Document:

EXHIBIT 4.6

                               MARGO CARIBE, INC.
                           2003 RESTRICTED STOCK PLAN

SECTION 1.  ESTABLISHMENT; PURPOSE; DEFINITIONS.

          (a) Margo Caribe,  Inc., a Puerto Rico  corporation  (the  "Company"),
     hereby establishes an incentive compensation plan for key employees,  to be
     known as "The Margo Caribe,  Inc. 2003 Restricted Stock Plan" (the "Plan"),
     as set forth in this  document.  The Plan  permits the grant of  Restricted
     Stock to key employees of the Company and its Subsidiaries and Affiliates.

          (b) The  purpose  of the Plan is to enable  the  Company  to  attract,
     retain and reward key  employees  of the Company and its  Subsidiaries  and
     Affiliates  and  strengthen  the  mutuality of  interests  between such key
     employees  and the  Company's  shareholders  by offering such key employees
     equity incentives.

          (c) For  purposes  of the Plan,  the  following  terms  shall have the
     meanings set forth below:

               "Affiliate"  means any entity  (other  than the  Company  and its
          Subsidiaries)  that is  designated  by the  Board  as a  participating
          employer under the Plan.

               "Award" means any award of Restricted Stock under the Plan.

               "Award  Agreement" means an agreement setting forth the terms and
          conditions  applicable to an Award granted to a Participant  under the
          Plan.

               "Board" means the Board of Directors of the Company.

               "Book Value"  means,  as of any given date,  on a per share basis
          (1)  the  shareholders'  equity  in the  Company  as of the end of the
          immediately  preceding  fiscal  year  as  reflected  in the  Company's
          audited  consolidated  balance sheet as of such year-end date, subject
          to such  adjustments as the Committee shall specify at or after grant,
          divided  by (2) the number of  outstanding  shares of Stock as of such
          year-end  date,  subject to such  adjustments  as the Committee  shall
          specify for events subsequent to such year-end date.

               "Change in  Control"  has the  meaning  assigned to it in Section
          6(b).

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               "Change  in  Control  Price" has the  meaning  assigned  to it in
          Section 6(c).

               "Committee" means the Compensation Committee of the Board.

               "Company" means Margo Caribe, Inc., a Puerto Rico corporation, or
          any successor corporation.

               "Disability"  means a mental or physical  condition which, in the
          opinion of the Committee,  renders a Participant unable or incompetent
          to carry out the job responsibilities  held by such Participant or the
          duties  assigned to such  Participant at the time such condition arose
          or was  incurred,  and which is  expected  to be  permanent  or for an
          indefinite duration.

               "Eligible Persons" has the meaning assigned to it in Section 4.

               "Exchange  Act" means the  Securities  Exchange  Act of 1934,  as
          amended.

               "Expiration  Date"  means  the date upon  which an Award,  or any
          portion thereof,  is scheduled to expire or terminate if not exercised
          or vested prior thereto, as determined by the Committee.

               "Fair Market Value" means, as of any given date, the mean between
          the highest and lowest quoted  selling price of the Stock on such date
          on the Nasdaq  SmallCap Market or, if no such sale of the Stock occurs
          on the Nasdaq  SmallCap  Market on such date,  then such mean price on
          the next preceding day on which the Stock was traded.  If the Stock is
          no longer traded on the Nasdaq SmallCap  Market,  then the Fair Market
          Value of the Stock shall be determined by the Committee in good faith.

               "Family   Member"  means  a   Participant's   child,   stepchild,
          grandchild, parent, stepparent,  grandparent,  spouse, sibling, niece,
          nephew,  mother-in-law,  father-in-law,  son-in-law,  daughter-in-law,
          brother-in-law or sister-in-law,  including adoptive relationships,  a
          trust in which any of these  persons  (and/or the  Participant)  holds
          more than 50% of the beneficial interest, a foundation in which any of
          these  persons  (and/or the  Participant)  controls the  management of
          assets and any other entity in which any of these persons  (and/or the
          Participant) owns more than 50% of the voting interests.

                                       -2-

<PAGE>

               "Non-Employee  Director" shall have the meaning set forth in Rule
          16b-3(b)(3)(i)  promulgated by the Securities and Exchange  Commission
          under the Exchange  Act, or any  successor  definition  adopted by the
          Commission.

               "Participant"  means an Eligible  Person who holds an outstanding
          Award granted under the Plan.

               "Performance-Based Restricted Stock" means an Award of Restricted
          Stock,  which  will vest upon the  achievement  of  Performance  Goals
          established  by or under the  direction of the Committee and set forth
          in the related Award Agreement.

               "Performance  Goals" means the performance  goals  established by
          the Committee  with respect to any Award,  which shall be based on one
          or more of the following measures: operating income, net income and/or
          operating  ratios.  Performance  goals may be measured on a corporate,
          subsidiary  or  business  unit  basis,  or  any  combination  thereof.
          Performance  goals  may  reflect  absolute  entity  performance  or  a
          relative comparison of entity performance to the performance of a peer
          group of entities or other external measure.

               "Plan" means The Margo Caribe,  Inc. 2003 Restricted  Stock Plan,
          as amended from time to time.

               "Restricted Stock" means an Award of shares of Stock that is made
          pursuant to Section 5 and is subject to restrictions.

               "Restriction  Period" and "Minimum Restriction Period" shall have
          the meanings assigned to them in Section 5(b)(6).

               "Section 16 Participant"  means a Participant  under the Plan who
          is then subject to Section 16 of the Exchange Act.

               "Stock" means the Common Shares,  $0.001 par value per share,  of
          the Company.

               "Subsidiary" means any corporation (other than the Company) in an
          unbroken chain of  corporations  beginning with the Company if each of
          the  corporations  (other than the last  corporation  in the  unbroken
          chain) owns stock  possessing 50% or more of the total combined voting
          power of all classes of stock in one of the other corporations in such
          chain.

                                       -3-

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               "Time-based  Restricted Stock" means an Award of Restricted Stock
          that will vest upon the lapse of a time period  determined by or under
          the  direction of the  Committee  and  specified in the related  Award
          Agreement.

SECTION 2.  ADMINISTRATION.

     The Plan  shall be  administered  by the  Committee.  The  Committee  shall
consist of not less than three  directors of the  Company,  all of whom shall be
Non-Employee  Directors.  Committee  members shall be appointed by the Board and
shall serve on the Committee at the pleasure of the Board.  The functions of the
Committee  specified  in the Plan shall be  exercised by the Board if and to the
extent that no Committee  exists which has the  authority to so  administer  the
Plan.

     The Committee  shall have full power to interpret and  administer  the Plan
and full authority to select the  individuals to whom Awards will be granted and
to  determine  the type and amount of Awards to be granted to each  Participant,
the  consideration,  if any,  to be paid for such  Awards,  the  timing  of such
Awards,  the terms and conditions of Awards granted under the Plan and the terms
and conditions of the related Award  Agreements  which will be entered into with
Participants. As to the selection of and grant of Awards to Participants who are
not Section 16 Participants,  the Committee may delegate its responsibilities to
members of the Company's management consistent with applicable law.

     The Committee shall have the authority to adopt,  alter,  change and repeal
such rules, regulations,  guidelines and practices governing the Plan, from time
to time, as it shall deem  advisable;  to interpret the terms and  provisions of
the Plan and any Award issued under the Plan (and any Award  Agreement  relating
thereto);  to direct  employees of the Company or other advisors to prepare such
materials  or  perform  such  analyses  as  the  Committee  deems  necessary  or
appropriate; and otherwise to supervise the administration of the Plan.

     Any interpretation and administration of the Plan by the Committee, and all
actions  and  determinations  of the  Committee,  shall be  final,  binding  and
conclusive  on the Company,  its  shareholders,  Subsidiaries,  Affiliates,  all
Participants in the Plan, their respective legal representatives, successors and
assigns and all persons  claiming under or through any of them. No member of the
Board or of the  Committee  shall incur any  liability  for any action  taken or
omitted, or any determination made, in good faith in connection with the Plan.

                                       -4-

<PAGE>

SECTION 3.  STOCK SUBJECT TO THE PLAN.

          (a)  Aggregate  Stock  Subject to the Plan.  Subject to  adjustment as
     provided  in  Section  3(c)  below,  the  total  number  of shares of Stock
     reserved  and  available  for Awards  under the Plan is 200,000.  Any Stock
     issued  hereunder  may  consist,  in whole or in part,  of  authorized  and
     unissued shares or treasury shares.

          (b) Forfeiture or Termination of Awards or Stock. If any Stock subject
     to  any  Award  granted  hereunder  is  forfeited  or  an  Award  otherwise
     terminates  or expires  without the  issuance  of Stock,  the Stock that is
     subject  to such  Award  shall  again  be  available  for  distribution  in
     connection  with future Awards under the Plan as set forth in Section 3(a),
     unless the  Participant  who had been awarded such  forfeited  Stock or the
     expired or  terminated  Award has  theretofor  received  dividends or other
     benefits of ownership with respect to such Stock.  For purposes  hereof,  a
     Participant  shall not be deemed to have  received a benefit  of  ownership
     with  respect  to such  Stock  by the  exercise  of  voting  rights  or the
     accumulation  of dividends  which are not realized due to the forfeiture of
     such Stock or the  expiration or  termination  of the related Award without
     issuance of such Stock.

          (c)   Adjustment.   In  the  event  of  any  merger,   reorganization,
     consolidation, recapitalization, share dividend, share split, reverse share
     split,  combination  of shares or other change in the  corporate or capital
     structure  of  the  Company  affecting  the  Stock,  such  substitution  or
     adjustment  shall  be made in the  aggregate  number  of  shares  of  Stock
     reserved for issuance  under the Plan, in the maximum number of shares that
     may be subject to Awards  granted to any  Participant  during any  calendar
     year or other  period  and in the number of shares  subject  to  Restricted
     Stock Awards granted under the Plan as may be approved by the Committee, in
     its sole discretion, to prevent dilution or enlargement of rights; provided
     that the  number of shares  subject  to any Award  shall  always be a whole
     number. Any fractional shares shall be eliminated.

SECTION 4.  ELIGIBILITY.

     Officers and other key  employees of the Company and its  Subsidiaries  and
Affiliates  (but  excluding  members of the  Committee  and any other person who
serves  only  as a  director)  who  are  responsible  for or  contribute  to the
management, growth or

                                       -5-

<PAGE>

profitability  of the business of the Company or its  Subsidiaries or Affiliates
("Eligible Persons") are eligible to be granted Awards under the Plan.

SECTION 5.  RESTRICTED STOCK.

          (a) Grant. Subject to the terms and conditions of the Plan, Restricted
     Stock may be awarded to Eligible  Persons at any time and from time to time
     as shall be determined by the Committee.  The Committee shall determine the
     individuals to whom,  and the time or times at which,  grants of Restricted
     Stock will be made; the number of shares of Restricted  Stock to be awarded
     to each  Participant;  the  price  (if  any) to be paid by the  Participant
     (subject  to  Section   5(b));   whether   the  Awards   will   consist  of
     Performance-Based  Restricted  Stock or  Time-Based  Restricted  Stock or a
     combination  thereof; the date or dates or conditions upon which Restricted
     Stock Awards will vest, whether through lapse of time or the achievement of
     specified  Performance  Goals;  the Performance Goal or Goals, if any, that
     must be  satisfied as a condition  to the vesting of any  Restricted  Stock
     Award;  the period or periods within which such Restricted Stock Awards may
     be subject to forfeiture; and the other terms and conditions of such Awards
     in addition to those set forth in Section 5(b).

          The Committee  may condition the grant or vesting of Restricted  Stock
     upon the lapse of time or the attainment of specified  Performance Goals or
     such other factors as the Committee may determine in its sole discretion.

          (b) Terms and  Conditions.  Restricted  Stock  awarded  under the Plan
     shall be subject to the following  terms and  conditions  and shall contain
     such additional terms and conditions,  not inconsistent with the provisions
     of the Plan,  as the Committee  shall deem  desirable.  A  Participant  who
     receives a Restricted Stock Award shall not have any rights with respect to
     such  Award,  unless  and until  such  Participant  has  executed  an Award
     Agreement  evidencing  the Award in the form  approved from time to time by
     the  Committee  and has  delivered  a fully  executed  copy  thereof to the
     Company,   and  has  otherwise  complied  with  the  applicable  terms  and
     conditions of such Award.

          (1)  The  purchase  price for  shares  of  Restricted  Stock  shall be
               determined by the Committee at the time of grant and may be equal
               to their par value or zero.

                                       -6-

<PAGE>

          (2)  Awards of  Restricted  Stock must be  accepted by  executing  the
               related Restricted Stock Award Agreement,  delivering an executed
               copy of such Restricted  Stock Award Agreement to the Company and
               paying whatever price (if any) is required under Section 5(b)(1).

          (3)  Subject  to  Section  5(b)(5),   each  Participant   receiving  a
               Restricted  Stock  Award shall be issued a stock  certificate  in
               respect of such  shares of  Restricted  Stock.  Such  certificate
               shall be  registered in the name of such  Participant,  and shall
               bear an appropriate legend referring to the terms, conditions and
               restrictions applicable to such Award.

          (4)  Subject to Section  5(b)(5),  the stock  certificates  evidencing
               such shares of Restricted Stock shall be delivered to and held in
               custody by the Company,  or its designee,  until the restrictions
               thereon  shall have  lapsed or any  conditions  to the vesting of
               such Award have been satisfied.  As a condition of any Restricted
               Stock Award, the Participant shall deliver to the Company a stock
               power,  endorsed in blank,  relating to the Stock covered by such
               Award.

          (5)  In the discretion of the Company,  any shares of Restricted Stock
               awarded to any  Participant  may be issued and held in book entry
               form. In such event, no stock certificates evidencing such shares
               will be issued and the applicable  restrictions  will be noted in
               the records of the Company's transfer agent and in the book entry
               system.

          (6)  A Participant  may be granted an Award of  Time-Based  Restricted
               Stock or Performance-  Based  Restricted  Stock, or a combination
               thereof.  Time-Based  Restricted  Stock  Awards will vest and all
               restrictions thereon will terminate upon the lapse of a period of
               time specified by the Committee, provided all other conditions to
               vesting have been met. Performance-Based  Restricted Stock Awards
               will vest and all  restrictions  thereon will  terminate upon the
               certification by the

                                       -7-

<PAGE>

               Committee of the achievement of the specified  Performance Goals,
               provided all other conditions to vesting have been met.

          (7)  Subject to the provisions of this Plan and the related Restricted
               Stock  Award  Agreement,  during the period set by the  Committee
               commencing  with  the  date  of a  Restricted  Stock  Award  (the
               "Restriction  Period"),  the  Participant  who has received  such
               Award shall not be permitted to sell, transfer, pledge, assign or
               otherwise  encumber  the  shares of  Restricted  Stock  which are
               subject to such Award.  The Restriction  Period shall not be less
               than six months  and one day in  duration  ("Minimum  Restriction
               Period")  and may be a  function  of time or the  achievement  of
               Performance Goals, or both, as determined by the Committee at the
               time of  grant.  Subject  to these  limitations  and the  Minimum
               Restriction  Period  requirement,  the  Committee,  in  its  sole
               discretion,  may  provide for the lapse of such  restrictions  in
               installments  and may accelerate or waive such  restrictions,  in
               whole or in part,  based on  service,  performance  or such other
               factors and criteria as the Committee may determine,  in its sole
               discretion.

          (8)  Except as provided in this Section  5(b)(8),  Section  5(b)(7) or
               Section 5(b)(9),  the Participant shall have, with respect to the
               shares  of  Restricted  Stock  awarded,  all of the  rights  of a
               shareholder of the Company, including the right to vote the Stock
               and the right to receive any  dividends.  The  Committee,  in its
               sole  discretion,  as determined at the time of award, may permit
               or require the payment of cash  dividends to be deferred  and, if
               the Committee so determines, reinvested, subject to Section 9(f),
               in additional Restricted Stock to the extent shares are available
               under Section 3, or otherwise reinvested.  Stock dividends issued
               with respect to  Restricted  Stock shall be treated as additional
               shares  of  Restricted   Stock  that  are  subject  to  the  same
               restrictions  and other  terms and  conditions  that apply to the
               shares

                                       -8-

<PAGE>

               with respect to which such dividends are issued.

          (9)  No  Restricted  Stock shall be  transferable  by any  Participant
               other  than by will or by the laws of descent  and  distribution,
               except that,  if determined by the Committee at the time of grant
               and so provided in the applicable Award Agreement,  a Participant
               may transfer  Restricted  Stock during his or her lifetime to one
               or  more  of  his  or  her  Family  Members,   provided  that  no
               consideration  is paid for the  transfer  and  that the  transfer
               would not result in the loss of any exemption under Rule 16b-3 of
               the  Exchange  Act with  respect  to any  Restricted  Stock.  The
               transferee   of   Restricted   Stock   will  be  subject  to  all
               restrictions,  terms and conditions  applicable to the Restricted
               Stock prior to its  transfer,  except that the  Restricted  Stock
               will not be further  transferable by the transferee other than by
               will or by the laws of descent and distribution.

          (10) If a Participant's employment by the Company or any Subsidiary or
               Affiliate  terminates by reason of death,  any  Restricted  Stock
               held by such  Participant  at the time of death shall  thereafter
               vest or any  restrictions  lapse,  to the extent such  Restricted
               Stock  would  have  become   vested  or  no  longer   subject  to
               restriction  within  one year  from  the  time of  death  had the
               Participant  continued  to fulfill all of the  conditions  of the
               Restricted Stock Award during such period;  provided that, if the
               vesting  of  such  Award  is  conditioned  on or  subject  to the
               achievement  of specified  Performance  Goals,  such  Performance
               Goals are achieved prior to the earlier of the expiration of such
               one year period or the Expiration  Date of the Award,  subject in
               all cases to the  Minimum  Restriction  Period  requirement.  The
               balance of the Restricted Stock shall be forfeited.

          (11) If a Participant's employment by the Company or any Subsidiary or
               Affiliate  terminates  by reason of  Disability,  any  Restricted
               Stock

                                                        -9-

<PAGE>

               then  held  by  such  Participant  shall  thereafter  vest or any
               restriction lapse, to the extent such Restricted Stock would have
               become  vested or no longer  subject to  restrictions  within one
               year  from  the  time of  such  termination  had the  Participant
               continued  to fulfill  all of the  conditions  of the  Restricted
               Stock Award during such period;  provided that, if the vesting of
               such Award is  conditioned  on or subject to the  achievement  of
               specified  Performance Goals, such Performance Goals are achieved
               prior to the earlier of the expiration of such one year period or
               the  Expiration  Date of the  Award,  subject in all cases to the
               Minimum  Restriction  Period  requirement.  The  balance  of  the
               Restricted Stock shall be forfeited.

          (12) Unless otherwise determined by the Committee at or after the time
               of granting any Restricted Stock Award, and except as provided in
               Section  5(b)(13)  hereof,  if a Participant's  employment by the
               Company or any Subsidiary or Affiliate  terminates for any reason
               other than death or Disability, all Restricted Stock held by such
               Participant  which is unvested or subject to  restriction  at the
               time of such termination shall thereupon be forfeited.

          (13) If a  Participant's  employment  with the  Company (or any of its
               Subsidiaries  or  Affiliates)   terminates  due  to  a  Qualified
               Retirement (as defined  below),  the following  provisions  shall
               apply (subject in all cases to Section 5(b)(13)(C) hereof):

               (A)  If and to the extent that any Award  Installment (as defined
                    below)  is vested as of the  Qualified  Retirement  Date (as
                    defined below),  all shares of Restricted  Stock held by the
                    Participant in connection with such Award  Installment shall
                    be free of  applicable  restrictions  and  delivered  to the
                    Participant (subject to Section 5(b)(5));

               (B)  (i) With respect to all Time-Based  Restricted  Stock Awards
                    held by the

                                      -10-

<PAGE>

                    Participant on his or her Qualified  Retirement Date, if and
                    to the extent that any Award Installment is not vested as of
                    such Qualified  Retirement Date, such Award  Installment (a)
                    shall remain in effect with respect to fifty  percent  (50%)
                    of the  shares  of Stock  covered  thereby  and,  as to such
                    shares,   shall   immediately  vest  on  the   Participant's
                    Qualified  Retirement  Date, and shall thereafter be free of
                    applicable  restrictions  and  delivered to the  Participant
                    (subject  to  Section  5(b)(5));  and (b)  shall  terminate,
                    effective as of the Qualified  Retirement Date, with respect
                    to the remaining  fifty percent (50%) of the shares  covered
                    by such Award Installment.

                    (ii) with respect to all Performance- Based Restricted Stock
                    Awards  held  by the  Participant  on  his or her  Qualified
                    Retirement  Date,  if and  to  the  extent  that  any  Award
                    Installment  is not  vested as of the  Qualified  Retirement
                    Date, such Award Installment (a) shall remain in effect with
                    respect  to  fifty  percent  (50%)  of the  shares  of Stock
                    covered thereby and, as to such shares,  shall vest upon the
                    achievement  of the related  Performance  Goals (unless such
                    Performance  Goals are not achieved  prior to the Expiration
                    Date  applicable to such Award  Installment,  in which event
                    the Award  Installment  will  terminate,  and all  shares of
                    Restricted  Stock covered by such Award  Installment will be
                    forfeited,  as of  such  Expiration  Date),  and  (b)  shall
                    terminate,  effective as of the Qualified  Retirement  Date,
                    with respect to the  remaining  fifty  percent  (50%) of the
                    shares  covered by such Award  Installment;  provided  that,
                    with  respect  to  any  member  of  the   Company's   Senior
                    Management  Group  (as  defined  below)  who has  given  the
                    Company at least one (1) full year's prior written notice of
                    his or her retirement, upon any Qualified

                                      -11-

<PAGE>

                    Retirement   of  such   individual,   no   portion   of  any
                    Performance-Based  Restricted  Stock  Awards  held  by  such
                    Participant  on his or her  Qualified  Retirement  Date will
                    terminate  on such  date,  but such  Awards  will  remain in
                    effect and one hundred  percent (100%) of the shares subject
                    to each such  Award held by such  Participant  on his or her
                    Qualified Retirement Date shall vest as of the date on which
                    the applicable  Performance Goals have been achieved (unless
                    such  Performance  Goals  are  not  achieved  prior  to  the
                    Expiration Date applicable to such Award, in which event the
                    Award will  terminate,  and all shares of  Restricted  Stock
                    covered  by  such  Award  will  be  forfeited,  as  of  such
                    Expiration Date).

               (C)  If the Committee  determines  that the Participant is or has
                    engaged in any  Disqualifying  Activity (as defined  below),
                    then (1) to the extent that any Restricted  Stock Award held
                    by such  Participant  has vested as of the  Disqualification
                    Date (as  defined  below),  the  Participant  shall have the
                    right to receive  all shares of  Restricted  Stock which are
                    vested as of such date (subject to Section  5(b)(5)) and (2)
                    to the extent that any  Restricted  Stock Award held by such
                    Participant has not vested as of the Disqualification  Date,
                    the Award shall  terminate,  and all related shares shall be
                    forfeited,  as  of  such  date.  Any  determination  by  the
                    Committee,  which  may act  upon the  recommendation  of the
                    Chief  Executive  Officer  or other  senior  officer  of the
                    Company,  that  the  Participant  is or has  engaged  in any
                    Disqualifying Activity, and as to the Disqualification Date,
                    shall be final and conclusive.

               (D)  For purposes of Section  5(b)(13),  the following  terms are
                    defined as follows:

                    (i)   Qualified   Retirement   -   any   termination   of  a
                    Participant's employment

                                      -12-

<PAGE>

                    with the Company or its  Subsidiaries  or Affiliates for any
                    reason  (other  than  death,  Disability  or an  involuntary
                    termination  for Cause) if, at or  immediately  prior to the
                    date of such termination,  the Participant satisfies both of
                    the following conditions:

                           (a)      the  Participant is 55 year of age or older;
                                    and

                           (b)      the  sum  of  the   Participant's   age  and
                                    completed years of service as an employee of
                                    the   Company   or   its   Subsidiaries   or
                                    Affiliates  (disregarding  fractions in both
                                    cases) shall total 70 or more.

                    (ii)  Qualified  Retirement  Date - the date as of which the
                    Participant's   employment   with   the   Company   or   its
                    Subsidiaries  or Affiliates  shall  terminate  pursuant to a
                    Qualified Retirement.

                    (iii)Disqualifying  Activity  - means  any of the  following
                    acts or activities:

                           (a)      directly   or   indirectly   serving   as  a
                                    principal,  shareholder,  partner, director,
                                    officer,  employee  or  agent  of,  or  as a
                                    consultant, advisor or in any other capacity
                                    to, any  business or entity  which  competes
                                    with  the  Company  or its  Subsidiaries  or
                                    Affiliates  in any business or activity then
                                    conducted  by  the  Company  or  any  of its
                                    Subsidiaries  or  Affiliates  to  an  extent
                                    deemed material by the Committee; or

                                      -13-

<PAGE>

                           (b)      any  disclosure by the  Participant,  or any
                                    use by the  Participant  for  his or her own
                                    benefit  or for  the  benefit  of any  other
                                    person or entity  (other than the Company or
                                    its  Subsidiaries  or  Affiliates),  of  any
                                    confidential  information or trade secret of
                                    the  Company or any of its  Subsidiaries  or
                                    Affiliates   without   the  consent  of  the
                                    Company; or

                           (c)      any   material   violation  of  any  of  the
                                    provisions of the Company's  Employee's Code
                                    of  Ethics   ("Code  of   Conduct")  or  any
                                    agreement  between the  Participant  and the
                                    Company;

                           (d)      making  any other  disclosure  or taking any
                                    other  action  which  is  determined  by the
                                    Committee to be  materially  detrimental  to
                                    the business, prospects or reputation of the
                                    Company  or  any  of  its   Subsidiaries  or
                                    Affiliates; or

                           (e)      the  Participant   fails,  in  any  material
                                    respect,  to  perform  his or  her  assigned
                                    responsibilities   as  an  employee  of  the
                                    Company  or  any  of  its   Subsidiaries  or
                                    Affiliates,  as determined by the Committee,
                                    in its sole judgment,  after consulting with
                                    the Chief Executive Officer.

                    The  ownership  of less  than 2% of the  outstanding  voting
                    securities of a publicly traded  corporation  which competes
                    with the Company or any of its

                                      -14-

<PAGE>

                    Subsidiaries   or   Affiliates   shall  not   constitute   a
                    Disqualifying Activity.

                    (iv) Cause - means a felony  conviction of a Participant  or
                    the failure of a Participant  to contest  prosecution  for a
                    felony, or a Participant's willful misconduct or dishonesty,
                    any of which,  in the judgment of the Committee,  is harmful
                    to  the  business  or  reputation  of  the  Company  or  any
                    Subsidiary  or Affiliate;  or any material  violation of the
                    Code of Conduct or any agreement between the Participant and
                    the Company.

                    (v)  Disqualification  Date - the earliest  date as of which
                    the Participant  engaged in any Disqualifying  Activity,  as
                    determined by the Committee.

                    (vi)  Award  Installment  - if the  Restricted  Stock  Award
                    consists of multiple  Awards,  each with a separate  Vesting
                    Date and/or separate Expiration Date, any one of such Awards
                    or,  if the  Restricted  Stock  Award  consists  of a single
                    Award,  with a single  Vesting Date and a single  Expiration
                    Date, then the entire Award.

                    (vii)Vesting  Date - the date on which any restrictions on a
                    Restricted  Stock  Award  terminate  and such  Award  vests,
                    whether  by  reason  of lapse of time,  the  achievement  of
                    specified Performance Goals or both.

                    (viii) Senior  Management  Group - means the Chief Executive
                    Officer and other members of the executive  management  team
                    (i.e., the Chief Executive Officer's Direct Reporting Group)
                    determined,  with respect to any Participant, on the date of
                    his or her retirement from the Company.

                                      -15-

<PAGE>

SECTION 6.  CHANGE IN CONTROL PROVISION.

          (a) Impact of Event. In the event of and upon a "Change in Control" as
     defined  in  Section  6(b),  the  following   acceleration   and  valuation
     provisions shall apply:

          (1)  All  restrictions,  limitations  and  Performance  Goals, if any,
               applicable to any Restricted Stock shall terminate and such Stock
               shall be deemed fully vested; and

          (2)  The value of all outstanding  Awards,  in each case to the extent
               vested,  shall,  unless otherwise  determined by the Committee in
               its sole  discretion at or after grant but prior to any Change in
               Control,  be cashed  out on the basis of the  "Change  in Control
               Price", as defined in Section 6(c), as of the date such Change in
               Control is determined to have occurred.

          (b)  Definition of Change in Control.  For purposes of Section 6(a), a
     "Change in Control" means the happening of any of the following:

          (1)  When any  "person" as defined in Section  3(a)(9) of the Exchange
               Act and as used in Sections 13(d) and 14(d) thereof,  including a
               "group"  as defined in Section  13(d) of the  Exchange  Act,  but
               excluding the Company and any Subsidiary and any employee benefit
               plan  sponsored or  maintained  by the Company or any  Subsidiary
               (including any trustee of such plan acting as trustee),  directly
               or indirectly, becomes the "beneficial owner" (as defined in Rule
               13d-3 under the Exchange  Act, as amended from time to time),  of
               securities of the Company  representing 20 percent or more of the
               combined   voting  power  of  the  Company's   then   outstanding
               securities;  provided,  however,  that  the  terms  "person"  and
               "group" shall not include any "Excluded  Director",  and the term
               "Excluded Director" means any director who, on the effective date
               of the  Plan,  is the  beneficial  owner  of or has the  right to
               acquire an amount of Stock equal to or greater  than five percent
               of the number of shares of

                                      -16-

<PAGE>

               Stock  outstanding on such effective  date; and further  provided
               that,  unless otherwise  determined by the Board or any committee
               thereof,  the terms  "person"  and "group"  shall not include any
               entity  or group of  entities  which  has  acquired  Stock of the
               Company  in  the  ordinary  course  of  business  for  investment
               purposes  only and not with the  purpose or effect of changing or
               influencing the control of the Company,  or in connection with or
               as a participant in any transaction having such purpose or effect
               ("Investment  Intent"),  as  demonstrated  by the  filing by such
               entity  or  group  of a  statement  on  Schedule  13G  (including
               amendments thereto) pursuant to Regulation 13D under the Exchange
               Act, as long as such entity or group continues to hold such Stock
               with an Investment Intent;

          (2)  When,  during  any  period of 24  consecutive  months  during the
               existence of the Plan, the  individuals  who, at the beginning of
               such period,  constitute  the Board (the  "Incumbent  Directors")
               cease for any reason  other than death to  constitute  at least a
               majority thereof; provided,  however, that a director who was not
               a director at the  beginning  of such  24-month  period  shall be
               deemed to have  satisfied  such 24-month  requirement  (and be an
               Incumbent  Director)  if such  director was elected by, or on the
               recommendation of or with the approval of, at least two-thirds of
               the directors who then  qualified as Incumbent  Directors  either
               actually  (because  they were  directors at the beginning of such
               24-month  period) or by prior operation of this Section  6(b)(2);
               or

          (3)  The occurrence of a transaction  requiring  shareholder  approval
               for  the  acquisition  of  the  Company,  or any  portion  of the
               outstanding equity securities or voting power of the Company,  by
               an entity other than the Company or a Subsidiary through purchase
               of Stock or assets, by merger or otherwise;

     provided,  however,  a change in control shall not be deemed to be a Change
     in Control for purposes of the Plan if the Board

                                      -17-

<PAGE>

     approves  such change  prior to either (i) the  commencement  of any of the
     events described in Section  6(b)(1),  (2), or (3) or (ii) the commencement
     by any person other than the Company of a tender offer for Stock.

          (c) Change in Control  Price.  For purposes of this Section 6, "Change
     in Control Price" means the highest price per share paid in any transaction
     reported on the Nasdaq SmallCap Market, or paid or offered in any bona fide
     transaction  related  to a Change in Control  of the  Company,  at any time
     during the 60-day period immediately preceding the occurrence of the Change
     in Control, in each case as determined by the Committee.

SECTION 7.  AMENDMENTS AND TERMINATION.

     The Board may at any time, in its sole discretion, amend, supplement, alter
or discontinue  the Plan, but no such amendment,  alteration or  discontinuation
shall be made which  would  impair the  rights of a  Participant  under an Award
theretofore granted, without the Participant's consent. The Company shall submit
to the shareholders of the Company for their approval any amendments to the Plan
which  are  required  to be  approved  by  shareholder  by law or the  rules and
regulations  of any  governmental  authority or any stock exchange or upon which
the Stock is then traded.

     Subject to changes in law or other  legal  requirements  that would  permit
otherwise, the Plan may not be amended without the approval of the shareholders,
to (a) increase the total number of shares of Stock that may be issued under the
Plan or to any  Participant  during any calendar  year  (except for  adjustments
pursuant to Section 3(c)), (b) modify the Plan's  eligibility  requirements,  or
(c) change the Performance Goals specified in Section 1(c).

     The Committee may at any time, in its sole  discretion,  amend the terms of
any  outstanding  Award,  but no such amendment shall be made which would impair
the rights of a  Participant  under an Award  theretofore  granted,  without the
Participant's  consent;  nor shall any such amendment  reduce the purchase price
(if any) of the Stock which is subject to an  outstanding  Award;  nor shall any
such  amendment be made which would make the applicable  exemptions  provided by
Rule 16b-3 under the  Exchange  Act  unavailable  to any Section 16  Participant
holding an Award without the Participant's consent.

     Subject  to the  above  provisions,  the  Board  shall  have all  necessary
authority to amend the Plan to take into account changes

                                      -18-

<PAGE>

in applicable  securities  and tax laws and accounting  rules,  as well as other
developments.

SECTION 8.  UNFUNDED STATUS OF PLAN.

