(f)            as soon as available
and in any event no later than 75 days after the beginning of each fiscal year
of the Borrower, a consolidated business plan for the Borrower and its
Non-Mueller  Subsidiaries prepared
by management of the Borrower, substantially similar in form and detail to the
business plans prepared prior to the Closing Date and furnished under the
Existing Credit Agreement, but taking into account the US Pipe Contribution,  to the Administrative Agent and including
balance sheets, and related statements of operations, retained earnings and
cash flow (to include separate forecasts for Consolidated Capital Expenditures
and Consolidated EBITDA), on a quarterly basis for such fiscal year, and a
reasonably detailed explanation of any underlying assumptions with respect
thereto; and

 

(g)           promptly, such
additional information regarding the business, financial or corporate affairs
of the Borrower or any Non-Mueller Subsidiary, or compliance with the terms 

 

86

 

of the Loan Documents, as
the Administrative Agent or any Lender may from time to time reasonably
request.

 

Documents required to be delivered pursuant to Section 7.01(a) or
(b) or Section 7.02(e) (to the extent any such
documents are included in materials otherwise filed with the SEC) may be
delivered electronically and if so delivered, shall be deemed to have been
delivered on the date (i) on which the Borrower posts such documents, or
provides a link thereto on the Borrower’s website on the Internet at the
website address listed on Schedule 11.02; or (ii) on which such
documents are posted on the Borrower’s behalf on an Internet or intranet
website, if any, to which each Lender and the Administrative Agent have access
(whether a commercial, third-party website or whether sponsored by the
Administrative Agent); provided that: (i) the Borrower shall
deliver paper copies of such documents to the Administrative Agent or any
Lender that requests the Borrower to deliver such paper copies until a written
request to cease delivering paper copies is given by the Administrative Agent
or such Lender and (ii) the Borrower shall notify (which may be by
facsimile or electronic mail) the Administrative Agent and each Lender of the
posting of any such documents and provide to the Administrative Agent by
electronic mail electronic versions (i.e., soft copies) of such
documents.  Notwithstanding anything
contained herein, in every instance the Borrower shall be required to provide
paper copies of the Compliance Certificates required by Section 7.02(b) to
the Administrative Agent.  Except for
such Compliance Certificates, the Administrative Agent shall have no obligation
to request the delivery or to maintain copies of the documents referred to
above, and in any event shall have no responsibility to monitor compliance by
the Borrower with any such request for delivery, and each Lender shall be
solely responsible for requesting delivery to it or maintaining its copies of
such documents.

 

The Borrower hereby acknowledges that (a) the Administrative Agent
and/or the Arrangers will make available to the Lenders and the L/C Issuer
materials and/or information provided by or on behalf of the Borrower hereunder
(collectively, “Borrower
Materials”) by posting the Borrower Materials on IntraLinks or
another similar electronic system (the “Platform”) and (b) certain of the
Lenders may be “public-side” Lenders (i.e.,
Lenders that do not wish to receive material non-public information with
respect to the Borrower or its securities) (each, a “Public Lender”).  The Borrower hereby agrees that, so long as
the Borrower is the issuer of any outstanding debt or equity securities that
are registered or issued pursuant to a private offering or is actively
contemplating issuing any such securities, (w) all Borrower Materials that
are to be made available to Public Lenders shall be clearly and conspicuously
marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall
appear prominently on the first page thereof; (x) by marking Borrower
Materials “PUBLIC”, the Borrower shall be deemed to have authorized the
Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to treat such
Borrower Materials as not containing any material non-public information with
respect to the Borrower or its securities for purposes of United States Federal
and state securities laws (provided, however, that to the extent
such Borrower Materials constitute Information, they shall be treated as set
forth in Section 11.07); (y) all Borrower Materials marked “PUBLIC”
are permitted to be made available through a portion of the Platform designated
“Public Investor”; and (z) the Administrative Agent and the Arrangers
shall be entitled to treat any Borrower Materials that are not marked “PUBLIC”
as being suitable only for posting on a portion of the Platform not designated “Public
Investor”.  Notwithstanding the 

 

87

 

foregoing, the Borrower
shall be under no obligation to mark any Borrower Materials “PUBLIC.”

 

7.03        Notices.  Promptly
notify the Administrative Agent and each Lender:

 

(a)           of the occurrence of
any Default;

 

(b)           of any matter that has
resulted or could reasonably be expected to result in a Material Adverse
Effect, including (i) breach or non-performance of, or any default under,
a Contractual Obligation of the Borrower or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between the
Borrower or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting the Borrower or any Subsidiary, including pursuant to any applicable
Environmental Laws;

 

(c)           of the occurrence of
any ERISA Event;

 

(d)           of any material change
in accounting policies or financial reporting practices by the Borrower or any
Non-Mueller Subsidiary; and

 

(e)           of any default under,
termination or suspension of, or election not to renew the Mortgage Warehouse
Facility (but excluding any termination of the Mortgage Warehouse Facility in
conjunction with the refinancing or voluntary repayment thereof as contemplated
by Section 7.11).

 

Each notice pursuant to this Section 7.03 shall be
accompanied by a statement of a Responsible Officer of the Borrower setting
forth details of the occurrence referred to therein and stating what action the
Borrower has taken and proposes to take with respect thereto.  Each notice pursuant to Section 7.03(a) shall
describe with particularity any and all provisions of this Agreement and any
other Loan Document that have been breached.

 

7.04        Payment of Obligations. 
Pay and discharge as the same shall become due and payable, all its
obligations and liabilities, including (a) all tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets (or on New Holdco and its Subsidiaries and their properties or assets to
the extent required to be paid by the Borrower or any Non-Mueller Subsidiary
pursuant to any Tax Sharing Agreement), unless the same are being contested in
good faith by appropriate proceedings diligently conducted and adequate
reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien upon
its property, except to the extent that any such Lien would otherwise be
permitted by Section 8.01; and (c) all Indebtedness having an
aggregate principal amount (including undrawn committed or available amounts
and including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $5,000,000, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.

 

7.05        Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full
force and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization or formation except in a transaction permitted
by Section 8.04 or 8.05; (b) take all 

 

88

 

reasonable action to
maintain all rights, privileges, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.

 

7.06        Maintenance of Properties.

 

(a)           Maintain, preserve and
protect all of its properties and equipment necessary in the operation of its
business in good working order and condition, ordinary wear and tear excepted,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.

 

(b)           Make all necessary
repairs thereto and renewals and replacements thereof except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect.

 

(c)           Use the standard of
care typical in the industry in the operation and maintenance of its
facilities.

 

(d)           Keep in full force and
effect all of its leases and other contract rights, and all rights of way,
easements and privileges necessary or appropriate for the proper operation of
the Mines being operated by the Borrower or a Non-Mueller Subsidiary except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.

 

(e)           Obtain and comply with
each permit, license, authorization and other governmental approval necessary
to recover Coal from any Mine being operated by the Borrower or a Non-Mueller
Subsidiary and observe the requirements thereof in all material respects,
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect.

 

(f)            Cause each Mine being
operated by the Borrower or a Non-Mueller Subsidiary to be operated,
maintained, developed and mined and cause the associated processing plants and
other fixed and operating assets to be operated and maintained, in a
workmanlike manner, as would a prudent coal mine operator, and in accordance
with generally accepted mining practices and all applicable requirements of
Law, including but not limited to applicable Environmental Laws, except where
the failure to do so could not reasonably be expected to have a Material
Adverse Effect.

 

7.07        Maintenance of Insurance. 
In the event compliance with the insurance requirements set forth in the
Security Instruments does not satisfy the following requirements, and not in
limitation of such insurance requirements in the Security Instruments,
maintain, with financially sound and reputable insurance companies, insurance
with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons  and
providing for not less than 15 days’ prior notice to the Administrative Agent
of termination, lapse or cancellation of such insurance, none of which
insurance (other than worker’s compensation insurance, disability insurance and
other similar types of insurance that do not constitute the insurance of its
properties or of interruptions 

 

89

 

to its business
operations) shall be provided by any Subsidiary or any other Affiliate of the
Borrower.

 

7.08        Compliance with Laws. 
Comply in all material respects with the requirements of all Laws
(including without limitation all applicable Environmental Laws) and all
orders, writs, injunctions and decrees applicable to it or to its business or
property, except in such instances in which (a) such requirement of Law or
order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted; or (b) the failure to comply
therewith could not reasonably be expected to have a Material Adverse Effect.

 

7.09        Books and Records.  (a) 
Maintain proper books of record and account, in which full, true and correct
entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the
Borrower or such Non-Mueller Subsidiary, as the case may be; and (b) maintain
such books of record and account in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
the Borrower or such Non-Mueller Subsidiary, as the case may be.

 

7.10        Inspection Rights. 
Permit representatives and independent contractors of the Administrative
Agent and each Lender to visit and inspect any of its properties, to examine
its corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss its affairs, finances and accounts with its
officers, and independent public accountants, all at such reasonable times
during normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Borrower; provided, however,
that when an Event of Default exists the Administrative Agent or any Lender (or
any of their respective representatives or independent contractors) may do any
of the foregoing at the expense of the Borrower at any time during normal
business hours and without advance notice.

 

7.11        Use of Proceeds.  Use
the proceeds of the Credit Extensions (i) to refinance existing
indebtedness, including all indebtedness outstanding under the Existing Credit
Agreement and indebtedness outstanding under the Mortgage Warehouse Facility
and the payment of all fees and expenses in connection therewith, (ii) to
pay a portion of the cost of acquiring Mueller Water Products and its
Subsidiaries in connection with the Merger, (iii) pay fees and expenses in
connection with the Transactions, and (iv) for working capital, capital
expenditures, and other general corporate purposes not in contravention of any
Law or of any Loan Document.

 

7.12        New Subsidiaries, Pledgors
and Real Property.

 

(a)           As soon as practicable
but in any event within 30 Business Days following the acquisition or creation
of any Subsidiary that is a Restricted Subsidiary, or the time any existing
Subsidiary becomes a Material Subsidiary (other than, in each case, a QHT
Interim Entity), cause to be delivered to the Administrative Agent each of the
following:

 

(i)            if such Subsidiary is
both a Domestic Subsidiary and a Material Subsidiary, a Guaranty Joinder
Agreement duly executed by such Material Subsidiary;

 

(ii)           if such Subsidiary is
both a Domestic Subsidiary and a Material Subsidiary, (A) a Security
Joinder Agreement duly executed by such Material Subsidiary 

 

90

 

(with all schedules thereto appropriately completed)
and (B) if such Material Subsidiary owns a fee interest in any real
property having a fair market value in excess of $10,000,000, or has a fee,
leasehold or grantee interest in any mineral rights relating or adjacent to the
Coal or natural gas operations of any Coal Mining Entity or otherwise acquired
for the commercial value of such mineral rights, those documents required by Section 3.02(b) and/or
(c), as applicable;

 

(iii)          if such Subsidiary is
both a Material Subsidiary and either a Domestic Subsidiary or a Direct Foreign
Subsidiary, and if any of the Subsidiary Securities issued by such Material
Subsidiary are owned by a Material Subsidiary who has not then executed and
delivered to the Administrative Agent the Pledge Agreement or a Pledge Joinder
Agreement granting a Lien to the Administrative Agent, for the benefit of the
Secured Parties, in such Pledged Interests, a Pledge Joinder Agreement (with
all schedules thereto appropriately completed) duly executed by the Material
Subsidiary that directly owns such Pledged Interests;

 

(iv)          if such Subsidiary is
both a Material Subsidiary and either a Domestic Subsidiary or a Direct Foreign
Subsidiary, and if any of the Subsidiary Securities issued by such Material
Subsidiary are owned by the Borrower or a Material Subsidiary who has
previously executed a Pledge Agreement or a Pledge Joinder Agreement, a Pledge
Agreement Supplement by the Borrower (if applicable) and each Material
Subsidiary that owns any of such Pledged Interests with respect to such Pledged
Interests in the form required by the Pledge Agreement;

 

(v)           if such Subsidiary is a
Material Subsidiary and owns any Domestic Subsidiary or Direct Foreign
Subsidiary that is also a Material Subsidiary, a Pledge Joinder Agreement (with
all schedules thereto appropriately completed) duly executed by such Material
Subsidiary;

 

(vi)          if the Pledged Interests
issued or owned by such Subsidiary constitute securities under Article 8
of the Uniform Commercial Code (A) the certificates representing 100% of
such Pledged Interests and (B) duly executed, undated stock powers or
other appropriate powers of assignment in blank affixed thereto;

 

(vii)         with respect to any
Person that has executed a Pledge Joinder Agreement, a Pledge Agreement Supplement,
or a Security Joinder Agreement, Uniform Commercial Code financing statements
naming such Person as “Debtor” and naming the Administrative Agent for the
benefit of the Secured Parties as “Secured Party,” in form, substance and
number sufficient in the reasonable opinion of the Administrative Agent and its
special counsel to be filed in all Uniform Commercial Code filing offices and
in all jurisdictions in which filing is necessary to perfect in favor of the
Administrative Agent for the benefit of the Secured Parties the Lien on the
Collateral conferred under such Security Instrument to the extent such Lien may
be perfected by Uniform Commercial Code filing;

 

(viii)        upon the reasonable
request of the Administrative Agent, an opinion of counsel to each Subsidiary
executing any Joinder Agreement or Pledge Supplement, and 

 

91

 

the Borrower if it executes a Pledge Agreement
Supplement, pursuant to this Section 7.12, dated as of the date of
delivery of such applicable Joinder Agreements (and other Loan Documents)
provided for in this Section 7.12 and addressed to the
Administrative Agent and the Lenders, in form and substance reasonably
acceptable to the Administrative Agent, each of which opinions may be in form
and substance, including assumptions and qualifications contained therein,
substantially similar to those opinions of counsel delivered pursuant to Section 5.01(a);
and

 

(ix)           with respect to each
Subsidiary executing any Joinder Agreement or Pledge Supplement, and the
Borrower if it executes a Pledge Agreement Supplement, pursuant to this Section 7.12,
current copies of the Organization Documents of each such Person, minutes of
duly called and conducted meetings (or duly effected consent actions) of the
Board of Directors, partners, or appropriate committees thereof (and, if
required by such Organization Documents or applicable law, of the shareholders,
members or partners) of such Person authorizing the actions and the execution
and delivery of documents described in this Section 7.12, all
certified by the applicable Governmental Authority or appropriate officer as
the Administrative Agent may elect;

 

provided
that in the event the Borrower or any Domestic Subsidiary forms a joint venture
permitted hereunder and otherwise satisfactory to the Administrative Agent that
is a Domestic Subsidiary and a Restricted Subsidiary but whose Organization
Documents prohibit such Subsidiary from Guaranteeing Indebtedness of the
Borrower, such Subsidiary shall not be required to become a Loan Party, but
unless otherwise agreed to by the Administrative Agent the Equity Interests of
such Person owned by the Borrower or any Loan Party shall be pledged to the
Administrative Agent for the benefit of the Secured Parties in accordance with
the provisions of this Section 7.12(a).

 

(b)           As soon as practicable
but in any event within 30 Business Days following the acquisition of any
Pledged Interests by any Material Subsidiary who has not theretofore executed
the Pledge Agreement or a Pledge Joinder Agreement and who is not otherwise
required to deliver a Pledge Joinder Agreement pursuant to Section 7.12(a),
cause to be delivered to the Administrative Agent a Pledge Joinder Agreement
(with all schedules thereto appropriately completed) duly executed by such
Material Subsidiary, and the documents, stock certificates, stock powers,
financing statements, opinions, Organization Documents and organizational
action relating thereto and to the pledge contained therein and described in Section 7.12(a)(vi),
(vii), (viii) and (ix).

 

7.13        [Intentionally Omitted].

 

7.14        Compliance with ERISA.  Do, and cause each of its ERISA
Affiliates to do, each of the following: (a) maintain each Plan in
compliance in all material respects with the applicable provisions of ERISA,
the Code and other Federal or state law; (b) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such
qualification; and (c) make all required contributions to any Plan subject
to Section 412 of the Code.

 

7.15        Further Assurances.  At the Borrower’s cost and
expense, upon request of the Administrative Agent, duly execute and deliver or
cause to be duly executed and delivered, to 

 

92

 

the Administrative Agent
such further instruments, documents, certificates, financing and continuation
statements, and do and cause to be done such further acts that may be
reasonably necessary or advisable in the reasonable opinion of the
Administrative Agent to carry out more effectively the provisions and purposes
of this Agreement, the Guaranty, the Security Instruments and the other Loan
Documents.

 

ARTICLE
VIII.

NEGATIVE COVENANTS

 

So long as any Lender shall have any Revolving Credit Commitment
hereunder, any Loan or other Obligation hereunder shall remain unpaid or
unsatisfied, or any Letter of Credit or Bankers’ Acceptance shall remain
outstanding, the Borrower shall not, nor shall it permit any Non-Mueller  Subsidiary to, directly or indirectly:

 

8.01        Liens.  Create, incur, assume
or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than the following:

 

(a)           Liens pursuant to any
Loan Document;

 

(b)           Liens existing on the
date hereof and listed on Schedule 8.01 and any renewals or extensions
thereof, provided that the property covered thereby consists only of the
property covered by the Liens being renewed or extended and any renewal or
extension of the obligations secured or benefited thereby is permitted by Section 8.03(b);

 

(c)           Liens for taxes,
assessments or other governmental charges not yet due or which are being
contested in good faith and by appropriate proceedings diligently conducted, if
adequate reserves with respect thereto are maintained on the books of the
applicable Person in accordance with GAAP;

 

(d)           carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s, landlord’s or other like Liens imposed
by Law or arising in the ordinary course of business which are not overdue for
a period of more than 30 days or which are being contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves with respect
thereto are maintained on the books of the applicable Person;

 

(e)           Liens, pledges or
deposits in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation,
other than any Lien imposed by ERISA;

 

(f)            Liens or deposits to
secure the performance of bids, trade contracts and leases (other than
Indebtedness), statutory obligations, surety bonds (other than bonds related to
judgments or litigation), performance bonds and other obligations of a like
nature incurred in the ordinary course of business, and including deposits (but
not Liens) related to the acquisition of property;

 

(g)           easements,
rights-of-way, covenants, consents, reservations, encroachments, variations and
zoning and other similar restrictions, charges, encumbrances or title defects
affecting real property which, in the aggregate, are not substantial in amount,
and which do not 

 

93

 

in any case materially
detract from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the applicable Person;

 

(h)           with respect to any
Mortgaged Fee Property or Mortgaged Coal Property, Liens which appear as
exceptions to the Title Policy delivered to the Administrative Agent with
respect to such Mortgaged Fee Property or Mortgaged Coal Property that are not
otherwise permitted by Section 8.01(a), (c), (d), (g) or
(i) and are acceptable to the Administrative Agent, it being
understood that the Liens appearing on the Title Policies delivered to the
Administrative Agent on the Closing Date are acceptable to the Administrative
Agent;

 

(i)            any interest or title
of a lessor or sublessor and any restriction or encumbrance to which the
interest or title of such lessor or sublessor may be subject that is incurred
in the ordinary course of business and, either individually or when aggregated
with all other Liens described in clauses (a) through (h) in effect
on any date of determination, could not be reasonably expected to have a
Material Adverse Effect;

 

(j)            Liens securing
judgments for the payment of money not constituting an Event of Default under Section 9.01
or securing appeal or other surety bonds related to such judgments;

 

(k)           Liens securing
Indebtedness permitted under Section 8.03(e); provided that (i) such
Liens do not at any time encumber any property other than the property financed
by such Indebtedness and (ii) the Indebtedness secured thereby does not
exceed the cost or fair market value, whichever is lower, of the property being
acquired on the date of acquisition; and

 

(l)            Liens on Mortgage
Accounts and Third Party Mortgage Accounts securing Indebtedness permitted
under Section 8.03(g);

 

(m)          Liens on residual
beneficial interests in any MSH Trust securing Indebtedness permitted under Section 8.03(g)(iii),
8.03(i) or 8.03(n); and

 

(n)           Liens on assets (other
than Equity Interests of New Holdco or of any Non-Mueller Subsidiary
constituting Collateral, and other than real estate interests (including
mineral rights relating to Coal) constituting Collateral)  securing Indebtedness the amount of which
Indebtedness shall not exceed in the aggregate at any time $20,000,000 and the
book value of the property securing such Indebtedness shall not exceed
$25,000,000.

