Document:

Exhibit
10.1

 

$175,000,000

 

REVOLVING CREDIT AGREEMENT

 

dated as of September 1,
2005,

 

among

 

D 56, INC.,

DEPARTMENT 56 RETAIL, INC.,

TIME TO CELEBRATE, INC.

and

LENOX, INCORPORATED,

as Borrowers,

 

DEPARTMENT 56, INC.,

and

THE OTHER GUARANTORS PARTY HERETO,

as Guarantors,

 

THE LENDERS PARTY HERETO,

 

UBS SECURITIES LLC,

as Arranger and Co-Syndication Agent,

 

UBS AG, STAMFORD BRANCH,

as Issuing Bank and Administrative Agent,

 

UBS LOAN FINANCE LLC,

as Swingline Lender,

 

JPMORGAN CHASE BANK, N.A.,

as Collateral Agent and Co-Syndication Agent,

 

and

 

WELLS
FARGO FOOTHILL, LLC and BANK OF AMERICA, N.A.,

as
Co-Documentation Agents

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE I.
  DEFINITIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01 Defined Terms

  	
   

  	
   

  
	
  SECTION 1.02 Classification of Loans
  and Borrowings

  	
   

  	
   

  
	
  SECTION 1.03 Terms Generally

  	
   

  	
   

  
	
  SECTION 1.04 Accounting Terms; GAAP

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II . THE CREDITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01 Commitments

  	
   

  	
   

  
	
  SECTION 2.02 Loans

  	
   

  	
   

  
	
  SECTION 2.03 Borrowing Procedure

  	
   

  	
   

  
	
  SECTION 2.04 Evidence of Debt;
  Repayment of Loans

  	
   

  	
   

  
	
  SECTION 2.05 Fees

  	
   

  	
   

  
	
  SECTION 2.06 Interest on Loans and
  Default Compensation

  	
   

  	
   

  
	
  SECTION 2.07 Termination and Reduction
  of Commitments

  	
   

  	
   

  
	
  SECTION 2.08 Interest Elections

  	
   

  	
   

  
	
  SECTION 2.09 [Intentionally Omitted]

  	
   

  	
   

  
	
  SECTION 2.10 Mandatory Prepayments of
  Loans.

  	
   

  	
   

  
	
  SECTION 2.11 Alternate Rate of
  Interest

  	
   

  	
   

  
	
  SECTION 2.12 Increased Costs

  	
   

  	
   

  
	
  SECTION 2.13 Breakage Payments

  	
   

  	
   

  
	
  SECTION 2.14 Payments Generally; Pro
  Rata Treatment; Sharing of Set-offs

  	
   

  	
   

  
	
  SECTION 2.15 Taxes

  	
   

  	
   

  
	
  SECTION 2.16 Mitigation Obligations;
  Replacement of Lenders

  	
   

  	
   

  
	
  SECTION 2.17 Swingline Loans

  	
   

  	
   

  
	
  SECTION 2.18 Letters of Credit

  	
   

  	
   

  
	
  SECTION 2.19 Determination of
  Borrowing Base

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III . REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01 Organization; Powers

  	
   

  	
   

  
	
  SECTION 3.02 Authorization;
  Enforceability

  	
   

  	
   

  
	
  SECTION 3.03 Governmental Approvals;
  No Conflicts

  	
   

  	
   

  
	
  SECTION 3.04
  Financial Statements

  	
   

  	
   

  
	
  SECTION 3.05
  Properties

  	
   

  	
   

  
	
  SECTION 3.06
  Equity Interests and Subsidiaries

  	
   

  	
   

  
	
  SECTION 3.07
  Litigation; Compliance with Laws

  	
   

  	
   

  
	
  SECTION 3.08
  Agreements

  	
   

  	
   

  
	
  SECTION 3.09
  Federal Reserve Regulations

  	
   

  	
   

  
	
  SECTION 3.10
  Investment Company Act; Public Utility Holding Company Act

  	
   

  	
   

  
	
  SECTION 3.11
  Use of Proceeds

  	
   

  	
   

  
	
  SECTION 3.12
  Taxes

  	
   

  	
   

  

 

i

 

	
  SECTION 3.13
  No Material Misstatements

  	
   

  	
   

  
	
  SECTION 3.14
  Labor Matters

  	
   

  	
   

  
	
  SECTION 3.15
  Solvency

  	
   

  	
   

  
	
  SECTION 3.16
  Employee Benefit Plans

  	
   

  	
   

  
	
  SECTION 3.17
  Environmental Matters

  	
   

  	
   

  
	
  SECTION 3.18
  Insurance

  	
   

  	
   

  
	
  SECTION 3.19
  Security Documents

  	
   

  	
   

  
	
  SECTION 3.20
  Acquisition Documents; Representations and Warranties in Agreement

  	
   

  	
   

  
	
  SECTION 3.21
  Anti-Terrorism Law

  	
   

  	
   

  
	
  SECTION 3.22
  Location of Material Inventory

  	
   

  	
   

  
	
  SECTION 3.23
  Accuracy of Borrowing Base

  	
   

  	
   

  
	
  SECTION 3.24
  Post-Audit Asset Dispositions

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV
  . CONDITIONS TO CREDIT EXTENSIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01
  Conditions to Initial Credit Extension

  	
   

  	
   

  
	
  SECTION 4.02
  Conditions to All Credit Extensions

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V
  . AFFIRMATIVE COVENANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01
  Financial Statements, Reports, etc. 

  	
   

  	
   

  
	
  SECTION 5.02
  Litigation and Other Notices

  	
   

  	
   

  
	
  SECTION 5.03
  Existence; Businesses and Properties

  	
   

  	
   

  
	
  SECTION 5.04
  Insurance

  	
   

  	
   

  
	
  SECTION 5.05
  Obligations and Taxes

  	
   

  	
   

  
	
  SECTION 5.06
  Employee Benefits

  	
   

  	
   

  
	
  SECTION 5.07
  Maintaining Records; Access to Properties and Inspections

  	
   

  	
   

  
	
  SECTION 5.08
  Use of Proceeds

  	
   

  	
   

  
	
  SECTION 5.09
  Compliance with Environmental Laws; Environmental Reports

  	
   

  	
   

  
	
  SECTION 5.10
  Reserved

  	
   

  	
   

  
	
  SECTION 5.11
  Additional Collateral; Additional Guarantors

  	
   

  	
   

  
	
  SECTION 5.12
  Security Interests; Further Assurances

  	
   

  	
   

  
	
  SECTION 5.13
  Information Regarding Collateral

  	
   

  	
   

  
	
  SECTION 5.14
  Borrowing Base-Related Reports

  	
   

  	
   

  
	
  SECTION 5.15
  Borrowing Base Verification; Inventory Appraisals

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI
  . NEGATIVE COVENANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01 Indebtedness

  	
   

  	
   

  
	
  SECTION 6.02
  Liens

  	
   

  	
   

  
	
  SECTION 6.03
  Sale and Leaseback Transactions

  	
   

  	
   

  
	
  SECTION 6.04
  Investment, Loan and Advances

  	
   

  	
   

  
	
  SECTION 6.05
  Mergers, Consolidations, Sales of Assets and Acquisitions

  	
   

  	
   

  
	
  SECTION 6.06
  Dividends

  	
   

  	
   

  
	
  SECTION 6.07
  Transactions with Affiliates

  	
   

  	
   

  
	
  SECTION 6.08
  Financial Covenants

  	
   

  	
   

  

 

ii

 

	
  SECTION 6.09 Limitation on
  Modifications of Indebtedness; Modifications of Certificate of Incorporation,
  or Other Constitutive Documents, By-laws and Certain Other Agreements, etc

  	
   

  	
   

  
	
  SECTION 6.10
  Limitation on Certain Restrictions on Subsidiaries

  	
   

  	
   

  
	
  SECTION 6.11
  Limitation on Issuance of Capital Stock

  	
   

  	
   

  
	
  SECTION 6.12
  Limitation on Creation of Subsidiaries

  	
   

  	
   

  
	
  SECTION 6.13
  Business

  	
   

  	
   

  
	
  SECTION 6.14
  Limitation on Accounting Changes

  	
   

  	
   

  
	
  SECTION 6.15
  Fiscal Year

  	
   

  	
   

  
	
  SECTION 6.16
  No Negative Pledges

  	
   

  	
   

  
	
  SECTION 6.17
  Lease Obligations

  	
   

  	
   

  
	
  SECTION 6.18
  Anti-Terrorism Law; Anti-Money Laundering

  	
   

  	
   

  
	
  SECTION 6.19
  Embargoed Person

  	
   

  	
   

  
	
  SECTION 6.20
  Inactive Subsidiaries

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII
  . GUARANTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01
  The Guarantee

  	
   

  	
   

  
	
  SECTION 7.02
  Obligations Unconditional

  	
   

  	
   

  
	
  SECTION 7.03
  Reinstatement

  	
   

  	
   

  
	
  SECTION 7.04
  Subrogation; Subordination

  	
   

  	
   

  
	
  SECTION 7.05
  Remedies

  	
   

  	
   

  
	
  SECTION 7.06
  Instrument for the Payment of Money

  	
   

  	
   

  
	
  SECTION 7.07
  Continuing Guarantee

  	
   

  	
   

  
	
  SECTION 7.08
  General Limitation on Guarantee Obligations

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII
  . EVENTS OF DEFAULT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX
  . COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01
  Collateral Account

  	
   

  	
   

  
	
  SECTION 9.02
  Application of Proceeds

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X
  . THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.01
  Appointment

  	
   

  	
   

  
	
  SECTION 10.02
  Administrative Agent and the Collateral Agent in their Individual Capacities

  	
   

  	
   

  
	
  SECTION 10.03
  Exculpatory Provisions

  	
   

  	
   

  
	
  SECTION 10.04
  Reliance by Agents

  	
   

  	
   

  
	
  SECTION 10.05
  Delegation of Duties

  	
   

  	
   

  
	
  SECTION 10.06
  Successor Administrative Agent

  	
   

  	
   

  
	
  SECTION 10.07
  Non-Reliance on Agents and Other Lenders

  	
   

  	
   

  
	
  SECTION 10.08
  No Other Administrative Agent or the Collateral Agent

  	
   

  	
   

  
	
  SECTION 10.09
  Indemnification

  	
   

  	
   

  
	
  SECTION 10.10
  Additional Loans

  	
   

  	
   

  

 

iii

 

	
  ARTICLE XI
  . MISCELLANEOUS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.01
  Notices

  	
   

  	
   

  
	
  SECTION 11.02 Waivers; Amendment

  	
   

  	
   

  
	
  SECTION 11.03
  Expenses; Indemnity

  	
   

  	
   

  
	
  SECTION 11.04
  Successors and Assigns

  	
   

  	
   

  
	
  SECTION 11.05
  Survival of Agreement

  	
   

  	
   

  
	
  SECTION 11.06
  Counterparts; Integration; Effectiveness; Electronic Execution

  	
   

  	
   

  
	
  SECTION 11.07
  Severability

  	
   

  	
   

  
	
  SECTION 11.08
  Right of Setoff

  	
   

  	
   

  
	
  SECTION 11.09
  Governing Law; Jurisdiction; Consent to Service of Process

  	
   

  	
   

  
	
  SECTION 11.10
  Waiver of Jury Trial

  	
   

  	
   

  
	
  SECTION 11.11
  Headings

  	
   

  	
   

  
	
  SECTION 11.12
  Confidentiality

  	
   

  	
   

  
	
  SECTION 11.13
  Interest Rate Limitation

  	
   

  	
   

  
	
  SECTION 11.14
  Lender Addendum

  	
   

  	
   

  
	
  SECTION 11.15
  USA PATRIOT Act Notice

  	
   

  	
   

  

 

iv

 

	
  ANNEXES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex I

  	
   

  	
  Applicable Margin

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.01(a)

  	
   

  	
  Mortgaged Real Property

  
	
  Schedule 1.01(b)

  	
   

  	
  Refinancing Indebtedness To Be Repaid

  
	
  Schedule 1.01(c)

  	
   

  	
  Subsidiary Guarantors

  
	
  Schedule 2.18

  	
   

  	
  Existing Letters of Credit

  
	
  Schedule 3.03

  	
   

  	
  Governmental Approvals; Compliance with
  Laws

  
	
  Schedule 3.05(b)

  	
   

  	
  Real Property

  
	
  Schedule 3.05(c)

  	
   

  	
  Intellectual Property Licenses

  
	
  Schedule 3.06(a)

  	
   

  	
  Subsidiaries

  
	
  Schedule 3.06(c)

  	
   

  	
  Corporate Organizational Chart

  
	
  Schedule 3.08(c)

  	
   

  	
  Material Agreements

  
	
  Schedule 3.17

  	
   

  	
  Environmental Matters

  
	
  Schedule 3.18

  	
   

  	
  Insurance

  
	
  Schedule 3.19(b)

  	
   

  	
  Trademarks

  
	
  Schedule 3.19(c)

  	
   

  	
  Patents

  
	
  Schedule 3.19(d)

  	
   

  	
  Copyrights

  
	
  Schedule 3.20

  	
   

  	
  List of Acquisition Documents

  
	
  Schedule 3.22

  	
   

  	
  Location of Material Inventory

  
	
  Schedule 4.01(g)

  	
   

  	
  Local Counsel

  
	
  Schedule 4.01(n)

  	
   

  	
  Landlord Access Agreements

  
	
  Schedule 4.01(o)(iii)

  	
   

  	
  Title Insurance Amounts

  
	
  Schedule 6.01(b)

  	
   

  	
  Existing Indebtedness

  
	
  Schedule 6.02(c)

  	
   

  	
  Existing Liens

  
	
  Schedule 6.04(b)

  	
   

  	
  Existing Investments

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
   

  	
  Form of Administrative Questionnaire

  
	
  Exhibit A-2

  	
   

  	
  Form of Compliance Certificate

  
	
  Exhibit A-3

  	
   

  	
  Form of LC Request

  
	
  Exhibit A-4

  	
   

  	
  Form of Lender Addendum

  
	
  Exhibit B

  	
   

  	
  Form of Assignment and Acceptance

  
	
  Exhibit C

  	
   

  	
  Form of Borrowing Request

  
	
  Exhibit D

  	
   

  	
  Form of Interest Election Request

  
	
  Exhibit E

  	
   

  	
  Form of Joinder Agreement

  
	
  Exhibit F

  	
   

  	
  Form of Landlord Lien Waiver and
  Access Agreement

  
	
  Exhibit G

  	
   

  	
  Form of Mortgage

  
	
  Exhibit H-1

  	
   

  	
  Form of Revolving Note

  
	
  Exhibit H-2

  	
   

  	
  Form of Swingline Note

  
	
  Exhibit I-1

  	
   

  	
  Form of Perfection Certificate

  
	
  Exhibit I-2

  	
   

  	
  Form of Perfection Certificate
  Supplement

  
	
  Exhibit J

  	
   

  	
  Form of Security Agreement

  

 

v

 

	
  Exhibit K-1

  	
   

  	
  Form of Opinion of Company Counsel

  
	
  Exhibit K-2

  	
   

  	
  Form of Opinion of Local Counsel

  
	
  Exhibit L

  	
   

  	
  Form of Intercompany Note

  
	
  Exhibit M

  	
   

  	
  Form of Solvency Certificate

  
	
  Exhibit N

  	
   

  	
  Form of Borrowing Base Certificate

  

 

vi

 

REVOLVING
CREDIT AGREEMENT

 

This REVOLVING CREDIT
AGREEMENT (this “Agreement”) dated as of September 1, 2005, among D
56, INC., a Minnesota corporation (“D 56”), DEPARTMENT 56 RETAIL, INC.,
a Minnesota corporation (“D 56 Retail”), TIME TO CELEBRATE, INC., a
Minnesota corporation (“TTC”), LENOX, INCORPORATED, a New Jersey
corporation (“Lenox” and, together with D 56, D 56 Retail and TTC, “Borrowers”
and each individually, a “Borrower”), DEPARTMENT 56, INC., a Delaware
corporation (“Holdings”), the Subsidiary Guarantors (such term and each
other capitalized term used but not defined herein having the meaning given to
it in Article I), the Lenders (as defined herein), UBS SECURITIES
LLC, as sole arranger and co-syndication agent (in such respective capacities, “Arranger”
and “Co-Syndication Agent”), JPMORGAN CHASE BANK, N.A., as collateral
agent and co-syndication agent for the Secured Parties (as defined herein) (in
such respective capacities, “Collateral Agent” and “Co-Syndication
Agent”), WELLS FARGO FOOTHILL, LLC and BANK OF AMERICA, N.A., as co-documentation
agents (in such capacity, “Co-Documentation Agents”), UBS LOAN FINANCE
LLC, as swingline lender (in such capacity, “Swingline Lender”), UBS AG,
STAMFORD BRANCH, as issuing bank and as administrative agent for the Lenders
and the Secured Parties (in such respective capacities, “Issuing Bank,”
and “Administrative Agent”).

 

WITNESSETH:

 

WHEREAS, Holdings has entered into a stock purchase
agreement, dated as of July 21, 2005 (as amended, supplemented or
otherwise modified from time to time in accordance with the provisions hereof
and thereof, the “Acquisition Agreement”), with Brown-Forman Corporation
(“Seller”), a Delaware corporation, to acquire (the “Acquisition”)
all of the issued and outstanding common shares of Lenox (the “Acquired
Business”).

 

WHEREAS, Borrowers have
requested the Lenders to extend credit in the form of Revolving Loans at any
time and from time to time prior to the Revolving Maturity Date, in an
aggregate principal amount at any time outstanding not in excess of
$175,000,000, of which no more than $105,000,000 may be drawn on the Closing
Date.

 

WHEREAS, Borrowers have
requested the Swingline Lender to make Swingline Loans, at any time and from
time to time prior to the Revolving Maturity Date, in an aggregate principal
amount at any time outstanding not in excess of $20,000,000.

 

WHEREAS, Borrowers have
requested the Issuing Bank to issue letters of credit, in an aggregate face
amount at any time outstanding not in excess of $20,000,000, to support payment
obligations incurred in the ordinary course of business by each Borrower and
their Subsidiaries.

 

WHEREAS, the
proceeds of the Loans are to be used in accordance with Section 3.11.

 

NOW, THEREFORE, the
Lenders are willing to extend such credit to Borrowers and the Issuing Bank is
willing to issue letters of credit for the account of Borrowers on the terms
and subject to the conditions set forth herein. 
Accordingly, the parties hereto agree as follows:

 

 

ARTICLE I.

DEFINITIONS

 

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

 

“ABR”, when used in reference to any Loan or
Borrowing, is used when such Loan, or the Loans
comprising such Borrowing, are bearing interest at a rate determined by
reference to the Alternate Base Rate.

 

“ABR Borrowing” shall mean a Borrowing
comprised of ABR Revolving Loans.

 

“ABR Revolving Borrowing” shall mean a
Borrowing comprised of ABR Revolving Loans.

 

“ABR Revolving Loan” shall mean any
Revolving Loan bearing interest at a rate determined by reference to the
Alternate Base Rate in accordance with the provisions of Article II.

 

“Accounting Changes” shall have meaning
assigned to such term in Section 1.04.

 

“Account Debtor” shall mean any Person who
may become obligated to another Person under, with respect to, or on account
of, an Account.

 

“Accounts” shall mean all “accounts,” as
such term is defined in the UCC as in effect on the date hereof in the State of
New York, in which such Person now or hereafter has rights.

 

“Acquired Business” shall have the meaning
assigned to such term in the first recital hereto.

 

“Acquisition” shall have the meaning
assigned to such term in the first recital hereto.

 

“Acquisition Agreement” shall have the
meaning assigned to such term in the first recital hereto.

 

“Acquisition Consideration” shall mean the
purchase consideration for any Permitted Acquisition and all other payments
paid to or for the benefit of the seller by Holdings, Borrowers or any of their
Subsidiaries in exchange for, or as part of, or in connection with, any
Permitted Acquisition, whether paid in cash or by exchange of Equity Interests
or of assets or otherwise and whether payable at or prior to the consummation
of such Permitted Acquisition or deferred for payment at any future time,
whether or not any such future payment is subject to the occurrence of any
contingency, and includes any and all payments representing the purchase price
and any assumptions of Indebtedness, “earn-outs” and other agreements to make
any payment the amount of which is, or the terms of payment of which are, in
any respect subject to or contingent upon the revenues, income, cash flow or
profits (or the like) of any Person or business; provided, that, if the
amount of any consideration that is a portion of Acquisition Consideration is
contingent and is not otherwise stated or determinable, Holdings, Borrowers or 

 

2

 

any
of their Subsidiaries may use the maximum reasonable anticipated amount of such
consideration as of the date of determination of the Acquisition Consideration
for purposes of determining compliance with clause (x) of the definition of
Permitted Acquisition.

 

“Acquisition Documents” shall mean the
collective reference to the Acquisition Agreement and all other agreements,
instruments and documents entered into in connection with the Acquisition.

 

“Adjusted LIBOR Rate” shall mean, with
respect to any Eurodollar Borrowing for any Interest Period, (a) an
interest rate per annum (rounded upward, if necessary, to the next 1/100 of 1%)
determined by the Administrative Agent to be equal to the LIBOR Rate for such
Eurodollar Borrowing in effect for such Interest Period divided by (b) 1 minus
the Statutory Reserves (if any) for such Eurodollar Borrowing for such Interest
Period.

 

“Administrative Agent” shall have the
meaning assigned to such term in the preamble hereto and includes each other
Person appointed as the successor pursuant to Article X.

 

“Administrative Agent Fees” shall have the meaning assigned to such
term in Section 2.05(b).

 

“Administrative Questionnaire” shall mean an
Administrative Questionnaire in the form of Exhibit A-1, or such
other form as may be supplied from time to time by the Administrative Agent.

 

“Affiliate” shall mean, when used with
respect to a specified Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified; provided, however,
that, for purposes of Section 6.07, the term “Affiliate” shall also
include any Person that directly or indirectly owns more than 10% of any class
of Equity Interests of the Person specified or that is an executive officer or
director of the Person specified.

 

“Agents” shall mean the Arranger,
Co-Documentation Agents, Co-Syndication Agents, Administrative Agent and the
Collateral Agent.

 

“Agreement” shall have the meaning assigned
to such term in the preamble hereto.

 

“Alternate Advance Rate Period” shall mean
the period beginning August 1 and ending October 31 of each year
until the Revolving Maturity Date.

 

“Alternate Base Rate” shall mean, for any
day, a rate per annum (rounded upward, if necessary, to the next 1/100 of 1%)
equal to the greater of (a) the Base Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus 0.50%.  If the Administrative Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate for any reason,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms of the definition thereof,
the Alternate Base Rate shall be determined without regard to clause (b) of
the preceding sentence until the circumstances giving rise to such inability no
longer exist.  Any change in the
Alternate Base Rate due to a change in the Base Rate or the 

 

3

 

Federal Funds Effective Rate shall be effective on the
effective date of such change in the Base Rate or the Federal Funds Effective
Rate, respectively.

 

“Anti-Terrorism Laws” shall have the meaning
assigned to such term in Section 3.21.

 

“Applicable Fee” shall mean, for any day,
with respect to any Revolving Loan, the applicable percentage set forth in Annex
I under the caption “Applicable Fee”.

 

“Applicable Margin” shall mean, for any day,
with respect to any Revolving Loan, the applicable percentage set forth in Annex
I under the appropriate caption.

 

“Arranger” shall have the meaning assigned
to such term in the preamble hereto.

 

“Asset Sale” shall mean (a) any
conveyance, sale, lease, sublease, assignment, transfer or other disposition
(including by way of merger or consolidation and including any sale and
leaseback transaction) of any Property (including stock of any Subsidiary of
Holdings by the holder thereof) by Holdings, Borrowers or any of their
Subsidiaries to any Person other than Borrowers or any Subsidiary Guarantor
(excluding (i) Inventory sold in the ordinary course of business, (ii) any
sale or discount, in each case without recourse, of accounts receivable arising
in the ordinary course of business, but only in connection with the compromise
or collection thereof, (iii) disposals of obsolete, uneconomical,
negligible, worn out or surplus Property in the ordinary course of business or (iv) sales
of Cash Equivalents and marketable securities) and (b) any issuance or
sale by any Subsidiary of Holdings (other than Borrowers) of its Equity Interests
to any Person (other than to Borrowers or any Subsidiary Guarantor).

 

“Assignment and Acceptance” shall mean an
assignment and acceptance entered into by a Lender and an assignee, and
accepted by the Administrative Agent, in the form of Exhibit B, or
such other form as shall be approved by the Administrative Agent.

 

“Attributable Indebtedness” shall mean, when
used with respect to any sale and leaseback transaction, as at the time of
determination, the present value (discounted at a rate equivalent to Borrowers’
then-current weighted average cost of funds for borrowed money as at the time
of determination, compounded on a semi-annual basis) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in any such sale and leaseback transaction.

 

“Base Rate” shall mean, for any day, a rate
per annum that is equal to the corporate base rate of interest established by
the Administrative Agent from time to time; each change in the Base Rate shall
be effective on the date such change is announced as being effective.  The corporate base rate is not necessarily
the lowest rate charged by the Administrative Agent to its customers.

 

“Board” shall mean the Board of Governors of
the Federal Reserve System of the United States.

 

“Borrower” and “Borrowers” each shall have the meaning assigned to such terms
in the preamble hereto.

 

4

 

“Borrowing” shall mean (a) Loans of the
same Class and Type, made, converted or continued on the same date and, in
the case of Eurodollar Revolving Loans, as to which a single Interest Period is
in effect, or (b) a Swingline Loan.

 

“Borrowing Availability” shall mean at any
time the lesser of (a) the Borrowing Base at such time and (b) the
aggregate amount of the Lenders’ Revolving Commitments at such time, in each
case, less the aggregate Revolving Exposure of all Lenders at such time.

 

“Borrowing Base” shall mean at any time,
subject to adjustment as provided in Section 2.19, an amount equal
to the sum of, without duplication:

 

(a)           the book
value of Eligible Accounts of Borrowers multiplied by the advance rate of 85%, plus

 

(b)           the lesser of (i) the advance
rate of 65% of the Cost of Eligible Inventory of Borrowers, or (ii) the
advance rate of 85% of the Net Recovery Cost Percentage multiplied by the Cost
of Eligible Inventory of Borrowers; provided  that during the
Alternate Advance Rate Period, the advance rates in (i) and (ii) of
this clause (b) shall be 70% and 90%, respectively, minus

 

(c)           a reserve in
the amount of the Current Derivative Exposure or such other amount as the
Administrative Agent and the Collateral Agent may reasonably determine in
respect of such exposure, minus

 

(d)           effective
immediately upon notification thereof to Borrowers by the Administrative Agent
or the Collateral Agent, any Reserves established from time to time by the
Administrative Agent or the Collateral Agent in the exercise of its reasonable credit judgment;

 

Subject to the relevant
terms and provisions set forth in this Agreement, including, without
limitation, Section 11.02, the Administrative Agent or the
Collateral Agent at all times shall be entitled to reduce or increase the
advance rates and standards of eligibility under this Agreement, in each case
in its commercially reasonable discretion.

 

The Borrowing Base at any
time shall be determined by reference to the most recent Borrowing Base
Certificate theretofore delivered to the Collateral Agent and the
Administrative Agent with such adjustments as the Administrative Agent or the
Collateral Agent deem appropriate in their reasonable credit judgment to assure that
the Borrowing Base is calculated in accordance with the terms of this
Agreement.

 

“Borrowing Base Certificate” shall mean an
Officers’ Certificate from Borrowers, substantially in the form of, and
containing the information prescribed by, Exhibit N, delivered to
the Administrative Agent and the Collateral Agent setting forth Borrowers’
calculation of the Borrowing Base.

 

“Borrowing Request” shall mean a request by
a Borrower in accordance with the terms of Section 2.03 and
substantially in the form of Exhibit C, or such other form as shall
be approved by the Administrative Agent.

 

5

 

“Business Day” shall mean any day other than
a Saturday, Sunday or other day on which banks in New York City are authorized
or required by law to close; provided, however, that when used in
connection with a Eurodollar Revolving Loan, the term “Business Day” shall also
exclude any day on which banks are not open for dealings in dollar deposits in
the London interbank market.

 

“Capital Expenditures” shall mean, with respect to any Person,
for any period, the aggregate amount of all expenditures by such Person and its
Subsidiaries during that period for fixed or capital assets that, in accordance
with GAAP, are or should be classified as capital expenditures in the
consolidated balance sheet of such Person and its Consolidated Subsidiaries.

 

“Capital Lease Obligations” of any Person shall
mean the obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) Property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

 

“Cash Equivalents” shall mean, as to any
Person:  (a) securities issued, or
directly, unconditionally and fully guaranteed or insured, by the United States
or any agency or instrumentality thereof (provided that the full faith
and credit of the United States is pledged in support thereof) having
maturities of not more than one year from the date of acquisition by such
Person; (b) securities issued, or directly, unconditionally and fully
guaranteed or insured, by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at the time
of acquisition, having one of the two highest ratings obtainable from either
Standard & Poor’s Ratings Group or Moody’s Investors Services, Inc.;
(c) time deposits and certificates of deposit or bankers’ acceptance of
any Lender or any commercial bank having, or which is the principal banking
subsidiary of a bank holding company organized under the laws of the United
States, any state thereof or the District of Columbia having, capital and surplus
aggregating in excess of $500.0 million and a rating of “A” (or such other
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act) with maturities of not more than one year from the date of
acquisition by such Person; (d) repurchase obligations with a term of not
more than 30 days for underlying securities of the types described in clause
(a) above entered into with any bank meeting the qualifications
specified in clause (c) above, which repurchase obligations are
secured by a valid perfected security interest in the underlying securities; (e) commercial
paper issued by any Person incorporated in the United States rated at least A-1
or the equivalent thereof by Standard & Poor’s Rating Service or at
least P-1 or the equivalent thereof by Moody’s Investors Service, Inc.,
and in each case maturing not more than one year after the date of acquisition
by such Person; (f) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses (a) through
(e) above; (g) variable rate preferred securities issued by
issuers rated AA- or better by Standard & Poor’s Rating Service or Aa3
or better by Moody’s Investors Service, Inc. and otherwise reasonably
acceptable to the Administrative Agent; and (h) demand deposit accounts
maintained in the ordinary course of business.

 

“Casualty Event” shall mean, with respect to
any Property (including Real Property) of any Person, any loss of title with
respect to such Property or any loss of or damage to or 

 

6

 

destruction
of, or any condemnation or other taking (including by any Governmental
Authority) of, such Property for which such Person or any of its Subsidiaries
receives insurance proceeds or proceeds of a condemnation award or other
compensation.  “Casualty Event” shall
include but not be limited to any taking of all or any part of any Real
Property of any Person or any part thereof, in or by condemnation or other
eminent domain proceedings pursuant to any law, or by reason of the temporary
requisition of the use or occupancy of all or any part of any Real Property of
any Person or any part thereof by any Governmental Authority, civil or
military.

 

“CERCLA” shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. § 9601 et  seq.

 

A “Change in Control” shall be deemed to have
occurred if:  (a) Holdings at any
time ceases to own 100% of the capital stock of any Borrower; (b) at any
time a change of control occurs under and as defined in any documentation
relating to any Material Indebtedness; (c) any “Person” or “group” (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that for purposes of this clause such Person or
group shall be deemed to have “beneficial ownership” of all securities that any
such Person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of Voting Stock representing more than 25% of the voting power of
the total outstanding Voting Stock of Holdings; or (d) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of Holdings (together with any new directors
whose election to such Board of Directors or whose nomination for election was
approved by a vote of 66 2/3% of the directors of Holdings then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to constitute
a majority of the Board of Directors of Holdings.

 

“Change in Law” shall mean (a) the
adoption of any law, treaty, order, rule or regulation after the date of
this Agreement, (b) any change in any law, treaty, order, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender
or Issuing Bank (or for purposes of Section 2.12(b), by any lending
office of such Lender or by such Lender’s or Issuing Bank’s holding company, if
any) with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the date of this
Agreement.

 

“Charges” shall have the meaning assigned to
such term in Section 11.13.

 

“Chattel Paper” shall mean all “chattel
paper,” as such term is defined in the UCC as in effect on the date hereof in
the State of New York, in which any Person now or hereafter has rights.

 

“Class”, when used in reference to any Loan
or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are Revolving Loans or Swingline Loans and,
when used in reference to any Commitment, refers to whether such Commitment is
a Revolving Commitment or Swingline Commitment.

 

7

 

“Closing Date” shall mean the date of the
initial Credit Extension hereunder.

 

“Code” shall mean the Internal Revenue Code
of 1986, as amended from time to time.

 

“Collateral” shall mean, collectively, all
of the Security Agreement Collateral, the Mortgaged Real Property and all other
Property of whatever kind and nature pledged as collateral under any Security
Document.

 

“Collateral Agent” shall have the meaning
assigned to such term in the preamble hereto.

 

“Collateral Agent Fee” shall have the
meaning ascribed to such term in Section 2.05(b)(ii).

 

“Commercial Letter of Credit” shall mean any
letter of credit or similar instrument issued for the account of a Borrower for
the benefit of such Borrower or any of its Subsidiaries, for the purpose of
providing the primary payment mechanism in connection with the purchase of
materials, goods or services by such Borrower or any of its Subsidiaries in the
ordinary course of their businesses.

 

“Commitment” shall mean, with respect to any
Lender, such Lender’s Revolving Commitment, LC Commitment or Swingline
Commitment.

 

“Commitment Fee” shall have the meaning
assigned to such term in Section 2.05(a).

 

“Commitments” shall mean the aggregate sum
of each Lender’s Commitment.

 

“Companies” shall mean Holdings and its
Subsidiaries; and “Company” shall
mean any one of them.

 

“Compliance Certificate” shall mean a
certificate of a Financial Officer substantially in the form of Exhibit A-2.

 

“Consolidated Companies” shall mean Holdings
and its Consolidated Subsidiaries.

 

“Consolidated EBITDA” shall mean, for any
period, Consolidated Net Income for such period, adjusted, in each case only to
the extent (and in the same proportion) deducted or excluded in determining
such Consolidated Net Income (and with respect to the portion of Consolidated
Net Income attributable to any Subsidiary of Holdings only if a corresponding
amount would be permitted at the date of determination to be distributed to
Holdings by such Subsidiary without prior approval (or with prior approval that
has already been obtained), pursuant to the terms of its organizational
documents and all agreements, instruments, judgments, decrees, orders,
statutes, rules and regulations applicable to such Subsidiary or its
stockholders), by (x) adding thereto (i) the amount of Consolidated
Interest Expense, (ii) provision for taxes based on income taxes
(including without duplication, and to the extent included in GAAP, any foreign
withholding taxes, single business or unitary taxes or other similar state
taxes) and including franchise taxes, (iii) amortization expense, (iv) depreciation
expense, (v) all other non-cash items (excluding any non-cash charge that
results in an accrual or a reserve for cash charges in any future period), (vi) severance
payments paid to former 

 

8

 

employees after the Closing Date and prior to December 31,
2006 in an aggregate amount not to exceed $8,500,000, (vii) nonrecurring
fees and expenses in connection with the Transactions incurred after the
Closing Date and prior to December 31, 2006 in an aggregate amount not to
exceed $1,000,000, (viii) expenses incurred in connection with retail
store closings after the Closing Date and prior to December 31, 2006 in an
aggregate amount not to exceed $2,500,000 and (ix) expenses incurred in
connection with facility consolidations after the Closing Date and prior to December 31,
2006 in an aggregate amount not to exceed $11,000,000, and (y) subtracting the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such period.  Consolidated EBITDA shall be calculated on a
Pro Forma Basis to give effect to the Acquisition and any other Permitted Acquisition
and Asset Sales consummated during the fiscal period of Holdings ended on the
Test Period thereof as if each such Permitted Acquisition had been effected on
the first day of such period and as if each such Asset Sale had been
consummated on the day prior to the first day of such period.  Notwithstanding the foregoing, to the extent
that results from any of the months set forth below are included in any
applicable test period, “Consolidated EBITDA” for such months shall be deemed
equal to the amounts set forth below:

 

	
  August 2004

  	
   

  	
  $

  	
  6,500,000

  	
   

  
	
  September 2004

  	
   

  	
  $

  	
  13,500,000

  	
   

  
	
  October 2004

  	
   

  	
  $

  	
  15,500,000

  	
   

  
	
  November 2004

  	
   

  	
  $

  	
  10,600,000

  	
   

  
	
  December 2004

  	
   

  	
  $

  	
  9,600,000

  	
   

  
	
  January 2005

  	
   

  	
  $

  	
  (4,300,000

  	
  )

  
	
  February 2005

  	
   

  	
  $

  	
  (1,200,000

  	
  )

  
	
  March 2005

  	
   

  	
  $

  	
  1,800,000

  	
   

  
	
  April 2005

  	
   

  	
  $

  	
  3,200,000

  	
   

  
	
  May 2005

  	
   

  	
  $

  	
  (5,600,000

  	
  )

  
	
  June 2005

  	
   

  	
  $

  	
  3,500,000

  	
   

  
	
  July 2005

  	
   

  	
  $

  	
  3,500,000

  	
   

  

 

“Consolidated Indebtedness” shall mean, as
at any date of determination, without duplication, the aggregate amount of all
Indebtedness (but including in any event the then outstanding principal amount
of all Loans, all Capital Lease Obligations and all LC Exposure) of Holdings
and its Consolidated Subsidiaries on a consolidated basis as determined in
accordance with GAAP.

 

“Consolidated Interest Coverage Ratio” shall
mean, for any Test Period, the ratio of (x) Consolidated EBITDA for such Test
Period to (y) Consolidated Interest Expense for such Test Period.