     The Plan is  intended  to  constitute  an  "unfunded"  plan  for  incentive
compensation.  With respect to any payments not yet made to a Participant by the
Company,  nothing  contained  herein shall give any such  Participant any rights
that are greater than those of a general creditor of the Company.

SECTION 9.  GENERAL PROVISIONS.

          (a)  The  Committee  may  require  each  Participant  acquiring  Stock
     pursuant  to an Award  under the Plan to  represent  to and agree  with the
     Company in writing that the  Participant  is acquiring  the Stock without a
     view to distribution  thereof. Any certificates for such shares may include
     any  legend  which  the  Committee   deems   appropriate   to  reflect  any
     restrictions on transfer.

          All shares of Stock or other securities issued under the Plan shall be
     subject  to  such  stop-transfer  orders  and  other  restrictions  as  the
     Committee  may deem  advisable  under  the  rules,  regulations  and  other
     requirements of the Securities and Exchange Commission,  any stock exchange
     upon which the Stock is then listed,  and any  applicable  federal or state
     securities  laws,  and the  Committee  may cause a legend or  legends to be
     placed on any certificates for such shares to make appropriate reference to
     such  restrictions or to cause such restrictions to be noted in the records
     of the Company's stock transfer agent and any applicable book-entry system.

          (b)  Nothing  contained  in this Plan  shall  prevent  the Board  from
     adopting  other  or  additional  compensation   arrangements,   subject  to
     shareholder  approval if such approval is required;  and such  arrangements
     may be either generally applicable or applicable only in specific cases.

          (c)  Neither  the  adoption of the Plan,  nor its  operation,  nor any
     document  describing,  implementing  or referring to the Plan,  or any part
     thereof,  shall  confer  upon any  Participant  under the Plan any right to
     continue in the employ, or as a director,  of the Company or any Subsidiary
     or Affiliate, or shall in any way affect the right and power of the Company
     or any Subsidiary or Affiliate to terminate the employment, or service as a
     director,  or  change  the  job  title,  duties,  authority,   position  or
     compensation of any Participant in the

                                      -19-

<PAGE>

     Plan at any time with or without  assigning a reason therefor,  to the same
     extent as the Company or any Subsidiary or Affiliate might have done if the
     Plan had not been adopted.

          (d) For purposes of this Plan, a transfer of a Participant between the
     Company  and  any  of its  Subsidiaries  or  Affiliates,  or  between  such
     Subsidiaries or Affiliates, shall not be deemed a termination of employment
     or  adversely  affect or enlarge the rights of any  Participant  under this
     Plan or with respect to any Award.

          (e) No  later  than  the date as of  which  an  amount  first  becomes
     includable  in the gross income of the  Participant  for federal,  state or
     Puerto Rico income tax  purposes  with respect to any Award under the Plan,
     the Participant shall pay to the Company, or make arrangements satisfactory
     to the Committee regarding the payment of, any federal,  state, Puerto Rico
     or local  taxes or other  items of any kind  required by law to be withheld
     with  respect to such amount.  Subject to the  following  sentence,  unless
     otherwise  determined  by the  Committee,  withholding  obligations  may be
     settled with Stock,  including  unrestricted  Stock previously owned by the
     Participant  or Stock  that is part of the  Award  that  gives  rise to the
     withholding  requirement.  Notwithstanding the foregoing, any election by a
     Section 16 Participant to settle such tax withholding obligation with Stock
     that is previously  owned by the Participant or part of such Award shall be
     subject to prior approval by the  Committee,  in its sole  discretion.  The
     obligations  of the  Company  under the Plan shall be  conditional  on such
     payment or arrangements and the Company and its Subsidiaries and Affiliates
     to the  extent  permitted  by law shall  have the right to deduct  any such
     taxes from any payment of any kind otherwise due to the Participant.

          (f) The actual or deemed reinvestment of dividends in additional Stock
     or  Restricted  Stock at the time of any  dividend  payment  shall  only be
     permissible if sufficient shares of Stock are available under Section 3 for
     such reinvestment  (taking into account the then outstanding and previously
     granted Restricted Stock).

          (g) The Plan, all Awards made and all actions taken thereunder and any
     agreements  relating  thereto,  shall  be  governed  by  and  construed  in
     accordance with the laws of the Commonwealth of Puerto Rico.

          (h) In the event any Award is  transferred  or assigned  pursuant to a
     court order, such transfer or assignment shall

                                      -20-

<PAGE>

     be without liability to the Company and the Company shall have the right to
     offset against such Award any expenses (including attorneys' fees) incurred
     by the Company in connection with such transfer or assignment.

          (i) All Award Agreements  entered into with  Participants  pursuant to
     the Plan shall be subject to the Plan. A Participant  who receives an Award
     under the Plan shall not have any rights  with the  respect to such  Award,
     unless  and  until  such   Participant  has  executed  an  Award  Agreement
     evidencing the Award, in the form approved by the Committee;  has delivered
     a  fully-executed  copy of such Award  Agreement  to the  Company;  and has
     otherwise complied with the applicable terms and conditions of such Award.

          (j) The provisions of Awards need not be the same with respect to each
     Participant.

SECTION 10.  SHAREHOLDER APPROVAL; EFFECTIVE DATE OF PLAN.

     The Plan was adopted by the Board on May 2, 2003 and is subject to approval
by the holders of the Company's outstanding Stock, in accordance with applicable
law. The Plan will become effective on the date of such approval.

SECTION 11.  TERM OF PLAN.

     No Award shall be granted pursuant to the Plan on or after May 2, 2013, but
Awards granted prior to such date may extend beyond that date.

                                      -21-Exhibit 10.15

 

REVOLVING CREDIT AND TERM

LOAN AGREEMENT

 

 

MAC-GRAY CORPORATION,

 

MAC-GRAY SERVICES, INC.,

 

AND

 

INTIRION CORPORATION

 

 

Dated as of June 24, 2003

 

 

 

 

CITIZENS BANK OF MASSACHUSETTS

 

 

AND

 

THE OTHER LENDING INSTITUTIONS WHICH
MAY BECOME

PARTIES TO THIS AGREEMENT

 

AND

 

CITIZENS BANK OF MASSACHUSETTS,

AS ADMINISTRATIVE AGENT

AND ARRANGER

 

AND

 

BANKNORTH, N.A., AS SYNDICATION AGENT

 

AND

 

KEYBANK, N.A.,

AS DOCUMENTATION AGENT

 

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  SECTION I  DEFINITIONS

  
	
   

  	
   

  
	
  1.1.

  	
  Definitions

  
	
  1.2.

  	
  Terms of General Application

  
	
   

  	
   

  
	
  SECTION II  DESCRIPTION OF
  CREDIT

  
	
   

  	
   

  
	
  2.

  	
  The Credit Facilities

  
	
  2.1.

  	
  The
  Loans

  
	
  2.2.

  	
  The
  Notes

  
	
  2.3.

  	
  Conversion

  
	
  2.4.

  	
  Notice and Manner of Borrowing or
  Conversion of Loans

  
	
  2.5.

  	
  Commitment
  Fee

  
	
  2.6.

  	
  Fee
  Letter

  
	
  2.7.

  	
  Reduction of Revolving Credit Commitment

  
	
  2.8.

  	
  Duration of Interest Periods

  
	
  2.9.

  	
  Interest Rates and Payments of Interest

  
	
  2.10.

  	
  Changed Circumstances

  
	
  2.11.

  	
  Capital Requirements

  
	
  2.12.

  	
  Payments and Prepayments of the Loans

  
	
  2.13.

  	
  Method of Payment; Withholding Tax
  Exemption

  
	
  2.14.

  	
  Default Rate Interest, Etc

  
	
  2.15.

  	
  Payments Not at End of Interest Period

  
	
  2.16.

  	
  Computation of Interest and Fees; Maximum
  Interest

  
	
  2.17.

  	
  Letters of Credit

  
	
  2.17(A).

  	
  Carryover
  LC’s

  
	
  2.18.

  	
  Letter of Credit Fees

  
	
  2.19.

  	
  Interdependence of Borrower Affiliated
  Group

  
	
   

  	
   

  
	
  SECTION III  CONDITIONS OF
  LOANS

  
	
   

  	
   

  
	
  3.1.

  	
  Conditions Precedent to the Term Loan;
  Initial Revolving Credit Loan and Initial Letters of Credit

  
	
  3.2.

  	
  Conditions Precedent to all Loans and
  Letters of Credit

  
	
   

  	
   

  
	
  SECTION IV  REPRESENTATIONS
  AND WARRANTIES

  
	
   

  	
   

  
	
  4.1.

  	
  Organization and Qualification

  
	
  4.2.

  	
  Corporate Authority

  
	
  4.3.

  	
  Valid Obligations

  
	
  4.4.

  	
  Consents or Approvals

  
	
  4.5.

  	
  Title to Properties; Absence of
  Encumbrances

  
	
  4.6.

  	
  Location of Records and Collateral; Name
  Change

  
	
  4.7.

  	
  Financial Statements

  

 

i

 

	
  4.8.

  	
  Changes

  
	
  4.9.

  	
  Defaults

  
	
  4.10.

  	
  Taxes

  
	
  4.11.

  	
  Litigation

  
	
  4.12.

  	
  Subsidiaries and Divisions

  
	
  4.13.

  	
  Investment Company Act

  
	
  4.14.

  	
  Compliance with ERISA

  
	
  4.15.

  	
  Environmental Matters

  
	
  4.16.

  	
  Disclosure

  
	
  4.17.

  	
  Solvency

  
	
  4.18.

  	
  Compliance with Statutes, etc

  
	
  4.19.

  	
  Capitalization

  
	
  4.20.

  	
  Labor Relations

  
	
  4.21.

  	
  Certain Transactions

  
	
  4.22.

  	
  Restrictions on the Borrower Affiliated
  Group

  
	
  4.23.

  	
  Real Property Leases and Laundry Facility
  Agreements

  
	
  4.23(A).

  	
  Laundry Facility Agreements

  
	
  4.24.

  	
  Franchises, Patents, Copyrights, Etc

  
	
  4.25.

  	
  [Intentionally Omitted.]

  
	
  4.26.

  	
  Collateral

  
	
  4.27.

  	
  Material Contracts

  
	
   

  	
   

  
	
  SECTION V  AFFIRMATIVE
  COVENANTS

  
	
   

  	
   

  
	
  5.1.

  	
  Financial Statements and other Reporting
  Requirements

  
	
  5.2.

  	
  Conduct of Business

  
	
  5.3.

  	
  Maintenance and Insurance

  
	
  5.4.

  	
  Taxes

  
	
  5.5.

  	
  Inspection by the Administrative Agent

  
	
  5.6.

  	
  Maintenance of Books and Records

  
	
  5.7.

  	
  Interest Rate Protection

  
	
  5.8.

  	
  Environmental Indemnification

  
	
  5.9.

  	
  Use of Proceeds

  
	
  5.10.

  	
  Pension Plans

  
	
  5.11.

  	
  Fiscal
  Year

  
	
  5.12.

  	
  Leases

  
	
  5.13.

  	
  Laundry Facility Agreements

  
	
  5.14.

  	
  Landlord Waivers

  
	
  5.15.

  	
  Control Agreements

  
	
  5.16.

  	
  Further Assurances

  
	
   

  	
   

  
	
  SECTION VI  NEGATIVE COVENANTS

  
	
   

  	
   

  
	
  6.1.

  	
  Indebtedness

  
	
  6.2.

  	
  Contingent Liabilities

  
	
  6.3.

  	
  Sale and Leaseback

  
	
  6.4.

  	
  Encumbrances

  

 

ii

 

	
  6.5.

  	
  Merger; Consolidation; Sale or Lease of
  Assets; Permitted Acquisitions

  
	
  6.6.

  	
  Maximum Total Leverage

  
	
  6.7.

  	
  [Intentionally Omitted]

  
	
  6.8.

  	
  [Intentionally Omitted]

  
	
  6.9.

  	
  Minimum Debt Service Coverage

  
	
  6.10.

  	
  Minimum Net Worth

  
	
  6.11.

  	
  Maximum Capital Expenditures and Prepaid
  Commission Expenses

  
	
  6.12.

  	
  Restricted Payments

  
	
  6.13.

  	
  Investments

  
	
  6.14.

  	
  ERISA

  
	
  6.15.

  	
  Transactions with Affiliates

  
	
  6.16.

  	
  Loans

  
	
  6.17.

  	
  Revolving Credit Commitment

  
	
  6.18.

  	
  No Amendments to Certain Documents

  
	
  6.19.

  	
  [Intentionally Omitted.]

  
	
  6.20.

  	
  Relocations of Principal Place of Business

  
	
  6.21.

  	
  Relocations of Books and Records

  
	
  6.22.

  	
  Changes in Fiscal Year

  
	
  6.23.

  	
  Debt Forgiveness

  
	
   

  	
   

  
	
  SECTION VII  DEFAULTS

  
	
   

  	
   

  
	
  7.1.

  	
  Events of Default

  
	
  7.2.

  	
  Remedies

  
	
   

  	
   

  
	
  SECTION VIII  CONCERNING THE ADMINISTRATIVE AGENT AND THE BANKS

  
	
   

  	
   

  
	
  8.1.

  	
  Appointment and Authorization

  
	
  8.2.

  	
  Administrative Agent and Affiliates

  
	
  8.3.

  	
  Future Advances

  
	
  8.4.

  	
  Delinquent Bank

  
	
  8.5.

  	
  Payments

  
	
  8.6.

  	
  Action by Administrative Agent

  
	
  8.7.

  	
  Notification of Defaults and Events of
  Default

  
	
  8.8.

  	
  Consultation with Experts

  
	
  8.9.

  	
  Liability of Administrative Agent

  
	
  8.10.

  	
  Indemnification

  
	
  8.11.

  	
  Independent Credit Decision

  
	
  8.12.

  	
  Successor Administrative Agent

  
	
  8.13.

  	
  Other
  Agents

  
	
   

  	
   

  
	
  SECTION IX  MISCELLANEOUS

  
	
   

  	
   

  
	
  9.1.

  	
  Notices

  
	
  9.2.

  	
  Expenses

  
	
  9.3.

  	
  Indemnification

  
	
  9.4.

  	
  Set-Off

  

 

iii

 

	
  9.5.

  	
  Term of Agreement

  
	
  9.6.

  	
  No
  Waivers

  
	
  9.7.

  	
  Governing
  Law

  
	
  9.8.

  	
  Amendments, Waivers, Etc

  
	
  9.9.

  	
  Binding Effect of Agreement

  
	
  9.10.

  	
  Successors and Assigns

  
	
  9.11.

  	
  Counterparts

  
	
  9.12.

  	
  Partial Invalidity

  
	
  9.13.

  	
  Captions

  
	
  9.14.

  	
  WAIVER OF JURY TRIAL

  
	
  9.15.

  	
  WAIVER OF SPECIAL DAMAGES

  
	
  9.16.

  	
  Entire Agreement

  
	
  9.17.

  	
  Replacement of Promissory Notes, Etc

  
	
   

  	
   

  
	
  EXHIBITS

  
	
   

  	
   

  
	
  EXHIBIT
  A-1 – Form of Revolving Credit Note

  
	
   

  
	
  EXHIBIT
  A-2 – Form of Term Note

  
	
   

  
	
  EXHIBIT
  B – Form of Notice of Borrowing or Conversion

  
	
   

  
	
  EXHIBIT C – Indebtedness, Encumbrances

  
	
   

  
	
  EXHIBIT D – Disclosure

  
	
   

  
	
  EXHIBIT E – Form of Opinion of Counsel to the Borrower Affiliated
  Group

  
	
   

  
	
  EXHIBIT F – Form of Report of Chief Financial Officer

  
	
   

  
	
  EXHIBIT G – Form of Assignment and Assumption

  
	
   

  
	
  EXHIBIT H – Forms of Laundry Facility Agreements

  
	
   

  
	
  EXHIBIT I – Post Closing

  
	
   

  
	
  SCHEDULES

  
	
   

  
	
  SCHEDULE
  1 – Commitments and Commitment Percentages

  

 

iv

 

REVOLVING CREDIT AND TERM LOAN AGREEMENT

 

Dated as of June 24, 2003

 

THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of
June 24, 2003 by and among MAC-GRAY CORPORATION, MAC-GRAY SERVICES, INC.,
and INTIRION CORPORATION, each a Delaware corporation, having its principal
place of business and chief executive office at 22 Water Street, Cambridge,
Massachusetts 02141 (collectively, the “Borrower”), CITIZENS BANK OF
MASSACHUSETTS (“Citizens”), having its head office at 28 State Street, Boston,
Massachusetts 02109, each of the other lending institutions listed on Schedule
1 hereto on the date hereof (Citizens and each such other lending
institution, and the other lending institutions which may now or hereafter
become parties hereto pursuant to Section 9.10 individually, a “Bank” and
collectively, the “Banks”), BankNorth, N.A., as syndication agent, and KeyBank,
N.A. as documentation agent for itself and each other Bank.

 

NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows:

 

SECTION I

 

DEFINITIONS

 

1.1.                              Definitions.

 

All
capitalized terms used in this Agreement, in the Notes or in any other Security
Document (as such terms are defined below), or in any certificate, report or
other document made or delivered pursuant to this Agreement (unless otherwise
defined therein) shall have the respective meanings assigned to them below:

 

Account and Accounts Receivable.  Individually and collectively, all rights to
payment for goods sold or leased or for services rendered, all sums of money or
other proceeds due or becoming due thereon (including, without limitation, all
accounts receivable, notes, bills, drafts, acceptances, instruments, documents,
chattel paper and all other debts, obligations and liabilities in whatever form
owing to any Person for goods sold by it or for services rendered by it), all
guaranties and security therefor, and all right, title and interest of such
Person in the goods or services giving rise thereto and the rights pertaining
to such goods, including rights of reclamation and stoppage in transit, and all
related insurance, whether any of the foregoing be now existing or hereafter
arising, now or hereafter received by or owing or belonging to such Person.

 

Administrative Agent.  Citizens in the capacity as Administrative
Agent for the Banks under this Agreement and the other Loan Documents,
including (where the context so permits) any other Person or Persons succeeding
to the functions of the Administrative Agent pursuant to this Agreement and the
other Loan Documents.

 

Affected Bank.  See Section 2.11.

 

Affected Loans.  See Section 2.10(a).

 

 

Affiliate.  With reference to any Person, (i) any
director or officer of that Person, (ii) any other Person controlling,
controlled by or under direct or indirect common control with that Person (and
if that Person is an individual, any member of the immediate family (including
parents, siblings, spouse, children, stepchildren, nephews, nieces and
grandchildren) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who
is controlled by any such member or trust), (iii) any other Person
directly or indirectly holding 10% or more of any class of the capital stock or
other equity interests (including options, warrants, convertible securities and
similar rights) of that Person, (iv) any other Person 10% or more of any class
of whose capital stock or other equity interests (including options, warrants,
convertible securities and similar rights) is held directly or indirectly by
that Person, and (v) any other Person that possesses, directly or indirectly,
power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise) of that Person.

 

Agreement.  This Agreement, as the same may be
renewed, extended, modified, supplemented or amended from time to time.

 

Ancillary Documents.  Collectively, (i) the Seller Subordinated
Debt Documents, (ii) the Material Contracts, and (iii) all other agreements,
instruments and contracts which shall from time to time be identified by the
Administrative Agent, the Banks and the Borrower as “Ancillary Documents” for
purposes of this Agreement, as the foregoing may be amended from time to
time in accordance with Section 6.18 and Section 9.8 hereof.

 

Applicable LIBOR Margin.  The Applicable LIBOR Margin is set forth in
Section 2.9.

 

Applicable Prime Rate Margin.  The Applicable Prime Rate Margin is set
forth in Section 2.9.

 

Arranger.  Citizens.

 

Assignee.  See Section 9.10(ii).

 

Assignment and Assumption.  See Section 9.10(ii).

 

Assignment of Hedging Contract(s).  The Collateral Assignment of Hedging
Contract(s) entered into within 90 days after the Closing Date and delivered by
the Borrower to the Administrative Agent, assigning all of its rights in and to
the Hedging Contract(s) and the proceeds thereof.

 

Bailee Notices.  Collectively, the separate bailee notices
which have been or are executed and delivered to the Administrative Agent, for
the ratable benefit of the Banks and the Administrative Agent, by the owner of
any public warehouse in which the Borrower or any other member of the Borrower
Affiliated Group stores its Inventory or other Collateral.

 

Banks.  See Preamble.

 

2

 

Borrower.  See Preamble.  The term “Borrower” or “Borrowers” shall, whenever used in the
Loan Agreement or any of the other Loan Documents or Security Documents, be
deemed to mean and include each of Mac-Gray, Services and Intirion.  It is understood and agreed that each of
Mac-Gray, Services and Intirion, as co-borrowers hereunder, shall be jointly
and severally liable for the payment and performance in full of the Obligations
in consideration of the financial accommodations to be provided by the Banks
hereunder.

 

Borrower Affiliated Group.  Collectively, (i) the Borrower and (ii) each
of the Subsidiaries of the Borrower.

 

Business Day.  (i) For all purposes other than as covered
by clause (ii) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Boston, Massachusetts are open for the conduct of a substantial
part of their commercial banking business; and (ii) with respect to all notices
and determinations in connection with, and payments of principal and interest
on, LIBOR Loans, any day that is a Business Day described in clause (i) and
that is also a day on which trading takes place between banks in United States
dollar deposits in the London interbank market.

 

Cambridge Fee Location.  That certain owned Real Estate of Mac-Gray
Services, Inc., located at 22 Water Street, Cambridge, Massachusetts, 02141.

 

Capital Expenditures.  To the extent capitalized in accordance with
GAAP, any expenditure for fixed assets (both tangible and intangible) including
assets being constructed (whether or not completed), leasehold improvements,
capital leases under GAAP, installment purchases of machinery and equipment,
acquisitions of real estate and other similar expenditures including (i) in the
case of a purchase, the entire purchase price, whether or not paid during the
fiscal period in question, (ii) in the case of a capital lease, the capitalized
amount thereof (determined in accordance with GAAP) and (iii) without
duplication, expenditures in or from any construction-in-progress account of
any member of the Borrower Affiliated Group.

 

Carryover LC’s.
Collectively, the five (5) Letters of Credit having a Stated Amount on the
Closing Date of $377,000.96, which were issued for the account of the Borrower
prior to the Closing Date by Fleet National Bank.

 

Cash Management Agreements.  Collectively, those agreements between the
Borrower and any of the Banks relating to the cash management of the Borrower
Affiliated Group, including, without limitation, any lockbox agreement entered
into from time to time by any member of the Borrower Affiliated Group at the
direction of the Administrative Agent and any agency agreements with
third-party banks in locations where the Administrative Agent has no operations
and at which any member of the Borrower Affiliated Group has a bank account.

 

CERCLA.  The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as the same may from time to time
be supplemented or amended and remain in effect.

 

Change in Control.  The occurrence of any of the following: (i)
any Person or “group” (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended) of Persons acting in concert as a partnership
or other group (other than Stewart G. MacDonald, Jr.,

 

3

 

Sandra MacDonald, Daniel MacDonald and/or Evelyn MacDonald or any of
their respective spouses or immediate family members or trusts or family
limited partnerships for their benefit) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become, after the date hereof, the “beneficial owner” (within
the meaning of such term under Rule 13d-3 under the Exchange Act) of securities
of the Borrower representing 25% or more of the combined voting power of the
then outstanding securities of the Borrower ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors; (ii) the board of directors of the Borrower shall cease to
consist of a majority of the individuals who constituted the board of directors
as of the date hereof or who shall have become a member thereof subsequent to
the date hereof after having been nominated, or otherwise approved in writing,
by at least a majority of individuals who constituted the board of directors of
the Borrower as of the date hereof; (iii) any change in equity ownership of any
Subsidiary of the Borrower or other member of the Borrower Affiliated Group
(other than Mac-Gray), except as may be expressly permitted by Section 6.5
hereof; or (iv) Stewart G. MacDonald, Jr. shall cease to be the Chairman
and Chief Executive Officer of Mac-Gray, or shall cease to perform substantially
all of his duties and responsibilities as such officer for a period of more
than 30 days (exclusive of vacations not in excess of such officer’s normal
annual vacation allowance,) unless the Administrative Agent, by the 120th day
following such cessation of service or the expiration of such 30 day period,
has determined in its reasonable discretion that the occurrence of such event
will not have a material adverse effect on the business, condition (financial
or otherwise), assets, operations or prospects of the Borrower Affiliated
Group.

 

Closing Date.
June 24, 2003.

 

Code.  The Internal Revenue Code of 1986 and the
rules and regulations thereunder, collectively, as the same may from time
to time be supplemented or amended and remain in effect.

 

Collateral.  Collectively, all of the agreements,
instruments, contracts, property (real and personal, tangible and intangible),
assets, accounts, Accounts Receivable, Inventory, equipment, investment
property (including a pledge of all stock of all Subsidiaries of the Borrower),
patents, trademarks, copyrights, websites, domain names, URL’s, other
intellectual property and all applications therefore and all goodwill
associated therewith, and all of the income, proceeds and products of any
thereof, under or in respect of which the Administrative Agent or any Bank or
any of the nominees, agents or legal representatives of the Administrative
Agent or any Bank shall have at the relevant time of reference to the term
“Collateral,” any rights or interest as security for the payment or performance
of all or any part of the Obligations, all as further described in the Security
Agreements and the other Loan Documents. 
Collateral hereunder shall not include the Cambridge Fee Location.

 

Collateral Assignment of Material Contracts
and Licenses. 
The Collateral Assignment of Material Contracts and Licenses dated as of
the date hereof and executed and delivered by the Borrower to the
Administrative Agent, for the ratable benefit of the Banks and the Administrative
Agent, assigning all of the Borrower’s rights and interests in and to the
Material Contracts and Licenses and the proceeds thereof.

 

4

 

Commitment.  With respect to each Bank, the amount set
forth on Schedule 1 as such Bank’s (i) Revolving Credit Commitment and
(ii) Term Loan Commitment, as such Bank’s Commitment may be modified
pursuant hereto and as in effect from time to time (as evidenced by an updated Schedule
1 circulated by the Administrative Agent from time to time to reflect
assignments permitted by Section 9.10).

 

Commitment Fee.  The commitment fee payable by the Borrower
to the Banks pursuant to Section 2.5.

 

Commitment Percentage.  With respect to each Bank, the percentage
set forth on Schedule 1 hereto as such Bank’s percentage of the
aggregate Revolving Credit Commitments and Term Loan Commitments.  Schedule 1 may be updated by the
Administrative Agent from time to time to reflect any changes to the Commitment
Percentages.

 

Consolidated and Consolidating.  The terms Consolidated and Consolidating
shall have the respective meanings ascribed to such terms under GAAP.

 

Consolidated Net Worth.  As at any date of determination, an amount
equal to the Consolidated net worth of the Borrower Affiliated Group, as
determined in accordance with GAAP.

 

Control Agreements.
Collectively, those agreements among the Borrower, the Agent and any banks in
which the Borrower Affiliated Group maintains deposit accounts.

 

Controlled Group.  All trades or businesses (whether or not
incorporated) under common control that, together with Mac-Gray, are treated as
a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of
ERISA.

 

Debt Service Coverage.  For any period, the ratio of Operating Cash
Flow to Debt Service.

 

Debt Service.  For any period, the sum of (i) Interest
Charges paid or required to be paid by the Borrower Affiliated Group in such
period, plus (ii) the aggregate amount of scheduled principal payments required
to be made by the Borrower Affiliated Group during such period with respect to
any Indebtedness for borrowed money or capital lease obligations.

 

Default.  An event or condition that, but for the
requirement that time lapse or notice be given, or both, would constitute an
Event of Default.

 

Delinquent Bank.  See Section 8.4.

 

Dollar or $.  Dollars in lawful currency of the United
States of America.

 

EBITDA.  In relation to the Borrower Affiliated Group
for any period, an amount equal to the Consolidated net income of the Borrower
Affiliated Group after deduction of all expenses, taxes and other proper
charges, determined in accordance with GAAP (with Inventory being determined on
a “first-in, first-out” basis) for such period, but, in determining such
Consolidated net income, any non-cash GAAP extraordinary gains or losses shall
be excluded from such calculation, plus the following to the extent deducted in
computing such Consolidated net

 

5

 

income for such period:  (i)
Interest Charges for such period, (ii) taxes on income for such period, (iii)
depreciation for such period, and (iv) amortization for such period.

 

Effective Date.  See Section 5.7.

 

Encumbrances.  See Section 6.4.

 

Environmental Laws.  Any and all applicable foreign, federal,
state and local environmental, health or safety statutes, laws, regulations,
ordinances, policies and or common law (whether now existing or hereafter
enacted or promulgated), of all federal, state, local or other governmental
authorities, agencies, commissions, boards, bureaus or departments which
may now or hereafter have jurisdiction over the Borrower, any other member
of the Borrower Affiliated Group or any landlord under any real estate Lease
under which the Borrower or such other member of the Borrower Affiliated Group
is a tenant, and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid,
liquid or gaseous in nature, into the environment or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of such Hazardous Materials, chemical substances, pollutants
or contaminants.

 

ERISA.  The Employee Retirement Income Security Act
of 1974 and the rules and regulations thereunder, collectively, as the same
may from time to time be supplemented or amended and remain in effect.

 

Equity Securities.  As to any Person, any shares of any class of
capital stock or other equity interests of such Person, voting or non-voting,
or any options, warrants or similar rights with respect to any such shares or
other equity interests.

 

Event of Default.  Any event described in Section 7.1.

 

Excess Cash Flow.  In relation to the Borrower Affiliated Group
for any period, the amount determined by (A) subtracting from EBITDA for such
period, the following items: 
(i) cash taxes on income directly or indirectly paid in such
period, (ii) Capital Expenditures made during such period (such Capital
Expenditures to be subject to the provisions of Section 6.10), (iii) Total
Fixed Charges paid in such period (including any Restricted Payment), (iv) the
aggregate amount of voluntary prepayments of principal during such period with
respect to the Term Loan; and (v) all Prepaid Commission Expenses paid in such
period; and (B) adding to EBITDA for such period, any amounts received, to the
extent not already included in EBITDA, in settlement or payment of any
judgment, or as repayment or redemption of promissory notes or capital stock of
any other Person held by the Borrower or any other member of the Borrower
Affiliated Group.

 

Existing Debt.  See Section 6.1(d).

 

6

 

Federal Funds Effective Rate.  For any day, a fluctuating interest 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, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for such day on such transactions received by the
Administrative Agent from 3 federal funds brokers of recognized standing
selected by the Administrative Agent.

 

Fee Letter.  The letter agreement dated as of the date
hereof among Citizens, the Arranger and the Borrower.

 

Five-Year Projections.  See Section 4.7.

 

Foreign Subsidiary.  See Section 3.1.13.

 

Funded Debt Ratio.  As at the end of any fiscal quarter of the
Borrower Affiliated Group, the ratio of (i) Total Funded Debt as at the end of
such fiscal quarter, to (ii) EBITDA for the four consecutive fiscal quarters of
the Borrower Affiliated Group ending on the last day of such fiscal quarter,
subject to any proforma adjustments to EBITDA for any acquired entities in
connection with any Permitted Acquisitions based on identified cost
improvements, subject to the Administrative Agent’s approval of any such
adjustments in its reasonable discretion.

 

Funding Date. Shall
mean the 24th day of June, 2003.

 

GAAP.  Generally accepted accounting principles in
the United States of America, consistently applied.

 

Guarantees.  As applied to any Person, without
duplication, all guarantees, endorsements or other contingent or surety
obligations with respect to obligations of others whether or not reflected on
such Person’s Consolidated balance sheet, including any obligation to furnish
funds, directly or indirectly (whether by virtue of partnership arrangements,
by agreement to keep-well or otherwise), through the purchase of goods,
supplies or services, or by way of stock purchase, capital contribution,
advance or loan, or to enter into a contract for any of the foregoing, for the
purpose of payment of obligations of any other Person.

 

Hazardous Material.  Any substance (i) the presence of which
requires or may hereafter require notification, investigation or
remediation under any Environmental Law; (ii) which is or becomes defined as a
“hazardous waste” or “hazardous material” or “hazardous substance” or
“controlled industrial waste” or “pollutant” or “contaminant” under any present
or future Environmental Law or amendments thereto including, without
limitation, CERCLA, and any applicable local statutes and the regulations
promulgated thereunder; (iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
or becomes regulated by any governmental authority, agency, department,
commission, board or instrumentality of any foreign country, the United States,
any state of the United States, or any political subdivision thereof to the
extent any of the foregoing has or had jurisdiction over the Borrower or any
other member of the Borrower Affiliated Group or any landlord under any real
property lease under which the Borrower or any other member of the Borrower
Affiliated Group is a tenant; or (iv) without limitation, which contains
gasoline, diesel

 

7

 

fuel or other petroleum products, asbestos, asbestos containing
materials (“ACM”), polychlorinated biphenyls (“PCB’s”), flammable materials or
radioactive material.

 

Hedging Contracts.  Shall mean, any interest swap agreements,
interest cap agreements and interest rate collar agreements, or any other
agreements or arrangements entered into between the Borrower and the Agent
and/or KeyBank, N.A. and designed to protect the Borrower against fluctuations
in interest rates or currency exchange rates.

 

Hedging Obligations.
Shall mean, with respect to the Borrower, all liabilities of the Borrower to
the Agent under the Hedging Contracts.

 

Indebtedness.  As applied to any Person, (i) all
obligations for borrowed money or other extensions of credit whether secured or
unsecured, absolute or contingent, including, without limitation, unmatured
reimbursement obligations with respect to letters of credit or guarantees
issued for the account of or on behalf of such Person, and all obligations
representing the deferred purchase price of property, other than accounts
payable arising in the ordinary course of business, (ii) all obligations
evidenced by bonds, notes, debentures or other similar instruments,
(iii) all obligations secured by any mortgage, pledge, security interest
or other lien on property owned or acquired by such Person, whether or not the
obligations secured thereby shall have been assumed, (iv) that portion of all
obligations arising under capital leases that is required to be capitalized on
the Consolidated balance sheet of such Person, (v) all Guarantees, and (vi) all
obligations that are immediately due and payable out of the proceeds of or
production from property now or hereafter owned or acquired by such Person.