 

8.02        Investments.  Make any
Investments, except:

 

(a)           Investments held by the
Borrower or such Non-Mueller Subsidiary in the form of Cash Equivalents;

 

(b)           loans and advances to
officers, directors and employees of the Borrower and Non-Mueller Subsidiaries
the ordinary course of the business of the Borrower and its Non-Mueller
Subsidiaries as conducted on the Closing Date to the extent permitted by
applicable Law;

 

(c)           Investments consisting
of extensions of credit in the nature of accounts receivable or notes
receivable arising from the grant of trade credit in the ordinary course of
business, and 

 

94

 

Investments received in
satisfaction or partial satisfaction thereof from financially troubled account
debtors to the extent reasonably necessary in order to prevent or limit loss;

 

(d)           Guarantees permitted by
Section 8.03;

 

(e)           Investments existing as
of the date hereof and as set forth in Schedule 6.13;

 

(f)            prior to the Amendment
No. 5 Effective Date, Investments by Loan Parties in Mortgage Accounts and
Third Party Mortgage Accounts, including Investments in MSH Trusts in
connection with the issuance of asset-backed securities that are not
Investments in residual beneficial interests in MSH Trusts otherwise permitted
by Section 8.02(h), provided that the aggregate book value
(but without adjustment for any write-down of the book value thereof) of all
such Investments permitted by this Section 8.02(f) owned by
Loan Parties does not at any time exceed $50,000,000;

 

(g)           prior to the applicable
Qualified Homebuilding Transaction, Investments by MSH Trusts in Mortgage
Accounts and Third Party Mortgage Accounts in connection with Indebtedness
under the Mortgage Warehouse Facility and the issuance of asset-backed
securities permitted by Section 8.03(g);

 

(h)           prior to the applicable
Qualified Homebuilding Transaction, Investments by Mid-State Homes, Walter
Mortgage Company and Mid-State Capital in MSH Trusts in connection with the
issuance of asset-backed securities permitted under Section 8.03(g)(iii) or
Section 8.03(i), provided that such Investments shall consist
solely of residual beneficial interests in MSH Trusts, including the associated
residual interest in Mortgage Accounts and Third Party Mortgage Accounts, and
assets related thereto;

 

(i)            Investments by Cardem
and each of the MSH Trusts in the ordinary course of business and in conformity
with their respective investment policies in effect from time to time;

 

(j)            Investments in
securities or assets of any Person acquired in an Acquisition permitted
hereunder;

 

(k)           Investments in (i) land
or tracts of land held by the Borrower or a Subsidiary on the Amendment No. 5
Effective Date and replacements thereof made in accordance with Section 8.05(b),
and (ii) land or mineral rights relating to the coal mining or natural gas
operations of any Subsidiaries in the business of coal mining acquired, leased
or held in the ordinary course of business by any Subsidiaries in the business
of coal mining;

 

(l)            other Investments of (i) the
Borrower in any Guarantor (other than Investments in the Homebuilding Assets), (ii) any
Non-Mueller Subsidiary in the Borrower or in a Guarantor, and (iii) of the
Borrower or any Guarantor in any Non-Mueller  Subsidiary
that is not a Guarantor provided that such Investments in non-Guarantor
Non-Mueller  Subsidiaries do not
exceed $15,000,000 in the aggregate at any time outstanding;

 

(m)          Investments in Swap
Contracts permitted to be maintained under Section 8.03(d);

 

95

 

(n)           so long as the
Consolidated Senior Secured Leverage Ratio is less than or equal to 1.50 to
1.00 based on a Pro Forma Effect Compliance Certificate delivered to the
Administrative Agent prior to any Investment contemplated hereunder and giving
pro forma effect thereto and to any Borrowings in connection therewith, other
Investments (excluding Homebuilding Assets) not exceeding $25,000,000 in any
fiscal year of the Borrower, provided that (i) the aggregate of all
Investments made under this clause (n) at any time outstanding
shall not exceed $75,000,000 and (ii) the aggregate amount of all
Investments in New Holdco or any of its Subsidiaries made under this clause (n) at
any time outstanding shall not exceed $15,000,000 (without increasing the
aggregate limit in the preceding clause (n)(ii)); provided  further
that (A) the aggregate amount of Investments at any time outstanding under
clause (i) of the immediately preceding proviso shall be increased
on any date of measurement thereof by an amount equal to the sum of
fifty percent (50%) of the portion of Excess Cash Flow each year not required
to be paid to reduce the Term Loan pursuant to Section 2.06(d)(iv) plus
fifty percent (50%) of the portion of the Net Cash Proceeds from the public or
private issuance of Equity Interests of the Borrower or any Restricted
Subsidiary not required to be paid to reduce the Term Loan pursuant to Section 2.06(d)(iii) plus
fifty percent (50%) of the portion of the Net Cash Proceeds from a Permitted
Securities Transaction actually received the Borrower and paid to reduce the
Term Loan pursuant to Section 2.06(d)(vi), in each case net of any
such amounts utilized in Section 8.06(c) and/or in Section 8.13
on or prior to such date, and (B) the annual limit of $25,000,000 provided
in this Section 8.02(n) shall be increased on any date of
measurement thereof by an amount equal to 1/3 of the amount by which the
$75,000,000 limit is increased pursuant to the immediately preceding proviso
(A) as of such date; provided, however, that if the
Consolidated Senior Secured Leverage Ratio is greater than 1.50 to 1.00 as calculated
above, or if a Pro Forma Effect Compliance Certificate has not been delivered
to the Administrative Agent as provided above, then additional Investments
under clause (n) shall be permitted only to the extent that, after
giving effect to such proposed Investment, the aggregate amount of Investments
made under this clause (n) shall not exceed $25,000,000;

 

(o)           Investments in Cardem
made in the ordinary course of its insurance business as conducted on the
Closing Date;

 

(p)           an Investment in a
joint venture of the Borrower in which the Borrower owns more than 50% of the
voting interest and is approved by the Administrative Agent, not to exceed
$27,000,000 in the aggregate at any time outstanding;

 

(q)           Investments by the
Borrower in New Holdco and/or one or more of its Subsidiaries in the form of
Equity Interests of the Borrower;

 

(r)            Investments by the
Borrower in New Holdco on the Closing Date of those amounts necessary to
consummate the Merger and the other Transactions in accordance with the sources
and uses of funds provided to the Lenders prior to the Closing Date;

 

(s)           Investments by the
Borrower in Mid-State Trust IX and Mid-State Trust XIV of those amounts
necessary to repay outstanding indebtedness and accrued fees and expenses under
the Mortgage Warehouse Facilities in connection with the termination thereof;

 

96

 

(t)            prior to the
applicable Qualified Homebuilding Transaction, Investments in the Homebuilding
Assets in an amount not to exceed $35,000,000 at any one time outstanding in
the aggregate; and

 

(u)           at any time after the
Amendment No. 5 Effective Date, Investments by Loan Parties and
Non-Mueller Subsidiaries in the Homebuilding Assets for the construction and
cost of building and completing the existing backlog of homebuilding contracts
(and other associated costs of the Homebuilding Assets) that result in the
origination of Mortgage Accounts, such Investments permitted under this Section 8.02(u) not
to exceed $80,000,000 in the aggregate at any time outstanding.

 

8.03        Indebtedness.  Create,
incur, assume or suffer to exist any Indebtedness, except:

 

(a)           Indebtedness under the
Loan Documents;

 

(b)           Indebtedness
outstanding on the date hereof and listed on Schedule 8.03 and any
refinancings, refundings, renewals or extensions thereof; provided that
the amount of such Indebtedness is not increased at the time of such
refinancing, refunding, renewal or extension except by an amount equal to a
reasonable premium or other reasonable amount paid, and fees and expenses
reasonably incurred, in connection with such refinancing and by an amount equal
to any existing commitments unutilized thereunder; provided further that
any refinancing, refunding, renewal or extension of Indebtedness subordinated
to the Obligations shall be on terms no less favorable to the Administrative
Agent and the Lenders, and no more restrictive to the Borrower, than the
subordinated Indebtedness being refinanced, refunded, renewed or extended and
in an amount not less than the amount outstanding at the time thereof;

 

(c)           Guarantees of the
Borrower or any Guarantor in respect of Indebtedness otherwise permitted
hereunder of the Borrower or any other Guarantor;

 

(d)           obligations (contingent
or otherwise) of the Borrower or any Non-Mueller Subsidiary existing or arising
under any Swap Contract, provided that (i) such obligations are (or
were) entered into by such Person in the ordinary course of business for the
purpose of directly mitigating risks associated with liabilities, commitments,
investments, assets, cash flows or property held or reasonably anticipated by
such Person, or changes in the value of securities issued by such Person, and
not for purposes of speculation or taking a “market view;” and (ii) such
Swap Contract does not contain any provision exonerating the non-defaulting
party from its obligation to make payments on outstanding transactions to the
defaulting party;

 

(e)           Indebtedness in respect
of capital leases, Synthetic Lease Obligations and purchase money obligations for
real property (other than purchase money obligations for real property
including mineral rights utilized or to be utilized in the Coal operations of
any Coal Mining Entity) and fixed or capital assets within the limitations set
forth in Section 8.01(k), which Indebtedness may include
Indebtedness existing on any property so acquired at the time of such
acquisition (other than any such Indebtedness created in contemplation of such
acquisition that does not secure the purchase price of such property), and including
any refinancings, refundings, renewals or extensions thereof so long as the
amount of such Indebtedness is not increased at the time of such refinancing,
refunding, renewal or extension except by an amount 

 

97

 

equal to a reasonable
premium or other reasonable amount paid, and fees and expenses reasonably
incurred, in connection with such refinancing; provided, however,
that the aggregate amount of all such Indebtedness at any one time outstanding
shall not exceed $75,000,000;

 

(f)            the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business;

 

(g)           in the case of
Mid-State Homes, Mid-State Capital, Walter Mortgage Company and each MSH Trust,
where applicable:

 

(i)            Indebtedness evidenced
by the Mortgage-Backed Securities,

 

(ii)           [Intentionally
Omitted], and

 

(iii)          Indebtedness resulting
from the issuance of additional securities by one or more MSH Trusts that is
secured or otherwise supported by Mortgage Accounts, Third Party Mortgage
Accounts and/or residual beneficial interests in MSH Trusts, which securities
shall not restrict the actions or businesses of the Borrower or any of its
Subsidiaries (other than Mid-State Homes, Mid-State Capital and Walter Mortgage
Company) in any manner and shall not include terms requiring any guarantee or
other credit support from or recourse to the Borrower or any of its Restricted
Subsidiaries that are less favorable to the Borrower and its Restricted Subsidiaries
than those contained in the Mortgage-Backed Securities;

 

(h)           in the case of
Mid-State Homes and Walter Mortgage Company, Indebtedness resulting from the
contingent obligations of Mid-State Homes or Walter Mortgage Company (i) to
repurchase Mortgage Accounts pursuant to Section 3(b) of either of
the Existing Borrower Account Transfer Agreements (or an equivalent contingent
obligation contained in any successor Borrower Account Transfer Agreement so
long as such contingent obligation is no greater than that contained in Section 3(b) of
the Existing Borrower Account Transfer Agreement), (ii) to repurchase
Foreclosure Accounts  (as defined
in the Existing Borrower Account Transfer Agreement) pursuant to the terms of Section 4  of each of the Existing Borrower Account
Transfer Agreements  (or an
equivalent contingent obligation contained in any successor Borrower Account
Transfer Agreement so long as such contingent obligation is no greater than
that contained in Section 4 of the Existing Borrower Account Transfer
Agreement), and (iii) to indemnify certain Indemnitees referred to in the
Existing Borrower Account Transfer Agreement for expenses incurred thereby on
the terms set forth in Section 6  of
each of the Existing Borrower Account Transfer Agreements (or an equivalent
contingent obligation with respect to indemnification contained in any
successor Borrower Account Transfer Agreement so long as such indemnification
obligation is no greater than that contained in Section 6 of the Existing
Borrower Account Transfer Agreement); provided that the aggregate amount
of Indebtedness existing under subclauses (h)(i) and (h)(iii) shall
not exceed $10,000,000 at any time;

 

(i)            Indebtedness either
existing on the Amendment No. 5 Effective Date or issued after the Amendment
No. 5 Effective Date but before the first Qualified Homebuilding
Transaction, in each case that is  secured
solely by residual beneficial interests in MSH Trusts, including the issuance
of securities by one or more MSH Trusts that are secured or otherwise 

 

98

 

supported thereby; provided
that no such Indebtedness (including any securities) shall restrict the actions
or businesses of the Borrower or any of its Non-Mueller Subsidiaries in any
manner and shall not include terms requiring any guarantee or other credit
support from or recourse to the Borrower or any of its Restricted Subsidiaries
that are less favorable to the Borrower and its Restricted Subsidiaries than
those contained in the Mortgage-Backed Securities;

 

(j)            Indebtedness (i) of
the Borrower or any Guarantor owing to the Borrower or any Guarantor, (ii) of
any Non-Mueller Subsidiary that is not a Guarantor owing to any other
Non-Mueller Subsidiary that is not a Guarantor, (iii) of any Non-Mueller  Subsidiary that is not a Guarantor owing
to the Borrower or any Guarantor in an aggregate amount at any time outstanding
not to exceed $15,000,000; and (iv) of the Borrower owing to Mueller Group
pursuant to the Borrower’s guarantee of the obligations of New Holdco under the
Subordinated New Holdco Note, so long as the Borrower’s obligations owing under
such Subordinated New Holdco Note are unsecured and subordinated in payment to
the Obligations in a manner satisfactory to the Administrative Agent and no
payment of principal or cash interest thereunder is scheduled to occur prior to
the date that is six months after the Term Loan Maturity Date;

 

(k)           surety bonds permitted
under Section 8.01;

 

(l)            Indebtedness
subordinated in payment to the Obligations hereunder in an aggregate principal
amount not to exceed $350,000,000 at any time outstanding so long as (i) the
terms of such Indebtedness are acceptable to the Administrative Agent, (ii) none
of the maturity date, any scheduled payment of principal or any obligation to
repurchase or prepay such Indebtedness (whether absolute or at the option of
the holder (other than as a result of the occurrence of a specified event that
would constitute an Event of Default)) occurs before the Revolving Credit
Maturity Date, and (iii) on or prior to the date of incurrence thereof,
the Borrower has delivered to the Administrative Agent a Compliance Certificate
demonstrating pro forma compliance, giving effect to the incurrence of such
Indebtedness, with the financial covenants set forth in Sections 8.12(a),
(b) and (c);

 

(m)          [Intentionally
Omitted];

 

(n)           additional unsecured
Indebtedness in an aggregate principal amount at any time outstanding not to
exceed $50,000,000; and

 

(o)           Indebtedness of any QHT
Interim Entity that is non-recourse to the Borrower and incurred pursuant to,
and substantially concurrently with, a Qualified Homebuilding Transaction.

 

8.04        Fundamental Changes. 
Merge, dissolve, liquidate, consolidate with or into another Person, or
Dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except that, so long as no Default exists or would
result therefrom, and in each case subject to Section 8.15:

 

(a)           except as limited by Section 8.15(c),
any Non-Mueller Subsidiary may merge with any one or more other Non-Mueller
Subsidiaries, provided that when any Guarantor is merging with another
Non-Mueller Subsidiary, the Guarantor shall be the continuing or surviving
Person; and

 

99

 

(b)           any Non-Mueller
Subsidiary may Dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise) to another Non-Mueller Subsidiary or to the
Borrower, provided that if the transferor in such a transaction is a
Guarantor, then the transferee must also be a Guarantor or the Borrower;

 

(c)           a merger or
consolidation necessary to consummate (i) an Acquisition permitted by and
in compliance with Section 8.13 or (ii) a Disposition
permitted by and in compliance with Section 8.05; and

 

(d)           the Borrower or any
applicable Subsidiary may effect any Qualified Homebuilding Transaction; and

 

(e)           any QHT Interim Entity
may liquidate or dissolve.

 

8.05        Dispositions.  Make any
Disposition or enter into any agreement to make any Disposition, except:

 

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

 

(b)           Dispositions for fair
market value of equipment or real property to the extent that (i) such equipment
or real property is exchanged for credit against the purchase price of similar
replacement property or (ii) the proceeds of such Disposition are
reasonably promptly applied to the purchase price of such replacement equipment
or real property, and in each case if the disposed property constituted
Collateral then the relevant Loan Party shall grant a Lien to the
Administrative Agent (including the delivery of any necessary Mortgage, Mineral
Rights Mortgage, Mortgaged Property Support Documents and Mortgaged Coal
Property Support Documents) on such new or replacement property;

 

(c)           subject to Section 8.15,
Dispositions of property by the Borrower or any Non-Mueller  Subsidiary to a wholly-owned Non-Mueller  Subsidiary or, solely with respect to
Dispositions of the stock of a Non-Mueller Subsidiary of the Borrower, the
Borrower; provided that if the transferor of such property is the
Borrower or a Guarantor, the transferee thereof must be a Guarantor or, subject
to the limitation above, the Borrower;

 

(d)           Dispositions for fair
market value permitted by Section 8.02 or 8.04(a) or (b);

 

(e)           transfers for fair
market value by Loan Parties or Mid-State Capital to one or more MSH Trusts of
Mortgage Accounts or Third Party Mortgage Accounts in connection with, and to
the extent required for the issuance of asset-backed securities permitted under
Section 8.03(g)(iii);

 

(f)            transfers for fair
market value by Mid-State Homes or Mid-State Capital of any interest in an MSH
Trust (other than any MSH Trust that is a borrower under a Mortgage Warehouse
Facility) to (i) third parties, or (ii) an MSH Trust in connection
with the issuance of asset-backed securities permitted under Section 8.03(g)(iii) or
8.03(i);

 

(g)           Dispositions for fair
market value not otherwise permitted under this Section 8.05, provided
that (i) at the time of such Disposition, no Default shall exist or would
result from such 

 

100

 

Disposition and (ii) each
such Disposition is either (A) a Disposition of Non-Core Subsidiaries so
long as such Non-Core Subsidiary has not been the transferee of any material
additional assets or operations (whether by transfer of assets or equity or by
merger or consolidation with any other Person) since the Closing Date and any
prepayment required by Section 2.06(d)(v) is made, (B) a
Disposition of mining equipment, including longwall shields, with an aggregate
book value not in excess of $30,000,000, or (C) a Disposition of property
that, when combined with all other Dispositions made in reliance on this clause
(g)(ii)(C) during such fiscal year, has an aggregate book value of not
in excess of $40,000,000;

 

(h)           Dispositions of all or
any portion of the Equity Interests in New Holdco owned by the Borrower in a
Permitted Securities Transaction conducted in compliance with Section 8.06(e) and/or
8.15(c) and with respect to which any mandatory prepayment of the
Term Loan required by Section 2.06(d)(vi) has been made, provided
that any such Disposition other than pursuant to a Restricted Payment permitted
by Section 8.06(e) shall be for fair market value; and

 

(i)            (i) the
Disposition of any Homebuilding Assets to a QHT Interim Entity and (ii) any
Qualified Homebuilding Transaction.

 

8.06        Restricted Payments. 
Declare or make, directly or indirectly, any Restricted Payment, or
incur any obligation (contingent or otherwise) to do so, except that, in each
case (except Section 8.06(a)) so long as no Default or Event of
Default shall have occurred and be continuing (both before and after the making
of such Restricted Payment):

 

(a)           each Non-Mueller
Subsidiary may make Restricted Payments to the Borrower and to wholly-owned
Non-Mueller Subsidiaries (and, in the case of a Restricted Payment by a
non-wholly-owned Non-Mueller Subsidiary, to the Borrower and any Non-Mueller
Subsidiary and to each other owner of capital stock or other Equity Interests
of such Non-Mueller Subsidiary on a pro rata basis based on their relative
ownership interests);

 

(b)           the Borrower and each
Non-Mueller Subsidiary may declare and make dividend payments or other
distributions payable solely in the common stock or other common Equity
Interests of such Person;

 

(c)           so long as the
Consolidated Senior Secured Leverage Ratio is less than or equal to 1.50 to
1.00 based on a Pro Forma Effect Compliance Certificate delivered to the
Administrative Agent prior to any Restricted Payment contemplated hereunder and
giving pro forma effect thereto and to any Borrowings in connection therewith,
to the extent available after making any prepayment required by Section 2.06(d),
and subject to the making of each such prepayment, the Borrower and each
Non-Mueller Subsidiary may purchase, redeem or otherwise acquire shares of, or
pay dividends or make distributions with respect to, its common stock or other
common Equity Interests or warrants or options to acquire any such shares with
the Net Cash Proceeds received from the issue of new shares of its common stock
or other common Equity Interests, provided that any amount so utilized
under this Section 8.06(c) shall reduce the applicable amount
of the Net Cash Proceeds from any such issuance available to be utilized
pursuant to Section 8.02(n) and/or Section 8.13,
and any amount of such Net Cash Proceeds utilized under Section 8.02(n) and/or
Section 8.13 shall reduce the amount permitted to be utilized
pursuant to this Section 8.06(c);

 

101

 

(d)           so long as the Consolidated Senior Secured
Leverage Ratio is less than or equal to 1.50 to 1.00 based on a Pro Forma
Effect Compliance Certificate delivered to the Administrative Agent prior to
any Restricted Payment contemplated hereunder and giving pro forma effect
thereto and to any Borrowings in connection therewith, the Borrower may, up to
an aggregate amount in any fiscal year not to exceed the Maximum Restricted
Payment Amount, (i) so long as after giving effect to any such Restricted
Payment the remaining amount available to be drawn under the Revolving Credit
Facility shall not be less than $50,000,000, repurchase shares of its own
capital stock for cash, and (ii) declare and pay cash dividends to its
stockholders; provided, however, that if the Consolidated Senior
Secured Leverage Ratio is greater than 1.50 to 1.00 as calculated above, or if
a Pro Forma Effect Compliance Certificate has not been delivered to the
Administrative Agent as provided above, the Borrower may, up to an aggregate
amount in any fiscal year not to exceed $40,000,000, repurchase shares of its
own capital stock and declare and pay cash dividends to its stockholders;

 

(e)           the Borrower may make a
Restricted Payment to its shareholders of all or any portion of the Equity
Interests in New Holdco owned by the Borrower in a Permitted Securities
Transaction so long as prior to the making of any such Restricted Payment the
Borrower has made prepayments (whether optional prepayments pursuant to Section 2.06(a) or
mandatory prepayments pursuant to Section 2.06(d), or any
combination thereof) of the Term Loan in an aggregate amount of not less than
$50,000,000 (exclusive of any prepayments pursuant to Section 2.06(d)(iv));
and

 

(f)           the
Borrower and its Subsidiaries may declare or make, directly or indirectly,
non-cash Restricted Payments pursuant to any Qualified Homebuilding
Transaction.