 

“Consolidated Interest Expense” shall mean,
for any period, without duplication, the total consolidated interest expense of
Holdings and its Consolidated Subsidiaries for such period (calculated without
regard to any limitations on the payment thereof and including amortization of
debt discount and deferred financing costs, capitalized interest, interest paid
in kind, commitment fees, letter of credit fees and net amounts payable under
Hedging Agreements) determined in accordance with GAAP plus, without
duplication, (a) the portion of Capital Lease Obligations of Holdings and
its Consolidated Subsidiaries representing the interest factor for 

 

9

 

such period, (b) imputed interest on Attributable
Indebtedness, (c) cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than Holdings or a Wholly
Owned Subsidiary) in connection with Indebtedness incurred by such plan or
trust, (d) all interest paid or payable with respect to discontinued
operations, (e) the product of (i) all dividend payments on any
series of any Preferred Stock, if any, of any Subsidiary of Holdings (other
than any Preferred Stock, if any, held by Holdings or a Wholly Owned
Subsidiary), multiplied  by (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of Holdings and its
Subsidiaries, expressed as a decimal and (f) all interest on any
Indebtedness of the type described in clause (f) or (k) of
the definition of “Indebtedness” with respect to Holdings or any of its
Subsidiaries.  Notwithstanding the
foregoing, to the extent that results from any of the months set forth below
are included in any applicable test period, “Consolidated Interest Expense” for
such months shall be deemed equal to the amounts set forth below:

 

	
  August 2004

  	
   

  	
  $

  	
  1,100,000

  	
   

  
	
  September 2004

  	
   

  	
  $

  	
  1,200,000

  	
   

  
	
  October 2004

  	
   

  	
  $

  	
  1,200,000

  	
   

  
	
  November 2004

  	
   

  	
  $

  	
  1,100,000

  	
   

  
	
  December 2004

  	
   

  	
  $

  	
  900,000

  	
   

  
	
  January 2005

  	
   

  	
  $

  	
  700,000

  	
   

  
	
  February 2005

  	
   

  	
  $

  	
  700,000

  	
   

  
	
  March 2005

  	
   

  	
  $

  	
  800,000

  	
   

  
	
  April 2005

  	
   

  	
  $

  	
  800,000

  	
   

  
	
  May 2005

  	
   

  	
  $

  	
  900,000

  	
   

  
	
  June 2005

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  July 2005

  	
   

  	
  $

  	
  1,000,000

  	
   

  

 

“Consolidated Net Income” shall mean, for
any period, the consolidated net income of Holdings and its Consolidated
Subsidiaries determined in accordance with GAAP, but excluding in any event (a) after-tax
extraordinary gains or extraordinary losses; (b) after-tax gains or losses
realized from (i) the acquisition of any securities, or the extinguishment
or conversion of any Indebtedness or Equity Interest, of Holdings or any of its
Subsidiaries or (ii) any sales of assets (other than Inventory in the
ordinary course of business); (c) net earnings or loss of any other Person
(other than a Subsidiary of Holdings) in which Holdings or any Consolidated
Subsidiary has an ownership interest, except (in the case of any such net
earnings) to the extent such net earnings shall have actually been received by
Holdings or such Consolidated Subsidiary (subject to the limitation in clause
(d) below) in the form of cash dividends or distributions; (d) the
net income of any Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Consolidated Subsidiary
of its net income is not at the time of determination permitted without
approval under applicable law or regulation or under such Consolidated
Subsidiary’s organizational documents or any agreement or instrument applicable
to such Consolidated Subsidiary or its stockholders; (e) gains or losses
from the cumulative effect of any change in accounting principles; (f) earnings
resulting from any reappraisal, revaluation or write-up of assets; and (g) the
income (or loss) of any Person accrued prior to the date it becomes a
Subsidiary of Holdings or any Consolidated Subsidiary or is merged into or 

 

10

 

consolidated
with Holdings or any Consolidated Subsidiary or that Person’s assets are
acquired by Holdings or such Consolidated Subsidiary (other than pursuant to
the Acquisition).

 

“Consolidated Subsidiary” shall mean, as to
any Person, all Subsidiaries of such Person which are consolidated with such
Person for financial reporting purposes in accordance with GAAP.

 

“Contested Collateral Lien Conditions” shall
mean, with respect to any Permitted Lien of the type described in paragraphs
(a), (b) and (f) of Section 6.02, the
following conditions:

 

(a)           the applicable Loan Party shall be contesting such Lien in
good faith;

 

(b)           to
the extent such Lien is in an amount in excess of $100,000, in the aggregate
with all other such Liens, the Administrative Agent and Collateral Agent shall
have established a Reserve (to the extent of such Lien on Accounts or
Inventory) with respect thereto or obtained a bond in an amount sufficient to
pay and discharge such Lien and the Administrative Agent’s or Collateral Agent’s
reasonable estimate of all interest and penalties related thereto; and

 

(c)           such
Lien shall in all respects be subject and subordinate in priority to the Lien
and security interest created and evidenced by the Security Documents, except
if and to the extent that the law or regulation creating, permitting or
authorizing such Lien provides that such Lien is or must be superior to the
Lien and security interest created and evidenced by the Security Documents.

 

“Contingent Obligation” shall mean, as to
any Person, any obligation, agreement, understanding or arrangement of such
Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations (“primary obligations”) of any other
Person (the “primary obligor”) in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or
any Property constituting direct or indirect security therefor; (b) to
advance or supply funds (i) for the purchase or payment of any such
primary obligation or (ii) to maintain working capital or equity capital
of the primary obligor or to maintain the net worth or solvency of the primary
obligor; (c) to purchase Property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation; (d) with
respect to bankers’ acceptances and letters of credit, until a reimbursement
obligation arises; or (e) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however,
that the term “Contingent Obligation” shall not include endorsements of
instruments for deposit or collection in the ordinary course of business or any
product warranties for deposit or collection in the ordinary course of business.  The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made (or,
if less, the maximum amount of such primary obligation for which such Person
may be liable, whether severally or jointly, pursuant to the terms of the
instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof (assuming
such Person is required to perform thereunder) as determined by such Person in
good faith.

 

11

 

“Control” shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and the terms “Controlling” and “Controlled”
shall have meanings correlative thereto.

 

“Cost” shall mean, as determined by the
Administrative Agent and the Collateral Agent in good faith, with respect to
Inventory, the lower of (a) landed cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value; provided, that
for purposes of the calculation of the Borrowing Base, (i) the Cost of the
Inventory shall not include: (A) the portion of the cost of Inventory
equal to the profit earned by any Affiliate on the sale thereof to a Borrower
or (B) write-ups or write-downs in cost with respect to currency exchange
rates, and (ii) notwithstanding anything to the contrary contained herein,
the cost of the Inventory shall be computed in the same manner and consistent
with the most recent Inventory Appraisal which has been received and approved
by the Administrative Agent and the Collateral Agent in its reasonable
discretion.

 

“Co-Documentation Agents” shall have the
meaning assigned to such term in the preamble hereto.

 

“Co-Syndication Agent” shall have the
meaning assigned to such term in the preamble hereto.

 

“Credit Extension” shall mean, as the
context may require, (i) the making of a Loan by a Lender or (ii) the
issuance of any Letter of Credit, or the amendment, extension or renewal of any
existing Letter of Credit, by the Issuing Bank; provided that “Credit
Extensions” shall not include conversions and continuations of outstanding
Loans.

 

“Current Derivative Exposure” shall mean, as of any date of
determination, 100% of the aggregate mark-to-market exposure then owing by any
Borrower under Lender Hedging Agreements, determined by all Lenders that are
counterparties to each Lender Hedging Agreement, in good faith and in a
commercially reasonable manner, based on net termination values and calculated
as if such Lender Hedging Agreements were terminated as of such determination
date and a payment were due thereunder to the Lender or its Affiliates and
furnished to the Administrative Agent and the Collateral Agent on a bi-monthly
basis (or more frequently, in the commercially reasonable discretion of the
Administrative Agent and the Collateral Agent).

 

“D 56” shall have the meaning assigned to
such term in the preamble hereto.

 

“Debt Issuance” shall mean the incurrence by
Holdings, a Borrower or any of their Subsidiaries of any Indebtedness after the
Closing Date (other than as permitted by Section 6.01).

 

“Default” shall mean any event, occurrence
or condition which is, or upon notice, lapse of time or both would constitute,
an Event of Default.

 

“Deposit Account Control Agreement” shall
have the meaning assigned to such term in the Security Agreement.

 

12

 

“Disqualified Capital Stock” shall mean any
Equity Interest which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the happening of
any event, (a) matures (excluding any maturity as the result of an
optional redemption by the issuer thereof) or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the
option of the holder thereof, in whole or in part, on or prior to the first
anniversary of the Final Maturity Date, (b) is convertible into or
exchangeable (unless at the sole option of the issuer thereof) for (i) debt
securities or (ii) any Equity Interests referred to in (a) above, in
each case at any time prior to the first anniversary of the Final Maturity
Date, or (c) contains any repurchase obligation which may come into effect
prior to payment in full of all Obligations.

 

“Dividend” with respect to any Person shall
mean that such Person has declared or paid a dividend or returned any equity
capital to its stockholders or authorized or made any other distribution,
payment or delivery of Property (other than common stock of such Person) or
cash to its stockholders as such, or redeemed, retired, purchased or otherwise
acquired, directly or indirectly, for a consideration any shares of any class
of its capital stock outstanding (or any options or warrants issued by such
Person with respect to its capital stock), or set aside any funds for any of
the foregoing purposes, or shall have permitted any of its Subsidiaries to
purchase or otherwise acquire for a consideration any shares of any class of
the capital stock of such Person outstanding (or any options or warrants issued
by such Person with respect to its capital stock).  Without limiting the foregoing, “Dividends”
with respect to any Person shall also include all payments made or required to
be made by such Person with respect to any stock appreciation rights, plans, equity
incentive or achievement plans or any similar plans or setting aside of any
funds for the foregoing purposes.

 

“Documents” shall mean all “documents,” as
such term is defined in the UCC as in effect on the date hereof in the State of
New York, in which any Person now or hereafter has rights.

 

“Dollars” or “$” shall mean lawful money of the United States.

 

“Eligible Accounts” shall have the meaning
assigned to such term in Section 2.19(a).

 

“Eligible In-Transit Inventory” shall mean,
as of any date of determination, without duplication of other Eligible
Inventory, Inventory (a) which has been shipped from any location for
receipt by a Borrower within sixty (60) days of the date of determination, but
which has not yet been received by a Borrower, (b) for which the purchase
order is in the name of, and title has passed to, a Borrower, (c) which is
fully insured on terms satisfactory to the Administrative Agent and the
Collateral Agent and has been fully paid for or is subject to payment terms
which are not overdue, (d) which is subject to a first priority Lien in
favor of the Administrative Agent (except for any possessory lien upon such
goods in the possession of a freight carrier or shipping company securing only
the freight charges for the transportation of such goods to Borrowers), (e) as
to which the Administrative Agent (or an agent acting on its behalf pursuant to
a customs broker agreement in form and substance satisfactory to the
Administrative Agent and the Collateral Agent) has control over the Documents
which evidence ownership of the subject Inventory, and (f) which otherwise
is not excluded from the definition of Eligible Inventory.

 

“Eligible Inventory” shall have the meaning
assigned to such term in Section 2.19(b).

 

13

 

“Embargoed Person” shall have the meaning
assigned to such term in Section 6.19.

 

“Environment” shall mean ambient air,
surface water and groundwater (including, without limitation, potable water,
navigable water and wetlands), the land surface or subsurface strata, natural
resources, the workplace or as otherwise defined in any Environmental Law.

 

“Environmental Claim” shall mean any claim,
notice, demand, order, action, suit, proceeding or other communication in each
case alleging liability for investigation, remediation, removal, cleanup,
response, corrective action, damages to natural resources, personal injury,
Property damage, fines, penalties or other costs resulting from, related to or
arising out of (i) the presence, Release or threatened Release in or into
the Environment of Hazardous Material at any location or (ii) any
violation of Environmental Law, and shall include, without limitation, any
claim seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from, related to or arising out of
the presence, Release or threatened Release of Hazardous Material or alleged
injury or threat of injury to health, safety, the Environment.

 

“Environmental Law” shall mean any and all
applicable present and future treaties, laws, statutes, ordinances,
regulations, rules, decrees, orders, judgments, consent orders, consent decrees
or other binding requirements, and the common law, relating to protection of
public health or the Environment, the Release or threatened Release of
Hazardous Material, natural resources or natural resource damages, or
occupational safety or health.

 

“Environmental Permit” shall mean any
permit, license, approval, consent or other authorization required by or from a
Governmental Authority under Environmental Law.

 

“Equity Interest” shall mean, with respect
to any Person, any and all shares, interests, participations or other
equivalents, including membership interests (however designated, whether voting
or non-voting), of equity of such Person, including, if such Person is a
partnership, partnership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, such partnership,
whether outstanding on the date hereof or issued after the Closing Date, but
excluding debt securities convertible or exchangeable into such equity.

 

“Equity Issuance” shall mean, without
duplication, any issuance or sale by Holdings or a Borrower (other than to
Holdings) after the Closing Date of (a) any Equity Interests (including
any Equity Interests issued upon exercise of any warrant or option) or any
warrants or options to purchase Equity Interests or (b) any other security
or instrument representing an Equity Interest (or the right to obtain any
Equity Interest) in the issuing or selling Person; provided, however,
that an Equity Issuance shall not include any such sale or issuance by Holdings
of not more than an aggregate amount of 5.0% of
the shares of its capital stock (including capital stock issued upon exercise
of any warrant or option or warrants or options to purchase its capital stock
but excluding Disqualified Capital Stock), in each case, to directors, officers
or employees of any Company.

 

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as the same may be amended from time to time.

 

14

 

“ERISA Affiliate” shall mean any trade or
business (whether or not incorporated) that, together with a Borrower, is
treated as a single employer under Section 414(b) or (c) of the
Code, or solely for purposes of Section 302 of ERISA and Section 412
of the Code, is treated as a single employer under Section 414 of the
Code.

 

“ERISA Event” shall mean (a) any “reportable
event,” as such term is defined in Section 4043(c) of ERISA or the
regulations issued thereunder, with respect to a Plan (other than an event for
which the 30-day notice period is waived by regulation); (b) the existence
with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412
of the Code or Section 302 of ERISA), whether or not waived, the failure
to make by its due date a required installment under Section 412(m) of the
Code with respect to any Plan or the failure to make any required contribution
to a Multiemployer Plan; (c) the filing pursuant to Section 412(d) of
the Code or Section 303(d) of ERISA of an application for a waiver of
the minimum funding standard with respect to any Plan; (d) the incurrence
by any Company or any of its ERISA Affiliates of any liability under Title IV
of ERISA with respect to the termination of any Plan; (e) the receipt by
any Company or any of its ERISA Affiliates from the PBGC or a plan
administrator of any notice relating to the intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan, or the occurrence of any
event or condition which could reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (f) the incurrence by any Company or any of its
ERISA Affiliates of any liability with respect to the withdrawal from any Plan
or Multiemployer Plan; (g) the receipt by any Company or its ERISA
Affiliates of any notice, concerning the imposition of Withdrawal Liability or
a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA; (h) the making
of any amendment to any Plan which could result in the imposition of a lien or
the posting of a bond or other security; and (i) the occurrence of a
nonexempt prohibited transaction (within the meaning of Section 4975 of
the Code or Section 406 of ERISA) which could result in liability to any
Company.

 

“Eurodollar Borrowing” shall mean a
Borrowing comprised of Eurodollar Revolving Loans.

 

“Eurodollar Revolving Borrowing” shall mean
a Borrowing comprised of Eurodollar Revolving Loans.

 

“Eurodollar Revolving Loan” shall mean any
Revolving Loan bearing interest at a rate determined by reference to the
Adjusted LIBOR Rate in accordance with the provisions of Article II.

 

“Event of Default” shall have the meaning
assigned to such term in Article VIII.

 

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

 

“Excluded Taxes” shall mean, with respect to
the Administrative Agent, any Lender, the Issuing Bank or any other recipient
of any payment to be made by or on account of any obligation of Borrowers
hereunder, (a) income or franchise taxes imposed on (or measured by) its
net income by the United States, or by the jurisdiction under the laws of which
such recipient 

 

15

 

is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office
is located, and (b) in the case of a Foreign Lender (other than an
assignee pursuant to a request by a Borrower under Section 2.16),
any withholding tax that is imposed on amounts payable to such Foreign Lender
at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 2.15(e), except to the extent that
such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from such Borrower with respect to such withholding tax pursuant to Section 2.15(a) (it
being understood and agreed, for the avoidance of doubt, that any withholding
tax imposed on a Foreign Lender as a result of a Change in Law or regulation or
interpretation thereof occurring after the time such Foreign Lender became a
party to this Agreement shall not be an Excluded Tax).

 

“Executive Order” shall have the meaning
assigned to such term in Section 3.21.

 

“Federal Funds Effective Rate” shall mean,
for any day, 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 on the next succeeding 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 the day for such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.

 

“Fee Letter” shall mean the confidential Fee
Letter, dated July 21, 2005, among Holdings, UBS Loan Finance LLC and UBS
Securities LLC.

 

“Fees” shall mean the Commitment Fees, the
Administrative Agent Fees, the Collateral Agent Fees, the LC Participation Fees
and the Fronting Fees.

 

“Final Maturity Date” shall mean September 1,
2010.

 

“Financial Officer” of any Person shall mean
the Chief Financial Officer, principal accounting officer, Treasurer or
Controller of such Person.

 

“FIRREA” shall mean the Federal Institutions
Reform, Recovery and Enforcement Act of 1989.

 

“Foreign Lender” shall mean any Lender that
is not, for United States federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a corporation or entity treated as a
corporation created or organized in or under the laws of the United States, or
any political subdivision thereof, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source or (iv) a
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
Persons have the authority to control all substantial decisions of such trust.

 

“Foreign Plan” shall mean any employee
benefit plan, program, policy, arrangement or agreement maintained or
contributed to by any Company with respect to employees employed outside the
United States.

 

16

 

“Foreign Subsidiary” shall mean a Subsidiary
that is organized under the laws of a jurisdiction other than the United States
or any state thereof or the District of Columbia.

 

“Fronting Fees” shall have the meaning
assigned to such term in Section 2.05(c).

 

“GAAP” shall mean generally accepted
accounting principles in the United States applied on a consistent basis.

 

“Governmental Authority” shall mean any
federal, state, local or foreign court, central bank or governmental agency,
authority, instrumentality or regulatory body.

 

“Governmental Real Property Disclosure Requirements”
shall mean any Requirement of Law of any Governmental Authority requiring
notification of the buyer, lessee, mortgagee, assignee or other transferee of
any Real Property, facility, establishment or business, or notification,
registration or filing to or with any Governmental Authority, in connection
with the sale, lease, mortgage, assignment or other transfer (including,
without limitation, any transfer of control) of any Real Property, facility,
establishment or business, of the actual or threatened presence or Release in
or into the Environment, or the use, disposal or handling of Hazardous Material
on, at, under or near the Real Property, facility, establishment or business to
be sold, leased, mortgaged, assigned or transferred.

 

“Guaranteed Obligations” shall have the
meaning assigned to such term in Section 7.01.

 

“Guarantees” shall mean the guarantees
issued pursuant to Article VII by Holdings and the Subsidiary
Guarantors.

 

“Guarantors” shall mean Holdings and the
Subsidiary Guarantors.

 

“Hazardous Materials” shall mean the
following:  hazardous substances;
hazardous wastes; polychlorinated biphenyls (“PCBs”) or any substance or
compound containing PCBs; asbestos or any asbestos-containing materials in any
form or condition; radon or any other radioactive materials including any
source, special nuclear or by-product material; petroleum, crude oil or any
fraction thereof; and any other pollutant or contaminant or hazardous, toxic or
dangerous chemicals, wastes, materials, compounds, constituents or substances,
as all such terms are used in their broadest sense and defined by or under any
Environmental Laws.

 

“Hedging Agreement” shall mean any interest
rate protection agreement, foreign currency exchange agreement, commodity price
protection agreement or other interest or currency exchange rate or commodity
price hedging arrangement, entered into for the purpose of hedging a Borrower’s
exposure to interest or exchange rates, loan credit exchange, security or
currency valuations or commodity prices and not for speculative purposes.

 

“Holdings” shall have the meaning assigned
to such term in the preamble hereto.

 

“Inactive Subsidiaries” shall mean each of
Axis Holdings Corporation, TD56 Holdings, Inc., Department 56 Trading Co.,
Ltd., D56 Canada Holding, Inc., Department 56 Minnesota, LLC,
BrowndaleTanley Limited, Department 56 Canada Co. and Samuel Kirk &
Son, Inc.

 

17

 

“Indebtedness” of any Person shall mean,
without duplication, (a) all obligations of such Person for borrowed money
or advances; (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments; (c) all obligations of such
Person upon which interest charges are customarily paid or accrued; (d) all
obligations of such Person under conditional sale or other title retention
agreements relating to Property purchased by such Person; (e) all
obligations of such Person issued or assumed as the deferred purchase price of
Property or services (excluding trade accounts payable and accrued obligations
incurred in the ordinary course of business on normal trade terms and not
overdue by more than 90 days); (f) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on Property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed; (g) all
Capital Lease Obligations, Purchase Money Obligations and synthetic lease
obligations of such Person; (h) all obligations of such Person in respect
of Hedging Agreements to the extent required to be reflected on a balance sheet
of such Person; (i) all Attributable Indebtedness of such Person; (j) all
obligations for the reimbursement of any obligor in respect of letters of
credit, letters of guaranty, bankers’ acceptances and similar credit transactions;
and (k) all Contingent Obligations of such Person in respect of Indebtedness or
obligations of others of the kinds referred to in clauses (a) through
(j) above.  The Indebtedness of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent that terms of such
Indebtedness provide that such Person is liable therefor.

 

“Indemnified Taxes” shall mean Taxes other
than Excluded Taxes.

 

“Indemnitee” shall have the meaning assigned
to such term in Section 11.03(b).

 

“Information” shall have the meaning
assigned to such term in Section 11.12.

 

“Instruments” shall mean all “instruments,”
as such term is defined in the UCC as in effect on the date hereof in the State
of New York, in which any Person now or hereafter has rights.

 

“Intellectual Property” shall have the
meaning assigned to such term in Section 3.05(c).

 

“Intercreditor Agreement” shall mean that
certain Intercreditor Agreement dated September 1, 2005, by and between
Holdings, Borrowers, Guarantors, the Administrative Agent and the Term Loan
Agent.

 

“Interest Election Request” shall mean a
request by a Borrower to convert or continue a Revolving Borrowing in
accordance with Section 2.08(b), substantially in the form of Exhibit D.

 

“Interest Payment Date” shall mean (a) with
respect to any ABR Revolving Loan (other than a Swingline Loan), the last day
of each March, June, September and December to occur during the
period that such Loan is outstanding and the Final Maturity Date of such Loan, (b) with
respect to any Eurodollar Revolving Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Revolving Loan with an Interest Period of more than three months’
duration, each day prior to the last day of such 

 

18

 

Interest Period that occurs at intervals of three
months duration after the first day of such Interest Period, and (c) with
respect to any Swingline Loan, the day that such Loan is required to be repaid.

 

“Interest Period” shall mean, with respect to
any Eurodollar Borrowing, the period commencing on the date of such Borrowing
and ending on the numerically corresponding day in the calendar month that is
one, two, three or six months thereafter, as a Borrower may elect; provided
that (a) if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day
and (b) any Interest Period that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing; provided, however, that an Interest Period shall
be limited to seven days to the extent required under Section 2.03(d).

 

“Inventory” shall mean all “inventory,” as
such term is defined in the UCC as in effect on the date hereof in the State of
New York, wherever located, in which any Person now or hereafter has rights.

 

“Inventory Appraisal” shall mean (a) on
the Closing Date, the appraisals prepared by Hilco Appraisal Services, LLC,
dated June 21, 2005 with respect to Inventory of D56 and dated June 26,
2005 with respect to Inventory of Lenox, and (b) thereafter, the most
recent inventory appraisal conducted by an independent appraisal firm and
delivered pursuant to Section 5.15 hereof.

 

“Investments” shall have the meaning assigned
to such term in Section 6.04.

 

“Issuing Bank” shall mean, as the context
may require, (a) UBS AG, Stamford Branch, with respect to Letters of
Credit issued by it; (b) JPMorgan Chase Bank, N.A. (including as successor
by merger to Bank One, NA) with respect to Letters of Credit issued by it; or (c) any
other Lender that may become an Issuing Bank pursuant to Section 2.18(i) or
2.18(k), with respect to Letters of Credit issued by such Lender; or (c) collectively,
all of the foregoing.

 

“Joinder Agreement” shall mean that certain
joinder agreement substantially in the form of Exhibit E.

 

“Landlord Lien Waiver and Access Agreement”
shall mean the Landlord Lien Waiver and Access Agreement, substantially in the
form of Exhibit F, or such other landlord lien waiver and access
agreement reasonably satisfactory in form and substance to the Administrative
Agent and the Collateral Agent.

 

“LC
Collateral Account” shall mean a collateral account in the
form of a deposit account established and maintained by the Administrative
Agent for the benefit of the Secured Parties, in accordance with the provisions
of Section 9.01.

 

19

 

“LC Commitment” shall mean the commitment of
the Issuing Bank to issue Letters of Credit pursuant to Section 2.18.

 

“LC Disbursement” shall mean a payment or
disbursement made by the Issuing Bank pursuant to a Letter of Credit.

 

“LC Exposure” shall mean at any time the sum
of (a) the aggregate undrawn amount of all outstanding Letters of Credit
at such time plus (b) the aggregate principal amount of all LC
Disbursements that have not yet been reimbursed at such time.  The LC Exposure of any Revolving Lender at
any time shall mean its Pro Rata Percentage of the aggregate LC Exposure at
such time.

 

“LC Participation Fee” shall have the
meaning assigned to such term in Section 2.05(c).

 

“LC Request” shall mean a request by a
Borrower in accordance with the terms of Section 2.18(b) and
substantially in the form of Exhibit A-3, or such other form as shall be approved by the
Administrative Agent.

 

“Leases” shall mean any and all leases,
subleases, tenancies, options, concession agreements, rental agreements,
occupancy agreements, access agreements and any other agreements of a similar
nature (including all amendments, extensions, replacements, renewals,
modifications and/or guarantees thereof), whether or not of record and whether
now in existence or hereafter entered into, affecting the use or occupancy of
all or any portion of any Real Property.

 

“Lender Addendum” shall mean with respect to
any Lender on the Closing Date, a lender addendum in the form of Exhibit A-4 ̧ to be executed and delivered
by such Lender on the Closing Date as provided in Section 11.14.

 

“Lender Affiliate” shall mean with respect
to any Lender that is a fund that invests in bank loans, any other fund that
invests in commercial loans and is managed or advised by the same investment
advisor as such Lender or by an Affiliate of such advisor.

 

“Lender Hedging Agreement” shall mean any
Hedging Agreement between a Borrower and any Person (or affiliate of such
Person) that was a Lender or an Affiliate of such lender at the time it entered
into such Hedging Agreement whether or not such Person has ceased to be a
Lender under this Agreement.

 

“Lenders” shall mean (a) the financial
institutions that have become a party hereto pursuant to a Lender Addendum
(other than any such financial institution that has ceased to be a party hereto
pursuant to an Assignment and Acceptance) and (b) any financial institution
that has become a party hereto pursuant to an Assignment and Acceptance.  Unless the context clearly indicates
otherwise, the term “Lenders” shall include the Swingline Lender.

 

“Lenox” shall have the meaning assigned to
such term in the preamble hereto.

 

20

 

“Letter of Credit” shall mean any (i) Standby
Letter of Credit and (ii) Commercial Letter of Credit, in each case,
issued or to be issued by an Issuing Bank for the account of a Borrower pursuant
to Section 2.18.

 

“Letter of Credit Expiration Date” shall
mean the date which is fifteen (15) days prior to the Revolving Maturity Date.

 

“Leverage Ratio” shall mean, at any date of
determination, the ratio of Consolidated Indebtedness (but specifically
excluding the guaranties referenced in Section 6.01(k))on such date
to Consolidated EBITDA for the Test Period then most recently ended.

 

“LIBOR Rate” shall mean, with respect to any
Eurodollar Borrowing for any Interest Period therefor, the rate per annum
determined by the Administrative Agent to be the arithmetic mean (rounded to
the nearest 1/100 of 1%) of the offered rates for deposits in Dollars with a
term comparable to such Interest Period that appears on the Telerate British
Bankers Assoc. Interest Settlement Rates Page (as defined below) at
approximately 11:00 a.m., London, England time, on the second full
Business Day preceding the first day of such Interest Period; provided, however,
that (i) if no comparable term for an Interest Period is available, the
LIBOR Rate shall be determined using the weighted average of the offered rates
for the two terms most nearly corresponding to such Interest Period and (ii) if
there shall at any time no longer exist a Telerate British Bankers Assoc.
Interest Settlement Rates Page, “LIBOR Rate” shall mean, with respect to each
day during each Interest Period pertaining to Eurodollar Borrowings comprising
part of the same Borrowing, the rate per annum equal to the rate at which the
Administrative Agent is offered deposits in Dollars at approximately 11:00 a.m.,
London, England time, two Business Days prior to the first day of such Interest
Period in the London interbank market for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to its portion of the amount of such Eurodollar Borrowing to be
outstanding during such Interest Period. 
“Telerate British Bankers Assoc.
Interest Settlement Rates Page” shall mean the display designated as
Page 3750 on the Telerate System Incorporated Service (or such other page as
may replace such page on such service for the purpose of displaying the
rates at which Dollar deposits are offered by leading banks in the London
interbank deposit market).

 

“Lien” shall mean, with respect to any
Property, (a) any mortgage, deed of trust, lien, pledge, encumbrance,
claim, charge, assignment, hypothecation, security interest or encumbrance of
any kind, any other type of preferential arrangement in respect of such
Property or any filing of any financing statement under the UCC or any other
similar notice of Lien under any similar notice or recording statute of any
Governmental Authority, including any easement, right-of-way or other
encumbrance on title to Real Property, in each of the foregoing cases whether
voluntary or imposed by law, and any agreement to give any of the foregoing; (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease having substantially
the same economic effect as any of the foregoing) relating to such Property;
and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.

 

“Loan Documents” shall mean this Agreement,
any Borrowing Base Certificate, the Letters of Credit, the Notes (if any), the
Security Documents, the Fee Letter (except for the 

 

21

 

provisions
thereof governing payment of fees to the Term Loan Agents), the Intercreditor
Agreement and each Lender Hedging Agreement.

 

“Loan Parties” shall mean Holdings,
Borrowers and the Subsidiary Guarantors.

 

“Loans” shall mean advances made to or at
the instructions of a Borrower pursuant to Article II hereof and
may constitute a Revolving Loan or a Swingline Loan.

 

“Margin Stock” shall have the meaning
assigned to such term in Regulation U.

 

“Material Adverse Effect” shall mean (a) a
material adverse effect on the business, Property, results of operations,
prospects or condition, financial or otherwise, or material agreements of
Borrowers and their Subsidiaries, taken as a whole; (b) material
impairment of the ability of the Loan Parties to fully and timely perform any
of their obligations under any Loan Document; (c) material impairment of
the rights of or benefits or remedies available to the Lenders, the
Administrative Agent or the Collateral Agent under any Loan Document; or (d) a
material adverse effect on the Collateral or the Liens in favor of the
Administrative Agent (for its benefit and for the benefit of the other Secured
Parties) on the Collateral or the priority of such Liens.

 

“Material Indebtedness” shall mean (a) the
Term Loan Indebtedness and (b) any other Indebtedness (other than the
Loans and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any Loan Party evidencing an aggregate outstanding principal
amount exceeding $3.0 million.  For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of such Loan Party in respect of any Hedging Agreement at any time
shall be the maximum aggregate amount (giving effect to any netting agreements)
that such Loan Party would be required to pay if such Hedging Agreement were
terminated at such time.

 

“Maximum Rate” shall have the meaning
assigned to such term in Section 11.13.

 

“Mortgage” shall mean an agreement,
including, but not limited to, a mortgage, deed of trust or any other document,
creating and evidencing a Lien on a Mortgaged Real Property, which shall be in
substantially in the form of Exhibit G, with such schedules and
including such provisions as shall be necessary to conform such document to
applicable local law or as shall be customary under applicable local law.

 

“Mortgaged Real Property” shall mean (a) each
Real Property identified on Schedule 1.01(a) hereto and (b) each
Real Property, if any, which shall be subject to a Mortgage delivered after the
Closing Date pursuant to Section 5.11(d).

 

“Multiemployer Plan” shall mean a multiemployer
plan within the meaning of Section 4001(a)(3) or
Section 3(37) of ERISA (a) to which any Company or any ERISA
Affiliate is then making or accruing an obligation to make contributions; (b) to
which any Company or any ERISA Affiliate has within the preceding five plan
years made contributions; or (c) with respect to which any Company could
incur liability.

 

“Net Cash Proceeds” shall mean:

 

22

 

(e)           with respect to any Asset Sale, the
cash proceeds received by any Loan Party (including cash proceeds subsequently
received (as and when received by any Loan Party) in respect of noncash
consideration initially received) net of (i) selling expenses (including
reasonable brokers’ fees or commissions, legal, accounting and other
professional and transactional fees, transfer and similar taxes and the Loan
Parties’ good faith estimate of income taxes paid or payable in connection with
such sale); (ii) amounts provided as a reserve, in accordance with GAAP,
against any liabilities under any indemnification obligations associated with
such Asset Sale (provided that, to the extent and at the time any such
amounts are released from such reserve, such amounts shall constitute Net Cash
Proceeds); (iii) the Loan Parties’ good faith estimate of payments
required to be made with respect to unassumed liabilities relating to the
assets sold within 90 days of such Asset Sale (provided that, to the
extent such cash proceeds are not used to make payments in respect of such
unassumed liabilities within 90 days of such Asset Sale, such cash proceeds
shall constitute Net Cash Proceeds); and (iv) the principal amount,
premium or penalty, if any, interest and other amounts on any Indebtedness for
borrowed money which is secured by a senior Lien on the asset sold in such
Asset Sale and which is repaid with such proceeds (other than any such
Indebtedness assumed by the purchaser of such asset);

 

(f)            with respect to any Debt Issuance or
Equity Issuance, the cash proceeds thereof, net of customary fees, commissions,
costs and other expenses incurred in connection therewith; and

 

(g)           with respect
to any Casualty Event, the cash insurance proceeds, condemnation awards and
other compensation received in respect thereof, net of all reasonable costs and
expenses incurred in connection with the collection of such proceeds, awards or
other compensation in respect of such Casualty Event.

 

“Net Current Assets” shall mean current
assets (other than cash, cash equivalents and tax-related current assets) of the
Acquired Business as of the Closing Date, minus current liabilities
(other than tax-related current liabilities) of the Acquired Business as of the
Closing Date.

 

“Net Recovery Cost Percentage” shall mean
the fraction, expressed as a percentage, (a) the numerator of which is the
amount equal to the recovery on the aggregate amount of the Inventory at such
time on a “net orderly liquidation value” basis as set forth in the most recent
Inventory Appraisal received by the Administrative Agent and the Collateral
Agent in accordance with Section 5.15, net of operating expenses,
liquidation expenses and commissions reasonably anticipated in the disposition
of such assets, and (b) the denominator of which is the original Cost of
the aggregate amount of the Eligible Inventory subject to appraisal.

 

“Non-Swept Accounts” shall have the meaning
assigned to such term in Section 2.04(f) hereto.

 

“Notes” shall mean any notes evidencing the
Revolving Loans or Swingline Loans issued pursuant to this Agreement, if any,
substantially in the form of Exhibit H-1 or H-2, as the case
may be.

 

23

 

“Obligations” shall mean (a) obligations
of Borrowers and any and all of the other Loan Parties from time to time
arising under or in respect of the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in such
proceeding) on the Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (ii) each
payment required to be made by Borrowers and any and all of the other Loan
Parties under this Agreement in respect of any Letter of Credit, when and as
due, including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or allowable
in such proceeding), of Borrowers and any and all of the other Loan Parties
under this Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of Borrowers and each Loan Party under or pursuant to this Agreement and the
other Loan Documents, (c) the due and punctual payment and performance of
all obligations of Borrowers and any and all of the other Loan Parties under
each Lender Hedging Agreement  and (d) the
due and punctual payment and performance of all obligations in respect of
overdrafts and related liabilities owed to any Lender, any Affiliate of a
Lender, the Administrative Agent or the Collateral Agent arising from treasury,
depositary and cash management services or in connection with any automated
clearinghouse transfer of funds.  All
Obligations of Borrowers hereunder and each other Loan Document shall be the
joint and several obligations of each Borrower.

 

“OFAC” shall have the meaning assigned to
such term in Section 3.21.

 

“Officers’ Certificate” shall mean a
certificate executed by the Chairman of the Board (if an officer), the Chief
Executive Officer, the President, one of the Financial Officers, each in his or
her official (and not individual) capacity.

 

“Other Taxes” shall mean any and all present
or future stamp or documentary taxes or any other excise or Property taxes,
charges or similar levies (including interest, fines, penalties and additions
to tax) arising from any payment made or required to be made under any Loan
Document or from the execution, delivery or enforcement of, or otherwise with
respect to, any Loan Document.

 

“Participant” shall have the meaning
assigned to such term in Section 11.04(d).

 

“PBGC” shall mean the Pension Benefit
Guaranty Corporation referred to and defined in ERISA.

 

“Perfection Certificate” shall mean a
certificate in the form of Exhibit I-1 or any other form approved
by the Administrative Agent, as the same shall be supplemented from time to
time by a Perfection Certificate Supplement or otherwise.