 

Initial Financial Statement.  See Section 4.7.

 

Insolvent or Insolvency.  The occurrence of one or more of the
following events with respect to a Person: 
dissolution; termination of existence; insolvency within the meaning of
the United States Bankruptcy Code or other foreign or domestic applicable
statutes; such Person’s inability to pay its debts as they come due;
appointment of a receiver of any part of the property of, execution of a trust
mortgage or an assignment for the benefit of creditors by, or the entry of an
order for relief or the filing of a petition in bankruptcy or the commencement
of any proceedings under any bankruptcy or insolvency laws, or any laws
relating to the relief of debtors, readjustment of indebtedness or
reorganization of debtors, or the offering of a plan to creditors for
composition or extension, except for an involuntary proceeding commenced
against such Person which is dismissed within 45 days after the commencement
thereof without the entry or an order for relief or the appointment of a
trustee.

 

Interest Charges.  For any period, means, without duplication,
all interest and all amortization of debt discount and expense (including
commitment fees, letter of credit fees, balance deficiency fees and similar
expenses (but excluding all fees and expenses paid (or the amortization
thereof) (i) on the Closing Date pursuant to Section 3.1.9, or (ii) to the
Borrower’s counsel, advisors, accountants and agents in connection with the
consummation of the transactions contemplated by this Agreement) on any
particular Indebtedness (including outstanding Letters of Credit) for which
such calculations are being made, all as determined in accordance with
GAAP.  Computations of Interest Charges
on a pro  forma basis for Indebtedness having a variable interest
rate shall be calculated at the rate in effect on the date of any
determination.

 

8

 

Interest Period.  With respect to each LIBOR Loan, the
Interest Period shall mean:

 

(i)                                     initially, the
period beginning on (and including) the Funding Date and ending on (but
excluding) June 30, 2003 (the “Stub Period”); and

 

(ii)                                  Then, each period
commencing on the last day of the next preceding Interest Period and ending on
the day which numerically corresponds to the last day of the Stub Period one
month thereafter (or, if such month has no numerically corresponding day, on
the last Business Day of such month) and

 

(iii)                               thereafter, each period
commencing on the last day of the next preceding Interest Period and ending
one, two, three or six months thereafter, subject to availability, as the
Borrower may elect in the applicable Notice of Borrowing or Conversion;

 

provided that:

 

(iv)                              any Interest Period
(other than an Interest Period determined pursuant to clause (iii) below) 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 the next
calendar month, in which case such Interest Period shall end on the first
preceding Business Day;

 

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

 

(vi)                              any Interest Period
applicable to Revolving Credit Loans that would otherwise end after the Revolving
Credit Maturity Date shall end on said Revolving Credit Maturity Date; and any
Interest Period applicable to any portion of the Term Loan that would otherwise
end after the Term Loan Maturity Date shall end on said Term Loan Maturity
Date;

 

(vii)                           no Interest Period
applicable to the Term Loan shall include a principal repayment date for such
Term Loan unless an aggregate principal amount of Loans at least equal to the
principal amount due on such principal repayment date shall be Prime Rate Loans
or other Loans having Interest Periods ending on or before such date;

 

(viii)                        if the Borrower has or
may incur Hedging Obligations with the Administrative Agent in connection
with the Loans, the Interest period shall be of the same duration as the
relevant period set forth under the applicable Hedging Contract.

 

(ix)                                notwithstanding clauses
(vi) and (vii) above, no Interest Period shall have a duration of less than one
month; and if any Interest Period would be for a shorter period, such Interest
Period shall not be available hereunder.

 

9

 

Intirion.  Intirion Corporation, a Delaware
corporation, which is a wholly-owned Subsidiary of Mac-Gray.

 

Intirion Patent and Trademark Security
Agreement.  The
Patent and Trademark Security Agreement dated as of the date hereof and
executed and delivered by Intirion to the Administrative Agent, for the ratable
benefit of the Banks and the Administrative Agent.

 

Intirion Security Agreement.  The Security Agreement dated as of the date
hereof and executed and delivered by Intirion to the Administrative Agent, for
the ratable benefit of the Banks and the Administrative Agent.

 

Inventory.  Goods, merchandise and other personal
property, now owned or hereafter acquired by a Person, which are held for sale
or lease or are furnished or to be furnished under a contract of service or are
raw materials, work in process or materials used or consumed or to be used or
consumed in such Person’s business.

 

Investment.  As applied to any Person, (i) the purchase
or acquisition of any share of capital stock, partnership interest, limited
liability company membership interest, evidence of indebtedness or other equity
security of any other Person, (ii) any loan, advance or extension of credit to,
or contribution to the capital of, any other Person, (iii) any real estate held
for sale or investment, (iv) any commodities futures contracts held other than
in connection with bona fide hedging transactions, (v) any other investment in
any other Person, and (vi) the making of any commitment or acquisition of any
option to make an Investment.

 

Issuing Bank.  Citizens Bank of Massachusetts.

 

Landlord Waivers.  Collectively, the separate Landlord Waivers
which have been, or shall be in accordance with Section 5.14 hereof, executed
and delivered to the Administrative Agent, for the ratable benefit of the Banks
and the Administrative Agent, by the landlord under the Leases for office,
warehouse, repair and other administrative space at the locations listed in Section
4.23 and on Exhibit D and at each other office, warehouse, repair or
other administrative location from time to time required by the Administrative
Agent with respect to any Leases of real property used for office, warehouse,
repair or other administrative purposes entered into after the Closing Date,
each in form and substance satisfactory to the Administrative Agent.

 

Laundry Facilities Agreement(s).  See Section 4.23.

 

Leasehold Mortgages.
Collectively, the separate Leasehold Mortgage, Security Agreement, Assignment
of Rents and Financing Statements between the applicable member of the Borrower
Affiliated Group and the Administrative Agent, for the ratable benefit of the
Banks and the Administrative Agent, with respect to each location required by
the Administrative Agent pursuant to Section 7.2(c) with respect to any Leases
of real property entered into by any member of the Borrower Affiliated Group.

 

Leases or Lease.  Any agreement granting a Person the right to
occupy space in a structure or real estate for any period of time or any
capital lease, operating lease or other lease of or agreement to use personal
property including, but not limited to, machinery, equipment, furniture and
fixtures, whether evidenced by written or oral lease, contract, sales agreement
or other agreement no matter how characterized.

 

10

 

Letters of Credit.  Letters of credit in the form customarily
issued by the Issuing Bank as standby Letters of Credit issued or to be issued
for the account of the Borrower by the Issuing Bank, under the joint
responsibilities of the Banks, upon the terms and subject to the conditions
contained in this Agreement.

 

LIBOR Loan.  Any Revolving Credit Loan or portion of the
Term Loan bearing interest at a rate determined with reference to the LIBOR
Rate.

 

LIBOR Rate.  Shall mean relative to any Interest Period
for a LIBOR Loan, the offered rate for deposits of U.S. Dollars in an amount
approximately equal to the amount of the LIBOR Loan for a term coextensive with
the Interest Period which the British Bankers’ Association fixes as its LIBOR
rate and which appears on the Telerate Page 3750 as of 11 a.m. London time on
the day which is two London Banking Days prior to the beginning of such Interest
Period. The LIBOR Rate may be adjusted, in the Administrative Agent’s sole
discretion, to take into consideration any change in the LIBOR Reserve
Percentage for such period.  The LIBOR
Rate shall be adjusted automatically as of the effective date of any such
change in the LIBOR Reserve Percentage.

 

LIBOR Reserve Percentage.  Means, relative to any day of any Interest
Period for the LIBOR Loan, the maximum aggregate (without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements) applicable to the Administrative Agent during such Interest
Period under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (the “Board”) or other governmental authority having
jurisdiction with respect thereto as issued from time to time and then
applicable to assets or liabilities consisting of “Eurocurrency Liabilities”,
as currently defend in Regulation D of the Board, having a term approximately
equal or comparable to such interest Period .

 

Loan.  A Revolver Loan or the Term Loan made to the
Borrower by any Bank pursuant to Section II of this Agreement, and “Loans”
means all of such Revolving Credit Loans and the Term Loan, collectively.

 

Loan Account.  The account or accounts on the books of the
Administrative Agent in which will be recorded Loans and advances (including
issued and outstanding Letters of Credit) made by the Banks to the Borrower
pursuant to this Agreement, payments made on such Loans and other appropriate
debits and credits as provided by this Agreement.

 

Loan Documents.  Collectively, this Agreement (including,
without limitation, the agreements and other instruments listed or described in
Section III), the Notes, the Security Agreements, the Services Patent and
Trademark Security Agreement, the Intirion Patent and Trademark Security
Agreement, the Mac-Gray Pledge Agreement, the Collateral Assignment of Material
Contracts and Licenses, the Cash Management Agreements, the Control Agreements,
the Negative Pledge Agreements, the Letters of Credit (and related
documentation and agreements, including any letter of credit application), and
the Landlord Waivers, the Bailee Notices, the Hedging Contract(s), the
Assignment of Hedging Contract(s), the Fee Letter, the Perfection Certificates
and the Solvency Certificates, together with all agreements and other
instruments contemplated thereby (other than the Ancillary Documents), all
certificates delivered

 

11

 

in connection therewith from time to time and all schedules, exhibits
and annexes thereto, as any of the foregoing may from time to time be
amended and in effect.

 

Mac-Gray.  Mac-Gray Corporation, a publicly-held
Delaware corporation.

 

Mac-Gray Pledge Agreement.  The Pledge Agreement dated as of the date
hereof and executed and delivered by Mac-Gray to the Administrative Agent, for
the ratable benefit of the Banks and the Administrative Agent, pursuant to
which, without limitation, all of the issued and outstanding capital stock of
its Subsidiaries is pledged to the Administrative Agent.

 

Mac-Gray Security Agreement.  The Security Agreement dated as of the date
hereof and executed and delivered by Mac-Gray to the Administrative Agent, for
the ratable benefit of the Banks and the Administrative Agent.

 

Majority Banks.  Any two or more Banks whose aggregate
Commitments constitute at least sixty-six and two-thirds percent (66.67%) of
the Total Commitment in effect at the relevant time of reference, or if the
Commitments have been terminated, any two or more Banks whose aggregate Loans
and Letters of Credit outstanding constitute at least sixty-six and two-thirds
percent (66.67%) of the aggregate Loans and Letters of Credit outstanding at
the relevant time of reference.

 

Material Contracts.  See Section 4.27.

 

Negative Pledge Agreements.  The Negative Pledge Agreements dated as of
the date hereof and executed and delivered by the Borrower to the
Administrative Agent, for the ratable benefit of the Banks and the
Administrative Agent.

 

Net Proceeds.  With respect to the sale, transfer or other
disposition by any member of the Borrower Affiliated Group of any asset or
group of assets (other than Inventory wholly in the ordinary course of
business, but including, without limitation, any sale of Equity Securities and
leases owned by the MicroFridge® Division), means the amount of cash (freely
convertible into Dollars) received by the Borrower, any other member of the
Borrower Affiliated Group or their agents or the Administrative Agent, from
such sale or other disposition (including, without limitation, any tax refund
or tax benefit resulting from a loss on such sale or other disposition as and
when such tax benefit is realized), after (i) provision for all income or
other taxes of the Borrower Affiliated Group measured by or resulting from such
sale or other disposition, (ii) payment of all reasonable third party brokerage
commissions and other reasonable out-of-pocket fees and expenses to third
parties related to such sale or other disposition, (iii) deduction of
appropriate amounts approved by the Administrative Agent to be provided by any member
of the Borrower Affiliated Group as a reserve, in accordance with GAAP, against
any liabilities associated with such sale, transfer or other disposition and
retained by such member of the Borrower Affiliated Group after such sale or
other disposition, and (iv) payment of the outstanding principal amount of, and
premium or penalty, if any, and interest on, any Indebtedness that is secured
by a lien or other encumbrance on the assets in question and that is required
to be repaid as a result of such sale, transfer or other disposition.

 

Notes.  Collectively, (i) the Revolving Credit Notes
and (ii) the Term Notes.

 

12

 

Notice of Borrowing or Conversion.  See Section 2.4.

 

Obligations.  Any and all obligations of the Borrower
Affiliated Group to the Administrative Agent or any Bank (i) under the Loan
Documents and Security Documents of every kind and description (including,
without limitation, any Hedging Obligations and any obligations with respect to
Letters of Credit), direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, regardless
of how they arise or by what agreement or instrument, if any, and including
obligations to perform acts and refrain from taking action as well as
obligations to pay money, and (ii) in connection with any cash management
arrangements or deposit accounts maintained by any member of the Borrower
Affiliated Group with the Administrative Agent or any Bank.

 

Operating Cash Flow.
For any period, EBITDA for such period, minus the sum of (w) 75% of
Capital Expenditures for such period, plus (x) 100% of Prepaid Commission
Expenses for such period, plus (y) any taxes on income paid or due and payable
in cash during such period, plus (z) any Restricted Payments made pursuant to
Section 6.12.

 

Participant.  See Section 9.10.

 

PBGC.  The Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.

 

PCB.  See definition of Hazardous Material.

 

Perfection Certificates.
Collectively, the separate perfection certificates dated as of the date hereof
and executed and delivered by an officer of each member of the Borrower
Affiliated Group to the Administrative Agent, for the ratable benefit of the
Banks and the Administrative Agent.

 

Permitted Acquisitions.  See Section 6.5.

 

Permitted Encumbrances.  See Section 6.4.

 

Person or person.  An individual, a company, a corporation, an
association, a partnership, a joint venture, a limited liability company or
partnership, an unincorporated trade or business enterprise, a trust, an
estate, or a government (national, regional or local) or an agency,
instrumentality or official thereof.

 

Plan.  At any time, an employee pension or other
benefit plan that is subject to Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code and is either (i) maintained by
the Borrower or any member of the Controlled Group for employees of the
Borrower or any member of the Controlled Group or (ii) if such Plan is
established or maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which the Borrower or any member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the preceding five
Plan years made contributions.

 

Prepaid Commission Expenses.  The amount of any one-time up-front payment
required

 

13

 

to be paid by any member of the Borrower Affiliated Group, to the
landlord or lessor under any Laundry Facility Agreement, upon the commencement
of such Laundry Facility Agreement (but without duplication for any amount
included as a Capital Expenditure).

 

Prime Rate.  The variable per annum rate of interest so
designated from time to time by Citizens as its Prime Rate.  The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate being charged to any
customer.

 

Prime Rate Loan.  Any Revolving Credit Loan or portion of the
Term Loan bearing interest calculated by reference to the Prime Rate.

 

Qualified Investments.  As applied to any member of the Borrower
Affiliated Group, investments in (i) notes, bonds or other obligations of the
United States of America or any agency thereof that as to principal and
interest constitute direct obligations of or are guaranteed by the United
States of America, (ii) certificates of deposit or other deposit instruments or
accounts of banks or trust companies organized under the laws of the United
States or any state thereof that have capital and surplus of at least
$100,000,000, (iii) commercial paper that is rated not less than prime-one or
A-I or their equivalents by Moody’s Investors Service, Inc. or Standard &
Poor’s Corporation, respectively, or their successors, and (iv) any repurchase
agreement secured by any one or more of the foregoing.

 

Rate Period.  The period beginning on the third Business
Day following delivery to the Administrative Agent of the annual or quarterly
financial statements required to be delivered pursuant to Section 5.1(a) or
Section 5.1(b) and ending on the second Business Day after the day on which the
next such quarterly (or annual, as applicable) financial statements are
delivered to the Administrative Agent.

 

Real Property or Real Properties.  Collectively, (i) the several parcels of
land together with the improvements now or hereafter located thereon, which are
now or hereafter owned by any member of the Borrower Affiliated Group, as more
fully set forth, in the case of those now owned, on Exhibit D hereto,
and (ii) the several parcels of land together with the improvements now or
hereafter located thereon, which are now or hereafter leased by any member of
the Borrower Affiliated Group pursuant to a real property Lease, as more fully
set forth, in the case of those now leased, on Exhibit D hereto.

 

Reportable Event.  See Section 5.1(g).

 

Restricted Payment.  (i) Any cash or property dividend,
distribution or payment, direct or indirect, by the Borrower or any of its
Subsidiaries to any Person who now holds, or who in the future holds, an equity
interest in the Borrower or any of its Subsidiaries, whether evidenced by a
security or not, other than regular compensation and bonuses paid to employees
of the Borrower and its Subsidiaries in the ordinary course of business and
consistent with past practices (which the parties agree shall include payments
made or to be made to Evelyn C. MacDonald pursuant to the agreement with her
described on Exhibit D hereto in an aggregate amount not to exceed
$105,000 in any fiscal year), and other than dividends payable solely in shares
of any class of capital stock to holders of that class, (ii) any payment on
account of the purchase, redemption, retirement or other acquisition for value
of any capital stock of the Borrower or its Subsidiaries, or any other payment
or distribution made in respect thereof, either directly or indirectly, and

 

14

 

(iii) any management or similar fees paid or payable by the
Borrower or any of its Subsidiaries to any Affiliate of the Borrower.

 

Revolving Credit Commitment.  In relation to any Bank, the maximum amount
of Revolving Credit Loans that such Bank shall be committed to make to the
Borrower upon the terms and subject to the conditions contained in this
Agreement, as set forth on Schedule 1, as such Schedule 1
may be updated by the Administrative Agent from time to time to reflect
any changes in the Revolving Credit Commitments as a result of assignments
permitted by Section 9.10.

 

Revolving Credit Commitment Percentage.  With respect to each Bank having a Revolving
Credit Commitment, the percentage set forth on Schedule 1 as such Bank’s
percentage of the aggregate Revolving Credit Commitments of all the Banks.  Schedule 1 shall be updated by the
Administrative Agent from time to time to reflect any changes in the Revolving
Credit Commitment Percentages.

 

Revolving Credit Maturity Date.  June 30, 2006.

 

Revolving Credit Notes.  See Section 2.2.

 

Revolving Credit Loans.  Collectively, the loans in the maximum
aggregate principal amount of $60,000,000 made or to be made to the Borrower by
the Banks pursuant to this Agreement (including Section 2.1(a) hereof) and subject
to the limitations contained herein.

 

Security Agreements.  Collectively, (i) the Mac-Gray Security
Agreement, (ii) the Intirion Security Agreement, and (iii) the Services
Security Agreement.

 

Security Documents.  Collectively, (i) the Loan Documents and
(ii) all other agreements, instruments or contracts by which any of the
Obligations shall be evidenced or under or in respect of which the
Administrative Agent, any Bank or any of their respective nominees, agents, or
representatives shall have, at such time, any rights or interests as security
for the payment or performance of all or any part of the Obligations.

 

Seller(s).  Individually and collectively, the one or
more sellers of properties and assets in connection with an acquisition of a
business made by the Borrower prior to the Closing Date.

 

Seller Subordinated Debt.  The Subordinated Debt of the Borrower or any
other member of the Borrower Affiliated Group to Seller(s) pursuant to the
Seller Subordinated Debt Documents.

 

Seller Subordinated Debt Documents.  Collectively, (i) the Seller Subordinated
Promissory Notes, and (ii) each of any other agreements, contracts and
instruments executed and delivered in connection with the foregoing or relating
thereto, in each case as amended or modified in accordance with Section 6.18
and Section 9.8 hereof.

 

Seller Subordinated Promissory Notes.  Collectively, the subordinated promissory
notes described on Exhibit D hereto and evidencing Subordinated Debt of
the Borrower or any other member of the Borrower Affiliated Group in favor of
any Seller.

 

15

 

Services.  Mac-Gray Services, Inc., a Delaware
corporation, which is a wholly-owned Subsidiary of Mac-Gray.

 

Services Patent and Trademark Security
Agreement.  The
Patent and Trademark Security Agreement dated as of the date hereof and
executed and delivered by Services to the Administrative Agent, for the ratable
benefit of the Banks and the Administrative Agent.

 

Services Security Agreement.  The Security Agreement dated as of the date
hereof and executed and delivered by Services to the Administrative Agent, for
the ratable benefit of the Banks and the Administrative Agent.

 

Solvency Certificates.  Collectively, the separate solvency
certificates dated as of the date hereof and executed and delivered by the
chief financial officer of each member of the Borrower Affiliated Group to the
Administrative Agent, for the ratable benefit of the Banks and the
Administrative Agent.

 

Special Payment Conditions.  Collectively, the following conditions: (i)
all sums which shall have become due and payable by the Borrower to the
Administrative Agent or the Banks under any of the Security Documents on or
prior to such date shall have been paid in full on or prior to such date; and
(ii) no event or condition which constitutes a Default or an Event of Default
shall be continuing on or as of such date or shall occur by reason of the
making of the payment on such date.

 

Stated Amount.  With respect to each Letter of Credit
outstanding at any time, the maximum amount then available to be drawn
thereunder (without regard to whether any conditions to drawing could then be
met).

 

Subordinated Debt.  Indebtedness (including any Indebtedness
evidenced by any payment-in-kind promissory notes, if any) of the Borrower or
any other member of the Borrower Affiliated Group which is unsecured and is
expressly subordinated and made junior to the payment and performance in full
of the Obligations on terms and conditions as shall be satisfactory to the
Administrative Agent and the Banks, and including, without limitation, the
Seller Subordinated Debt; provided that the terms of the subordination
set forth in the Seller Subordinated Promissory Notes are deemed satisfactory
to the Administrative Agent and the Banks solely with respect to the Seller
Subordinated Debt outstanding on the Closing Date.

 

Subsidiary.  Any corporation, association, joint stock
company, business trust or other similar organization of which 50% or more of
the ordinary voting power for the election of a majority of the members of the
board of directors or other governing body of such entity is held or controlled
by a Person or a Subsidiary of such Person; or any other such organization the
management of which is directly or indirectly controlled by a Person or a
Subsidiary of such Person through the exercise of voting power or otherwise; or
any joint venture, whether incorporated or not, in which a Person has a 50% or
more ownership interest.

 

Taxes or Other Payments.  See Section 2.13(a).

 

Term Notes.  See Section 2.2.

 

16

 

Term Loan.  The term loan in the original principal
amount of $20,000,000 made or to be made to the Borrower on the Closing Date by
the Banks having a Term Loan Commitment pursuant to this Agreement (including
Section 2.1(d) hereof), and subject to the limitations contained herein.

 

Term Loan Commitment.  In relation to any Bank, the maximum
liability of such Bank, as set forth on Schedule 1, to participate in
making the Term Loan to the Borrower upon the terms and subject to the
conditions contained in this Agreement. 
Schedule 1 shall be updated by the Administrative Agent from time
to time to reflect any changes in the Term Loan Commitments as a result of
assignments permitted by Section 9.10.

 

Term Loan Commitment Percentage.  With respect to each Bank having a Term Loan
Commitment, the percentage set forth on Schedule 1 as such Bank’s
percentage of the aggregate Term Loan Commitments of all the Banks.  Schedule 1 shall be updated by the
Administrative Agent from time to time to reflect any changes in the Term Loan
Commitment Percentages.

 

Term Loan Maturity Date.  June 30, 2008.

 

Total Commitment.  As of any date, the sum of the then-current
Commitments of the Banks, provided that the Total Commitment shall not
at any time exceed $80,000,000.

 

Total Fixed Charges.  For any period, (i) Interest Charges paid or
required to be paid by the Borrower Affiliated Group in such period, plus
(ii) the aggregate amount of scheduled principal payments required to be made
by the Borrower Affiliated Group during such period with respect to any
Indebtedness for borrowed money or capital lease obligations, plus (iii)
any fees, including Letter of Credit Fees and Commitment Fees, required to be
paid in connection with any of the foregoing Indebtedness.

 

Total Funded Debt.  As at any date of determination, on a
Consolidated basis for the Borrower Affiliated Group (and without duplication),
the sum of (i) the aggregate amount of the Loans outstanding on such date, plus
(ii) the Stated Amount of Letters of Credit outstanding on such date, plus
(iii) the aggregate amount of the Subordinated Debt outstanding on such date, plus
(iv) all principal obligations arising under capital leases in effect on such
date required to capitalized in accordance with GAAP, plus (v) all other
Guarantees and Indebtedness for borrowed money of the Borrower Affiliated Group
outstanding on such date.

 

1.2.                              Terms of General Application.  For all purposes of this Agreement and the
other Security Documents, except as otherwise expressly provided herein or
therein or unless the context otherwise requires:

 

(i)                                     references to any
Person defined in this Agreement refer to such Person and its successor in
title and assigns or (as the case may be) his successors, assigns, heirs,
executors, administrators and other legal representatives;

 

17

 

(ii)                                  references to any
agreement, instrument or document defined in this Agreement refer to such
document as originally executed, or if subsequently varied, extended, renewed,
modified, amended, restated or supplemented from time to time, as so varied,
extended, renewed, modified, amended, restated or supplemented and in effect at
the relevant time of reference thereto;

 

(iii)                               words importing the
singular only shall include the plural and vice  versa, and the
words importing the masculine gender shall include the feminine gender and vice
versa, and all references to dollars, $, U.S. Dollars or United States
Dollars, shall be to Dollars;

 

(iv)                              accounting terms not
otherwise defined in this Agreement or any of the other Security Documents have
the meanings assigned to them in accordance with GAAP, on a basis consistent
with the financial statements referred to in Section 4.7 of this
Agreement;

 

(v)                                 all financial
statements and other financial information provided by the Borrower and each
other member of the Borrower Affiliated Group, to the Administrative Agent or
any Bank shall be provided with reference to Dollars;

 

(vi)                              all of the obligations of
the Borrower Affiliated Group under this Agreement and each other Security
Document shall be the joint and several obligations of each member of the
Borrower Affiliated Group; and

 

(vii)                           this Agreement and the other
Loan Documents are the result of negotiation among, and have been reviewed by
counsel to, among others, the Borrower Affiliated Group and the Administrative
Agent and are the product of discussions and negotiations among all parties.  Accordingly, this Agreement and the other
Loan Documents are not intended to be construed against the Administrative
Agent or any of the Banks merely on account of the Administrative Agent’s or
any Bank’s involvement in the preparation of such documents.

 

SECTION II

 

DESCRIPTION OF
CREDIT

 

2.                                       The Credit Facilities.

 

2.1.                              The Loans.

 

(a)                                  Revolving
Credit Loans.  Subject to the terms
and conditions set forth in this Agreement, each of the Banks having a
Revolving Credit Commitment severally agrees to lend to the Borrower and the
Borrower may borrow, repay and reborrow from time to time between the
Closing Date and the Revolving Credit Maturity Date, such amounts as are
requested by the Borrower up to a maximum aggregate principal amount
outstanding (after giving effect to all amounts requested) at any one time
equal to such Bank’s
Revolving Credit Commitment; provided, however, that the maximum
aggregate principal amount of all Revolving Credit Loans outstanding (after
giving effect to the amounts requested), plus the aggregate Stated
Amount of

 

18

 

Letters of
Credit outstanding at such time, plus the aggregate amount of all
unreimbursed draws under outstanding Letters of Credit, shall not at any time
exceed the aggregate amount of the Revolving Credit Commitments of all of the
Banks at such time; and provided, further, that at the time the
Borrower requests a Revolving Credit Loan and after giving effect to the making
thereof, no Default or Event of Default has occurred and is continuing.

 

The Revolving Credit Loans shall be made pro  rata in
accordance with the Revolving Credit Commitment Percentage of each Bank having
a Revolving Credit Commitment.  If the
aggregate principal amount of Revolving Credit Loans outstanding at any time, plus
the aggregate Stated Amount of Letters of Credit outstanding at such time, plus
the aggregate amount of any unreimbursed draws under outstanding Letters of
Credit shall at any time exceed the Revolving Credit Commitment of all the
Banks then in effect, the Borrower shall immediately pay to the Administrative
Agent for the respective accounts of the Banks the amount of such excess.  Failure to make such payment on demand shall
be an Event of Default hereunder.

 

(b)                                 Term
Loan.  Subject to the terms and
conditions set forth in this Agreement, each of the Banks having a Term Loan
Commitment severally agrees to lend to the Borrower on the Closing Date, and
the Borrower agrees to borrow on such date and repay in accordance with Section
2.12, an amount equal to such Bank’s
Term Loan Commitment.

 

(c)                                  Loan
Account.  The Administrative Agent
shall enter Loans and advances made by the Banks to the Borrower pursuant to
this Agreement (including, without limitation, on account of the Revolving
Credit Loans, the Term Loan and any Letters of Credit) as debits in the Loan
Account.  The Administrative Agent shall
also record in the Loan Account all payments made by the Borrower on account of
the Loans and may also record therein, in accordance with customary accounting
practices, other debits and credits, including customary banking charges and
all interest, fees, charges and expenses chargeable to the Borrower under this
Agreement.  The debit balance of the
Loan Account shall reflect the amount of the Borrower’s Obligations hereunder and shall be considered
correct absent manifest error.  If there
shall be a conflict, discrepancy or inconsistency between the Loan Account and
any Note Schedule, the entries and records in the Loan Account shall control,
supersede and prevail as among the Borrower, the Administrative Agent and the
Banks.

 

2.2.                              The Notes.

 

(a)                                  The
Revolving Credit Notes.  The
Revolving Credit Loans shall be evidenced by separate Revolving Credit Notes of
the Borrower to each Bank having a Revolving Credit Commitment in or
substantially in the form of Exhibit A-1 hereto (collectively, the “Revolving Credit Notes”), with appropriate
insertions for each such Bank.

 

(b)                                 The
Term Notes.  The Term Loan shall be
evidenced by separate Term Notes of the Borrower to each Bank having a Term
Loan Commitment in or substantially in the form of Exhibit A-2 hereto
(collectively, the “Term
Notes”), with
appropriate insertions for each such Bank.

 

(c)                                  Note
Schedules.  The Administrative Agent
and each Bank may, instead of or in addition to maintaining a loan account, and
is hereby irrevocably authorized by the Borrower to,

 

19

 

enter on the
schedule forming a part of its Notes or otherwise in its records, appropriate
notations (collectively, the “Note Schedules”) evidencing the date and the amount of each Loan,
as applicable, the interest rate applicable thereto and the date and amount of
each payment of principal made by the Borrower with respect thereto; and in the
absence of manifest error, such notations shall constitute conclusive evidence
thereof.  The Administrative Agent and
each Bank is hereby irrevocably authorized by the Borrower to attach to and
make a part of its respective Notes a continuation of any such schedule as and
when required.  No failure on the part
of the Administrative Agent or any Bank to make any notation as provided in
this subsection (c) shall in any way affect any Loan or the rights of the Banks
or the Obligations of the Borrower with respect thereto.  If there shall be a conflict, discrepancy or
inconsistency between the Loan Account and any Note Schedule, the entries and
records in the Loan Account shall control, supersede and prevail as among the
Borrower, the Administrative Agent and the Banks.

 

2.3.                              Conversion. 
Provided that no Default or Event of Default shall have occurred and be
continuing, and subject to and in accordance with the provisions of Section
2.4(a), the Borrower may convert all or any part (in integral multiples of
$500,000) of any outstanding Loan into a Loan of the other type provided for in
this Agreement in the same aggregate principal amount, on any Business Day
(which, in the case of a conversion of a LIBOR Loan, shall be the last day of
the Interest Period applicable to such LIBOR Loan).  The Borrower shall give the Administrative Agent and the Banks
prior notice of each such conversion (which notice shall be effective upon
receipt) in accordance with Section 2.4. 
All such conversions shall be made pro  rata in accordance
with each Bank’s
Commitment Percentage applicable to the type of Loan being converted.

 

2.4.                              Notice and Manner of Borrowing or
Conversion of Loans.

 

(a)                                  Whenever
the Borrower desires to obtain or continue a Loan hereunder or convert an
outstanding Loan into a Loan of the other type provided for in this Agreement,
the Borrower shall notify the Administrative Agent (which notice shall be
irrevocable) by telecopy or telephone received no later than 10:00 a.m. Boston,
Massachusetts time on the date that is one (1) Business Day before the day on
which the requested Loan is to be made or continued as or converted to a Prime
Rate Loan, and received no later than 10:00 a.m. Boston, Massachusetts time on
the date that is three (3) Business Days before the day on which the requested
Loan is to be made or continued as or converted to a LIBOR Loan, provided that
no more than eight (8) LIBOR Loans may be outstanding at any one
time.  Such notice by the Borrower shall
specify (i) the effective date and amount of each Loan to be obtained,
continued or converted (or portion thereof to be continued or converted, as the
case may be), subject to the limitations set forth in Section 2.1, (ii)
the interest rate option to be applicable thereto, and (iii) the duration of the
applicable Interest Period, if any (subject to the provisions of the definition
of Interest Period and Section 2.8). 
Each LIBOR Loan must be for an amount equal to at least $500,000 and in
additional increments of $500,000.  Each
such notification by telephone pursuant to Section 2.3 or this Section 2.4(a)
(a “Notice of
Borrowing or Conversion”)
shall be immediately followed by a written confirmation thereof by the Borrower
in substantially the form of Exhibit B hereto, provided that if
such written confirmation differs in any material respect from the action taken
by the Administrative Agent, the records of the Administrative Agent shall be
conclusive absent manifest error.

 

20

 

(b)                                 Subject
to the terms and conditions hereof, each Bank shall make available to the
Administrative Agent, in immediately available funds, no later than 1:00 p.m.,
Boston, Massachusetts time, on the date upon which any Prime Rate Loan or LIBOR
Loan is to be made, such Bank’s
Commitment Percentage of the requested Loan. 
The Administrative Agent shall, in turn, make each Loan on the effective
date specified therefor by crediting the amount of such Loan to the Borrower’s demand deposit account
with the Administrative Agent.  In no
event shall the Administrative Agent (in its capacity as Administrative Agent)
have any obligation to make any funding or shall any Bank be obligated to fund
more than its Commitment Percentage of the requested Prime Rate Loan or LIBOR
Loan.