 

8.07        Change in Nature of Business.  Engage in any material line of business that
is not a Core Business.

 

8.08        Transactions with Affiliates.  Enter into any transaction of any kind with
any Affiliate of the Borrower, whether or not in the ordinary course of
business, other than (a) transactions on fair and reasonable terms
substantially as favorable to the Borrower or such Non-Mueller Subsidiary as
would be obtainable by the Borrower or such Non-Mueller Subsidiary at the time
in a comparable arm’s length transaction with a Person other than an Affiliate,
(b) the consummation by the Borrower and its Non-Mueller Subsidiaries of
the transactions effected by the Loan Documents, (c) any employment
arrangement entered into by the Borrower or any of its Non-Mueller Subsidiaries
in the ordinary course of business and consistent with the past practices of
the Borrower or such Non-Mueller Subsidiary, (d) transactions between or
among the Borrower and its Non-Mueller Subsidiaries or between or among
Non-Mueller Subsidiaries of the Borrower, in each case to the extent permitted
under the terms of the Loan Documents, (e) the declaration and payment of
dividends and the making of distributions to all holders of any class of
capital stock of the Borrower or any of its Non-Mueller Subsidiaries to the
extent otherwise permitted under Section 8.06, (f) any Tax
Sharing Agreement, and (g) shared service arrangements entered into in the
ordinary course of business and allocating expenses and fees reasonably in
accordance with the services provided.

 

8.09        Burdensome Agreements.  Enter into any Contractual Obligation (other
than this Agreement or any other Loan Document) that:

 

102

 

(a)           requires the grant of a
Lien to secure an obligation of such Person if a Lien is granted to secure
another obligation of such Person; or

 

(b)           limits the ability (i) of
any Non-Mueller  Subsidiary to make
Restricted Payments to the Borrower or any Guarantor or to otherwise transfer
property to the Borrower or any Guarantor other than customary restrictions
required in connection with (x) financings permitted by this Agreement,
the limitations of which are no more restrictive than the corresponding
limitations applicable to the Borrower hereunder, and (y) Dispositions
permitted by this Agreement and which limitations cover only such assets or
Person(s) which are the subject matter of such Dispositions and, prior to
such Disposition, permit the Liens granted under the Loan Documents therein, (ii) of
any Restricted Subsidiary to Guarantee the Indebtedness of the Borrower, or (iii) of
the Borrower or any Non-Mueller Subsidiary to create, incur, assume or suffer
to exist Liens on property of such Person; provided, however,
that this clause (iii) shall not prohibit:

 

(A)          a
negative pledge contained in either (x) Indebtedness of any Non-Mueller
Subsidiary as of the date it becomes a Non-Mueller Subsidiary of the Borrower
in any transaction otherwise permitted hereunder or (y) Indebtedness
outstanding on the date hereof and listed on Schedule 8.03, in each case
so long as such provision does not impair or conflict with any Security
Instrument or with Section 7.12 hereof;

 

(B)           provisions
limiting Liens on property of the MSH Trusts as may be contained in the terms
of any Indebtedness permitted under Section 8.03(g) or 8.03(i);

 

(C)           provisions
limiting Liens on property as may be contained in the terms of any Indebtedness
permitted under Section 8.03(e) and (n) solely to
the extent any such limitations relates to the property financed by or the
subject of such Indebtedness;

 

(D)          provisions
limiting Liens on property, and only on such property, subject to a prior Lien
permitted under Section 8.01(d), (e), (f), (h),
(j), (k) and (l); and

 

(E)           such
provisions as may be contained in any refinancing or replacing Indebtedness
permitted under Section 8.03, provided that the terms of such
provisions shall be no less favorable to the Administrative Agent and the
Lenders as were contained in the Indebtedness being refinanced or replaced.

 

8.10        Use of Proceeds.  Use the proceeds of any Credit Extension,
whether directly or indirectly, and whether immediately, incidentally or ultimately,
in any manner that might cause the Credit Extension or the application of such
proceeds to violate Regulations T, U or X of the FRB, in each case as in effect
on the date or dates of such Credit Extension and such use of proceeds.

 

8.11        Prepayment
of Indebtedness; Amendment to Material Agreements.

 

(a)           Prepay, redeem,
purchase, repurchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner, or make any payment in violation of any
subordination terms of, Indebtedness that is subordinated to the Indebtedness
hereunder (including, the Borrower’s guaranty obligations under the
Subordinated New Holdco Note), 

 

103

 

including pursuant to any
change of control, sale of assets, issuance of any equity or otherwise as may
be set forth in the terms thereof or available to the Borrower at its option,
except those prepayments that (i) are made in connection with a
refinancing thereof otherwise permitted by Section 8.03(b) or (ii) after
giving effect to which, as demonstrated by the Borrower in a certificate signed
by a Responsible Officer and delivered to the Administrative Agent, no Default
exists or will have occurred, the Consolidated Senior Secured Leverage Ratio is
not greater than 1.50 to 1.00 and the remaining amount available to be drawn
under the Revolving Credit Facility is not less than $50,000,000; provided
that the Borrower may use an amount not greater than the portion of Excess Cash
Flow each year not required to be paid to reduce the Term Loan pursuant to Section 2.06(d)(iv) to
prepay amounts outstanding under the Subordinated New Holdco Note; or

 

(b)           Amend, modify or change
in any manner any term or condition of (i) any material lease, (ii) the
Subordinated New Holdco Note, (iii) the Convertible Notes or (iv) any
Tax Sharing Agreement, so that the terms and conditions thereof are less
favorable in any material respect to the Administrative Agent and the Lenders
than the terms of such Indebtedness as of the Closing Date, but in no event
shall terms of recourse, guarantees or credit support or, with respect to the
Subordinated New Holdco Note, any requirement to pay interest or principal in
cash, be any less favorable to the Administrative Agent and the Lenders than
the terms of such Indebtedness as of the Closing Date.

 

8.12        Financial
Covenants.

 

(a)           Consolidated
Leverage Ratio.  Permit the
Consolidated Leverage Ratio at any time during any period of four fiscal
quarters of the Borrower set forth below to be greater than the ratio set forth
below opposite such period:

 

	
  Four Fiscal Quarters Ending

  	
   

  	
  Maximum

  Consolidated

  Leverage Ratio

  	
   

  
	
  Amendment No. 5 Effective Date through
  December 30, 2008

  	
   

  	
  2.75 to 1.00

  	
   

  
	
  December 31, 2008 and each fiscal
  quarter thereafter

  	
   

  	
  2.50 to 1.00

  	
   

  

 

(b)           Consolidated Senior
Secured Leverage Ratio.  Permit the
Consolidated Senior Secured Leverage Ratio at any time during any period of
four fiscal quarters of the Borrower set forth below to be greater than the
ratio set forth below opposite such period:

 

104

 

	
  Four Fiscal Quarters Ending

  	
   

  	
  Maximum

  Consolidated Senior

  Secured Leverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Amendment No. 5 Effective Date through
  September 29, 2008

  	
   

  	
  2.75 to 1.00

  	
   

  
	
  September 30, 2008 through
  December 30, 2008

  	
   

  	
  2.50 to 1.00

  	
   

  
	
  December 31, 2008 through the date
  immediately preceding the Consolidated Senior Secured Leverage Ratio
  Step-Down Date

  	
   

  	
  2.25 to 1.00

  	
   

  
	
  Consolidated Senior Secured Leverage Ratio
  Step-Down Date and each fiscal quarter thereafter

  	
   

  	
  2.00 to 1.00

  	
   

  

 

For purposes of this Section 8.12(b),
the term “Consolidated
Senior Secured Leverage Ratio Step-Down Date” means the earlier
of (i) March 31, 2009, and (ii) the date upon which, after the
Amendment No. 5 Effective Date, the sum of (x) all issuances of
Indebtedness permitted under Section 8.03 and evidenced by
mortgage-backed securities (or any related securities) or subordinated to the
Obligations plus (y) all private or public issuances of Equity
Interests of the Borrower or any Restricted Subsidiary used to refinance the
Indebtedness under the Loan Documents  equals
at least $100,000,000 in the aggregate.

 

(c)           Consolidated Fixed
Charge Coverage Ratio.  Permit the
Consolidated Fixed Charge Coverage Ratio as of the end of any Four-Quarter
Period of the Borrower to be less than 2.50 to 1.00.

 

(d)           Capital Expenditures.  Make or become legally obligated to make
Consolidated Capital Expenditures in the aggregate for the Borrower and its
Non-Mueller Subsidiaries during each fiscal year set forth below, in an amount
in excess of the amount set forth opposite such fiscal year:

 

	
  Fiscal Year

  	
   

  	
  Amount

  	
   

  
	
  2007

  	
   

  	
  $

  	
  160,000,000

  	
   

  
	
  2008

  	
   

  	
  $

  	
  160,000,000

  	
   

  
	
  2009

  	
   

  	
  $

  	
  95,000,000

  	
   

  
	
  2010 and
  each fiscal year thereafter

  	
   

  	
  $

  	
  80,000,000

  	
   

  

 

provided,
however, that so long as no Default has occurred and is continuing or would
result from such expenditure, up to $15,000,000 of any amount set forth above,
if not expended in the fiscal year for which it is permitted above (but
excluding in that calculation any amount carried forward from a prior fiscal
year), may be carried over for expenditure in the next following fiscal year.

 

8.13        Acquisitions.  (a)   So
long as the Consolidated Senior Secured Leverage Ratio is less than or equal to
1.50 to 1.00 based on a Pro Forma Effect Compliance Certificate delivered to
the Administrative Agent prior to any Acquisition contemplated hereunder and
giving pro 

 

105

 

forma effect thereto and to any
Borrowings in connection therewith, enter into any agreement, contract, binding
commitment or other arrangement providing for any Acquisition, or take any
action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition, unless (i) the Person to be (or whose assets
are to be) acquired does not oppose such Acquisition and the line or lines of
business of the Person to be acquired constitute Core Businesses, (ii) no
Default or Event of Default shall have occurred and be continuing either
immediately prior to or immediately after giving effect to such Acquisition
and, if the Cost of Acquisition is in excess of $25,000,000, the Borrower shall
have furnished to the Administrative Agent (A) pro forma historical
financial statements as of the end of the most recently completed fiscal year
of the Borrower and most recent interim fiscal quarter, if applicable, giving
effect to such Acquisition, and (B) a Compliance Certificate prepared on a
historical pro forma basis as of the most recent date for which financial
statements have been furnished pursuant to Section 7.01(a) or (b),
giving effect to such Acquisition, which Compliance Certificate shall
demonstrate that no Default or Event of Default would exist immediately after
giving effect thereto, (iii) the Person acquired shall be a wholly-owned
Restricted Subsidiary, or be merged with or into a Restricted Subsidiary,
immediately upon consummation of the Acquisition (or if assets are being
acquired, the acquiror shall be a Restricted Subsidiary), (iv) upon
consummation of the Acquisition each Non-Mueller Subsidiary shall have complied
with the provisions of Section 7.12, including with respect to any
new assets (including real property or mineral rights) acquired, (v) if
the Cost of Acquisition shall exceed an amount equal to fifty percent (50%) of
the Aggregate Acquisition Limit (defined below) in effect as of the date of
such Acquisition, the Required Lenders shall consent to such Acquisition in
their discretion, and (vi) after giving effect to such Acquisition, the
aggregate Costs of Acquisition incurred since the Closing Date shall not exceed
the Aggregate Acquisition Limit then in effect; provided that an
agreement, contract, binding commitment or other arrangement providing for an
Acquisition that would not otherwise satisfy the provisions of this Section 8.13
at such time may be entered into so long as an express condition to the
consummation thereof is the full compliance with this Agreement and the other
Loan Documents.

 

For purposes
of this Section 8.13(a), the term “Aggregate Acquisition Limit” means (a) if
as of the end of the most recently ended fiscal quarter of the Borrower the
Consolidated Leverage Ratio is greater than or equal to 3.00 to 1.00,
$80,000,000, (b) if as of the end of the most recently ended fiscal quarter
of the Borrower the Consolidated Leverage Ratio is less than 3.00 to 1.00 but
greater than or equal to 2.50 to 1.00, $150,000,000, and (c) if as of the
end of the most recently ended fiscal quarter of the Borrower the Consolidated
Leverage Ratio is less than 2.50 to 1.00, $200,000,000; provided that as
of any date of measurement the amount set forth in (a), (b) or
(c) of this definition, as applicable, shall be increased by an
amount equal to the sum of fifty percent (50%) of the portion of Excess
Cash Flow each year not required to be paid to reduce the Term Loan pursuant to
Section 2.06(d)(iv) plus fifty percent (50%) of the portion of
the Net Cash Proceeds from the public or private issuance of Equity Interests
of the Borrower or any Restricted Subsidiary not required to be paid to reduce
the Term Loan pursuant to Section 2.06(d)(iii) plus fifty
percent (50%) of the portion of the Net Cash Proceeds from a Permitted
Securities Transaction actually received the Borrower and paid to reduce the
Term Loan pursuant to Section 2.06(d)(vi), in each case net of any
such amounts utilized in Section 8.06(c) and/or in Section 8.02(n) on
or prior to such date.

 

106

 

(b)           If the Consolidated
Senior Secured Leverage Ratio is greater than 1.50 to 1.00 as calculated in Section 8.13(a) above,
or if a Pro Forma Effect Compliance Certificate has not been delivered to the
Administrative Agent as provided in Section 8.13(a) above,
then the cash consideration for any Acquisitions otherwise permitted under this
Section 8.13 shall not exceed, in the aggregate for all such
Acquisitions, $25,000,000.

 

8.14        Creation of New
Subsidiaries.  Create or acquire any new
Non-Mueller Subsidiary after the Closing Date other than (a) any new Subsidiary
created in connection with a Qualified Homebuilding Transaction, or (b) MSH
Trusts and Restricted Subsidiaries created or acquired in accordance with Section 7.12,
provided that any Unrestricted Subsidiary may create a Subsidiary that
is an Unrestricted Subsidiary and the Borrower or any Non-Mueller Subsidiary
may create a Subsidiary that is an Unrestricted Subsidiary described in part
(e) of the definition of “Unrestricted Subsidiary”.

 

8.15        Mid-State
Homes, Walter Mortgage Company, Mid-State Capital, Non-Core Subsidiaries, New
Holdco and Mueller Water Products; Residual Beneficial Interests.  Notwithstanding anything to the contrary
herein:

 

(a)           permit Mid-State Homes,
Walter Mortgage Company, Mid-State Capital or any Subsidiary of either of them (other
than an MSH Trust) to (i) own any material assets other than Mortgage
Accounts, Third Party Mortgage Accounts, mortgage servicing rights, residual
beneficial interests in any MSH Trust, and Equity Interests of Non-Mueller
Subsidiaries (other than MSH Trusts) that are in full compliance with this Section 8.15(a),
or (ii) conduct any operations other than those associated with the
ownership, servicing, warehousing and securitizing of Mortgage Accounts, Third
Party Mortgage Accounts, Serviced Mortgage Accounts and interests in any MSH
Trust;

 

(b)           permit the ownership of
any residual beneficial interests in any MSH Trust by any Person other than (i) Mid-State
Homes, (ii) Walter Mortgage Company, (iii) Mid-State Capital, (iv) any
other Non-Mueller Subsidiary formed solely to securitize Mortgage Accounts
and/or Third Party Mortgage Accounts, (v) any QHT Interim Entity, and (vi) another
Person in connection with and as a result of the transfer of any such residual
beneficial in accordance with Section 8.05(f);

 

(c)           permit the Borrower to
own less than 100% of the Equity Interests of New Holdco, as reduced by any
Permitted Securities Transaction so long as not less than 50% of the Net Cash
Proceeds from the consummation of any one or more Permitted Securities Transactions
described in parts (b), (c) and (d) of the
definition thereof are received by the Borrower (whether directly as a result
of a Disposition of the Borrower’s Equity Interests in New Holdco or indirectly
as a result of a distribution from New Holdco) and the prepayment required by Section 2.06(d)(vi) is
made;

 

(d)           until such time as the
Borrower’s ownership of the Equity Interests of New Holdco is reduced pursuant
to transactions permitted hereunder to an amount not in excess of 50%, permit (i) New
Holdco to own any material assets other than the Equity Interests of Mueller
Water Products or to conduct any operations other than those associated with
the ownership of such Equity Interests or (ii) Mueller Water Products to
own any material assets 

 

107

 

other than the Equity Interests
stock of Mueller Group or to conduct any operations other than those associated
with the ownership of such Equity Interests.

 

8.16        Cash
of Mid-State Holdings, Mid-State Homes and Mid-State Capital.  Permit Mid-State Holdings, Mid-State Homes
and Mid-State Capital to have cash on hand in an aggregate amount exceeding
$5,000,000 at any time  (it being
understood and agreed that for purposes of this Section 8.16, “cash
on hand” shall not include any short term investments, restricted).

 

ARTICLE IX.

EVENTS OF DEFAULT AND REMEDIES

 

9.01        Events of Default.  Any of the following shall constitute an
Event of Default:

 

(a)           Non-Payment.  The Borrower or any other Loan Party fails to
pay (i) when and as required to be paid herein, any amount of principal of
any Loan or any L/C Obligation, or (ii) within three days after the same
becomes due, any interest on any Loan or on any L/C Obligation, or any
commitment or other fee due hereunder, or (iii) within five days after the
same becomes due, any other amount payable hereunder or under any other Loan
Document; or

 

(b)           Specific Covenants.  The Borrower fails to perform or observe any
term, covenant or agreement contained (i) in any of Section 7.03(a),
(b) or (g), 7.05 (other than with respect to the
maintenance of good standing), 7.10, 7.11 or 7.12 or Article VIII,
or (ii) in either Section 7.01 or 7.02 and such failure
continues for 15 days;  or

 

(c)           Other Defaults.  Any Loan Party fails to perform or observe
any other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 30 days after the earlier of (i) receipt of notice
of such default by a Responsible Officer of the Borrower from the
Administrative Agent, or (ii) any Responsible Officer of the Borrower
becomes aware of such default; or

 

(d)           Representations and
Warranties.  Any representation,
warranty, certification or statement of fact made or deemed made by or on
behalf of the Borrower or any other Loan Party herein, in any other Loan
Document, or in any document delivered in connection herewith or therewith
shall be incorrect or misleading when made or deemed made; or

 

(e)           Cross-Default.  (i) The Borrower or any Non-Mueller
Subsidiary (A) fails to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise, and after
passage of any grace period) in respect of any Indebtedness or Guarantee (other
than Indebtedness hereunder and Indebtedness under Swap Contracts) having an
aggregate principal amount (including undrawn committed or available amounts
and including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $20,000,000, or (B) fails to observe or perform
any other agreement or condition relating to any such Indebtedness or Guarantee
or contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event occurs, and such default continues for more than
the period of grace, if any, therein specified, the effect of which default or
other event is to cause, or to permit the holder or holders of such
Indebtedness or the beneficiary or 

 

108

 

beneficiaries of such Guarantee
(or a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or (ii) there occurs under any Swap Contract an
Early Termination Date (as defined in such Swap Contract) resulting from (A) any
event of default under such Swap Contract as to which the Borrower or any
Non-Mueller Subsidiary is the Defaulting Party (as defined in such Swap
Contract) or (B) any Termination Event (as so defined) under such Swap
Contract as to which the Borrower or any Non-Mueller Subsidiary is an Affected
Party (as so defined) and, in either event, the Swap Termination Value owed by
the Borrower or such Non-Mueller Subsidiary as a result thereof is greater than
$20,000,000; or

 

(f)            Insolvency
Proceedings, Etc.  Any Loan Party or
any of its Non-Mueller Subsidiaries institutes or consents to the institution
of any proceeding under any Debtor Relief Law, or makes an assignment for the
benefit of creditors; or applies for or consents to the appointment of any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer for it or for all or any material part of its property; or any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer is appointed without the application or consent of such Person and the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or
any material part of its property is instituted without the consent of such
Person and continues undismissed or unstayed for 60 calendar days, or an order
for relief is entered in any such proceeding; or

 

(g)           Inability to Pay
Debts; Attachment.  (i) The
Borrower or any Non-Mueller Subsidiary becomes unable or admits in writing its
inability or fails generally to pay its debts as they become due, or (ii) any
writ or warrant of attachment or execution or similar process is issued or
levied against all or any material part of the property of any such Person and
is not released, vacated or fully bonded within 30 days after its issue or
levy; or

 

(h)           Judgments.  There is entered against the Borrower or any
Non-Mueller Subsidiary (i) a final judgment or order for the payment of
money in an aggregate amount exceeding $15,000,000 (to the extent not covered
by insurance provided by a Person described in Section 7.07 as to
which the insurer does not dispute coverage), or (ii) any one or more
non-monetary final judgments that have, or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, in
either case, (A) enforcement proceedings are commenced by any creditor
upon such judgment or order and remain unstayed, or (B) there is a period
of 30 consecutive days during which a stay of enforcement of such judgment, by
reason of a pending appeal or otherwise, is not in effect; or

 

(i)            ERISA.  (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan which has resulted or would reasonably
be expected to result in liability of the Borrower under Title IV of ERISA to
the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of $15,000,000, or (ii) the Borrower or any ERISA Affiliate fails
to pay when due, after the expiration of any applicable grace period, any
installment payment 

 

109

 

with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of $15,000,000; or

 

(j)            Invalidity of Loan
Documents.  Any Loan Document, at any
time after its execution and delivery and for any reason other than as
expressly permitted hereunder or satisfaction in full of all the Obligations,
ceases to be in full force and effect; or any Loan Party or any other Person
contests in any manner the validity or enforceability of any Loan Document or
any Lien granted to the Administrative Agent pursuant to the Security
Instruments; or any Loan Party denies that it has any or further liability or
obligation under any Loan Document, or purports to revoke, terminate or rescind
any Loan Document; or

 

(k)           Change of Control.  There occurs any Change of Control; or

 

(l)            Mortgage Servicer.  At any time before the applicable Qualified
Homebuilding Transaction, Mid-State Homes, Walter Mortgage Company, Walter
Mortgage Servicing or Jim Walter Homes ceases to be the “servicer” or Jim
Walter Homes, Mid-State Homes or Walter Mortgage Company ceases to be the “subservicer”
on any mortgages securing any of the financings contemplated under Section 8.03(g)(i).