 

24

 

“Perfection Certificate Supplement” shall
mean a certificate supplement in the form of Exhibit I-2 or any
other form approved by the Administrative Agent.

 

“Permitted Acquisition” shall mean, with
respect to Borrowers or any Subsidiary Guarantor, any transaction or series of
related transactions for the direct or indirect (a) acquisition of all or
substantially all of the Property of any other Person, or of any business or
division of any other Person; (b) acquisition of in excess of 50% of the
Equity Interests of any other Person, or otherwise causing any other Person to
become a subsidiary of such Person; or (c) merger or consolidation or any
other combination with any other Person; provided, that, in the event of
any merger or consolidation involving a Borrower, a Borrower shall be the
surviving entity, if each of the following conditions are met:

 

(i)            no Default then exists or would result therefrom;

 

(ii)           after
giving effect to such acquisition on a Pro Forma Basis, (A) Borrowers
shall be in compliance with all covenants set forth in Section 6.08
as of the most recent Test Period (assuming, for purposes of Section 6.08,
that such acquisition, and all other Permitted Acquisitions consummated since
the first day of the relevant Test Period for each of the financial covenants
set forth in Section 6.08 ending on or prior to the date of such
acquisition, had occurred on the first day of such relevant Test Period), and (B) the
Loan Parties can reasonably be expected to remain in compliance with such
covenants through the Final Maturity Date and to have sufficient cash liquidity
to conduct their business and pay their respective debts and other liabilities
as they come due;

 

(iii)          no
Company shall, in connection with any such acquisition, assume or remain liable
with respect to any Indebtedness or other liability (including any material tax
or ERISA liability) of the related seller, except (A) to the extent
permitted under Section 6.01, and (B) obligations of the
seller incurred in the ordinary course of business and necessary or desirable
to the continued operation of the underlying properties, and any other such
liabilities or obligations not permitted to be assumed or otherwise supported
by any Company hereunder shall be paid in full or released as to the assets
being so acquired on or before the consummation of such acquisition;

 

(iv)          the
acquired Person shall be engaged in a business of a same or substantially
similar type as that conducted by Borrowers and the Subsidiaries on the Closing
Date and the Property acquired in connection with any such acquisition shall be
made subject to the Lien of the Security Documents and shall be free and clear
of any Liens, other than Permitted Liens;

 

(v)           the
Property acquired in connection with any such acquisition shall be made subject
to the Lien of the Security Documents on terms reasonably satisfactory to the
Administrative Agent and the Collateral Agent, and shall be free and clear of
any Liens, other than Permitted Liens, and the Administrative Agent and the
Collateral Agent shall have received all opinions, certificates, lien search
results and other documents reasonably requested by the Administrative Agent
and the Collateral Agent;

 

25

 

(vi)          at
the time such Permitted Acquisition is made, (A) average Borrowing
Availability for the 30 days prior to the date that such Permitted Acquisition
closes shall be not less than $35.0 million and (B) projected average
Borrowing Availability (exclusive of any Accounts and Inventory of the acquired
Person) for the 30 days beginning on the date that such Permitted Acquisition
closes shall be not less than $35.0 million based on projections presented by
Borrowers to the Administrative Agent and reasonably satisfactory to the
Administrative Agent;

 

(vii)         the
board of directors or other similar governing body of the acquired Person shall
not have indicated publicly its opposition to the consummation of such
acquisition;

 

(viii)        with
respect to any acquisition involving Acquisition Consideration of more than
$1.0 million, Borrowers shall have provided the Administrative Agent and the
Lenders with (A) historical financial statements for the last three fiscal
years of the Person or business to be acquired (audited if available without
undue cost or delay) and unaudited financial statements thereof for the most
recent interim period which are available, (B) reasonably detailed
projections for the succeeding five years pertaining to the Person or business
to be acquired, (C) a reasonably detailed description of all material
information relating thereto and copies of all material documentation
pertaining to such acquisition, and (D) all such other information and
data relating to such acquisition or the Person or business to be acquired as
may be reasonably requested by the Administrative Agent or the Required
Lenders;

 

(ix)           Borrowers
shall have delivered to the Administrative Agent and the Collateral Agent and
the Lenders an Officers’ Certificate certifying that (A) such acquisition
complies with this definition (which shall have attached thereto reasonably
detailed backup data and calculations showing such compliance), and (B) such
acquisition could not reasonably be expected to result in a Material Adverse
Effect; and

 

(x)            the
aggregate amount of the Acquisition Consideration for all Permitted
Acquisitions during the term of this Agreement shall not exceed $30.0 million; provided
that any Equity Interests constituting all or a portion of such Acquisition
Consideration shall not have a cash dividend requirement on or prior to the
Revolving Maturity Date.

 

“Permitted Liens” shall have the meaning
assigned to such term in Section 6.02.

 

“Person” shall mean any natural Person,
corporation, business trust, joint venture, association, company, limited
liability company, partnership or government, or any agency or political
subdivision thereof.

 

“Plan” shall mean any “employee pension
benefit plan” as such term is
defined in Section 3(2) of ERISA (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA which is maintained or contributed to by any
Company or its ERISA Affiliate or with respect to which any Company could incur
liability (including, without limitation, under Section 4069 of ERISA).

 

26

 

“Preferred Stock” shall mean, with respect
to any Person, any and all
preferred or preference Equity Interests (however designated) of such Person
whether now outstanding or issued after the Issue Date.

 

“Prior Lien” shall have the meaning assigned
to such term in the applicable Security Document.

 

“Pro Forma Basis” shall mean on a basis in
accordance with GAAP and Regulation S-X under the Securities Act and otherwise reasonably satisfactory to the
Administrative Agent.

 

“Property” shall mean any right, title or
interest in or to property or assets of any kind whatsoever, whether real,
personal or mixed and whether tangible or intangible and including Equity
Interests or other ownership interests of any Person and whether now in
existence or owned or hereafter entered into or acquired, including, without
limitation, all Real Property.

 

“Pro Rata Percentage” of any Revolving Lender at any time shall mean the percentage
of the total Revolving Commitment represented by such Lender’s Revolving
Commitment.

 

“Purchase Money Obligation” shall mean, for
any Person, the obligations of such Person in respect of Indebtedness incurred
for the purpose of financing all or any part of the purchase price of any
Property (including Equity Interests of any Person) or the cost of
installation, construction or improvement of any Property or assets and any
refinancing thereof; provided,
however, that such Indebtedness is
incurred within 90 days after such acquisition of such Property by such Person.

 

“Qualified Capital Stock” of any Person shall mean any capital stock of such
Person that is not Disqualified Capital Stock.

 

“Real Property” shall mean, collectively,
all right, title and interest (including any leasehold estate) in and to any
and all parcels of or interests
in real Property owned, leased or operated by any Person, whether by lease,
license or other means, together with, in each case, all easements,
hereditaments and appurtenances relating thereto, all improvements and
appurtenant fixtures and equipment, all general intangibles and contract rights
and other Property and rights incidental to the ownership, lease or operation
thereof.

 

“Refinancing” shall mean the repayment in
full and the termination of any commitment to make extensions of credit under
all of the outstanding indebtedness of Holdings and Borrowers and their
respective Subsidiaries listed on Schedule 1.01(b).

 

“Register” shall have the meaning assigned
to such term in Section 11.04(c).

 

“Regulation D” shall mean Regulation D of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof.

 

“Regulation T” shall mean Regulation T of
the Board as from time to time in effect and all official rulings and
interpretations thereunder or thereof.

 

27

 

“Regulation U” shall mean Regulation U of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof.

 

“Regulation X” shall mean Regulation X of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof.

 

“Related Parties” shall mean, with respect
to any person, such person’s Affiliates and the partners, directors, officers,
employees, agents and advisors of such person and of such person’s Affiliates.

 

“Release” shall mean any spilling, leaking, seepage, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, disposing, depositing, dispersing, emanating or migrating of any
Hazardous Material in, into, onto or through the Environment.

 

“Required Lenders” shall mean, at any time,
Lenders having at least a majority of the Revolving Commitments or, if the
Revolving Commitments have been terminated, a majority of the sum of Revolving
Exposure.

 

“Requirements of Law” shall mean, collectively, any and all
requirements of any Governmental Authority including any and all laws,
ordinances, rules, regulations or similar statutes or case law.

 

“Reserves” shall mean reserves established
against the Borrowing Base that the Administrative Agent or the Collateral
Agent may, in their reasonable credit
judgment, establish from time to time.

 

“Response” shall mean (a) “response” as
such term is defined in CERCLA, 42 U.S.C. § 9601(24), and (b) all
other actions required by any Governmental Authority or voluntarily undertaken
to: (i) clean up, remove, treat, abate or in any other way address any
Hazardous Material in the environment; (ii) prevent the Release or threat of Release, or
minimize the further Release, of any Hazardous Material; or (iii) perform
studies and investigations in connection with, or as a precondition to, clause
(i) or (ii) above.

 

“Responsible Officer” of any corporation
shall mean any executive officer or
Financial Officer of such corporation and any other officer or similar official
thereof with responsibility for the administration of the obligations of such
corporation in respect of this Agreement.

 

“Revolving Availability Period” shall mean
the period from and including the Closing Date to but excluding the earlier of
the Revolving Maturity Date and the date of termination of the Revolving
Commitments.

 

“Revolving Borrowing” shall mean a Borrowing comprised of Revolving
Loans.

 

“Revolving Commitment” shall mean, with
respect to each Lender, the commitment, if any, of such Lender to make
Revolving Loans hereunder up to the amount set forth on Schedule I to the
Lender Addendum executed and delivered by such Lender, or in the Assignment and
Acceptance pursuant to which such Lender assumed its Revolving Commitment, as
applicable, as the same may be (a) reduced from time to time pursuant to Section 2.07
and (b) reduced or 

 

28

 

increased from time to time pursuant to assignments by
or to such Lender pursuant to Section 11.04.  The aggregate amount of the Lenders’
Revolving Commitments on the Closing Date is $175.0 million.

 

“Revolving Credit Priority Collateral” shall
have the meaning provided to such term in the Intercreditor Agreement.

 

“Revolving Exposure” shall mean, with
respect to any Lender at any time, the aggregate principal amount at such time
of all outstanding Revolving Loans of such Lender, plus the aggregate
amount at such time of such Lender’s LC Exposure, plus the aggregate
amount at such of such Lender’s Swingline Exposure.

 

“Revolving Lender” shall mean a Lender with
a Revolving Commitment.

 

“Revolving Loan” shall mean a Loan made by
the Lenders to a Borrower pursuant to Section 2.01(b).

 

“Revolving Maturity Date” shall mean September 1, 2010.

 

“Sarbanes-Oxley Act” shall mean the United
States Sarbanes-Oxley Act of 2002, as amended, and all rules and
regulations promulgated thereunder.

 

“Secured Parties” shall mean, collectively,
the Administrative Agent, the Collateral Agent, each other Agent, the Issuing
Bank, the Lenders and each party
to a Lender Hedging Agreement if at the date of entering into such Lender
Hedging Agreement such Person (if it is an Affiliate of a Lender rather than a
Lender) executes and delivers to the Administrative Agent a letter agreement in
form and substance acceptable to the Administrative Agent pursuant to which
such Person (i) appoints the Administrative Agent as its agent under the
applicable Loan Documents and (ii) agrees to be bound by the provisions of
Section 9.02 and the Security Agreement.

 

“Securities Act” shall mean the Securities
Act of 1933, as amended.

 

“Security Agreement” shall mean a Security Agreement substantially in the form of
Exhibit J among the Loan Parties and the Administrative Agent for
the benefit of the Secured Parties.

 

“Security Agreement Collateral” shall mean
all Property pledged or granted as collateral pursuant to the Security
Agreement delivered on the
Closing Date or thereafter pursuant to Section 5.11.

 

“Security Documents” shall mean the Security
Agreement, the Mortgages, the
Perfection Certificate and each other security document or pledge agreement
delivered in accordance with applicable local or foreign law to grant a valid,
perfected security interest in any Property, and all UCC or other financing
statements or instruments of perfection required by this Agreement, the
Security Agreement or any Mortgage to be filed with respect to the security
interests in Property and fixtures created pursuant to the Security Agreement
or any Mortgage 

 

29

 

and any other document or instrument utilized to
pledge as collateral for the Obligations any Property of whatever kind or
nature.

 

“Seller” has the meaning assigned to such
term in the first recital hereto.

 

“Specified Dated Account” shall mean an
Account of a specific Account Debtor pursuant to dating terms provided by
Borrowers in the ordinary course of business consistent with past practices
where such specific Account Debtor and dating terms are acceptable to the
Administrative Agent and the Collateral Agent.

 

“Standby Letter of Credit”  shall mean
any standby letter of credit or similar instrument issued for the purpose of
supporting (a) workers’ compensation liabilities of a Borrower or any of
its Subsidiaries, (b) the obligations of third-party insurers of a
Borrower or any of its Subsidiaries arising by virtue of the laws of any
jurisdiction requiring third-party insurers to obtain such letters of credit,
or (c) performance, payment, deposit or surety obligations of a Borrower
or any of its Subsidiaries if required by law or governmental rule or
regulation or in accordance with custom and practice in the industry.

 

“Statutory Reserves” shall mean, for any
Interest Period for any Eurodollar Borrowing, the average maximum rate at which
reserves (including any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the United States Federal Reserve System in New York City with
deposits exceeding one billion dollars against
“Eurodollar liabilities” (as such term is used in Regulation D).  Eurodollar Borrowings shall be deemed to
constitute Eurodollar liabilities and to be subject to such reserve
requirements without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to any Lender under Regulation D.

 

“Subsidiary” shall mean, with respect to any
Person (the “parent”) at any date, any corporation, limited liability
company, partnership, association or other entity the accounts of which would
be consolidated with those of the parent in the parent’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing
more than 50% of the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise Controlled,
by the parent or one or more Subsidiaries of the parent or by the parent and
one or more Subsidiaries of the parent. 
Unless otherwise set forth herein, reference in this Agreement to “Subsidiary”
shall mean Borrowers’ direct and indirect Subsidiaries.

 

“Subsidiary Guarantor” shall mean each
Subsidiary listed on Schedule 1.01(c), and each other Subsidiary
that is or becomes a party to this Agreement pursuant to Section 5.11,
other than a Foreign Subsidiary.

 

“Supermajority Lenders” shall mean at any
time, Lenders having at least 66 2/3% of the Revolving Commitments or, if the
Revolving Commitments have been terminated, at least 66 2/3% of the Revolving
Exposure.

 

30

 

“Survey” shall mean a survey of any
Mortgaged Real Property (and all improvements thereon) (i) prepared by a
surveyor or engineer licensed to perform surveys in the state where such
Mortgaged Real Property is located, (ii) dated (or redated) not earlier
than six months prior to the date of delivery thereof unless there shall have
occurred within six months prior to such date of delivery any exterior
construction on the site of such Mortgaged Real Property, in which event such
survey shall be dated (or redated) after the completion of such construction or
if such construction shall not have been completed as of such date of delivery,
not earlier than 20 days prior to such date of delivery, (iii) certified
by the surveyor (in a manner reasonably acceptable to the Administrative Agent)
to the Administrative Agent, the Collateral Agent and the Title Company, (iv) complying
in all respects with the minimum detail requirements of the American Land Title
Association as such requirements are in effect on the date of preparation of
such survey and (v) sufficient for the Title Company to remove all
standard survey exceptions from the title insurance policy (or commitment)
relating to such Mortgaged Real Property and issue the endorsements of the type
required by Section 4.01(o)(iii).

 

“Swingline Commitment” shall mean the
commitment of the Swingline Lender to make loans pursuant to Section 2.17,
as the same may be reduced from time to time pursuant to Section 2.07
or Section 2.17.

 

“Swingline Exposure” shall mean at any time
the aggregate principal amount at such time of all outstanding Swingline
Loans.  The Swingline Exposure of any
Revolving Lender at any time shall equal its Pro Rata Percentage of the
aggregate Swingline Exposure at such time.

 

“Swingline Lender” shall have the meaning
assigned to such term in the preamble hereto.

 

“Swingline Loan” shall mean any Loan made by
the Swingline Lender pursuant to Section 2.17.

 

“Tax Return” shall mean all returns,
statements, filings, attachments and other documents or certifications required
to be filed in respect of Taxes.

 

“Taxes” shall mean (i) any and all
present or future taxes, duties, levies, fees, imposts, assessments,
deductions, withholdings or other charges, whether computed on a separate,
consolidated, unitary, combined or other basis and any and all liabilities
(including interest, fines, penalties or additions to tax) with respect to the
foregoing, and (ii) any transferee, successor, joint and several,
contractual or other liability (including, without limitation, liability
pursuant to Treasury Regulation §1.1502-6 (or any similar provision of state,
local or non-U.S. law)) in respect of any item described in clause (i).

 

“Term Loan Agent” shall mean the
Administrative Agent as such term is defined in the Term Loan Agreement.

 

“Term Loan Agreement” shall mean that
certain Term Loan Agreement dated as of September 1, 2005 by and among
Borrowers, Holdings, Guarantors, the lenders party thereto, UBS Securities,
LLC, as sole arranger and syndication agent and UBS AG, Stamford Branch, as
administrative agent and collateral agent.

 

31

 

“Term Loan Documents” shall mean the Loan
Documents, as such term is defined in the Term Loan Agreement.

 

“Term Loan Indebtedness” shall mean all
Indebtedness and other obligations of the Loan Parties under the Term Loan
Documents.

 

“Term Loan Priority Collateral” shall have
the meaning provided to such term in the Intercreditor Agreement.

 

“Test Period” shall mean, at any time, the
four consecutive fiscal quarters of Holdings then last ended (in each case
taken as one accounting period).

 

“Title Company” shall mean any title
insurance company as shall be retained by a Borrower and reasonably acceptable
to the Administrative Agent.

 

“Title Policy” shall have the meaning
assigned to such term in Section 4.01(o).

 

“Transaction Documents” shall mean the
Acquisition Documents, the Loan Documents and the Term Loan Documents.

 

“Transactions” shall mean, collectively, the
transactions to occur on or prior to the Closing Date pursuant to the
Transaction Documents, including (a) the consummation of the Acquisition; (b) the
execution and delivery of the Loan Documents and the initial borrowings
hereunder; (c) the execution and delivery of the Term Loan Documents and
the incurrence of the Term Loan Indebtedness thereunder; (d) the
Refinancing; and (e) the payment of all fees and expenses to be paid on or
prior to the Closing Date and owing in connection with the foregoing.

 

“Treasury Regulation” means the regulations
promulgated under the Code.

 

“Type,” when used in reference to any Loan
or Borrowing, refers to whether the rate of interest on such Loan, or on the
Loans comprising such Borrowing, is determined by reference to the Adjusted
LIBOR Rate or the Alternate Base Rate.

 

“UCC” shall mean the Uniform Commercial Code
as in effect in the applicable state or jurisdiction.

 

“Voting Stock” shall mean any class or
classes of capital stock of Holdings pursuant to which the holders thereof have
the general voting power under ordinary circumstances to elect at least a
majority of the Board of Directors of Holdings.

 

“Wholly Owned Subsidiary” shall mean, as to
any Person, (a) any corporation 100% of whose capital stock (other than
directors’ qualifying shares) is at the time owned by such Person and/or one or
more Wholly Owned Subsidiaries of such Person and (b) any partnership,
association, joint venture, limited liability company or other entity in which
such Person and/or one or more Wholly Owned Subsidiaries of such Person have a
100% equity interest at such time.

 

32

 

“Withdrawal Liability” shall mean liability
to a Multiemployer Plan as a result of a complete or partial withdrawal from
such Multiemployer Plan, as such terms are defined in Part I of Subtitle E
of Title IV of ERISA.

 

SECTION 1.02 
Classification of
Loans and Borrowings.  For purposes of this Agreement,
Loans may be classified and referred to by Class (e.g., a “Revolving Loan”)
or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar
Revolving Loan”).  Borrowings also may be
classified and referred to by Class (e.g., a “Revolving Borrowing”) or by
Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar
Revolving Borrowing”).

 

SECTION 1.03 
Terms Generally.  The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any Loan Document, agreement, instrument of other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the
words “herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement, and (f) the words “asset”
and “Property” shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.

 

SECTION 1.04 
Accounting Terms; GAAP.  Except
as otherwise expressly provided herein, all financial statements to be
delivered pursuant to this Agreement shall be prepared in accordance with GAAP
as in effect from time to time and all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect on the date
hereof unless agreed to by Borrowers and the Required Lenders.  In the event that any “Accounting Change” (as
defined below) shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this Agreement, then
the Borrowers and the Administrative Agent agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect
such Accounting Changes with the desired result that the criteria for
evaluating the Borrowers’ financial condition shall be the same after such
Accounting Changes as if such Accounting Changes had not been made.  Until such time as such an amendment shall
have been executed and delivered by Borrowers and the Required Lenders, all
financial covenants, standards and terms in this Agreement shall continue to be
calculated or construed as if such Accounting Changes had not occurred.  “Accounting Changes” refers to changes in
accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants or, if applicable, the
Securities and Exchange Commission (or successors thereto or agencies with
similar functions).

 

33

 

ARTICLE II.
 

THE CREDITS

 

SECTION 2.01 
Commitments.  Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly to make Revolving Loans to Borrowers, at any
time and from time to time after the Closing Date until the earlier of one
Business Day prior to the Revolving Maturity Date and the termination of the Commitment
of such Lender in accordance with the terms hereof, in an aggregate principal
amount at any time outstanding that will not result in such Lender’s Revolving
Exposure exceeding the lesser of (a) such Lender’s Revolving Commitment
and (b) such Lender’s Pro Rata Percentage multiplied by the Borrowing Base
then in effect.

 

Within the limits set
forth above and subject to the terms, conditions and limitations set forth
herein, Borrowers may borrow, pay or prepay and reborrow Revolving Loans.

 

SECTION 2.02 
Loans.  (a)  Each
Loan (other than Swingline Loans) shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
applicable Commitments; provided
that the failure of any Lender to make any Loan shall not in itself relieve any
other Lender of its obligation to lend hereunder (it being understood, however,
that no Lender shall be responsible for the failure of any other Lender to make
any Loan required to be made by such other Lender).  Except for Loans deemed made pursuant to Section 2.02(f),
Loans (other than Swingline Loans) comprising any Borrowing shall be in an
aggregate principal amount that is (i) in the case of ABR Revolving Loans,
integral multiples of $500,000 and not less than $500,000 or (B) in the
case of Eurodollar Revolving Loans, an integral multiple of $500,000 and not
less than $1.0 million or (ii) equal to the remaining available balance of
the applicable Revolving Commitments.

 

(b)           Subject to Sections 2.11 and 2.12,
each Borrowing shall be comprised entirely of ABR Revolving Loans or Eurodollar
Revolving Loans as Borrowers may request pursuant to Section 2.03.  Each Lender may at its option make any
Eurodollar Revolving Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect
the obligation of Borrowers to repay such Loan in accordance with the terms of
this Agreement.  Borrowings of more than
one Type may be outstanding at the same time; provided further that Borrowers shall not be entitled to
request any Borrowing that, if made, would result in more than fifteen
Eurodollar Borrowings outstanding hereunder at any one time.  For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.

 

(c)           Except with respect to Loans made
pursuant to Section 2.02(f), each Lender shall make each Loan
(other than Swingline Loans) to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds to such account in New
York City as the Administrative Agent may designate not later than 2:00 p.m.,
New York City time, and the Administrative Agent shall promptly credit the amounts
so received to an account as directed by Borrowers in the applicable Borrowing
Request maintained with the Administrative Agent or, if 

 

34

 

a Borrowing shall
not occur on such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the respective Lenders.

 

(d)           Unless the Administrative Agent shall
have received notice from a Lender prior to the date of any Borrowing that such
Lender will not make available to the Administrative Agent such Lender’s
portion of such Borrowing, the Administrative Agent may assume that such Lender
has made such portion available to the Administrative Agent on the date of such
Borrowing in accordance with paragraph (c) above, and the Administrative
Agent may, in reliance upon such assumption, make available to Borrowers on
such date a corresponding amount.  If the
Administrative Agent shall have so made funds available then, to the extent
that such Lender shall not have made such portion available to the
Administrative Agent, such Lender and Borrowers severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to Borrowers until the date such amount is repaid to the Administrative Agent
at (i) in the case of Borrowers, the interest rate applicable at the time
to the Loans comprising such Borrowing and (ii) in the case of such
Lender, a rate determined by the Administrative Agent to represent its cost of
overnight or short-term funds (which determination shall be conclusive absent
manifest error).  If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount shall
constitute such Lender’s Loan as part of such Borrowing for purposes of this
Agreement.

 

(e)           Notwithstanding any other provision
of this Agreement, Borrowers shall not be entitled to request, or to elect to
convert or continue, any Borrowing if the Interest Period requested with
respect thereto would end after the Revolving Maturity Date.

 

(f)            If the Issuing Bank shall not have
received from Borrowers the payment required to be made by Section 2.18(e) within
the time specified in such Section, the Issuing Bank will promptly notify the
Administrative Agent of the LC Disbursement and the Administrative Agent will
promptly notify each Revolving Lender of such LC Disbursement and its Pro Rata
Percentage thereof.  Each Revolving
Lender shall pay by wire transfer of immediately available funds to the
Administrative Agent on such date (or, if such Revolving Lender shall have
received such notice later than 12:00 (noon), New York City time, on any day,
not later than 11:00 a.m., New York City time, on the immediately following
Business Day), an amount equal to such Lender’s Pro Rata Percentage of such LC
Disbursement (it being understood that such amount shall be deemed to
constitute an ABR Revolving Loan of such Lender, and such payment shall be
deemed to have reduced the LC Exposure), and the Administrative Agent will
promptly pay to the Issuing Bank amounts so received by it from the Revolving
Lenders.  The Administrative Agent will
promptly pay to the Issuing Bank any amounts received by it from Borrowers
pursuant to Section 2.18(e) prior to the time that any
Revolving Lender makes any payment pursuant to this paragraph (f); any such
amounts received by the Administrative Agent thereafter will be promptly
remitted by the Administrative Agent to the Revolving Lenders that shall have
made such payments and to the Issuing Bank, as their interests may appear.  If any Revolving Lender shall not have made
its Pro Rata Percentage of such LC Disbursement available to the Administrative
Agent as provided above, such Lender and Borrowers severally agree to pay
interest on such amount, for each day from and including the date such amount
is required to be paid in accordance with this paragraph (f) to but
excluding the date such amount is paid, to the Administrative Agent for the account
of the Issuing Bank at (i) in the case of Borrowers, a rate 

 

35

 

per annum equal to
the interest rate applicable to Revolving Loans pursuant to Section 2.06(a),
and (ii) in the case of such Lender, for the first such day, the Federal
Funds Effective Rate, and for each day thereafter, the Alternate Base Rate.

 

SECTION 2.03 
Borrowing Procedure.  To
request a Revolving Borrowing, Borrowers shall notify the Administrative Agent
of such request by telephone (promptly confirmed by telecopy) (i) in the
case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time,
three Business Days before the date of the proposed Borrowing or (ii) in
the case of an ABR Borrowing, (other than Swingline Loans), not later than
12:00 noon, New York City time, on the Business Day of the proposed
Borrowing.  Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by Borrowers.  Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.02:

 

(a)           the
aggregate amount of such Borrowing;

 

(b)           the
date of such Borrowing, which shall be a Business Day;

 

(c)           whether
such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

 

(d)           in
the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; provided
that until the earlier of (i) the date on which the Administrative Agent
shall have notified Borrower that the primary syndication of the Commitments
has been completed and (ii) the date which is 30 days after the Closing
Date, the Interest Period shall be seven days;

 

(e)           the
location and number of the account to which funds are to be disbursed, which
shall comply with the requirements of Section 2.02; and

 

(f)            that
the conditions set forth in Section 4.02 (b)-(e) are
satisfied as of the date of the notice.

 

If no election as to the
Type of Borrowing is specified, then the requested Borrowing shall be an ABR
Borrowing.  If no Interest Period is
specified with respect to any requested Eurodollar Revolving Borrowing, then
Borrowers shall be deemed to have selected an Interest Period of one month’s
duration (subject to the proviso in clause (d) above).  Promptly following receipt of a Borrowing
Request in accordance with this Section 2.03, the Administrative
Agent shall advise each Lender of the details thereof and of the amount of such
Lender’s Loan to be made as part of the requested Borrowing.

 

SECTION 2.04 
Evidence of Debt;
Repayment of Loans.  (a)  Borrowers
hereby unconditionally promise to pay (i) to the Administrative Agent for
the account of each Revolving Lender, the then unpaid principal amount of each
Revolving Loan of such Lender on the Revolving Maturity Date and (ii) to
the Swingline Lender the then unpaid principal amount of each Swingline Loan on
the earlier of the Revolving Maturity Date and the first date after such 

 

36

 

Swingline Loan is
made that is the 15th or last day of a calendar month and is at least two
Business Days after such Swingline Loan is made; provided  that on each date that a Revolving Borrowing
is made, Borrowers shall repay all Swingline Loans that were outstanding on the
date such Borrowing was requested.

 

(b)           Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
Borrowers to such Lender resulting from each Loan made by such Lender from time
to time, including the amounts of principal and interest payable and paid to
such Lender from time to time under this Agreement.

 

(c)           The Administrative Agent shall
maintain accounts in which it will record (i) the amount of each Loan made
hereunder, the Type and Class thereof and the Interest Period applicable
thereto; (ii) the amount of any principal or interest due and payable or
to become due and payable from Borrowers to each Lender hereunder; and (iii) the
amount of any sum received by the Administrative Agent hereunder for the
account of the Lenders and each Lender’s share thereof.

 

(d)           The entries made in the accounts
maintained pursuant to paragraphs (b) and (c) above shall be prima
facie evidence of the existence and amounts of the obligations therein
recorded; provided that
the failure of any Lender or the Administrative Agent to maintain such accounts
or any error therein shall not in any manner affect the obligations of
Borrowers to repay the Loans in accordance with their terms.

 

(e)           Any Lender may request that Loans of
any Class made by it be evidenced by a promissory note.  In such event, Borrowers shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) in the form of Exhibit H-1 or H-2, as the case may
be.  Thereafter, the Loans evidenced by
such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 11.04) be represented by one or more
promissory notes in such form payable to the order of the payee named therein
(or, if such promissory note is a registered note, to such payee and its
registered assigns).

 

(f)            Within 45 days after the Closing
Date, Borrowers and the other Loan Parties shall establish, and thereafter
shall maintain in place, the cash management system described in this Section 2.04(f).  All funds received at any time by each
Borrower and each other Loan Party, whether from sales of Inventory or
collections of Accounts in the ordinary course of business, from Net Cash
Proceeds or otherwise, shall be deposited in one or more collection accounts
over which the Administrative Agent shall have complete dominion and control
and which shall be subject to a Deposit Account Control Agreement among such
Borrower or Loan Party, the Administrative Agent and the bank at which such
account is maintained, except that (x) the Loan Parties may maintain a bank
account or accounts in Canada (which shall be used for depositing payments
received from Canadian customers in Canadian dollars) which are not subject to
such a Deposit Account Control Agreement; provided, that, the aggregate amounts
held in all such Canadian bank accounts shall not at any time exceed the
Canadian dollar equivalent of $250,000 and (y) the Loan Parties may maintain
bank accounts in the United States which are not subject to such a Deposit
Account Control Agreement; provided that, the aggregate amounts held in all
such United States bank accounts shall not at any time exceed $5,000,000
(collectively, the 

 

37

 

“Non-Swept Accounts”). 
Each Deposit Account Control Agreement covering a collection account
shall provide that all funds on deposit in such account shall be transferred on
a daily basis to an account of the Administrative Agent.  Such transferred funds shall be applied on a
daily basis by the Administrative Agent to the repayment of any outstanding
Swingline Loans and, thereafter, to any outstanding Revolving Loans, in each
case without a reduction in the Commitments. 
Except for (i) payroll and other fiduciary accounts and (ii) other
accounts which do not hold more than $250,000 in the aggregate, all
disbursement accounts and all other bank accounts, including, without
limitation, all Canadian accounts and all Non-Swept Accounts, of each Borrower
and each other Loan Party shall be subject to a Deposit Account Control
Agreement which shall provide for the daily transfer of all funds on deposit
therein if an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have sent a notice directing the bank at which such
account is maintained to begin making such daily transfers (which notice may be
sent by the Administrative Agent only if an Event of Default shall have
occurred and be continuing).

 

SECTION 2.05 
Fees.  (a)  Commitment
Fee.  Borrowers agree to pay to the
Administrative Agent for the account of each Lender a commitment fee (a “Commitment
Fee”), equal to the Applicable Fee per annum on the average daily unused
amount of each Commitment of such Lender during the period from and including
the Closing Date to but excluding the date on which such Commitment
terminates.  Accrued Commitment Fees
shall be payable in arrears on the last day of March, June, September and December of
each year and on the date on which the Revolving Commitments terminate,
commencing on the first such date to occur after the date hereof.  All Commitment Fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).  For purposes of computing Commitment Fees, a
Revolving Commitment of a Lender shall be deemed to be used to the extent of
the outstanding Revolving Loans and LC Exposure of such Lender (and the
Swingline Exposure of such Lender shall be disregarded for such purpose).

 

(b)           Administrative Agent Fees;
Collateral Agent Fees.  (i)  Borrowers
agree to pay to the Administrative Agent, for its own account, the applicable
administrative agency fees set forth in the Fee Letter or such other fees
payable in the amounts and at the times separately agreed upon between
Borrowers and the Administrative Agent (the “Administrative Agent Fees”).

 

(ii)           Borrowers agree to pay to the
Administrative Agent and the Collateral Agent, each for its own account, the
applicable agency fee set forth in the Fee Letter or such other fees payable in
the amounts and at the times separately agreed upon between Borrower and the
Administrative Agent and the Collateral Agent, as the case may be (the “Collateral
Agent Fees”).

 

(c)           LC and Fronting Fees.  Borrowers agree to pay (i) to the
Administrative Agent for the account of each Revolving Lender a participation
fee (“LC Participation Fee”) with respect to its participations in
Letters of Credit, which shall accrue at a rate equal to the Applicable Margin
from time to time used to determine the interest rate on Eurodollar Revolving
Loans pursuant to Section 2.06 on the average daily amount of such
Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed
LC Disbursements) during the period from and including the Closing Date to but
excluding the later of the date on which such Lender’s Revolving Commitment
terminates and the date on which such Lender ceases to have any LC Exposure, 

 

38

 

and (ii) to the Issuing Bank a fronting fee (“Fronting Fee”),
which shall accrue at the rate of 0.25% per annum on the average daily amount
of the LC Exposure (excluding any portion thereof attributable to unreimbursed
LC Disbursements) during the period from and including the Closing Date to but
excluding the later of the date of termination of the Revolving Commitments and
the date on which there ceases to be any LC Exposure, as well as the Issuing
Bank’s standard fees with respect to the issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder.  LC Participation Fees and Fronting Fees
accrued through and including the last day of March, June, September and December of
each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Closing Date; provided that all such fees shall
be payable on the date on which the Revolving Commitments terminate and any such
fees accruing after the date on which the Revolving Commitments terminate shall
be payable on demand.  Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable within
10 days after demand.  All LC
Participation Fees and Fronting Fees shall be computed on the basis of a year
of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).  During an Event of Default, the LC Participation
Fee shall be increased to a per annum rate equal to 2% plus the otherwise
applicable rate with respect thereto.

 

(d)           All Fees shall be paid on the dates
due, in immediately available funds, to the Administrative Agent for
distribution, if and as appropriate, among the Lenders, except that the
Fronting Fees shall be paid directly to the Issuing Bank.  Once paid, none of the Fees shall be
refundable under any circumstances.

 

SECTION 2.06 
Interest on Loans and
Default Compensation.  (a)  Subject
to the provisions of Section 2.06(c), the Loans comprising each ABR
Borrowing, including each Swingline Loan, shall bear interest at a rate per
annum equal to the Alternate Base Rate plus the Applicable Margin in
effect from time to time.

 

(b)           Subject to the provisions of Section 2.06,
the Loans comprising each Eurodollar Borrowing shall bear interest at a rate
per annum equal to the Adjusted LIBOR Rate for the Interest Period in effect
for such Borrowing plus the Applicable Margin in effect from time to
time.

 

(c)           Notwithstanding the foregoing, during
an Event of Default, all Obligations shall, at the discretion of the
Administrative Agent or Required Lenders upon notice thereof to the Borrowers,
bear interest, after as well as before judgment, at a per annum rate equal to (i) in
the case of principal of any Loan, 2% plus the rate otherwise applicable
to such Loan as provided in the preceding paragraphs of this Section 2.06
or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided
in paragraph (a) of this Section 2.06.

 

(d)           Accrued interest on each Loan shall
be payable in arrears on each Interest Payment Date for such Loan and, in the
case of Revolving Loans, upon termination of the Revolving Commitments; provided that (i) interest
accrued pursuant to paragraph (c) of this Section 2.06 shall
be payable on demand (provided  that, absent demand, such interest
shall be payable on each Interest Payment Date and upon termination of the
Revolving Commitments), (ii) in the event of any repayment or prepayment of
any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of
the Revolving Availability Period), accrued interest on the 

 

39

 

principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.

 

(e)           All interest hereunder shall be
computed on the basis of a year of 360 days, except that interest computed by
reference to the Alternate Base Rate shall be computed on the basis of a year
of 365 days (or 366 days in a leap year), and in each case shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).  The applicable Alternate Base
Rate or Adjusted LIBOR Rate shall be determined by the Administrative Agent in
accordance with the provisions of this Agreement and such determination shall
be conclusive absent manifest error.