 

2.5.                              Commitment Fee. 
The Borrower shall pay to the Administrative Agent, for the accounts of
the Banks having Revolving Credit Commitments, in accordance with their
respective Revolving Credit Commitment Percentages, a commitment fee computed
at a rate per annum on the average daily aggregate amount, during each fiscal
quarter or portion thereof, of the unborrowed portion of the Revolving Credit
Commitment, (A) from the Closing Date through the second Business Day after the
date on which the Compliance Certificate required to be delivered pursuant to
Section 5.1(d) for the fiscal quarter of the Borrower Affiliated Group ending
June 30, 2003 is delivered to the Administrative Agent, equal to 0.375%,
and (B) thereafter, determined in accordance with the table below:

 

	
  Funded Debt Ratio

  	
   

  	
  Commitment
  Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Greater than or equal to 1.75 to 1.00

  	
   

  	
  0.375

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than 1.75 to 1.00

  	
   

  	
  0.25

  	
  %

  

 

Commitment fees shall be payable quarterly in arrears, on the last day
of September, December, March and June of each year beginning
June 30, 2003, and on the Revolving Credit Maturity Date.

 

2.6.                              Fee Letter. 
The Borrower shall pay to the Administrative Agent fees in the amounts
and at the times outlined in the Fee Letter.

 

2.7.                              Reduction of Revolving Credit
Commitment.  The Borrower
may from time to time by written notice delivered to the Administrative
Agent at least seven (7) Business Days prior to the date of the requested
reduction, reduce by a minimum amount of $1,000,000, and in additional
increments of $500,000, any unborrowed portion of the Revolving Credit
Commitment.  No reduction of the
Revolving Credit Commitment shall be subject to reinstatement.

 

2.8.                              Duration of Interest Periods.

 

(a)                                  Subject
to the provisions of the definition of Interest Period, the duration of each
Interest Period applicable to a LIBOR Loan shall be as specified in the
applicable Notice of Borrowing or Conversion. 
The Borrower shall have the option to elect a subsequent Interest Period
to be applicable to such Loan by giving notice of such election to the Bank received
no later than 10:00 a.m. Boston, Massachusetts time on the date that is three
(3) Business Days

 

21

 

before the end
of the then applicable Interest Period if such Loan is to be continued as or
converted to a LIBOR Loan.

 

(b)                                 If
the Administrative Agent does not receive a notice of election of duration of
an Interest Period for a LIBOR Loan pursuant to subsection (a) above within the
applicable time limits specified therein, or if, when such notice must be
given, a Default or an Event of Default exists, the Borrower shall be deemed to
have elected to convert such Loan in whole into a Prime Rate Loan on the last
day of the then current Interest Period with respect thereto.

 

(c)                                  Notwithstanding
the foregoing, the Borrower may not select an Interest Period that would
end, but for the provisions of the definition of Interest Period, after the
Revolving Credit Maturity Date or the Term Loan Maturity Date, as the case
may be.

 

2.9.                              Interest Rates and Payments of
Interest.

 

(a)                                  Each
Revolving Credit Loan and portion of the Term Loan which is a Prime Rate Loan
shall bear interest on the outstanding principal amount thereof at a rate per
annum equal to the Prime Rate plus the Applicable Prime Rate Margin, which rate
shall change contemporaneously with any change in the Prime Rate.  Such interest shall be payable on the last
day of any fiscal quarter in which a Prime Rate Loan is outstanding hereunder,
and when such Loan is due (whether at maturity, by reason of acceleration or
otherwise).

 

(b)                                 Each
Revolving Credit Loan and portion of the Term Loan which is a LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for each Interest
Period applicable thereto, at a rate per annum equal to the LIBOR Rate plus the
Applicable LIBOR Margin.  Such interest
(including any adjustments made in the Administrative Agent’s discretion consistent
with the definition of LIBOR Rate to take into consideration any change in the
LIBOR Reserve Percentage) shall be payable for such Interest Period (i) on the
earlier of the last day of such Interest Period and, if such Interest Period is
longer than 3 months, at intervals of 3 months after the first day of such
Interest Period and (ii) when such LIBOR Loan is due (whether at maturity, by
reason of acceleration or otherwise).

 

(c)                                  For
purposes of this Section 2.9, with reference to (1) the “Applicable Prime Rate Margin” shall be equal to (A) from the Closing Date through
the second Business Day after the date on which the compliance certificate
required to be delivered pursuant to Section 5.1(d), for the preceding rolling
twelve (12) month period of the Borrower Affiliated Group ending
September 30, 2003 is delivered to the Administrative Agent, a percentage
equal to at least 1.75%, and (B) thereafter, the percentage determined for each
Rate Period by reference to Table 1 below, and (ii) the “Applicable LIBOR Margin” shall be equal to (A)
from the Closing Date through the second Business Day after the date on which
the compliance certificate required to be delivered pursuant to Section 5.1(d),
for the preceding rolling twelve (12) month period of the Borrower Affiliated
Group ending September 30, 2003 is delivered to the Administrative Agent,
a percentage equal to at least 1.75%, and (B) thereafter, the percentage
determined for each Rate Period by reference to Table 1 below:

 

22

 

Table 1

 

Revolving Credit Loans

and the Term Loan

 

	
  Funded Debt Ratio

  	
   

  	
  Applicable

  Prime Rate

  Margin

  	
   

  	
  Applicable

  LIBOR

  Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  a)                                      greater than or
  equal to 2.25 to 1

  	
   

  	
  0.00

  	
  %

  	
  2.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  b)                                     less than 2.25
  to 1 but greater than or equal to 1.50 to 1

  	
   

  	
  0.00

  	
  %

  	
  1.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  c)                                      less than 1.50
  to 1

  	
   

  	
  0.00

  	
  %

  	
  1.50

  	
  %

  

 

For purposes of determining the Applicable Prime Rate Margin and the
Applicable LIBOR Margin, the Funded Debt Ratio will be tested quarterly,
commencing with the second full fiscal quarter of the Borrower Affiliated Group
following the Closing, based on the financial statements and compliance
certificate required to be delivered pursuant to Sections 5.1(a) or (b), as
applicable, and 5.1(d), respectively. 
For purposes of determining the interest rate for any Rate Period
hereunder, any interest rate change shall be effective two (2) Business Days
after the date on which the financial statements and compliance certificate
required to be delivered pursuant to Sections 5.1(a) or (b) and 5.1(d),
respectively, is delivered to the Administrative Agent, together with a notice
to the Administrative Agent (which shall be verified by the Administrative
Agent) specifying any change in the Applicable Prime Rate Margin and the
Applicable LIBOR Margin, and if the Borrower has failed to deliver the
compliance certificate required to be delivered pursuant to Sections 5.1(a) or
(b), as applicable, and 5.1(d), respectively, the Applicable Prime Rate Margin
and the Applicable LIBOR Margin that would otherwise be in effect shall
automatically be increased by .25% until such compliance certificate is
delivered.

 

2.10.                        Changed Circumstances.

 

(a)                                  In
the event that:

 

(i)                                     on any date on
which the LIBOR Rate would otherwise be set the Administrative Agent shall have
determined in good faith (which determination shall be final and conclusive)
that adequate and fair means do not exist for ascertaining the LIBOR Rate, as
the case may be, or

 

(ii)                                  at any time the
Administrative Agent shall have determined in good faith (which determination
shall be final and conclusive) that:

 

(A)                              the making or
continuation of, or conversion of any Loan to, a LIBOR Loan has been made
impracticable or unlawful by (1) the

 

23

 

occurrence of a contingency that materially and adversely affects the
London interbank market or (2) compliance by the Administrative Agent or any
Bank in good faith with any applicable law or governmental regulation,
guideline or order or interpretation or change thereof by any governmental
authority charged with the interpretation or administration thereof or with any
request or directive of any such governmental authority (whether or not haying
the force of law); or

 

(B)                                the LIBOR Rate shall no
longer represent the effective cost to any Bank for United States dollar
deposits in the London interbank market;

 

then, and in any such event, the Administrative Agent shall promptly so
notify the Borrower thereof in writing. 
Until the Administrative Agent notifies the Borrower that the
circumstances giving rise to such notice no longer apply, the obligation of
each Bank to allow selection by the Borrower of the type of Loan affected by
the contingencies described in this Section 2.10(a) (herein called “Affected
Loans”) shall be suspended.  If at
the time the Administrative Agent so notifies the Borrower, the Borrower has
previously given the Administrative Agent a Notice of Borrowing or Conversion
with respect to one or more Affected Loans but such Loans have not yet gone
into effect, such notification shall be deemed to be void and the Borrower
may borrow Loans of a non-affected type by giving a substitute Notice of
Borrowing or Conversion pursuant to Section 2.4.

 

Upon such date as shall be specified in such notice (which shall not be
earlier than the date such notice is given) the Borrower shall, with respect to
the outstanding Affected Loans, prepay the same, together with interest thereon
and any amounts required to be paid pursuant to Section 2.15, and
may borrow a Loan of another type in accordance with Section 2.1 hereof by
giving a Notice of Borrowing or Conversion pursuant to Section 2.4 hereof.

 

The provisions of this Section 2.10(a) shall be applied to the Borrower
so as not to discriminate against the Borrower vis-à-vis other customers of the
applicable Bank.

 

(b)                                 In
case any law, regulation, treaty or official directive or the interpretation or
application thereof by any court or by any governmental authority charged with
the administration thereof or the compliance with any guideline or request of
any central bank or other governmental authority (whether or not having the force
of law):

 

(i)                                     subjects the
Administrative Agent or any Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by the Borrower or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of the Administrative Agent or such Bank
imposed by the United States of America or any political subdivision thereof),
or

 

(ii)                                  imposes, modifies or
deems applicable any deposit insurance, reserve, special deposit or similar
requirement against assets held by, or deposits in or for the account of, or
loans by, the Administrative Agent or any Bank

 

24

 

(other than such requirements as are already included in the
determination of the LIBOR Rate), or

 

(iii)                               imposes upon the
Administrative Agent or any Bank any other condition with respect to its
performance under this Agreement or any other Loan Document,

 

and the result of any of the foregoing is to increase the cost to the
Administrative Agent or such Bank, reduce the income receivable by the
Administrative Agent or such Bank or impose any expense upon the Administrative
Agent or such Bank with respect to any Loans or any payments made under or with
respect to the Letters of Credit, the Administrative Agent shall promptly
notify the Borrower thereof.  The
Borrower agrees to pay to the Administrative Agent or such Bank the amount of
such increase in cost, reduction in income or additional expense as and when
such cost, reduction or expense is incurred or determined, upon presentation by
the Administrative Agent or such Bank of a written statement of such amount and
setting forth in reasonable detail the Administrative Agent’s or such Bank’s
calculation thereof, which statement shall be deemed true and correct absent
manifest error.  The provisions of this
Section 2.10(b) shall be applied to the Borrower so as not to discriminate
against the Borrower vis-à-vis other customers of the applicable Bank.

 

2.11.                        Capital Requirements.  If after the date hereof the Administrative
Agent or any Bank determines that (i) the adoption of or change in any law,
rule, regulation or guideline regarding capital requirements for banks or bank
holding companies, or any change in the interpretation or application thereof
by any governmental authority charged with the administration thereof, or (ii)
compliance by the Administrative Agent or any Bank or its parent bank holding
company with any guideline, request or directive of any such entity regarding capital
adequacy (whether or not having the force of law), has the effect of reducing
the return on the Administrative Agent’s
or such Bank’s or
such holding company’s
capital as a consequence of the Administrative Agent’s or such Bank’s commitment to make Loans hereunder to a level
below that which the Administrative Agent or such Bank or such holding company
could have achieved but for such adoption, change or compliance (taking into
consideration the Administrative Agent’s
or such Bank’s or
such holding company’s
then existing policies with respect to capital adequacy and assuming the full
utilization of such entity’s
capital) by any amount deemed by the Administrative Agent or such Bank to be
material, then the Administrative Agent shall promptly notify the Borrower
thereof.  The Borrower agrees to pay to
the Administrative Agent or such Bank the amount of such reduction of capital
as and when such reduction is determined, upon presentation by the
Administrative Agent or such Bank of a written statement in the amount and
setting forth in reasonable detail the Administrative Agent’s or such Bank’s calculation thereof,
which statement shall be deemed true and correct absent manifest error.  In determining such amount, the
Administrative Agent or such Bank may use any reasonable averaging and
attribution methods.  The provisions of
this Section 2.11 shall be applied to the Borrower so as not to discriminate
against the Borrower vis-à-vis other customers of the applicable Bank.

 

Upon the receipt by the Borrower from any Bank (an “Affected Bank”) of
a claim for compensation under Section 2.10 or this Section 2.11, which claim
shall be delivered to the Borrower promptly after the Affected Bank has
determined that it is entitled to compensation, the Borrower may: (i) request
one or more of the other Banks to acquire and assume all or part of

 

25

 

such Affected Bank’s Loans and Commitments; or (ii) designate a
replacement bank or financial institution satisfactory to the Administrative
Agent in its sole discretion.  If one or
more of the other Banks in its sole discretion agrees to acquire all or part of
such Affected Bank’s Loans and Commitments or if such a satisfactory replacement
bank or financial institution is designated, the Affected Bank shall promptly
assign all or such part of its Loans and Commitments.

 

2.12.                        Payments and Prepayments of the Loans.

 

(a)                                  The
entire principal of the Revolving Credit Notes shall be absolutely due and
payable by the Borrower to the Banks on the Revolving Credit Maturity
Date.  All of the other Indebtedness
evidenced by the Revolving Credit Notes shall, if not sooner paid, also be
absolutely due and payable by the Borrower to the Banks on the Revolving Credit
Maturity Date.

 

(b)                                 The
entire principal of the Term Notes shall be payable by the Borrower to the
Banks in 20 consecutive quarterly installments of principal.  Such quarterly installments of principal
shall be payable on the installment payment dates, and shall be in the amounts,
set forth below:

 

	
  Installment

  Payment Date

  	
   

  	
  Aggregate
  Amount

  of Payment

  	
   

  
	
  09/30/03

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  12/31/03

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  03/31/04

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  06/30/04

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  09/30/04

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  12/31/04

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  03/31/05

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  06/30/05

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  09/30/05

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  12/31/05

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  03/31/06

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  06/30/06

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  09/30/06

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  12/31/06

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  03/31/07

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  06/30/07

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  09/30/07

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  12/31/07

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  03/31/08

  	
   

  	
  $

  	
  714,285

  	
   

  
	
  06/30/08

  	
   

  	
  $

  	
  6,428,585

  	
   

  

 

All of the indebtedness evidenced by each Term Note shall, if not
sooner paid, be in any event absolutely and unconditionally due and payable in
full by the Borrower to the Banks on the Term Loan Maturity Date.

 

26

 

(c)                                  Revolving
Credit Loans that are Prime Rate Loans may be voluntarily prepaid at any
time, without premium or penalty, upon 5 Business Days’ prior written notice to the Administrative Agent
and each Bank.  Subject to the
provisions of Section 2.15, Revolving Credit Loans that are LIBOR Loans
may be voluntarily prepaid at any time, without premium or penalty, upon 5
Business Days’
prior written notice to the Administrative Agent and each Bank.  Any interest accrued on the amounts so
prepaid to the date of such payment must be paid at the time of any such
payment.  No prepayment of the Revolving
Credit Loans prior to the Revolving Credit Maturity Date shall affect the Total
Commitment or impair the Borrower’s
right to borrow as set forth in Section 2.1.  Partial prepayments of the Revolving Credit Loans shall be in an
amount equal to $500,000 or an integral multiple thereof.  In the case of any partial payment of the
Revolving Credit Loans, the total amount of such partial payment shall be
allocable among the Revolving Credit Loans, subject to adjustment as provided
in Section 8.5, pro  rata in accordance with the Revolving Credit
Commitment Percentage of each Bank having a Revolving Credit Commitment.

 

(d)                                 Subject
to the provisions of Section 2.15, the Term Loan may be voluntarily
prepaid at any time, in whole or in part, without premium or penalty, upon 5
Business Days’
prior written notice to the Administrative Agent and each Bank, provided
that interest accrued on the amounts so paid to the date of such payment must
be paid at the time of any such payment. 
Partial prepayments of the Term Loan shall be in an amount equal to
$500,000 or an integral multiple thereof. 
In the case of any partial prepayment of the Term Loan, the total amount
of such partial prepayment shall be allocable, subject to adjustment as
provided in Section 8.5, pro  rata to each Bank having a Term Loan
Commitment in accordance with each such Bank’s Term Loan Commitment Percentage.

 

(e)                                  The
Borrower shall be required to make mandatory prepayments of the Loans as set
forth below (each a “Mandatory
Prepayment”), such
payments being due and payable on the day on which any Net Proceeds are
received with respect to clauses (i) through (iv) below, and on the date on
which the financial statements referred to below are required to be delivered,
whether or not such financial statements are actually delivered, with respect
to clause (v) below:

 

(i)                                     subject to Section
6.5, an amount equal to 50% of the Net Proceeds received by the Borrower or any
other member of the Borrower Affiliated Group from the sale or other
disposition of any of its respective non-core assets, except for (x) sales of
Inventory in the ordinary course of business, (y) sales of assets wholly in the
ordinary course of business having an aggregate purchase price of not more than
$750,000 (together with amounts under subclause (z) below) in any fiscal year, provided
that all such sales are made at fair market value, and (z) sales of obsolete
equipment having an aggregate value not exceeding $750,000 (together with
amounts under subclause (y) above) in any fiscal year, provided that the
proceeds of such sales are reinvested in equipment serving the same or similar
function within 60 days after the receipt of such Net Proceeds and further
provided that the remaining 50% of the Net Proceeds received by the Borrower or
any other member of the Borrower Affiliated Group from the sale or other
disposition of any of its respective non-core assets shall be due and payable
one (1) year from the date of such asset sale to the

 

27

 

extent such Net Proceeds are not reinvested in Permitted Acquisitions
during such period;

 

(ii)                                  subject to Section
6.1, an amount equal to 100% of the Net Proceeds received from the incurrence
of any Indebtedness for borrowed money, except for the Indebtedness described
in either clause (c) or (e) of Section 6.1;

 

(iii)                               an amount equal to 100%
of the proceeds of insurance received by the Borrower, any other member of the
Borrower Affiliated Group or the Administrative Agent, except for any of
such proceeds of insurance which are expressly permitted to be retained by the
Borrower or such member of the Borrower Affiliated Group pursuant to the Security
Agreements or Leasehold Mortgages and which are fully re-deployed in the
ordinary course of business within six (6) months from the date so recovered,
provided that up to $300,000 of insurance proceeds may be applied by the
Borrower or any member of the Borrower Affiliated Group for repairs and/or
replacements without such six (6) month limitation;

 

(iv)                              an amount equal to 100%
of the Net Proceeds received from the sale of any Equity Securities by the
Borrower or any other member of the Borrower Affiliated Group, except for
Equity Securities issued to employees, directors and consultants in connection
with an employee benefit or equity incentive plan existing on the date hereof
or hereafter adopted by the Board of Directors of the Borrower or such other
member of the Borrower Affiliated Group; and

 

(v)                                 commencing on
April 30, 2004 and annually thereafter, an amount equal to 50% of the
Excess Cash Flow of the Borrower Affiliated Group for each fiscal year of the
Borrower Affiliated Group (commencing with the fiscal year ended
December 31, 2003), as evidenced by the financial statements required to
be delivered pursuant to Section 5.1(a); provided that notwithstanding the
foregoing, if at the end of any fiscal year of the Borrower Affiliated Group,
the Funded Debt Ratio (as evidenced by the annual audited financial statements
required to be delivered pursuant to Section 5.1(a)) is less than 1.50 to 1 for
the four consecutive fiscal quarters ending with the last fiscal quarter of
such fiscal year, the requirement to prepay from Excess Cash Flow pursuant to
this clause (v) shall be eliminated for such fiscal year.

 

Subject to the proviso set forth in the last sentence of this
paragraph, Mandatory Prepayments shall be applied to installments of principal
due under the Term Loan in inverse order of maturity, until the Term Loan has
been paid in full.  Mandatory
prepayments of Prime Rate Loans shall be made without any premium or
penalty.  Mandatory Prepayments of LIBOR
Loans shall be made subject to the provisions of Section 2.15, provided
that, if no Default or Event of Default has occurred, the Borrower shall be
permitted to make any such Mandatory Prepayment that is due prior to the end of
an Interest Period to a cash collateral account established and controlled by
the Administrative Agent.  Any such
amounts will be held in such cash collateral

 

28

 

account until the end of the applicable Interest Period and then
applied to the Term Loan as described in this clause (e), and such payment of
the Term Loan shall be deemed made at the end of such Interest Period for
purposes of Section 2.15.  All such
Mandatory Prepayments shall be allocable to the Term Loan pro  rata
to each Bank having a Term Loan Commitment in accordance with each such Bank’s
Term Loan Commitment Percentage.  Upon
payment in full of the Term Loan, all Mandatory Prepayments under Sections
2.12(e)(i) through 2.l2(e)(iv) shall be applied to the Revolving Credit Loans,
until the Revolving Credit Loans have been paid in full (with a concurrent
permanent reduction of the Revolving Credit Commitments, pro  rata,
by such Mandatory Prepayment amounts); provided, however, that
(A) Mandatory Prepayments shall no longer be required under Section 2.l2(e)(v)
upon repayment in full of the Term Loan, and (B) 100% of any Net Proceeds
received with respect to the sale of the Cambridge Fee Location shall be
applied to the Revolving Credit Loans on a pro  rata basis, until
the Revolving Credit Loans have been paid in full (without a concurrent
reduction of the Revolving Credit Commitments).

 

2.13.                        Method of Payment; Withholding Tax
Exemption.

 

(a)                                  All
payments and prepayments of principal and all payments of interest and other
amounts shall be made by the Borrower to the Administrative Agent, for the
respective accounts of the Banks or (as the case may be) the
Administrative Agent, at 28 State Street, Boston, Massachusetts 02109, in
immediately available funds, on or before 11:00 a.m. (Boston, Massachusetts
time) on the due date thereof, free and clear of, and without any deduction or
withholding for, any present or future taxes (excluding any taxes imposed on
the net income of any Bank or the Administrative Agent) or other fees,
withholdings or other charges or payments (“Taxes or Other Payments”).  In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required with respect to any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will (i) pay directly to
the relevant authority the full amount required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official receipt or other
documentation satisfactory to the Administrative Agent evidencing such payment
to such authority; and (iii) pay to the Administrative Agent such additional
amount or amounts as shall be necessary to ensure that the net amount actually
received by the Administrative Agent shall equal the full amount the
Administrative Agent would have received, had no such withholding or deduction
been required. The Borrower authorizes the Administrative Agent and each Bank,
in the Administrative Agent’s
or such Bank’s sole
discretion, to charge to any deposit account which the Borrower
may maintain with the Administrative Agent or such Bank the principal,
interest, fees, charges, taxes and expenses provided for in this Agreement or
any other document executed and delivered in connection herewith, or to advance
to the Borrower and to charge to it as a Revolving Credit Loan a sum sufficient
to pay such principal, interest, fees, charges, taxes and expenses, with notice
thereafter sent to Mac-Gray’s
chief financial officer in accordance with the Administrative Agent’s or such Bank’s customary practice.

 

(b)                                 At
least five (5) Business Days prior to the first date on which interest or fees
are payable hereunder for the account of any Bank, each Bank that is not
incorporated under the laws of the United States of America or a state thereof
(herein, a “Foreign
Bank”) agrees that
it will deliver to each of the Borrower and the Administrative Agent (or, in
the case of a Participant or an Assignee, to the Bank from which the interest
was transferred) two duly completed and

 

29

 

executed
copies of either U.S. Internal Revenue Service Form 1001 or Form 4224 (or any
subsequent versions thereof or successors thereof), certifying in either case
that such Foreign Bank is entitled to receive payments under this Agreement and
the Notes either without deduction or withholding of any United States federal
income taxes or at a reduced rate of any United States federal income taxes, as
the case may be.  Each Foreign Bank
which so delivers a Form 1001 or Form 4224 further undertakes to deliver to
each of the Borrower and the Administrative Agent two additional copies of such
form (or a successor form) on or before the date that such form expires or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the
Administrative Agent, in each case certifying that such Foreign Bank is
entitled to receive payments under this Agreement and the Notes either without
deduction or withholding of any United States federal income taxes or at a
reduced rate of any United States federal income taxes as the case may be,
unless an event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Foreign Bank from duly completing and delivering any such form with respect to
it and such Foreign Bank advises the Borrower and the Administrative Agent in
writing that it is no longer capable of receiving payments without any
deduction or withholding of United States federal income taxes.

 

(c)                                  If
the form provided by a Bank at the time such Bank first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from the Taxes
and Other Payments unless and until such Bank provides the appropriate forms
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from such Taxes and Other Payments for
periods governed by such form; provided, however, that, if at the
date of the Assignment and Assumption pursuant to which an Assignee becomes a
party to this Agreement, the assigning Bank was entitled to payments under
Section 2.13 in respect of United States withholding tax with respect to
interest paid at such date, then the term Taxes and Other Payments shall
include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includable in Taxes and Other Payments)
United States withholding tax, if any, applicable with respect to the Assignee
on such date, but only to the extent that the assigning Bank was so entitled to
such payments under Section 2.13.

 

(d)                                 For
any period with respect to which a Bank has failed to provide the Borrower with
the appropriate form described in Subsection 2.13(b) above (other than if such
failure is due to a change in law occurring subsequent to the date on which a
form originally was required to be provided, or if such form otherwise is not
required under Subsection 2.13(b) above), such Bank shall not be entitled to
any additional payments under Section 2.10 or Section 2.13(a) with respect to
Taxes and Other Payments imposed by the United States by reason of such
failure; provided, however, that should a Bank become subject to
Taxes and Other Payments because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as the Bank reasonably shall
request to assist the Bank to recover such Taxes and Other Payments.

 

(e)                                  If
a Bank or the Administrative Agent receives a refund in respect of any Taxes or
Other Payments as to which it has been indemnified by the Borrower or with
respect to which the Borrower has paid additional amounts pursuant to Section
2.10 or this Section 2.13, it shall,

 

30

 

within 60 days
from the date of such receipt, pay over the amount of such refund to the
Borrower, net of all reasonable out-of-pocket expenses of such Bank or the
Administrative Agent and without interest (other than interest paid by the
relevant taxation authority with respect to such refund); provided that
the Borrower, upon the written request of such Bank or the Administrative
Agent, agrees to repay the amount paid over to the Borrower (plus penalties,
interest or other reasonable charges) to such Bank or the Administrative Agent
in the event such Bank or the Administrative Agent is required to repay such
refund to such taxation authority.

 

2.14.                        Default Rate Interest, Etc.

 

(a)                                  After
and during the continuance of any Default or Event of Default, all amounts
outstanding hereunder or under any other Loan Document (including, without
limitation, all principal, interest and fees outstanding) shall bear interest
from and including the due date thereof until paid, compounded daily and
payable on demand, at a rate per annum equal to (i) if such due date occurs
prior to the end of an Interest Period, 2% above the interest rate applicable
to such Loan for such Interest Period until the expiration of such Interest
Period, and thereafter, 2% above the rate then applicable to Prime Rate Loans;
and (ii) in all other cases, 2% above the rate then applicable to Prime Rate
Loans.

 

(b)                                 After
and during the continuance of any Default or Event of Default, the Letter of
Credit fees payable under Section 2.18 shall be increased to a rate per
annum equal to 2% above the rate applicable thereto prior to the occurrence
thereof.

 

2.15.                        Payments Not at End of Interest Period.  If the Borrower for any reason makes any
payment of principal with respect to any LIBOR Loan on any day other than the
last day of an Interest Period applicable to such LIBOR Loan, or fails to
borrow or continue or convert to a LIBOR Loan after giving a Notice of
Borrowing or Conversion pursuant to Section 2.4, the Borrower shall pay to the
Administrative Agent for the respective accounts of the Banks an amount
computed pursuant to the following formula:

 

L = (R - T) x P x D

360

 

L =                   amount payable to the Administrative
Agent for the accounts of the Banks

R =                  interest rate on such Loan

T =                  effective interest rate per annum at
which any readily marketable bond or other obligation of the United States,
selected at the Administrative Agent’s sole discretion, maturing on or near the
last day of the then applicable Interest Period of such Loan and in
approximately the same amount as such Loan can be purchased by the
Administrative Agent on the day of such payment of principal or failure to
borrow or continue or convert

P =                   the amount of principal prepaid or
the amount of the requested Loan

D =                 the number of days remaining in the
Interest Period as of the date of such      payment
or the number of days of the requested Interest Period

 

The Borrower shall pay such amount upon presentation by the
Administrative Agent of a statement setting forth the amount and the
Administrative Agent’s calculation thereof (in reasonable detail) pursuant
hereto, which statement shall be deemed conclusive and binding

 

31

 

absent manifest error. In addition to the foregoing amount, the
Borrower agrees to reimburse the Administrative Agent (without duplication) for
any costs associated with marking to market any obligations of the Borrower
under any Hedging Contract(s) that are required to be terminated as a result of
any conversion, repayment or prepayment of the principal amount of any LIBOR
Loan on a date other than the scheduled last day of the applicable Interest
Period. Such additional amounts shall be paid by the Borrower upon presentation
by the Administrative Agent of a statement setting forth the amount and the
Administrative Agent’s calculation thereof (in reasonable detail) pursuant
hereto, which statement shall be deemed conclusive and binding absent manifest
error. The Borrower acknowledges and agrees that (i) the Administrative Agent
shall have no obligation to purchase, sell and/or match funds in connection
with the use of the LIBOR Rate may be used merely as a reference in
determining such rate, and (iii) the Borrower has accepted the LIBOR Rate as a
fair and reasonable basis for calculating such rate, any other amount payable
hereunder and any other funding losses incurred by the Administrative Agent.
The Borrower further agrees to pay such amount and any other funding losses, if
any, whether or not the Administrative Agent elects to purchase, sell and/or
match funds.

 

2.16.                        Computation of Interest and Fees;
Maximum Interest.  Interest and
all fees payable hereunder on account of Prime Rate Loans shall be computed
daily on the basis of a year of 365/366 days and paid for the actual number of
days for which due.  Interest and all
fees payable hereunder on account of LIBOR Loans shall be computed daily on the
basis of 360 days and paid for the actual number of days for which due.  If the due date for any payment of principal
is extended by operation of law, interest shall be payable for such extended
time.  If any payment required by this
Agreement becomes due on a day that is not a Business Day such payment
may be made on the next succeeding Business Day (subject to clause (i) of
the definition of Interest Period), and such extension shall be included in
computing interest in connection with such payment.  Notwithstanding any other term of this Agreement, the Notes or
any other document referred to herein therein, the maximum amount of interest
which may be charged to or collected from any person liable hereunder or
under any Notes by any Bank shall be absolutely limited to, and shall in no
event exceed, the maximum amount of interest which could lawfully be charged or
collected under applicable law (including, to the extent applicable, the
provisions of Section 5197 of the Revised Statutes of the United States of
America, as amended, 12 U.S.C. Section 85, as amended), so that the maximum of
all amounts constituting interest under applicable law, howsoever computed,
shall never exceed as to any Person liable therefor such lawful maximum, and
any term of this Agreement, the Notes, the Letter of Credit applications, or
any other document referred to herein or therein which could be construed as
providing for interest in excess of such lawful maximum shall be and hereby is
made expressly subject to and modified by the provisions of this paragraph.

 

2.17.                        Letters of Credit.  In addition, upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants
of the Borrower made herein, the Issuing Bank agrees to issue, under the joint
responsibilities of the Banks having Revolving Credit Commitments, to the
extent permitted by law and the Uniform Custom Practices of the International
Chamber of Commerce governing Letters of Credit (Publication No. 500 or any
successor thereto), one or more Letters of Credit on the application and for
the account of the Borrower, during the period from the Closing Date to 14 days
prior to the Revolving Credit Maturity Date; provided that the Stated
Amount of Letters of Credit outstanding at any time, plus the aggregate
amount of all unreimbursed draws under such

 

32

 

outstanding
Letters of Credit, shall not at any time (i) exceed $2,000,000 in the
aggregate, or (ii) when added to the then outstanding amount of Revolving
Credit Loans at such time, exceed the aggregate amount of the Revolving Credit
Commitments of all the Banks at such time; and provided, further
that at the time the Borrower requests the issuance of a Letter of Credit and
after giving effect to the issuance thereof, there has not occurred and is not
continuing a Default or an Event of Default. 
It is understood and agreed by the parties hereto that amounts drawn
under such Letters of Credit shall become immediately due and payable by the
Borrower to the Administrative Agent, for the ratable accounts of the Issuing
Bank and the Banks, and shall bear interest at the rate then applicable to
Revolving Credit Loans that are Prime Rate Loans, and, if not paid forthwith,
shall be added to the Loan Account as Revolving Credit Loans and shall be
immediately due and payable upon the Revolving Credit Maturity Date (or, if earlier,
upon acceleration of the Loans).  Upon
the issuance of each Letter of Credit by the Issuing Bank, each Bank having a
Revolving Credit Commitment shall be deemed to automatically have purchased a
participation in such Letter of Credit in accordance with its Commitment
Percentage of the Revolving Credit Commitment and each Bank severally agrees
that it shall be absolutely liable, without regard to the occurrence of any
Default or Event of Default or any other condition precedent whatsoever, to the
extent of such Bank’s
Revolving Credit Commitment Percentage thereof, to reimburse the Issuing Bank
on demand for the amount of each draft paid by such Issuing Bank under each
Letter of Credit to the extent that such amount is not reimbursed by the
Borrower pursuant hereto.  In addition,
all Letters of Credit shall, unless the Administrative Agent, the Issuing Bank
and the Banks otherwise agree in writing, have a stated expiration date not to
exceed one year and shall, in any event, expire not later than 14 days prior to
the Revolving Credit Maturity Date.