 

9.02        Remedies Upon Event of Default.  If any Event of Default occurs and is
continuing, the Administrative Agent shall, at the request of, or may, with the
consent of, the Required Lenders, take any or all of the following actions:

 

(a)           declare the commitment
of each Lender to make Loans and any obligation of the L/C Issuer to make L/C –
BA Credit Extensions to be terminated, whereupon such commitments and
obligation shall be terminated;

 

(b)           declare the unpaid
principal amount of all outstanding Loans, all interest accrued and unpaid
thereon, and all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
by the Borrower;

 

(c)           require that the
Borrower Cash Collateralize the L/C – BA Obligations (in an amount equal to the
then Outstanding Amount thereof); and

 

(d)           exercise on behalf of
itself and the Lenders all rights and remedies available to it and the Lenders
under the Loan Documents or applicable Law;

 

provided,
however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrower under the Bankruptcy Code of the
United States, the obligation of each Lender to make Loans and any obligation
of the L/C Issuer to make L/C – BA Credit Extensions shall automatically
terminate, the unpaid principal amount of all outstanding Loans and all
interest and other amounts as aforesaid shall automatically become due and
payable, and the obligation of the Borrower to Cash Collateralize the L/C – BA
Obligations as aforesaid shall automatically become effective, in each case
without further act of the Administrative Agent or any Lender.

 

110

 

9.03        Application of Funds.  After the exercise of remedies
provided for in Section 9.02 (or after the Loans have automatically
become immediately due and payable and the L/C – BA Obligations have
automatically been required to be Cash Collateralized as set forth in the
proviso to Section 9.02), any amounts received on account of the
Obligations shall be applied by the Administrative Agent in the following
order:

 

First, to payment of that portion of the
Obligations constituting fees, indemnities, expenses and other amounts
(including reasonable fees, charges and disbursements of counsel to the
Administrative Agent and amounts payable under Article IV) payable
to the Administrative Agent in its capacity as such;

 

Second, to payment of that portion of the Obligations
constituting fees, indemnities and other amounts (other than principal,
interest and Letter of Credit – BA Fees) payable to the Lenders and the L/C
Issuer (including reasonable fees, charges and disbursements of counsel to the
respective Lenders and the L/C Issuer and amounts payable under Article IV),
ratably among them in proportion to the respective amounts described in this
clause Second payable to them;

 

Third, to payment of that portion of the
Obligations constituting accrued and unpaid Letter of Credit – BA Fees and
interest on the Loans, L/C – BA Borrowings and other Obligations, ratably among
the Lenders and the L/C Issuer in proportion to the respective amounts
described in this clause Third payable to them;

 

Fourth, (ratably among the Lenders and the L/C
Issuer in proportion to the respective amounts described in this clause Fourth
held by them) to (i) the payment of that portion of the Obligations
constituting unpaid principal of the Loans and L/C – BA Borrowings, (ii) the
payment of the maximum amount of all Bankers’ Acceptances then outstanding,
such payment to be for the account of the L/C Issuer (or to the extent
Revolving Lenders have theretofore funded their participations in any such
Bankers’ Acceptance, ratably among such Revolving Lenders in accordance with
their Pro Rata Revolving Shares) and (iii) to Cash Collateralize that
portion of L/C – BA Obligations comprising the aggregate undrawn amount of
Letters of Credit, to the Administrative Agent for the account of the L/C
Issuer; provided that if the amounts available are insufficient to make
all payments provided for in this clause Fourth, that portion allocable
to clause (iii) shall be applied first to pay Outstanding Amounts of
Revolving Loans and L/C – BA Borrowings before being utilized to Cash
Collateralize L/C – BA Obligations;

 

Fifth, to payment of Swap Termination Values
and amounts owing under Related Treasury Management Arrangements, in each case
to the extent owing to any Lender or any Affiliate of any Lender arising under
Related Credit Arrangements that shall have been terminated and as to which the
Administrative Agent shall have received notice of such termination and the
Swap Termination Value thereof or the amount owing under the applicable Related
Treasury Management Arrangement from the applicable Lender or Affiliate of a
Lender;

 

Sixth, to the payment of all other Obligations
of the Loan Parties owing under or in respect of the Loan Document that are due
and payable to the Administrative Agent and the other Secured Parties, or any
of them, on such date, ratably based on the respective aggregate amounts of all
such Obligations owing to the Administrative Agent and the other Secured
Parties on such date; and

 

111

 

Last, the balance, if any, after all of the
Obligations have been indefeasibly paid in full, to the Borrower or as
otherwise required by Law.

 

Subject to Section 2.04(c),
amounts used to Cash Collateralize the aggregate undrawn amount of Letters of
Credit pursuant to clause Fourth above shall be applied to satisfy
drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash
Collateral after all Letters of Credit have either been fully drawn or expired,
such remaining amount shall be applied to the other Obligations, if any, in the
order set forth above.

 

ARTICLE X.

ADMINISTRATIVE AGENT

 

10.01      Appointment and Authority.  Each of the Lenders and the L/C Issuer hereby
irrevocably appoints Bank of America to act on its behalf as the Administrative
Agent hereunder and under the other Loan Documents and authorizes the
Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental
thereto.  The provisions of this Article are
solely for the benefit of the Administrative Agent, the Lenders and the L/C
Issuer, and neither the Borrower nor any other Loan Party shall have rights as
a third party beneficiary of any of such provisions.

 

10.02      Rights as a Lender.  The Person serving as the Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the
Person serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept
deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the
Borrower or any Subsidiary or other Affiliate thereof as if such Person were
not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.

 

10.03      Exculpatory Provisions.  The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein and in the other
Loan Documents.  Without limiting the
generality of the foregoing, the Administrative Agent:

 

(a)           shall not be subject to
any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing;

 

(b)           shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby or by the other
Loan Documents that the Administrative Agent is required to exercise as
directed in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be expressly provided for herein or in the other Loan
Documents), provided that the Administrative Agent shall not be required
to take any action that, in its opinion or the opinion of its counsel, may
expose the Administrative Agent to liability or that is contrary to any Loan
Document or applicable law; and

 

112

 

(c)           shall not, except as
expressly set forth herein and in the other Loan Documents, have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Affiliates that is communicated to or
obtained by the Person serving as the Administrative Agent or any of its
Affiliates in any capacity.

 

The
Administrative Agent shall not be liable for any action taken or not taken by
it (i) with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Sections 11.01 and 9.02) or (ii) in
the absence of its own gross negligence or willful misconduct.  The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until notice describing such
Default is given to the Administrative Agent by the Borrower, a Lender or the
L/C Issuer.

 

The
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or
in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance
or observance of any of the covenants, agreements or other terms or conditions
set forth herein or therein or the occurrence of any Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article V or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.

 

10.04      Reliance by Administrative Agent.  The Administrative Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice,
request, certificate, consent, statement, instrument, document or other writing
(including any electronic message, Internet or intranet website posting or
other distribution) believed by it to be genuine and to have been signed, sent
or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon
any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying
thereon.  In determining compliance with
any condition hereunder to the making of a Loan, or the issuance of a Letter of
Credit or Bankers’ Acceptance, that by its terms must be fulfilled to the
satisfaction of a Lender or the L/C Issuer, the Administrative Agent may
presume that such condition is satisfactory to such Lender or the L/C Issuer
unless the Administrative Agent shall have received notice to the contrary from
such Lender or the L/C Issuer prior to the making of such Loan or the issuance
of such Letter of Credit or Bankers’ Acceptance.  The Administrative Agent may consult with
legal counsel (who may be counsel for the Borrower), independent accountants
and other experts selected by it, and shall not be liable for any action taken
or not taken by it in accordance with the advice of any such counsel,
accountants or experts.

 

10.05      Delegation of Duties.  The Administrative Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub-agents appointed by the
Administrative Agent.  The Administrative
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall
apply to any such sub-agent and to the Related Parties of the Administrative
Agent and any 

 

113

 

such sub-agent, and shall apply
to their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

 

10.06      Resignation of Administrative Agent.  The Administrative Agent may at any time give
notice of its resignation to the Lenders, the L/C Issuer and the Borrower.  Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, in consultation with
the Borrower, to appoint a successor, which shall be a bank with an office in
the United States, or an Affiliate of any such bank with an office in the
United States.  If no such successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may on behalf
of the Lenders and the L/C Issuer, appoint a successor Administrative Agent
meeting the qualifications set forth above; provided that if the
Administrative Agent shall notify the Borrower and the Lenders that no
qualifying Person has accepted such appointment, then such resignation shall
nonetheless become effective in accordance with such notice and (1) the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents (except that in the
case of any Collateral held by the Administrative Agent on behalf of the
Lenders or the L/C Issuer under any of the Loan Documents, the retiring
Administrative Agent shall continue to hold such Collateral until such time as
a successor Administrative Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender and the L/C
Issuer directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this Section.  Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder, such successor shall succeed to
and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Administrative Agent, and the retiring Administrative
Agent shall be discharged from all of its duties and obligations hereunder or
under the other Loan Documents (if not already discharged therefrom as provided
above in this Section).  The fees payable
by the Borrower to a successor Administrative Agent shall be the same as those
payable to its predecessor unless otherwise agreed between the Borrower and
such successor.  After the retiring
Administrative Agent’s resignation hereunder and under the other Loan
Documents, the provisions of this Article and Section 11.04
shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting as Administrative Agent.

 

Any
resignation by Bank of America as Administrative Agent pursuant to this Section shall
also constitute its resignation as L/C Issuer and Swing Line Lender.  Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder, (a) such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring L/C Issuer and Swing Line Lender, (b) the retiring
L/C Issuer and Swing Line Lender shall be discharged from all of their
respective duties and obligations hereunder or under the other Loan Documents,
and (c) the successor L/C Issuer shall issue letters of credit in
substitution for the Letters of Credit and/or Bankers’ Acceptances, if any,
outstanding at the time of such succession or make other arrangements
satisfactory to the retiring L/C Issuer to effectively assume the obligations
of the retiring L/C Issuer with respect to such Letters of Credit and/or
Bankers’ Acceptances.

 

114

 

10.07      Non-Reliance on Administrative Agent and
Other Lenders.  Each Lender
and the L/C Issuer acknowledges that it has, independently and without reliance
upon the Administrative Agent or any other Lender or any of their Related
Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.  Each Lender and the L/C
Issuer also acknowledges that it will, independently and without reliance upon
the Administrative Agent or any other Lender or any of their Related Parties
and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or any related
agreement or any document furnished hereunder or thereunder.

 

10.08      No Other Duties, Etc.  Anything herein to the contrary
notwithstanding, none of the Arrangers, and none of the Book Manager,
Arrangers, Syndication Agent or Documentation Agent listed on the cover page hereof,
shall have any powers, duties or responsibilities under this Agreement or any
of the other Loan Documents, except in its capacity, as applicable, as the
Administrative Agent, a Lender or the L/C Issuer hereunder.

 

10.09      Administrative Agent May File Proofs of
Claim.  In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to any Loan Party, the Administrative Agent (irrespective
of whether the principal of any Loan or L/C – BA Obligation shall then be due
and payable as herein expressed or by declaration or otherwise and irrespective
of whether the Administrative Agent shall have made any demand on the Borrower)
shall be entitled and empowered, by intervention in such proceeding or
otherwise

 

(a)           to file and prove a
claim for the whole amount of the principal and interest owing and unpaid in
respect of the Loans, L/C – BA Obligations and all other Obligations that are
owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders, the L/C Issuer and the
Administrative Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders, the L/C Issuer and the
Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections
2.04(i) and (j), 2.10 and 11.04) allowed in such
judicial proceeding; and

 

(b)           to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same;

 

and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Lender and the L/C Issuer
to make such payments to the Administrative Agent and, in the event that the
Administrative Agent shall consent to the making of such payments directly to
the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount
due for the reasonable compensation, expenses, disbursements and advances of
the Administrative Agent and its agents and counsel, and any other amounts due
the Administrative Agent under Sections 2.10 and 11.04.

 

Nothing
contained herein shall be deemed to authorize the Administrative Agent to
authorize or consent to or accept or adopt on behalf of any Lender or the L/C
Issuer any plan of 

 

115

 

reorganization, arrangement,
adjustment or composition affecting the Obligations or the rights of any Lender
or to authorize the Administrative Agent to vote in respect of the claim of any
Lender in any such proceeding.

 

10.10      Collateral and Guaranty Matters.  The Lenders and the L/C Issuer irrevocably
authorize the Administrative Agent, at its option and in its discretion,

 

(a)           to release any Pledged
Interest and any Lien on any property granted to or held by the Administrative
Agent under any Loan Document (i) subject to Section 11.01, if
approved, authorized or ratified in writing by the Required Lenders, or (ii) without
the approval of any of the Lenders (A) upon the occurrence of the Facility
Termination Date or (B) to the extent such property is Disposed or to be
Disposed as part of or in connection with any Disposition permitted hereunder
or under any other Loan Document (including a Disposition of Equity Interests
in New Holdco as a result of a Permitted Securities Transaction permitted
hereunder);

 

(b)           to subordinate any Lien
on any property granted to or held by the Administrative Agent under any Loan
Document to the holder of any Lien on such property that is permitted by Section 8.01(j);
and

 

(c)           to release any
Guarantor from its obligations under the applicable Guaranty if such Person
ceases to be a Subsidiary as a result of a transaction permitted hereunder.

 

Upon request
by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agent’s authority to release or subordinate its
interest in particular types or items of property, or to release any Guarantor
from its obligations under the applicable Guaranty pursuant to this Section 10.10.

 

ARTICLE XI.

MISCELLANEOUS

 

11.01      Amendments, Etc.  No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent to any departure by
the Borrower or any other Loan Party therefrom, shall be effective unless in
writing signed by the Required Lenders and the Borrower or the applicable Loan
Party, as the case may be, and acknowledged by the Administrative Agent, and
each 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 amendment, waiver or consent shall:

 

(a)           waive any condition set
forth in Section 5.01(a) without the written consent of each
Lender except to the extent otherwise provided for in Section 5.01(a);

 

(b)           extend or increase (i) the
Revolving Credit Commitment of any Revolving Lender (or reinstate any Revolving
Credit Commitment terminated pursuant to Section 9.02) without the
written consent of such Revolving Lender, or (ii) the obligation of any
Term Loan Lender to make any portion of the Term Loan without the written
consent of such Term Loan Lender;

 

(c)           postpone any date fixed
by this Agreement or any other Loan Document for any payment (but excluding
mandatory prepayments) of principal, interest, fees or other amounts due 

 

116

 

to the Lenders (or any of
them), including the Term Loan Maturity Date and the Revolving Credit Maturity
Date, or any scheduled reduction of the Aggregate Revolving Credit Commitments
hereunder or under any other Loan Document, in each case without the written
consent of each Lender directly affected thereby;

 

(d)           reduce the principal
of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or
(subject to clause (v) of the second proviso to this Section 11.01)
any fees or other amounts payable hereunder or under any other Loan Document,
without the written consent of each Lender directly affected thereby; provided,
however, that only the consent of the Required Lenders shall be
necessary (i) to amend the definition of “Default Rate” (so long as such
amendment does not result in the Default Rate being lower than the interest
rate then applicable to Base Rate Loans or Eurodollar Rate Loans, as
applicable) or to waive any obligation of the Borrower to pay interest or
Letter of Credit – BA Fees at the Default Rate or (ii) to amend any
financial covenant hereunder (or any defined term used therein) even if the
effect of such amendment would be to change the Applicable Rate, the Required
Equity Prepayment Percentage or the Required ECF Prepayment Percentage;

 

(e)           change Section 2.14
or Section 9.03 in a manner that would alter the pro rata sharing
of payments required thereby without the written consent of each Lender
directly affected thereby;

 

(f)            change any provision of this Section or
the definition of “Required Lenders” or any other provision hereof specifying
the number or percentage of Lenders required to amend, waive or otherwise
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender;

 

(g)           change any provision of
this Section or the definition of “Required Revolving Lenders” or any
other provision hereof specifying the number or percentage of Revolving Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Revolving Lender;

 

(h)           change any provision of
this Section or the definition of “Required Term Loan Lenders” or any
other provision hereof specifying the number or percentage of Term Loan Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Term Loan Lender;

 

(i)            impose any greater
restriction on the ability of any Lender to assign any of its rights or
obligations hereunder without the written consent of Lenders having more than
50% of the Aggregate Credit Exposures then in effect within each of the
following classes of commitments:  (i) the
class consisting of the Revolving Lenders, and (ii) the class consisting
of the Term Loan Lenders; provided that for purposes of this clause, the
aggregate amount of each Lender’s risk participation and funded participation
in L/C Obligations and Swing Line Loans shall be deemed to be held by such
Lender;

 

117

 

(j)            release any Guarantor from the applicable
Guaranty without the written consent of each Lender, except to the extent such
Guarantor is the subject of a Disposition permitted by Section 8.05
(in which case such release may be made by the Administrative Agent acting
alone);

 

(k)           release all or a
material part of the Collateral without the written consent of each Lender
except with respect to Dispositions and releases of Collateral permitted or
required hereunder (including pursuant to Section 8.05) or as
provided in the other Loan Documents (in which case such release may be made by
the Administrative Agent acting alone); or

 

(l)            reduce the number or
type of events that give rise to a mandatory prepayment pursuant to Section 2.06(d) or
change the order or manner of application of the Net Cash Proceeds provided
therein, in each case without the written consent of each Lender directly
affected thereby;

 

and, provided  further,
that (i) no amendment, waiver or consent shall, unless in writing and
signed by the L/C Issuer in addition to the Lenders required above, affect the
rights or duties of the L/C Issuer under this Agreement or any Issuer Document
relating to any Letter of Credit or Bankers’ Acceptance issued or to be issued
by it; (ii) no amendment, waiver or consent shall, unless in writing and
signed by the Swing Line Lender in addition to the Lenders required above,
affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above, affect the rights
or duties of the Administrative Agent under this Agreement or any other Loan
Document; (iv) Section 11.06(h) may not be amended,
waived or otherwise modified without the consent of each Granting Lender all or
any part of whose Loans are being funded by an SPC at the time of such
amendment, waiver or other modification; (v) each of the Joint Fee Letter
and the Agency Fee Letter may be amended, or rights or privileges thereunder
waived, in a writing executed only by the respective parties thereto; and (vi) no
amendment, waiver or consent which has the effect of  enabling the Borrower to satisfy any
condition to a Borrowing contained in Section 5.02 hereof which,
but for such amendment, waiver or consent would not be satisfied, shall be
effective to require the Revolving Lenders, the Swing Line Lender or the L/C
Issuer to make any additional Revolving Loan or Swing Line Loan, or to issue
any additional or renew any existing Letter of Credit or issue any Bankers’
Acceptance, unless and until the Required Revolving Lenders (or, if applicable,
all Revolving Lenders) shall have approved such amendment, waiver or
consent.  Notwithstanding anything to the
contrary herein, no Defaulting Lender shall have any right to approve or
disapprove any amendment, waiver or consent hereunder, except that the
Revolving Credit Commitment of such Lender may not be increased or extended
without the consent of such Lender.