 

SECTION 2.07 
Termination and
Reduction of Commitments.  (a)   The
Revolving Commitments, the Swingline Commitment, and the LC Commitment shall
automatically terminate on the Revolving Maturity Date.

 

(b)           Borrowers may at any time terminate,
or from time to time reduce, the Commitments of any Class; provided that (i) each
reduction of the Commitments of any Class shall be in an amount that is an
integral multiple of $1.0 million and not less than $5.0 million and (ii) the
Revolving Commitments shall not be terminated or reduced if, after giving
effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.10,
the sum of the Revolving Exposures would exceed the aggregate amount of
Revolving Commitments.

 

(c)           Borrowers shall notify the
Administrative Agent of any election to terminate or reduce the Commitments
under paragraph (b) of this Section 2.07 at least three
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof.  Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof.  Each notice delivered by Borrowers pursuant
to this Section 2.07 shall be irrevocable.  Any termination or reduction of the
Commitments of any Class shall be permanent.  Each reduction of the Commitments of any Class shall
be made ratably among the Lenders in accordance with their respective
Commitments of such Class.

 

SECTION 2.08 
Interest Elections.  (a)  Each
Revolving Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an
initial Interest Period as specified in such Borrowing Request.  Thereafter, Borrowers may elect to convert
such Borrowing to a different Type or to continue such Borrowing and, in the
case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as
provided in this Section 2.08. 
Borrowers may elect different options with respect to different portions
of the affected Borrowing, in which case each such portion shall be allocated
ratably among the Lenders holding the Loans comprising such Borrowing, and the
Loans comprising each such portion shall be considered a separate
Borrowing.  Notwithstanding anything to
the contrary, Borrowers shall not be entitled to request any conversion or
continuation that, if made, would result in more than fifteen Eurodollar
Borrowings outstanding hereunder at any one time.  This Section 2.08 shall not apply
to Swingline Borrowings, which may not be converted or continued.

 

40

 

(b)           To make an election pursuant to this Section 2.08,
Borrowers shall notify the Administrative Agent of such election by telephone
or by email of a scanned and duly executed Interest Election Request by the
time that a Borrowing Request would be required under Section 2.03
if Borrowers were requesting a Revolving Borrowing of the Type resulting from
such election to be made on the effective date of such election.  Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery
or telecopy to the Administrative Agent of a written Interest Election Request
substantially in the form of Exhibit D.

 

(c)           Each telephonic and written Interest
Election Request shall specify the following information in compliance with Section 2.02:

 

(i)            the Borrowing to which such Interest
Election Request applies and, if different options are being elected with
respect to different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified
for each resulting Borrowing);

 

(ii)           the effective date of the election
made pursuant to such Interest Election Request, which shall be a Business Day;

 

(iii)          whether the resulting Borrowing is to
be an ABR Borrowing or a Eurodollar Borrowing; and

 

(iv)          if the resulting Borrowing is a
Eurodollar Borrowing, the Interest Period to be applicable thereto after giving
effect to such election, which shall be a period contemplated by the definition
of the term “Interest Period”; provided
that until the earlier of (i) the date on which the Administrative Agent
shall have notified Borrowers that the primary syndication of the Commitments
has been completed and (ii) the date which is 30 days after the Closing
Date, the Interest Period shall be seven days.

 

If any such Interest Election Request requests a
Eurodollar Borrowing but does not specify an Interest Period, then Borrowers
shall be deemed to have selected an Interest Period of one month’s duration
(subject to the proviso in clause (iv) above).

 

(d)           Promptly following receipt of an
Interest Election Request, the Administrative Agent shall advise each Lender of
the details thereof and of such Lender’s portion of each resulting Borrowing.

 

(e)           If an Interest Election Request with
respect to a Eurodollar Borrowing is not timely delivered prior to the end of
the Interest Period applicable thereto, then, unless such Borrowing is repaid
as provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. 
Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request of
the Required Lenders, so notifies Borrowers, then, after the occurrence and
during the continuance of such Event of Default (i) no outstanding
Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless
repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the
end of the Interest Period applicable thereto.

 

41

 

SECTION 2.09 
[Intentionally
Omitted]

 

SECTION 2.10 
Mandatory Prepayments
of Loans.

 

(a)           Revolving Loan Prepayments.

 

(i)            In the event of the termination of
all the Revolving Commitments, Borrowers shall, on the date of such termination,
repay or prepay all its outstanding Revolving Borrowings and all outstanding
Swingline Loans and replace all outstanding Letters of Credit and/or deposit an
amount equal to 105% of the LC Exposure in the LC Collateral Account.

 

(ii)           In the event of any partial reduction
of the Revolving Commitments, then (x) at or prior to the effective date of
such reduction, the Administrative Agent shall notify Borrowers and the
Revolving Lenders of the sum of the Revolving Exposures after giving effect
thereto and (y) if the sum of the Revolving Exposures would exceed the
aggregate amount of Revolving Commitments after giving effect to such
reduction, then Borrowers shall, on the date of such reduction, first,
repay or prepay all Swingline Loans, second, repay or prepay Revolving
Borrowings and third, replace or cash collateralize outstanding Letters
of Credit in accordance with the procedures set forth in Section 2.18(j)
in an amount sufficient to eliminate such excess.

 

(iii)          Except as otherwise expressly provided
in Section 10.10, in the event that the sum of all Lenders’
Revolving Exposures exceeds the Borrowing Base then in effect, the Borrowers
shall, without notice or demand, immediately apply an amount equal to such
excess to prepay the Loans and any interest accrued thereon, in accordance with
this Section 2.10(a)(iii). 
The Borrowers shall, first, repay or prepay Revolving Borrowings
and second, replace or cash collateralize outstanding Letters of Credit
in accordance with the procedures set forth in Section 2.18(j) in
an amount sufficient to eliminate such excess.

 

(iv)          In the event that the sum of all
Lenders’ Revolving Exposures exceeds the Revolving Commitments then in effect,
the Borrowers shall, without notice or demand, immediately first, repay
or prepay Revolving Borrowings and, second, replace or cash
collateralize outstanding Letters of Credit in accordance with the procedures
set forth in Section 2.18(j) in an amount sufficient to eliminate
such excess.

 

(v)           In the event that the aggregate LC
Exposure exceeds the LC Commitment then in effect, the Borrowers shall, without
notice or demand, immediately replace or cash collateralize outstanding Letters
of Credit in accordance with the procedures set forth in Section 2.18(j)
in an amount sufficient to eliminate such excess.

 

(b)           Asset Sales.  Not later than one Business Day following the
receipt of any Net Cash Proceeds of any Asset Sale, Borrowers shall, and shall
cause their Subsidiaries to, apply 100% of the Net Cash Proceeds received with
respect thereto to make prepayments in accordance with Section 2.10(f);
provided that, prior to
the repayment in full of the Term Loan Indebtedness, only Net Cash Proceeds
from Asset Sales of Revolving Credit Priority Collateral shall be subject to
the provisions of this Section 2.10(b).

 

(c)           Debt Issuance and Preferred Equity
Issuance.  Upon any Debt Issuance or
Equity Issuance of Equity Interests (other than common Equity Interests of
Holdings) after the Closing 

 

42

 

Date and after the
repayment in full of the Term Loan Indebtedness, Borrowers shall make
prepayments in accordance with Section 2.10(f) in an aggregate
principal amount equal to 100% of the Net Cash Proceeds of such Debt Issuance
or Equity Issuance.

 

(d)           Common Equity Issuance.  Upon any Equity Issuance of common Equity
Interests of Holdings after the Closing Date and after the repayment in full of
the Term Loan Indebtedness, Borrowers shall make prepayments in accordance with
Section 2.10(f) in an aggregate principal amount equal to 75%
of the Net Cash Proceeds of such Equity Issuance.

 

(e)           Casualty Events.  Not later than one Business Day following the
receipt of any Net Cash Proceeds from a Casualty Event, Borrowers shall, and
shall cause their Subsidiaries to, apply an amount equal to 100% of such Net
Cash Proceeds to make prepayments in accordance with Section 2.10(f);
provided that, prior to
the repayment in full of the Term Loan Indebtedness, only Net Cash Proceeds
from Casualty Events of Revolving Credit Priority Collateral shall be subject
to the provisions of this Section 2.10(e).

 

(f)            Application of Prepayments.

 

(i)            Prior to any mandatory prepayment of
Borrowings hereunder (other than prepayments under Section 2.10(a)),
Borrowers shall select the Borrowing or Borrowings to be prepaid and shall
specify such selection in the notice of such prepayment pursuant to Section 2.10(g).  Subject to Section 9.02 and so
long as no Default shall then exist and be continuing, all mandatory
prepayments shall be applied as follows: first, to Fees and reimbursable
expenses of Agents then due and payable pursuant to the Loan Documents; second,
to interest then due and payable on all Loans; third, to the principal
balance of the Swingline Loan until the same has been repaid in full; fourth,
to the outstanding principal balance of Revolving Credit Advances until the
same has been paid in full, including accompanying accrued interest and charges
under Sections 2.12, 2.13 and 2.15 (Borrowers may elect
which of any Eurodollar Borrowings is to be prepaid); fifth, to cash
collateralize all LC Exposures plus any accrued and unpaid Fees with respect
thereto (to be held and applied in accordance with Section 2.18(j)
hereof); sixth, to all other Obligations pro rata in accordance with the
amounts that such Lender certifies is outstanding; and, seventh,
returned to Borrowers or to such party as otherwise required by law.  Such mandatory prepayments of the Revolving
Loans shall not cause a corresponding reduction in the Revolving Commitments of
the Lenders.

 

(ii)           Amounts to be applied pursuant to
this Section 2.10 to the prepayment of Revolving Loans shall be
applied first to reduce outstanding ABR Revolving Loans.  Any amounts remaining after such application
shall be applied to prepay Eurodollar Revolving Loans.  Notwithstanding the foregoing, so long as no
Default shall have occurred and be continuing, if the amount of any prepayment
of Loans required under this Section 2.10 shall be in excess of the
amount of the ABR Revolving Loans at the time outstanding, only the portion of
the amount of such prepayment as is equal to the amount of such outstanding ABR
Revolving Loans shall be immediately prepaid and, at the election of Borrowers,
the balance of such required prepayment shall be prepaid immediately, together
with any amounts owing to the Lenders under Section 2.13.

 

43

 

(g)           Notice of Prepayment.  Borrowers shall notify the Administrative
Agent (and, in the case of prepayment of a Swingline Loan, the Swingline
Lender) by telephone (confirmed by telecopy) or by email of a scanned and duly
executed notice of any mandatory prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York
City time, three Business Days before the date of prepayment, (ii) in the
case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New
York City time, on the date of prepayment or (iii) in the case of
prepayment of a Swingline Loan, not later than 11:00 a.m., New York City
time, on the date of prepayment.  Each
such notice shall be irrevocable and shall specify the prepayment date, the
principal amount of each Borrowing or portion thereof to be prepaid and, in the
case of a mandatory prepayment, a reasonably detailed calculation of the amount
of such prepayment.  Promptly following
receipt of any such notice (other than a notice relating solely to Swingline
Loans), the Administrative Agent shall advise the Lenders of the contents
thereof.  Each partial prepayment of any
Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02,
except as necessary to apply fully the required amount of a mandatory
prepayment.  Each prepayment of a
Borrowing shall be applied ratably to the Loans included in the prepaid
Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.06.

 

SECTION 2.11 
Alternate Rate of
Interest.  If prior
to the commencement of any Interest Period for a Eurodollar Borrowing:

 

(a)           the Administrative Agent determines
(which determination shall be conclusive absent manifest error) that adequate
and reasonable means do not exist for ascertaining the Adjusted LIBOR Rate for such
Interest Period; or

 

(b)           the
Administrative Agent is advised by the Required Lenders that the Adjusted LIBOR
Rate for such Interest Period will not adequately and fairly reflect the cost
to such Lenders of making or maintaining their Loans included in such Borrowing
for such Interest Period;

 

then the Administrative Agent shall give notice
thereof to Borrowers and the Lenders by telephone or telecopy as promptly as
practicable thereafter and, until the Administrative Agent notifies Borrowers
and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of
any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing
shall be ineffective and (ii) if any Borrowing Request requests a
Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

 

SECTION 2.12 
Increased Costs.  (a)  If
any Change in Law shall:

 

(i)            impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBOR Rate) or the Issuing Bank;
or

 

44

 

(ii)           impose on any Lender or the Issuing
Bank or the London interbank market any other condition affecting this
Agreement or Eurodollar Revolving Loans made by such Lender or any Letter of
Credit or participation therein;

 

and the result of any of the foregoing shall be to
increase the cost to such Lender of making or maintaining any Eurodollar
Revolving Loan (or of maintaining its obligation to make any such Loan) or to
increase the cost to such Lender or the Issuing Bank of participating in,
issuing or maintaining any Letter of Credit or to reduce the amount of any sum
received or receivable by such Lender or the Issuing Bank hereunder (whether of
principal, interest or otherwise), then Borrowers will pay to Administrative
Agent for the account of such Lender or the Issuing Bank, as the case may be,
such additional amount or amounts as will compensate such Lender or the Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.

 

(b)           If any Lender or the Issuing Bank
determines that any Change in Law affecting such Lender or any lending office
of such Lender or such Lender’s holding company, if any,  regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s or the Issuing
Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding
company, if any, as a consequence of this Agreement, the Commitments of such
Lender or Issuing Bank or the Loans made by, or participations in Letters of
Credit held by, such Lender, or the Letters of Credit issued by the Issuing
Bank, to a level below that which such Lender or the Issuing Bank or such
Lender’s or the Issuing Bank’s holding company could have achieved but for such
Change in Law (taking into consideration such Lender’s or the Issuing Bank’s
policies and the policies of such Lender’s or the Issuing Bank’s holding
company with respect to capital adequacy), then from time to time Borrowers
will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
or such Lender’s or the Issuing Bank’s holding company for any such reduction
suffered.

 

(c)           A certificate of a Lender or the
Issuing Bank setting forth the amount or amounts necessary to compensate such
Lender or the Issuing Bank or its holding company, as the case may be, as
specified in paragraph (a) or (b) of this Section 2.12
shall be delivered to Borrowers and shall be conclusive absent manifest
error.  Borrowers shall pay
Administrative Agent for the account of such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.

 

(d)           Failure or delay on the part of any
Lender or the Issuing Bank to demand compensation pursuant to this Section 2.12
shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to
demand such compensation; provided
that Borrowers shall not be required to compensate a Lender or the Issuing Bank
pursuant to this Section 2.12 for any increased costs incurred or
reductions suffered more than six months prior to the date that such Lender or
the Issuing Bank, as the case may be, notifies Borrowers of the Change in Law
giving rise to such increased costs or reductions and of such Lender’s or the Issuing
Bank’s intention to claim compensation therefor (except that, if the Change in
Law giving rise to such increased costs or reductions is retroactive, then the
six-month period referred to above shall be extended to include the period of
retroactive effect thereof).

 

45

 

SECTION 2.13 
Breakage Payments.  In the event of (a) the payment or
prepayment, whether optional or mandatory, of any principal of any Eurodollar
Revolving Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion
of any Eurodollar Revolving Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Revolving Loan on the date specified in any notice delivered
pursuant hereto or (d) the assignment of any Eurodollar Revolving Loan
other than on the last day of the Interest Period applicable thereto as a
result of a request by Borrowers pursuant to Section 2.16, then, in
any such event, Borrowers shall compensate each Lender for the loss, cost and
expense attributable to such event.  In
the case of a Eurodollar Revolving Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on
the principal amount of such Loan had such event not occurred, at the Adjusted
LIBOR Rate that would have been applicable to such Loan, for the period from
the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the Eurodollar market.  A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this Section 2.13
shall be delivered to Borrowers and Administrative Agent and shall be
conclusive and binding absent manifest error. 
Borrowers shall pay Administrative Agent for the account of such Lender
the amount shown as due on any such certificate within 10 days after receipt
thereof.

 

SECTION 2.14 
Payments Generally;
Pro Rata Treatment; Sharing of Set-offs.  (a)  
Borrowers shall make each payment required to be made by them hereunder or
under any other Loan Document (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 2.12,
2.13 or 2.15, or otherwise) on or before the time expressly
required hereunder or under such other Loan Document for such payment (or, if
no such time is expressly required, prior to 2:00 p.m., New York City
time), on the date when due, in immediately available funds, without setoff, deduction
or counterclaim.  Any amounts received
after such time on any date may, in the discretion of the Administrative Agent,
be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. 
All such payments shall be made to the Administrative Agent at its
offices at 677 Washington Boulevard, Stamford, Connecticut, except payments to
be made directly to the Issuing Bank or Swingline Lender as expressly provided
herein and except that payments pursuant to Sections 2.12, 2.13, 2.15
and 11.03 shall be made to the Administrative Agent for the benefit of
to the Persons entitled thereto and payments pursuant to other Loan Documents
shall be made to the Administrative Agent for the benefit of the Persons
specified therein.  The Administrative
Agent shall distribute any such payments received by it for the account of any
other Person to the appropriate recipient promptly following receipt thereof.  If any payment under any Loan Document shall
be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension.  All payments under each Loan
Document shall be made in dollars.

 

46

 

(b)           If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of
interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal and unreimbursed LC
Disbursements then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements then
due to such parties.

 

(c)           If any Lender shall, by exercising
any right of setoff or counterclaim or otherwise, obtain payment in respect of
any principal of or interest on any of its Revolving Loans, or participations
in LC Disbursements or Swingline Loans resulting in such Lender receiving payment
of a greater proportion of the aggregate amount of its Revolving Loans and
participations in LC Disbursements and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans and participations in LC Disbursements
and Swingline Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans and participations in LC Disbursements and
Swingline Loans; provided
that (i) if any such participations are purchased and all or any portion
of the payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest, and (ii) the provisions of this paragraph shall not be
construed to apply to any payment made by Borrowers pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
a Lender as consideration for the assignment of or sale of a participation in
any of its Loans or participations in LC Disbursements to any assignee or
participant, other than to Borrowers or any Subsidiary or Affiliate thereof (as
to which the provisions of this paragraph shall apply).  Each Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against Borrowers rights of setoff and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of Borrowers
in the amount of such participation.

 

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

 

47

 

(e)           If any Lender shall fail to make any
payment required to be made by it pursuant to Section 2.02(c), 2.02(f),
2.14(d), 2.17(d), 2.18(d) or 11.03(d), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid.

 

SECTION 2.15 
Taxes.  (a)  Any
and all payments by or on account of any obligation of Borrowers hereunder or
under any other Loan Document shall be made without set-off, counterclaim or
other defense and free and clear of and without deduction or withholding for
any and all Indemnified Taxes; provided
that if a Borrower shall be required by law to deduct any Indemnified Taxes
from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions or
withholdings applicable to additional sums payable under this Section 2.15)
the Administrative Agent, Lender or Issuing Bank (as the case may be) receives
an amount equal to the sum it would have received had no such deductions or
withholdings been made, (ii) such Borrower shall make such deductions or
withholdings and (iii) such Borrower shall pay the full amount deducted or
withheld to the relevant Governmental Authority in accordance with applicable
law.

 

(b)           In addition, Borrowers shall pay any
Other Taxes to the relevant Governmental Authority in accordance with
applicable law.

 

(c)           Borrowers shall indemnify and pay the
Administrative Agent, each Lender and the Issuing Bank, within 10 Business Days
after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank,
as the case may be, on or with respect to any payment by or on account of any
obligation of Borrowers hereunder or under any other Loan Document (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section 2.15) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability delivered to a Borrower by a Lender or the Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or
the Issuing Bank, shall be conclusive absent manifest error.

 

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

 

(e)           Any Foreign Lender that is entitled
to an exemption from or reduction of withholding tax under the law of the
jurisdiction in which a Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall
deliver to Borrowers (with a copy to the Administrative Agent), at the time or
times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by Borrowers
as will permit such payments to be made without withholding or at a reduced
rate.  In the case of a U.S. Borrower,
each Foreign Lender either (1) (i) agrees to furnish 

 

48

 

either U.S. Internal Revenue Service Form W-8ECI or U.S. Internal
Revenue Service Form W-8BEN (or successor form) and (ii) agrees (for
the benefit of Borrowers and the Administrative Agent), to the extent it may
lawfully do so at such times, upon reasonable request by Borrowers or the
Administrative Agent, to provide a new Form W-8ECI or Form W-8BEN (or
successor form) upon the expiration or obsolescence of any previously delivered
form to reconfirm any complete exemption from, or any entitlement to a
reduction in, U.S. federal withholding tax with respect to any interest payment
hereunder or (2) in the case of any such Foreign Lender that is not a “bank”
within the meaning of Section 881(c)(3)(A) of the Code, (i) agrees
to furnish either (a) a “Non-Bank Certificate” in a form acceptable to the
Administrative Agent and the Borrowers and two accurate and complete original
signed copies of Internal Revenue Service Form W-8BEN (or successor form)
or (b) an Internal Revenue Form W-8ECI (or successor form),
certifying (in each case) to such Foreign Lender’s legal entitlement to an
exemption or reduction from U.S. federal withholding tax with respect to all
interest payments hereunder and (ii) agrees (for the benefit of Borrowers
and the Administrative Agent) to the extent it may lawfully do so at such
times, upon reasonable request by Borrowers or the Administrative Agent, to
provide a new Form W-8BEN or W-8ECI (or successor form) upon the
expiration or obsolescence of any previously delivered form to reconfirm any
complete exemption from, or any entitlement to a reduction in, U.S. federal
withholding tax with respect to any interest payment hereunder.

 

(f)            If the Administrative Agent or a
Lender (or an assignee) determines in its reasonable discretion that it has
received a refund of any Indemnified Taxes or Other Taxes as to which it has
been indemnified by Borrowers or with respect to which a Borrower has paid
additional amounts pursuant to this Section 2.15, it shall pay over
such refund to Borrowers (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower under this Section 2.15
with respect to the Indemnified Taxes or the Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of the Administrative Agent or such
Lender (or assignee) and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund); provided, however, that Borrowers,
upon the request of the Administrative Agent or such Lender (or assignee),
agree to repay the amount paid over to Borrowers (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender (or
assignee) in the event the Administrative Agent or such Lender (or assignee) is
required to repay such refund to such Governmental Authority.  Nothing contained in this Section 2.15(f) shall
require the Administrative Agent or any Lender (or assignee) to make available
its tax returns or any other information which it deems confidential to
Borrowers or any other Person. 
Notwithstanding anything to the contrary, in no event will any Lender be
required to pay any amount to Borrowers the payment of which would place such
Lender in a less favorable net after-tax position than such Lender would have
been in had the additional amounts giving rise to such refund of any
Indemnified Taxes or Other Taxes never been paid in the first place.

 

SECTION 2.16 
Mitigation
Obligations; Replacement of Lenders.

 

(a)           Mitigation of Obligations.  If any Lender requests compensation under Section 2.12,
or requires Borrowers to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or 

 

49

 

affiliates, if, in the reasonable judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable
pursuant to Section 2.12 or 2.15, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender.  Each Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

 

(b)           Replacement of Lenders.  If any Lender requests compensation under Section 2.12,
or if Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
or if any Lender defaults in its obligation to fund Loans hereunder, or if
Borrowers exercise their replacement rights under Section 11.02(c) 
then Borrowers may, at their sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 11.04), all of its interests, rights and
obligations under this Agreement and the other Loan Documents to an assignee
selected by Borrowers that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment); provided that (i) Borrowers
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Commitment is being assigned, the Issuing Bank and Swingline
Lender), which consent shall not unreasonably be withheld or delayed, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements and Swingline
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder, from the assignee (to the extent of such outstanding principal
and accrued interest and fees) or Borrowers (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.12 or payments required to be made
pursuant to Section 2.15, such assignment will result in a material
reduction in such compensation or payments. 
A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling Borrowers to require such assignment and
delegation cease to apply.

 

SECTION 2.17 
Swingline Loans.

 

(a)           Swingline Commitment.  Subject to the terms and conditions set forth
herein, the Swingline Lender agrees to make Swingline Loans to Borrowers from
time to time during the Revolving Availability Period, in an aggregate
principal amount at any time outstanding that will not result in the aggregate
principal amount of outstanding Swingline Loans exceeding $20.0 million, and
provided that after making a Swingline Loan, the sum of the total Revolving
Exposures shall not exceed the lesser of (A) the total Revolving
Commitments and (B) the Borrowing Base then in effect; provided that the Swingline
Lender shall not be required to make a Swingline Loan to refinance an
outstanding Swingline Loan.  Within the
foregoing limits and subject to the terms and conditions set forth herein,
Borrowers may borrow, repay and reborrow Swingline Loans.

 

(b)           Swingline Loans.  To request a Swingline Loan, Borrowers shall
notify the Administrative Agent of such request by telephone (confirmed by
telecopy), not later than 2:00 p.m., New York City time, on the day of a
proposed Swingline Loan.  Each such
notice shall be irrevocable and shall specify the requested date (which shall
be a Business Day), the account to 

 

50

 

which such Swingline Loan is deposited and amount of the requested
Swingline Loan.  The Administrative Agent
will promptly advise the Swingline Lender of any such notice received from
Borrowers.  The Swingline Lender shall
make each Swingline Loan available to Borrowers by means of a credit to the
account of Borrowers directed by Borrowers in the applicable request for the
Swingline Loans (or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.18(e),
by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on
the requested date of such Swingline Loan. 
Borrowers shall not request a Swingline Loan if at the time of and
immediately after giving effect to such request a Default has occurred and is
continuing.  Swingline Loans shall be
made in minimum amounts of $100,000 and integral multiples of $100,000 above
such amount.

 

(c)           Prepayment.  Borrowers shall have the right at any time
and from time to time to repay any Swingline Loan, in whole or in part, upon
giving written or telecopy notice (or telephone notice promptly confirmed by
written, or telecopy notice) to the Swingline Lender and to the Administrative
Agent before 1:00 p.m., New York City time on the date of repayment at the
Swingline Lender’s address for notices specified in the Swingline Lender’s
Administrative Questionnaire.  All
principal payments of Swingline Loans shall be accompanied by accrued interest
on the principal amount being repaid to the date of payment.

 

(d)           Participations.  The Swingline Lender may by written notice
given to the Administrative Agent not later than 12:00 noon, New York City
time, on any Business Day require the Revolving Lenders to acquire
participations on such Business Day in all or a portion of the Swingline Loans
outstanding; provided, that, the Swingline Lender shall require that the
Revolving Lenders acquire participations in all of the Swingline Loans
outstanding at least once weekly.  Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Lenders will participate.  Promptly upon
receipt of such notice, the Administrative Agent will give notice thereof to
each Revolving Lender, specifying in such notice such Lender’s Pro Rata
Percentage of such Swingline Loan or Loans. 
Each Revolving Lender hereby absolutely and unconditionally agrees, upon
receipt of notice as provided above, to pay to the Administrative Agent, for
the account of the Swingline Lender, such Lender’s Pro Rata Percentage of such Swingline
Loan or Loans.  Each Revolving Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever (provided
that such payment shall not cause such Lender’s Revolving Exposure to exceed
such Lender’s Revolving Commitment). 
Each Revolving Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner
as provided in Section 2.02(f) with respect to Loans made by
such Lender (and Section 2.02 shall apply, mutatis  mutandis,
to the payment obligations of the Revolving Lenders), and the Administrative
Agent shall promptly pay to the Swingline Lender the amounts so received by it
from the Revolving Lenders.  The
Administrative Agent shall notify Borrowers of any participations in any
Swingline Loan acquired pursuant to this paragraph, and thereafter payments in
respect of such Swingline Loan shall be made to the Administrative Agent and
not to the Swingline Lender.  Any amounts
received by the Swingline Lender from Borrowers (or other party on behalf of a
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to 

 

51

 

the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Revolving Lenders that shall have made their payments pursuant to this
paragraph and to the Swingline Lender, as their interests may appear.  The purchase of participations in a Swingline
Loan pursuant to this paragraph shall not relieve Borrowers of any default in
the payment thereof.

 

SECTION 2.18 
Letters of Credit.

 

(a)           General.  Subject to the terms and conditions set forth
herein, Borrowers may request the issuance of Letters of Credit for Borrowers’
account or the account of a Subsidiary in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period (provided that the applicable Borrower shall be a
co-applicant with respect to each Letter of Credit issued for the account of or
in favor of a Subsidiary).  In the event
of any inconsistency between the terms and conditions of this Agreement and the
terms and conditions of any form of letter of credit application or other
agreement submitted by Borrowers to, or entered into by Borrowers with, the
Issuing Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control.  The letters of
credit issued by JPMorgan Chase Bank, N.A. set forth on Schedule 2.18
shall, on the Closing Date, be deemed issued hereunder and shall constitute
Letters of Credit.

 

(b)           Request for Issuance, Amendment,
Renewal, Extension; Certain Conditions. 
To request the issuance of a Letter of Credit or the amendment, renewal
or extension of an outstanding Letter of Credit, Borrowers shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) an LC Request to the Issuing Bank
and the Administrative Agent not later than 11:00 a.m. on the third
Business Day preceding the requested date of issuance, amendment, renewal or
extension, or such later date and time as is acceptable to the Issuing
Bank.  A request for an initial issuance
of a Letter of Credit shall specify in form and detail satisfactory to the
Issuing Bank:  (i) the proposed
issuance date of the requested Letter of Credit (which shall be a Business
Day); (ii) the amount thereof; (iii) the expiry date thereof; (iv) the
name and address of the beneficiary thereof; (v) the documents to be
presented by such beneficiary in case of any drawing thereunder; (vi) the
full text of any certificate to be presented by such beneficiary in case of any
drawing thereunder; and (vii) such other matters as the Issuing Bank may
require.  A request for an amendment,
renewal or extension of any outstanding Letter of Credit shall specify in form
and detail satisfactory to the Issuing Bank (i) the Letter of Credit to be
amended, renewed or extended; (ii) the proposed date of amendment, renewal
or extension thereof (which shall be a Business Day); (iii) the nature of
the proposed amendment, renewal or extension; and (iv) such other matters
as the Issuing Bank may require.  If
requested by the Issuing Bank, Borrowers also shall submit a letter of credit
application on the Issuing Bank’s standard form in connection with any request
for a Letter of Credit.  A Letter of
Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit Borrowers shall
be deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension (i) the LC Exposure shall not exceed $20.0
million and (ii) the total Revolving Exposures shall not exceed the lesser
of (A) the total Revolving Commitments and (B) the total Borrowing
Base then in effect.  Unless the Issuing
Bank shall agree otherwise, no Letter of Credit shall be in an initial amount
less than $100,000, in the case of a Commercial Letter of Credit, or $500,000,
in the case of a Standby Letter of Credit.

 

52

 

(c)           Expiration Date.  Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) in the case of a
Standby Letter of Credit, (x) the date which is one year after the date of the issuance
of such Standby Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (y) the Letter of Credit
Expiration Date and (ii) in the case of a Commercial Letter of Credit, (x)
the date that is one year after the date of issuance of such Commercial Letter
of Credit (or, in the case of any renewal or extension thereof, one year after
such renewal or extension) and (y) the Letter of Credit Expiration Date.

 

(d)           Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender’s Pro Rata Percentage of the aggregate amount available to be
drawn under such Letter of Credit.  In
consideration and in furtherance of the foregoing, each Revolving Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender’s Pro Rata Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by Borrowers on the date
due as provided in paragraph (e) of this Section 2.18, or of
any reimbursement payment required to be refunded to Borrowers for any
reason.  Each Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph
in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a
Default or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.

 

(e)           Reimbursement.  If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, Borrowers shall reimburse such
LC Disbursement by paying to the Issuing Bank an amount equal to such LC
Disbursement not later than 2:00 p.m., New York City time, on the date
that such LC Disbursement is made, if Borrowers shall have received notice of
such LC Disbursement prior to 11:00 a.m., New York City time, on such
date, or, if such notice has not been received by Borrowers prior to such time,
on such date, then not later than 2:00 p.m., New York City time on (i) the
Business Day that Borrowers receive such notice, if such notice is received
prior to 11:00 a.m., New York City time, on the day of receipt, or (ii) the
Business Day immediately following the day that Borrowers receive such notice,
if such notice is not received prior to such time on the day of receipt; provided that Borrowers may,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.03 or 2.17 that such payment be financed with
an ABR Revolving Borrowing in an equivalent amount and, to the extent so
financed, Borrowers’ obligation to make such payment shall be discharged and
replaced by the resulting ABR Revolving Borrowing.  If Borrowers fail to make such payment when
due, the Issuing Bank shall notify the Administrative Agent and the
Administrative Agent shall notify each Revolving Lender of the applicable LC
Disbursement, the payment then due from Borrowers in respect thereof and such
Lender’s Pro Rata Percentage thereof. 
Promptly following receipt of such notice, each Revolving Lender shall
pay to the Administrative Agent its Pro Rata Percentage of the unreimbursed LC
Disbursement in the same manner as provided in Section 2.02(f) with
respect to Loans made by such Lender, and the Administrative Agent shall
promptly pay to the Issuing Bank the amounts so received by it from the
Revolving Lenders.  Promptly 

 

53

 

following receipt by the Administrative Agent of any payment from
Borrowers pursuant to this paragraph, the Administrative Agent shall, to the
extent that Revolving Lenders have made payments pursuant to this paragraph to
reimburse the Issuing Bank, distribute such payment to such Lenders and the
Issuing Bank as their interests may appear. 
Any payment made by a Revolving Lender pursuant to this paragraph to reimburse
the Issuing Bank for any LC Disbursement (other than the funding of ABR
Revolving Loans as contemplated above) shall not constitute a Loan and shall
not relieve Borrowers of its obligation to reimburse such LC Disbursement.

 

(f)            Obligations Absolute.  The obligation of Borrowers to reimburse LC
Disbursements as provided in paragraph (e) of this Section 2.18
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Agreement, or any term or
provision therein, (ii) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any respect or
any statement therein being untrue or inaccurate in any respect, (iii) payment
by the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit, or
(iv) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this Section 2.18,
constitute a legal or equitable discharge of, or provide a right of setoff against,
the obligations of Borrowers hereunder. 
Neither the Administrative Agent, any other Agent, the Lenders nor the
Issuing Bank, nor any of their Affiliates, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to
any Letter of Credit (including any document required to make a drawing
thereunder), any error in interpretation of technical terms or any consequence
arising from causes beyond the control of the Issuing Bank; provided  that the
foregoing shall not be construed to excuse the Issuing Bank from liability to
Borrowers to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by Borrowers to the
extent permitted by applicable law) suffered by Borrowers that are caused by
the Issuing Bank’s failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof.  The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the
part of the Issuing Bank (as finally determined by a court of competent
jurisdiction), the Issuing Bank shall be deemed to have exercised care in each
such determination.  In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

(g)           Disbursement Procedures.  The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit.  The
Issuing Bank shall promptly notify the Administrative Agent and Borrowers by 

 

54

 

telephone (confirmed by telecopy) of such demand for payment and
whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give
or delay in giving such notice shall not relieve Borrowers of its obligation to
reimburse the Issuing Bank and the Revolving Lenders with respect to any such
LC Disbursement (other than with respect to the timing of such reimbursement
obligation set forth in Section 2.18(e)).

 

(h)           Interim Interest.  If the Issuing Bank shall make any LC
Disbursement, then, unless Borrowers shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that Borrowers reimburse such LC Disbursement,
at the rate per annum then applicable to ABR Revolving Loans; provided that, if Borrowers fail
to reimburse such LC Disbursement when due pursuant to paragraph (e) of
this Section 2.18, then Section 2.06(c) shall
apply.  Interest accrued pursuant to this
paragraph shall be for the account of the Issuing Bank, except that interest
accrued on and after the date of payment by any Revolving Lender pursuant to
paragraph (e) of this Section 2.18 to reimburse the Issuing
Bank shall be for the account of such Lender to the extent of such payment.

 

(i)            Resignation or Removal of the
Issuing Bank.  The Issuing Bank may
resign as Issuing Bank hereunder at any time upon at least 30 days’ prior
notice to the Lenders, the Administrative Agent and Borrowers.  The Issuing Bank may be replaced at any time
by written agreement among Borrowers, the Administrative Agent, the replaced
Issuing Bank and the successor Issuing Bank. 
One or more Lenders may be appointed as additional Issuing Banks in
accordance with subsection (k) below. 
The Administrative Agent shall notify the Lenders of any such
replacement of the Issuing Bank or any such additional Issuing Bank.  At the time any such resignation or
replacement shall become effective, Borrowers shall pay all unpaid fees accrued
for the account of the replaced Issuing Bank pursuant to Section 2.05(c).  From and after the effective date of any such
resignation or replacement or addition, as applicable, (i) the successor
or additional Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be
issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to
such successor or such addition or to any previous Issuing Bank, or to such
successor or such additional Issuing Bank and all previous Issuing Banks, as
the context shall require.  After the
resignation or replacement of an Issuing Bank hereunder, the replaced Issuing
Bank shall remain a party hereto and shall continue to have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such resignation or replacement, but shall not be
required to issue additional Letters of Credit. 
If at any time there is more than one Issuing Bank hereunder, Borrowers
may, in their discretion, select which Issuing Bank is to issue any particular
Letter of Credit.