 

In order to evidence such Letters of Credit, the Borrower shall enter
into, with the Issuing Bank and the Banks, such agreements and execute such
customary instruments and documents as the Administrative Agent, the Issuing
Bank and the Banks reasonably require, including, but not limited to, a letter
of credit application and agreement.

 

2.17(A).                              Carryover LC’s.  The parties hereto agree that on the Closing Date the Carryover
LC’s shall remain outstanding and shall be deemed to have been issued pursuant
to this Agreement by Citizens Bank of Massachusetts, in its capacity as Issuing
Bank hereunder, and such Carryover LC’s shall be treated, for all purposes of
this Agreement and the other Loan Documents, as outstanding Letters of Credit.

 

2.18.                        Letter of Credit Fees.  A per annum Letter of Credit fee shall be
payable upon the issuance thereof to the Issuing Bank, for the ratable accounts
of the Banks, on each standby Letter of Credit at a rate per annum equal to the
Applicable LIBOR Margin applicable to Revolving Credit Loans then in effect
multiplied by the face amount of such Letter of Credit, along with, solely for
the account of the Issuing Bank, such documentary issuing, processing and other
fees as are customarily charged by the Issuing Bank on standby Letters of
Credit (provided that no fronting fee shall be applicable upon the issuance of
any such Letter of Credit upon the issuance thereof).  The Letter of Credit fees for each Letter of Credit shall be payable
quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter.

 

2.19.                        Interdependence of Borrower
Affiliated Group.  In order to
induce each of the Banks to enter into this Agreement and the other Loan Documents
to which it is a party, and grant the Loans hereunder and issue the Letters of
Credit, the Borrower and each other member

 

33

 

of the Borrower Affiliated Group hereby jointly and severally represent
and warrant that:

 

(i)                                     the business of
each member of the Borrower Affiliated Group shall benefit from the successful
performance of the business of each other member of the Borrower Affiliated
Group, and the Borrower Affiliated Group as a whole;

 

(ii)                                  each member of the
Borrower Affiliated Group has cooperated to the extent necessary and shall
continue to cooperate with each other member of the Borrower Affiliated Group
to the extent necessary in the development and conduct of each other member of
the Borrower Affiliated Group’s business, and shall to the extent necessary
share and participate in the formulation of methods of operation, distribution,
leasing, inventory control, and other similar business matters essential to
each member of the Borrower Affiliated Group’s business;

 

(iii)                               the failure of any
member of the Borrower Affiliated Group to cooperate with all other members of
the Borrower Affiliated Group in the conduct of their respective businesses
shall have an adverse impact on the business of each other member of the
Borrower Affiliated Group, and the failure of any member of the Borrower
Affiliated Group to associate or cooperate with all other members of the
Borrower Affiliated Group is reasonably likely to impair the goodwill of such
other members of Borrower Affiliated Group and the Borrower Affiliated Group as
a whole; and

 

(iv)                              each member of the
Borrower Affiliated Group is accepting joint and several liability for the
Obligations and represents and warrants that the financial accommodations being
provided hereby are for the mutual benefit, directly and indirectly, of each
member of the Borrower Affiliated Group.

 

SECTION III

 

CONDITIONS OF
LOANS

 

3.1.                              Conditions Precedent to the Term
Loan; Initial Revolving Credit Loan and Initial Letters of Credit.  The obligation of the Banks to make the Term
Loan and the initial Revolving Credit Loan and to issue any Letter of Credit on
the Closing Date, is subject to the fulfillment on the Closing Date of each of
the following conditions precedent:

 

3.1.1.                     Loan
Documents, Ancillary Documents, Etc.

 

(i)                                   Each of (A) the Loan
Documents (other than the Hedging Contract(s) and the Assignment of Hedging
Contract(s)) and (B) the Ancillary Documents, shall have been duly and properly
authorized, executed and delivered by the respective parties thereto and shall
be in full force and effect on and as of the Closing Date.

 

(ii)                                Executed original
counterparts of each of the Loan Documents (other than the Hedging Contract(s)
and the Assignment of Hedging Contract(s)), and copies (or originals, as
requested by the Administrative Agent) of each of the

 

34

 

Ancillary Documents, as executed and delivered by the respective
parties thereto, shall have been furnished to the Administrative Agent.

 

3.1.2.                     Legality of Transactions.  No change in applicable law or regulation
shall have occurred as a consequence of which it shall have become and continue
to be unlawful (i) for the Administrative Agent or any of the Banks to
perform any of their agreements or obligations under any of the Loan Documents
to which they are a party on the Closing Date, or (ii) for the Borrower,
or any other member of the Borrower Affiliated Group to perform any of its
agreements or obligations under any of the Loan Documents or Ancillary
Documents to which it is a party on the Closing Date.

 

3.1.3.                     Representations and Warranties.  Each of the representations and warranties
made by or on behalf of the Borrower and each other member of the Borrower
Affiliated Group to the Administrative Agent and the Banks in this Agreement or
the other Loan Documents shall be true and correct when made, shall, for all
purposes of this Agreement, be deemed to be repeated on and as of the Closing
Date, and shall be true and correct on and as of such date.

 

3.1.4.                     Performance, Consents, No
Defaults, Litigation, Etc.  The
Borrower and each other member of the Borrower Affiliated Group shall have duly
and properly performed, complied with and observed each of its covenants,
agreements and obligations contained in any of the Loan Documents or Ancillary
Documents to which it is a party or by which it is bound which are required to
be performed on the Closing Date.  All
necessary consents and/or waivers in connection with the consummation of the
transactions contemplated by the Loan Documents shall have been obtained by the
Borrower and the other members of the Borrower Affiliated Group and copies
thereof shall have been delivered to the Administrative Agent and the Banks.  No event shall have occurred on or prior to
the Closing Date and be continuing on such Closing Date, and no condition shall
exist on such Closing Date, which constitutes a Default or an Event of
Default.  No litigation or other
proceeding shall be continuing, or pending or threatened in writing, which
could have a material adverse effect on the condition (financial or otherwise),
business, assets, operations, income, or prospects of the Borrower Affiliated
Group taken as a whole.

 

3.1.5.                     Certified Copies of Charter Documents.  The Administrative Agent shall have received
from each of the Borrower and the other members of the Borrower Affiliated
Group a copy, certified by a duly authorized officer of each of the Borrower
and such other members of the Borrower Affiliated Group to be true and complete
on the Closing Date, of (i) its charter or other incorporation documents, as in
effect on such date of certification, certified by the Secretary of State of
its jurisdiction of incorporation, and (ii) its by-laws as in effect on such
date.

 

3.1.6.                     Proof of Corporate Action.  The Administrative Agent shall have received
from each of the Borrower and each other member of the Borrower Affiliated
Group a copy, certified by a duly authorized officer of each of the Borrower
and such other member of the Borrower Affiliated Group to be true and complete
on the Closing Date, of records of all corporate action taken by each of the
Borrower and such member of the Borrower Affiliated Group to authorize, as
applicable (i) its execution and delivery

 

35

 

of the Loan Documents and the Ancillary Documents to which it is or is
to become a party, (ii) its performance of all of its agreements and obligation
under each of such documents, and (iii) any borrowings and other transactions
contemplated by this Agreement.

 

3.1.7.                     Incumbency Certificate.  The Administrative Agent shall have received
from each of the Borrower and each other member of the Borrower Affiliated
Group an incumbency certificate, dated the Closing Date and signed by the duly
authorized officers of each of the Borrower and such other member of the
Borrower Affiliated Group, and giving the name and bearing a specimen signature
of each individual who shall be authorized, as applicable: (i) to sign, in
the name and on behalf of each of the Borrower and such other member of the
Borrower Affiliated Group, each of the Loan Documents and each of the Ancillary
Documents to which it is or is to become a party; (ii) to make application for
the Loans or conversion thereof; and (iii) to give notices to take other action
on its behalf under the Loan Documents.

 

3.1.8.                     Proceedings and Documents.  All corporate, governmental and other
proceedings in connection with the transactions contemplated by the Loan
Documents, the Ancillary Documents and all instruments and documents incidental
thereto, shall be in form and substance reasonably satisfactory to the
Administrative Agent and the Administrative Agent shall have received all such
counterpart originals or certified or other copies of all such instruments and
documents as the Administrative Agent shall have reasonably requested.

 

3.1.9.                     Good Standing, Etc.  The Administrative Agent shall have received
a long-form certificate of the Secretary of State of the respective
jurisdictions of incorporation of each of the Borrower and each other member of
the Borrower Affiliated Group as to each of the Borrower’s and such other
member of the Borrower Affiliated Group’s legal existence and good standing in
such state and listing all documents on file in the office of said Secretary of
State.  The Administrative Agent shall
also have received certificates of qualification to do business from any
jurisdictions in which each of the Borrower and each other member of the
Borrower Affiliated Group is required to be qualified.

 

3.1.10.               Fees.  The Borrower shall have complied with its obligations under
Section 2.6 to pay the fees described in the Fee Letter, and the Letter of
Credit fees described in Section 2.18, and all legal fees and expenses and
collateral examination fees and other fees and expenses incurred by the
Administrative Agent in connection with the consummation of the transactions
contemplated by this Agreement.

 

3.1.11.               Legal Opinions.  The Administrative Agent shall have received
a written legal opinion, addressed to the Administrative Agent and the Banks,
dated the Closing Date, from Goodwin Procter, LLP counsel to the Borrower
Affiliated Group, in or substantially in the form of Exhibit E hereto.

 

3.1.12.               Collateral Examination: Financial
Condition.  The Administrative Agent
and each of the Banks shall have completed their due diligence, including a
review of the assets of the Borrower Affiliated Group.  The Administrative Agent and the Banks shall

 

36

 

have received, reviewed and approved, in their reasonable discretion,
the Initial Financial Statement and the Five-Year Projections.  The Administrative Agent and the Banks shall
be satisfied that there has been no material adverse change in the condition
(financial or otherwise), business, assets, operations, income or prospects of
the Borrower Affiliated Group taken as a whole since the most recent financial
statements referred to in Section 4.7.

 

3.1.13.               Security Documents; U.C.C. and other
Search Reports; Insurance; Patents, Trademarks and Copyrights.  The Security Documents and the appropriate
financing statements and filings (in the name of the Borrower and each other
member of the Borrower Affiliated Group) and other documents in respect thereto
and necessary to enable the Administrative Agent to perfect a legal, valid and
enforceable first-priority security interest in the Collateral described
therein for the benefit of the Banks, shall have been duly executed by each of
the Borrower and such other members of the Borrower Affiliated Group, and filed
or recorded, as applicable, in all appropriate filing offices or other
locations necessary for the perfection of such first-priority interests, and
all other actions necessary for the perfection of such interests (other than
with respect to motor vehicles) shall have been completed.  The Administrative Agent shall have received
reports concerning the results of searches of the Patent and Trademark Office,
the Copyright Office and Uniform Commercial Code filing offices for the
Borrower and each other member of the Borrower Affiliated Group in each
jurisdiction where Collateral or other assets are located made no more than 30
days prior to the Closing Date.  In
addition, the Administrative Agent shall have received satisfactory evidence
that all Cash Management Agreements have been delivered, and that necessary
arrangements thereunder have become effective. 
The Administrative Agent shall have received the original stock
certificates, together with stock powers endorsed in blank, for (i) all of
the issued and outstanding capital stock of each member of the Borrower
Affiliated Group except Mac-Gray and any Foreign Subsidiary (as defined in the
Mac-Gray Pledge Agreement), and (ii) 65% of the issued and outstanding capital
stock of any Foreign Subsidiary.  The
Administrative Agent shall have received satisfactory evidence that liability
insurance and casualty insurance, including any insurance as is required by the
Security Documents to be in effect in respect of all real and personal property
and fixtures, of each of the Borrower and each other member of the Borrower
Affiliated Group is in effect and the interest of the Administrative Agent as
mortgagee, loss payee and additional insured has been duly endorsed upon all
instruments of insurance issued in respect of such property and in respect of
liability.  All such insurance shall
provide for 30 days’ advance written notice to the Administrative Agent of any
cancellation thereof.  The
Administrative Agent shall also have received signed Landlord Waivers and/or
Bailee Notices, as applicable, for each location leased by the Borrower or any
other member of the Borrower Affiliated Group, each in form and substance
satisfactory to the Administrative Agent. 
Arrangements satisfactory to the Administrative Agent shall have been
made for the due filing of each of the Services Patent and Trademark Security
Agreement and the Intirion Patent and Trademark Security Agreement in the United
States Patent and Trademark Office.

 

37

 

3.1.14.               Solvency.  The Administrative Agent and the Banks shall
have received reasonably satisfactory evidence that the Borrower and each other
member of the Borrower Affiliated Group is solvent, and will be solvent after
giving effect to the Loans to be made hereunder on the Closing Date.

 

3.1.15.               Payoff and
Release Letter.  The Administrative
Agent shall have received a payoff and release letter (and related UCC-3 financing
statements or other discharges) in form and substance satisfactory to the
Administrative Agent and the Banks from Fleet National Bank, as the prior
agent, and arrangements completely satisfactory to the Banks shall have been
made by the Borrower with respect thereto; and neither the Borrower nor any
other member of the Borrower Affiliated Group shall have any outstanding
Indebtedness, other than as permitted by Section 6.1.

 

3.2.                              Conditions Precedent to all Loans
and Letters of Credit.  The
obligation of each Bank to make each Loan and issue each Letter of Credit,
including the initial Loans, or continue or convert Loans to Loans of the other
type, is further subject to the following conditions:

 

(a)                                  timely
receipt by the Administrative Agent and the Banks of the Notice of Borrowing or
Conversion as provided in Section 2.4;

 

(b)                                 the
representations and warranties contained in Section IV shall be true and
accurate in all material respects on and as of the date of such Notice of
Borrowing or Conversion and on the effective date of the making, continuation
or conversion of each Loan as though made at and as of each such date (except
to the extent that such representations and warranties expressly relate to an
earlier date), and no Default or Event of Default shall have occurred and be
continuing, or would result from such Loan;

 

(c)                                  the
resolutions referred to in Section 3.1.6 shall remain in full force and effect;
and

 

(d)                                 no
change shall have occurred in any law or regulation or interpretation thereof that,
in the opinion of counsel for the Administrative Agent or any Bank, would make
it illegal or against the policy of any governmental agency or authority for
such Bank to make Loans hereunder.

 

The making of each Loan shall be deemed to be a representation and
warranty by the Borrower on the date of the making, continuation or conversion
of such Loan as to the accuracy of the facts referred to in subsection (b) of
this Section 3.2.

 

SECTION IV

 

REPRESENTATIONS
AND WARRANTIES

 

In order to induce the Administrative Agent and the Banks to enter into
this Agreement and to make Loans and issue Letters of Credit hereunder, the
Borrower and each other member of the Borrower Affiliated Group jointly and
severally represent and warrant to the Administrative Agent and each Bank that:

 

38

 

4.1.                              Organization and Qualification.  The Borrower and each other member of the
Borrower Affiliated Group (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation as
indicated on Exhibit D hereto, (b) has all requisite corporate
power to own its property and conduct its business as now conducted and as
presently contemplated, and (c) is duly qualified and in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
where the nature of its properties or business requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on the business, condition (financial or otherwise), assets, operations
or prospects of the Borrower Affiliated Group taken as a whole.

 

4.2.                              Corporate Authority.  The execution, delivery and performance of
each of the Loan Documents and Ancillary Documents to which the Borrower or any
other member of the Borrower Affiliated Group is or is to become a party and
the transactions contemplated hereby and thereby are within the corporate power
and authority of the Borrower or such member of the Borrower Affiliated Group
and have been authorized by all necessary corporate proceedings, and do not and
will not (a) require any consent or approval of any creditors, trustees for
creditors or shareholders of the Borrower or such member of the Borrower
Affiliated Group (other than any such consent that has been obtained prior to
the Closing Date and delivered to the Administrative Agent), (b) contravene any
provision of the charter documents or by-laws of the Borrower or such member of
the Borrower Affiliated Group or any law, rule or regulation applicable to the
Borrower or such member of the Borrower Affiliated Group, (c) contravene any
provision of, or constitute an event of default or event that, but for the
requirement that time elapse or notice be given, or both, would constitute an
event of default under, any other agreement, instrument, order or undertaking
binding on the Borrower or such member of the Borrower Affiliated Group, or (d)
result in or require the imposition of any Encumbrance (other than as required by
the Loan Documents) on any of the properties, assets or rights of the Borrower
or such member of the Borrower Affiliated Group.

 

4.3.                              Valid Obligations.  Each of the Loan Documents and Ancillary Documents to which the
Borrower or any other member of the Borrower Affiliated Group is or is to
become a party and all of their respective terms and provisions are the legal,
valid and binding obligations of the Borrower or such member of the Borrower
Affiliated Group enforceable in accordance with their respective terms, except
as limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors’
rights generally, and except as the remedy of specific performance or of
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.

 

4.4.                              Consents or Approvals.  The execution, delivery and performance of
each of the Loan Documents and Ancillary Documents to which the Borrower or any
other member of the Borrower Affiliated Group is or is to become a party and
the transactions contemplated herein and therein do not require any approval or
consent of, or filing or registration with, any governmental or other agency or
authority, or any other party, except filings under the Uniform Commercial Code
and with the Patent and Trademark Office in connection with the Collateral, and
except for consents required in connection with the Collateral Assignment of
Material Contracts and Licenses.

 

4.5.                              Title to Properties; Absence of Encumbrances.  Each of the Borrower and each other member
of the Borrower Affiliated Group has good and marketable title to all of the

 

39

 

properties, assets and rights
of every name and nature now purported to be owned by it, including, without
limitation, such properties, assets and rights as are reflected in the Initial
Financial Statement (except such properties, assets or rights as have been
disposed of in the ordinary course of business since the date thereof), free
from all Encumbrances except Permitted Encumbrances, and, except as so
disclosed, free from all defects of title that might materially adversely
affect any of such properties, assets or rights.  All such properties and assets and all properties which are
leaseholds are free and clear of all title defects or objections, liens,
claims, charges, security interests and other Encumbrances of any nature
whatsoever (except for Permitted Encumbrances), and are not, in the case of
real property, subject to any rights of way, building, use or other
restrictions, easements, exceptions, variances, reservations or limitations of
any nature whatsoever except, with respect to all such properties and assets,
(i) provisions of existing building and zoning laws, provided that such
provisions would not materially interfere with the Borrower’s or any other
member of the Borrower Affiliated Group’s use of such properties, (ii) liens
for current taxes not yet due, and (iii) as otherwise disclosed on Exhibit D
hereto.  The rights, properties and
other assets presently owned, leased or licensed by each of the Borrower and
each other member of the Borrower Affiliated Group and described elsewhere in
this Agreement include all rights, properties and other assets necessary to
permit the Borrower and such member of the Borrower Affiliated Group to conduct
its businesses in all material respects in the same manner as its businesses
have been conducted prior to the date hereof. 
At the time the Borrower or any other member of the Borrower Affiliated
Group pledges, sells, assigns or transfers to the Administrative Agent any
instrument, document of title, security, chattel paper or other property
(including Inventory, contract rights and Accounts) or any proceeds or products
thereof, or any interest therein, the Borrower or such member of the Borrower
Affiliated Group shall be the lawful owner thereof and shall have good right to
pledge, sell, assign or transfer the same; none of such properties shall have
been pledged, sold, assigned or transferred to any Person other than the
Administrative Agent or in any way encumbered; and the Borrower or such member
of the Borrower Affiliated Group shall defend the same against the claims and
demands of all Persons.

 

4.6.                              Location of Records and Collateral;
Name Change.  The Borrower shall
give the Administrative Agent written notice of each location (including the
street address (other than for Laundry Facility Agreements), the city or town,
and the State) at which Collateral in excess of an aggregate amount of $100,000
is or will be kept and each office of the Borrower and each other member of the
Borrower Affiliated Group at which the records of the Borrower and such member
of the Borrower Affiliated Group are kept. 
Except as provided above or as such notice is given, all Collateral
owned by the Borrower and each other member of the Borrower Affiliated Group is
and shall be kept, and all records of the Borrower and each other member of the
Borrower Affiliated Group pertaining to Accounts and contract rights are and
shall be kept, at such location as appears on Exhibit D hereto.  The Borrower shall give the Administrative
Agent 30 days’
prior written notice of any change in its name or corporate form or any change
in the name or names under which the Borrower’s or any other member of the Borrower Affiliated
Group’s business is
transacted.

 

4.7.                              Financial Statements.  The Borrower has furnished to the
Administrative Agent and the Banks the Consolidated balance sheet of the
Borrower Affiliate Group as of December 31, 2002 and the related
Consolidated statements of income, changes in stockholders’ equity and cash flow of
the Borrower Affiliated Group for the fiscal year then ended, and related
footnotes,

 

40

 

audited and
certified by PriceWaterhouseCoopers, LLP and prepared in accordance with
GAAP.  The Borrower has also furnished
to the Administrative Agent and the Banks the Consolidated balance sheet of the
Borrower Affiliated Group as of March 31, 2003 and the related
Consolidated statements of income, changes in stockholders’ equity and cash flow of
the Borrower Affiliated Group for the fiscal quarter then ended, prepared in
accordance with GAAP and certified by management of the Borrower (such quarterly
financial statements, along with the annual audited financial statements
referred to above, being collectively referred to herein as the “Initial Financial
Statement”).  The Borrower has also furnished to the
Administrative Agent and the Banks the unaudited pro  forma
Consolidated projected balance sheets of the Borrower Affiliated Group for the
next 5 fiscal years, and its related unaudited Consolidated projected
statements of income, changes in stockholders’ equity and cash flow for the next 5 fiscal years,
in each case prepared as if the Loans had been made as of the Closing Date (the
“Five-Year
Projections”).  The Borrower has also furnished to the
Administrative Agent and the Banks management reports for the Borrower
Affiliated Group prepared for the fiscal years ended December 31, 2002 and
December 31, 2001.  The Initial
Financial Statements were prepared in accordance with GAAP and present fairly
the financial position of the Borrower Affiliated Group as of such dates and
the results of the operations of the Borrower Affiliated Group for such
periods.  There are no liabilities,
contingent or otherwise, not disclosed in the Initial Financial Statements that
involve a material amount.  The
Five-Year Projections were prepared in good faith by the Borrower based upon
reasonable assumptions and on a basis consistent with the Initial Financial
Statements.

 

4.8.                              Changes.  Since
the date of the Initial Financial Statement, there have been no changes in the
assets, liabilities, financial condition, business or prospects of the Borrower
Affiliated Group taken as a whole, the effect of which has, individually or in
the aggregate, been materially adverse.

 

4.9.                              Defaults.  As
of the date of this Agreement, no Default or Event of Default exists.

 

4.10.                        Taxes.  Each of the Borrower and each other member
of the Borrower Affiliated Group has filed all federal, state and other tax
returns required to be filed, and all taxes, assessments and other governmental
charges due from the Borrower or such other member of the Borrower Affiliated
Group have been fully paid or adequate reserves have been established
therefor.  Except as set forth on Exhibit
D hereto, neither the Borrower nor any other member of the Borrower
Affiliated Group has executed any waiver of limitations in respect of tax
liabilities.  Each member of the
Borrower Affiliated Group has established on its books reserves adequate for
the payment of all federal, state and other tax liabilities.

 

4.11.                        Litigation. 
Except as set forth on Exhibit D hereto, there is no litigation,
arbitration, claim, proceeding or investigation pending or threatened against
the Borrower or any other member of the Borrower Affiliated Group that, if
adversely determined, could result in a material judgment not fully covered by
insurance, could result in a forfeiture of all or any substantial part of the
property of the Borrower or such other member of the Borrower Affiliated Group,
or could otherwise have a material adverse effect on the business, condition
(financial or otherwise), assets, operations or prospects of the Borrower
Affiliated Group taken as a whole, or could reasonably be expected to adversely
affect the ability of the Borrower or such other member of the Borrower
Affiliated Group to pay and perform the Obligations.

 

41

 

4.12.                        Subsidiaries and Divisions.  As of the date of this Agreement, no member
of the Borrower Affiliated Group has any Subsidiaries or business divisions
except as set forth on Exhibit D hereto with respect to each such member
of the Borrower Affiliated Group.

 

4.13.                        Investment Company Act.  Neither the Borrower nor any other member of
the Borrower Affiliated Group is subject to regulation under the Investment
Company Act of 1940, as amended.

 

4.14.                        Compliance with ERISA.  Each of the Borrower and each other member
of the Borrower Affiliated Group and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and are in compliance in all material
respects with the applicable provisions of ERISA and the Code, and have not
incurred any liability to the PBGC or a Plan under Title IV of ERISA; and no “prohibited transaction” or “reportable event” (as such terms are
defined in ERISA) has occurred with respect to any Plan. Each of the Borrower
and each other member of the Borrower Affiliated Group has no pension plans,
profit-sharing plans, employee stock ownership plans or other employee benefit
plans, except as described on Exhibit D.

 

4.15.                        Environmental Matters.

 

(a)                                  Each
of the Borrower and each other member of the Borrower Affiliated Group has
obtained all permits, licenses and other authorizations which are required
under all Environmental Laws, except to the extent failure to have any such
permit, license or authorization would not have a material adverse effect on
the business, condition (financial or otherwise), assets, operations or
prospects of the Borrower Affiliated Group taken as a whole.  Each of the Borrower and each other member
of the Borrower Affiliated Group is in compliance with the terms and conditions
of all such permits, licenses and authorizations, and is also in compliance
with all other limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except to the extent failure to comply would not have a material adverse effect
on the business, condition (financial or otherwise), assets, operations or
prospects of the Borrower Affiliated Group taken as a whole.

 

(b)                                 No
notice, notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by the Borrower
or any other member of the Borrower Affiliated Group to have any permit,
license or authorization required in connection with the conduct of its
business or with respect to any Environmental Laws, including, without
limitation, Environmental Laws relating to the generation, treatment, storage,
recycling, transportation, disposal or release of any Hazardous Materials.  Neither the Borrower nor any other member of
the Borrower Affiliated Group has been identified as a potentially responsible
party (as that term has been construed pursuant to CERCLA, or any similar
foreign, state or local laws) at any site other than the sites listed and
described in Exhibit D.

 

(c)                                  No
material oral or written notification of a release of a Hazardous Material has
been given or filed by or on behalf of the Borrower or any other member of the
Borrower

 

42

 

Affiliated
Group and no property now or previously owned, leased or used by the Borrower
or any other member of the Borrower Affiliated Group is listed or proposed for
listing on the National Priorities List under CERCLA, or on any similar
foreign, state or local list of sites requiring investigation or clean-up.

 

(d)                                 There
are no Encumbrances arising under or pursuant to any Environmental Laws on any
of the real property or properties owned, leased or used by the Borrower or any
other member of the Borrower Affiliated Group and no governmental actions have
been taken or are in process which could subject any of such properties to such
Encumbrances, or as a result of which the Borrower or any other member of the
Borrower Affiliated Group would be required to place any notice or restriction
relating to the presence of Hazardous Materials at any property owned by it in
any deed to such property.

 

(e)                                  Neither
the Borrower nor any other member of the Borrower Affiliated Group, nor, to the
knowledge of the Borrower Affiliated Group, after due inquiry, any previous
owner, tenant, occupant or user of any property owned, leased or used by the
Borrower or any other member of the Borrower Affiliated Group has (i) engaged
in or permitted any operations or activities upon or any use or occupancy of
such property, or any portion thereof, for the purpose of or in any way
involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal (whether legal or illegal,
accidental or intentional) of any Hazardous Materials on, under, in or about
such property, except to the extent commonly used in day to day operations of
such property and in such case only in compliance with all Environmental Laws,
or (ii) transported any Hazardous Materials to, from or across such property
except to the extent commonly used in day to day operations of such property and,
in such case, in compliance with all Environmental Laws; nor to the knowledge
of any member of the Borrower Affiliated Group have any Hazardous Materials
migrated from other properties upon, about or beneath such property; nor, to
the knowledge of the Borrower Affiliated Group, are any Hazardous Materials
presently constructed, deposited, stored or otherwise located on, under, in or
about such property except to the extent commonly used in day to day operations
of such property and, in such case, in compliance with all Environmental Laws.

 

4.16.                        Disclosure. 
No representations and warranties made by each member of the Borrower
Affiliated Group in this Agreement, any other Loan Document or in any other
agreement, instrument, document, certificate, statement or letter furnished to
the Administrative Agent, the Arranger, or the Banks by or on behalf of any
member of the Borrower Affiliated Group, and no other factual information
heretofore or contemporaneously furnished by or on behalf of any member of the Borrower
Affiliated Group to the Administrative Agent, the Arranger or the Banks, in
connection with any of the transactions contemplated by any of the Loan
Documents or Ancillary Documents contains any untrue statement of material fact
or omits to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances in
which they are made.  Except as
disclosed herein, there is no contract or agreement in place or any fact known
to any member of the Borrower Affiliated Group which materially adversely
affects, or which would in the future materially adversely affect, the
business, condition (financial or otherwise), assets, properties, operations or
prospects of the Borrower Affiliated Group taken as a whole.

 

4.17.                        Solvency. 
Both before and after giving effect to all Indebtedness incurred by the
Borrower on the Closing Date, neither the Borrower nor any such member of the
Borrower

 

43

 

Affiliated
Group (i) is Insolvent, or will be rendered Insolvent by the Indebtedness
incurred in connection therewith, (ii) will be left with unreasonably small
capital with which to engage in its business, even allowing for a reasonable
margin of error in the projections of the future performance of the Borrower
and such other members of the Borrower Affiliated Group, (iii) will have
incurred Indebtedness beyond its ability to pay such Indebtedness as it
matures, or (iv) will fail to have assets (both tangible and intangible) having
a present fair salable value in excess of the amount required to pay the
probable liability on its then existing debts (whether matured or unmatured,
liquidated or unliquidated, absolute fixed or contingent).

 

4.18.                        Compliance with Statutes, etc.  Each of the Borrower and each other member
of the Borrower Affiliated Group is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except for such non-compliances as
will not, in the aggregate, have a material adverse effect on the business,
condition (financial or otherwise), assets, operations or prospects of the
Borrower Affiliated Group taken as a whole.

 

4.19.                        Capitalization.  On and as of the Closing Date, the authorized capital stock, and
the number of issued and outstanding shares of capital stock of each member of
the Borrower Affiliated Group is as set forth on Exhibit D hereto.  All such outstanding shares of capital stock
of each member of the Borrower Affiliated Group (other than Mac-Gray) have been
duly and validly issued, in compliance with all legal requirements relating to
the authorization and issuance of shares of capital stock, and are fully paid
and non-assessable.  No member of the
Borrower Affiliated Group (other than Mac-Gray) has outstanding any other
securities convertible into or exchangeable for its capital stock or
outstanding any rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating
to, its capital stock, in each case except as set forth in Exhibit D
with respect to such member of the Borrower Affiliated Group.

 

4.20.                        Labor Relations.  Neither the Borrower nor any other member of the Borrower
Affiliated Group is engaged in any unfair labor practice.  There is (i) no unfair labor practice
complaint pending or threatened against the Borrower or any other member of the
Borrower Affiliated Group before the National Labor Relations Board, and no
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Borrower or any other member of
the Borrower Affiliated Group or, to the knowledge of the Borrower Affiliated
Group, threatened against it, (ii) no labor dispute, slowdown or stoppage
pending against the Borrower or any other member of the Borrower Affiliated
Group or, to the knowledge of the Borrower Affiliated Group, threatened against
the Borrower or any other member of the Borrower Affiliated Group, and (iii) to
the knowledge of the Borrower Affiliated Group, no union representation
question exists with respect to the employees of the Borrower or any other
member of the Borrower Affiliated Group and no union organizing activities are
taking place.

 

4.21.                        Certain Transactions.  Except as set forth on Exhibit D,
none of the officers, partners, directors, or employees of any member of the
Borrower Affiliated Group is presently a party to any transaction with any
other member of the Borrower Affiliated Group (other than for services as
employees, officers and directors), including any contract, agreement or other

 

44

 

arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, partner, director or such employee or, to the knowledge of the
Borrower Affiliated Group, any corporation, partnership, trust or other entity
in which any officer, partner, director, or any such employee or natural person
related to such officer, partner, director or employee or other Person in which
such officer, partner, director or employee has a direct or indirect beneficial
interest, has a substantial direct or indirect beneficial interest or is an
officer, director, trustee or partner.

 

4.22.                        Restrictions on the Borrower
Affiliated Group.  No
member of the Borrower Affiliated Group is a party to or bound by any contract,
agreement or instrument, or subject to any charter or other corporate
restriction, materially and adversely affecting the business, property, assets,
operations or condition (financial or otherwise) of the Borrower Affiliated
Group taken as a whole.