 

11.02      Notices;
Effectiveness; Electronic Communication.

 

(a)           Notices Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone or in the case of
notices otherwise expressly provided herein (and except as provided in
subsection (b) below), all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopier as
follows, 

 

118

 

and all notices and other
communications expressly permitted hereunder to be given by telephone shall be
made to the applicable telephone number, as follows:

 

(i)            if
to the Borrower, the Administrative Agent, the L/C Issuer or the Swing Line
Lender, to the address, telecopier number, electronic mail address or telephone
number specified for such Person on Schedule 11.02, as changed pursuant
to subsection (d) below; and

 

(ii)           if
to any other Lender, to the address, telecopier number, electronic mail address
or telephone number specified in its Administrative Questionnaire, as changed
pursuant to subsection (d) below.

 

Notices sent
by hand or overnight courier service, or mailed by certified or registered
mail, shall be deemed to have been given when received; notices sent by
telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient).  Notices delivered through
electronic communications to the extent provided in subsection (b) below,
shall be effective as provided in such subsection (b).

 

(b)           Electronic
Communications.  Notices and other
communications to the Lenders and the L/C Issuer hereunder may be delivered or
furnished by electronic communication (including e-mail and Internet or
intranet websites) pursuant to procedures approved by the Administrative Agent,
provided that the foregoing shall not apply to notices to any Lender or
the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer,
as applicable, has notified the Administrative Agent that it is incapable of
receiving notices under such Article by electronic communication.  The Administrative Agent or the Borrower may,
in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.

 

Unless the
Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other
communication is not sent during the normal business hours of the recipient,
such notice or communication shall be deemed to have been sent at the opening
of business on the next business day for the recipient, and (ii) notices
or communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that such
notice or communication is available and identifying the website address
therefor.

 

(c)           The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE.”  THE AGENT PARTIES (AS
DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER
MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR
ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY 

 

119

 

OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM
VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH
THE BORROWER MATERIALS OR THE PLATFORM. 
In no event shall the Administrative Agent or any of its Related Parties
(collectively, the “Agent
Parties”) have any liability to the Borrower, any Lender, the
L/C Issuer or any other Person for losses, claims, damages, liabilities or
expenses of any kind (whether in tort, contract or otherwise) arising out of
the Borrower’s or the Administrative Agent’s transmission of Borrower Materials
through the Internet, except to the extent that such losses, claims, damages,
liabilities or expenses are determined by a court of competent jurisdiction by
a final and nonappealable judgment to have resulted from the gross negligence
or willful misconduct of such Agent Party; provided, however,
that in no event shall any Agent Party have any liability to the borrower, any
Lender, the L/C Issuer or any other Person for indirect, special, incidental,
consequential or punitive damages (as opposed to direct or actual damages).

 

(d)           Change of Address,
Etc.  Each of the Borrower, the
Administrative Agent, the L/C Issuer and the Swing Line Lender may change its
address, telecopier or telephone number for notices and other communications
hereunder by notice to the other parties hereto.  Each other Lender may change its address,
telecopier or telephone number for notices and other communications hereunder
by notice to the Borrower, the Administrative Agent, the L/C Issuer and the
Swing Line Lender.  In addition, each
Lender agrees to notify the Administrative Agent from time to time to ensure
that the Administrative Agent has on record (i) an effective address,
contact name, telephone number, telecopier number and electronic mail address
to which notices and other communications may be sent and (ii) accurate
wire instructions for such Lender.

 

(e)           Reliance by
Administrative Agent, L/C Issuer and Lenders.  The Administrative
Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon
any notices (including telephonic Revolving Loan Notices, Swing Line Loan
Notices and Term Loan Interest Rate Selection Notices) purportedly given by or
on behalf of the Borrower even if (i) such notices were not made in a
manner specified herein, were incomplete or were not preceded or followed by
any other form of notice specified herein, or (ii) the terms thereof, as
understood by the recipient, varied from any confirmation thereof.  The Borrower shall indemnify the
Administrative Agent, the L/C Issuer, each Lender and the Related Parties of
each of them from all losses, costs, expenses and liabilities resulting from
the reliance by such Person on each notice purportedly given by or on behalf of
the Borrower.  All telephonic notices to
and other telephonic communications with the Administrative Agent may be
recorded by the Administrative Agent, and each of the parties hereto hereby
consents to such recording.

 

11.03      No Waiver; Cumulative Remedies.  No failure by any Lender, the L/C Issuer or
the Administrative Agent to exercise, and no delay by any such Person in
exercising, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.

 

120

 

11.04      Expenses; Indemnity; Damage Waiver.

 

(a)           Costs and Expenses.  The Borrower shall pay (i) all
reasonable out-of-pocket expenses incurred by the Administrative Agent and its
Affiliates and the Arrangers (including the reasonable fees, charges and disbursements
of counsel for the Administrative Agent and the Arrangers), in connection with
the syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket
expenses incurred by the L/C Issuer in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, the L/C Issuer, the Swing Line Lender or the Arrangers
(including the fees, charges and disbursements of any counsel for the
Administrative Agent, the Swing Line Lender, the L/C Issuer or the Arrangers),
in connection with the enforcement or protection of its rights (A) in
connection with this Agreement and the other Loan Documents, including its
rights under this Section, or (B) in connection with the Loans made or
Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.

 

(b)           Indemnification by the Borrower.  The Borrower shall indemnify the
Administrative Agent (and any sub-agent thereof), each Lender and the L/C
Issuer, and each Related Party of any of the foregoing Persons (each such
Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses (including the reasonable fees,
charges and disbursements of any counsel for any Indemnitee), incurred by any
Indemnitee or asserted against any Indemnitee by any third party or by the
Borrower or any other Loan Party arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or
thereunder, the consummation of the transactions contemplated hereby or thereby
or, in the case of the Administrative agent (and any sub-agent thereof) and its
Related Parties only, the administration of this Agreement and the other Loan
Documents, (ii) any Loan, Letter of Credit or Bankers’ Acceptance or the
use or proposed use of the proceeds therefrom (including any refusal by the L/C
Issuer to honor a demand for payment under a Letter of Credit or Bankers’
Acceptance if the documents presented in connection with such demand do not
strictly comply with the terms of such Letter of Credit or Bankers’
Acceptance), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
its Non-Mueller  Subsidiaries, or
any Environmental Liability related in any way to the Borrower or any of its
Non-Mueller  Subsidiaries, or (iv) any
actual or prospective claim, litigation, investigation or proceeding relating
to any of the foregoing, whether based on contract, tort or any other theory,
whether brought by a third party or by the Borrower or any other Loan Party,
and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses (x) are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or (y) result from a claim brought by the Borrower or any
other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s
obligations hereunder or under any other Loan Document, if the 

 

121

 

Borrower or such Loan
Party has obtained a final and nonappealable judgment in its favor on such
claim as determined by a court of competent jurisdiction.

 

(c)           Reimbursement by Lenders.  To the extent that the Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) or
(b) of this Section to be paid by it to the Administrative Agent (or
any sub-agent thereof), the L/C Issuer or any Related Party of any of the
foregoing, each Lender severally agrees to pay to the Administrative Agent (or
any such sub-agent), the L/C Issuer or such Related Party, as the case may be,
such Lender’s pro rata share (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought based on such Lender’s
portion of Loans, commitments and risk participations with respect to the
Revolving Credit Facility and the Term Loan Facility) of such unpaid amount, provided
that the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against the
Administrative Agent (or any such sub-agent) or the L/C Issuer in its capacity
as such, or against any Related Party of any of the foregoing acting for the
Administrative Agent (or any such sub-agent) or L/C Issuer in connection with
such capacity.  The obligations of the
Lenders under this subsection (c) are subject to the provisions of Section 2.13(d);
provided  further that any amount due exclusively to the L/C
Issuer in its capacity as such shall be borne pursuant to this Section 11.04(c) pro
rata by the Revolving Lenders, and not by any Term Lender.

 

(d)           Waiver of Consequential Damages,
Etc.  To the fullest extent permitted
by applicable law, the Borrower shall not assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any
other Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Loan, Letter of Credit or Bankers’
Acceptance or the use of the proceeds thereof. 
No Indemnitee referred to in subsection (b) above shall be liable
for any damages arising from the use by unintended recipients of any
information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby
or thereby.

 

(e)           Payments.  All amounts due under this Section shall
be payable not later than ten Business Days after demand therefor.

 

(f)            Survival.  The agreements in this Section shall
survive the resignation of the Administrative Agent, the L/C Issuer and the
Swing Line Lender, the replacement of any Lender and the occurrence of the
Facility Termination Date.

 

11.05      Payments Set Aside.  To the extent that any payment by or on behalf of the
Borrower is made to the Administrative Agent, the L/C Issuer or any Lender, or
the Administrative Agent, the L/C Issuer or any Lender exercises its right of
setoff, and such payment or the proceeds of such setoff or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the
Administrative Agent, the L/C Issuer or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any
proceeding under any Debtor Relief Law or otherwise, then (a) to the
extent of such recovery, the obligation or part 

 

122

 

thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such setoff had not occurred,
and (b) each Lender and the L/C Issuer severally agrees to pay to the
Administrative Agent upon demand its applicable share (without duplication) of
any amount so recovered from or repaid by the Administrative Agent, plus
interest thereon from the date of such demand to the date such payment is made at
a rate per annum equal to the Federal Funds Rate from time to time in
effect.  The obligations of the Lenders
and the L/C Issuer under clause (b) of the preceding sentence shall
survive the occurrence of the Facility Termination Date.

 

11.06      Successors and Assigns.

 

(a)           Successors and Assigns Generally.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that the Borrower
may not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of the Administrative Agent and each Lender
and no Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an Eligible Assignee in accordance with the
provisions of subsection (b) of this Section, (ii) by way of
participation in accordance with the provisions of subsection (d) of this
Section, (iii) by way of pledge or assignment of a security interest
subject to the restrictions of subsection (f) of this Section, or (iv) to
an SPC in accordance with the provisions of subsection (h) of this Section (and
any other attempted assignment or transfer by any party hereto shall be null
and void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby,
Participants to the extent provided in subsection (d) of this Section and,
to the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

 

(b)           Assignments by Lenders.  Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Revolving Credit Commitment
and its Revolving Loans (including for purposes of this subsection (b),
participations in L/C – BA Obligations and in Swing Line Loans) or of its Pro
Rata Term Share of the Term Loan at the time owing to it (such Lender’s portion
of Loans, commitments and risk participations with respect to each of the
Revolving Credit Facility and the Term Loan Facility (each, an “Applicable Facility”)
being referred to in this Section 11.06 as its “Applicable Share”))
at the time owing to it); provided that

 

(i)            except in the case of an assignment
of the entire remaining amount of the assigning Lender’s Applicable Share of
the Applicable Facility at the time owing to it or in the case of an assignment
to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a
Lender, the aggregate amount of the Applicable Share (which for this purpose
includes Loans outstanding thereunder) with respect to each Applicable
Facility, determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent or, if “Trade Date”
is specified in the Assignment and Assumption, as of the Trade Date, shall not
be less than (A) $5,000,000 with respect to the Revolving Credit Facility
and (B) $1,000,000 with respect to the Term Loan Facility, unless in
either case each of the Administrative Agent and, so long as no 

 

123

 

Event of Default has occurred and is continuing, the
Borrower otherwise consents (each such consent not to be unreasonably withheld
or delayed), provided, however, that concurrent assignments to
members of an Assignee Group and concurrent assignments from members of an
Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and
members of its Assignee Group) will be treated as a single assignment for
purposes of determining whether such minimum amount has been met;

 

(ii)           each partial assignment shall be made
as an assignment of a proportionate part of all the assigning Lender’s rights
and obligations under this Agreement with respect to the Applicable Facility,
except that this clause (ii) shall not (A) prohibit any Lender from
assigning all or a portion of its rights and obligations among the Applicable
Facilities on a non-pro rata basis or (B) apply to rights in respect of
Swing Line Loans;

 

(iii)          any assignment of a Revolving Credit
Commitment must be approved by the Administrative Agent, the L/C Issuer and the
Swing Line Lender unless the Person that is the proposed assignee is itself a
Lender (whether or not the proposed assignee would otherwise qualify as an
Eligible Assignee); and

 

(iv)          the parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Assumption,
together with a processing and recordation fee in the amount, if any, required
as set forth in Schedule 11.06, and the Eligible Assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.

 

Subject to acceptance and recording thereof by the Administrative Agent
pursuant to subsection (c) of this Section, from and after the effective
date specified in each Assignment and Assumption, the Eligible Assignee
thereunder shall be a party to this Agreement and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Revolving Lender or a Term Lender, as applicable, under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and Assumption
covering all of the assigning Lender’s rights and obligations under this
Agreement, such Lender shall cease to be a party hereto) but shall continue to
be entitled to the benefits of Sections 4.01, 4.04, 4.05,
and 11.04 with respect to facts and circumstances occurring prior to the
effective date of such assignment.  Upon
request, the Borrower (at its expense) shall execute and deliver applicable
Notes to the assignee Lender.  Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this subsection shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with subsection (d) of this Section.

 

(c)           Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrower (in such capacity, subject to Section 11.17),
shall maintain at the Administrative Agent’s Office a copy of each Assignment
and Assumption delivered to it and a register for the recordation of the names
and addresses of the Lenders, and the Revolving Credit Commitments of, and
principal amounts of the Loans and L/C – BA Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent and the Lenders may
treat each 

 

124

 

Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by each of the Borrower and the L/C Issuer at any reasonable time
and from time to time upon reasonable prior notice.  In addition, at any time that a request for a
consent for a material or substantive change to the Loan Documents is pending,
any Lender may request and receive from the Administrative Agent a copy of the
Register.

 

(d)           Participations.  Any Lender may at any time, without the
consent of, or notice to, the Borrower or the Administrative Agent, sell
participations to any Person (other than a natural person or the Borrower or
any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all
or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Revolving Credit Commitment and/or the Loans
(including such Lender’s participations in L/C – BA Obligations and/or Swing
Line Loans) owing to it); provided that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations and (iii) the Borrower, the Administrative Agent, the
Lenders and the L/C Issuer shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement.

 

(e)           Any agreement or instrument pursuant
to which a Lender sells such a participation shall provide that such Lender
shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any 
provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in
the first proviso to Section 11.01 that affects such
Participant.  Subject to subsection (e) of
this Section, the Borrower agrees that each Participant shall be entitled to
the benefits of Sections 4.01, 4.04 and 4.05 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to subsection (b) of this Section.  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 11.08
as though it were a Lender, provided such Participant agrees to be
subject to Section 2.14 as though it were a Lender.

 

(f)            Limitations upon Participant
Rights.  A Participant shall not be
entitled to receive any greater payment under Section 4.01 or 4.04
than the applicable Lender would have been entitled to receive with respect to
the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower’s prior written consent.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 4.01
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with Section 4.01(e) as
though it were a Lender.

 

(g)           Certain Pledges.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such
Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

 

125

 

(h)           Electronic Execution of
Assignments.  The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records
Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.

 

(i)            Special Purpose Funding Vehicles.  Notwithstanding anything to the contrary
contained herein, any Lender (a “Granting Lender”) may grant to a special
purpose funding vehicle identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the Borrower (an “SPC”) the option to
provide all or any part of any Loan that such Granting Lender would otherwise
be obligated to make pursuant to this Agreement; provided that (i) nothing
herein shall constitute a commitment by any SPC to fund any Loan, and (ii) if
an SPC elects not to exercise such option or otherwise fails to make all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof or, if it fails to do so, to make such payment to
the Administrative Agent as is required under Section 2.13(b)(ii).  Each party hereto hereby agrees that (i) neither
the grant to any SPC nor the exercise by any SPC of such option shall increase
the costs or expenses or otherwise increase or change the obligations of the
Borrower under this Agreement (including its obligations under Section 4.04),
(ii) no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement for which a Lender would be liable, and (iii) the
Granting Lender shall for all purposes, including the approval of any
amendment, waiver or other modification of any provision of any Loan Document,
remain the lender of record hereunder. 
The making of a Loan by an SPC hereunder shall utilize the Revolving
Credit Commitment or commitment to make a Term Loan of the Granting Lender to
the same extent, and as if, such Loan were made by such Granting Lender.  In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the occurrence of the
Facility Termination Date) that, prior to the date that is one year and one day
after the payment in full of all outstanding commercial paper or other senior
debt of any SPC, it will not institute against, or join any other Person in
instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceeding under the laws of the United States or
any State thereof.  Notwithstanding anything
to the contrary contained herein, any SPC may (i) with notice to, but
without prior consent of the Borrower and the Administrative Agent and with the
payment of a processing fee in the amount of $2,500, assign all or any portion
of its right to receive payment with respect to any Loan to the Granting Lender
and (ii) disclose on a confidential basis any non-public information
relating to its funding of Loans to any rating agency, commercial paper dealer
or provider of any surety or Guarantee or credit or liquidity enhancement to
such SPC.

 

(j)            Resignation as L/C Issuer or
Swing Line Lender after Assignment. 
Notwithstanding anything to the contrary contained herein, if at any
time Bank of America assigns all of its Revolving Credit Commitment, Revolving
Loans and any Pro Rata Term Share of the Term Loan pursuant to subsection (b) above,
Bank of America may, (i) upon 30 days’ notice to the Borrower and the
Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the
Borrower, resign as Swing Line Lender. 
In the event of any such resignation as L/C Issuer or Swing Line Lender,
the Borrower shall be entitled to appoint from among the Lenders willing to 

 

126

 

serve in such capacity a
successor L/C Issuer or Swing Line Lender hereunder; provided, however,
that no failure by the Borrower to appoint any such successor shall affect the
resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case
may be.  If Bank of America resigns as
L/C Issuer, it shall retain all the rights, powers, privileges and duties of
the L/C Issuer hereunder with respect to all Letters of Credit and Bankers’
Acceptances outstanding as of the effective date of its resignation as L/C
Issuer and all L/C – BA Obligations with respect thereto (including the right
to require the Lenders to make Base Rate Loans or fund risk participations in
Unreimbursed Amounts pursuant to Section 2.04(c)).  If Bank of America resigns as Swing Line
Lender, it shall retain all the rights of the Swing Line Lender provided for
hereunder with respect to Swing Line Loans made by it and outstanding as of the
effective date of such resignation, including the right to require the Lenders
to make Base Rate Loans or fund risk participations in outstanding Swing Line
Loans pursuant to Section 2.05(c). Upon the appointment of a
successor L/C Issuer and/or Swing Line Lender, (a) such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and
(b) the successor L/C Issuer shall issue letters of credit in substitution
for the Letters of Credit and/or Bankers’ Acceptances, if any, outstanding at
the time of such successor or make other arrangements satisfactory to Bank of
America to effectively assume the obligations of Bank of America with respect
to such Letters of Credit and/or Bankers’ Acceptances.

 

11.07      Treatment of Certain Information;
Confidentiality.  Each of the Administrative Agent, the Lenders
and the L/C Issuer agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective partners, directors,
trustees, officers, employees, agents, advisors and representatives (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other
party hereto, (e) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any action or proceeding relating
to this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Borrower and its obligations, (g) with the
consent of the Borrower or (h) to the extent such Information (x) becomes
publicly available other than as a result of a breach of this Section or (y) becomes
available to the Administrative Agent, any Lender, the L/C Issuer or any of
their respective Affiliates on a nonconfidential basis from a source other than
the Borrower.

 

For purposes of this Section, “Information” means all information received
from the Borrower or any Non-Mueller  Subsidiary
relating to the Borrower or any Non-Mueller  Subsidiary
or any of their respective businesses, other than any such information that is
available to the Administrative Agent, any Lender or the L/C Issuer on a
nonconfidential basis prior to disclosure by the Borrower or any Non-Mueller  Subsidiary, provided that, in the
case of information received from the Borrower or any Non-Mueller  Subsidiary after the date hereof, 

 

127

 

any information not marked “PUBLIC” at the time of
delivery will be deemed to be confidential; provided that any
information marked “PUBLIC” may also be marked “Confidential”.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

Each of the Administrative Agent, the Lenders and the L/C Issuer
acknowledges that (a) the Information may include material non-public
information concerning the Borrower or a Non-Mueller  Subsidiary, as the case may be, (b) it has developed
compliance procedures regarding the use of material non-public information and (c) it
will handle such material non-public information in accordance with applicable
Law, including Federal and state securities Laws.