 

(j)            Cash Collateralization.  If any Event of Default shall occur and be
continuing, on the Business Day that Borrowers receive notice from the
Administrative Agent, Collateral Agent or the Required Lenders (or, if the
maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure
representing greater than 50% of the total LC Exposure) demanding the deposit
of cash collateral pursuant to this paragraph, Borrowers shall deposit in the
LC Collateral Account, in the name of the Administrative Agent or the
Collateral Agent, as applicable for the benefit of the Secured Parties, an
amount in cash equal to 105% of the LC Exposure as of such date plus any accrued and unpaid
interest thereon; provided
that the obligation to deposit such 

 

55

 

cash collateral shall become effective immediately, and such deposit
shall become immediately due and payable, without demand or other notice of any
kind, upon the occurrence of any Event of Default with respect to Borrowers
described in clause (g) or (h) of Article VIII.  Each such deposit shall be held by the
Administrative Agent or the Collateral Agent as collateral for the payment and
performance of the obligations of Borrowers under this Agreement.  The Administrative Agent or the Collateral
Agent, as applicable, shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account.  Other than any interest earned on the
investment of such deposits, which investments shall be made at the option and
sole discretion of the Administrative Agent or the Collateral Agent, as
applicable, and at the risk and expense of Borrowers, such deposits shall not
bear interest.  Interest or profits, if
any, on such investments shall accumulate in such account.  Moneys in such account shall be applied by
Administrative Agent and the Collateral Agent to reimburse the Issuing Bank for
LC Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
Borrowers for the LC Exposure at such time or, if the maturity of the Loans has
been accelerated (but subject to the consent of Revolving Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other Obligations of Borrowers under this Agreement.  If Borrowers are required to provide an
amount of cash collateral hereunder as a result of the occurrence of an Event
of Default, such amount plus
any accrued interest or realized profits of such amounts (to the extent not
applied as aforesaid) shall be returned to Borrowers within three Business Days
after all Events of Default have been cured or waived.  If Borrowers are required to provide an
amount of such collateral hereunder pursuant to Section 2.10(a),
such amount plus any
accrued interest or realized profits on account of such amount (to the extent
not applied as aforesaid) shall be returned to Borrowers as and to the extent
that, after giving effect to such return, Borrowers would remain in compliance
with Section 2.10(a) and no Default or Event of Default shall
have occurred and be continuing.

 

(k)           Additional Issuing Banks.  Borrowers may, at any time and from time to
time with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld) and such Lender, designate one or more additional
Lenders to act as an issuing bank under the terms of this Agreement.  Any Lender designated as an issuing bank
pursuant to this paragraph (k) shall be deemed (in addition to being a Lender)
to be the Issuing Bank with respect to Letters of Credit issued or to be issued
by such Lender, and all references herein and in the other Loan Documents to
the term “Issuing Bank” shall, with respect to such Letters of Credit, be
deemed to refer to such Lender in its capacity as Issuing Bank, as the context
shall require.

 

(l)            The Issuing Bank shall be under no
obligation to issue any Letter of Credit if:

 

(i)            any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Bank from issuing such Letter of Credit, or any law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction over
the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from,
the issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the Issuing
Bank is not otherwise compensated hereunder) not in effect on the Closing Date,
or shall impose upon the Issuing Bank any unreimbursed loss, 

 

56

 

cost or expense which was not
applicable on the Closing Date and which the Issuing Bank in good faith deems
material to it; or

 

(ii)           the issuance of such Letter of Credit
would violate one or more policies of the Issuing Bank.

 

(m)          The Issuing Bank shall be under no
obligation to amend any Letter of Credit if (i) the Issuing Bank would
have no obligation at such time to issue such Letter of Credit in its amended
form under the terms hereof, or (ii) the beneficiary of such Letter of
Credit does not accept the proposed amendment to such Letter of Credit.

 

SECTION 2.19 
Determination of
Borrowing Base.

 

(a)   Eligible Accounts.  On any date of determination of the Borrowing
Base, all of the Accounts owned by each Borrower and reflected in the most
recent Borrowing Base Certificate delivered by the Borrowers to the
Administrative Agent and the Collateral Agent shall be “Eligible Accounts” for
the purposes of this Agreement, except any Account to which any of the
exclusionary criteria set forth below applies. 
In addition, the Administrative Agent or the Collateral Agent shall have
the right from time to time in their reasonable credit judgment to establish,
modify or eliminate Reserves against Eligible Accounts, to adjust any of the
criteria set forth below and to establish new criteria with respect to Eligible
Accounts, subject to the approval of the Supermajority Lenders in the case of
any adjustment of criteria or establishment of new criteria which have the
effect of making more credit available. 
Eligible Accounts shall not include any of the following Accounts:

 

(i)            any Account in which the
Administrative Agent, on behalf of the Secured Parties, does not have a
perfected, first priority and, other than the second priority Lien securing the
Term Loan Indebtedness, exclusive Lien;

 

(ii)           any Account that is not owned by a
Borrower;

 

(iii)          any Account due from an Account Debtor
that is not domiciled in the United States or Canada (other than the Provinces
of Quebec, Newfoundland, Nunavut and the Northwest Territories) and (if not a
natural Person) organized under the laws of the United States or Canada (other
than the Provinces of Quebec, Newfoundland, Nunavut and the Northwest
Territories) or any political subdivision thereof (other than the Provinces of
Quebec, Newfoundland, Nunavut and the Northwest Territories);

 

(iv)          any Account that is payable in any
currency other than dollars or Canadian dollars; provided, that, not
more than the Canadian dollar equivalent of $6,000,000 of Accounts payable in
Canadian dollars shall be Eligible Accounts; provided, further,
that the Borrowing Base Certificate shall set forth the U.S. dollar equivalent
of such Canadian dollar Eligible Accounts and the methodology for calculating
such U.S. dollar equivalent shall be acceptable to the Administrative Agent and
the Collateral Agent;

 

(v)           any Account that does not arise from
the sale of goods or the performance of services by such Borrower in the
ordinary course of its business;

 

57

 

(vi)                              any Account that does not comply
with all applicable legal requirements, including, without limitation, all
laws, rules, regulations and orders of any Governmental Authority;

 

(vii)                           any Account (a) to the extent
that Borrowers’ right to receive payment is not absolute or is contingent upon
the fulfillment of any condition whatsoever unless such condition is satisfied
or (b) as to which Borrowers are not able to bring suit or otherwise
enforce its remedies against the Account Debtor through judicial or
administrative process or (c) that represents a progress billing
consisting of an invoice for goods sold or used or services rendered pursuant
to a contract under which the Account Debtor’s obligation to pay that invoice
is subject to the Borrowers’ completion of further performance under such
contract or is subject to the equitable lien of a surety bond issuer;

 

(viii)                        to the extent that any defense,
counterclaim, setoff or dispute is asserted as to such Account, it being
understood that the remaining balance of the Account shall be eligible;

 

(ix)                                any Account that is not a true and
correct statement of bona fide indebtedness incurred in the amount of the
Account for merchandise sold to or services rendered and accepted by the
applicable Account Debtor;

 

(x)                                   any Account with respect to which an
invoice or other electronic transmission constituting a request for payment,
reasonably acceptable to the Administrative Agent and the Collateral Agent in
form and substance, has not been sent on a timely basis to the applicable
Account Debtor according to the normal invoicing and timing procedures of
Borrowers;

 

(xi)                                any Account that arises from a sale
to any director, officer, other employee or Affiliate of a Borrower, or to any
entity that has any common officer or director with any Borrower;

 

(xii)                             to the extent a Borrower or any
Subsidiary is liable for goods sold or services rendered by the applicable
Account Debtor to such Borrower or any Subsidiary but only to the extent of the
potential offset;

 

(xiii)                          any Account that arises with respect
to goods that are delivered on a bill-and-hold, cash-on-delivery basis or
placed on consignment, guaranteed sale or other terms by reason of which the
payment by the Account Debtor is or may be conditional;

 

(xiv)                         any Account that is in default; provided that, without limiting
the generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:

 

(a)                                  any Account other
than a Specified Dated Account not paid within 120 days following its original
invoice date or that is more than 60 days
past due according to its original terms of sale, or any Specified Dated
Account that is more than 40 days past due according to its original terms of
sale; or

 

58

 

(b)                                 the Account Debtor
obligated upon such Account suspends business, makes a general assignment for
the benefit of creditors or fails to pay its debts generally as they come due;
or

 

(c)                                  a petition is filed
by or against any Account Debtor obligated upon such Account under any
bankruptcy law or any other federal, state or foreign (including any
provincial) receivership, insolvency relief or other law or laws for the relief
of debtors;

 

(xv)                            any Account that is the obligation
of an Account Debtor (other than an individual) if 50% or more of the dollar
amount of all Accounts owing by that Account Debtor are ineligible under the
other criteria set forth in this Section 2.19(a);

 

(xvi)                         any Account as to which any of the
representations or warranties in the Loan Documents are untrue;

 

(xvii)                      to the extent such Account is
evidenced by a judgment, Instrument or Chattel Paper;

 

(xviii)                   to the extent such Account exceeds
any credit limit established by the Administrative Agent and the Collateral
Agent, in their reasonable credit judgment, following prior notice of such
limit by the Administrative Agent or the Collateral Agent to the Borrowers;

 

(xix)                           that portion of any Account (a) in
respect of which there has been, or should have been, established by a Borrower
a contra account, whether in respect of contractual allowances with respect to
such Account, audit adjustment, anticipated discounts or otherwise, or (b) which
is due from an Account Debtor to whom a Borrower owes a trade payable, but only
to the extent of such trade payable or (c) which a Borrower knows is
subject to the exercise by an Account Debtor of any right of rescission,
set-off, recoupment, counterclaim or defense;

 

(xx)                              any Account acquired as part of a
Permitted Acquisition unless and until the Administrative Agent and the
Collateral Agent shall be satisfied as to its eligibility; or

 

(xxi)                           any Account on which the Account
Debtor is a Governmental Authority, unless the applicable Borrower has assigned
its rights to payment of such Account to the Administrative Agent, on behalf of
the Secured Parties, pursuant to the Assignment of Claims Act of 1940, as
amended, in the case of a federal Governmental Authority, and pursuant to
applicable law, if any, in the case of any other Governmental Authority, and
such assignment has been accepted and acknowledged by the appropriate
government officers.

 

(b)                                 Eligible
Inventory.  On any date of
determination of the Borrowing Base, all of the Inventory owned by each
Borrower and reflected in the most recent Borrowing Base Certificate delivered
by the Borrowers to the Administrative Agent and the Collateral Agent shall be “Eligible
Inventory” for the purposes of this Agreement, except any Inventory to which
any of the exclusionary criteria set forth below applies.  In addition, the Administrative Agent or the

 

59

 

Collateral Agent shall have the right from time to
time in their reasonable credit judgment to establish, modify or eliminate
Reserves against Eligible Inventory, to adjust any of the criteria set forth
below and to establish new criteria with respect to Eligible Inventory, subject
to the approval of the Supermajority Lenders in the case of any adjustment of
criteria or establishment of new criteria which have the effect of making more
credit available.  Eligible Inventory
shall not include any Inventory that:

 

(i)                                     the Administrative Agent, on behalf
of Secured Parties, does not have a perfected, first priority and, other than
the second priority Lien securing the Term Loan Indebtedness, exclusive Lien
upon;

 

(ii)                                  (a) is stored at a location
where the aggregate value of Inventory exceeds $250,000 unless the
Administrative Agent and the Collateral Agent have given their prior consent
thereto and unless either (x) a reasonably satisfactory Landlord Lien Waiver
and Access Agreement has been delivered to the Administrative Agent, or (y)
Reserves reasonably satisfactory to the Administrative Agent and the Collateral
Agent have been established with respect thereto or (b) is stored with a
bailee or warehouseman where the aggregate value of Inventory exceeds $250,000
unless either (x) a reasonably satisfactory, acknowledged bailee waiver letter
has been received by the Administrative Agent or (y) Reserves reasonably
satisfactory to the Administrative Agent and the Collateral Agent have been
established with respect thereto, or (c) is located at an owned location
subject to a mortgage in favor of a lender other than the Administrative Agent
or the Collateral Agent where the aggregate value of Inventory exceeds $250,000
unless either (x) a reasonably satisfactory mortgagee waiver has been delivered
to the Administrative Agent or (y) Reserves reasonably satisfactory to the
Administrative Agent and the Collateral Agent have been established with
respect thereto;

 

(iii)                               is placed on consignment, unless a
valid consignment agreement which is reasonably satisfactory to Administrative
Agent and the Collateral Agent is in place with respect to such Inventory;

 

(iv)                              is in transit, unless such Inventory
constitutes Eligible In-Transit Inventory;

 

(v)                                 is covered by a negotiable document
of title (other than Eligible In-Transit Inventory), unless such document has
been delivered to the Administrative Agent with all necessary endorsements,
free and clear of all Liens except those in favor of the Administrative Agent
and the Lenders and landlords, carriers, bailees and warehousemen if clause (ii) above
has been complied with;

 

(vi)                              is to be returned to suppliers;

 

(vii)                           is obsolete, unsalable, shopworn,
damaged or unfit for sale;

 

(viii)                        consists of display items or packing
or shipping materials, manufacturing supplies, work-in-process Inventory or
replacement parts;

 

(ix)                                is not of a type held for sale in
the ordinary course of Borrowers’ business;

 

60

 

(x)                                   breaches any of the representations
or warranties pertaining to Inventory set forth in the Loan Documents;

 

(xi)                                consists of Hazardous Material or
goods that can be transported or sold only with licenses that are not readily
available;

 

(xii)                             is not covered by casualty insurance
maintained as required by Section 5.04; or

 

(xiii)                          is acquired as part of a Permitted
Acquisition unless and until the Administrative Agent and the Collateral Agent
shall be satisfied as to its eligibility.

 

ARTICLE III.
 

REPRESENTATIONS AND WARRANTIES

 

Each Loan Party
represents and warrants to the Administrative Agent, the Collateral Agent, the
Issuing Bank and each of the Lenders (with references to the Companies being
references thereto after giving effect to the Transactions unless otherwise
expressly stated) that:

 

SECTION 3.01 
Organization; Powers.  Each Company (a) is duly organized and
validly existing under the laws of the jurisdiction of its organization, (b) has
all requisite power and authority to carry on its business as now conducted and
to own and lease its Property and (c) is qualified and in good standing
(to the extent such concept is applicable in the applicable jurisdiction) to do
business in every jurisdiction where such qualification is required, except in
such jurisdictions where the failure to so qualify or be in good standing,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

SECTION 3.02 
Authorization;
Enforceability. 
The Transactions to be entered into by each Loan Party are within such
Loan Party’s powers and have been duly authorized by all necessary action.  This Agreement has been duly executed and
delivered by each Loan Party and constitutes, and each other Loan Document to
which any Loan Party is to be a party, when executed and delivered by such Loan
Party, will constitute, a legal, valid and binding obligation of such Loan
Party, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

SECTION 3.03 
Governmental
Approvals; No Conflicts. 
Except as set forth on Schedule 3.03, the Transactions (a) do
not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except (i) such as have been
obtained or made and are in full force and effect, (ii) filings necessary
to perfect Liens created under the Loan Documents and (iii) consents,
approvals, registrations, filings or actions the failure of which to obtain or
perform could not reasonably be expected to result in a Material Adverse
Effect, (b) will not violate the charter, by-laws or other organizational
documents of any Company or any order of any Governmental Authority, (c) will
not violate, result in a default or require any consent or approval under any
applicable law or regulation, indenture, agreement or other instrument binding
upon any Company or its assets, or give rise to a right thereunder to

 

61

 

require any payment to be made by any Company, except
for violations, defaults or the creation of such rights that could not
reasonably be expected to result in a Material Adverse Effect, and (d) will
not result in the creation or imposition of any Lien on any Property of any
Company, except Liens created under the Loan Documents and Permitted Liens.

 

SECTION 3.04 
Financial Statements.  (a)  Holdings
and Borrowers have heretofore furnished to the Lenders (i) the audited
consolidated balance sheets and the related statements of income, stockholders’
equity and cash flows of Holdings and its Consolidated Subsidiaries as of and
for the fiscal years ended January 1, 2005 and January 3, 2004,
audited by and accompanied by the opinion of Deloitte & Touche LLP,
independent public accountants, (ii) the unaudited consolidated balance
sheets and the related statements of income and cash flows of Holdings and its
Consolidated Subsidiaries as of and for the fiscal quarter ended April 2,
2005, and (iii) the unaudited consolidated and consolidating balance sheets
and the related statements of income of Holdings and its Consolidated
Subsidiaries as of and for each of the fiscal months ending May 28, 2005, July 2,
2005 and July 30, 2005.  Such
financial statements have been prepared in accordance with GAAP consistently
applied and present fairly and accurately the financial condition and results
of operations and cash flows of Holdings and its Consolidated Subsidiaries as
of such dates and for such periods subject to year-end adjustments for interim
financial statements.

 

(b)                                 Holdings
and Borrowers have heretofore furnished to the Lenders: audited consolidated
balance sheets and the related statements of income, stockholders’ equity and
cash flows of the Acquired Business and its Consolidated Subsidiaries as of and
for the fiscal years ended April 30, 2005 and April 30, 2004, audited
by and accompanied by the opinion of Pricewaterhouse Coopers, independent
public accountants.  Such financial
statements have been prepared in accordance with GAAP consistently applied and
present fairly and accurately, in all material respects, the financial
condition and results of operations and cash flows of the Acquired Business and
its Consolidated Subsidiaries as of such dates and for such periods.

 

(c)                                  Except
as set forth in the financial statements described in Section 3.04(a) and
3.04(b) or the schedules hereto, as of the Closing Date, there are
no liabilities of any Company of any kind, whether accrued, contingent,
absolute, determined, determinable or otherwise, which if unpaid could
reasonably be expected to result in a Material Adverse Effect, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than liabilities under the Loan
Documents and the Term Loan Documents.

 

(d)                                 Holdings
and Borrowers have heretofore delivered to the Lenders unaudited pro forma
consolidated and consolidating balance sheets and statements of income, as well
as pro  forma EBITDA, as of and for the twelve-month period ended July 31, 2005, after giving
effect to the Transactions as if they had occurred on such date.  Such pro forma financial statements
have been prepared in good faith by the Loan Parties, based on the assumptions
stated therein (which assumptions are believed by the Loan Parties on the date
hereof and on the Closing Date to be reasonable), are based on the best
information available to the Loan Parties as of the date of delivery thereof,
accurately reflect all adjustments required to be made to give effect to the
Transactions, and in accordance with Regulation S-X under the Securities Act,
and present fairly on a Pro Forma Basis the estimated consolidated and
consolidating financial position and results

 

62

 

of operations of Holdings and Borrowers (including the
Acquired Business) as of and for such dates, assuming that the Transactions had
actually occurred at such dates, it being recognized by Lenders, however, that
projections as to future events are not to be viewed as facts and that the
actual results during the period or periods covered by said projections may
differ from the projected results.

 

(e)                                  Since
April 30, 2005 with respect to Lenox and its Subsidiaries and since January 1,
2005 with respect to Holdings and its Subsidiaries, there has been no event,
change or occurrence that, individually or in the aggregate, has had or could
reasonably be expected to result in a Material Adverse Effect.

 

SECTION 3.05 
Properties.  (a)  Each
Company has good title to, or valid leasehold interests in, all its Property
material to its business, except for minor irregularities or deficiencies in
title that, individually or in the aggregate, do not interfere with its ability
to conduct its business as currently conducted or to utilize such Property for
its intended purpose.  Title to all such
Property held by such Company is free and clear of all Liens except for
Permitted Liens.  The Property of the
Companies, taken as a whole, (i) is in good operating order, condition and
repair (ordinary wear and tear excepted) (except to the extent that the failure
to be in such condition could not reasonably be expected to result in a
Material Adverse Effect) and (ii) constitutes all the Property which is
required for the business and operations of the Companies as presently
conducted.

 

(b)                                 Schedule 3.05(b) contains
a true and complete list of each interest in Real Property owned by any Company
as of the date hereof and describes the type of interest therein held by such
Company.  Schedule 3.05(b) contains
a true and complete list of each Real Property leased, subleased or otherwise
occupied or utilized by any Company, as lessee, sublessee, franchisee or
licensee, as of the date hereof and describes the type of interest therein held
by such Company and whether such lease, sublease or other instrument requires
the consent of the landlord thereunder or other parties thereto to the
Transactions.

 

(c)                                  Except
for those agreements listed in Schedule 3.05(c), at least one Loan
Party owns, or is licensed to use, all patents, patent applications,
trademarks, trade names, service marks, copyrights, technology, trade secrets,
proprietary information, domain names, know-how and processes necessary for the
conduct of its business as currently conducted (the “Intellectual Property”),
except for those the failure to own or license which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.  With respect to those license
agreements listed in Schedule 3.05(c), each Loan Party is using
commercially reasonable efforts to obtain a consent from each third-party
licensor listed therein to become the licensee of the applicable license
agreement.  No claim has been asserted
and is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does any Loan Party know of any valid basis for any such
claim.  The use of such Intellectual
Property by each Loan Party does not infringe the rights of any Person, except
for such claims and infringements that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.

 

(d)                                 (i) No
Company has received any notice of, nor has any knowledge of, the occurrence or
pendency or contemplation of any Casualty Event affecting all or any portion of
the Property

 

63

 

and (ii) no Mortgage encumbers improved Real
Property that is located in an area that has been identified by the Secretary
of Housing and Urban Development as an area having special flood hazards and
with respect to which flood insurance has been made available under the
National Flood Insurance Act of 1968.

 

SECTION 3.06 
Equity Interests and
Subsidiaries.  (a)  Schedule 3.06(a) sets
forth a list of (i) all the Subsidiaries and their jurisdiction of
organization as of the Closing Date and (ii) the number of shares of each
class of its Equity Interests authorized, and the number outstanding (and the
record holder of such Equity Interests), on the Closing Date and the number of
shares covered by all outstanding options, warrants, rights of conversion or
purchase and similar rights at the Closing Date.  All Equity Interests of each Company (other
than Holdings) are duly and validly issued and are fully paid and
non-assessable and, except as set forth on Schedule 3.06(a), are
owned by Holdings or Borrowers, directly or indirectly through Wholly Owned
Subsidiaries and all Equity Interests of Borrowers are owned directly by
Holdings.  Each Loan Party is the record
and beneficial owner of, and has good and marketable title to, the Equity
Interests pledged by it under the Security Agreement, free of any and all
Liens, rights or claims of other Persons, except the security interest created
by the Security Agreement and the second priority security interest securing
the Term Loan Indebtedness, and there are no outstanding warrants, options or
other rights to purchase, or shareholder, voting trust or similar agreements
outstanding with respect to, or Property that is convertible into, or that
requires the issuance or sale of, any such Equity Interests.

 

(b)                                 No
consent of any Person including any other general or limited partner, any other
member of a limited liability company, any other shareholder or any other trust
beneficiary is necessary or desirable in connection with the creation,
perfection or first priority status of the security interest of the
Administrative Agent in any Equity Interests pledged to the Administrative
Agent for the benefit of the Secured Parties under the Security Agreement or
the exercise by the Administrative Agent of the voting or other rights provided
for in the Security Agreement or the exercise of remedies in respect thereof.

 

(c)                                  An
accurate organization chart, showing the ownership structure of Holdings,
Borrowers and each Subsidiary on the Closing Date, and after giving effect to
the Transaction, is set forth on Schedule 3.06(c).

 

SECTION 3.07 
Litigation; Compliance
with Laws.  (a)  There are no
actions, suits or proceedings at law or in equity by or before any Governmental
Authority now pending or, to the knowledge of any Company, threatened against
or affecting any Company or any business, Property or rights of any such Person
(i) that involve any Loan Document or the Transactions or (ii) as to
which there is a reasonable possibility of an adverse determination and that,
if adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.

 

(b)                                 Except
for matters covered by Section 3.17, no Company or any of its
Property is in violation of, nor will the continued operation of their Property
as currently conducted violate, any Requirements of Law (including any zoning
or building ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting the Real Property or is in
default with respect to any judgment, writ, injunction, decree or order of any
Governmental

 

64

 

Authority, where such violation or default could
reasonably be expected to result in a Material Adverse Effect.

 

SECTION 3.08 
Agreements.  (a)  No
Company is a party to any agreement or instrument or subject to any corporate
or other constitutional restriction that has resulted or could reasonably be
expected to result in a Material Adverse Effect.

 

(b)                                 No
Company is in default in any manner under any provision of any indenture or
other agreement or instrument evidencing Indebtedness, or any other agreement
or instrument to which it is a party or by which it or any of its Property are
or may be bound, where such default could reasonably be expected to result in a
Material Adverse Effect.

 

(c)                                  Schedule 3.08(c) accurately
and completely lists all material agreements (other than leases of Real
Property set forth on Schedule 3.05(b)) to which any Company is a
party which are in effect on the date hereof in connection with the operation
of the business conducted thereby and Borrowers have delivered to the
Administrative Agent complete and correct copies of all such material
agreements, including any amendments, supplements or modifications with respect
thereto.

 

SECTION 3.09 
Federal Reserve
Regulations.  (a)  No Company is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of buying or carrying Margin Stock.

 

(b)                                 No
part of the proceeds of any Loan or any Letter of Credit will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately,
for any purpose that entails a violation of, or that is inconsistent with, the
provisions of the regulations of the Board, including Regulation T, U or
X.  The pledge of the Security Agreement
Collateral pursuant to the Security Agreement does not violate such
regulations.

 

SECTION 3.10 
Investment Company
Act; Public Utility Holding Company Act.  No Company is (a) an “investment company”
or a company “controlled” by an “investment company,” as defined in, or subject
to regulation under, the Investment Company Act of 1940, as amended, or (b) a
“holding company,” an “affiliate” of a “holding company” or a “subsidiary
company” of a “holding company,” as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935, as amended.

 

SECTION 3.11 
Use of Proceeds.  On the Closing Date, Borrowers will use the
proceeds of the Revolving Loans, not to exceed $105,000,000, to finance a
portion of the Acquisition consideration and the Refinancing and to pay related
fees, commissions and expenses in connection therewith.  After the Closing Date, Borrowers will use
the proceeds of the Revolving Loans for working capital and general corporate
purposes.

 

SECTION 3.12 
Taxes.  Each Company has (a) timely filed or
caused to be timely filed all federal Tax Returns and all material, state,
local and foreign Tax Returns or materials required to have been filed by it
and all such Tax Returns are true and correct in all material respects and has (b) duly
and timely paid or caused to be duly and timely paid all Taxes (whether or not
shown on any Tax Return) due and payable by it and all assessments received by
it, except Taxes (i) that are being contested in good faith by appropriate
proceedings and for which such

 

65

 

Company shall have set aside on its books adequate
reserves in accordance with GAAP or (ii) which could not, individually or
in the aggregate, have a Material Adverse Effect; provided that any such contest of Taxes with respect to
Collateral shall also satisfy the Contested Collateral Lien Conditions.  Each Company has made adequate provision in
accordance with GAAP for all Taxes not yet due and payable.  Each Company is unaware of any proposed or
pending tax assessments, deficiencies or audits that could be reasonably
expected to, individually or in the aggregate, result in a Material Adverse
Effect.

 

SECTION 3.13 
No Material
Misstatements.  No
information, report, financial statement, exhibit or schedule furnished by
or on behalf of any Company to the Administrative Agent or any Lender in
connection with the negotiation of any Loan Document or included therein or
delivered pursuant thereto contained, contains or will contain any material misstatement
of fact or omission, omits or will omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were, are or will be made, not misleading as of the date such information is
dated or certified; provided
that to the extent any such information, report, financial statement, exhibit
or schedule was based upon or constitutes a forecast or projection, each
Company represents only that it acted in good faith and utilized reasonable
assumptions and due care in the preparation of such information, report,
financial statement, exhibit or schedule.

 

SECTION 3.14 
Labor Matters.  As of the date hereof and the Closing Date,
there are no strikes, lockouts or slowdowns against any Company pending or, to
the knowledge of any Company, threatened. 
The hours worked by and payments made to employees of any Company have
not been in violation of the Fair Labor Standards Act or any other applicable
federal, state, local or foreign law dealing with such matters in any manner
which could reasonably be expected to result in a Material Adverse Effect.  All payments due from any Company, or for
which any claim may be made against any Company, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of such Company except where the failure to do so could
not reasonably be expected to result in a Material Adverse Effect.  The consummation of the Transactions will not
give rise to any right of termination or right of renegotiation on the part of
any union under any collective bargaining agreement to which any Company is
bound.

 

SECTION 3.15 
Solvency.  Immediately after the consummation of the
Transactions to occur on the Closing Date and immediately following the making
of each Loan and after giving effect to the application of the proceeds of each
Loan taking into account rights of contribution against or reimbursement from
other Loan Parties, (a) the fair value of the assets of each Loan Party
(individually and on a consolidated basis with its Subsidiaries) will exceed
its debts and liabilities, subordinated, contingent or otherwise; (b) the
present fair saleable value of the Property of each Loan Party (individually
and on a consolidated basis with its Subsidiaries) will be greater than the
amount that will be required to pay the probable liability of its debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) each Loan Party
(individually and on a consolidated basis with its Subsidiaries) will be able
to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (d) each Loan
Party (individually and on a consolidated basis with its Subsidiaries) will not
have unreasonably small capital with

 

66

 

which to conduct its business in which it is engaged
as such business is now conducted and is proposed to be conducted following the
Closing Date.

 

SECTION 3.16 
Employee Benefit Plans.
  (a)  Each Company and its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of ERISA and
the Code and the regulations and published interpretations thereunder.  No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events,
could reasonably be expected to result in material liability of any Company or
any of its ERISA Affiliates or the imposition of a Lien on any of the assets of
a Company.  The present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No. 87)
did not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $250,000 the fair market value of the assets of
all such underfunded Plans.  Using
actuarial assumptions and computation methods consistent with subpart 1 of
subtitle E of Title IV of ERISA, the aggregate liabilities of each Company or
its ERISA Affiliates to all Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Multiemployer Plan, could not reasonably be expected to result in a
Material Adverse Effect.

 

(b)                                 None
of the Companies has any Foreign Plans.

 

SECTION 3.17 
Environmental Matters.  (a)  Except
as set forth in Schedule 3.17 or except as, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect:

 

(1)                                  The Companies and their businesses,
operations and Real Property are and in the last six years have been in
compliance with, and the Companies have no liability under, Environmental Law;

 

(2)                                  The Companies have obtained all
Environmental Permits required for the conduct of their businesses and
operations, and the ownership, operation and use of their assets, under
Environmental Law, all such Environmental Permits are valid and in good
standing and, under the currently effective business plan of the Companies, no
expenditures or operational adjustments are expected to be required in order to
renew or modify such Environmental Permits during the next five years except as
may be needed in the ordinary and normal course of business;

 

(3)                                  There has been no Release or
threatened Release of Hazardous Material on, at, under or from any real
Property or facility presently or formerly owned, leased or operated by the
Companies or their predecessors in interest that could result in liability of
the Companies under Environmental Law;

 

(4)                                  There is no Environmental Claim
pending or, to the knowledge of the Companies, threatened against the
Companies, or relating to the real Property currently or formerly owned, leased
or operated by the Companies or relating to the operations of the Companies,
and there are no actions, activities, circumstances, conditions, events or
incidents that could reasonably be expected to form the basis of such an Environmental
Claim; and

 

67

 

(5)                                  No Person with an indemnity or
contribution obligation to the Companies relating to compliance with or
liability under Environmental Law is in default with respect to such obligation.

 

(b)                                 Except
as set forth in Schedule 3.17:

 

(1)                                  No Company is obligated to perform
any action or otherwise incur any expense under Environmental Law pursuant to
any order, decree, judgment or agreement by which it is bound or has assumed by
contract or agreement, and no Company is conducting or financing any Response
pursuant to any Environmental Law with respect to any Real Property or any
other location except as, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect;

 

(2)                                  No Real Property or facility owned,
operated or leased by the Companies and, to the knowledge of the Companies, no
real Property or facility formerly owned, operated or leased by the Companies
or any of their predecessors in interest is (i) listed or proposed for
listing on the National Priorities List promulgated pursuant to CERCLA or (ii) listed
on the Comprehensive Environmental Response, Compensation and Liability
Information System promulgated pursuant to CERCLA or (iii) included on any
similar list maintained by any Governmental Authority including, without
limitation, any such list relating to petroleum except as, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect;

 

(3)                                  No Lien has been recorded or, to the
knowledge of any Company, threatened under any Environmental Law with respect
to any Real Property or assets of the Companies;

 

(4)                                  The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not require any notification, registration, filing,
reporting, disclosure, investigation, remediation or cleanup pursuant to any
Governmental Real Property Disclosure Requirements or any other Environmental
Law except where the failure to provide or perform any of the foregoing could
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect; and

 

(5)                                  The Companies have made available to
Lenders all material reports and assessments in the possession, custody or
control of, or otherwise reasonably available to, the Companies concerning
compliance with or liability under Environmental Law including, without
limitation, those concerning the existence of Hazardous Material at real Property
or facilities currently or formerly owned, operated, leased or used by the
Companies except as, individually or in the aggregate, could not reasonably be
expected to reveal or result in a Material Adverse Effect.

 

SECTION 3.18 
Insurance.  Schedule 3.18 sets forth a true,
complete and correct description of all insurance maintained by each Company as
of the Closing Date.  As of each such
date, such insurance is in full force and effect and all premiums have been
duly paid.  Each

 

68

 

Company has insurance in such amounts and covering
such risks and liabilities as are in accordance with normal industry practice.

 

SECTION 3.19 
Security Documents.  (a)  The
Security Agreement is effective to create in favor of the Administrative Agent
for the benefit of the Secured Parties, a legal, valid and enforceable security
interest in and Lien on the Security Agreement Collateral and, when (i) financing
statements and other filings in appropriate form are filed in the offices
specified on Schedule 6 to the Perfection Certificate and (ii) upon
the taking of possession or control by the Administrative Agent of the Security
Agreement Collateral with respect to which a security interest may be perfected
only by possession or control (which possession or control shall be given to
the Administrative Agent to the extent possession or control by the
Administrative Agent is required by the Security Agreement), the Lien created
by the Security Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the grantors thereunder
in the Security Agreement Collateral (other than such Security Agreement
Collateral in which a security interest cannot be perfected under the UCC as in
effect at the relevant time in the relevant jurisdiction), in each case subject
to no Liens other than Permitted Liens.

 

(b)                                 To
the extent that the federal trademark laws of the United States are applicable
to security interests in trademarks, the proper filing and recordation of the
Security Agreement or a short form thereof in the United States Patent and
Trademark Office against all U.S. registered trademarks and trademark
applications (other than intent-to-use trademark applications) set forth on Schedule 3.19(b) (“Trademarks”)
within three (3) months of the date of execution thereof will render the
Administrative Agent’s Lien on, and security interest in, for the benefit of
the Secured Parties, the applicable Loan Party’s right title and interest in
such Trademarks fully perfected and effective against subsequent purchasers of
such Trademarks, in each case subject to no Liens other than Permitted Liens.

 

(c)                                  To
the extent that the federal patent laws of the United States are applicable to
security interests in patents, the proper filing and recording of the Security
Agreement or a short form thereof at the United States Patent and Trademark
Office against the U.S. patents and patent applications set forth on Schedule 3.19(c) (“Patents”)
within three (3) months of the date of execution thereof will render the
Administrative Agent’s Lien on, and security interest in, for the benefit of
the Secured Parties, the applicable Loan Party’s right, title and interest in
such Patents fully perfected and effective against subsequent purchasers of
such Patents, in each case subject to no Liens other than Permitted Liens.

 

(d)                                 To
the extent that the federal copyright laws of the United States are applicable
to security interests in copyrights, the proper filing and recording of the
Security Agreement or a short form thereof at the United States Copyright
Office against the U.S. registered copyrights set forth on Schedule 3.19(d) (“Copyrights”)
within one (1) month of the date of execution thereof will render the
Administrative Agent’s Lien on, and security interest in, for the benefit of
the Secured Parties, the applicable Loan Party’s right, title and interest in
such Copyrights fully perfected and effective against subsequent transferees of
such Copyrights, in each case subject to no Liens other than Permitted Liens.

 

69

 

(e)                                  Each
Mortgage executed and delivered as of the Closing Date is, or, to the extent
any Mortgage is duly executed and delivered thereafter by the relevant Loan
Party, will be, effective to create, in favor of the Administrative Agent, for
its benefit and the benefit of the Secured Parties, a legal, valid and
enforceable second priority Lien on and security interest in all of the Loan
Parties’ right, title and interest in and to the Mortgaged Real Properties
thereunder and the proceeds thereof (junior only to the Lien securing the Term
Loan Indebtedness), and when the Mortgages are filed in the offices specified
on Schedule 1.01(a), (or, in the case of any Mortgage executed and
delivered after the date thereof in accordance with the provisions of Sections
5.11 and 5.12, when such Mortgage is filed in the offices specified
in the local counsel opinion delivered with respect thereto in accordance with
the provisions of Sections 5.11 and 5.12) the Mortgages shall
constitute fully perfected Liens on, and security interests in, all right,
title and interest of the Loan Parties in the Mortgaged Real Properties and the
proceeds thereof, in each case prior and superior in right to any other Person,
other than the Lien securing the Term Loan Indebtedness and other Liens
reasonably acceptable to Administrative Agent.

 

(f)                                    Each
Security Document delivered pursuant to Sections 5.11 and 5.12
will, upon execution and delivery thereof, be effective to create in favor of
the Administrative Agent, for the benefit of the Secured Parties, a legal,
valid and enforceable security interest in and Lien on all of the Loan Parties’
right, title and interest in and to the Collateral thereunder, and when all
appropriate filings or recordings are made in the appropriate offices as may be
required under applicable law, such Security Document will constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Collateral, in each case subject to no Liens other
than the applicable Permitted Liens.

 

SECTION 3.20 
Acquisition Documents;
Representations and Warranties in Agreement.  (a)  Schedule 3.20
lists (i) each exhibit, schedule, annex or other attachment to the
Acquisition Agreement and (ii) each agreement, certificate, instrument,
letter or other document contemplated by the Acquisition Agreement or any item
referred to in clause (i) to be entered into, executed or delivered
or to become effective in connection with the Acquisition.  The Lenders have been furnished true and
complete copies of each Acquisition Document to the extent executed and
delivered on or prior to the Closing Date.