 

4.23.                        Real Property Leases and Laundry
Facility Agreements.  Exhibit
D hereto contains a complete list of all leases, occupancy agreements and
all amendments thereto and all other documents affecting rights and obligations
thereunder, including without limitation, assignments and subleases, pursuant
to which the Borrower or any other member of the Borrower Affiliated Group leases
real property, and license agreements pursuant to which a third party would
have the right to enter upon the leased premises (herein individually referred
to as a “Real
Property Lease” and
collectively referred to as the “Real
Property Leases”)
other than agreements and other documents pursuant to which the Borrower or any
other member of the Borrower Affiliated Group installs, operates and maintains
certain pay per use laundry equipment and/or rents the same to an owner,
manager or any other Person affiliated with the premises at which such
equipment is located (herein individually referred to as a “Laundry Facility
Agreement” and
collectively referred to as the “Laundry
Facility Agreements”).  The Borrower has made available to the Banks
and/or their counsel, at the Borrower’s
headquarters, all written Laundry Facility Agreements for their review at such
headquarters.  There are no leases,
occupancy agreements or other documents, other than the Real Property Leases
and the Laundry Facility Agreements, affecting the properties or the interests
of the Borrower or any other member of the Borrower Affiliated Group.  The copies of the Real Property Leases and
Laundry Facility Agreements heretofore delivered by the Borrower to each Bank
and the Laundry Facility Agreements requested by and made available to the
Banks and/or their counsel are true, correct and complete copies thereof and
each of such Real Property Leases and each of such Laundry Facility Agreements
is in full force and effect in accordance with the terms thereof.  Neither the Borrower nor any other member of
the Borrower Affiliated Group nor, to the knowledge of the Borrower Affiliated
Group, any other party thereto is in default under the applicable Real Property
Lease or Laundry Facility Agreement or has given or received any notice of
cancellation or termination of such Real Property Lease or Laundry Facility
Agreement (other than expirations occurring in the ordinary course of business
consistent with past practices) or condemnation of the premises which is the
subject of any Real Property Lease or Laundry Facility Agreement.  To the knowledge of the Borrower Affiliated
Group, all work to be performed by any other party to each Real Property Lease
and Laundry Facility Agreement has been completed and there are no claims
pending or threatened against any such third party for failure to have
performed or completed any such work.

 

45

 

4.23(A).                              Laundry Facility Agreements.  Mac-Gray is not party to any of the Laundry
Facility Agreements.  Services (or a
predecessor by merger or otherwise in interest to Services) is the member of
the Borrower Affiliated Group who is a party to each Laundry Facility
Agreement.  The rights granted to and
exercised by the Borrower and other members of the Borrower Affiliated Group
under the Laundry Facility Agreements include Borrower’s and other members of the Borrower Affiliated Group’s right to install and
operate certain pay per use laundry equipment on the premises which are the
subject of the Laundry Facility Agreements and maintain and service such
equipment; and the Borrower and other members of the Borrower Affiliated Group
do not exercise control over, have exclusive possession of or maintain such
premises.  The occupants of the
buildings located on the subject premises have open access to the common areas
where the laundry equipment is located, restricted only upon terms and
conditions as may be imposed in the sole discretion of the other party to
the applicable Laundry Facility Agreement. 
Neither Services nor any other member of the Borrower Affiliated Group
has received a notice under any of the Laundry Facility Agreements informing
such member of the Borrower Affiliated Group of a substantial decrease in the
occupancy rate, or of newly granted permission for occupants to install
individual laundry equipment, in any building to which such Laundry Facility
Agreement relates (other than in connection with expirations occurring in the
ordinary course of business consistent with past practices).

 

4.24.                        Franchises, Patents, Copyrights, Etc.  Except as otherwise set forth on Exhibit
D hereto, each of the Borrower and each other member of the Borrower
Affiliated Group possesses all franchises, patents, copyrights, trademarks,
tradenames, domain names, service marks, licenses and permits, approvals and
rights in respect of the foregoing, adequate for the conduct of its business as
substantially now conducted without known conflict with any rights of others
and, in each case, free of any Encumbrance that is not a Permitted Encumbrance.

 

4.25.                        [Intentionally Omitted.]

 

4.26.                        Collateral. 
All of the Obligations of the Borrower Affiliated Group to the
Administrative Agent and the Banks under or in respect of the Loan Documents
will, at all times from and after the execution and delivery of each of the
Security Documents, be entitled to the benefits of and be secured by each of
such Security Documents to the extent provided therein.

 

4.27.                        Material Contracts.  Exhibit D sets forth each of the
contracts (other than the Leases and Laundry Facility Agreements), agreements
and licenses which is material to the operations or business of the Borrower or
any other member of the Borrower Affiliated Group (the “Material Contracts”).

 

SECTION V

 

AFFIRMATIVE
COVENANTS

 

So long as any Bank has any commitment to make Loans or issue Letters
of Credit hereunder or any Loan or other Obligation hereunder remains
outstanding, the Borrower, and to the extent referred to therein (including to
the extent the Borrower has agreed to cause the members of the Borrower
Affiliated Group to comply), each other member of the Borrower Affiliated
Group, jointly and severally covenant as follows:

 

46

 

5.1.                              Financial Statements and other
Reporting Requirements. 
The Borrower shall furnish to the Administrative Agent and the Banks:

 

(a)                                  as
soon as available, but in any event within 90 days after the end of each fiscal
year of the Borrower Affiliated Group, a Consolidated balance sheet as of the
end of, and a related Consolidated statement of income, changes in stockholders’ equity and cash flow
for, such year, prepared in accordance with GAAP and audited and certified by a
“Big Five” accounting firm; and,
concurrently with such financial statements, a copy of said certified public
accountants’
management letter and a written statement by such accountants that, in the
making of the audit necessary for their report and opinion upon such financial
statements they have obtained no knowledge of any Default or Event of Default
under any of Sections 6.6, 6.7, 6.8, 6.9 or 6.10, or, if in the opinion of such
accountants any such Default or Event of Default exists under any of Sections
6.6, 6.7, 6.8, 6.9 or 6.10, they shall disclose in such written statement the
nature and status thereof;

 

(b)                                 as
soon as available, but in any event within 45 days after the end of each fiscal
quarter of the Borrower Affiliated Group, a Consolidated balance sheet as of
the end of, and a related Consolidated statement of income, changes in
stockholders’
equity and cash flow for, the portion of the fiscal year then ended and for the
fiscal quarter then ended, prepared in accordance with GAAP (without footnotes)
and certified by the chief financial officer of each member of the Borrower
Affiliated Group, but subject, however, to normal, recurring year-end
adjustments that shall not in the aggregate be materially adverse;

 

(c)                                  at
least 15 days before the first day of each fiscal year of the Borrower
Affiliated Group, (i) an annual operating budget presented on a quarterly basis
for such succeeding fiscal year, and (ii) Consolidated pro  forma
projections of the Borrower Affiliated Group for such succeeding fiscal year in
form acceptable to the Administrative Agent and the Banks (it being recognized
by the Administrative Agent and the Banks that projections as to future results
are not to be viewed as facts and that the actual results for the period or
periods covered by the projections may differ from the projected results);

 

(d)                                 concurrently
with the delivery of each financial statement pursuant to subsections (a) and
(b) of this Section 5.1, a report in substantially the form of Exhibit F
hereto signed on behalf of the Borrower Affiliated Group by the chief financial
officer of Mac-Gray, and including, without limitation, computations in
reasonable detail evidencing compliance with the covenants contained in
Sections 6.6 through 6.10 hereof, inclusive;

 

(e)                                  promptly
after the receipt thereof by the Borrower or any other member of the Borrower
Affiliated Group, copies of any reports submitted to any member of the Borrower
Affiliated Group by independent public accountants in connection with any
interim review of the accounts of the Borrower or such member of the Borrower
Affiliated Group made by such accountants;

 

(f)                                    promptly
after the same are available, copies of all financial statements, proxy
material, and reports as the Borrower or any other member of the Borrower
Affiliated Group shall send to its stockholders or that the Borrower or any
other member of the Borrower Affiliated Group may file with any
governmental authority at any time having jurisdiction over the Borrower or
such member of the Borrower Affiliated Group;

 

47

 

(g)                                 if
and when the Borrower or any other member of the Borrower Affiliated Group
gives or is required to give notice to the PBGC of any “Reportable Event” (as defined in Section 4043 of ERISA) with respect
to any Plan that might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that any member of the Controlled Group or the plan
administrator of any Plan has given or is required to give notice of any such
Reportable Event, a copy of the notice of such Reportable Event given or
required to be given to the PBGC or, if such notice is not given to the PBGC, a
description of the content of the notice that would be required to be given;

 

(h)                                 immediately
upon becoming aware of the existence of any condition or event (i) that
constitutes a Default or Event of Default, written notice thereof specifying
the nature and duration thereof and the action being or proposed to be taken
with respect thereto or (ii) affecting the Borrower or any other member of the
Borrower Affiliated Group which could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise), assets,
operations or prospects of the Borrower Affiliated Group taken as a whole,
written notice thereof specifying the nature thereof and the action being or
proposed to be taken with respect thereto; and immediately upon receipt
thereof, copies of any notice (whether formal or informal) of any cancellation,
termination or material change in any insurance maintained by any member of the
Borrower Affiliated Group;

 

(i)                                     promptly
upon becoming aware of any litigation or of any investigative proceedings by
any Person, including, without limitation, any governmental agency or authority
commenced or threatened against the Borrower or any other member of the
Borrower Affiliated Group of which it has notice, or of a material change in
any such existing litigation or proceedings, the outcome of which would or
might have a materially adverse effect on the assets, business, condition (financial
or otherwise), operations or prospects of the Borrower Affiliated Group taken
as a whole, written notice thereof and the action being or proposed to be taken
with respect thereto;

 

(j)                                     promptly
upon becoming aware of any investigative proceedings by a governmental agency
or authority commenced or threatened against the Borrower or any other member
of the Borrower Affiliated Group regarding any potential violation of
Environmental Laws or any spill, release, discharge or disposal of any
Hazardous Material, written notice thereof, copies of all correspondence,
reports and other materials furnished’
to or prepared by any member of the Borrower Affiliated Group (or its
representatives) in connection therewith and the action .being or proposed to
be taken with respect thereto;

 

(k)                                  prior
to the occurrence of an Event of Default, the Borrower shall make available for
review at its headquarters on a quarterly basis all Laundry Facility Agreements
then in effect, and, subject to the last paragraph of this Section 5.1, during
the continuance of an Event of Default shall furnish to the Administrative
Agent upon its request a list or lists of all Laundry Facility Agreements then
in effect, including location of the premises, date of expiration of the
Laundry Facility Agreement and number of machines at the premises for each such
Laundry Facility Agreement; and

 

(l)                                     from
time to time, with reasonable promptness, such other financial data and other
information or documents (financial or non-financial) about the Borrower and
each other member of the Borrower Affiliated Group (including accountants’ management letters and

 

48

 

annual
budgets) as the Administrative Agent or any Bank may reasonably request.

 

The Administrative Agent and the Banks agree that they will handle the
list or lists provided to them pursuant to Section 5.1(k) in the same manner as
set forth in Section 5.5 with respect to the information referred to therein, provided
that any such list or lists may be disclosed in connection with any
enforcement action being taken by the Administrative Agent hereunder.

 

5.2.                              Conduct of Business.  The Borrower shall, and shall cause each
other member of the Borrower Affiliated Group to:

 

(a)                                  duly
observe and comply in all material respects with all applicable laws and
requirements of any governmental authorities relative to its corporate
existence, rights and franchises, to the conduct of its business and to its
property and assets (including without limitation all Environmental Laws and
ERISA), and shall maintain and keep in full force and effect all licenses and
permits necessary in any material respect to the proper conduct of its
business;

 

(b)                                 maintain
its corporate existence (except that immaterial Subsidiaries of Services
may be dissolved (with any assets being transferred to Services) or merged
with and into Services);

 

(c)                                  remain
engaged in substantially the same fields of business as those in which it is
now engaged, except that the Borrower or any other member of the Borrower
Affiliated Group may withdraw from any business activity which its Board
of Directors reasonably deems unprofitable or unsound, provided that
promptly after such withdrawal, the Borrower shall provide the Administrative
Agent with written notice thereof;

 

(d)                                 comply
in all material respects with the provisions of all agreements, contracts and
other binding obligations applicable to the Borrower, or any other member of
the Borrower Affiliated Group; and

 

(e)                                  at
least 10 Business Days prior to forming any Subsidiary, deliver to the
Administrative Agent the Borrower’s
agreement, and immediately upon formation, such Subsidiary’s agreement, in each
case reasonably satisfactory to counsel for the Administrative Agent, that the
Subsidiary shall be a member of the Borrower Affiliated Group, and shall be
bound by the terms of this Agreement, the other Security Documents and the
related documents and instruments as a “Borrower” hereunder and
thereunder, as a guarantor or otherwise as the Administrative Agent
may determine in its sole discretion, and, without in any way limiting the
foregoing, simultaneously with the formation of any such Subsidiary, the
Borrower or other applicable member of the Borrower Affiliated Group shall
pledge 100% of the issued and outstanding stock of such newly-formed Subsidiary
(or 65% with respect to any Foreign Subsidiary) to the Administrative Agent for
the ratable benefit of the Administrative Agent and the Banks.

 

5.3.                              Maintenance and Insurance.  The Borrower shall, and shall cause each
other member of the Borrower Affiliated Group to, maintain its properties in
good repair, working order and condition (normal wear and tear excepted) as
required for the normal conduct of its business and from time to time the
Borrower will make or cause to be made, and cause each

 

49

 

other member
of the Borrower Affiliated Group to make or cause to be made, all necessary and
proper repairs, renewals, replacements, additions and improvements thereto so
that the business of the Borrower and such other members of the Borrower
Affiliated Group may be properly and advantageously conducted at all times
and shall maintain or cause to be maintained all Leases as may be required
for the conduct of the Borrower’s and each other member of the Borrower Affiliated
Group’s
business.  The Borrower shall and shall
cause each other member of the Borrower Affiliated Group to at all times
maintain liability and casualty insurance with financially sound and reputable
insurers in such amounts as the officers of the Borrower and such other member
of the Borrower Affiliated Group in the exercise of their reasonable judgment
deem to be adequate.  The Administrative
Agent shall be named as mortgagee, loss payee and additional insured and shall
be given 30 days’
prior written notice of any cancellation or modification of insurance.  If the Borrower or any other member of the
Borrower Affiliated Group fails to provide such insurance, the Administrative
Agent, in its sole discretion, may provide such insurance and charge the
cost thereof to the Loan Account or to the Borrower’s or any such other member of the Borrower
Affiliated Group’s
deposit account with the Administrative Agent. 
Any payment not recovered from the Borrower or any other member of the
Borrower Affiliated Group shall bear interest at the Prime Rate plus the
Applicable Prime Rate Margin then in effect applicable to Revolving Credit
Loans.  The Administrative Agent shall
not, by the fact of approving, disapproving, accepting, obtaining or failing to
obtain any such insurance, incur liability for the form or legal sufficiency of
insurance contracts, solvency of insurance companies or payment of lawsuits,
and the Borrower and each other member of the Borrower Affiliated Group hereby
expressly assumes full responsibility therefor and liability, if any,
thereunder.  The Borrower shall, and
shall cause each other member of the Borrower Affiliated Group to, furnish to
the Administrative Agent certificates or other evidence satisfactory to the
Administrative Agent of compliance with the foregoing insurance
provisions.  The provisions of this
Section 5.3 shall be deemed to be supplemental to, but not duplicative of, the
provisions of any of the Security Documents that require the maintenance of
insurance.

 

5.4.                              Taxes.  The
Borrower shall, and shall cause each other member of the Borrower Affiliated
Group to, pay or cause to be paid all taxes, assessments or governmental
charges on or against it or its properties on or prior to the time when they
become due; provided that this covenant shall not apply to any tax,
assessment or charge that is being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been established
and are being maintained in accordance with GAAP if no lien shall have been
filed to secure such tax, assessment or charge. If the Borrower shall fail to
pay any taxes, assessments or governmental charges on or against it or its
properties on or prior to the time when they become due when due to the
appropriate taxing authority or fails to remit to the Administrative Agent
satisfactory evidence of the payment of anysuch charges or any Taxes, interest
or penalties that may become payable by the Administrative Agent as a
result of any such failure, the Borrower shall indemnify the Administrative
Agent and the other Banks to the extent of any such failure to pay any such
amounts when due.

 

5.5.                              Inspection by the Administrative
Agent.  The Borrower shall, and
shall cause each other member of the Borrower Affiliated Group to, permit the
Banks, through the Administrative Agent or the Administrative Agent’s designee, at such
reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to such Person, to (i) visit
and inspect the properties (including the Real Properties) of the Borrower and
such

 

50

 

other members
of the Borrower Affiliated Group, (ii) conduct field examinations from time to
time, (iii) examine and make copies of and take abstracts from the books and
records of the Borrower and such other members of the Borrower Affiliated
Group, and (iv) discuss the affairs, finances and accounts of the Borrower and
such other members of the Borrower Affiliated Group with its appropriate
officers, employees and accountants, provided that when an Event of
Default has occurred and is continuing the Administrative Agent or any Bank
may do any of the foregoing at any time during normal business hours and
without advance notice.  In handling
such information the Administrative Agent and the Banks shall exercise the same
degree of care that each exercises with respect to its own proprietary
information of the same types to maintain the confidentiality of any non-public
information thereby received, except that disclosure of such information
may be made (w) to the subsidiaries or affiliates of the Arranger, the
Administrative Agent and each Bank in connection with their present or
prospective business relations with the Borrower Affiliated Group, (x) to
prospective transferees or purchasers of an interest in the Loans, (y) as
required by law, regulation, rule or order, subpoena, judicial order or similar
order and (z) as may be required in connection with the examination, audit
or similar investigation of the Arranger, the Administrative Agent or any Bank.

 

5.6.                              Maintenance of Books and Records.  The Borrower shall, and shall cause each
other member of the Borrower Affiliated Group to, keep adequate books and
records of account, in which true and complete entries will be made reflecting
all of its business and financial transactions, and such entries will be made
in accordance with GAAP and applicable law.

 

5.7.                              Interest Rate Protection.  On or prior to the Closing Date, the
Borrower shall enter into, and thereafter the Borrower shall maintain in
effect, certain Hedging Contracts in form and substance reasonably satisfactory
to the Administrative Agent, providing for the rate of interest applicable to
the Loans to be capped at a level above the LIBOR Rate plus the Applicable
LIBOR Margin prevailing on the effective date of such interest rate protection
arrangements (the “Effective
Date”) acceptable
to the Administrative Agent in its reasonable discretion with respect to not
less than $40,000,000  of principal
of the Loans, as reduced by any term loan principal installment payments made
by the Borrower in accordance with Section 2.12(b), such interest rate
protection arrangements to remain in effect from the Effective Date through the
third anniversary of the Effective Date

 

5.8.                              Environmental Indemnification.  The Borrower covenants and agrees that it
will, and will cause each other member of the Borrower Affiliated Group to,
indemnify and hold the Administrative Agent and each Bank harmless from and
against any and all claims, expense, damage, loss or liability incurred by the
Administrative Agent or any Bank in connection with environmental matters with
respect to the Real Properties.  It is
expressly acknowledged by the Borrower that the foregoing indemnification shall
survive any foreclosure or any modification, release or discharge of any or all
of the Security Documents or the payment of the Loans and shall inure to the
benefit of the Administrative Agent and the Banks and their respective
successors and assigns.  The obligations
under this Section 5.8 shall constitute “Obligations” for all purposes of the
Security Documents.  In connection with
the foregoing, the Borrower shall deliver promptly to the Administrative Agent
copies of all environmental information or reports with respect to the Real
Properties.

 

5.9.                              Use of Proceeds.  The proceeds of the Revolving Credit Loans and the Term Loan will
be used by the Borrower solely to repay in full the Borrower’s obligations for
borrowed

 

51

 

money to Fleet
National Bank, as prior agent for a group of lenders, and to provide working
capital for the Borrower Affiliated Group and for general corporate purposes
(including purposes permitted by this Agreement) for the Borrower Affiliated
Group and for Permitted Acquisitions. 
No portion of any Loans shall be used for the purpose of purchasing or
carrying any “margin
security” or “margin stock” as such terms are used
in Regulations U or X of the Board of Governors of the Federal Reserve System.

 

5.10.                        Pension Plans. 
With respect to any Plan, the benefits under which are guaranteed, in
whole or in part, by the PBGC or any governmental authority succeeding to any
or all of the functions of the PBGC, the Borrower will, and will cause each
other member of the Borrower Affiliated Group to, (i) fund each Plan as
required by the provisions of Section 412 of the Code; (ii) cause each
Plan to pay all benefits when due; and (iii) furnish the Administrative Agent
(a) promptly with a copy of any notice of each Plan’s termination sent to the PBGC and (b) no later than
the date of submission to the Department of Labor or to the Internal Revenue
Service, as the case may be, a copy of any request for waiver from the
funding standards or extension of the amortization periods required by Section
412 of the Code.

 

5.11.                        Fiscal Year. 
Each of the Borrower and each other member of the Borrower Affiliated
Group shall have a fiscal year ending on December 31 of each year and
shall notify the Administrative Agent of any change in such fiscal year
(whereupon, notwithstanding the provisions of Section 9.8, the Administrative
Agent and the Banks shall have the right to modify the timing of the financial
covenants hereunder accordingly in order to correspond to any such change in
fiscal year).

 

5.12.                        Leases.  The
Borrower shall use its best efforts to, and shall cause each other member of
the Borrower Affiliated Group to use its best efforts to, cause the landlord
(other than under a Laundry Facility Agreement) of any premises leased by the
Borrower or such other member of the Borrower Affiliated Group which contains
books and records or Collateral in an aggregate amount in excess of $100,000 to
deliver to the Administrative Agent, at the option of the Administrative Agent
and the Banks, a Landlord Waiver simultaneously with the execution of any Lease
of such real property.

 

5.13.                        Laundry Facility Agreements.  With respect to the Laundry Facility
Agreements: (i) any member of the Borrower Affiliated Group other than
Mac-Gray may be party to the Laundry Facility Agreements entered into
after the Closing Date, provided that at the time such member of the
Borrower Affiliated Group enters into such Laundry Facility Agreements, and at
all times thereafter, the appropriate member of the Borrower Affiliated Group
shall have pledged 100% of the issued and outstanding stock of such member of
the Borrower Affiliated Group party to the Laundry Facility Agreements to the
Administrative Agent for the ratable benefit of the Administrative Agent and
the Banks; and (ii) each member of the Borrower Affiliated Group will use
commercially reasonable efforts to have at least 90% of all Laundry Facility Agreements
entered into or renewed by any member of the Borrower Affiliated Group after
the Closing Date be substantially in the forms attached hereto as Exhibit H
applicable to the type of Laundry Facility Agreements so entered into.  In addition to, and without in any way
limiting, the foregoing the Borrower will use its best efforts to ensure that
no Laundry Facility Agreements entered into or renewed after the Closing Date
shall prohibit, require consent for, or in any other way limit a change in
ownership or control of such member of the Borrower Affiliated Group.

 

52

 

5.14.                        Landlord Waivers. 
The Borrower shall use best efforts to deliver to the
Administrative Agent, within 45 days of the Closing Date, executed Landlord
Waivers for the ratable benefit of the Banks and the Administrative Agent, each
in form and substance satisfactory to the Administrative Agent.

 

5.15.                        Control
Agreements.  The Borrower shall use best efforts to
deliver to the Administrative Agent, within 30 days of the Closing Date
executed Control Agreements with respect to its deposit accounts for the
ratable benefit of the Banks and the Administrative Agent, each in form and
substance satisfactory to the Administrative Agent.

 

5.16.                        Further
Assurances.  (1) At any time and from time to time the
Borrower shall, and shall cause each of its Subsidiaries to, execute and
deliver such further instruments and take such further action as
may reasonably be requested by the Administrative Agent or any Bank to
effect the purposes of the Loan Documents and the Security Documents.  Without limitation of the foregoing, upon
receipt of an affidavit of an officer of any Bank as to the loss, theft,
destruction or mutilation of any Note or any other Security Document which is
not of public record, and, in the case of any such loss, theft, destruction or
mutilation, upon cancellation of such Note or other Security Document, the
Borrower and each other member of the Borrower Affiliated Group, as applicable,
will issue, in lieu thereof, a replacement note or other Security Document in
the same principal amount thereof and otherwise of like tenor, (ii) the
Borrowers will duly obtain and deliver to the Administrative Agent, not later
than 30 days after the Closing Date, the agreements, instruments, contracts and
documents listed and described on Exhibit I hereto, each of which shall
be in form and substance satisfactory to the Administrative Agent.

 

SECTION VI

 

NEGATIVE
COVENANTS

 

So long as any
Bank has any commitment to make Loans and issue Letters of Credit hereunder or
any Loan or other Obligation hereunder remains outstanding, the Borrower
(including to the extent the Borrower has agreed to cause the members of the
Borrower Affiliated Group to comply) and each other member of the Borrower
Affiliated Group, jointly and severally covenant as follows:

 

6.1.                              Indebtedness. 
The Borrower shall not, nor shall permit any other member of the
Borrower Affiliated Group to, create, incur, assume, guarantee or be or remain
liable with respect to any Indebtedness other than the following:

 

(a)                                  Indebtedness
of the Borrower to the Administrative Agent or the Banks under any Security
Document;

 

(b)                                 Indebtedness
in respect of current liabilities, other than for borrowed money, of the
Borrower Affiliated Group incurred in the ordinary course of business and of a
type and magnitude consistent with past practices;

 

(c)                                  Indebtedness
in respect of capital leases and purchase money security interests of the
Borrower Affiliated Group representing obligations permitted to be incurred by
the terms of

 

53

 

this Agreement
and incurred in the ordinary course of business and consistent with past
practices; provided, that the aggregate principal amount of Indebtedness
permitted by this clause (c) shall not exceed (i) $3,000,000 in the case of
vehicle capital leases or purchase money security interests, and (ii)
$1,000,000 for all other purposes, at any one time outstanding;

 

(d)                                 Indebtedness
existing on the date of this Agreement and disclosed as Item No. 3 on Exhibit
C hereto;

 

(e)                                  Indebtedness
existing on the date of this Agreement and disclosed on Exhibit C hereto
(other than Item No. 3 thereon) (the “Existing
Debt”) and the
Seller Subordinated Debt, provided that (A) all such Existing Debt and
Seller Subordinated Debt (including any related payment-in-kind promissory
notes) shall at all times be and remain unsecured and subordinated on terms
satisfactory to the Administrative Agent and the Banks, to the Obligations
(including, without limitation, that no payments of principal or interest shall
be made with respect to such Existing Debt or Seller Subordinated Debt during
the occurrence and continuance of a Default or Event of Default under this Agreement
or if such payment would cause such a Default or Event of Default, and the
Borrower shall be required to deliver to the Administrative Agent a certificate
certifying that no such Default or Event of Default exists within a reasonable
period of time prior to making such payment), and (B) the Existing Debt and
Seller Subordinated Debt shall not at any one time exceed an aggregate
principal amount of $340,755.41 (as reduced by any principal payments made
thereon from time to time after the Closing Date);

 

(f)                                    Indebtedness
secured by Encumbrances permitted by Sections 6.4(c) and (g), respectively; and

 

(g)                                 Indebtedness
of up to $5,000,000 in connection with financing of the Cambridge Fee Location
owned by Services, secured solely by a mortgage of such property on market
terms.

 

6.2.                              Contingent Liabilities.  The Borrower shall not, nor shall permit any
other member of the Borrower Affiliated Group to, create, incur, assume or
remain liable with respect to any Guarantees other than the following:

 

(a)                                  Guarantees
in favor of the Administrative Agent or the Banks under any Security Document;

 

(b)                                 Guarantees
existing on the date of this Agreement and disclosed on Exhibit C
hereto;

 

(c)                                  Guarantees
resulting from the endorsement of negotiable instruments for collection in the
ordinary course of business;

 

(d)                                 Guarantees
with respect to surety, performance and return-of-money and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money) not exceeding in the aggregate
at any time $100,000;

 

(e)                                  Guarantees
in respect of interest rate protection arrangements required hereby; and

 

54

 

(f)                                    Guarantees
of any Indebtedness of any member of the Borrower Affiliated Group which is
permitted by Section 6.1 by any other member of the Borrower Affiliated Group.

 

6.3.                              Sale and Leaseback.  The Borrower shall not, nor shall permit any
other member of the Borrower Affiliated Group to, enter into any arrangement,
directly or indirectly, whereby it shall sell or transfer any property owned by
it in order to lease such property or lease other property that the Borrower or
such other member of the Borrower Affiliated Group intends to use for
substantially the same purpose as the property being sold or transferred.

 

6.4.                              Encumbrances. 
The Borrower shall not, nor shall permit any other member of the
Borrower Affiliated Group to, create, incur, assume or suffer to exist any
mortgage, pledge, security interest, lien or other charge or encumbrance,
including the lien or retained security title of a conditional vendor upon or
with respect to any of its property or assets (“Encumbrances”),
or assign or otherwise convey any right to receive income, including the sale
or discount of Accounts Receivable with or without recourse, except the
following (“Permitted
Encumbrances”):

 

(a)                                  Encumbrances
in favor of the Administrative Agent or the Banks under any Security Document;

 

(b)                                 Encumbrances
existing on the date of this Agreement and disclosed in Exhibit C
hereto;

 

(c)                                  Liens
for taxes, fees, assessments and other governmental charges to the extent that
payment of the same may be postponed or is not required in accordance with
the provisions of Section 5.4;

 

(d)                                 Landlords’ and lessors’ liens in respect of
rent not in default, to the extent Landlord Waivers shall have been delivered
to the Administrative Agent, or liens in respect of pledges or deposits under
worker’s
compensation, unemployment insurance, social security laws, or similar legislation
(other than ERISA) or in connection with appeal and similar bonds incidental to
litigation; mechanics’,
laborers’, carriers’, warehousemans’, materialmen’s and similar liens, if
the obligations secured by such liens are not then delinquent; liens securing
the performance of bids, tenders, contracts (other than for the payment of
money); and statutory obligations incidental to the conduct of its business and
that do not in the aggregate materially detract from the value of its property
or materially impair the use thereof in the operation of its business;

 

(e)                                  Judgment
liens that shall not have been in existence for a period longer than
30 days after the creation thereof or, if a stay of execution shall have
been obtained, for a period longer than 30 days after the expiration of such
stay;

 

(f)                                    Easements,
rights of way, restrictions and other similar charges or Encumbrances relating
to real property and not interfering in a material way with the ordinary
conduct of its business;

 

(g)                                 Encumbrances
securing the purchase price of capital assets (including rights of lessors
under capital leases) to the extent such purchase is permitted hereunder, provided,

 

55

 

however,
that (A) each such Encumbrance is given solely to secure the purchase price of,
or the lease obligations relating to, such property, does not extend to any
other property and is given at the time of the acquisition of the property, and
(B) the Indebtedness secured thereby does not exceed the lesser of the cost of
such property or its fair market value at the time such security interest
attaches, and in any event, such Indebtedness does not exceed (i) $3,000,000 in
the case of vehicle capital leases or purchase money security interests which exist
on the Closing Date (and refinancings thereof in the ordinary course of
business, provided that the aggregate $3,000,000 limit is not exceeded),
and (ii) $1,000,000 for all other purposes, in the aggregate outstanding at any
time; and

 

(h)                                 Encumbrances
expressly permitted under Section 6.1(g).

 

In addition, the Borrower shall not, nor shall the Borrower permit any
other member of the Borrower Affiliated Group or any of its other Subsidiaries
to, enter into or permit to exist any arrangement or agreement which directly
or indirectly prohibits the Borrower or any such other member of the Borrower
Affiliated Group or Subsidiary from creating or incurring any Encumbrance in
favor of the Administrative Agent for the benefit of the Banks and the
Administrative Agent under the Loan Documents.

 

6.5.                              Merger; Consolidation; Sale or Lease
of Assets; Permitted Acquisitions.  The Borrower shall not, nor shall permit any other member of the
Borrower Affiliated Group to, (a) sell, lease or otherwise dispose of assets or
properties (valued at the lower of cost or fair market value), other than (i)
sales of Inventory in the ordinary course of business, and (ii) sales of assets
not in the ordinary course of business in an aggregate amount not to exceed
$500,000 in any fiscal year of the Borrower Affiliated Group; or (b) liquidate,
merge or consolidate into or with any other Person or enter into or undertake
any plan or agreement of liquidation, merger or consolidation with any other
Person, provided that any wholly-owned Subsidiary of the Borrower
may merge or consolidate into or with (i) the Borrower if no Default or
Event of Default has occurred and is continuing or would result from such
merger and if the Borrower is the surviving company, or (ii) any other
wholly-owned Subsidiary of the Borrower; or (c) without the prior written
consent of the Banks, acquire all or substantially all of the assets (or a
division) or capital stock (or other equity) of any Person, provided
that the Borrower may make acquisitions (“Permitted Acquisitions”) so long as (i) the Borrower shall be in compliance
with all representations, warranties and covenants set forth in this Agreement
and the other Loan Documents before and after giving effect to each proposed
acquisition, (ii) the Borrower shall then have at least $5,000,000 in
availability in Revolving Credit Loans, after giving effect to the proposed
acquisition, (iii) the entity to be acquired by the Borrower shall be in the
card and coin-operated laundry business and its operations shall be located in
or adjacent to the Borrower’s
existing markets, (iv) the entity to be acquired by the Borrower shall have
positive EBITDA for at least the 12-month period prior to the acquisition, such
that the acquisition shall be deemed accretive by the Lenders, (v) any
acquisition or combination of acquisitions with aggregate consideration in
excess of $15,000,000 shall require the prior written consent of the Majority
Banks, and (vi) for covenant purposes, the Borrower may make proforma
adjustments to the EBITDA calculations set forth herein of any such acquired
entities based on identified cost improvements, subject to the Agent’s satisfactory review in
its reasonable discretion of such adjustments.

 

56

 

6.6.                              Maximum Total Leverage.  The Borrower shall not at any time permit
the Funded Debt Ratio of the Borrower Affiliated Group as at the last day of
any fiscal quarter in any fiscal period identified below to be greater than the
3.00 to 1.00 at any time.

 

6.7.                              [Intentionally Omitted].

 

6.8.                              [Intentionally
Omitted].

 

6.9.                              Minimum Debt Service Coverage.  The Borrower shall maintain Debt Service
Coverage of at least 1.20 to 1.00 at all times.