 

11.08      Right of Setoff. 
If an Event of Default shall have occurred and be continuing, each
Lender, the L/C Issuer and each of their respective Affiliates is hereby
authorized at any time and from time to time, after obtaining the prior written
consent of the Administrative Agent, to the fullest extent permitted by
applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held
and other obligations (in whatever currency) at any time owing by such Lender,
the L/C Issuer or any such Affiliate to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement or any other Loan Document to such Lender
or the L/C Issuer, irrespective of whether or not such Lender or the L/C Issuer
shall have made any demand under this Agreement or any other Loan Document and
although such obligations of the Borrower  may
be contingent or unmatured or are owed to a branch or office of such Lender or
the L/C Issuer different from the branch or office holding such deposit or
obligated on such indebtedness.  The
rights of each Lender, the L/C Issuer and their respective Affiliates under
this Section are in addition to other rights and remedies (including other
rights of setoff) that such Lender, the L/C Issuer or their respective
Affiliates may have.  Each Lender and the
L/C Issuer agrees to notify the Borrower and the Administrative Agent promptly
after any such setoff and application, provided that the failure to give
such notice shall not affect the validity of such setoff and application.

 

11.09      Interest Rate Limitation.  Notwithstanding anything to the contrary contained in
any Loan Document, the interest paid or agreed to be paid under the Loan
Documents shall not exceed the maximum rate of non-usurious interest permitted
by applicable Law (the “Maximum
Rate”).  If the
Administrative Agent or any Lender shall receive interest in an amount that
exceeds the Maximum Rate, the excess interest shall be applied to the principal
of the Loans or, if it exceeds such unpaid principal, refunded to the
Borrower.  In determining whether the
interest contracted for, charged, or received by the Administrative Agent or a
Lender exceeds the Maximum Rate, such Person may, to the extent permitted by
applicable Law, (a) characterize any payment that is not principal as an
expense, fee, or premium rather than interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate, allocate,
and spread in equal or unequal parts the total amount of interest throughout
the contemplated term of the Obligations hereunder.

 

11.10      Counterparts; Integration;
Effectiveness.  This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall 

 

128

 

constitute an original,
but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof.  Except as provided in Section 5.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an
executed counterpart of a signature page of this Agreement by telecopy
shall be effective as delivery of a manually executed counterpart of this
Agreement.

 

11.11      Survival of Representations and
Warranties.  All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery hereof and thereof. 
Such representations and warranties have been or will be relied upon by
the Administrative Agent and each Lender, regardless of any investigation made
by the Administrative Agent or any Lender or on their behalf and
notwithstanding that the Administrative Agent or any Lender may have had notice
or knowledge of any Default at the time of any Credit Extension, and shall
continue in full force and effect as long as any Loan or any other Obligation
hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall
remain outstanding.

 

11.12      Severability.  If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to
replace the illegal, invalid or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the illegal,
invalid or unenforceable provisions.  The
invalidity of a provision in a particular jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

 

11.13      Replacement of Lenders. 
If any Lender requests compensation under Section 4.04, if
the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 4.01,
if any Lender is a Defaulting Lender, or if any Lender fails to approve any
amendment, waiver or consent requested by Borrower pursuant to Section 11.01
that has received the written approval of not less than the Required Lenders
but also requires the approval of such Lender, then in each such case the
Borrower may, at its sole expense and effort, upon notice to such Lender and
the 

 

129

 

Administrative Agent,
require such Lender to assign and delegate, without recourse (in accordance
with and subject to the restrictions contained in, and consents required by, Section 11.06),
all of its interests, rights and obligations under this Agreement and the
related Loan Documents to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment), provided
that:

 

(a)           the Borrower shall have paid to the
Administrative Agent the assignment fee specified in Section 11.06(b);

 

(b)           such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and L/C –
BA Advances, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any
amounts under Section 4.05) from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts);

 

(c)           in the case of any such assignment
resulting from a claim for compensation under Section 4.04 or
payments required to be made pursuant to Section 4.01, such
assignment will result in a reduction in such compensation or payments
thereafter;

 

(d)           in the case of any such assignment
resulting from the refusal of a Lender to approve a requested amendment, waiver
or consent, the Person to whom such assignment is being made has agreed to
approve such requested amendment, waiver or consent; and

 

(e)           such assignment does not conflict
with applicable Laws.

 

A Lender shall not be required to make any such assignment or
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.

 

11.14      Governing Law; Jurisdiction; Etc.

 

(a)           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

(b)           SUBMISSION TO JURISDICTION.  THE BORROWER IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED
STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE
ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO
BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)           WAIVER OF VENUE.  THE BORROWER IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY 

 

130

 

APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS
SECTION.  EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

 

(d)           SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW.

 

11.15      Waiver of Jury Trial. 
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

 

11.16      USA PATRIOT Act Notice. 
Each Lender that is subject to the Act (as hereinafter defined) and the
Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required
to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender or the Administrative Agent, as applicable, to
identify the Borrower in accordance with the Act.

 

11.17      No Fiduciary Relationship. 
The Borrower acknowledges and agrees that in connection with all aspects
of each transaction contemplated by this Agreement, the Borrower, on the one
hand, and each of Bank of America, SunTrust Bank, the Arrangers and any
affiliate through which any of them may be acting (each, a “Transaction Affiliate”),
on the other hand, have an arms-length business relationship that creates no
fiduciary duty on the part of any of Bank of America, SunTrust Bank, either
Arranger or any of their respective Transaction Affiliates and each of them
expressly disclaims any fiduciary relationship.

 

131Exhibit 10.1

 

SECOND AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

THIS SECOND AMENDED AND
RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on May 1,
2008 (the “Execution Date”), to be effective for all purposes as of May 2,
2008 (the “Effective Date”), by and between Linens ‘n Things, Inc.,
a Delaware corporation (the “Company”) and wholly owned subsidiary of
Linens Holding Co., a Delaware corporation (“Holding”), and F. David
Coder (the “Executive”).

 

WHEREAS, the Company and the
Executive entered in an Amended and Restated Employment Agreement on May 9,
2006, effective as of May 1, 2006 (the “Original Employment Agreement”);
and

 

WHEREAS, the Company and the
Executive now desire to amend certain provisions of the Original Employment
Agreement and restate the Original Employment Agreement, as so amended,
effective as of the Effective Date.

 

NOW, THEREFORE, in
consideration of the mutual representations, warranties, covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:

 

1.             Employment of Executive; Duties.

 

1.1          Title.  During the Employment Period
(as defined in Section 2
hereof), the Executive shall serve as President and Chief Operating Officer of
the Company and of Holding.  The
Executive shall have the normal duties, responsibilities and authority
commensurate with such positions.

 

1.2          Duties.  During the Employment Period,
the Executive shall do and perform all services and acts necessary or advisable
to fulfill the duties and responsibilities of the Executive’s positions and
shall render such services on the terms set forth herein.  In addition, the Executive shall have such
other executive and managerial powers and duties as may reasonably be assigned
to the Executive, commensurate with the Executive serving as a President and
Chief Operating Officer.  The Company may
adjust the duties and responsibilities of the Executive as President and Chief
Operating Officer, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the
Company’s needs from time to time. 
Except for sick leave, reasonable vacations and excused leaves of
absence, the Executive shall, throughout the Employment Period, devote
substantially all the Executive’s working time, attention, knowledge and skills
faithfully, and to the best of the Executive’s ability, to the duties and
responsibilities of the Executive’s positions in furtherance of the business
affairs and activities of the Company and its subsidiaries and Affiliates (as
defined in Section 5.4(a) hereof)
and, except where the Company provides its written consent otherwise, shall
maintain the Executive’s principal residence within 75 miles of the principal
office of the Company as of the Effective Date. 
The Executive shall at all times be subject to, comply with, observe and
carry out (a) the Company’s rules, regulations, policies and codes of
ethics and/or conduct applicable to its employees generally and in effect from
time to time and (b) such rules, regulations, policies, codes of ethics 

 

 

and/or conduct, directions and restrictions
as the Board of Directors of the Company (the “Board”) may from time to
time reasonably establish or approve for senior executive officers of the
Company.

 

2.             Term of
Employment.

 

2.1          Employment
Period.  The employment of the Executive hereunder
shall continue until December 31, 2009 (the “Initial Employment Period”),
unless terminated earlier in accordance with the provisions of Section 4 of this Agreement.

 

2.2          Extension.  Unless terminated earlier in
accordance with the provisions of Section 4
of this Agreement, the employment of the Executive hereunder shall continue
after the end of the Initial Employment Period for additional one (1)-year
periods (each an “Extension Period” and, together with the Initial
Employment Period, the “Employment Period”), unless the Company or the
Executive notifies the other in writing not less than one (1) year prior
to the end of the Initial Employment Period, or the end of the applicable
Extension Period, of its or the Executive’s election, in its or the Executive’s
sole discretion, not to extend the Employment Period.

 

3.             Compensation
and General Benefits.

 

3.1          Base Salary.

 

(a)           During the
Employment Period, the Company agrees to pay to the Executive an annual base
salary in an amount equal to $500,000 (such base salary, as may be adjusted
from time to time pursuant to Section 3.1(b),
is referred to herein as the “Base Salary”).  The Executive’s Base Salary, less amounts
required to be withheld under applicable law, shall be payable in equal
installments in accordance with the Company’s normal payroll practices and
procedures in effect from time to time for the payment of salaries to officers
of the Company, but in no event less frequently than monthly.

 

(b)           The Board or
the Compensation Committee established by the Board (the “Compensation
Committee”) shall review the Executive’s performance on an annual basis
and, based on such review, may change the Base Salary, as it, acting in its
sole discretion, shall determine to be reasonable and appropriate.

 

3.2          Bonus.  With respect to the 2008
calendar year and with respect to each calendar year that commences during the
Employment Period, the Executive shall be eligible to receive from the Company
an annual performance bonus (the “Annual Bonus”) on a basis and in an
amount to be determined by the Board or the Compensation Committee in the
exercise of its sole discretion for the applicable year.  The target Annual Bonus, if any, will be 50%
of the Base Salary.  Any Annual Bonus
earned shall be payable in full as soon as reasonably practicable following the
determination thereof, but in no event later than May 15 of the following
year, and in accordance with the Company’s normal payroll practices and
procedures.  Except as otherwise
expressly provided in Section 4
hereof, any Annual Bonus (or portion thereof) payable under this Section 3.2 shall not be payable
unless the Executive is employed by the Company on the last day of the period
to which such Annual Bonus relates.

 

2

 

3.3          Expenses.  During the Employment Period,
in addition to any amounts to which the Executive may be entitled pursuant to
the other provisions of this Section 3 or
elsewhere herein, the Executive shall be entitled to receive reimbursement from
the Company for all reasonable and necessary expenses incurred by the Executive
in performing the Executive’s duties hereunder on behalf of the Company,
subject to, and consistent with, the Company’s policies for expense payment and
reimbursement, in effect from time to time.

 

3.4          Fringe Benefits.  During the Employment Period, in addition to
any amounts to which the Executive may be entitled pursuant to the other
provisions of this Section 3
or elsewhere herein, the Executive shall be entitled to participate in, and to
receive benefits under, (a) any benefit plans, arrangements or policies
made available by the Company to its employees generally, subject to and on a
basis consistent with the terms, conditions and overall administration of each
such plan, arrangement or policy and (b) without limiting the foregoing,
the benefits set forth on Exhibit B
attached hereto.

 

3.5          Stock Options.  During the Employment Period and subject to
the approval of the Option Committee of Holding, as defined in the Linens
Holding Co. Stock Option Plan (the “Plan”), the Executive shall be
eligible to participate in and be granted stock options under the Plan, or any
successor stock option plan, to purchase shares of Common Stock, par value
$0.01 per share, of Holding (the “Common Stock”).

 

4.             Termination.

 

4.1          General.  The employment of the Executive hereunder
(and the Employment Period) shall terminate as provided in Section 2 hereof, unless earlier
terminated in accordance with the provisions of this Section 4.

 

4.2          Death or Disability of the
Executive.

 

(a)           The employment of the Executive hereunder (and the
Employment Period) shall terminate upon (i) the death of the Executive and
(ii) at the option of the Company, upon not less than fifteen (15) days’
prior written notice to the Executive or the Executive’s personal
representative or guardian, if the Executive suffers a “Total Disability” (as defined
in Section 4.2(b) hereof).  Upon termination for death or Total
Disability, subject to reduction by any benefits paid or payable to the
Executive, the Executive’s beneficiaries or estate under any Company-sponsored
disability benefit plan program or policy for the period following such date of
termination, (A) the Company shall pay to the Executive, guardian or
personal representative, as the case may be, the Executive’s current Base
Salary for the remainder of the Employment Period in effect immediately prior
to the date of termination and (B) subject further to the sole discretion
of the Board or the Compensation Committee, the Company may also pay to the
Executive, guardian or personal representative, as the case may be, a prorated
share of the Annual Bonus pursuant to Section 3.2
hereof (based on the period of actual employment) that the Executive would have
been entitled to had the Executive worked the full year during which the
termination occurred, provided that bonus targets are met for the year of such
termination.  Any bonus shall be payable
as soon as reasonably practicable following the determination thereof, but in
no event later than May 15 of the following year, and in accordance with
the Company’s normal payroll practices and procedures.

 

3

 

(b)           For purposes of this Agreement, “Total Disability”
shall mean (i) if the Executive is subject to a legal decree of
incompetency (the date of such decree being deemed the date on which such
disability occurred), (ii) the written determination by a physician
selected by the Company that, because of a medically determinable disease,
injury or other physical or mental disability, the Executive is unable
substantially to perform, with or without reasonable accommodation, the
material duties of the Executive required hereby, and that such disability has
lasted for ninety (90) consecutive days or any one hundred twenty (120) days
during the immediately preceding twelve (12)-month period or is, as of the date
of determination, reasonably expected to last six (6) months or longer
after the date of determination, in each case based upon medically available
reliable information or (iii) Executive’s qualifying for benefits under
the Company’s long-term disability coverage, if any.  In conjunction with determining mental and/or
physical disability for purposes of this Agreement, the Executive hereby
consents to (x) any examinations that the Board or the Compensation
Committee determines are relevant to a determination of whether the Executive
is mentally and/or physically disabled or are required by the Company
physician, (y) furnish such medical information as may be reasonably
requested and (z) waive any applicable physician patient privilege that
may arise because of such examination.

 

(c)           With respect to outstanding stock options and other
equity-based awards held by the Executive as of the date of termination
pursuant to this Section 4.2,
(i) any such options that are not vested or exercisable as of such date of
termination shall immediately expire and any such equity-based awards that are
not vested as of such date of termination shall immediately be forfeited and (ii) any
such options that are vested and exercisable as of such date of termination
shall expire immediately following the expiration of the one hundred eighty
(180)-day period following such date of termination.

 

(d)           With respect to any shares of Common Stock held by the
Executive that are vested as of the date of termination pursuant to this Section 4.2 (or issued pursuant to the
exercise of options following such date of termination pursuant to Section 4.2(c) hereof), for the
two hundred seventy (270)-day period following such date of termination, the
Company (or its designee) shall have the right to purchase from the Executive
or the Executive’s beneficiary, as applicable, and the Executive or the
Executive’s beneficiary hereby agrees to sell any or all such shares to the
Company (or the Company’s designee) for an amount equal to the product of (i) the
per share current fair market value of a share of Common Stock (as determined
by the Board in good faith) and (ii) the number of shares so purchased.

 

4.3          Termination by the Company Without
Cause or Resignation by the Executive For Good Reason.

(a)           The Company may terminate the Executive’s employment
without “Cause” (as defined in Section 4.3(g)),
and thereby terminate the Executive’s employment (and the Employment Period)
under this Agreement at any time with no requirement for notice to the
Executive.

 

(b)           The Executive may resign, and thereby terminate the
Executive’s employment (and the Employment Period), at any time for “Good
Reason” (as defined in Section 4.3(f) hereof),
upon not less than sixty (60) days’ prior written notice to the 

 

4

 

Company specifying in reasonable detail the
reason therefor; provided, however, that the Company shall have a
reasonable opportunity to cure any such Good Reason (to the extent possible)
within sixty (60) days after the Company’s receipt of such notice; and provided
further that, if the Company is not seeking to cure, the Company shall not
be obligated to allow the Executive to continue working during such period and
may, in its sole discretion, accelerate such termination of employment (and the
Employment Period) to any date during such period.

 

(i)            Executive
may not terminate employment under this Agreement for Good Reason regarding any
of the Company’s acts or omissions of which Executive had actual notice for
sixty (60) days or more prior to giving notice of termination for Good Reason.

 

(ii)           A
determination of whether the Executive legitimately has Good Reason for
termination of the Executive’s employment under this Agreement, and of whether
the Company has effectively cured and thus eliminated the grounds for such Good
Reason, shall be made only by the Chief Executive Officer of the Company (the “Chief
Executive Officer”), within the Chief Executive Officer’s sole judgment and
discretion, acting in good faith after having met with the Company’s Senior
Vice President of Human Resources.

 

(c)           In the event the Executive’s employment is terminated
pursuant to this Section 4.3,
then, subject to Section 4.3(d) hereof,
the following provisions shall apply:

 

(i)            The
Company shall continue to pay the Executive the Base Salary to which the
Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the
year of termination) had the Executive remained in the employ of the Company
until the expiration of the Employment Period in effect immediately prior to
the date of termination, with all such amounts payable in accordance with the
Company’s normal payroll practices and procedures in the same manner and at the
same time as though the Executive remained employed by the Company.

 

(ii)           If
such termination occurs upon or within six (6) months following a Change
of Control (as defined in Exhibit A
attached hereto), the Company shall continue to pay the Executive the Base
Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary
rate during the year of termination) for the greater of (A) the period set
forth in Section 4.3(c)(i) hereof
or (B) a two (2)-year period following such date of termination, with all
such amounts payable in accordance with the Company’s normal payroll practices
and procedures in the same manner and at the same time as though the Executive
remained employed by the Company.

 

(iii)          In
the event the Executive’s employment is terminated pursuant to this Section 4.3 without Cause, and if the
Company has previously effected reductions in the Executive’s Base Salary and
the base salary of all executives at the same level as the Executive, which
reductions were

 

5

 

substantially similar, then the Base Salary rate for purposes of Section 4.3(c)(i) or (ii) hereof shall be the Base Salary
rate in effect immediately prior to such reductions.

 

(iv)          Subject
to the sole discretion of the Board or the Compensation Committee, the Company
may pay to the Executive a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the
period of actual employment) that the Executive would have been entitled to had
the Executive worked the full year during which the termination occurred,
provided that bonus targets are met for the year of such termination.  The bonus shall be payable as soon as
reasonably practicable following the determination thereof, but in no event
later than May 15 of the following year, and in accordance with the
Company’s normal payroll practices and procedures.

 

(v)           With
respect to outstanding options and other equity-based awards held by the
Executive as of the date of termination pursuant to this Section 4.3, (A) any such options
that are not vested or exercisable as of such date of termination shall
immediately expire and any such equity-based awards that are not vested as of
such date of termination shall immediately be forfeited and (B) any such
options that are vested and exercisable as of such date of termination shall
expire immediately following the expiration of the ninety (90)-day period
following such date of termination.

 

(vi)          With
respect to any shares of Common Stock held by the Executive that are vested as
of the date of termination pursuant to this Section 4.3
(or issued pursuant to the exercise of options following such date of
termination pursuant to Section 4.3(c)(v) hereof),
for the one hundred eighty (180)-day period following such date of termination,
the Company (or its designee) shall have the right to purchase from the
Executive, and the Executive hereby agrees to sell any or all such shares to
the Company (or the Company’s designee), for an amount equal to the product of (A) the
per share current fair market value of a share of Common Stock (as determined
by the Board in good faith) and (B) the number of shares so purchased.

 

(d)           As a condition precedent to the Executive’s right to
receive the benefits set forth in Section 4.3(c) hereof,
the Executive agrees to execute a release of the Company and its respective
Affiliates, officers, directors, stockholders, employees, agents, insurers,
representatives and successors from and against any and all claims that the
Executive may have against any such Person (as defined in Section 5.4(f) hereof) relating
to the Executive’s employment by the Company and the termination thereof, such
release to be in form and substance reasonably satisfactory to the Company.