 

(b)                                 All
representations and warranties of each Company set forth in the Acquisition
Agreement were true and correct in all material respects as of the time such
representations and warranties were made and shall be true and correct in all
material respects as of the Closing Date as if such representations and
warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date.

 

SECTION 3.21 
Anti-Terrorism Law.  (a)  No
Loan Party and, to the knowledge of the Loan Parties, none of their Affiliates
is in violation of any Requirement of Law relating to terrorism or money
laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224
on Terrorist Financing, effective September 24, 2001 (the “Executive
Order”), and the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

 

70

 

(b)                                 No
Loan Party and to the knowledge of the Loan Parties, no Affiliate or broker or
other agent of any Loan Party acting or benefiting in any capacity in
connection with the Loans is any of the following:

 

(i)                                     a person that is listed in the annex
to, or is otherwise subject to the provisions of, the Executive Order;

 

(ii)                                  a person owned or controlled by, or
acting for or on behalf of, any person that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order;

 

(iii)                               a person with which any Lender is
prohibited from dealing or otherwise engaging in any transaction by any
Anti-Terrorism Law;

 

(iv)                              a person that commits, threatens or
conspires to commit or supports “terrorism” as defined in the Executive Order;
or

 

(v)                                 a person that is named as a “specially
designated national and blocked person” on the most current list published by
the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”)
at its official website or any replacement website or other replacement
official publication of such list.

 

(c)                                  No
Loan Party and, to the knowledge of the Loan Parties, no broker or other agent
of any Loan Party acting in any capacity in connection with the Loans (i) conducts
any business or engages in making or receiving any contribution of funds, goods
or services to or for the benefit of any person described in paragraph (b) above,
(ii) deals in, or otherwise engages in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order, or (iii) engages
in or conspires to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law.

 

SECTION 3.22 
Location of Material
Inventory.  Schedule 3.22
sets forth all locations in the United States where the aggregate value of
Inventory owned by the Loan Parties exceeds $250,000.

 

SECTION 3.23 
Accuracy of Borrowing
Base.  At the time
any Borrowing Base Certificate is delivered pursuant to this Agreement, each
Account and each item of Inventory included in the calculation of the Borrowing
Base satisfies all of the criteria stated herein (or of which Borrowers have
hereafter been notified by the Administrative Agent and the Collateral Agent
under Section 2.19) to be an Eligible Account and an item of
Eligible Inventory, respectively.

 

SECTION 3.24 
Post-Audit Asset
Dispositions.  As
of the Closing Date, Borrowers and their Subsidiaries have not disposed of
assets (other than Inventory sold in the ordinary course of their business)
which are set forth in the Inventory Appraisal and which have an aggregate fair
market value of more than $250,000.

 

71

 

ARTICLE IV.
 

CONDITIONS TO CREDIT EXTENSIONS

 

SECTION 4.01 
Conditions to Initial
Credit Extension. 
The obligation of each Lender and, if applicable, each Issuing Bank to
fund the initial Credit Extension requested to be made by it shall be subject
to the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Section 4.01.

 

(a)                                  Loan
Documents.  All legal matters
incident to this Agreement, the Credit Extensions hereunder and the other Loan
Documents shall be reasonably satisfactory to the Lenders, to the Issuing Bank
and to the Administrative Agent and there shall have been delivered to the
Administrative Agent an executed counterpart of each of the Loan Documents,
including this Agreement, the Security Agreement, the Intercreditor Agreement,
each Mortgage, the Perfection Certificate and each other applicable Loan
Document.

 

(b)                                 Corporate
Documents.  The Administrative Agent
shall have received:

 

(i)                                     a certificate of the Secretary or
Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that
attached thereto is a true and complete copy of the certificate or articles of
incorporation or other constitutive documents, including all amendments thereto
certified as of a recent date by the Secretary of State of the state of its
organization, (B) that attached thereto is a true and complete copy of the
by-laws of such Loan Party as in effect on the Closing Date and at all times
since a date prior to the date of the resolutions described in clause (C) below,
(C) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the execution,
delivery and performance of the Loan Documents to which such Person is a party
and, in the case of Borrowers, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (D) as to the incumbency and specimen signature of each
officer executing any Loan Document or any other document delivered in
connection herewith on behalf of such Loan Party (together with a certificate
of another officer as to the incumbency and specimen signature of the Secretary
or Assistant Secretary executing the certificate in this clause (i);

 

(ii)                                  a long form certificate as to the
good standing (in such jurisdictions where such certificates are issued and, in
jurisdictions where a long form certificate of good standing is not issued, a
short form certificate of good standing) of each Loan Party as of a recent
date, from such Secretary of State; and

 

(iii)                               such other documents as the Lenders,
the Issuing Bank or the Administrative Agent may reasonably request.

 

(c)                                  Officers’
Certificate.  The Administrative
Agent shall have received a certificate, dated the Closing Date and signed by
the Chief Executive Officer and the Chief Financial Officer of each Borrower
(or in the case of Lenox, the Chief Financial Officer and another officer),
confirming compliance with the conditions precedent set forth in paragraphs
(f), (i), (j)

 

72

 

and (k) of this Section 4.01, clauses
(ii), (iii) and (v) of paragraph (d) of this Section 4.01
and paragraphs (b), (c), (d) and (e) of Section 4.02.

 

(d)                                 Financings
and Other Transactions, Etc.

 

(i)                                     The Lenders shall be satisfied with
the form and substance of the Transaction Documents (including fairness
opinions, employment agreements, indemnity agreements and comfort letters, if
any, related to the Acquisition).

 

(ii)                                  The total debt financing
requirements for the Transaction shall not exceed $205.0 million and the Transactions shall have been
consummated or shall be consummated simultaneously on the Closing Date, in each
case in all material respects in accordance with the terms hereof and the terms
of the Transaction Documents (and without the waiver or amendment of any such
terms not approved by the Administrative Agent and Borrowers shall have
delivered copies of executed Acquisition Documents, certified by each Borrower’s
Chief Financial Officer as current).

 

(iii)                               Borrower shall have received not
less than $100.0 million from the proceeds of the Term Loan Indebtedness and
the Term Loan Agreement shall be in form and substance satisfactory to the
Lenders and copies of the executed Term Loan Documents shall have been delivered
to the Administrative Agent.

 

(iv)                              The Lenders shall be satisfied with
the capitalization, the terms and conditions of any equity arrangements and the
corporate or other organizational structure of the Companies (after giving
effect to the Transactions).

 

(v)                                 The Refinancing shall have been
consummated in full to the satisfaction of the Lenders with all liens in favor
of the existing lenders being unconditionally released; the Administrative
Agent shall have received a “pay-off” letter with respect to all debt being
refinanced in the Refinancing; the Administrative Agent shall have received
from any Person holding any Lien securing any such debt, such UCC termination
statements, mortgage releases, releases of assignments of leases and rents and
other instruments, in each case in proper form for recording, as the
Administrative Agent shall have reasonably requested to release and terminate
of record the Liens securing such debt.

 

(e)                                  Financial
Statements; Pro Forma Balance Sheet; Projections.  The Lenders shall have received and shall be
reasonably satisfied with the form and substance of the financial statements
described in Section 3.04 and with the forecasts of the Borrowing
Base and the financial performance of Holdings and Borrowers and their
respective Subsidiaries.

 

(f)                                    Indebtedness
and Minority Interests.  After giving
effect to the Transactions and the other transactions contemplated hereby, no
Company shall have outstanding any Indebtedness for borrowed money, preferred
stock or minority interests other than (i) the Loans and extensions of
credit hereunder, (ii) the loans and extensions of credit under the Term
Loan Credit Agreement (iii) the Capital Lease Obligations and other
Indebtedness listed on Schedule 6.01, and (iv) Indebtedness
owed to Borrowers or any Guarantor.

 

73

 

(g)                                 Opinions
of Counsel.  The Administrative Agent
shall have received, on behalf of itself, the other Agents, the Arranger, the
Lenders and the Issuing Bank, a favorable written opinion of (i) Dorsey &
Whitney LLP, special counsel for the Loan Parties, substantially to the effect
set forth in Exhibit K-1, and (ii) each local counsel listed
on Schedule 4.01(g), substantially to the effect set forth in Exhibit K-2,
in each case (A) dated the Closing Date, (B) addressed to the Agents,
the Issuing Bank and the Lenders and (C) covering such other matters
relating to the Loan Documents and the Transactions as the Administrative Agent
shall reasonably request, and (iii) a copy of each legal opinion, if any,
delivered under the other Transaction Documents, and Borrowers shall use their
best efforts to deliver reliance letters from the party delivering such opinion
authorizing the Agents, Lenders and the Issuing Bank to rely thereon as if such
opinion were addressed to them.

 

(h)                                 Solvency
Certificate and Other Reports.  (i) 
The Administrative Agent shall have received all audits, reports and opinions
of appraisers, consultants or other advisors retained by it to review the
Collateral, business, operation or condition of Borrowers and their
Subsidiaries giving effect to the Transactions, and shall be satisfied with
such audits, reports and opinions.

 

(ii)                                  The Administrative Agent shall have
received a solvency certificate in the form of Exhibit M, dated the
Closing Date and signed by the Chief Financial Officer of each Borrower.

 

(i)                                     Requirements
of Law.  The Lenders shall be
satisfied that the Transactions shall be in full compliance with all material
Requirements of Law, including without limitation Regulations T, U and X of the
Board.  The Lenders shall have received
reasonably satisfactory evidence of compliance with all applicable Requirements
of Law, including all applicable environmental laws and regulations.

 

(j)                                     Consents.  The Lenders shall be satisfied that all
requisite Governmental Authorities and third parties shall have approved or
consented to the Transactions, and there shall be no governmental or judicial
action, actual or threatened, that has or would have, singly or in the aggregate,
a reasonable likelihood of restraining, preventing or imposing burdensome
conditions on the Transactions or the other transactions contemplated hereby.

 

(k)                                  Litigation.  There shall be no litigation, public or
private, or administrative proceedings, governmental investigation or other
legal or regulatory developments, actual or threatened, that, singly or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect,
or could materially and adversely affect the ability of Holdings, Borrowers and
the Subsidiaries to fully and timely perform their respective obligations under
the Transaction Documents, or the ability of the parties to consummate the
financings contemplated hereby or the other Transactions.

 

(l)                                     Sources
and Uses.  The sources and uses of
the Loans shall be as set forth in Section 3.11.

 

(m)                               Fees.  The Arranger, Collateral Agent and
Administrative Agent shall have received all Fees and other amounts due and
payable on or prior to the Closing Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses (including the

 

74

 

reasonable legal fees and expenses of Winston &
Strawn LLP, special counsel to the Administrative Agent, and the reasonable
fees and expenses of any local counsel, appraisers, consultants and other
advisors) required to be reimbursed or paid by Borrowers hereunder or under any
other Loan Document.

 

(n)                                 Personal
Property Requirements.  The
Administrative Agent shall have received:

 

(i)                                     all certificates, agreements or
instruments representing or evidencing the Pledged Securities and the Pledged
Notes (each as defined in the Security Agreement) accompanied by instruments of
transfer and stock powers endorsed in blank shall have been delivered to the
Administrative Agent;

 

(ii)                                  all other certificates, agreements,
including control agreements, or instruments necessary to perfect the
Administrative Agent’s security interest in all Chattel Paper, all Instruments
and all Investment Property of each Loan Party (as each such term is defined in
the Security Agreement and to the extent required by Section 3.4 of
the Security Agreement);

 

(iii)                               UCC Financing Statements in
appropriate form for filing under the UCC, filings with the United States
Patent, Trademark and Copyright offices and such other documents under
applicable Requirements of Law in each jurisdiction as may be necessary or
appropriate or, in the opinion of the Administrative Agent, desirable to
perfect the Liens created, or purported to be created, by the Security
Documents.

 

(iv)                              certified copies of UCC, tax and
judgment lien searches, bankruptcy and pending lawsuit searches or equivalent
reports or searches, each of a recent date listing all effective financing
statements, lien notices or comparable documents that name any Loan Party as
debtor and that are filed in those state and county jurisdictions in which any
Property of any Loan Party is located and the state and county jurisdictions in
which any Loan Party is organized or maintains its principal place of business
and such other searches that the Administrative Agent deems necessary or
appropriate, none of which encumber the Collateral covered or intended to be
covered by the Security Documents (other than Permitted Liens);

 

(v)                                 with respect to each Real Property
set forth on Schedule 4.01(n), such Loan Party shall have obtained
a Landlord Lien Waiver and Access Agreement or, if applicable, a bailee letter
or other appropriate waiver and access agreement;

 

(vi)                              a customs broker agreement in form
and substance satisfactory to the Administrative Agent and the Collateral Agent
with respect to the Documents covering Eligible In-Transit Inventory; and

 

(vii)                           evidence acceptable to the
Administrative Agent of payment by the Loan Parties of all applicable recording
taxes, fees, charges, costs and expenses required for the recording of the
Security Documents.

 

75

 

(o)                                 Real
Property Requirements.  The
Administrative Agent shall have received:

 

(i)                                     a Mortgage encumbering each
Mortgaged Real Property in favor of Administrative Agent, for the benefit of
the Secured Parties, duly executed and acknowledged by each Loan Party that is
the owner of or holder of any interest in such Mortgaged Real Property, and
otherwise in form for recording in the recording office of each political
subdivision where each such Mortgaged Real Property is situated, together with
such certificates, affidavits, questionnaires or returns as shall be required
in connection with the recording or filing thereof to create a lien under
applicable law, and such UCC-1 Financing Statements, all of which shall be in
form and substance reasonably satisfactory to Administrative Agent, and any
other instruments necessary to grant a mortgage lien under the laws of any
applicable jurisdiction;

 

(ii)                                  with respect to each Mortgaged Real
Property, such consents, approvals, amendments, supplements or other
instruments as necessary or required to consummate the Transactions or as shall
reasonably be deemed necessary by the Administrative Agent in order for the
owner or holder of the fee or leasehold interest constituting such Mortgaged
Real Property to grant the Lien contemplated by the Mortgage with respect to
such Mortgaged Real Property;

 

(iii)                               with respect to each Mortgage, a
policy (or commitment to issue a policy) of title insurance insuring (or
committing to insure) the Lien of such Mortgage as a valid second mortgage Lien
on the Mortgaged Real Property and fixtures described therein (junior only to
the Lien securing the Term Loan Indebtedness) in the amount set forth on Schedule 4.01(o)(iii) hereto
with respect to such Mortgaged Real Property which policies (or commitments)
(each, a “Title Policy”) shall (A) be
issued by the Title Company, (B) to the extent necessary, include such
reinsurance arrangements (with provisions for direct access, if necessary) as
shall be reasonably acceptable to the Administrative Agent, (C) contain a “tie-in”
or “cluster” endorsement (if available under applicable law) (i.e.,
policies which insure against losses regardless of location or allocated value
of the insured Property up to a stated maximum coverage amount), (D) have
been supplemented by such endorsements (or where such endorsements are not available,
opinions of special counsel, architects or other professionals reasonably
acceptable to the Administrative Agent to the extent that such opinions can be
obtained at a cost which is reasonable with respect to the value of the
Mortgaged Real Property subject to such Mortgage) as shall be reasonably
requested by the Administrative Agent (including, without limitation,
endorsements on matters relating to usury, first loss, last dollar, zoning,
contiguity, revolving credit, doing business, non-imputation, public road
access, survey, variable rate, environmental lien and so-called comprehensive
coverage over covenants and restrictions), and (E) contain no exceptions
to title other than exceptions reasonably acceptable to the Administrative
Agent;

 

(iv)                              with respect to each Mortgaged Real
Property, such affidavits, certificates, information (including financial data)
and instruments of indemnification (including, without limitation, a so-called “gap”
indemnification) as shall be required to induce the Title Company to issue the
Title Policies (or commitment) and endorsements contemplated in subparagraph (iii) above;

 

76

 

(v)                                 evidence reasonably acceptable to
the Administrative Agent of payment by Borrowers of all Title Policy premiums,
search and examination charges, and related charges, mortgage recording taxes,
fees, charges, costs and expenses required for the recording of the Mortgages
and issuance of the Title Policies referred to subparagraph (iii) above;

 

(vi)                              with respect to each Real Property
or Mortgaged Real Property, copies of all Leases in which Borrowers or any
Subsidiary holds the lessor’s interest or other agreements relating to
possessory interests, if any.  To the
extent any of the foregoing affect any Mortgaged Real Property, such agreement
shall be subordinate to the Lien of the Mortgage to be recorded against such
Mortgaged Real Property, either expressly by its terms or pursuant to a
subordination, non-disturbance and attornment agreement, and shall otherwise be
acceptable to the Administrative Agent;

 

(vii)                           with respect to each Mortgaged Real
Property, Borrowers and each Subsidiary shall have made all notification,
registrations and filings, to the extent required by, and in accordance with, all
Governmental Real Property Disclosure Requirements applicable to such Mortgaged
Real Property; and

 

(viii)                        within sixty (60) days after the
Closing Date, Surveys with respect to each Mortgaged Real Property.

 

(p)                                 Insurance.  The Administrative Agent shall have received
a copy of, or a certificate as to coverage under, the insurance policies
required by Section 5.04 and the applicable provisions of the
Security Documents, each of which shall be endorsed or otherwise amended to
include a “standard” or “New York” lender’s loss payable endorsement and to
name the Administrative Agent as additional insured, in form and substance
satisfactory to the Administrative Agent.

 

(q)                                 Borrowing
Base Certificate.  The Collateral
Agent and the Administrative Agent shall have received a Borrowing Base
Certificate, dated as of the Closing Date.

 

(r)                                    Take-Over
Audit.  Within five (5) days
prior to the Closing Date, the Administrative Agent’s and Collateral Agent’s
staff shall have conducted a supplemental “take-over audit” which supports and
confirms (i) the calculation of the initial Borrowing Base, (ii) no
material change in the procedures since the delivery of the Inventory
Appraisal, (iii) no material change in sales, Inventory turn or the level
of Inventory since the delivery of the Inventory Appraisal and (iv) the
accuracy of all representations and warranties set forth herein.

 

(s)                                  USA
Patriot Act.  The Lenders shall have
received, sufficiently in advance of the Closing Date, all documentation and
other information required by bank regulatory authorities under applicable “know
your customer” and anti-money laundering rules and regulations, including
without limitation, the United States PATRIOT Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) including, without limitation, the
information described in Section 11.15.

 

SECTION 4.02 
Conditions to All
Credit Extensions. 
The obligation of each Lender and each Issuing Bank to make any Credit
Extension (including the initial Credit Extension) shall be subject to, and to
the satisfaction of, each of the conditions precedent set forth below.

 

77

 

(a)                                  Notice.  The Administrative Agent shall have received
a Borrowing Request as required by Section 2.03 (or such notice
shall have been deemed given in accordance with Section 2.03) if
Loans are being requested or, in the case of the issuance, amendment, extension
or renewal of a Letter of Credit, the Issuing Bank and the Administrative Agent
shall have received a notice requesting the issuance, amendment, extension or
renewal of such Letter of Credit as required by Section 2.18(b) or,
in the case of the Borrowing of a Swingline Loan, the Swingline Lender and the
Administrative Agent shall have received a notice requesting such Swingline
Loan as required by Section 2.17(b).

 

(b)                                 No
Default.  Borrowers and each other
Loan Party shall be in compliance in all material respects with all the terms
and provisions set forth herein and in each other Loan Document on its part to
be observed or performed, and, at the time of and immediately after such Credit
Extension, no Default shall have occurred and be continuing on such date or
after giving effect to the Credit Extension requested to be made on such date;
provided, that, if the conditions set forth in this Section 4.02(b) are
not satisfied, each Lender and each Issuing Bank shall continue to be obligated
to make Credit Extensions unless and until such time as the Administrative
Agent or the Required Lenders elect to cease making Credit Extensions as a
result thereof.

 

(c)                                  Representations
and Warranties.  Each of the
representations and warranties made by any Loan Party set forth in Article III
hereof or in any other Loan Document shall be true and correct in all material
respects (except that any representation and warranty that is qualified as to “materiality”
or “Material Adverse Effect” shall be true and correct in all respects) on and
as of the date of such Credit Extension with the same effect as though made on
and as of such date, except to the extent such representations and warranties
expressly relate to an earlier date.

 

(d)                                 No
Material Adverse Effect.  There has
been no event, condition and/or contingency that has had or is reasonable
likely to have a Material Adverse Effect.

 

(e)                                  No
Legal Bar.  No order, judgment or
decree of any Governmental Authority shall purport to restrain any Lender from
making any Loans to be made by it.  No
injunction or other restraining order shall have been issued, shall be pending
or noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated by this Agreement or the
making of Loans hereunder.

 

Each of the
delivery of a Borrowing Request or notice requesting the issuance, amendment,
extension or renewal of a Letter of Credit and the acceptance by Borrowers of
the proceeds of such Credit Extension shall constitute a representation and
warranty by Borrowers and each other Loan Party that on the date of such Credit
Extension (both immediately before and after giving effect to such Credit
Extension and the application of the proceeds thereof) the conditions contained
in this Section 4.02 have been satisfied.  Borrowers shall provide such information
(including calculations in reasonable detail of the covenants in Section 6.08)
as the Administrative Agent may reasonably request to confirm that the
conditions in this Section 4.02 have been satisfied.

 

78

 

ARTICLE V.
 

AFFIRMATIVE COVENANTS

 

Each Loan
Party covenants and agrees with each Lender that so long as this Agreement
shall remain in effect and until the Commitments have been terminated and the
principal of and interest on each Loan, all Fees and all other expenses or
amounts payable under any Loan Document shall have been paid in full and all
Letters of Credit have been canceled or have expired or been fully cash
collateralized and all amounts drawn thereunder have been reimbursed in full,
unless the Required Lenders shall otherwise consent in writing, each Loan Party
will, and will cause each of its Subsidiaries to:

 

SECTION 5.01 
Financial Statements,
Reports, etc.  In
the case of Holdings and Borrowers, furnish to the Administrative Agent and
each Lender:

 

(a)                                  Annual
Reports.  Within 90 days after the
end of each fiscal year (but no later than the date on which Holdings is
required to file a Form 10-K under the Exchange Act), (i) the
consolidated balance sheet of Holdings as of the end of such fiscal year and
related consolidated statements of income, cash flows and stockholders’ equity
for such fiscal year, and notes thereto, all prepared in accordance with
Regulation S-X under the Securities Act and accompanied by an opinion of
Deloitte & Touche LLP or other independent public accountants of
recognized national standing satisfactory to the Administrative Agent or one of
the “Big 4” accounting firms (which opinion shall not be qualified as to scope
or contain any going concern or other qualification), stating that such
financial statements fairly present, in all material respects, the consolidated
financial condition, results of operations, cash flows and changes in
stockholders’ equity of the Consolidated Companies as of the end of and for
such fiscal year in accordance with GAAP consistently applied, (ii) a
management report in a form reasonably satisfactory to the Administrative Agent
setting forth, on a consolidating basis, the financial condition, results of
operations and cash flows of each of the Department 56 business and the Lenox
business as of the end of and for such fiscal year, as compared to the
financial condition, results of operations and cash flows of such business as
of the end of and for the previous fiscal year and its budgeted results of
operations and cash flows, and (iii) a management’s discussion and
analysis of the financial condition and results of operations for such fiscal
year, as compared to the previous fiscal year;

 

(b)                                 Quarterly
Reports.  Within 45 days after the
end of each of the first three fiscal quarters of each fiscal year (but no
later than the date on which Holdings is required to file a Form 10-Q
under the Exchange Act), (i) the consolidated balance sheet of Holdings as
of the end of such fiscal quarter and related consolidated statement of income
for such fiscal quarter and the related consolidated statements of income and
cash flows for the then elapsed portion of the fiscal year, in comparative form
with the consolidated statements of income and cash flows for the comparable
periods in the previous fiscal year, and notes thereto, all prepared in
accordance with Regulation S-X under the Securities Act and accompanied by a
certificate of a Financial Officer stating that such financial statements
fairly present, in all material respects, the consolidated financial condition,
results of operations and cash flows of the Consolidated Companies

 

79

 

as of the date and for the periods specified in accordance with GAAP
consistently applied, and on a basis consistent with audited financial
statements referred to in Section 5.01(a), subject to normal
year-end audit adjustments, (ii) a management report in a form reasonably
satisfactory to the Administrative Agent setting forth, on a consolidating
basis, the financial condition, results of operations and cash flows of each of
the Department 56 business and the Lenox business as of the end of and for such
fiscal quarter and for the then elapsed portion of the fiscal year, as compared
to the financial condition, results of operations and cash flows of such
business as of the end of such fiscal quarter and for the comparable periods in
the previous fiscal year and its budgeted results of operations and cash flows,
and (iii) a management’s discussion and analysis of the financial
condition and results of operations for such fiscal quarter and the then
elapsed portion of the fiscal year, as compared to the comparable periods in
the previous fiscal year;

 

(c)                                  Monthly
Reports.  Within 30 days (40 days for
the month ending January 31 of each year) after the end of the first two
months of each fiscal quarter, (i) the consolidated statement of income of
Holdings for such month and the consolidated statements of income and cash
flows for the then elapsed portion of the fiscal year, in comparative form with
the consolidated statements of income and cash flows for the comparable periods
in the previous fiscal year, accompanied by a certificate of a Financial
Officer stating that such financial statements fairly present, in all material
respects, the consolidated results of operations and cash flows of the
Consolidated Companies as of the date and for the periods specified in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments, and (ii) a management report in a form reasonably
satisfactory to the Administrative Agent setting forth, on a consolidating
basis, the results of operations and cash flows of each of the Department 56
business and the Lenox business for such month and for the then elapsed portion
of the fiscal year, as compared to the results of operations and cash flows of
such business for the comparable periods in the previous fiscal year and its
budgeted results of operations and cash flows;

 

(d)                                 Financial
Officer’s Certificate.  (i) 
Concurrently with any delivery of financial statements under paragraphs (a), (b) or
(c) above, a certificate of a Financial Officer certifying that no Default
has occurred or, if such a Default has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken with
respect thereto; (ii) concurrently with any delivery of financial
statements under sub-paragraph (a) or (b) above, a Compliance Certificate;
and (iii) in the case of paragraph (a) above, a report of the
accounting firm opining on or certifying such financial statements stating that
in the course of its regular audit of the financial statements of Holdings and
its Subsidiaries, which audit was conducted in accordance with GAAP, such
accounting firm obtained no knowledge that any Default has occurred or, if in
the opinion of such accounting firm such a Default has occurred, specifying the
nature and extent thereof;

 

(e)                                  Financial
Officer’s Certificate Regarding Collateral. 
Concurrently with any delivery of financial statements under paragraph (a) above,
a Perfection Certificate Supplement in accordance with the provisions of Section 5.13(b);

 

80

 

(f)                                    Public
Reports.  Promptly after the same
become publicly available, copies of all periodic and other reports, proxy
statements and other materials filed by any Company with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or all of
the functions of said Commission, or with any national securities exchange, or
distributed to holders of its Indebtedness pursuant to the terms of the
documentation governing such Indebtedness (or any trustee, agent or other representative
therefor), as the case may be;

 

(g)                                 Management
Letters.  Promptly after the receipt
thereof by any Company, a copy of any “management letter” received by any such
Person from its certified public accountants and the management’s responses
thereto;

 

(h)                                 Budgets.  No later than the first day of each fiscal
year of Holdings and Borrowers, a budget in form reasonably satisfactory to the
Administrative Agent (including budgeted statements of income by each of the
Department 56 business and the Lenox business and sources and uses of cash and
balance sheets) prepared by each of Holdings and Borrowers, respectively, for (i) each
fiscal month of such fiscal year prepared in detail and (ii) each of the
two years immediately following such fiscal year prepared in summary form, in
each case, of Holdings, Borrowers and their respective Subsidiaries, with
appropriate presentation and discussion of the principal assumptions upon which
such budgets are based, accompanied by the statement of a Financial Officer of
each of Holdings and Borrowers to the effect that the budget of Holdings and
Borrowers, respectively, is a reasonable estimate for the period covered
thereby;

 

(i)                                     Annual
Meetings with Lenders.  Within 120
days after the close of each fiscal year of Holdings, Holdings and Borrowers
shall, at the request of the Administrative Agent or Required Lenders, hold a
meeting (at a mutually agreeable location and time) with all Lenders who choose
to attend such meeting at which meeting shall be reviewed the financial results
of the previous fiscal year and the financial condition of the Companies and
the budgets presented for the current fiscal year of the Companies; and

 

(j)                                     Other
Information.  Promptly, from time to
time, such other information regarding the operations, business affairs and
financial condition of any Company, or compliance with the terms of any Loan
Document, as the Administrative Agent or any Lender may reasonably request.

 

SECTION 5.02 
Litigation and Other
Notices.  Furnish
to the Administrative Agent and each Lender prompt written notice of the
following:

 

(a)                                  any
Default, specifying the nature and extent thereof and the corrective action (if
any) taken or proposed to be taken with respect thereto;

 

(b)                                 the
filing or commencement of, or any threat or notice of intention of any Person
to file or commence, any action, suit or proceeding, whether at law or in
equity by or before any Governmental Authority, (i) against any Company or
any Affiliate thereof

 

81

 

that could reasonably be expected to result in a Material Adverse
Effect or (ii) with respect to any Loan Document;

 

(c)                                  any
development that has resulted in, or could reasonably be expected to result in
a Material Adverse Effect;

 

(d)                                 the
occurrence of a Casualty Event and will ensure that the Net Cash Proceeds of
any such event (whether in the form of insurance proceeds, condemnation awards
or otherwise) are collected and applied in accordance with the applicable
provisions of this Agreement and the Security Documents;

 

(e)                                  (i) the
incurrence of any material Lien (other than Permitted Liens) on, or claim
asserted against any of the Collateral or (ii) the occurrence of any other
event which could materially affect the value of the Collateral; and

 

(f)                                    any
threatened indictment by any Governmental Authority of any Loan Party, as to
which any Loan Party receives knowledge or notice, under any criminal or civil
proceedings against any Loan Party pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of
the Collateral having a value in excess of $500,000 or (ii) any other Property of any Loan Party which is
necessary or material to the conduct of its business.

 

SECTION 5.03 
Existence; Businesses
and Properties.  (a)  Do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under Section 6.05
or, in the case of any Subsidiary, where the failure to perform such
obligations, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect.

 

(b)                                 Do
or cause to be done all things necessary to obtain, preserve, renew, extend and
keep in full force and effect the rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names material to the
conduct of its business; maintain and operate such business in substantially
the manner in which it is presently conducted and operated; comply with all
applicable Requirements of Law (including any and all zoning, building,
Environmental Law, ordinance, code or approval or any building permits or any
restrictions of record or agreements affecting the Real Property) and decrees
and orders of any Governmental Authority, whether now in effect or hereafter
enacted, except where the failure to comply, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect; pay
and perform its obligations under all Leases and Transaction Documents; and at
all times maintain and preserve all Property material to the conduct of such
business and keep such Property in good repair, working order and condition and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times; provided
that nothing in this Section 5.03(b) shall prevent (i) sales
of assets, consolidations or mergers by or involving any Company in accordance
with Section 6.05; (ii) the withdrawal by any Company of its
qualification as a foreign corporation in any jurisdiction where such
withdrawal, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect; or (iii) the abandonment by any
Company of any

 

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rights, franchises, licenses, trademarks, tradenames,
copyrights or patents that such Person reasonably determines are not useful to
its business.

 

SECTION 5.04 
Insurance.  (a)  Keep
its insurable Property adequately insured at all times by financially sound and
reputable insurers (provided that Borrowers shall not be deemed to breach
this provision if, after their insurer becomes unsound or irreputable,
Borrowers promptly and diligently obtain adequate insurance from an alternative
carrier); maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies in the same or similar businesses operating in the
same or similar locations, including public liability insurance against claims
for personal injury or death or Property damage occurring upon, in, about or in
connection with the use of any Property owned, occupied or controlled by it;
and maintain such other insurance as may be required by law; and, with respect
to the Collateral, otherwise maintain all insurance coverage required under
each applicable Security Document, such policies to be in such form and amounts
and having such coverage as may be reasonably satisfactory to the
Administrative Agent and the Collateral Agent, it being agreed that the levels
of insurance in place on the Closing Date, absent a material change in the
Property of the Loan Parties, shall be satisfactory to the Administrative Agent
and the Collateral Agent so long as appropriate steps are taken to assure that
such insurance coverage is also obtained for any future Subsidiaries.

 

(b)                                 All
such insurance shall (i) provide that no cancellation, material reduction
in amount or material change in coverage thereof shall be effective until at
least 30 days after receipt by the Administrative Agent of written notice
thereof, (ii) name the Administrative Agent as mortgagee (in the case of
Property insurance) or additional insured (in the case of liability insurance)
or loss payee (in the case of casualty insurance), as applicable, (iii) if
reasonably requested by the Administrative Agent or the Collateral Agent,
include a breach of warranty clause and (iv) be reasonably satisfactory in
all other respects to the Administrative Agent and the Collateral Agent.

 

(c)                                  Notify
the Administrative Agent and the Collateral Agent immediately whenever any
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained under this Section 5.04 is taken out
by any Company; and promptly deliver to the Administrative Agent and the Collateral
Agent a duplicate original copy of such policy or policies.

 

(d)                                 Obtain
flood insurance in such total amount as the Administrative Agent or the
Required Lenders may from time to time require, if at any time the area in
which any improvements located on any real Property covered by a Mortgage is
designated a “flood hazard area” in any Flood Insurance Rate Map published by
the Federal Emergency Management Agency (or any successor agency), and
otherwise comply with the National Flood Insurance Program as set forth in the
Flood Disaster Protection Act of 1975, as amended from time to time.

 

(e)                                  Deliver
to the Administrative Agent and the Collateral Agent and the Lenders a report
of a reputable insurance broker with respect to such insurance and such supplemental
reports with respect thereto as the Administrative Agent or the Collateral
Agent may from time to time reasonably request.

 

83

 

SECTION 5.05 
Obligations and Taxes.  (a)  Pay
its Indebtedness and other obligations promptly and in accordance with their
terms and pay and discharge promptly when due all Taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
in respect of its Property, before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise that, if unpaid, might give rise to a Lien other than a Permitted
Lien upon such properties or any part thereof; provided that such payment and discharge shall not be
required with respect to any such Tax, assessment, charge, levy or claim so
long as the validity or amount thereof shall be contested in good faith by
appropriate proceedings and the applicable Company shall have set aside on its
books adequate reserves with respect thereto in accordance with GAAP and such
contest operates to suspend collection of the contested obligation, Tax,
assessment or charge and enforcement of a Lien other than a Permitted Lien and,
in the case of Collateral, the applicable Company shall have otherwise complied
with the Contested Collateral Lien Conditions.

 

(b)                                 Timely
and correctly file all material Tax Returns required to be filed by it.

 

SECTION 5.06 
Employee Benefits.  (a)  With
respect to each Plan, comply in all material respects with the applicable
provisions of ERISA and the Code and (b) furnish to the Administrative
Agent (x) as soon as possible after, and in any event within 10 days after any
Responsible Officer of the Companies or their ERISA Affiliates or any ERISA
Affiliate knows or has reason to know that, any ERISA Event has occurred that,
alone or together with any other ERISA Event could reasonably be expected to
result in liability of the Companies or their ERISA Affiliates in an aggregate
amount exceeding $500,000 or the imposition of a Lien, a statement of a
Financial Officer of Holdings setting forth details as to such ERISA Event and
the action, if any, that the Companies propose to take with respect thereto,
and (y) upon request by the Administrative Agent, copies of:  (i) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by any Company
or any ERISA Affiliate with the Internal Revenue Service with respect to each
Plan; (ii) the most recent actuarial valuation report for each Plan; (iii) all
notices received by any Company or any ERISA Affiliate from a Multiemployer
Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such
other documents or governmental reports or filings relating to any Plan (or
employee benefit plan sponsored or contributed to by any Company) as the
Administrative Agent shall reasonably request.

 

SECTION 5.07 
Maintaining Records;
Access to Properties and Inspections.  Keep proper books of record and account in
which full, true and correct entries in conformity with GAAP and all
Requirements of Law are made of all dealings and transactions in relation to
its business and activities.  Keep proper
records of intercompany accounts with full, true and correct entries reflecting
all payments received and paid (including, without limitation, funds received
by Borrowers from swept deposit accounts of the other Companies).  Upon reasonable prior notice, each Loan Party
will permit any representatives designated by the Administrative Agent,
Collateral Agent or any Lender to visit and inspect the financial records and
the Property of such Loan Party at reasonable times and as often as reasonably
requested and to make extracts from and copies of such financial records, and
permit any representatives designated by the Administrative Agent, Collateral
Agent or any Lender to discuss the affairs, finances and condition of any Loan
Party with the officers thereof and independent accountants therefor.

 

84

 

SECTION 5.08 
Use of Proceeds.  Use the proceeds of the Loans and request the
issuance of Letters of Credit only for the purposes set forth in Section 3.11.

 

SECTION 5.09 
Compliance with
Environmental Laws; Environmental Reports.  (a)  Comply,
and cause all lessees and other Persons occupying Real Property owned, operated
or leased by any Company to comply, in all material respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Real Property; obtain and renew all material Environmental Permits applicable
to its operations and Real Property; and conduct any Response required by a
Governmental Authority in accordance with Environmental Laws; provided that no Company shall be
required to undertake any Response to the extent that its obligation to do so
is being contested in good faith and by proper proceedings and appropriate
reserves are being maintained with respect to such circumstances in accordance
with GAAP.