 

6.10.                        Minimum Net Worth.  The Borrower shall not at any time permit the Consolidated Net
Worth of the Borrower Affiliated Group to be less than $62,500,000, plus,
on a cumulative basis, an amount equal to 50% of the net after tax profit of
the Borrower Affiliated Group earned in each fiscal quarter (commencing with
the fiscal quarter ending September 30, 2003).

 

6.11.                        Maximum Capital Expenditures and
Prepaid Commission Expenses. 
The sum of Capital Expenditures made, and Prepaid Commission Expenses
paid, by the Borrower Affiliated Group, in the aggregate, shall not exceed
$17,500,000 in any fiscal year, provided that the foregoing limitation shall
not apply to any capital expenditures made by the Borrower for any acquired
entities in connection with Permitted Acquisitions for the first twelve (12)
months immediately following each such acquisition.

 

6.12.                        Restricted Payments.  The Borrower shall not, nor shall permit any
other member of the Borrower Affiliated Group to, pay, make or declare any
Restricted Payment.  Notwithstanding the
foregoing, (i) the Borrower may make regularly scheduled payments on the
Existing Debt and the Seller Subordinated Debt (each as in effect on the
Closing Date) to the extent no Default or Event of Default then exists or would
result from the making of any such payment, (ii) the Borrower’s Subsidiaries
may from time to time make distributions to the Borrower, and (iii) the
Borrower may make Restricted Payments of up to $3,000,000 in the aggregate
in connection with the repurchase of Borrower’s common stock through December 31, 2004, provided
that the Borrower has, as of the date of any such Restricted Payments, no
less than $5,000,000 of unused and available Revolving Loans after giving
effect to such repurchase.  Neither the
Borrower nor any other member of the Borrower Affiliated Group will enter into any
agreement, contract or arrangement (other than the Loan Documents) restricting
the ability of any Subsidiary of the Borrower or any other member of the
Borrower Affiliated Group to pay or make dividends or distributions in cash or
kind, to make loans, advances or other payments of any nature or to make
transfers or distributions of all or any part of its assets to the Borrower or
any other member of the Borrower Affiliated Group.

 

6.13.                        Investments. 
The Borrower shall not, nor shall permit any other member of the
Borrower Affiliated Group to, make or maintain any Investments other than
Qualified Investments.

 

6.14.                        ERISA.  Neither
the Borrower nor any member of the Controlled Group shall permit any Plan
maintained by it to (i) engage in any “prohibited
transaction” (as
defined in Section 4975 of the Code), (ii) incur any “accumulated funding deficiency” (as defined in

 

57

 

Section 302
of ERISA) whether or not waived, or (iii) terminate any Plan in a manner that
could result in the imposition of a lien or encumbrance on the assets of the
Borrower or any other member of the Borrower Affiliated Group pursuant to
Section 4068 of ERISA.

 

6.15.                        Transactions with Affiliates.  The Borrower shall not, nor shall permit any
other member of the Borrower Affiliated Group to, enter into or participate in
any agreements or transactions of any kind with any Affiliate, except (i)
agreements or transactions contemplated, required or allowed by any Loan
Document or any Ancillary Document as in effect on the date of this Agreement
or described on Exhibit D hereto, provided that such agreements
or transactions are not otherwise prohibited by this Agreement or any of the
Security Documents; (ii) agreements or transactions (in each case) in the
ordinary course of business and on an arms-length basis which (A) include only
terms which are fair and equitable to the Borrower or such other member of the
Borrower Affiliated Group, (B) do not violate or otherwise conflict with any of
the terms of any of the Loan Documents, (C) require the payment of no fees,
charges or commissions by the Borrower or such member of the Borrower
Affiliated Group to any Affiliate except those which are reasonable and
disclosed to the Administrative Agent, (D) are disclosed on the books, accounts
and records of the Borrower or such other member of the Borrower Affiliated
Group, and (E) involve terms no less favorable to the Borrower or such other
member of the Borrower Affiliated Group than would be the terms of a similar
agreement or transaction with any Person other than an Affiliate; and (iii) the
loans permitted by Section 6.16. 
Neither the Borrower nor any other member of the Borrower Affiliated
Group will enter into any agreement containing any provision which would be
violated or breached by the performance by the Borrower or such other member of
the Borrower Affiliated Group of its obligations hereunder or under any of the
other Loan Documents.

 

6.16.                        Loans.  The
Borrower shall not, nor shall permit any other member of the Borrower
Affiliated Group to, make to any Person any loan, advance or other transfer
with the anticipation of repayment, except for loans and advances to employees
of the Borrower or such other member of the Borrower Affiliated Group, made in
the ordinary course of business and consistent with past practices, not
exceeding $250,000 in the aggregate at any time outstanding; provided,
that no such advances to any single employee shall exceed $50,000 in the
aggregate.

 

6.17.                        Revolving Credit Commitment.  The Borrower shall not cause or permit the
aggregate principal amount of all Revolving Credit Loans outstanding at any
time, plus the aggregate Stated Amount of Letters of Credit outstanding
at such time, plus the aggregate amount of any unreimbursed draws under
outstanding Letters of Credit, to exceed the aggregate amount of the Revolving
Credit Commitments of all the Banks at such time.

 

6.18.                        No Amendments to Certain Documents.  The Borrower shall not, nor shall permit any
other member of the Borrower Affiliated Group to, at any time cause or permit
(i) any of the Ancillary Documents to be modified, amended or supplemented in
any respect whatever, except for such modification or amendment as would not,
in the Administrative Agent’s
sole discretion, effect any change adverse to the Administrative Agent or the
Banks, or have a material adverse effect on the business, condition (financial
or otherwise), assets, operations or prospects of the Borrower Affiliated Group
taken as a whole, or (ii) any of the charter or other incorporation documents
or by-laws of the Borrower or such other member of the Borrower Affiliated
Group to be modified, amended or supplemented in any material respect whatever,
without (in each case) the express prior written agreement, consent or approval
of the Administrative Agent.

 

58

 

6.19.                        [Intentionally Omitted.]

 

6.20.                        Relocations of Principal Place of
Business.  The Borrower
shall not, nor shall permit any member of the Borrower Affiliated Group to,
relocate its chief executive offices from the locations set forth on Exhibit D,
except as expressly permitted under the Loan Documents or upon no less than
ninety (90) days prior written notice to the Agent and the Lenders.

 

6.21.                        Relocations of Books and Records.  The Borrower shall not, and shall not permit
any member of the Borrower Affiliated Group to, permanently remove from its
chief executive offices any books or records of the Borrower or any member of
the Borrower Affiliated Group, except with the prior written consent of the
Agent or in connection with the relocation of the Borrower’s principal place of
business in accordance with Section 6.20.

 

6.22.                        Changes in Fiscal Year.  The Borrower shall not, nor shall permit any
member of the Borrower Affiliated Group to, change its fiscal year.

 

6.23.                        Debt Forgiveness.  The Borrower shall not, nor shall permit any member of the
Borrower Affiliated Group, to waive any material debt or claim owing to the
Borrower or any member of the Borrower Affiliated Group (including any accounts
receivable) if such waiver could have a material adverse effect upon the
Borrower or any member of the Borrower Affiliated Group of if such waiver is
prohibited by the terms of any of the Loan Documents.

 

SECTION VII

 

DEFAULTS

 

7.1.                              Events of Default.  There shall be an Event of Default hereunder if any of the
following events occurs:

 

(a)                                  the
Borrower shall fail to pay (i) any amount of principal of any Loans when due or
(ii) any amount of interest thereon or any fees or expenses payable hereunder
or under any Note or any other Security Document within 3 days after the due
date therefor; or

 

(b)                                 the
Borrower or any other member of the Borrower Affiliated Group shall fail to
perform, comply with or observe or shall otherwise breach any one or more of
the terms, obligations, covenants or agreements contained in Sections 5.1,
5.2(b), 5.2(d), 5.3 (with respect to maintenance of insurance), 5.5, 5.8, 5.9,
5.13, 5.14(ii), 6.1 through 6.12, inclusive, and 6.14 through 6.17, inclusive;
or

 

(c)                                  the
Borrower or any other member of the Borrower Affiliated Group shall fail to
perform, comply with or observe or shall otherwise breach any one or more of
the terms, covenants, obligations or agreements (other than in respect of
subsections 7.1(a) and (b) hereof) contained in this Agreement or in any other
Security Document and such failure shall continue for 20 days; or

 

(d)                                 any
representation or warranty of the Borrower or any other member of the Borrower
Affiliated Group made in any Security Document or any other documents or

 

59

 

agreements
executed in connection with the transactions contemplated by this Agreement or
in any certificate delivered hereunder shall prove to have been false in any
material respect upon the date when made or deemed to have been made; or

 

(e)                                  [Intentionally
Omitted.]

 

(f)                                    the
Borrower or any other member of the Borrower Affiliated Group shall fail to pay
at maturity, or within any applicable period of grace (not to exceed 30 days),
any obligations for borrowed monies or advances in excess of $100,000, or any
obligations for the lease or other use of real or personal property in excess
of $100,000, or fail to observe or perform any term, covenant or agreement
evidencing or securing such obligations for borrowed monies or advances in
excess of $100,000, or relating to such lease or use of real or personal
property in excess of $100,000, the result of which failure is to permit the
holder or holders of such Indebtedness to cause such Indebtedness to become due
prior to its stated maturity upon delivery of required notice, if any, or to
permit any party to any agreement evidencing such obligations to terminate or
cancel such agreement; or

 

(g)                                 the
Borrower or any other member of the Borrower Affiliated Group shall
(i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar official
of itself or of all or a substantial part of its property, (ii) be generally
not paying its debts as such debts become due, (iii) make a general assignment
for the benefit of its creditors, (iv) commence a voluntary case under the
Federal Bankruptcy Code (as now or hereafter in effect), (v) take any action or
commence any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
or any other law providing for the relief of debtors, (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code (as now or
hereafter in effect) or other law, (vii) take any action under the laws of its
jurisdiction of incorporation or organization similar to any of the foregoing,
(viii) be Insolvent, or (ix) pass any board resolution or take any corporate
action for the purpose of effecting any of the foregoing; or

 

(h)                                 a
proceeding or case shall be commenced, without the application or consent of
the Borrower or other applicable member of the Borrower Affiliated Group in any
court of competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets, or (iii) similar relief in
respect of it, under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts or any other
law providing for the relief of debtors, and such proceeding or case shall
continue undismissed, or unstayed and in effect, for a period of 45 days; or an
order for relief shall be entered in an involuntary case under the Federal Bankruptcy
Code (as now or hereafter in effect), against the Borrower or any other member
of the Borrower Affiliated Group; or action under the laws of the jurisdiction
of incorporation or organization of the Borrower or any other member of the
Borrower Affiliated Group similar to any of the foregoing shall be taken with
respect to the Borrower or any such member of the Borrower Affiliated Group and
shall continue unstayed and in effect for any period of 45 days; or

 

(i)                                     judgments
or orders for the payment of money shall be entered against the Borrower or any
other member of the Borrower Affiliated Group by any court, or a warrant of

 

60

 

attachment or
execution or similar process shall be issued or levied against property of the
Borrower or any other member of the Borrower Affiliated Group, that in the
aggregate exceed $100,000 in value and such judgments, orders, warrants or
process shall continue undischarged or unstayed for 30 days; or

 

(j)                                     the
Borrower, any other member of the Borrower Affiliated Group or any member of
the Controlled Group shall fail to pay when due an aggregate amount in excess
of $250,000 which it shall have become liable to pay to the PBGC or to a Plan
under Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall
be filed under Title IV of ERISA by the Borrower, any other member of the
Borrower Affiliated Group or any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any such Plan or Plans or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans against the Borrower or any
other member of the Borrower Affiliated Group and such proceedings shall not
have been dismissed within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any such Plan or Plans must be terminated; or

 

(k)                                  a
Change of Control shall have occurred; or

 

(l)                                     the
Borrower or any other member of the Borrower Affiliated Group shall be
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of its
business and such order shall continue in effect for more than 30 days, or the
Borrower or any other member of the Borrower Affiliated Group shall be indicted
for a state or federal crime, or any criminal action shall otherwise have been
brought against the Borrower or any other member of the Borrower Affiliated
Group, a punishment for which in any such case could reasonably be expected to
include forfeiture of any assets of the Borrower Affiliated Group having a fair
market value in excess of $250,000; or

 

(m)                               there
shall occur any material damage to, or loss, theft or destruction of, any
Collateral, whether insured or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or other casualty,
which in any such case causes, for more than 30 consecutive days, the cessation
or substantial curtailment of revenue producing activities at any facility of
the Borrower or any other member of the Borrower Affiliated Group if such event
or circumstance is not covered by business interruption insurance and which
cessation or curtailment could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise), assets,
operations or prospects of the Borrower Affiliated Group taken as a whole; or

 

(n)                                 there
shall occur the loss, suspension or revocation of, or failure to renew, any
license or permit now held or hereafter acquired if such loss, suspension,
revocation or failure to renew could reasonably be expected to have a material
adverse effect on the business, financial condition, assets, operations or
prospects of the Borrower Affiliated Group taken as a whole; or

 

(o)                                 any
covenant, agreement or obligation of the Borrower or any other member of the
Borrower Affiliated Group contained in or evidenced by any Security Document or
any Ancillary Document to which the Borrower or such member of the Borrower
Affiliated Group is a party shall, prior to the date on which such document
shall terminate with the express prior

 

61

 

written
agreement, consent or approval of the Administrative Agent and the Banks, cease
in any material respect to be legal, valid, binding or enforceable in
accordance with the terms thereof; or

 

(p)                                 any
Security Document or any Ancillary Document shall be canceled, terminated,
revoked or rescinded (or any notice of such cancellation, termination,
revocation or rescission given) otherwise than with the express prior written
agreement, consent or approval of the Administrative Agent and the Banks; or
any action at law, suit in equity or other legal proceeding to cancel, revoke,
or rescind any Security Document or any Ancillary Document shall be commenced
by or on behalf of the Borrower or any other member of the Borrower Affiliated
Group, or by any court or any other governmental or regulatory authority or
agency of competent jurisdiction; or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or shall issue a judgment, order, decree or ruling to the
effect that, any one or more of the Security Documents or Ancillary Documents
or any one or more of the obligations of the Borrower or any other member of
the Borrower Affiliated Group under any one or more of the Security Documents
and Ancillary Documents are illegal, invalid or unenforceable in accordance
with the terms thereof; or

 

(q)                                 any
default or event of default shall occur and be continuing under any Ancillary Document
(after giving effect to any cure or grace period thereunder, such period not to
exceed 30 days in any event).

 

(r)                                    there
shall occur a default or event of default or circumstance which would, but for
the passage of time, be a default or an event of default under any other
document or instrument evidencing Indebtedness of the Borrower or any member of
the Borrower Affiliated Group to the Administrative Agent or any other Bank.

 

7.2.                              Remedies. 
Upon the occurrence of an Event of Default described in subsections
7.1(g) and (h), immediately and automatically, and upon the occurrence of any
other Event of Default, at any time thereafter while such Event of Default is
continuing, at the option of the Majority Banks and upon the Administrative
Agent’s declaration:

 

(a)                                  each
Bank’s commitment
to make any further Loans hereunder shall terminate;

 

(b)                                 the
unpaid principal amount of the Loans together with accrued interest, all other
Obligations, and all other obligations of the Borrower to the Administrative Agent
and each Bank of any kind shall become immediately due and payable without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived; and

 

(c)                                  the
Administrative Agent may require the Borrower and each other applicable
member of the Borrower Affiliated Group to execute and deliver to the
Administrative Agent, for the ratable benefit of the Banks, a Leasehold
Mortgage with respect to all locations for which there is a Lease or Laundry
License in effect at such time, and may exercise (on behalf of itself and
the Banks) any and all other rights the Administrative Agent and the Banks have
under this Agreement, the Notes, the Security Documents, or any other documents
or agreements executed in connection herewith, or at law or in equity, and
proceed to protect and enforce the Administrative Agent’s and the Banks’ rights by any action at law, in equity or other
appropriate proceeding.

 

62

 

SECTION VIII

 

CONCERNING THE
ADMINISTRATIVE AGENT AND THE BANKS

 

8.1.                              Appointment and Authorization.  Each of the Banks hereby appoints Citizens
to serve as Administrative Agent under this Agreement and irrevocably
authorizes the Administrative Agent to take such action on such Bank’s behalf under this
Agreement and to exercise such powers and to perform such duties under this
Agreement and the other documents and instruments executed and delivered in
connection with the consummation of the transactions contemplated hereby
(including, without limitation, all Security Documents) as are delegated to the
Administrative Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.

 

8.2.                              Administrative Agent and Affiliates.  Citizens shall also have the same rights and
powers under this Agreement of a Bank and may exercise or refrain from
exercising the same as though it were not the Administrative Agent, and
Citizens and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any other member
of the Borrower Affiliated Group or any Affiliate of any member of the Borrower
Affiliated Group as if it were not the Administrative Agent hereunder.  Except as otherwise provided by the terms of
this Agreement, nothing herein shall prohibit any Bank from accepting deposits
from, lending money to or generally engaging in any kind of business with the
Borrower or any other member of the Borrower Affiliated Group or any Affiliate
of any member of the Borrower Affiliated Group.

 

8.3.                              Future Advances.

 

(a)                                  In
order to more conveniently administer the Loans, the Administrative Agent may,
unless notified to the contrary by any Bank prior to the date upon which any
Revolving Credit Loan is to be made, assume that such Bank has made available
to the Administrative Agent on such date the amount of such Bank’s share of such
Revolving Credit Loan to be made on such date as provided in this Agreement,
and the Administrative Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a corresponding
amount.  If any Bank makes available to
the Administrative Agent such amount on a date after the date upon which the
Revolving Credit Loan is made, such Bank shall pay to the Administrative Agent
on demand an amount equal to the product of (i) the average computed for the
period referred to in clause (iii) below, of the weighted average interest rate
paid by the Administrative Agent for federal funds acquired by the Administrative
Agent during each day included in such period, multiplied  by (ii)
the amount of such Bank’s
share of such Revolving Credit Loan, multiplied  by (iii) a
fraction, the numerator of which is the number of days that elapsed from and
including such date to the date on which the amount of such Bank’s share of such
Revolving Credit Loan shall become immediately available to the Administrative
Agent, and the denominator of which is 360 or 365, as applicable.  A statement of the Administrative Agent
submitted to such Bank with respect to any amounts owing under this subsection
shall be prima  facie evidence of the amount due and owing to the
Administrative Agent by such Bank.

 

(b)                                 The
Administrative Agent may at any time, in its sole discretion, upon notice to
any Bank, refuse to make any Revolving Credit Loan to the Borrower on behalf of
such Bank unless such Bank shall have provided to the Administrative Agent
immediately available federal

 

63

 

funds equal to
such Bank’s
share of such Revolving Credit Loan in accordance with this Agreement.

 

(c)                                  Anything
in this Agreement to the contrary notwithstanding, the obligations to make
Loans under the terms of this Agreement shall be the several and not joint
obligation of each of the Banks and any advances made by the Administrative
Agent on behalf of any Bank are strictly for the administrative convenience of
the parties and shall in no way diminish any Bank’s liability to repay the Administrative Agent for
such Loans and advances.  If the amount
of any Bank’s share
of any Revolving Credit Loan which the Administrative Agent has advanced to the
Borrower is not made available to the Administrative Agent by such Bank within
1 Business Day following the date upon which such Revolving Credit Loan is
made, the Administrative Agent shall be entitled to recover such amount from
the Borrower on demand, with interest thereon at the rate per annum applicable
to the Revolving Credit Loans made on such date.

 

8.4.                              Delinquent Bank.  Notwithstanding anything to the contrary contained in this
Agreement, any Bank that fails to make available to the Administrative Agent
its share of any Revolving Credit Loan when and to the full extent required by
the provisions of this Agreement shall be deemed delinquent (a “Delinquent Bank”) and shall be deemed a
Delinquent Bank until such time as such delinquency is satisfied.  A Delinquent Bank shall be deemed to have
assigned any and all payments due to it from the Borrower, whether on account
of outstanding Loans, interest, fees or otherwise, to the remaining
non-delinquent Banks for application to, and reduction of, their respective pro
rata shares of all outstanding Revolving Credit Loans.  The Delinquent Bank hereby authorizes the
Administrative Agent to distribute such payments to the non-delinquent Banks in
proportion to their respective pro  rata shares of all outstanding
Revolving Credit Loans.  A Delinquent
Bank shall be deemed to have satisfied in full a delinquency when and if, as a
result of application of the assigned payments to all outstanding Revolving
Credit Loans of the non-delinquent Banks, the Banks’ respective pro  rata shares of all
outstanding Loans have returned to those in effect immediately prior to such
delinquency and without giving effect to the nonpayment causing such
delinquency.  No Delinquent Bank shall
have a right to participate in any vote taken by the Banks hereunder, which
shall be calculated as if the Commitments of the Delinquent Bank did not exist.

 

8.5.                              Payments.

 

(a)                                  All
payments and prepayments of principal of and interest on Revolving Credit Loans
and the Term Loan received by the Administrative Agent shall be paid to each of
the Banks, pro  rata in accordance with their respective interests
in such Loans; and any other payments received by the Administrative Agent
hereunder shall be paid to the Banks or the Administrative Agent or both pro
rata as their respective interests appear.

 

(b)                                 Each
of the Banks and the Administrative Agent hereby agrees that if it should
receive any amount (whether by voluntary payment, by the exercise of the right
of set-off or banker’s
lien, by counterclaim or cross action, by the enforcement of any right
hereunder or otherwise) in respect of principal of, or interest on, the Loans
or any fees which are to be shared among the Banks, which, as compared to the
amounts theretofore received by the other Banks with respect to such principal,
interest or fees, is in excess of such Bank’s pro  rata share of such principal,
interest or fees as provided in this Agreement, such Bank shall share such
excess, less

 

64

 

the costs and
expenses (including, reasonable attorneys’ fees and disbursements)
incurred by such Bank in connection with such realization, exercise, claim or
action, pro  rata with all other Banks in proportion to their
respective interests therein, and such sharing shall be deemed a purchase
(without recourse) by such sharing party of participation interests in the
Loans or such fees, as the case may be, owed to the recipients of such
shared payments to the extent of such shared payments; provided, however,
that if all or any portion of such excess amount is thereafter recovered from
such Bank, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.

 

8.6.                              Action by Administrative Agent.

 

(a)                                  The
obligations of the Administrative Agent hereunder are only those expressly set
forth herein.  The Administrative Agent
shall have no duty to exercise any right or power or remedy hereunder or under
any other document or instrument executed and delivered in connection with or
as contemplated by this Agreement or to take any affirmative action hereunder
or thereunder.

 

(b)                                 The
Administrative Agent shall keep all records of the Loans and payments
hereunder, and shall give and receive notices and other communications to be
given or received by the Administrative Agent hereunder on behalf of the Banks.

 

(c)                                  Upon
the occurrence and during the continuance of an Event of Default the
Administrative Agent may, and upon the direction of the Majority Banks pursuant
to Section 7.2 the Administrative Agent shall, exercise the option of the Banks
pursuant to Section 7.2 to declare all Loans and other Obligations immediately
due and payable and may take such action as may appear necessary or
desirable to collect the Obligations and enforce the rights and remedies of the
Administrative Agent or the Banks.

 

8.7.                              Notification of Defaults and
Events of Default.  Each
Bank hereby agrees that, upon learning of the existence of a Default or an
Event of Default, pursuant to Section 5.1(h) or otherwise, it shall notify the
Administrative Agent thereof.  The
Administrative Agent hereby agrees that upon actual receipt of any notice under
this Section 8.7, it shall notify the other Banks of the existence of such
Default or Event of Default.

 

8.8.                              Consultation with Experts.  The Administrative Agent shall be entitled
to retain and consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable to the Banks for any
action taken, omitted to be taken or suffered in good faith by it in accordance
with the advice of such counsel, accountants or experts.  The Administrative Agent may employ
administrative agents and attorneys-in-fact and shall not be liable to the
Banks for the default or misconduct of any such administrative agents or
attorneys.

 

8.9.                              Liability of Administrative Agent.  The Administrative Agent shall exercise the
same care to protect the interests of each Bank as it does to protect its own
interests, so that so long as the Administrative Agent exercises such care it
shall not be under any liability to any of the Banks, except for the
Administrative Agent’s
gross negligence or willful misconduct with respect to anything it may do
or refrain from doing.  Subject to the
immediately preceding sentence, neither the Administrative Agent nor any of its
directors, officers, administrative agents or employees shall be liable for any
action taken or not taken by it in connection herewith

 

65

 

in its
capacity as Administrative Agent. 
Without limiting the generality of the foregoing, neither the
Administrative Agent nor any of its directors, officers, administrative agents
or employees shall be responsible for or have any duty to ascertain, inquire
into or verify: (i) any statement, warranty or representation made in
connection with this Agreement, any Security Document, or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified
in Sections 3.1 or 3.2, except receipt of items required to be delivered to the
Administrative Agent; (iv) the validity, effectiveness, enforceability or
genuineness of this Agreement, the Notes, any other Loan Document or Security
Document or any other document or instrument executed and delivered in
connection with or as contemplated by this Agreement; (v) the existence, value,
collectibility or adequacy of the Collateral or any part thereof or the
validity, effectiveness, perfection or relative priority of the liens and
security interests of the Banks (through the Administrative Agent) therein; or
(vi) the filing, recording, refiling, continuing or re-recording of any
financing statement or other document or instrument evidencing or relating to
the security interests or liens of the Banks (through the Administrative Agent)
in the Collateral.  The Administrative
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement or other writing (which may be a bank
wire, telecopy or similar writing) believed by it to be genuine or to be signed
or sent by the proper party or parties.

 

8.10.                        Indemnification.  Each Bank agrees to indemnify the Administrative Agent (to the
extent the Administrative Agent is not reimbursed by the Borrower), ratably in
accordance with its Commitment Percentage, from and against any cost, expense
(including attorneys’
fees and disbursements), claim, demand, action, loss or liability which the
Administrative Agent may suffer or incur in connection with this
Agreement, or any action taken or omitted by the Administrative Agent hereunder,
or the Administrative Agent’s
relationship with the Borrower hereunder, including, without limitation, the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers and duties
hereunder and of taking or refraining from taking any action hereunder, but
excluding any costs, expenses or losses directly arising from the
Administrative Agent’s
gross negligence or willful misconduct. 
No payment by any Bank under this Section shall in any way relieve the
Borrower of its obligations under this Agreement with respect to the amounts so
paid by any Bank, and the Banks shall be subrogated to the rights of the
Administrative Agent, if any, in respect thereto.

 

8.11.                        Independent Credit Decision.  Each of the Banks represents and warrants to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Bank and based on the financial
statements referred to in Section 4.7 and such other documents and information
as it has deemed appropriate, made its own independent credit analysis and
decision to enter into this Agreement. 
Each of the Banks acknowledges that it has not relied upon any
representation by the Administrative Agent and that the Administrative Agent
shall not be responsible for any statements in or omissions from any documents
or information concerning the Borrower, this Agreement, the Notes, any other
Loan Document or Security Document or any other document or instrument executed
and delivered in connection with or as contemplated by this Agreement.  Each of the Banks acknowledges that it will,
independently and without reliance upon the Administrative Agent or other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.

 

66

 

8.12.                        Successor Administrative Agent.  Citizens, or any successor Administrative
Agent, may resign as Administrative Agent at any time by giving 30 days
prior written notice thereof to the Banks and to the Borrower.  Upon any such resignation, the Banks shall
have the right to appoint a successor Administrative Agent, which successor
Administrative Agent shall be reasonably acceptable to the Borrower.  If no successor Administrative Agent shall
have been so appointed by the Banks, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent’s giving of notice of resignation, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall be a commercial bank (or Affiliate thereof)
or savings and loan association organized under the laws of the United States
of America or any State thereof or under the laws of another country which is
doing business in the United States of America or any State thereof and having
a combined capital, surplus and undivided profits of at least $100,000,000 and
shall be reasonably acceptable to the Borrower.  Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from all further duties and
obligations under this Agreement.  After
any retiring Administrative Agent’s
resignation or removal hereunder as Administrative Agent, the provisions of
this Section VIII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent under this Agreement.

 

8.13.                        Other Agents. 
The documentation agent and syndication agent shall have no rights or
obligations in their respective capacities as such agents.

 

SECTION IX

 

MISCELLANEOUS

 

9.1.                              Notices. 
Unless otherwise specified herein, all notices hereunder to any party
hereto shall be in writing and shall be deemed to have been given when
delivered by hand, when properly deposited in the mails postage prepaid, when
sent by electronic facsimile transmission, or when delivered to an overnight
courier, addressed to such party at its address indicated below:

 

If to the Borrower, at

 

c/o Mac-Gray Corporation

22 Water Street

Cambridge, Massachusetts 02141

Attention:                                         Stewart Gray
MacDonald, Jr., Chairman and

Chief Executive Officer

Telecopy:                                           (617)
492-5386

 

with a copy to

 

Goodwin Procter, LLP

Exchange Place

Boston, Massachusetts 02109-2881

 

67

 

Attention:                                         Stuart M.
Cable, Esq.

Telecopy:                                           (617)
523-1231

 

If to the Administrative Agent or Citizens, at

 

Citizens Bank of Massachusetts

28 State Street

Boston, Massachusetts 02109

Attention:                                         Michael St.
Jean, Vice President

Telecopy:                                           (617)
723-9431

 

with a copy to

 

Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.

One Financial Center

Boston, Massachusetts 02110

Attention:                                         Mary-Laura
Greely, Esq.

Steven P. Rosenthal, Esq.

Telecopy:                                           (617)
542-2241

 

If to any Bank, at the address for such Bank set forth on Schedule 1,

 

or at any other address specified by such party in writing.  Notwithstanding the foregoing, the
Administrative Agent and the Banks shall have been deemed for all purposes to
have delivered any notice required to be delivered to the Borrower by this
Agreement or otherwise, by sending such notification to the address set forth
above for the “Borrower.”

 

9.2.                              Expenses. 
The Borrower will pay on demand all reasonable expenses of the Arranger,
the Administrative Agent or any Bank in connection with the preparation, waiver
or amendment of this Agreement, the Notes, the Security Documents or other
documents executed in connection therewith, or the administration, default or collection
of the Loans or other Obligations or administration, default, collection in
connection with the Arranger’s,
the Administrative Agent’s
or any Bank’s
exercise, preservation or enforcement of any of its rights, remedies or options
hereunder or thereunder, including, without limitation, reasonable fees of
outside legal counsel, any local counsel or the allocated costs of in-house
legal counsel, accounting, consulting, brokerage or other similar professional
fees or expenses, all reasonable out-of-pocket costs and expenses (including
reasonable fees of outside counsel) of the Arranger and the Administrative
Agent incurred in connection with the syndication and/or participation of the
Loans, and any fees or expenses associated with any travel or other costs
relating to any appraisals, field examinations, or other examinations conducted
in connection with the Obligations or any Collateral therefor, and the amount
of all such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate).

 

9.3.                              Indemnification.  The Borrower shall absolutely and unconditionally indemnify and
hold harmless the Administrative Agent, the Arranger, the documentation agent,
the syndication agent and each of the Banks against any and all claims,
demands, suits, actions, causes of action, damages, losses, settlement
payments, obligations, costs, expenses (including, without limitation,
reasonable fees and disbursements of counsel), and all other liabilities

 

68

 

whatsoever,
including without limitation, those liabilities arising from the Obligations or
Taxes, which shall at any time or times be incurred or sustained by the
Administrative Agent, the Arranger, the documentation agent, the syndication
agent or any of the Banks or by any of their shareholders, directors, officers,
employees, subsidiaries, affiliates or administrative agents (other than as a
result of the gross negligence or willful misconduct of the Administrative Agent,
the Arranger, the documentation agent, the syndication agent or any of the
Banks) on account of, or in relation to, or in any way in connection with, any
of the arrangements or transactions contemplated by, associated with or
ancillary to either this Agreement, any of the other Loan Documents or other
Security Documents or any of the Ancillary Documents, whether or not all or any
of the transactions contemplated by, associated with or ancillary to this
Agreement, any of such Loan Documents, Security Documents or any of such
Ancillary Documents, are ultimately consummated.  Without prejudice to the survival of any other covenant of the
Borrower hereunder, the covenants of this Section 9.3 shall survive the
termination of this Agreement and the payment or satisfaction of payment of
amounts owing with respect to the Notes or any other Loan Document.

 

9.4.                              Set-Off. 
Regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, any deposits, balances or other sums credited by
or due from any Bank or any of its branch or affiliate offices to the Borrower
or any other member of the Borrower Affiliated Group may upon prior
written notice to the Administrative Agent, at any time and from time to time,
without notice to the Borrower or such member of the Borrower Affiliated Group
or compliance with any other condition precedent now or hereafter imposed by
statute, rule of law, or otherwise (all of which are hereby expressly waived)
be set off, appropriated, and applied by any Bank against any and all
obligations of the Borrower or such member of the Borrower Affiliated Group to
such Bank or any of its affiliates in such manner as the head office of the
Bank or any of its branch offices in their sole discretion may determine
(with notice to be given to the Borrower promptly thereafter), and the Borrower
and each other member of the Borrower Affiliated Group hereby grants such Bank
a continuing security interest in such deposits, balances or other sums for the
payment and performance of all such obligations.

 

9.5.                              Term of Agreement.  This Agreement shall continue in force and effect so long as any
Bank has any commitment to make Loans hereunder or any Loan or any Obligation
shall be outstanding.

 

9.6.                              No Waivers. 
No failure or delay by the Administrative Agent or any Bank in
exercising any right, power or privilege hereunder or under any Note or under
any other documents or agreements executed in connection herewith shall operate
as a waiver thereof; nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege.  The rights and remedies
herein and in the Notes provided are cumulative and not exclusive of any rights
or remedies otherwise provided by agreement or law.