 

(e)           Anything in this Agreement to the contrary notwithstanding,
if it shall be determined that any payment, vesting, distribution or transfer
by the Company or any successor, or any Affiliate of the foregoing or by any
other Person or that any other event occurring with respect to the Executive
and the Company for the Executive’s benefit, whether paid or payable or
distributed or distributable under the terms of this Agreement 

 

6

 

or otherwise (including under any employee
benefit plan) (a “Payment”) would be subject to or result in the
imposition of the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”) (and any regulations or
guidance promulgated or issued thereunder, any successor provision, and any
similar provision of state or local income tax law) (collectively, the “Excise
Tax”), then the amount of the Payment shall be reduced to the highest
amount that may be paid by the Company or other entity without subjecting any
such Payment to the Excise Tax (the “Payment Reduction”).  The Executive shall have the right to
designate those payments or benefits that shall be reduced or eliminated under
the Payment Reduction to avoid the imposition of the Excise Tax, subject to the
confirmation of the Accounting Firm (as defined herein) with respect to the
intended effect thereof.

 

(i)            Subject
to the provisions of Section 4.3(e)(ii),
all determinations required to be made under this Section 4.3(e), including whether and when a Payment is
subject to Section 4999 and the assumptions to be utilized in arriving at
such determination and in determining an appropriate Payment Reduction, shall
be made by KPMG LLP, or any other nationally recognized accounting firm that
shall be the Company’s outside auditors at the time of such determination (the “Accounting
Firm”), which Accounting Firm shall provide detailed supporting
calculations to the Executive and the Company within fifteen (15) business days
of the receipt of notice from the Company or the Executive that there will be a
Payment that the Person giving notice believes may be subject to the Excise
Tax.  All fees and expenses of the
Accounting Firm shall be borne by the Company. 
Any determination by the Accounting Firm shall be binding upon the
Company and the Executive in determining whether a Payment Reduction is
required and the amount thereof (subject to Sections 4.3(e)(ii) and
(iii)), in the absence of material
mathematical or legal error.

 

(ii)           As
a result of uncertainty in the application of Section 4999 that may exist
at the time of the initial determination by the Accounting Firm, it may be
possible that in making the calculations required to be made hereunder, the
Accounting Firm shall determine that a Payment Reduction need not be made that
properly should be made (an “Overpayment”) or that a Payment Reduction
not properly needed to be made should be made (an “Underpayment”).  If, within seventy-five (75) days after the
Accounting Firm’s initial determination under Section 4.3(e)(i),
the Accounting Firm shall determine that an Overpayment was made, any such
Overpayment shall be treated for all purposes, to the extent practicable and
subject to applicable law, as a loan to the Executive with interest at the
applicable Federal rate provided for in Section 1274(d) of the Code
and shall be repaid by the Executive to the Company within thirty-five (35)
days after the Executive receives notice of the Accounting Firm’s
determination; provided, however, that the amount to be repaid by
the Executive to the Company either as a loan or otherwise as a lump sum
payment (where a loan is not practicable or permitted by law) shall be reduced
to the extent that any portion of the Overpayment to be repaid will not be
offset by a corresponding reduction in tax by reason of such repayment of the Overpayment.  If the Accounting Firm shall determine that
an Underpayment was made, any such Underpayment shall be due and payable by the
Company to the Executive

 

7

 

within thirty-five (35) days after the Company receives notice of the
Accounting Firm’s determination.

 

(iii)          The
Executive shall give written notice to the Company of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Executive
of an Excise Tax, such notice to be provided within fifteen (15) days after the
Executive shall have received written notice of such claim.  The Executive shall cooperate with the
Company in determining whether to contest or pay such claim and shall not pay
such claim without the written consent of the Company, which shall not be
unreasonably withheld, conditioned or delayed.

 

(iv)          This
Section 4.3(e) shall
remain in full force and effect following the termination of the Executive’s
employment for any reason until the expiration of the statute of limitations on
the assessment of taxes applicable to the Executive for all periods in which
the Executive may incur a liability for taxes (including Excise Taxes),
interest or penalties arising out of the operation of this Agreement.

 

(f)            For purposes of this Agreement, the Executive would be
entitled to terminate the Executive’s employment for “Good Reason” if
without the Executive’s prior written consent:

 

(i)            the
Company fails to comply with any material obligation imposed by this Agreement;

 

(ii)           the
Company changes the Executive’s position from that of President and Chief
Operating Officer; provided, however, that a change in the
Executive’s duties or responsibilities without a change in the Executive’s
position as President and Chief Operating Officer shall not constitute Good
Reason; or

 

(iii)          the
Company effects a reduction in the Executive’s Base Salary, unless all
executives at the same level as the Executive receive a substantially similar
reduction in base salary.

 

(g)           For purposes of this Agreement, “Cause” means the
occurrence of any one or more of the following events, and the Company shall
have the sole discretion to determine the existence of Cause:

 

(i)            a
failure by the Executive to comply with any obligation under this Agreement;

 

(ii)           the
Executive’s being indicted for (A) any felony or (B) any misdemeanor
that causes or is likely to cause harm or embarrassment to the Company or any
of its Affiliates, in the reasonable judgment of the Board;

 

8

 

(iii)          theft,
embezzlement or fraud by the Executive in connection with the performance of
the Executive’s duties hereunder;

 

(iv)          the
Executive’s engaging in any activity that gives rise to a material conflict
with the Company or any of its Affiliates;

 

(v)           the
misappropriation by the Executive of any material business opportunity of the
Company or any of its Affiliates;

 

(vi)          any
failure to comply with, observe or carry out the Company’s rules, regulations,
policies and codes of ethics and/or conduct applicable to its employees
generally and in effect from time to time, including (without limitation) those
regarding conflicts, potential conflicts of interest or the appearance of a
conflict of interest

 

(vii)         any
failure to comply with, observe or carry out the rules, regulations, policies,
directions, codes of ethics and/or conduct and restrictions established or
approved by the Board from time to time for senior executive officers of the
Company, including (without limitation) those regarding conflicts, potential
conflicts of interest or the appearance of a conflict of interest;

 

(viii)        substance
abuse or use of illegal drugs that, in the reasonable judgment of the Board, (A) impairs
the Executive’s performance of the Executive’s duties hereunder or (B) causes
or is likely to cause harm or embarrassment to the Company or any of its
Affiliates; and

 

(ix)           engagement
in conduct that Executive knows or should know is injurious to the Company or
any of its Affiliates.

 

4.4          Termination For Cause, Voluntary
Resignation Other Than For Good Reason or Election Not to Extend the Employment
Period.

 

(a)           (i) The Company may, upon action of the Board,
terminate the employment of the Executive (and the Employment Period) at any
time for “Cause,” (ii) the Executive may voluntarily resign other than for
Good Reason and thereby terminate the Executive’s employment (and the
Employment Period) under this Agreement at any time upon not less than thirty
(30)-days’ prior written notice or (iii) either the Company or the
Executive may elect not to extend or further extend the Employment Period
pursuant to Section 2.2
hereof.

 

(b)           The following provisions shall apply upon termination by
the Company for Cause, by the Executive as the result of resignation for other
than for Good Reason, or by the Company or the Executive at the end of the
Employment Period as the result of an election not to extend or further extend
the Employment Period:

 

(i)            The
Executive shall be entitled to receive all amounts of earned but unpaid Base
Salary and benefits accrued through the date of such termination.  Except as provided below, all other rights of
the Executive

 

9

 

(and all obligations of the Company) hereunder shall terminate as of
the date of such termination.

 

(ii)           With
respect to outstanding options and other equity-based awards held by the
Executive as of the date of termination pursuant to this Section 4.4, (A) any such options
that are not vested or exercisable as of such date of termination shall
immediately expire and any such equity-based awards that are not vested as of
such date of termination shall immediately be forfeited and (B) any such
options that are vested and exercisable as of such date of termination shall
expire immediately following the expiration of the ninety (90)-day period
following such date of termination.

 

(iii)          With
respect to any shares of Common Stock held by the Executive that are vested as
of the date of termination pursuant to this Section 4.4
(or issued pursuant to the exercise of options following such date of
termination pursuant to Section 4.4(b)(ii) hereof),
for the one hundred eighty (180)-day period following such date of termination,
the Company (or its designee) shall have the right to purchase from the
Executive and the Executive hereby agrees to sell any or all such shares to the
Company (or the Company’s designee) for an amount equal to the product of (A) the
per share current fair market value of a share of Common Stock (as determined
by the Board in good faith) and (B) the number of shares so purchased.

 

4.5          Resignation from Officer Positions.  Upon the termination of the Executive’s
employment for any reason (unless otherwise agreed in writing by the Company
and the Executive), the Executive will be deemed to have resigned, without any
further action by the Executive, from any and all officer, and/or director
positions that the Executive, immediately prior to such termination, (a) held
with the Company or any of its Affiliates and (b) held with any other
entities at the direction of, or as a result of the Executive’s affiliation
with, the Company or any of its Affiliates. 
If for any reason this Section 4.5
is deemed to be insufficient to effectuate such resignations, then Executive
will, upon the Company’s request, execute any documents or instruments that the
Company may deem necessary or desirable to effectuate such resignations.  In addition, the Executive hereby designates
the Secretary or any Assistant Secretary of the Company and of any Affiliate to
execute any such documents or instruments as the Executive’s attorney-in-fact
to effectuate such resignations if execution by the Secretary or any Assistant
Secretary of the Company or Affiliate is deemed by the Company or the Affiliate
to be a more expedient means to effectuate such resignation or resignations.

 

4.6          Section 409A of the Code.  Notwithstanding anything to the contrary in
this Agreement, the parties mutually desire to avoid adverse tax consequences
associated with the application of Section 409A of the Code to this
Agreement and agree to cooperate fully and take appropriate reasonable actions
to avoid any such consequences under Section 409A of the Code, including
delaying payments and reforming the form of the Agreement if such action would
reduce or eliminate taxes and/or interest payable as a result of Section 409A
of the Code. In this regard, notwithstanding anything to the contrary in this Section 4, to the extent necessary to
comply with Section 409A of the Code, any payment

 

10

 

required under this Section 4 shall be deferred for a
period of six (6) months, regardless of the circumstances giving rise to
or the basis for such payment.

 

5.             Confidentiality, Work Product
and Non-Competition and Non-Solicitation.

 

5.1          Confidentiality.

 

(a)           In connection with the Executive’s
employment with the Company, the Company promises to provide the Executive with
access to “Confidential Information” (as defined in Section 5.4(d) hereof) in support of the Executive’s
employment duties.  The Executive
recognizes that the Company’s business interests require a confidential
relationship between the Company and the Executive and the fullest practical
protection and confidential treatment of all Confidential Information.  At all times, both during and after the
Employment Period, the Executive shall not directly or indirectly:  (i) appropriate, download, print, copy,
remove, use, disclose, divulge, communicate or otherwise “Misappropriate” (as
defined in Section 5.4(e) hereof)
any Confidential Information, including, without limitation, originals or
copies of any Confidential Information, in any media or format, except
for the Company’s benefit within the course and scope of the Executive’s
employment or with the prior written consent of the Chief Executive Officer; or
(ii) take or encourage any action that would circumvent, interfere with or
otherwise diminish the value or benefit of the Confidential Information to any
of the Company Parties (as defined in Section 5.4(b) hereof).

 

(b)           All Confidential Information, and all
other information and property affecting or relating to the business of the
Company Parties within the Executive’s possession, custody or control,
regardless of form or format, shall remain, at all times, the property of the
respective Company Parties, the appropriation, use and/or disclosure of which
is governed and restricted by this Agreement.

 

(c)           The Executive acknowledges and agrees
that:

 

(i)            the Executive occupies a unique position within the
Company, and the Executive is and will be intimately involved in the
development and/or implementation of Confidential Information;

 

(ii)           in the event the Executive breaches this Section 5.1 with respect to any
Confidential Information, such breach shall be deemed to be a Misappropriation
of such Confidential Information; and

 

(iii)          any Misappropriation of Confidential Information will
result in immediate and irreparable harm to the Company.

 

(d)           Upon receipt of any formal or
informal request, by legal process or otherwise, seeking the Executive’s direct
or indirect disclosure or production of any Confidential Information to any
Person, the Executive shall promptly and timely notify the Company and provide
a description and, if applicable, hand deliver a copy of such request to the
Company.  The Executive irrevocably
nominates and appoints the Company as the Executive’s true and lawful
attorney-in-fact to act in the Executive’s name, place and stead to perform any

 

11

 

act that the Executive might
perform to defend and protect against any disclosure of Confidential
Information.

 

(e)           At any time the Company may request,
during or after the Employment Period, the Executive shall deliver to the
Company all originals and copies of Confidential Information and all other
information and property affecting or relating to the business of the Company
Parties within the Executive’s possession, custody or control, regardless of
form or format, including, without limitation any Confidential Information
produced by the Executive.  Both during
and after the Employment Period, the Company shall have the right of reasonable
access to review, inspect, copy and/or confiscate any Confidential Information
within the Executive’s possession, custody or control.

 

(f)            Upon termination or expiration of
this Agreement, the Executive shall immediately return to the Company all
Confidential Information, and all other information and property affecting or
relating to the business of the Company Parties, within the Executive’s possession,
custody or control, regardless of form or format, without the necessity of a
prior Company request.

 

(g)           During the Employment Period, the
Executive represents and agrees that the Executive will not use or disclose any
confidential or proprietary information or trade secrets of others, including
but not limited to former employers, and that the Executive will not bring onto
the premises of the Company or access such confidential or proprietary
information or trade secrets of such others, unless consented to in writing by
said others, and then only with the prior written authorization of the Company.

 

5.2          Work Product/Intellectual Property.

 

(a)           Assignment.  The Executive hereby assigns to the Company
all right, title and interest to all “Work Product” (as defined in Section 5.4(h) hereof) that (i) relates
to any of the Company Parties’ actual or anticipated business, research and
development or existing or future products or services, or (ii)  is
conceived, reduced to practice, developed or made using any equipment,
supplies, facilities, assets, information or resources of any of the Company
Parties (including, without limitation, any intellectual property rights).

 

(b)           Disclosure.  The Executive shall promptly disclose Work
Product to the Chief Executive Officer and perform all actions reasonably
requested by the Company (whether during or after the Employment Period) to
establish and confirm the ownership and proprietary interest of any of the
Company Parties in any Work Product (including, without limitation, the
execution of assignments, consents, powers of attorney, applications and other
instruments).  The Executive shall not
file any patent or copyright applications related to any Work Product except
with the written consent of the Chief Executive Officer.

 

5.3          Non-Competition and
Non-Solicitation.

 

(a)           In consideration of the Confidential
Information being provided to the Executive as stated in Section 5.1 hereof, and other good and
valuable new consideration as stated in this Agreement, including, without
limitation, employment and/or 

 

12

 

continued employment with the
Company, and the business relationships, Company goodwill, work experience,
client, customer and/or vendor relationships and other fruits of employment
that the Executive will have the opportunity to obtain, use and develop under
this Agreement, the Executive agrees to the restrictive covenants stated in
this Section 5.3.

 

(b)           During the Employment Period and
until the end of the Restricted Period (as defined in Section 5.4(g) hereof), the
Executive agrees that the Executive will not, directly or indirectly, on the
Executive’s own behalf or on the behalf of any other Person, within the United
States of America or in any other country or territory in which the businesses
of the Company are conducted:

 

(i)            engage in a Competing Business (as defined in Section 5.4(c) hereof, including,
without limitation, by owning, managing, operating, controlling, being employed
by, providing services as a consultant or independent contractor to or
participating in the ownership, management, operation or control of any
Competing Business;

 

(ii)           induce or attempt to induce any customer, vendor,
supplier, licensor or other Person in a business relationship with any Company
Party, for or with which the Executive or employees working under the Executive’s
supervision had any direct or indirect responsibility or contact during the
Employment Period, (A) to do business with a Competing Business or (B) to
cease, restrict, terminate or otherwise reduce business with the Company for
the benefit of a Competing Business, regardless of whether the Executive
initiates contact; or

 

(iii)          (A) solicit, recruit, persuade, influence or induce,
or attempt to solicit, recruit, persuade, influence or induce anyone employed
or otherwise retained by any of the Company Parties (including any independent
contractor or consultant), to cease or leave their employment or contractual or
consulting relationship with any Company Party, regardless of whether the
Executive initiates contact for such purposes or (B) hire, employ or
otherwise attempt to establish, for any Person, any employment, agency,
consulting, independent contractor or other business relationship with any
Person who is or was employed or otherwise retained by any of the Company
Parties (including any independent contractor or consultant).

 

(c)           The parties hereto acknowledge and
agree that, notwithstanding anything in Section 5.3(b)(i) hereof,
(i) the Executive may own or hold, solely as passive investments,
securities of Persons engaged in any business that would otherwise be included
in Section 5.3(b)(i), as long
as with respect to each such investment the securities held by the Executive do
not exceed five percent (5%) of the outstanding securities of such Person and
such securities are publicly traded and registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) the
Executive may serve on the board of directors (or other comparable position) or
as an officer of any entity at the request of the Board; provided, however,
that in the case of investments otherwise permitted under clause (i) above,
the Executive shall not be permitted to, directly or indirectly, participate in,
or 

 

13

 

attempt to influence, the
management, direction or policies of (other than through the exercise of any
voting rights held by the Executive in connection with such securities), or
lend the Executive’s name to, any such Person.

 

(d)           The Executive acknowledges and agrees
that, for purposes of this Section 5.3,
indirect acts by the Executive shall include, without limitation, an act by the
Executive’s spouse, ancestor, lineal descendant, lineal descendant’s spouse,
sibling or other member of the Executive’s immediate family.

 

(e)           The Executive acknowledges that (i) the
restrictive covenants contained in this Section 5.3
hereof are ancillary to and part of an otherwise enforceable agreement, such
being the agreements concerning Confidential Information and other
consideration as stated in this Agreement, (ii) at the time that these
restrictive covenants are made, the limitations as to time, geographic scope
and activity to be restrained, as described herein, are reasonable and do not
impose a greater restraint than necessary to protect the good will and other
legitimate business interests of the Company, including without limitation,
Confidential Information (including trade secrets), client, customer and/or
vendor relationships, client and/or customer goodwill and business
productivity, (iii) in the event of termination of the Executive’s
employment, the Executive’s experiences and capabilities are such that the
Executive can obtain gainful employment without violating this Agreement and
without the Executive incurring undue hardship, (iv) based on the relevant
benefits and other new consideration provided for in this Agreement, including,
without limitation, the disclosure and use of Confidential Information, the
restrictive covenants of this Section 5.3,
as applicable according to their terms, shall remain in full force and effect
even in the event of the Executive’s involuntary termination from employment,
with or without Cause and (v) the Executive has carefully read this
Agreement and has given careful consideration to the restraints imposed upon
the Executive by this Agreement and consents to the terms of the restrictive
covenants in this Section 5.3,
with the knowledge that this Agreement may be terminated at any time in
accordance with the provisions hereof.

 

5.4          Definitions.  For purposes of this Agreement, the following
terms shall have the following meanings:

 

(a)           An “Affiliate” of any
specified Person means any other Person, whether now or hereafter existing,
directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person.  For purposes hereof, “control” or any other
form thereof, when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms “controlling” and “controlled” shall have meanings correlative to the
foregoing.

 

(b)           “Company Parties” means the
Company, and its direct and indirect parents, subsidiaries and Affiliates, and
their successors in interest.

 

(c)           “Competing Business” means any
business that competes with any of the Company Parties, including, without
limitation, any enterprise that engages in,

 

14

 

owns or operates businesses
that market, sell, distribute, manufacture or otherwise are involved in the
home textile, housewares or home accessories industries.

 

(d)           Confidential Information.

 

(i)            Definition. “Confidential Information”
means any and all material, information, ideas, inventions, formulae, patterns,
compilations, programs, devices, methods, techniques, processes, know how,
plans (marketing, business, strategic, technical or otherwise), arrangements,
pricing and other data of or relating to any of the Company Parties (as well as
their customers and/or vendors) that is confidential, proprietary or trade
secret (A) by its nature, (B) based on how it is treated or designated
by a Company Party, (C) because the disclosure of which would have a
material adverse effect on the business or planned business of any of the
Company Parties and/or (D) as a matter of law.

 

(ii)           Exclusions. 
Confidential Information does not include material, data, and/or
information (A) that any Company Party has voluntarily placed in the
public domain, (B) that has been lawfully and independently developed and
publicly disclosed by third parties, (C) that constitutes the general
non-specialized knowledge and skills gained by the Executive during the
Employment Period or (D) that otherwise enters the public domain through
lawful means; provided, however, that the unauthorized
appropriation, use or disclosure of Confidential Information by the Executive,
directly or indirectly, shall not affect the protection and relief afforded by
this Agreement regarding such information.