 

(b)                                 If
a Default caused by reason of a breach of Section 3.17 or 5.09(a) shall
have occurred and be continuing for more than 20 days without the Companies
commencing activities reasonably likely to cure such Default, at the written
request of the Required Lenders through the Administrative Agent, provide to
the Lenders within 45 days after such request, at Borrowers’ expense, an
environmental assessment report regarding the matters which are the subject of
such default, including where appropriate, any soil and/or groundwater
sampling, prepared by an environmental consulting firm and in the form and
substance reasonably acceptable to the Administrative Agent and indicating the
presence or absence of Hazardous Materials and the estimated cost of any
compliance or Response to address them.

 

SECTION 5.10 
Reserved.

 

SECTION 5.11 
Additional Collateral;
Additional Guarantors.  (a)  Subject
to this Section 5.11, with respect to any Property acquired after
the Closing Date by Borrowers or any other Loan Party that is intended to be
subject to the Lien created by any of the Security Documents but is not so
subject (but, in any event, excluding any Property described in paragraph (b) of
this subsection) promptly (and in any event within 30 days after the
acquisition thereof provided the Administrative Agent has provided all joinder
agreements to the applicable Security Documents necessary for the Loan Parties
to comply herewith):  (i) execute
and deliver to the Administrative Agent such amendments or supplements to the
relevant Security Documents or such other documents as the Administrative Agent
shall deem necessary or advisable to grant to the Administrative Agent, for its
benefit and for the benefit of the other Secured Parties, a Lien on such
Property subject to no Liens other than Permitted Liens, and (ii) take all
actions necessary to cause such Lien to be duly perfected to the extent
required by such Security Document in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
statements in such jurisdictions as may be reasonably requested by the
Administrative Agent.  Borrowers shall
otherwise take such actions and execute and/or deliver to the Administrative
Agent such documents as the Administrative Agent shall require to confirm the
validity, perfection and priority of the Lien of the Security Documents against
such after-acquired properties or assets.

 

(b)                                 With
respect to any Person that is or becomes a Wholly Owned Subsidiary (other than
any Foreign Subsidiary that is not a direct Subsidiary of a Loan Party)
promptly (and in any event within 30 days after such Person becomes a
Subsidiary) (i) deliver to the Administrative

 

85

 

Agent the certificates, if any, representing the
Equity Interests of such Subsidiary (provided
that with respect to any first-tier Foreign Subsidiary of a Borrower or a
Subsidiary organized in a State of the United States, in no event shall more
than 66% of the Equity Interests of any Foreign Subsidiary be subject to any
Lien or pledged under any Security Document if such pledge would have a
material adverse tax impact on Borrowers (determined at the reasonable
discretion of the Administrative Agent)), together with undated stock powers or
other appropriate instruments of transfer executed and delivered in blank by a
duly authorized officer of such Subsidiary’s parent, as the case may be, and
all intercompany notes owing from such Subsidiary to any Loan Party together
with instruments of transfer executed and delivered in blank by a duly authorized
officer of such Subsidiary, and (ii) cause such new Subsidiary (other than
any Foreign Subsidiary if such pledge would have a material adverse tax impact
on Borrowers (determined at the reasonable discretion of the Administrative
Agent) (A) to execute a Joinder Agreement or such comparable documentation
and a joinder agreement to the Security Agreement in the form annexed thereto
which is in form and substance reasonably satisfactory to the Administrative
Agent, and (B) to take all actions necessary or advisable in the opinion
of the Administrative Agent to cause the Lien created by the Security Agreement
to be duly perfected to the extent required by such agreement in accordance
with all applicable Requirements of Law, including, without limitation, the
filing of financing statements in such jurisdictions as may be reasonably
requested by the Administrative Agent or the Collateral Agent.

 

(c)                                  Each
Loan Party will promptly grant to the Administrative Agent, within 60 days of
the acquisition thereof, a security interest in and Mortgage Lien on each owned
or leased Real Property of such Loan Party as is acquired by such Loan Party
after the Closing Date and that, together with any improvements thereon,
individually has a fair market value of at least $1.0 million, as additional
security for the Obligations (unless the subject Property is already mortgaged
to a third party to the extent permitted by Section 6.02).  Such Mortgages shall be granted pursuant to
documentation reasonably satisfactory in form and substance to the
Administrative Agent and shall constitute valid and enforceable perfected Liens
subject only to Permitted Liens.  The
Mortgages or instruments related thereto shall be duly recorded or filed in such
manner and in such places as are required by law to establish, perfect,
preserve and protect the Liens in favor of the Administrative Agent required to
be granted pursuant to the Mortgages and all taxes, fees and other charges
payable in connection therewith shall be paid in full.  Such Loan Party shall otherwise take such
actions and execute and/or deliver to the Administrative Agent such documents
as the Administrative Agent shall require, to confirm the validity, perfection
and priority of the Lien of any existing Mortgage or new Mortgage against such
after-acquired Real Property (including, without limitation, a Title Policy, a
Survey and local counsel opinion (in form and substance reasonably satisfactory
to the Administrative Agent) in respect of such Mortgage).

 

SECTION 5.12 
Security Interests;
Further Assurances. 
Promptly, upon the reasonable request of the Administrative Agent, the
Collateral Agent or any Lender, at Borrowers’ expense, execute, acknowledge and
deliver, or cause the execution, acknowledgment and delivery of, and thereafter
register, file or record, or cause to be registered, filed or recorded, in an
appropriate governmental office, any document or instrument supplemental to or
confirmatory of the Security Documents or otherwise deemed by the
Administrative Agent or the Collateral Agent reasonably necessary or desirable
for the continued validity, perfection and priority of the Liens on the
Collateral covered thereby superior to and prior to the rights of all

 

86

 

third Persons other than the holders of Permitted
Liens and subject to no other Liens except as permitted by the applicable
Security Document, or obtain any consents, including, without limitation,
landlord or similar lien waivers and consents, as may be necessary or
appropriate in connection therewith. 
Deliver or cause to be delivered to the Administrative Agent from time
to time such other documentation, consents, authorizations, approvals and
orders in form and substance reasonably satisfactory to the Administrative
Agent as the Administrative Agent shall reasonably deem necessary to perfect or
maintain the Liens on the Collateral pursuant to the Security Documents.  Upon the exercise by the Administrative
Agent, the Collateral Agent or the Lenders of any power, right, privilege or
remedy pursuant to any Loan Document which requires any consent, approval,
registration, qualification or authorization of any Governmental Authority
execute and deliver all applications, certifications, instruments and other
documents and papers that the Administrative Agent, the Collateral Agent or the
Lenders may be so required to obtain.  If
the Administrative Agent, the Collateral Agent or the Required Lenders
determine that they are required by law or regulation to have appraisals prepared
in respect of the Real Property of any Loan Party constituting Collateral,
Borrowers shall provide to the Administrative Agent and the Collateral Agent
appraisals that satisfy the applicable requirements of the Real Estate
Appraisal Reform Amendments of FIRREA and are otherwise in form and substance
reasonably satisfactory to the Administrative Agent and the Collateral Agent.

 

SECTION 5.13  Information Regarding Collateral.  (a)  Furnish
to the Administrative Agent and the Collateral Agent 30 days prior written
notice (in the form of an officer’s certificate), clearly describing any of the
following changes (i) in any Loan Party’s corporate name or in any trade
name used to identify it in the conduct of its business or in the ownership of
its properties, (ii) in the location of any Loan Party’s chief executive
office, its principal place of business, any office in which it maintains books
or records relating to Collateral owned by it or any office or facility at
which Collateral owned by it is located (including the establishment of any
such new office or facility), (iii) in any Loan Party’s identity or
corporate structure, (iv) in any Loan Party’s Federal Taxpayer
Identification Number or (v) in any Loan Party’s jurisdiction of
organization.  Borrowers agree not to
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the UCC or otherwise that are required in order
for the Administrative Agent to continue at all times following such change to
have a valid, legal and perfected security interest in all the Collateral.  Borrowers agree to provide to the
Administrative Agent such other information in connection with such changes as
the Administrative Agent and the Collateral Agent may reasonably request.  Borrowers also agree promptly to notify the
Administrative Agent and the Collateral Agent if any material portion of the
Collateral is subject to a Casualty Event.

 

(b)                                 Each
year, at the time of delivery of annual financial statements with respect to
the preceding fiscal year pursuant to paragraph (a) of Section 5.01,
deliver to the Administrative Agent (i) a Perfection Certificate
Supplement setting forth any changes to the information required pursuant to
the Perfection Certificate or confirming that there has been no change in such
information since the date of the Perfection Certificate delivered on the
Closing Date or the date of the most recently delivered Perfection Certificate
Supplement pursuant to this Section 5.13(b) and (ii) a
certificate of a Financial Officer and the chief legal officer of the Loan
Parties certifying that all UCC Financing Statements (including fixture
filings, as applicable) or other appropriate filings, recordings or
registrations, including all refilings, rerecordings and reregistrations,
containing a description of the Collateral have been filed of record in each

 

87

 

governmental, municipal or other appropriate office in
each jurisdiction necessary to protect and perfect the security interests and
Liens under the Security Documents for a period of not less than 18 months
after the date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period).

 

SECTION 5.14 
Borrowing Base-Related
Reports.  Borrowers
shall deliver or cause to be delivered (at the expense of the Borrowers) to the
Collateral Agent and the Administrative Agent the following:

 

(a)                                  in
no event less frequently than 20 days after the end of each month for the month
most recently ended, a Borrowing Base Certificate from the Borrowers
accompanied by such supporting detail and documentation as shall be requested
by the Administrative Agent or the Collateral Agent in their reasonable credit
judgment; provided, however, that, during the months of December and
January, if at any time the outstanding amount of Revolving Loans and Swing
Line Loans exceeds $35.0 million, Borrowers shall deliver a Borrowing Base
Certificate on the 15th day and on the last day of such months as of the date
that is two weeks prior to such date of delivery;

 

(b)                                 upon
request by the Administrative Agent and the Collateral Agent, and in no event
less frequently than 30 days after the end of (i) each month, a monthly
trial balance showing Accounts outstanding aged from statement date as follows:
1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by
a comparison to the prior month’s trial balance and such supporting detail and
documentation as shall be requested by the Administrative Agent or the
Collateral Agent in their reasonable credit judgment and (ii) each month,
a summary of Inventory by location and type accompanied by such supporting
detail and documentation as shall be requested by the Administrative Agent or the
Collateral Agent in their reasonable credit judgment (in each case, together
with a copy of all or any part of such delivery requested by any Lender in
writing after the Closing Date);

 

(c)                                  on
the date any Borrowing Base Certificate is delivered pursuant to Section 5.14(a) or
at such more frequent intervals as the Administrative Agent or the Collateral
Agent may request from time to time (together with a copy of all or any part of
such delivery requested by any Lender in writing after the Closing Date), a
collateral report with respect to the Borrowers, accompanied by such supporting
detail and documentation as shall be requested by the Administrative Agent or
the Collateral Agent in their reasonable credit judgment;

 

(d)                                 at
the time of delivery of each of the financial statements delivered pursuant to Sections
5.01(a) and (b), a reconciliation of the Accounts trial balance and
quarter-end Inventory reports of Borrowers to the general ledger of such
Borrower, in each case, accompanied by such supporting detail and documentation
as shall be requested by the Administrative Agent or the Collateral Agent in
their reasonable credit judgment;

 

(e)                                  at
the time of delivery of each of the financial statements delivered pursuant to Sections
5.01(a) and (b), a list of any applications for the registration of any

 

88

 

patent, trademark or copyright with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency which any Loan Party has filed in the prior fiscal quarter; and

 

(f)                                    such
other reports, statements and reconciliations with respect to the Borrowing
Base or Collateral of any or all Loan Parties as the Administrative Agent or
the Collateral Agent shall from time to time request in their reasonable credit
judgment.

 

The delivery of
each certificate and report or any other information delivered pursuant to this
Section 5.14 shall constitute a representation and warranty by each
Borrower that the statements and information contained therein are true and
correct in all material respects on and as of such date.

 

SECTION 5.15 
Borrowing Base
Verification; Inventory Appraisals.  Any of the Administrative Agent’s and
Collateral Agent’s officers, designated employees or agents shall have the
right, at any reasonable time or times on prior notice to the Borrower, in the
name of the Administrative Agent or the Collateral Agent, as applicable, to
verify the validity, amount or any other matter relating to Accounts or Inventory
by mail, telephone, electronic communication, personal inspection or otherwise
and to conduct field audits of the financial affairs and Collateral of the Loan
Parties.  Borrowers shall cooperate fully
with the Administrative Agent and the Collateral Agent in an effort to
facilitate and promptly conclude any such verification process.  The Loan Parties shall cooperate fully with
the Administrative Agent and the Collateral Agent and their agents during all
Collateral field audits, which shall be at Borrowers’ expense and shall be
conducted (i) during the first twelve months following the Closing Date,
three times and (ii) during each successive twelve month period following
the Closing Date, two times, and Inventory Appraisals, which shall be at
Borrowers’ expense and shall be conducted two times during any year, except
that for the year 2007 and each year thereafter if there were no Revolving
Loans or Swingline Loans outstanding on December 31 of the prior year then
only one Inventory Appraisal shall be conducted during such year, or in the
case of both field audits and Inventory Appraisals, following the occurrence
and during the continuation of an Event of Default, more frequently at the
Administrative Agent’s or the Collateral Agent’s reasonable request.

 

ARTICLE VI.
 

NEGATIVE COVENANTS

 

Each Loan Party covenants
and agrees with each Lender that, so long as this Agreement shall remain in
effect and until the Commitments have been terminated and the principal of and
interest on each Loan, all Fees and all other expenses or amounts payable under
any Loan Document have been paid in full and all Letters of Credit have been
canceled or have expired or been fully cash collateralized and all amounts
drawn thereunder have been reimbursed in full, unless the Required Lenders
shall otherwise consent in writing, no Loan Party will, nor will they cause or
permit any Subsidiaries to:

 

SECTION 6.01 
Indebtedness.  Incur, create, assume or permit to exist,
directly or indirectly, any Indebtedness, except:

 

89

 

(a)                                  Indebtedness
incurred pursuant to this Agreement and the other Loan Documents;

 

(b)                                 (i) Indebtedness
actually outstanding on the Closing Date and listed on Schedule 6.01(b) or
(ii) refinancings or renewals thereof; provided that (A) any such refinancing Indebtedness is
in an aggregate principal amount not greater than the aggregate principal
amount of the Indebtedness being renewed or refinanced, plus the amount of any premiums
required to be paid thereon and fees and expenses associated therewith, (B) such
refinancing Indebtedness has a later or equal final maturity and longer or
equal weighted average life than the Indebtedness being renewed or refinanced
and (C) the covenants, events of default, subordination and other
provisions thereof (including any guarantees thereof) shall be, in the
aggregate, no less favorable to the Lenders than those contained in the
Indebtedness being renewed or refinanced;

 

(c)                                  Indebtedness
of Borrowers under Hedging Agreements;

 

(d)                                 to
the extent recorded in the Companies’ intercompany account ledgers,
intercompany Indebtedness of the Companies outstanding to the extent permitted
by Section 6.04(e);

 

(e)                                  Indebtedness
of the Borrowers and their Subsidiaries organized in a State within the United
States in respect of Purchase Money Obligations and Capital Lease Obligations
and refinancings or renewals thereof (other than refinancings funded with
intercompany advances), in an aggregate amount not to exceed $10.0 million at any time outstanding;

 

(f)                                    Indebtedness
in respect of workers’ compensation claims, self-insurance obligations,
performance bonds, surety appeal or similar bonds and completion guarantees
provided by a Company in the ordinary course of its business;

 

(g)                                 Contingent
Obligations of any Loan Party in respect of Indebtedness otherwise permitted
under Section 6.01;

 

(h)                                 Indebtedness
in respect of taxes, assessments or governmental charges to the extent that
payment thereof shall not at the time be required to be made in accordance with
Section 5.05;

 

(i)                                     Indebtedness
in respect of netting services and overdraft protections in connection with
deposit accounts, in each case in the ordinary course of business;

 

(j)                                     the
Term Loan Indebtedness;

 

(k)                                  unsecured
guaranties by Holdings, Borrowers or any of their Subsidiaries in respect of
the obligations under that certain Consignment Agreement, dated as of August 5,
1998 (as amended), among Lenox, Sovereign Bank and Sovereign Precious Metals,
LLC, successor in interest to BankBoston, N.A. or any agreement that replaces
such Consignment Agreement, in an amount not to exceed $15.0 million in the
aggregate at any time outstanding; and

 

90

 

(l)                                     other
unsecured Indebtedness (not of the type covered in clauses (a) – (k)
above) of any Company not to exceed $25.0 million in the aggregate principal amount at any time outstanding.

 

SECTION 6.02 
Liens.  Create, incur, assume or permit to exist,
directly or indirectly, any Lien on any Property now owned or hereafter
acquired by it or on any income or revenues or rights in respect of any
thereof, except (the “Permitted Liens”):

 

(a)                                  inchoate
Liens for taxes, assessments or governmental charges or levies not yet due and
payable or delinquent and Liens for taxes, assessments or governmental charges
or levies, which (i) are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance
with GAAP, which proceedings (or orders entered in connection with such
proceedings) have the effect of preventing the forfeiture or sale of the
Property or assets subject to any such Lien, or (ii) in the case of any
such charge or claim which has or may become a Lien against any of the
Collateral, such Lien and the contest thereof shall satisfy the Contested
Collateral Lien Conditions;

 

(b)                                 Liens
in respect of Property of any Company imposed by law, which were incurred in
the ordinary course of business and do not secure Indebtedness for borrowed
money, such as carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s,
suppliers’, repairmen’s and mechanics’ Liens and other similar Liens arising in
the ordinary course of business, and (i) which do not in the aggregate
materially detract from the value of the Property of the Companies, taken as a
whole, and do not materially impair the use thereof in the operation of the
business of the Companies, taken as a whole, (ii) which do not pertain to
Indebtedness that is due and payable or which pertain to Liens that are being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, which proceedings (or orders
entered in connection with such proceedings) have the effect of preventing the
forfeiture or sale of the Property or assets subject to any such Lien, and (iii) in
the case of any such Lien which has or may become a Lien against any of the
Collateral, such Lien and the contest thereof shall satisfy the Contested
Collateral Lien Conditions;

 

(c)                                  Liens
in existence on the Closing Date and set forth on Schedule 6.02(c);
provided that (i) the
aggregate principal amount of the Indebtedness, if any, secured by such Liens
does not increase; and (ii) such Liens do not encumber any Property other
than the Property subject thereto on the Closing Date;

 

(d)                                 easements,
rights-of-way, restrictions (including zoning restrictions), covenants,
encroachments, protrusions and other similar charges or encumbrances, and minor
title deficiencies on or with respect to any Real Property, in each case
whether now or hereafter in existence, not (i) securing Indebtedness, (ii) individually
or in the aggregate materially impairing the value or marketability of such
Real Property and (iii) individually or in the aggregate materially
interfering with the conduct of the business of the Companies at such Real
Property;

 

91

 

(e)                                  Liens
arising out of judgments or awards not resulting in a Default and in respect of
which such Company shall in good faith be prosecuting an appeal or proceedings
for review in respect of which there shall be secured a subsisting stay of
execution pending such appeal or proceedings; provided that the aggregate amount of all such judgments or
awards (and any cash and the fair market value of any Property subject to such
Liens) does not exceed $1.0 million at any time outstanding;

 

(f)                                    Liens
(other than any Lien imposed by ERISA) (i) imposed by law or deposits made
in connection therewith in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other types of social
security, (ii) incurred in the ordinary course of business to secure the
performance of tenders, statutory obligations (other than excise taxes),
surety, stay, customs and appeal bonds, statutory bonds, bids, leases,
government contracts, trade contracts, performance and return of money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money) or (iii) arising by virtue of deposits made in the
ordinary course of business to secure liability for premiums to insurance
carriers; provided that
(w) with respect to clauses (i), (ii) and (iii) hereof,
such Liens are for amounts not yet due and payable or delinquent or, to the
extent such amounts are so due and payable, such amounts are being contested in
good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, which proceedings for orders entered in
connection with such proceedings have the effect of preventing the forfeiture
or sale of the Property or assets subject to any such Lien, (x) to the extent
such Liens are not imposed by law, such Liens shall in no event encumber any
Property other than cash and Cash Equivalents which have been deposited with
such lienholder or has otherwise been subordinated to the Liens securing the
Obligations hereunder pursuant to a Landlord Lien Waiver and Access Agreement,
(y) in the case of any such Lien against any of the Collateral, such Lien and
the contest thereof shall satisfy the Contested Collateral Lien Conditions and
(z) the aggregate amount of deposits at any time pursuant to clause (ii) and
(iii) shall not exceed $250,000 in the aggregate;

 

(g)                                 Leases
or subleases with respect to the assets or properties of any Company, in each
case entered into in the ordinary course of such Company’s business so long as
such Leases are subordinate in all respects to the Liens granted and evidenced
by the Security Documents and do not, individually or in the aggregate, (i) interfere
in any material respect with the ordinary conduct of the business of any
Company or (ii) materially impair the use (for its intended purposes) or
the value of the Property subject thereto;

 

(h)                                 Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by any Company in the ordinary
course of business in accordance with the past practices of such Company;

 

(i)                                     Liens
arising pursuant to Purchase Money Obligations or Capital Lease Obligations
incurred pursuant to Section 6.01(e); provided that (i) the Indebtedness secured by any such
Lien (including refinancings thereof) does not exceed 100% of the cost of the
Property being acquired or leased at the time of the incurrence of such
Indebtedness and (ii) any such Liens attach only to the Property being
financed pursuant

 

92

 

to such Purchase Money Obligations or Capital Lease Obligations and do
not encumber any other Property of any Company;

 

(j)                                     bankers’
Liens, rights of setoff and other similar Liens existing solely with respect to
cash and Cash Equivalents on deposit in one or more accounts maintained by any
Company, in each case granted in the ordinary course of business in favor of
the bank or banks with which such accounts are maintained, securing amounts
owing to such bank with respect to cash management and operating account
arrangements, including those involving pooled accounts and netting
arrangements; provided
that in no case shall any such Liens secure (either directly or indirectly) the
repayment of any Indebtedness;

 

(k)                                  Liens
granted pursuant to the Security Documents;

 

(l)                                     licenses
or sublicenses of Intellectual Property granted by any Company in the ordinary
course of business and not interfering in any material respect with the
ordinary conduct of the business of such Company;

 

(m)                               Liens
attaching solely to cash earnest money deposits in connection with any letter
of intent or purchase agreement in connection with a Permitted Acquisition;

 

(n)                                 Liens
in favor of customs and revenues authorities which secure payment of customs
duties in connection with the importation of goods to the extent required by
law;

 

(o)                                 Liens
deemed to exist in connection with set-off rights in the ordinary course of Borrowers’
and their Subsidiaries’ business;

 

(p)                                 replacement,
extension or renewal of any Lien permitted herein in the same property
previously subject thereto provided the underlying Indebtedness is permitted to
be replaced, extended and renewed under Section 6.01(b);

 

(q)                                 the
filing of financing statements solely as a precautionary measure in connection
with operating leases or the filing of financing statements regarding
consignment of goods; and

 

(r)                                    the
following Liens securing the Term Loan Indebtedness: (i) with respect to
the Term Loan Priority Collateral, first priority Liens senior to the Liens
securing the Obligations and (ii) with respect to the Revolving Credit
Priority Collateral, second priority Liens junior to the Liens securing the
Obligations;

 

provided, however, that no Liens (other than
Liens permitted under Section 6.02(r)(ii)) shall be permitted to
exist, directly or indirectly, on any Pledged Securities or Pledged Notes (each
as defined in the Security Agreement).

 

SECTION 6.03 
Sale and Leaseback
Transactions. 
Enter into any arrangement, directly or indirectly, with any Person
whereby it shall sell or transfer any Property, real or personal, used or
useful in its business, whether now owned or hereafter acquired, and thereafter
rent or lease such Property or other Property which it intends to use for
substantially the same

 

93

 

purpose or purposes as the Property being sold or
transferred unless (i) the sale of such Property is permitted by Section 6.05
and (ii) any Liens arising in connection with its use of such Property are
permitted by Section 6.02.

 

SECTION 6.04 
Investment, Loan and
Advances.  Directly
or indirectly, lend money or credit or make advances to any Person, or purchase
or acquire any stock, obligations or securities of, or any other interest in,
or make any capital contribution to, any other Person, or purchase or own a
futures contract or otherwise become liable for the purchase or sale of
currency or other commodities at a future date in the nature of a futures
contract (all of the foregoing, collectively, “Investments”), except
that the following shall be permitted:

 

(a)                                  the
Companies may consummate the Transactions in accordance with the provisions of
the Transaction Documents;

 

(b)                                 Investments
outstanding on the Closing Date and identified on Schedule 6.04(b);

 

(c)                                  the
Companies may (i) acquire and hold accounts receivables owing to any of
them if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary terms, (ii) acquire and hold
cash and Cash Equivalents, (iii) endorse negotiable instruments for
collection in the ordinary course of business, (iv) make lease, utility
and other similar deposits in the ordinary course of business; or (v) make
prepayments and deposits to suppliers in the ordinary course of business;

 

(d)                                 Borrowers
may enter into Hedging Agreements;

 

(e)                                  any
Loan Party (other than Holdings) may make intercompany loans and advances to
any other Loan Party (other than Holdings); provided that such loan shall simultaneously be recorded on
such Loan Party’s ledgers as an intercompany loan, evidenced by a promissory
notes and shall be pledged (and delivered) by such Loan Party that is the
lender of such intercompany loan as Collateral pursuant to the Security
Agreement, provided  further
that (i) no Loan Party may make loans to any Foreign Subsidiary pursuant
to this paragraph (e) and (ii) any loans made pursuant to this
paragraph (e) shall be subordinated to the Obligations of the Loan Parties
pursuant to an intercompany note in substantially the form of Exhibit L;

 

(f)                                    Borrowers
and the Subsidiaries may make loans and advances (including payroll,
relocation, travel and entertainment related advances) in the ordinary course
of business consistent with past practices to their respective employees (other
than any loans or advances to any director or executive officer (or equivalent
thereof) that would be in violation of Section 402 of the Sarbanes-Oxley
Act);

 

(g)                                 Borrowers
and the Subsidiaries may sell or transfer amounts and acquire assets to the
extent permitted by Section 6.05;

 

(h)                                 Borrowers
may establish (i) Wholly Owned Subsidiaries to the extent permitted by Section 6.12
and (ii) non-Wholly Owned Subsidiaries and/or joint ventures

 

94

 

to the extent that Investments in such non-Wholly Owned Subsidiaries
and/or joint ventures shall not exceed $2.5 million at any time outstanding,
after taking into account amounts returned in cash (including upon
disposition);

 

(i)                                     Investments
(other than as described in Section 6.04(e)) (i) by a Borrower
in any Subsidiary Guarantor, (ii) by any Company in a Borrower or any
Subsidiary Guarantor, (iii) by Holdings in a Borrower and (iv) by a
Subsidiary Guarantor in another Subsidiary Guarantor;

 

(j)                                     Investments
in securities of trade creditors or customers in the ordinary course of
business and consistent with such Company’s past practices that are received in
settlement of bona fide disputes or pursuant to any plan of reorganization or
liquidation or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers;

 

(k)                                  Investments
made by a Borrower or any Subsidiary as a result of consideration received in
connection with an Asset Sale made in compliance with Section 6.05;

 

(l)                                     earnest
money required in connection with and to the extent permitted by Permitted
Acquisitions;

 

(m)                               Loan
Parties may hold Investments to the extent such Investments reflect an increase
in the value of Investments otherwise permitted under this Section 6.04
hereof;

 

(n)                                 Investments
in deposit accounts opened in the ordinary course of business provided such
deposit accounts are subject to Deposit Account Control Agreements if required
hereunder;

 

(o)                                 Any
Loan Party may capitalize or forgive any Indebtedness owed to it by other Loan
Parties (except that Borrowers shall not forgive intercompany loans made to any
other Loan Party);

 

(p)                                 the
Loan Parties may maintain an executive deferred compensation program and
acquire, maintain and sell readily marketable securities as part of such
program, which securities may consist of stocks, bonds and mutual funds, but
not to exceed $5.0 million in the aggregate at any time; and

 

(q)                                 Other
Investments not exceeding $1,000,000 at any time outstanding (plus any
appreciation in the value of any such Investment occurring after such
Investment is acquired).

 

SECTION 6.05 
Mergers,
Consolidations, Sales of Assets and Acquisitions.  Wind up, liquidate or dissolve its affairs or
enter into any transaction of merger or consolidation, or convey, sell, lease
or otherwise dispose of (or agree to do any of the foregoing at any future
time) all or any part of its Property or assets, or purchase or otherwise acquire
(in one or a series of

 

95

 

related transactions) any part of the Property or
assets of any Person (or agree to do any of the foregoing at any future time),
except that:

 

(a)                                  Capital
Expenditures by Borrowers and the Subsidiaries shall be permitted to the extent
permitted by Section 6.08(e);

 

(b)                                 (i) purchases
or other acquisitions of inventory, materials, equipment and intangible assets
in the ordinary course of business shall be permitted, (ii) subject to Section 2.10(b),
sales of used, worn out, obsolete or surplus Property by any Company in the
ordinary course of business and the abandonment or other Asset Sale of
Intellectual Property that is, in the reasonable judgment of Borrowers, no
longer economically practicable to maintain or useful in the conduct of the
business of the Companies as currently being conducted shall be permitted and (iii) subject
to Section 2.10(b), the sale, lease or other disposal of any assets
in an arm’s length transaction shall be permitted; provided that the aggregate consideration received in
respect of all Asset Sales pursuant to this clause (b)(iii) shall
not exceed $1.0 million in any four consecutive fiscal quarters of Borrowers;

 

(c)                                  Investments
in connection with any such transaction may be made to the extent permitted by Section 6.04;

 

(d)                                 Borrowers
and the Subsidiaries may sell Cash Equivalents and use cash for purposes that
are otherwise permitted by the terms of this Agreement in the ordinary course
of business;

 

(e)                                  Borrowers
and the Subsidiaries may lease (as lessee or lessor) real or personal Property
and may guaranty such lease, in each case, in the ordinary course of business
and in accordance with the applicable Security Documents;

 

(f)                                    the
Transactions shall be permitted as contemplated by the Transaction Documents;

 

(g)                                 Borrowers
and the Subsidiaries may consummate Permitted Acquisitions;

 

(h)                                 (i) any
Loan Party may transfer or lease Property to, or acquire or lease Property
from, any Loan Party; provided, that any such lease of any of the
Mortgaged Real Property shall be made expressly subordinated to the applicable
Mortgage, and (ii) any Loan Party (other than Holdings) may be merged into
any other Loan Party (other than Holdings); provided, that, in any merger
involving a Borrower, a Borrower shall be the surviving corporation; provided that the Liens on the
Collateral granted in favor of the Administrative Agent under the Security
Documents shall be maintained;

 

(i)                                     any
Subsidiary of a Borrower may dissolve, liquidate or wind up its affairs at any
time; provided that such
dissolution, liquidation or winding up, as applicable, could not reasonably be
expected to have a Material Adverse Effect; and

 

96

 

(j)                                     discounts
or forgiveness of accounts receivable in the ordinary course of business or in
connection with collection or compromise thereof shall be permitted provided
the account debtor is not an Affiliate; and

 

(k)                                  Permitted
Liens (to the extent constituting a conveyance of Property) shall be permitted.

 

To the extent the
Required Lenders waive the provisions of this Section 6.05 with
respect to the sale of any Collateral, or any Collateral is sold as permitted
by this Section 6.05, such Collateral (unless sold to a Company)
shall be sold free and clear of the Liens created by the Security Documents,
and the Administrative Agent and the Collateral Agent shall take all actions
deemed appropriate in order to effect the foregoing.

 

SECTION 6.06 
Dividends.  Authorize, declare or pay, directly or
indirectly, any Dividends with respect to any Company, except that:

 

(a)                                  any
Subsidiary of a Borrower (i) may pay cash Dividends to such Borrower or
any Wholly Owned Subsidiary of such Borrower and (ii) if such Subsidiary
is not a Wholly Owned Subsidiary of such Borrower, may pay cash Dividends to
its shareholders generally so long as such Borrower or its Subsidiary which
owns the equity interest or interests in the Subsidiary paying such Dividends
receives at least its proportionate share thereof (based upon its relative
holdings of equity interests in the Subsidiary paying such Dividends and taking
into account the relative preferences, if any, of the various classes of equity
interests in such Subsidiary);

 

(b)                                 so
long as no Default exists or would result therefrom, Borrowers may pay
Dividends to Holdings for the purpose of enabling Holdings to, and Holdings
may, repurchase outstanding shares of its common stock (or options to purchase
such common stock) following the death, disability, retirement or termination
of employment of employees, officers or directors of any Company; provided that (i) all
amounts used to effect such repurchases are obtained by Holdings from a
substantially concurrent issuance of its common stock (or options to purchase
such common stock) to other employees, members of management, executive
officers or directors of any Company or (ii) to the extent the proceeds
used to effect any repurchase pursuant to this clause (ii) are not
obtained as described in preceding clause (i), the aggregate amount of
Dividends paid by Holdings to its stockholders pursuant to this paragraph (b) (exclusive
of amounts paid as described pursuant to preceding clause (i)) shall not
exceed $1.0 million in any fiscal
year of Holdings;

 

(c)                                  Borrowers
may pay cash Dividends to Holdings for the purpose of paying, so long as all
proceeds thereof are promptly used by Holdings to pay, its franchise taxes and
operating expenses incurred in the ordinary course of business and other
corporate overhead costs and expenses (including legal and accounting expenses
and similar expenses and customary fees to non-officer directors of Holdings);

 

97

 

(d)                                 Borrowers
and Subsidiaries may pay cash Dividends to Holdings for the purpose of paying,
so long as all proceeds thereof are promptly used by Holdings to pay, its
income tax when and as due; and

 

(e)                                  On
the Closing Date, D 56 may pay a cash Dividend in the amount of the Acquisition
Consideration to effect the Acquisition.

 

SECTION 6.07 
Transactions with
Affiliates.  Enter
into, directly or indirectly, any transaction or series of related
transactions, whether or not in the ordinary course of business, with any
Affiliate of any Company (other than between or among Borrowers and their
Wholly-Owned Subsidiaries), other than in the ordinary course of business and
on terms and conditions substantially as favorable to such Company as would
reasonably be obtained by such Company at that time in a comparable arm’s-length
transaction with a Person other than an Affiliate, except that:

 

(a)                                  Dividends
may be paid to the extent provided in Section 6.06;

 

(b)                                 loans
may be made and other transactions may be entered into between and among any
Company and its Affiliates to the extent permitted by Sections 6.01 and 6.04;

 

(c)                                  customary
fees may be paid to non-officer directors of Holdings and customary indemnities
may be provided to all directors of Holdings; and

 

(d)                                 the
Transactions may be effected.

 

SECTION 6.08 
Financial Covenants.

 

(a)                                  Maximum
Leverage Ratio.  Permit the Leverage
Ratio, for any Test Period ending on or about the dates set forth in the table
below, to exceed the ratio set forth opposite such period in the table below:

 

	
  Test Period

  	
   

  	
  Leverage
  Ratio

  	
   

  
	
  Four fiscal quarters ending December 31,
  2005

  	
   

  	
  2.9 to 1.0

  	
   

  
	
  Four fiscal quarters ending March 31,
  2006

  	
   

  	
  3.3 to 1.0

  	
   

  
	
  Four fiscal quarters ending June 30,
  2006

  	
   

  	
  3.7 to 1.0

  	
   

  
	
  Four fiscal quarters ending September 30,
  2006

  	
   

  	
  4.0 to 1.0

  	
   

  
	
  Four fiscal quarters ending December 31,
  2006

  	
   

  	
  2.0 to 1.0

  	
   

  
	
  Four fiscal quarters ending March 31,
  2007

  	
   

  	
  2.0 to 1.0

  	
   

  
	
  Four fiscal quarters ending June 30,
  2007

  	
   

  	
  2.6 to 1.0

  	
   

  
	
  Four fiscal quarters ending September 30,
  2007

  	
   

  	
  2.8 to 1.0

  	
   

  
	
  Four fiscal quarters ending December 31,
  2007

  	
   

  	
  2.0 to 1.0

  	
   

  
	
  Each period of four fiscal quarters
  thereafter

  	
   

  	
  2.0 to 1.0

  	
   

  

 

(b)                                 Minimum
Interest Coverage Ratio.  Permit the
Consolidated Interest Coverage Ratio, for any Test Period ending on or about
the dates set forth in the table below, to be less than the ratio set forth
opposite such period in the table below:

 

98

 

	
  Test Period

  	
   

  	
  Interest
  Coverage

  Ratio

  	
   

  
	
  Four fiscal quarters ending December 31,
  2005

  	
   

  	
  2.35 to 1.0

  	
   

  
	
  Four fiscal quarters ending March 31,
  2006

  	
   

  	
  2.35 to 1.0

  	
   

  
	
  Four fiscal quarters ending June 30,
  2006

  	
   

  	
  2.75 to 1.0

  	
   

  
	
  Four fiscal quarters ending September 30,
  2006

  	
   

  	
  2.90 to 1.0

  	
   

  
	
  Four fiscal quarters ending December 31,
  2006

  	
   

  	
  3.00 to 1.0

  	
   

  
	
  Four fiscal quarters ending March 31,
  2007

  	
   

  	
  3.35 to 1.0

  	
   

  
	
  Four fiscal quarters ending June 30,
  2007

  	
   

  	
  3.60 to 1.0

  	
   

  
	
  Four fiscal quarters ending September 30,
  2007

  	
   

  	
  3.75 to 1.0

  	
   

  
	
  Four fiscal quarters ending December 31,
  2007

  	
   

  	
  3.75 to 1.0

  	
   

  
	
  Each period of four fiscal quarters
  thereafter

  	
   

  	
  3.75 to 1.0

  	
   

  

 

(c)                                  Limitation
on Capital Expenditures.  Permit the
aggregate amount of Capital Expenditures made in any test period ending on or
about the dates set forth in the table below, to exceed the amount set forth
opposite such period below:

 

	
  Test Period

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
  (in
  millions)

  	
   

  
	
  Closing Date - December 31, 2005

  	
   

  	
  $

  	
  5.7

  	
   

  
	
  Four fiscal quarters ending December 31,
  2006

  	
   

  	
  $

  	
  14.0

  	
   

  
	
  Four fiscal quarters ending December 31,
  2007

  	
   

  	
  $

  	
  14.0

  	
   

  
	
  Four fiscal quarters ending December 31,
  2008

  	
   

  	
  $

  	
  14.0

  	
   

  
	
  Four fiscal quarters ending December 31,
  2009

  	
   

  	
  $

  	
  14.0

  	
   

  
	
  Four fiscal quarters ending December 31,
  2010

  	
   

  	
  $

  	
  14.0

  	
   

  

 

provided,
however, that (x) if the aggregate amount of Capital Expenditures
described in clause (c) above for any test period shall be less
than the amount permitted in clause (c) above for such test period
(before giving effect to any carryover), then 50% of the shortfall may be added
to the amount of Capital Expenditures permitted in clause (c) above
for the immediately succeeding (but not any other) fiscal year and (y) in
determining whether any amount is available for carryover, the amount expended
in any fiscal year shall first be deemed to be from the amount allocated to
such year before any carryover.