 

9.7.                              Governing Law. 
This Agreement, the Notes and the other Loan Documents and Security
Documents shall be deemed to be contracts made under seal and shall be
construed in accordance with and governed by the laws of the Commonwealth of
Massachusetts (without giving effect to any conflicts of laws provisions
contained therein).  Any legal action or
proceeding arising out of or relating to this Agreement, any other Loan
Document or Security Document or any Obligation may be instituted, in the
Administrative Agent’s
sole discretion, in

 

69

 

the courts of
the Commonwealth of Massachusetts or the United States of America for the
District of Massachusetts, and the Borrower and each other member of the
Borrower Affiliated Group hereby irrevocably submits to the jurisdiction of
each such court in any such action or proceeding; provided, however,
that the foregoing shall not limit the Administrative Agent’s rights to bring any
legal action or proceeding in any other appropriate jurisdiction.

 

9.8.                              Amendments, Waivers, Etc.  Except as otherwise expressly provided in
this Agreement or any of the other Security Documents: (i) each of the Security
Documents may be modified, amended or supplemented in any respect whatever
only with the prior written consent or approval of the Majority Banks and the
Borrower; and (ii) the performance or observance by the Borrower of any of its
covenants, agreements or obligations under any of the Security Documents may be
waived only with the written consent of the Majority Banks; provided, however,
that the following changes shall require the written consent, agreement or
approval of all of the Banks directly affected thereby (with respect to clauses
(A), (B), (C), (D) and (E)) and of all the Banks (with respect to clause (F)):
(A) any decrease in the amount of or postponement of the regularly scheduled or
otherwise required payment date for any of the Obligations (including, without
limitation, principal, interest and fees); (B) any decrease in the interest
rates or fees prescribed in any of the Notes; (C) any increase in the
Commitment or Commitment Percentage of any of the Banks, except as permitted by
Section 9.10; (D) any release of all or any substantial part of the Collateral
(except for any such releases of Collateral permitted or provided for in the
Loan Documents); (E) any change in the definition of Majority Banks; and (F)
any change in the terms of this Section 9.8. 
Any change to Section IX or any other provision of this Agreement
affecting the rights or obligations of the Administrative Agent shall not be
amended or modified without the prior written consent of the Administrative
Agent.

 

9.9.                              Binding Effect of Agreement.  This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided that (i) the Borrower may not assign or transfer
its rights or obligations hereunder, and (ii) no Bank may assign or
transfer its rights or obligations hereunder to any Person except in accordance
with the provisions of Section 9.10.

 

9.10.                        Successors and Assigns.

 

(i)                                     Any
Bank may at any time grant to one or more banks or other financial
institutions (each, a “Participant”) participating interests in any of its
Commitments or any or all of its Loans in an amount and on such terms as such
Bank may deem appropriate.  In the
event of any such grant by a Bank of a participating interest to a Participant,
whether or not upon notice to the Borrower and the Administrative Agent, such
Bank shall remain responsible for the performance of its obligations hereunder,
and the Borrower and the Administrative Agent shall continue to deal solely and
directly with such Bank in connection with such Bank’s rights and obligations under
this Agreement.  Any agreement pursuant
to which any Bank may grant such a participating interest shall provide
that such Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without limitation, the right
to approve any amendment, modification or waiver of any provision of this
Agreement; provided, however, that such participation agreement
may provide that such Bank will not agree, without the consent of the
Participant, to any modification, amendment or waiver of this Agreement
requiring the consent, agreement or approval of all of the Banks, as described

 

70

 

in Section 9.8.  The Borrower
agrees that each Participant shall be entitled to the benefits of Sections
2.10, 2.11 and 2.15 with respect to its participating interest.  An assignment or other transfer which is not
permitted by subsection (ii) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (i).

 

(ii)                                   Any Bank may at
any time assign to one or more banks or other financial institutions (each, an
“Assignee”) all, or a part of all, of its rights, interests and obligations
under this Agreement and the Notes (or any one of its Notes) on such terms, as
between such Bank and each of its Assignees, as such Bank may deem
appropriate and such Assignee shall assume such rights, interests and
obligations, pursuant to an instrument executed by such Assignee and such
transferor Bank substantially in the form of Exhibit G hereto (an
“Assignment and Assumption”); provided, however, that (A) prior
to assigning any interest to any Assignee hereunder, such Bank will (x) notify
the Borrower and the Administrative Agent in writing identifying the proposed
Assignee and stating the aggregate principal amount of the proposed interest to
be assigned, and (y) receive the prior written consent of the Administrative
Agent and, prior to the occurrence (which is continuing) of an Event of
Default, the Borrower, which consent may not be unreasonably withheld by
either the Borrower or the Administrative Agent, and (B) no Bank will
assign to any Assignee less than an aggregate amount equal to the lesser of (x)
$5,000,000 of such Bank’s Commitments and interest in the Notes (as such
interest may be reduced pursuant to the terms hereof) or (y) the remaining
amount of such Bank’s Commitments.  It
is understood and agreed that the proviso contained in the immediately
preceding sentence shall not be applicable in the case of, and this subsection
(ii) shall not restrict, an assignment or other transfer by any Bank to an
Affiliate of such Bank or to any other Bank or a collateral assignment or other
similar transfer to a Federal Reserve Bank. 
Upon execution and delivery of such an Assignment and Assumption and
payment by such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such Assignee, such
Assignee shall be a Bank party to this Agreement and shall have all the rights,
interests and obligations of a Bank with the Commitments as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. 
Upon the consummation of any assignment pursuant to this subsection
(ii), the transferor Bank, the Administrative Agent and the Borrower shall make
appropriate arrangements so that, if required, new Notes are issued to the
Assignee.

 

(iii)                                No Assignee,
Participant or other transferee of any Bank’s rights shall be entitled to
receive any greater payment under Sections 2.10, 2.11 and 2.15 than such Bank
would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower’s prior written consent or at a
time when the circumstances giving rise to such greater payment did not exist.

 

(iv)                               Assignments require a
fee payable to the Administrative Agent by the transferor Bank, solely for the
account of the Administrative Agent, in the amount of $3,500.

 

71

 

9.11.                        Counterparts. 
This Agreement may be signed in any number of counterparts with the
same effect as if the signatures hereto and thereto were upon the same
instrument.

 

9.12.                        Partial Invalidity.  The invalidity or unenforceability of any
one or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.

 

9.13.                        Captions.  The
captions and headings of the various sections and subsections of this Agreement
are provided for convenience only and shall not be construed to modify the
meaning of such sections or subsections.

 

9.14.                        WAIVER OF JURY TRIAL.  THE BORROWER, THE BANKS AND
THE ADMINISTRATIVE AGENT MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY.  THIS WAIVER CONSTITUTES
A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE BANKS TO ENTER INTO
THIS AGREEMENT AND TO MAKE LOANS AND EXTEND CREDIT TO THE BORROWER.  The Borrower (i) certifies that neither the
Administrative Agent, nor any Bank nor any representative, administrative agent
or attorney of the Administrative Agent or any Bank has represented, expressly
or otherwise, that the Administrative Agent or any Bank would not, in the event
of litigation, seek to enforce the foregoing waivers and (ii) acknowledges
that, in entering into this Agreement and the other Loan Documents to which the
Borrower is a party, the Administrative Agent and the Banks are relying upon,
among other things, the waivers and certifications contained in this Section
9.14.

 

9.15.                        WAIVER OF SPECIAL DAMAGES.  EXCEPT AS PROHIBITED BY LAW,
THE BORROWER HEREBY WAIVES ANY RIGHTS WHICH IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF
ANY DISPUTE IN CONNECTION WITH THE LOAN DOCUMENTS OR OTHER SECURITY DOCUMENTS,
INCLUDING WITHOUT LIMITATION THIS AGREEMENT AND THE NOTES AND ANY AMENDMENTS
THEREOF, ANY SPECIAL EXEMPLARY OR PUNITIVE DAMAGES.  THE BORROWER (A) CERTIFIES THAT NO BANK, ADMINISTRATIVE AGENT OR
REPRESENTATIVE, ADMINISTRATIVE AGENT OR ATTORNEY THEREOF HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH ENTITY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT, IN ENTERING
INTO THIS AGREEMENT, THE BANKS AND THE ADMINISTRATIVE AGENTS ARE RELYING UPON,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION
9.15.

 

9.16.                        Entire Agreement.  This Agreement, the Notes, the other Security Documents and the
other documents and agreements executed in connection herewith constitute the
final

 

72

 

agreement of
the parties hereto and supersede any prior agreement or understanding, written
or oral, with respect to the matters contained herein and therein.

 

9.17.                        Replacement of Promissory Notes, Etc.  Upon receipt of an affidavit of an officer
of any Bank as to the loss, theft, destruction or mutilation of one or more of
the Notes payable to such Bank, or upon receipt of an affidavit of an officer
of the Administrative Agent as to the loss, theft, destruction or mutilation of
any other Loan Document which is not of public record, and, in the case of any
such loss, theft, destruction or mutilation, upon cancellation of such Note or
Loan Document, the Borrower will issue, in lien thereof, a replacement Note or
other Loan Document containing the same terms and conditions.

 

73

 

IN WITNESS WHEREOF, the parties have caused
this Agreement to be executed by their duly authorized officers as of the day
and year first above written.

 

 

	
   

  	
  The Borrower:

  
	
   

  	
   

  	
   

  
	
   

  	
  MAC-GRAY CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stewart Gray MacDonald, Jr.

  
	
   

  	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MAC-GRAY SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael J. Shea

  
	
   

  	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTIRION CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael J. Shea

  
	
   

  	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  The Administrative Agent:

  
	
   

  	
   

  	
   

  
	
   

  	
  CITIZENS BANK OF MASSACHUSETTS

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael St. Jean

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
							

 

74

 

	
   

  	
  The Documentation Agent:

  
	
   

  	
   

  	
   

  
	
   

  	
  KEYBANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  The Syndication Agent:

  
	
   

  	
   

  	
   

  
	
   

  	
  BANKNORTH, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

75

 

	
   

  	
  The Banks:

  
	
   

  	
   

  	
   

  
	
   

  	
  CITIZENS BANK OF MASSACHUSETTS

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael St. Jean

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  BANKNORTH, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey R. Westling

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  CAMBRIDGE SAVINGS BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Peter M. Sherwood

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  EASTERN BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph V. Leary

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  KEYBANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mitchell B. Feldman

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  HSBC BANK USA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Patrick J. Doulin

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
						

 

76

SCHEDULE
1

 

Commitment and Commitment Percentages

 

	
  1.

  	
  Bank

  	
   

  	
  Revolving

  Credit

  Commitment

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Citizens Bank of Massachusetts

  28 State Street

  Boston, MA 02109

  	
   

  	
  $

  	
  17,625,000

  	
   

  	
  29.375

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BankNorth, N.A.

  7 New England Executive Park

  Burlington, MA 01803

  	
   

  	
  $

  	
  13,875,000

  	
   

  	
  23.125

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Cambridge Savings Bank

  1374 Massachusetts Avenue

  Cambridge, MA 02138

  	
   

  	
  $

  	
  3,750,000

  	
   

  	
  6.250

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Eastern Bank

  265 Franklin Street

  Boston, MA 02110

  	
   

  	
  $

  	
  5,625,000

  	
   

  	
  9.375

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Key Bank, N.A.

  176 Federal Street, 3rd Floor

  Boston, MA 02110

  	
   

  	
  $

  	
  9,750,000

  	
   

  	
  16.250

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HSBC Bank USA

  17 South Broadway

  Nyack, NY 10960

  	
   

  	
  $

  	
  9,375,000

  	
   

  	
  15.625

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TOTAL

  	
   

  	
  $

  	
  60,000,000

  	
   

  	
  100

  	
  %

  

 

	
  2.

  	
  Bank

  	
   

  	
  Term Loan 

  Commitment

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Citizens Bank of Massachusetts

  28 State Street

  Boston, MA 02109

  	
   

  	
  $

  	
  5,875,000

  	
   

  	
  29.375

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BankNorth, N.A.

  7 New England Executive Park

  Burlington, MA 01803

  	
   

  	
  $

  	
  4,625,000

  	
   

  	
  23.125

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Cambridge Savings Bank

  1374 Massachusetts Avenue

  Cambridge, MA 02138

  	
   

  	
  $

  	
  1,250,000

  	
   

  	
  6.250

  	
  %

  

 

I-1

 

	
   

  	
  Eastern Bank

  265 Franklin Street

  Boston, MA 02110

  	
   

  	
  $

  	
  1,875,000

  	
   

  	
  9.375

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Key Bank, N.A.

  176 Federal Street

  Boston, MA 02110

  	
   

  	
  $

  	
  3,250,000

  	
   

  	
  16.250

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HSBC Bank USA

  17 South Broadway

  Nyack, NY 10960

  	
   

  	
  $

  	
  3,125,000

  	
   

  	
  15.625

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TOTAL

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  100

  	
  %

  

 

I-2

 

EXHIBIT A-1

 

[FORM OF REVOLVING CREDIT NOTE]

 

	
  $                         

  	
   

  	
  Date: June 24, 2003

  

 

FOR VALUE
RECEIVED, the undersigned (hereinafter, together with their successors in title
and assigns, collectively, called the “Borrowers”), by this promissory note
(hereinafter, together with the Schedule annexed hereto, called “this Note”),
absolutely and unconditionally and jointly and severally promise to pay to the
order of
                           
a [national banking association organized under the laws of the United States
of America] (hereinafter, together with its successors in title and assigns,
called the “Bank”), the principal sum of
                   
and    /100 Dollars
($           ), or so
much thereof as shall have been advanced by the Bank to the Borrowers by way of
revolving credit loans under the Loan Agreement (as hereinafter defined) and
shall remain outstanding, such payment to be made as hereinafter provided, and
to pay interest on the principal sum outstanding hereunder from time to time from
the date hereof until the said principal sum or the unpaid portion thereof
shall have become due and payable as hereinafter provided.

 

Capitalized terms used herein without definition shall have the meaning
set forth in the Loan Agreement.

 

The unpaid principal (not at the time overdue) under this Note shall
bear interest at the rate or rates from time to time in effect under the Loan
Agreement.  Accrued interest on the
unpaid principal under this Note shall be payable on the dates specified in the
Loan Agreement.

 

On June 30, 2006, the date of the final maturity of this Note, there
shall become absolutely due and payable by the Borrowers hereunder, and the
Borrowers hereby jointly and severally promise to pay to the Bank, the balance
(if any) of the principal hereof then remaining unpaid, all of the unpaid
interest accrued hereon and all (if any) other amounts payable on or in respect
of this Note or the indebtedness evidenced hereby.

 

Each overdue
amount (whether of principal, interest or otherwise) payable on or in respect
of this Note or the indebtedness evidenced hereby shall (to the extent
permitted by applicable law) bear interest at the rates and on the terms
provided by the Loan Agreement.  The
unpaid interest accrued on each overdue amount in accordance with the foregoing
terms of this paragraph shall become and be absolutely and jointly and
severally due and payable by the Borrowers to the Bank on demand by the
Administrative Agent.  Interest on each
overdue amount will continue to accrue as provided by the foregoing terms of
this paragraph, and will (to the extent permitted by applicable law) be
compounded daily until the obligations of the Borrowers in respect of the
payment of such overdue amount shall be discharged (whether before or after judgment).

 

Each payment
of principal, interest or other sum payable on or in respect of this Note or
the indebtedness evidenced hereby shall be made by the Borrowers directly to
the Administrative Agent in dollars, for the account of the Bank, at the address
of the Administrative Agent set forth in the Loan Agreement, on the due date of
such payment, and in immediately available and freely transferable funds.  All payments on or in respect of this Note
or the indebtedness 

 

1

 

evidenced hereby shall be made
without set-off or counterclaim and free and clear of and without any
deductions, withholdings, restrictions or conditions of any nature.

 

This Note is made and delivered by the Borrowers to the Bank pursuant
to the Revolving Credit and Term Loan Agreement, dated as of June 24, 2003,
among (i) the Borrowers, (ii) the Banks and (iii) the Administrative Agent
(hereinafter, as originally executed, and as now or hereafter varied or
supplemented or amended and restated, called the “Loan Agreement”), to which
reference is hereby made for a statement of the terms and conditions (to the
extent not set forth herein) under which the Loans evidenced by this Note were
made and are to be repaid.  This Note
evidences the joint and several obligation of the Borrowers (a) to repay the
principal amount of the Bank’s Commitment Percentage of the Revolving Credit
Loans made by the Banks to the Borrowers pursuant to the Loan Agreement; (b) to
pay interest, as herein and therein provided, on the principal amount hereof
remaining unpaid from time to time; and (c) to pay other amounts which may
become due and payable hereunder or thereunder as herein and therein
provided.  The payment of the principal
of and the interest on this Note and the payment of all (if any) other amounts
as may become due and payable on or in respect of this Note are secured by
certain collateral, as evidenced by the Security Documents.  Reference is hereby made to the Loan
Agreement (including the Exhibits and Schedules annexed thereto)
and to the other Security Documents for a complete statement of the terms
thereof and for a description of such collateral.

 

The Borrowers
will have the right to prepay the unpaid principal of this Note in full or in
part upon the terms contained in the Loan Agreement.  The Borrowers will have an obligation to prepay principal of this
Note from time to time if and to the extent required under, and upon the terms
contained in, the Loan Agreement.  Any
partial payment of the indebtedness evidenced by this Note shall be applied in
accordance with the terms of the Loan Agreement.

 

Pursuant to
and upon the terms contained in Section 7 of the Loan Agreement, the entire
unpaid principal of this Note, all of the interest accrued on the unpaid
principal of this Note and all (if any) other amounts payable on or in respect
of this Note or the indebtedness evidenced hereby may be declared to be
immediately due and payable, whereupon the entire unpaid principal of this
Note, all of the interest accrued on the unpaid principal of this Note and all
(if any) other amounts payable on or in respect of this Note or the
indebtedness evidenced hereby shall (if not already due and payable) forthwith
become and be due and payable to the Bank without presentment, demand, protest
or any other formalities of any kind, all of which are hereby expressly and
irrevocably waived by the Borrowers, excepting only for notice expressly
provided for in the Loan Agreement.

 

All
computations of interest payable as provided in this Note shall be made by the
Administrative Agent in accordance with the terms of the Loan Agreement.  The interest rate in effect from time to
time shall be determined in accordance with the terms of the Loan Agreement.

 

Should all or
any part of the indebtedness represented by this Note be collected by action at
law, or in bankruptcy, insolvency, receivership or other court proceedings, or
should this Note be placed in the hands of attorneys for collection after
default, the Borrowers hereby promise to pay to the holder of this Note, upon
demand by the holder hereof at any time, in addition to 

 

2

 

principal, interest and all (if
any) other amounts payable on or in respect of this Note or the indebtedness
evidenced hereby, all court costs and reasonable attorneys’ fees and all other
collection charges and expenses reasonably incurred or sustained by the holder
of this Note.

 

No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of
any other rights of the Bank or such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar or waiver of the same or any other
right on any further occasion.

 

Each of the Borrowers and every endorser and guarantor of this Note
hereby irrevocably waives notice of acceptance, presentment, demand, notice of
nonpayment, protest, notice of protest, suit and all other demands, notices and
other conditions precedent in connection with the delivery, acceptance,
performance, default, collection and/or enforcement of this Note or any
collateral or security therefor, except for notices expressly provided for in
the Loan Agreement or any other Loan Document, and assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.

 

Each of the Borrowers hereby absolutely and irrevocably consents and
submits, for itself and its property, to the non-exclusive jurisdiction of the
courts of the Commonwealth of Massachusetts or of the United States of America
for the District of Massachusetts in connection with any actions or proceedings
brought against any Borrower by the holder hereof arising out of or relating to
this Note.

 

THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY.  THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND THE MAKE THE LOAN.

 

This Note is intended to take effect as a sealed instrument.  This Note and the obligations of the
Borrowers hereunder shall be governed by and interpreted and determined in
accordance with the laws of the Commonwealth of Massachusetts.

 

(Signatures on next page)

 

3

 

IN WITNESS
WHEREOF, this REVOLVING CREDIT NOTE has been duly executed under seal by the
undersigned on the day and in the year first above written in Boston,
Massachusetts.

 

	
  WITNESS:

  	
  MAC-GRAY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stewart Gray MacDonald, Jr.

  
	
   

  	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAC-GRAY SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stewart Gray MacDonald, Jr.

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTIRION CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stewart Gray MacDonald, Jr.

  
	
   

  	
   

  	
  Title:

  	
  President

  
					

 

4

 

SCHEDULE TO REVOLVING CREDIT NOTE

 

	
  DATE

  	
   

  	
  AMOUNT OF

  LOAN

  	
   

  	
  TYPE OF

  LOAN

  (PRIME

  RATE OR

  LIBOR

  	
   

  	
  APPLICABLE

  PRIME RATE

  MARGIN OR

  APPLICABLE

  LIBOR

  MARGIN

  	
   

  	
  ////INTEREST

  RATE*

  	
   

  	
  INTEREST

  PERIOD**

  	
   

  	
  AMOUNT

  PAID

  	
   

  	
  NOTATION

  MADE BY

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*/             or Prime Rate Loans, insert “Prime Rate
plus Applicable Prime Rate Margin”

For LIBOR Loans, insert “LIBOR Rate plus Applicable LIBOR Margin”

**/      or LIBOR Loans only

 

5

 

EXHIBIT A-2

 

[FORM OF TERM NOTE]

 

	
  $                               

  	
  Date: June 24, 2003

  

 

FOR VALUE RECEIVED, the undersigned.(hereinafter, together with their
successors in title and assigns, collectively, called the “Borrowers”), by this
promissory note (hereinafter, together with the Schedule annexed hereto, called
“this Note”), absolutely and unconditionally and jointly and severally promise
to pay to the order of
                        
a [national banking association organized under the laws of the United States
of America] (hereinafter, together with its successors in title and assigns,
called the “Bank”), the principal sum of
                               
and   /l00 Dollars
($            ),
or, if less, the aggregate principal outstanding amount of all fundings made
under the Term Loan by the Bank pursuant to the Loan Agreement (as hereinafter
defined), and to pay interest on the principal sum outstanding hereunder from
time to time from the date hereof until the said principal sum or the unpaid
portion thereof shall have become due and payable as hereinafter provided.

 

Capitalized terms used herein without definition shall have the meaning
set forth in the Loan Agreement.

 

The unpaid principal (not at the time overdue) under this Note shall
bear interest at the rate or rates from time to time in effect under the Loan
Agreement.  Accrued interest on the
unpaid principal under this Note shall be payable on the dates specified in the
Loan Agreement.

 

Subject to the prepayment provisions of the Loan Agreement, the entire
principal of this Note shall be payable by the Borrowers to the holder hereof
in twenty (20) consecutive quarter-annual installments of principal, with such
installments to be payable on the last day of each September, December, March
and June in each year, beginning September 30, 2000, and with the last of such
twenty (20) installments to be payable on June 30, 2008.  While any principal hereof remains unpaid,
subject to the prepayment provisions of the Loan Agreement, there shall become
absolutely due and payable by the Borrowers hereunder in succession, and the
Borrowers hereby jointly and severally promise to pay to the holder hereof, the
twenty (20) such quarter-annual installments of the principal of this
Note.  Subject to the prepayment provisions
in the Loan Agreement, the amount of each installment of principal payable by
the Borrowers is set forth in the table opposite the date on which such
installment shall become due and payable hereunder:

 

	
  Installment

  Payment Date

  	
   

  	
  Aggregate
  Amount

  of Payment

  	
   

  
	
  09/30/03

  	
   

  	
   

  	
   

  
	
  12/31/03

  	
   

  	
   

  	
   

  
	
  03/31/04

  	
   

  	
   

  	
   

  
	
  06/30/04

  	
   

  	
   

  	
   

  
	
  09/30/04

  	
   

  	
   

  	
   

  
	
  12/31/05

  	
   

  	
   

  	
   

  

 

1

 

	
  03/31/05

  	
   

  	
   

  	
   

  
	
  06/30/05

  	
   

  	
   

  	
   

  
	
  09/30/05

  	
   

  	
   

  	
   

  
	
  12/31/05

  	
   

  	
   

  	
   

  
	
  03/31/06

  	
   

  	
   

  	
   

  
	
  06/30/06

  	
   

  	
   

  	
   

  
	
  09/30/06

  	
   

  	
   

  	
   

  
	
  12/31/06

  	
   

  	
   

  	
   

  
	
  03/31/07

  	
   

  	
   

  	
   

  
	
  06/30/07

  	
   

  	
   

  	
   

  
	
  09/30/07

  	
   

  	
   

  	
   

  
	
  12/31/07

  	
   

  	
   

  	
   

  
	
  03/31/08

  	
   

  	
   

  	
   

  
	
  06/30/08

  	
   

  	
   

  	
   

  

 

On June 30, 2008, the date of the final maturity of this Note, there
shall become absolutely due and payable by the Borrowers hereunder, and the
Borrowers hereby jointly and severally promise to pay to the Bank, the balance
(if any) of the principal hereof then remaining unpaid, all of the unpaid
interest accrued hereon and all (if any) other amounts payable on or in respect
of this Note or the indebtedness evidenced hereby.

 

Each overdue
amount (whether of principal, interest or otherwise).payable on or in respect
of this Note or the indebtedness evidenced hereby shall (to the extent
permitted by applicable law) bear interest at the rates and on the terms
provided by the Loan Agreement.  The
unpaid interest accrued on each overdue amount in accordance with the foregoing
terms of this paragraph shall become and be absolutely and jointly and
severally due and payable by the Borrowers to the Bank on demand by the
Administrative Agent.  Interest on each
overdue amount will continue to accrue as provided by the foregoing terms of
this paragraph, and will (to the extent permitted by applicable law) be
compounded daily until the obligations of the Borrowers in respect of the
payment of such overdue amount shall be discharged (whether before or after
judgment).

 

Each payment of principal, interest or other sum payable on or in
respect of this Note or the indebtedness evidenced hereby shall be made by the
Borrowers directly to the Administrative Agent in dollars, for the account of
the Bank, at the address of the Administrative Agent set forth in the Loan
Agreement, on the due date of such payment, and in immediately available and
freely transferable funds.  All payments
on or in respect of this Note or the indebtedness evidenced hereby shall be
made without set-off or counterclaim and free and clear of and without any
deductions, withholdings, restrictions or conditions of any nature.

 

This Note is made and delivered by the Borrowers to the Bank pursuant
to the Revolving Credit and Term Loan Agreement, dated as of June 24, 2003,
among (i) the Borrowers, (ii) the Banks, and (iii) the Administrative Agent
(hereinafter, as originally executed, and as now or hereafter varied or
supplemented or amended and restated, called the “Loan Agreement”), to which
reference is hereby made for a statement of the terms and conditions (to the
extent not set forth herein) under which the Loan evidenced hereby was made and
is to be repaid.  This Note evidences
the joint and several obligation of the Borrowers (a) to repay the principal
amount of 

 

2

 

the Bank’s Commitment
Percentage of the Term Loan made by the Banks to the Borrowers pursuant to the
Loan Agreement; (b) to pay interest, as herein and therein provided, on the
principal amount hereof remaining unpaid from time to time; and (c) to pay
other amounts which may become due and payable hereunder or thereunder as
herein and therein provided.  The payment
of the principal of and the interest on this Note and the payment of all (if
any) other amounts as may become due and payable on or in respect of this Note
are secured by certain collateral, as evidenced by the Security Documents.  Reference is hereby made to the Loan
Agreement (including the Exhibits and Schedules annexed thereto)
and to the other Security Documents for a complete statement of the terms
thereof and for a description of such collateral.

 

The Borrowers
will have the right to prepay the unpaid principal of this Note in full or in
part upon the terms contained in the Loan Agreement.  The Borrowers will have an obligation to prepay principal of this
Note from time to time if and to the extent required under, and upon the terms
contained in, the Loan Agreement.  Any
partial payment of the indebtedness evidenced by this Note shall be applied in
accordance with the terms of the Loan Agreement.  Any prepaid principal of this Note may not be reborrowed.

 

Pursuant to
and upon the terms contained in Section 7 of the Loan Agreement, the entire
unpaid principal of this Note, all of the interest accrued on the unpaid
principal of this Note and all (if any) other amounts payable on or in respect
of this Note or the indebtedness evidenced hereby may be declared to be
immediately due and payable, whereupon the entire unpaid principal of this
Note, all of the interest accrued on the unpaid principal of this Note and all
(if any) other amounts payable on or in respect of this Note or the
indebtedness evidenced hereby shall (if not already due and payable) forthwith
become and be due and payable to the Bank without presentment, demand, protest
or any other formalities of any kind, all of which are hereby expressly and
irrevocably waived by the Borrowers, excepting only for notice expressly
provided for in the Loan Agreement.

 

All computations of interest payable as provided in this Note shall be
made by the Administrative Agent in accordance with the terms of the Loan
Agreement.  The interest rate in effect
from time to time shall be determined in accordance with the terms of the Loan
Agreement.

 

Should all or any part of the indebtedness represented by this Note be
collected by action at law, or in bankruptcy, insolvency, receivership or other
court proceedings, or should this Note be placed in the hands of attorneys for
collection after default, the Borrowers hereby promise to pay to the holder of
this Note, upon demand by the holder hereof at any time, in addition to
principal, interest and all (if any) other amounts payable on or in respect of
this Note or the indebtedness evidenced hereby, all court costs and reasonable
attorneys’ fees and all other collection charges and expenses reasonably
incurred or sustained by the holder of this Note.

 

No delay or
omission on the part of the Bank or any holder hereof in exercising any right
hereunder shall operate as a waiver of such right or of any other rights of the
Bank or such holder, nor shall any delay, omission or waiver on any one
occasion be deemed a bar or waiver of the same or any other right on any further
occasion.

 

3

 

Each of the
Borrowers and every endorser and guarantor of this Note hereby irrevocably
waives notice of acceptance, presentment, demand, notice of nonpayment,
protest, notice of protest, suit and all other demands, notices and other
conditions precedent in connection with the delivery, acceptance, performance,
default, collection and/or enforcement of this Note or any collateral or
security therefor, except for notices’ expressly provided for in the Loan
Agreement or any other Loan Document, and assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.

 

Each of the Borrowers hereby absolutely and irrevocably consents and
submits, for itself and its property, to the non-exclusive jurisdiction of the
courts of the Commonwealth of Massachusetts or of the United States of America
for the District of Massachusetts in connection with any actions or proceedings
brought against any Borrower by the holder hereof arising out of or relating to
this Note.

 

THE BORROWERS AND THE BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY.  THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND THE MAKE THE LOAN.

 

This Note is
intended to take effect as a sealed instrument.  This Note and the obligations of the Borrowers hereunder shall be
governed by and interpreted and determined in accordance with the laws of the
Commonwealth of Massachusetts.

 

(Signatures on next page)

 

4

 

IN WITNESS
WHEREOF, this TERM NOTE has been duly executed under seal by the undersigned on
the day and in the year first above written in Boston, Massachusetts.

 

	
  WITNESS:

  	
  MAC-GRAY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stewart Gray MacDonald, Jr.

  
	
   

  	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAC-GRAY SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stewart Gray MacDonald, Jr.

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTIRION CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stewart Gray MacDonald, Jr.

  
	
   

  	
   

  	
  Title:

  	
  President

  
					

 

5

 

SCHEDULE TO TERM NOTE

 

	
  DATE

  	
   

  	
  AMOUNT OF

  LOAN

  	
   

  	
  TYPE OF

  LOAN

  (PRIME

  RATE OR

  LIBOR

  	
   

  	
  APPLICABLE

  PRIME RATE

  MARGIN OR

  APPLICABLE

  LIBOR

  MARGIN

  	
   

  	
  INTEREST

  RATE*

  	
   

  	
  INTEREST

  PERIOD**

  	
   

  	
  AMOUNT

  PAID

  	
   

  	
  NOTATION

  MADE BY

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*/             or Prime Rate Loans, insert “Prime
Rate plus Applicable Prime Rate Margin”

For LIBOR Loans, insert “LIBOR Rate plus Applicable LIBOR Margin”

**/      or LIBOR Loans only

 

6

 

EXHIBIT B

 

[FORM OF NOTICE OF BORROWING OR CONVERSION]

 

MAC-GRAY CORPORATION

MAC-GRAY SERVICES, INC.

INTIRION CORPORATION

 

Citizens National Bank, as Administrative Agent

100 Federal Street

Boston, Massachusetts 02110

 

Re:                               Revolving Credit and
Term Loan Agreement

Dated as of June   , 2003 (the
“Agreement”)

 

Gentlemen:

 

Pursuant to Section 2.4 of the Agreement, the undersigned hereby
confirms its request made on
                   ,
200  for a [Prime Rate] [LIBOR] Loan in the amount of
$             
to be made on                      ,
200 .  We understand that this
request is irrevocable and binding on us and obligates us to accept the requested
[Prime Rate] [LIBOR] Loan on such date.

 

[The Interest Period applicable to said Loan will be [one] [two]
[three] [six] months.]*

 

[Said Loan represents a conversion of the [Prime Rate] [LIBOR] Loan in
the same amount made on
                   .]**

 

We hereby certify (a) that the aggregate outstanding principal amount
of the Revolving Credit Loans on today’s date is
$          , (b) that we will
use the proceeds of the requested Loan in accordance with the provisions of the
Agreement, (c) that the representations and warranties contained or referred to
in Section IV of the Agreement are true and accurate on and as of the effective
date of the Loan as though made at and as of such date (except to the extent
that such representations and warranties expressly relate to an earlier date),
and (d) that no Default or Event of Default has occurred and is continuing or
will result from the Loan.

 

1

 

	
   

  	
  MAC-GRAY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stewart Gray MacDonald, Jr.

  
	
   

  	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAC-GRAY SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTIRION CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
						

 

*                To be inserted in any request for a
LIBOR Loan.

**         To be inserted in any request for a
conversion.

 

2

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