 

(iii)          Inclusions. Confidential Information includes,
without limitation, the following information (including without limitation,
compilations or collections of information) relating or belonging to any
Company Party (as well as their clients, customers and/or vendors) and created,
prepared, accessed, used or reviewed by the Executive during or after the
Employment Period:  (1) product and manufacturing information, such
as ingredients, combinations of ingredients and manufacturing processes; (2) scientific and technical information, such
as research and development, tests and test results, formulae and formulations,
studies and analysis; (3) financial and
cost information, such as operating and production costs, costs of
goods sold, costs of supplies and manufacturing materials, non-public financial
statements and reports, profit and loss information, margin information and
financial performance information; (4) customer
related information, such as customer related contracts, engagement
and scope of work letters, proposals and presentations, customer-related
contacts, lists, identities and prospects, practices, plans, histories,
requirements and needs, price information and formulae and information
concerning client or customer products, services, businesses or equipment
specifications; (5) vendor and supplier
related information, such as the identities, practices, history or
services of any vendors or suppliers and vendor or supplier contacts; (6) sales, marketing and price information,
such as marketing and sales programs and related data, sales and marketing
strategies and 

 

15

 

plans, sales and marketing procedures and
processes, pricing methods, practices and techniques and pricing schedules and
lists; (7) database, software and other
computer related information, such as computer programs, data,
compilations of information and records, software and computer files,
presentation software and computer-stored or backed-up information including,
but not limited to, e-mails, databases, word processed documents, spreadsheets,
notes, schedules, task lists, images and video; (8) employee-related information, such as lists
or directories identifying employees, representatives and contractors, and
information regarding the competencies (knowledge, skill, experience),
compensation and needs of employees, representatives and contractors and training
methods; and (9) business- and
operation-related information, such as operating methods,
procedures, techniques, practices and processes, information about
acquisitions, corporate or business opportunities, information about partners
and potential investors, strategies, projections and related documents,
contracts and licenses and business records, files, equipment, notebooks,
documents, memoranda, reports, notes, sample books, correspondence, lists and
other written and graphic business records.

 

(e)           “Misappropriate”, or any form
thereof, means:

 

(i)            the acquisition of any Confidential Information by a
Person who knows or has reason to know that the Confidential Information was
acquired by theft, bribery, misrepresentation, breach or inducement of a breach
of a duty to maintain secrecy or espionage through electronic or other means
(each, an “Improper Means”); or

 

(ii)           the disclosure or use of any Confidential Information
without the express consent of the Company by a Person who (A) used
Improper Means to acquire knowledge of the Confidential Information, (B) at
the time of disclosure or use, knew or had reason to know that his or her
knowledge of the Confidential Information was (x) derived from or through
a Person who had utilized Improper Means to acquire it, (y) acquired under
circumstances giving rise to a duty to maintain its secrecy or limit its use or
(z) derived from or through a Person who owed a duty to the Company to
maintain its secrecy or limit its use or (C) before a material change of his
or her position, knew or had reason to know that it was Confidential
Information and that knowledge of it had been acquired by accident or mistake.

 

(f)            “Person” means any
individual, corporation, partnership, limited liability company, joint venture,
association, business trust, joint-stock company, estate, trust, unincorporated
organization, government or other agency or political subdivision thereof or
any other legal or commercial entity.

 

(g)           “Restricted Period” means the
longer of (i) twelve (12) months after the date of termination of
employment (the Executive’s last day of work for the Company) or (ii) the
period during which the Executive is receiving payments from the Company
pursuant to Section 4 hereof.

 

16

 

(h)           “Work Product” means all
patents and patent applications, all inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports, creative works,
discoveries, software, computer programs, modifications, enhancements,
know-how, formulations, concepts and ideas, and all similar or related
information (in each case whether or not patentable), all copyrights and
copyrightable works, all trade secrets, confidential information, and all other
intellectual property and intellectual property rights that are conceived,
reduced to practice, developed or made by the Executive either alone or with
others in the course of employment with the Company (including employment prior
to the date of this Agreement).

 

5.5          Remedies.  Because the Executive’s services are unique
and because the Executive has access to Confidential Information, the Executive
acknowledges and agrees that if the Executive breaches any of the provisions of
Section 5 hereof, the Company
may suffer immediate and irreparable harm for which monetary damages alone will
not be a sufficient remedy.  The
restrictive covenants stated in Section 5
hereof are without prejudice to the Company’s rights and causes of action at
law.

 

5.6          Interpretation; Severability.

 

(a)           The Executive has carefully
considered the possible effects on the Executive of the covenants not to
compete, the confidentiality provisions and the other obligations contained in
this Agreement, and the Executive recognizes that the Company has made every
effort to limit the restrictions placed upon the Executive to those that are
reasonable and necessary to protect the Company’s legitimate business
interests.

 

(b)           The Executive acknowledges and agrees
that the restrictive covenants set forth in this Agreement are reasonable and
necessary in order to protect the Company’s valid business interests.  It is the intention of the parties hereto
that the covenants, provisions and agreements contained herein shall be
enforceable to the fullest extent allowed by law.  If any covenant, provision or agreement
contained herein is found by a court having jurisdiction to be unreasonable in
duration, scope or character of restrictions, or otherwise to be unenforceable,
such covenant, provision or agreement shall not be rendered unenforceable
thereby, but rather the duration, scope or character of restrictions of such
covenant, provision or agreement shall be deemed reduced or modified with
retroactive effect to render such covenant, provision or agreement reasonable
or otherwise enforceable (as the case may be), and such covenant, provision or
agreement shall be enforced as modified. 
If the court having jurisdiction will not review the covenant, provision
or agreement, the parties hereto shall mutually agree to a revision having an
effect as close as permitted by applicable law to the provision declared
unenforceable.  The parties hereto agree
that if a court having jurisdiction determines, despite the express intent of
the parties hereto, that any portion of the covenants, provisions or agreements
contained herein are not enforceable, the remaining covenants, provisions and
agreements herein shall be valid and enforceable.  Moreover, to the extent that any provision is
declared unenforceable, the Company shall have any and all rights under
applicable statutes or common law to enforce its rights with respect to any and
all Confidential Information or unfair competition by the Executive.

 

17

 

6.             Miscellaneous.

 

6.1          Public
Statements.

 

(a)           Media Nondisclosure.  The Executive agrees that during the
Employment Period or at any time thereafter, except as may be authorized in
writing by the Company, the Executive will not directly or indirectly disclose
or release to the Media any information concerning or relating to any aspect of
the Executive’s employment or termination from employment with the Company
and/or any aspect of any dispute that is the subject of this Agreement.  For the purposes of this Agreement, the term “Media”
includes, without limitation, any news organization, station, publication,
show, website, web log (blog), bulletin board, chat room and/or program (past,
present and/or future), whether published through the means of print, radio,
television and/or the Internet or otherwise, and any member, representative,
agent and/or employee of the same.

 

(b)           Non-Disparagement.  The Executive agrees that during the
Employment Period or at any time thereafter, the Executive  will not make any statements, comments or
communications in any form, oral, written or electronic to any Media or any
customer, client or supplier of the Company or any of its Affiliates, which
would constitute libel, slander or disparagement of the Company or any of its
Affiliates, including, without limitation, any such statements, comments or
communications that criticize, ridicule or are derogatory to the Company or any
of its Affiliates; provided, however, that the terms of this Section 6.1(b) shall not apply to
communications between the Executive and, as applicable, the Executive’s
attorneys or other persons with whom communications would be subject to a claim
of privilege existing under common law, statute or rule of procedure.  The Executive further agrees that the
Executive will not in any way solicit any such statements, comments or
communications from others.

 

6.2          ARBITRATION.  SUBJECT TO THE RIGHTS UNDER SECTION 6.3
HEREOF TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL
BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES,
WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETO ARISING
UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT BY OR
TERMINATION FROM THE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF
DAMAGES, OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE)  (COLLECTIVELY, “DISPUTES”).  THE PARTIES EACH WAIVE THE RIGHT TO A JURY
TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT
OUTSIDE THE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT.  In the event either party provides a notice of
arbitration of any dispute to the other party, the parties agree to submit that
dispute to a single arbitrator selected from a panel of arbitrators of JAMS
located in the greater New York City-Southern New Jersey area.  The arbitration will be governed by the JAMS
Comprehensive Arbitration Rules and Procedures in effect at the time the
arbitration is commenced.  If for any
reason JAMS cannot serve as the arbitration administrator, the Company may
select an alternative arbitration administrator such as the American
Arbitration Association, to serve under the terms of this Agreement.

 

18

 

(a)                                  VENUE. 
THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUE OF ANY SUCH
ARBITRATION PROCEEDING (AND OF ANY OTHER PROCEEDING, INCLUDING ANY COURT
PROCEEDING, UNDER THIS AGREEMENT) SHALL BE PASSAIC COUNTY, NEW JERSEY (THE “AGREED
VENUE”).

 

(b)                                 Authority and
Decision.  The
arbitrator shall have the authority to award the same damages and other relief
that a court could award.  The arbitrator
shall issue a reasoned award explaining the decision and any damages
awarded.  The arbitrator’s decision will be
final and binding upon the parties and enforceable by a court of competent
jurisdiction.  The parties will abide by
and perform any award rendered by the arbitrator.  In rendering the award, the arbitrator shall
state the reasons therefor, including (without limitation) any computations of
actual damages or offsets, if applicable.

 

(c)                                  Fees and Costs.  In the event of arbitration under the terms
of this Agreement, the fees charged by JAMS or other arbitration administrator
and the arbitrator shall be borne by the parties as determined by the
arbitrator, except for any initial registration fee, which the parties shall
bear equally.  Otherwise, the parties
shall each bear their own costs, expenses and attorneys’ fees incurred in
arbitration; provided, however, that the prevailing party shall
be entitled to recover and have awarded its attorneys’ fees, court costs,
arbitration expenses, and its portion of the fees and costs charged by JAMS or
other arbitration administrator, regardless of which party initiated the
proceedings, in addition to any other relief to which it may be entitled.

 

(d)                                 Limited Scope.  The following are excluded from binding
arbitration under this Agreement:  claims
for workers’ compensation benefits or unemployment benefits; replevin; and
claims for which a binding arbitration agreement is invalid as a matter of law.

 

6.3                               Injunctive Relief.  The parties hereto may seek injunctive relief
in arbitration; provided, however, that as an exception to the
arbitration agreement set forth in Section 6.2
hereof, the parties, in addition to all other available remedies, shall each
have the right to initiate an action in any court of competent jurisdiction in
order to request injunctive or other equitable relief regarding the terms of Sections 5 or 6.2 hereof. 
The exclusive venue of any such proceeding shall be in the Agreed
Venue.  The parties agree (a) to
submit to the jurisdiction of any competent court in the Agreed Venue, (b) to
waive any and all defenses the Executive may have on the grounds of lack of
jurisdiction of such court and (c) that neither party shall be required to
post any bond, undertaking or other financial deposit or guarantee in seeking
or obtaining such equitable relief. 
Evidence adduced in any such proceeding for an injunction may be used in
arbitration as well.  The existence of
this right shall not preclude or otherwise limit the applicability or exercise
of any other rights and remedies that a party hereto may have at law or in
equity.

 

6.4                               Settlement of Existing Rights.  In exchange for the other terms of this
Agreement, the Executive acknowledges and agrees that: (a) the Executive’s
entry into this Agreement is a condition of employment and/or continued
employment with the Company, as applicable; (b) except as otherwise provided
herein, this Agreement will replace any existing 

 

19

 

employment agreement between the parties and
thereby act as a novation, if applicable; (c) the Executive is being
provided with access to Confidential Information, including, without
limitation, proprietary trade secrets of one or more Company Parties, to which
the Executive has not previously had access; (d) all Company inventions
and intellectual property developed by the Executive during any past employment
with the Company and all goodwill developed with the Company’s clients,
customers and other business contacts by the Executive during any past
employment with Company, as applicable, is the exclusive property of the
Company; and (e) all Confidential Information and/or specialized training
accessed, created, received or utilized by the Executive during any past
employment with Company, as applicable, will be subject to the restrictions on
Confidential Information described in this Agreement, whether previously so
agreed or not.

 

6.5                               Entire Agreement; Waiver.  This Agreement contains the entire agreement
between the Executive and the Company with respect to the subject matter
hereof, and supersedes any and all prior understandings or agreements, whether
written or oral. No modification or addition hereto or waiver or cancellation
of any provision hereof shall be valid except by a writing signed by the party
to be charged therewith.  No delay on the
part of any party to this Agreement in exercising any right or privilege
provided hereunder or by law shall impair, prejudice or constitute a waiver of
such right or privilege.

 

6.6                               Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without
regard to principles of conflict of laws.

 

6.7                               Successors and Assigns; Binding Agreement.  The rights and obligations of
the parties under this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their heirs, personal representatives, successors and
permitted assigns.  This Agreement is a
personal contract, and, except as specifically set forth herein, the rights and
interests of the Executive herein may not be sold, transferred, assigned,
pledged or hypothecated by any party without the prior written consent of the
others.  As used herein, the term “successor”
as it relates to the Company, shall include, but not be limited to, any
successor by way of merger, consolidation or sale of all or substantially all
of such Person’s assets or equity interests.

 

6.8                               Representation by Counsel; Independent Judgment.  Each of the parties hereto
acknowledges that (a) it or the Executive has read this Agreement in its
entirety and understands all of its terms and conditions, (b) it or the
Executive has had the opportunity to consult with any individuals of its or the
Executive’s choice regarding its or the Executive’s agreement to the provisions
contained herein, including legal counsel of its or the Executive’s choice, and
any decision not to was the Executive’s or its alone and (c) it or the
Executive is entering into this Agreement of its or the Executive’s own free
will, without coercion from any source, based upon its or the Executive’s own
independent judgment.

 

6.9                               Interpretation.  The parties and their respective legal
counsel actively participated in the negotiation and drafting of this
Agreement, and in the event of any ambiguity or mistake herein, or any dispute
among the parties with respect to the provisions 

 

20

 

hereto, no provision of this Agreement shall
be construed unfavorably against any of the parties on the ground that the
Executive, it, or the Executive’s or its counsel was the drafter thereof.

 

6.10                        Survival.  The provisions of Sections 4.3(e), 5 and 6
hereof shall survive the termination of this Agreement.

 

6.11                        Notices.  All notices and communications hereunder
shall be in writing and shall be deemed properly given and effective when
received, if sent by facsimile or telecopy, or by postage prepaid by registered
or certified mail, return receipt requested, or by other delivery service which
provides evidence of delivery, as follows:

 

If to the Company, to:

 

Linens ‘n Things, Inc.

6 Brighton Road

Clifton, New Jersey  07015

Attention: 
General Counsel

 

with a copy (which shall not constitute
notice) to:

 

Gardere Wynne Sewell LLP

1601 Elm Street, Suite 3000

Dallas, Texas 
75201-4761

Attention: 
Ronald M. Gaswirth, Esq.

Telephone: 
(214) 999-4601

Facsimile: 
(214) 999-3601

E-mail: 
rgaswirth@gardere.com

 

If to the Executive, to:

 

F. David Coder

at the most recent address of the

Executive on file with the Company

 

or to such other address as one party may
provide in writing to the other party from time to time.

 

6.12                        Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.  Facsimile transmission of any signed original
document or retransmission of any signed facsimile transmission will be deemed
the same as delivery of an original.  At
the request of any party, the parties will confirm facsimile transmission by
signing a duplicate original document.

 

6.13                        Captions.  Paragraph headings are for convenience only
and shall not be considered a part of this Agreement.

 

21

 

6.14                        No Third Party Beneficiary Rights.  Except as otherwise provided in this
Agreement, no entity shall have any right to enforce any provision of this
Agreement, even if indirectly benefited by it.

 

6.15                        Withholding.  Any payments provided for hereunder shall be
paid net of any applicable withholding required under Federal, state or local
law and any additional withholding to which Executive has agreed.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

22

 

IN WITNESS WHEREOF, the
parties have duly executed this Agreement, intending it as a document under
seal, on the Execution Date to be effective for all purposes as of the
Effective Date.

 

	
   

  	
  LINENS ‘N THINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/ ROBERT J. DINICOLA

  
	
   

  	
   

  	
  Robert J. DiNicola

  
	
   

  	
   

  	
       Chairman of the Board

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
             /s/
  F. DAVID CODER

  
	
   

  	
  Name:   F. David Coder

  

 

 

 

EXHIBIT A

 

Definition
of Change of Control

 

“Change of Control”
means:

 

(1)                                  any event
occurs the result of which is that any “Person,” as such term is used in
Sections 13(d) and 14(d) of the Exchange Act, other than one or
more Permitted Holders or their Related Parties, becomes the beneficial owner,
as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a
Person shall be deemed to have “beneficial ownership” of all shares that any
such Person has the right to acquire within one year) directly or indirectly,
of more than 50% of the Voting Stock of Holding or any successor company,
including, without limitation, through a merger or consolidation or purchase of
Voting Stock of Holding; provided that
none of the Permitted Holders or their Related Parties have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board; provided further
that the transfer of 100% of the Voting Stock of Holding to a Person that has
an ownership structure identical to that of Holding prior to such transfer,
such that Holding becomes a wholly owned Subsidiary of such Person, shall not
be treated as a Change of Control;

 

(2)                                  after an
initial public offering of Capital Stock of Holding, during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board,
together with any new directors whose election by such Board or whose
nomination for election by the stockholders of Holding was approved by a vote
of a majority of the directors of Holding then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the Board then in office;

 

(3)                                  the sale,
lease, transfer, conveyance or other disposition, in one or a series of related
transactions other than a merger or consolidation, of all or substantially all
of the assets of Holding and its Subsidiaries taken as a whole to any Person or
group of related Persons other than a Permitted Holder or a Related Party of a
Permitted Holder; or

 

(4)                                  the adoption of
a plan relating to the liquidation or dissolution of Holding.

 

For purposes of this
definition, the following terms shall have the meanings set forth below:

 

An “Affiliate”
of any specified Person means any other Person, whether now or hereafter
existing, directly or indirectly controlling or controlled by, or under direct
or indirect common control with, such specified Person.  For purposes hereof, “control” or any other
form thereof, when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” shall have meanings correlative to the
foregoing.

 

“Apollo” means Apollo
Management V, L.P. and its Affiliates or any entity controlled thereby or any
of the partners thereof.

 

A-1

 

“Board” means the
Board of Directors of Holding or any committee thereof duly authorized to act
on behalf of such Board of Directors.

 

“Capital Stock” of any Person
means any and all shares, interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in, however designated, equity of such
Person, including any Preferred Stock, but excluding any debt securities
convertible into such equity.

 

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

 

“Holding” means Linens
Holding Co., a Delaware corporation.

 

“Permitted Holder” means any of
Apollo, NRDC Real Estate Advisors I, LLC or Silver Point Capital Fund
Investments, LLC.

 

“Person” means any
individual, corporation, partnership, limited liability company, joint venture,
association, business trust, joint-stock company, estate, trust, unincorporated
organization, government or other agency or political subdivision thereof or
any other legal or commercial entity.

 

“Preferred Stock” as applied to
the Capital Stock of any corporation means Capital Stock of any class or
classes, however designated, that is preferred as to the payment of dividends,
or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such corporation, over shares of Capital Stock of
any other class of such corporation.

 

“Related Party” means:

 

(1)                                  any controlling
stockholder, 50% (or more) owned Subsidiary, or immediate family member (in the
case of an individual) of any Permitted Holder; or

 

(2)                                  any trust,
corporation, partnership, limited liability company or other entity, the
beneficiaries, stockholders, partners, members, owners or Persons beneficially
holding an 50% or more controlling interest of which consist of any one or more
Permitted Holders and/or such other Persons referred to in the immediately
preceding clause (1).

 

“Subsidiary” means, with
respect to any specified Person:

 

(1)                                  any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency and after giving effect to any voting agreement
or stockholders’ agreement that effectively transfers voting power) to vote in
the election of directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and

 

(2)                                  any partnership
(a) the sole general partner or the managing general partner of which is
such Person or a Subsidiary of such Person or (b) the only general 

 

A-2

 

partners
of which are that Person or one or more Subsidiaries of that Person (or any
combination thereof).

 

“Voting Stock” of an entity
means all classes of Capital Stock of such entity then outstanding
and normally entitled to vote in the election of directors or all interests in
such entity with the ability to control the management or actions of such
entity.

 

Notwithstanding anything to
the contrary in this Exhibit A, the definition of Change of Control shall
be interpreted consistently with the definition of “Change of Control”
contained in Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), and regulations and guidance issued by the Internal
Revenue Service under Section 409A of the Code, including IRS Notice
2005-1.

 

A-3

 

EXHIBIT B

 

Fringe
Benefits

 

1.                                       Health
insurance in accordance with the Company’s health insurance plan or program in
effect from time to time.

 

2.                                       Prescription
drug coverage in accordance with the Company’s health insurance plan or
program, or separate prescription drug coverage plan or program, in effect from
time to time.

 

3.                                       Dental
insurance in accordance with the Company’s dental insurance plan or program in
effect from time to time.

 

4.                                       Long-term
disability insurance in accordance with the Company’s long-term disability
insurance plan or program in effect from time to time.

 

5.                                       Eligibility for
life insurance coverage in such amount as the Company makes available to its
employees or executives, subject to a bi-weekly payroll deduction for the
premium and completion by the Executive of any authorization documentation.

 

6.                                       Cellular
telephone and service.

 

7.                                       Annual
financial planning services through Joel Isaacson Company, or a reasonable
substitute therefor, as may be determined by the Company from time to time.

 

B-1

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