 

SECTION 6.09 
Limitation on
Modifications of Indebtedness; Modifications of Certificate of Incorporation,
or Other Constitutive Documents, By-laws and Certain Other Agreements, etc.  (i) Amend or modify, or permit the
amendment or modification of, any provision of existing Indebtedness or of any
agreement (including any purchase agreement, indenture, loan agreement or
security agreement) relating thereto other than any amendments or modifications
to Indebtedness which do not in any way materially adversely affect the
interests of the Lenders and are otherwise permitted under Section 6.01(b);
or (ii) amend or modify, or permit the amendment or modification of, the
Term Loan Documents except as permitted under the Intercreditor Agreement or (iii) amend
or modify, or permit the amendment or modification of, any other Transaction
Document, in each case except for amendments or modifications which are not in
any way adverse in any material respect to the interests of the Lenders; or (iv) amend,
modify or change its articles of incorporation or other constitutive documents
(including by the

 

99

 

filing or modification of any certificate of
designation) or by-laws, or any agreement entered into by it, with respect to
its capital stock (including any shareholders’ agreement), or enter into any
new agreement with respect to its capital stock, other than any amendments,
modifications, agreements or changes pursuant to this clause (iv) or any
such new agreements pursuant to this clause (iv) which do not in any way
materially adversely affect in any material respect the interests of the
Lenders; provided that Holdings
may issue such capital stock as is not prohibited by Section 6.11
or any other provision of this Agreement and may amend articles of
incorporation or other constitutive documents to authorize any such capital
stock.

 

SECTION 6.10 
Limitation on Certain
Restrictions on Subsidiaries.  Directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Subsidiary to (a) pay dividends or make any other
distributions on its capital stock or any other interest or participation in
its profits owned by a Borrower or any other Subsidiary of a Borrower, or pay
any Indebtedness owed to a Borrower or any other Subsidiary of a Borrower, (b) make
loans or advances to a Borrower or any other Subsidiary of a Borrower or (c) transfer
any of its properties to a Borrower or any other Subsidiary of a Borrower,
except for such encumbrances or restrictions existing under or by reason of (i) applicable
law; (ii) this Agreement and the other Loan Documents; (iii) the Term
Loan Documents, (iv) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of a Borrower or any
other Subsidiary of a Borrower; (v) customary provisions restricting
assignment of any agreement entered into by a Borrower or any other Subsidiary
of a Borrower in the ordinary course of business; (vi) any holder of a
Lien permitted by Section 6.02 may restrict the transfer of the
asset or assets subject thereto; (vii) restrictions which are not more
restrictive than those contained in this Agreement contained in any documents
governing any Indebtedness incurred after the Closing Date in accordance with
the provisions of this Agreement; (viii) customary restrictions and
conditions contained in any agreement relating to the sale of any Property
permitted under Section 6.05 pending the consummation of such sale;
(ix) any agreement in effect at the time such Subsidiary becomes a
Subsidiary of Borrower, so long as such agreement was not entered into in
contemplation of such Person becoming a Subsidiary of a Borrower; or (x) in the
case of any joint venture which is not a Loan Party in respect of any matters
referred to in clauses (b) and (c) above, restrictions
in such Person’s organizational or governing documents or pursuant to any joint
venture agreement or stockholders agreements solely to the extent of the Equity
Interests of or assets held in the subject joint venture or other entity.

 

SECTION 6.11 
Limitation on Issuance
of Capital Stock.  (a)  With respect
to Holdings, issue any Equity Interest that is not Qualified Capital Stock.

 

(b)                                 Borrowers
will not, and will not permit any Subsidiary, to issue any Equity Interest of
any Subsidiary (including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, Equity Interest of any
Subsidiary, except (i) for stock splits, stock dividends and additional
Equity Interests issuances which do not decrease the percentage ownership of a
Borrower or any Subsidiaries in any class of the Equity Interest of such
Subsidiary; (ii) Subsidiaries of a Borrower formed after the Closing Date
pursuant to Section 6.12 may issue Equity Interests to a Borrower
or the Subsidiary of a Borrower which is to own such stock; and (iii) a
Borrower may issue common stock that is Qualified Capital Stock to
Holdings.  All Equity Interests issued in
accordance with this Section 6.11(b) shall, to the

 

100

 

extent required by this Agreement or the Security
Agreement, be delivered to the Administrative Agent for pledge pursuant to the
Security Agreement.

 

SECTION 6.12 
Limitation on Creation of Subsidiaries.  Establish, create or acquire any additional
Subsidiaries; provided
that a Borrower may establish or create one or more Wholly Owned Subsidiaries
of a Borrower or one of its Wholly Owned Subsidiaries without consent so long
as (a) 100% of the Equity Interest of any new Subsidiary is, upon the
creation or establishment of any such new Subsidiary (or, in the case of
Foreign Subsidiaries if such pledge would have a material adverse tax impact on
a Borrower (determined at the reasonable discretion of the Administrative
Agent), 66%), pledged and delivered to the Administrative Agent for the benefit
of the Secured Parties under the Security Agreement; (b) upon the creation
or establishment of any such new Wholly Owned Subsidiary (other than a Foreign
Subsidiary if such actions would have a material adverse tax impact on a
Borrower (determined at the reasonable discretion of the Administrative
Agent)), such Subsidiary becomes a party to the applicable Security Documents
and shall become a Subsidiary Guarantor hereunder and execute a Joinder Agreement
and the other Loan Documents all in accordance with Section 5.11(b) above.

 

SECTION 6.13 
Business.  (a)  With
respect to Holdings, engage in any business activities or have any assets or
liabilities, other than (i) its ownership of the Equity Interests of
Borrowers, (ii) obligations under the Loan Documents and the Term Loan
Documents and (iii) activities and assets incidental to the foregoing clauses
(i) and (ii).

 

(b)                                 With
respect to Borrowers and the Subsidiaries, engage (directly or indirectly) in any
business other than those businesses in which Borrowers and its Subsidiaries
are engaged on the Closing Date (or which are substantially related thereto or
are reasonable extensions thereof).

 

SECTION 6.14 
Limitation on
Accounting Changes. 
Make or permit, any change in accounting policies or reporting
practices, without the consent of the Required Lenders, which consent shall not
be unreasonably withheld or delayed, except changes that, in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect or are
required by GAAP.

 

SECTION 6.15 
Fiscal Year.  Change its fiscal year end to a date other
than on or about December 31.

 

SECTION 6.16 
No Negative Pledges.  Directly or indirectly enter into or assume
any agreement (other than this Agreement prohibiting the creation or assumption
of any Lien upon its properties or assets, whether now owned or hereafter
acquired, except for Property subject to purchase money security interests,
operating leases and capital leases.

 

SECTION 6.17 
Lease Obligations.  Create, incur, assume or suffer to exist any
obligations as lessee for the rental or hire of real or personal Property of
any kind under leases or agreements to lease having an original term of one
year or more that would cause the direct and contingent liabilities of
Borrowers and their Subsidiaries, on a consolidated basis, in respect of all
such obligations to exceed $20.0 million payable in any period of 12
consecutive months.

 

101

 

SECTION 6.18 
Anti-Terrorism Law;
Anti-Money Laundering.

 

(a)                                  Directly
or indirectly, (i) knowingly conduct any business or engage in making or
receiving any contribution of funds, goods or services to or for the benefit of
any person described in Section 3.21, (ii) knowingly deal in,
or otherwise engage in any transaction relating to, any property or interests
in property blocked pursuant to the Executive Order or any other Anti-Terrorism
Law, or (iii) knowingly engage in or conspire to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and
the Loan Parties shall deliver to the Lenders any certification or other
evidence requested from time to time by any Lender in its reasonable discretion,
confirming the Loan Parties’ compliance with this Section 6.18).

 

(b)                                 Cause
or permit any of the funds of such Loan Party that are used to repay the Loans
to be derived from any unlawful activity with the result that the making of the
Loans would be in violation of any Requirement of Law.

 

SECTION 6.19 
Embargoed Person.  Cause or permit (a) any of the funds or
properties of the Loan Parties that are used to repay the Loans to constitute
property of, or be beneficially owned directly or indirectly by, any person
subject to sanctions or trade restrictions under United States law (“Embargoed
Person” or “Embargoed Persons”) that is identified on (1) the “List
of Specially Designated Nationals and Blocked Persons” maintained by OFAC
and/or on any other similar list maintained by OFAC pursuant to any authorizing
statute including, but not limited to, the International Emergency Economic
Powers Act, 50 U.S.C. §§ 1701 et seq.,
The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or Requirement of Law
promulgated thereunder, with the result that the investment in the Loan Parties
(whether directly or indirectly) is prohibited by a Requirement of Law, or the
Term Loans made by the Lenders would be in violation of a Requirement of Law,
or (2) the Executive Order, any related enabling legislation or any other
similar Executive Orders or (b) any Embargoed Person to have any direct or
indirect interest, of any nature whatsoever in the Loan Parties, with the
result that the investment in the Loan Parties (whether directly or indirectly)
is prohibited by a Requirement of Law or the Term Loans are in violation of a
Requirement of Law.

 

SECTION 6.20 
Inactive Subsidiaries.  Cause or permit any of the Inactive
Subsidiaries to become active, conduct business or hold assets in an amount
exceeding $250,000 in the aggregate.

 

ARTICLE VII.
 

GUARANTEE

 

SECTION 7.01 
The Guarantee.  The Guarantors hereby jointly and severally
guarantee as a primary obligor and not as a surety to each Secured Party and
their respective successors and assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the principal of
and interest (including any interest, fees, costs or charges that would accrue
but for the provisions of the Title 11 of the United States Code after any
bankruptcy or insolvency petition under Title 11 of the United States Code) on
the Loans made by the Lenders to, and the Notes held by each Lender of, Borrowers,
and all other Obligations

 

102

 

from time to time owing to the Secured Parties by any
Loan Party under any Loan Document or Lender Hedging Agreement relating to the
Loans, in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the “Guaranteed Obligations”).  The Guarantors hereby jointly and severally
agree that if any Borrower or other Guarantor(s) shall fail to pay in full when
due (whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Guarantors will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration
or otherwise) in accordance with the terms of such extension or renewal.

 

SECTION 7.02 
Obligations
Unconditional.  The
obligations of the Guarantors under Section 7.01 shall constitute a
guaranty of payment and are absolute, irrevocable and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the Guaranteed Obligations of Borrowers under this Agreement,
the Notes, if any, or any other agreement or instrument referred to herein or
therein, or any substitution, release or exchange of any other guarantee of or
security for any of the Guaranteed Obligations, and, to the fullest extent permitted
by applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
Guarantor (except for payment in full). 
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not alter or impair the
liability of the Guarantors hereunder which shall remain absolute, irrevocable
and unconditional under any and all circumstances as described above:

 

(a)                                  the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Loan Document or any other agreement,
document or instrument to which a Borrower is or may become a party;

 

(b)                                 the
absence of any action to enforce this Agreement or any other Loan Document or
the waiver or consent by Administrative Agent and Lenders with respect to any
of the provisions thereof;

 

(c)                                  the
existence, value or condition of, or failure to perfect its Lien against, any
security for the Obligations or any action, or the absence of any action, by
Administrative Agent and Lenders in respect thereof (including the release of
any such security);

 

(d)                                 the
insolvency of a Borrower or any other Guarantor;

 

(e)                                  at
any time or from time to time, without notice to the Guarantors, the time for
any performance of or compliance with any of the Guaranteed Obligations shall
be extended, or such performance or compliance shall be waived;

 

(f)                                    any
of the acts mentioned in any of the provisions of this Agreement or the Notes,
if any, or any other agreement or instrument referred to herein or therein
shall be done or omitted;

 

103

 

(g)                                 the
maturity of any of the Guaranteed Obligations shall be accelerated, or any of
the Guaranteed Obligations shall be amended in any respect, or any right under
the Loan Documents or any other agreement or instrument referred to herein or
therein shall be amended or waived in any respect or any other guarantee of any
of the Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;

 

(h)                                 any
lien or security interest granted to, or in favor of, Issuing Bank or any
Lender or Agent as security for any of the Guaranteed Obligations shall fail to
be perfected;

 

(i)                                     the
release of a Borrower or any other Guarantor; or

 

(j)                                     any
other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor (other than
indefeasible payment in full in cash of all Obligations and the termination of
all Commitments).

 

The Guarantors hereby
expressly waive diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that any Secured Party exhaust any
right, power or remedy or proceed against a Borrower under this Agreement or
the Notes, if any, or any other agreement or instrument referred to herein or
therein, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations. 
The Guarantors waive any and all notice of the creation, renewal,
extension, waiver, termination or accrual of any of the Guaranteed Obligations
and notice of or proof of reliance by any Secured Party upon this Guarantee or
acceptance of this Guarantee, and the Guaranteed Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred in
reliance upon this Guarantee, and all dealings between Borrowers and the
Secured Parties shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. 
This Guarantee shall be construed as a continuing, absolute, irrevocable
and unconditional guarantee of payment without regard to any right of offset
with respect to the Guaranteed Obligations at any time or from time to time
held by Secured Parties, and the obligations and liabilities of the Guarantors
hereunder shall not be conditioned or contingent upon the pursuit by the
Secured Parties or any other Person at any time of any right or remedy against
Borrowers or against any other Person which may be or become liable in respect
of all or any part of the Guaranteed Obligations or against any collateral
security or guarantee therefor or right of offset with respect thereto.  This Guarantee shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon
the Guarantors and the successors and assigns thereof, and shall inure to the
benefit of the Lenders, and their respective successors and assigns,
notwithstanding that from time to time during the term of this Agreement there
may be no Guaranteed Obligations outstanding.

 

SECTION 7.03 
Reinstatement.  The obligations of the Guarantors under this Article VII
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of a Borrower or other Loan Party in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise. 
The Guarantors jointly and severally agree that they will indemnify each
Secured Party on demand for all reasonable

 

104

 

costs and expenses (including reasonable fees of
counsel) incurred by such Secured Party in connection with such rescission or
restoration, including any such costs and expenses incurred in defending
against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law, other than any costs or expenses resulting from the bad faith or
willful misconduct of such Secured Party.

 

SECTION 7.04 
Subrogation;
Subordination.  Each
Guarantor hereby agrees that until the indefeasible payment and satisfaction in
full in cash of all Guaranteed Obligations and the expiration and termination
of the Commitments of the Lenders under this Agreement it shall not exercise
any right or remedy arising by reason of any performance by it of its guarantee
in Section 7.01, whether by subrogation or otherwise, against a
Borrower or any other Guarantor of any of the Guaranteed Obligations or any
security for any of the Guaranteed Obligations. 
The payment of any amounts due with respect to any Indebtedness of
Borrowers or any other Guarantor now or hereafter owing to any Guarantor or
Borrowers by reason of any payment by such Guarantor under the Guarantee in
this Article VII is hereby subordinated to the prior indefeasible
payment in full in cash of the Guaranteed Obligations.  In addition, any Indebtedness of the
Guarantors now or hereafter held by any Guarantor is hereby subordinated in
right of payment in full in cash to the Guaranteed Obligations.  Each Guarantor agrees that it will not
demand, sue for or otherwise attempt to collect any such Indebtedness of
Borrowers to such Guarantor until the Obligations shall have been indefeasibly
paid in full in cash.  If,
notwithstanding the foregoing sentence, any Guarantor shall prior to the
indefeasible payment in full in cash of the Guaranteed Obligations collect,
enforce or receive any amounts in respect of such Indebtedness, such amounts
shall be collected, enforced and received by such Guarantor as trustee for the
Secured Parties and be paid over to Administrative Agent on account of the
Guaranteed Obligations without affecting in any manner the liability of such
Guarantor under the other provisions of the guaranty contained herein.

 

SECTION 7.05 
Remedies.  The Guarantors jointly and severally agree
that, as between the Guarantors and the Lenders, the obligations of Borrowers
under this Agreement and the Notes, if any, may be declared to be forthwith due
and payable as provided in Article XI (and shall be deemed to have
become automatically due and payable in the circumstances provided in said Article XI)
for purposes of Section 7.01, notwithstanding any stay, injunction
or other prohibition preventing such declaration (or such obligations from
becoming automatically due and payable) as against Borrowers and that, in the
event of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and
payable by Borrowers) shall forthwith become due and payable by the Guarantors
for purposes of Section 7.01.

 

SECTION 7.06 
Instrument for the
Payment of Money. 
Each Guarantor hereby acknowledges that the guarantee in this Article VII
constitutes an instrument for the payment of money, and consents and agrees
that any Lender or Agent, at its sole option, in the event of a dispute by such
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring a motion-action under New York CPLR Section 3213.

 

SECTION 7.07 
Continuing Guarantee.  The guarantee in this Article VII
is a continuing guarantee of payment, and shall apply to all Guaranteed
Obligations whenever arising.

 

105

 

SECTION 7.08 
General Limitation on
Guarantee Obligations. 
In any action or proceeding involving any state corporate law, or any
state, federal or foreign bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of any
Guarantor under Section 7.01 would otherwise be held or determined
to be void, voidable, invalid or unenforceable, or subordinated to the claims
of any other creditors, on account of the amount of its liability under Section 7.01,
then, notwithstanding any other provision to the contrary, the amount of such
liability shall, without any further action by such Guarantor, any Loan Party
or any other Person, be automatically limited and reduced to the highest amount
that is valid and enforceable and not subordinated to the claims of other creditors
as determined in such action or proceeding.

 

ARTICLE VIII.
 

EVENTS OF DEFAULT

 

In case of the happening
of any of the following events (“Events of
Default”):

 

(a)                                  default
shall be made in the payment of any principal of any Loan or the reimbursement
with respect to any LC Disbursement when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment
thereof or by acceleration thereof or otherwise;

 

(b)                                 default
shall be made in the payment of any interest on any Loan or any Fee or any
other amount (other than an amount referred to in (a) above) due under any
Loan Document, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of three (3) Business Days;

 

(c)                                  any
representation or warranty made or deemed made in or in connection with any
Loan Document or the borrowings or issuances of Letters of Credit hereunder, or
any representation, warranty, statement or information contained in any report,
certificate, financial statement or other instrument furnished in connection
with or pursuant to any Loan Document, shall prove to have been false or
misleading in any material respect when so made, deemed made or furnished; it
being recognized by Lenders, however, that projections as to future events are
not to be viewed as facts and that the actual results during the period or
periods covered by said projections may differ from the projected results;

 

(d)                                 (i) default
shall be made in the due observance or performance by any Company of any
covenant, condition or agreement contained in Section 5.02, 5.03(a) or
5.08 or in Article VI or (ii) default shall be made in
the due observance or performance by any Company of any covenant, condition or
agreement contained in Section 5.07, 5.14 or 5.15 and
such default shall continue unremedied or shall not be waived for a period of 5
Business Days;

 

(e)                                  default
shall be made in the due observance or performance by any Company of any
covenant, condition or agreement contained in any Loan Document (other than
those specified in (a), (b) or (d) above) and such default shall
continue

 

106

 

unremedied or shall not be waived for a period of 20 days after written
notice thereof from the Administrative Agent or any Lender to Borrowers;

 

(f)                                    an
“Event of Default” under, and as defined in the Term Loan Credit Agreement,
shall occur or any Company shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any Indebtedness (other than
the Obligations), when and as the same shall become due and payable, or (ii) fail
to observe or perform any other term, covenant, condition or agreement
contained in any agreement or instrument evidencing or governing any such Indebtedness
if the effect of any failure referred to in clauses (i) and (ii) is
to cause, or to permit the holder or holders of such Indebtedness or a trustee
on its or their behalf (with or without the giving of notice, the lapse of time
or both) to cause, such Indebtedness to become due prior to its stated maturity
or become subject to a mandatory offer to purchase by the obligor; provided that it shall not
constitute an Event of Default pursuant to this paragraph (f) unless the
aggregate amount of all such Indebtedness referred to in clauses (i) and
(ii) exceeds $2.5 million at any one time;

 

(g)                                 an
involuntary proceeding shall be commenced or an involuntary petition shall be
filed in a court of competent jurisdiction seeking (i) relief in respect
of any Company, or of a substantial part of the Property or assets of any
Company, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other federal, state or foreign bankruptcy,
insolvency, receivership or similar law; (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
any Company or for a substantial part of the Property or assets of any Company;
or (iii) the winding-up or liquidation of any Company; and, in any such
case, such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be entered;

 

(h)                                 any
Company shall (i) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other federal, state or foreign bankruptcy,
insolvency, receivership or similar law; (ii) consent to the institution
of, or fail to contest in a timely and appropriate manner, any proceeding or
the filing of any petition described in (g) above; (iii) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Company or for a substantial part of
the Property or assets of any Company; (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding; (v) make
a general assignment for the benefit of creditors; (vi) become unable
(after taking into account all rights of contribution), admit in writing its
inability or fail generally to pay its debts as they become due; (vii) take
any action for the purpose of effecting any of the foregoing; or (viii) wind
up or liquidate, except as expressly allowed under Section 6.05(i);

 

(i)                                     one
or more judgments for the payment of money in an aggregate amount in excess of
$2.5 million shall be rendered
against any Company or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally

 

107

 

taken by a judgment creditor to levy upon assets or properties of any
Company to enforce any such judgment;

 

(j)                                     an
ERISA Event shall have occurred that, in the opinion of the Required Lenders,
when taken together with all other such ERISA Events that have occurred, could
reasonably be expected to result in liability of any Company and its ERISA
Affiliates in an aggregate amount exceeding $2.5 million or the imposition of a
Lien on any assets of a Company;

 

(k)                                  any
security interest and Lien purported to be created by any Security Document
shall cease to be in full force and effect, or shall cease to give the
Administrative Agent, for the benefit of the Secured Parties, the Liens,
rights, powers and privileges purported to be created and granted under such
Security Documents (including a perfected first priority security interest in
and Lien on, all of the Collateral thereunder (except as otherwise expressly
provided in such Security Document)) in favor of the Administrative Agent, or
shall be asserted by a Borrower or any other Loan Party not to be, a valid,
perfected, first priority (except as otherwise expressly provided in this Agreement
or such Security Document) security interest in or Lien on the Collateral
covered thereby;

 

(l)                                     the
Guarantees shall cease to be in full force and effect, unless in connection
with the sale, merger or dissolution of a Guarantor to the extent permitted
under Section 6.05 hereof;

 

(m)                               any
Loan Document or any material provisions thereof shall at any time and for any
reason be declared by a court of competent jurisdiction to be null and void, or
a proceeding shall be commenced by any Loan Party or any other Person, or by
any Governmental Authority, seeking to establish the invalidity or
unenforceability thereof (exclusive of questions of interpretation of any
provision thereof), or any Loan Party shall repudiate or deny that it has any
liability or obligation for the payment of principal or interest or other
obligations purported to be created under any Loan Document;

 

(n)                                 there
shall have occurred a Change in Control;

 

(o)                                 any
Loan Party shall be prohibited or otherwise restrained from conducting the business
theretofore conducted by it in any manner that has or could reasonably be
expected to result in a Material Adverse Effect by virtue of any determination,
ruling, decision, decree or order of any court or Governmental Authority of
competent jurisdiction; or

 

(p)                                 the
indictment by any Governmental Authority of any Loan Party as to which any Loan
Party or Administrative Agent receives notice as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of Administrative
Agent, under any criminal statute, or commencement of criminal or civil
proceedings against any Loan Party pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of
the Collateral having a

 

108

 

value in excess of $1.0 million or (ii) any other Property of any
Loan Party which is necessary or material to the conduct of its business;

 

then, and in every
such event (other than an event with respect to Holdings or Borrowers described
in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to Borrowers, take either or both of the
following actions, at the same or different times:  (i) terminate forthwith the Commitments
and (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of Borrowers accrued hereunder and under
any other Loan Document, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Borrowers and the Guarantors, anything contained
herein or in any other Loan Document to the contrary notwithstanding; and in
any event with respect to Holdings or Borrowers described in paragraph (g) or
(h) above, the Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of Borrowers accrued hereunder
and under any other Loan Document, shall automatically become due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived by Borrowers and the Guarantors, anything
contained herein or in any other Loan Document to the contrary notwithstanding.

 

ARTICLE IX.
 

COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL
PROCEEDS

 

SECTION 9.01 
Collateral Account.

 

(i)                                     The Administrative Agent is hereby
authorized to establish and maintain at one of its offices in the name of the
Administrative Agent and pursuant to a Deposit Account Control Agreement, one
restricted deposit account designated “Borrower LC Collateral Account”.  Each Loan Party shall deposit into the LC
Collateral Account from time to time the cash collateral required to be
deposited under Section 2.18(j) hereof.

 

(ii)                                  The balance from time to time in
such LC Collateral Account shall constitute part of the Collateral and shall
not constitute payment of the Obligations until applied as hereinafter
provided.  Notwithstanding any other
provision hereof to the contrary, all amounts held in the LC Collateral Account
shall constitute collateral security first for the liabilities in respect of
Letters of Credit outstanding from time to time and second for the other
Obligations hereunder until such time as all Letters of Credit shall have been
terminated and all of the liabilities in respect of Letters of Credit have been
paid in full.

 

SECTION 9.02 
Application of
Proceeds.  Subject
to the provisions of the Intercreditor Agreement, the proceeds received by the
Administrative Agent in respect of any sale of, collection from or other
realization upon all or any part of the Collateral pursuant to the exercise by
the Administrative Agent of its remedies shall be applied, together with any
other sums then

 

109

 

held by the Administrative Agent pursuant to this
Agreement, promptly by the Administrative Agent as follows:

 

(a)                                  First,
to the payment of the reasonable costs and expenses, fees, commissions and
taxes of such sale, collection or other realization incurred or due to the
Administrative Agent, the Collateral Agent and their agents and counsel, and
all expenses, liabilities and advances made or incurred by the Administrative
Agent in connection therewith, together with interest on each such amount at
the highest rate then in effect under this Agreement from and after the date
such amount is due, owing or unpaid until paid in full;

 

(b)                                 Second,
to the payment of all other reasonable costs and expenses of such sale,
collection or other realization including, without limitation, costs and
expenses and all costs, liabilities and advances made or incurred by the other
Secured Parties in connection therewith, together with interest on each such
amount at the highest rate then in effect under this Agreement from and after
the date such amount is due, owing or unpaid until paid in full;

 

(c)                                  Third,
without duplication of amounts applied pursuant to clauses (a) and (b) above,
to the indefeasible payment in full in cash, of all Obligations constituting
accrued interest or Fees, payable to the Lenders hereunder, equally and ratably
as set forth below;

 

(d)                                 Fourth,
without duplication of amounts applied pursuant to clauses (a) and (b) above, to the indefeasible payment in full in
cash of the outstanding principal amount of
the Swingline Loans;

 

(e)                                  Fifth,
without duplication of amounts applied pursuant to clauses (a) and (b) above,
to the indefeasible payment in full in cash, of all Obligations constituting
principal of the Revolving Loans;

 

(f)                                    Sixth,
without duplication of amounts applied pursuant to clauses (a) and (b),
to the cash collateralization of the
outstanding Letters of Credit Obligations;

 

(g)                                 Seventh, to the indefeasible payment in full in
cash of any Obligations due to any Lender under a Lender Hedging Agreement permitted by this Agreement;

 

(h)                                 Eighth,
to the payment of all other Obligations; and

 

(i)                                     Ninth,
the balance, if any, to the Person lawfully entitled thereto (including the
applicable Loan Party or its successors or assigns).

 

In carrying out the
foregoing, (a) amounts received shall be applied in the numerical order
provided until exhausted prior to application to the next succeeding category; (b) except
for payments on Swing Loans, each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that its then outstanding
Revolving Loans, Letters of Credit Obligations and obligations outstanding under the Lender Hedging Agreements permitted
by this Agreement bears to the aggregate then outstanding Revolving Loans, Letters
of Credit Obligations, and

 

110

 

obligations outstanding under the Lender Hedging Agreements) of
amounts available to be applied pursuant to clauses “Third”, “Fourth” “Fifth”
and “Sixth” above

 

ARTICLE X.
 

THE ADMINISTRATIVE AGENT AND THE COLLATERAL
AGENT

 

SECTION 10.01 
Appointment.  (a)  Each
Lender hereby irrevocably designates and appoints the Administrative Agent as
the agent of such Lender under this Agreement and the other Loan Documents, and
each Lender irrevocably authorizes the Administrative Agent, in such capacity,
to take such actions on its behalf under the provisions of this Agreement and
the other Loan Documents and to exercise such powers as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.

 

(b)                                 Each
Lender hereby irrevocably designates and appoints the Collateral Agent as the
agent of such Lender under this Agreement and the other Loan Documents, and
each Lender irrevocably authorizes the Collateral Agent, in such capacity, to
take such actions on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers as are expressly delegated to
the Collateral Agent by the terms of this Agreement and the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.

 

SECTION 10.02 
Administrative Agent
and the Collateral Agent in their Individual Capacities.  Each Person serving as the Administrative
Agent or the Collateral Agent hereunder shall have the same rights and powers
in its capacity as a Lender as any other Lender and may exercise the same as
though it were not the Administrative Agent or the Collateral Agent, as
applicable, and such Person and its Affiliates may accept deposits from, lend
money to, act as the financial advisor or in any other advisory capacity for,
and generally engage in any kind of business with, a Borrower or any Subsidiary
or other Affiliate thereof as if it were not the Administrative Agent hereunder
or Collateral Agent, as applicable, and without any duty to account therefor to
the Lenders.  The Lenders hereby
acknowledge that the Administrative Agent is also acting as the administrative
agent and the collateral agent under the Term Loan Documents.

 

SECTION 10.03 
Exculpatory Provisions.  Neither the Administrative Agent nor the
Collateral Agent shall have any duties or obligations except those expressly
set forth in the Loan Documents.  Without
limiting the generality of the foregoing, (a) the Administrative Agent and
the Collateral Agent, shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing, (b) the
Administrative Agent and the Collateral Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent or the Collateral Agent, as applicable, is
required to exercise in writing by the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 11.02); provided, that, neither the
Administrative Agent nor the Collateral Agent shall be required to take any
action that, in its judgment or the judgment of its counsel, may expose such
Agent to liability or that is 

 

111

 

contrary to any Loan Document or applicable
Requirements of Law, and (c) except as expressly set forth in the Loan
Documents, the Administrative Agent and the Collateral Agent shall not have any
duty to disclose, and shall not be liable for the failure to disclose, any
information relating to Borrowers or any of their Affiliates that is
communicated to or obtained by the bank serving as Administrative Agent or the
Collateral Agent, as applicable, or any of its respective Affiliates in any
capacity.  The Administrative Agent and
the Collateral Agent shall not be liable for any action taken or not taken by
it with the consent or at the request of the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary, or as such Agent
shall believe in good faith shall be necessary, under the circumstances as
provided in Section 11.02) or in the absence of its own gross
negligence or willful misconduct.  The
Administrative Agent and the Collateral Agent shall not be deemed to have
knowledge of any Default unless and until written notice thereof is given to
the Administrative Agent and the Collateral Agent by Borrowers or a Lender, and
the Administrative Agent and the Collateral Agent shall not be responsible for
or have any duty to ascertain or inquire into (i) any statement, warranty
or representation made in or in connection with this Agreement or any other
Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent or the Collateral Agent, as
applicable.  Without limiting the
generality of the foregoing, the use of the term “agent” in this Agreement with
reference to the Administrative Agent or the Collateral Agent is not intended
to connote any fiduciary or other implied (or express) obligations arising
under agency doctrine of any applicable law. 
Instead, such term us used merely as a matter of market custom and is
intended to create or reflect only an administrative relationship between
independent contracting parties.

 

SECTION 10.04 
Reliance by Agents.  The Agents shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
(including any electronic message, Internet or intranet website posting or
other distribution) believed by it to be genuine and to have been signed, sent
or otherwise authenticated by the proper Person.  The Agents also may rely upon any statement
made to it orally or by telephone and believed by it to have been made by the
proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition
hereunder to the making of a Loan or other Credit Extension, that by its terms
must be fulfilled to the satisfaction of a Lender, the Administrative Agent may
presume that such condition is satisfactory to such Lender unless the Administrative
Agent shall have received notice to the contrary from such Lender prior to the
making of such Loan or other Credit Extension. 
The Agents may consult with legal counsel (who may be counsel for
Borrowers), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

 

SECTION 10.05 
Delegation of Duties.  Each of the Administrative Agent and the
Collateral Agent may perform any and all of its duties and exercise its rights
and powers hereunder or under any other Loan Document by or through any one or
more sub-agents

 

112

 

appointed by the Administrative Agent or the
Collateral Agent, as applicable.  The
Administrative Agent and the Collateral Agent and any such respective sub-agent
may perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. 
The exculpatory provisions of this Article shall apply to any such
sub-agent and to the Related Parties of each of the Administrative Agent and
the Collateral Agent and any such sub-agent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities of the Administrative
Agent and the Collateral Agent.

 

SECTION 10.06 
Successor
Administrative Agent. 
The Administrative Agent and/or Collateral Agent may resign as such at
any time upon at least 30 days’ prior notice to the Lenders, the Issuing Bank
and Borrowers.  Upon any such
resignation, the Required Lenders shall have the right, in consultation with
Borrowers, to appoint a successor from among the Lenders.  If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent and/or Collateral Agent, as applicable,
gives notice of its resignation, then the retiring Administrative Agent and/or
Collateral Agent, as applicable may, on behalf of the Lenders and the Issuing
Bank, appoint a successor Administrative Agent and/or Collateral Agent, as
applicable, which successor shall be a commercial banking institution organized
under the laws of the United States (or any state thereof) or a United States
branch or agency of a commercial banking institution, and having combined
capital and surplus of at least $250.0 million; provided, however, that if such retiring
Administrative Agent and/or Collateral Agent, as applicable is unable to find a
commercial banking institution which is willing to accept such appointment and
which meets the qualifications set forth above, the retiring Administrative
Agent’s and/or Collateral Agent’s resignation shall nevertheless thereupon
become effective, and the Lenders shall assume and perform all of the duties of
the Administrative Agent and/or Collateral Agent, as applicable hereunder until
such time, if any, as the Required Lenders appoint a successor Administrative Agent
and/or Collateral Agent, as applicable.

 

Upon the acceptance of
its appointment as Administrative Agent and/or Collateral Agent, as applicable,
hereunder by a successor, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent and/or Collateral Agent, as applicable, and the retiring
Administrative Agent and/or Collateral Agent, as applicable, shall be
discharged from its duties and obligations hereunder.  The fees payable by Borrowers to a successor
Administrative Agent and/or Collateral Agent, as applicable, shall be the same
as those payable to its predecessor unless otherwise agreed between Borrowers
and such successor.  After the
Administrative Agent’s and/or Collateral Agent’s resignation hereunder, the
provisions of this Article X and Section 11.03 shall
continue in effect for the benefit of such retiring Administrative Agent and/or
Collateral Agent, as applicable, its respective sub-agents and their respective
Affiliates in respect of any actions taken or omitted to be taken by any of
them while it was acting as Administrative Agent and/or Collateral Agent, as
applicable.

 

SECTION 10.07 
Non-Reliance on Agents
and Other Lenders. 
Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to
enter into this Agreement.  Each Lender
also acknowledges

 

113

 

that it will, independently and without reliance upon
the Agents or any other Lender and based on such documents and information as
it shall from time to time deem appropriate, continue to make its own decisions
in taking or not taking action under or based upon this Agreement, any other
Loan Document or related agreement or any document furnished hereunder or
thereunder.

 

SECTION 10.08 
No Other
Administrative Agent or the Collateral Agent.  The Lenders identified in this Agreement, the
Co-Syndication Agents and the Co-Documentation Agents shall not have any right,
power, obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Lenders. 
Without limiting the foregoing, neither the Co-Syndication Agents nor
the Co-Documentation Agents shall have or be deemed to have a fiduciary
relationship with any Lender.  Each
Lender hereby makes the same acknowledgments with respect to the Co-Syndication
Agents and the Co-Documentation Agents as it makes with respect to the
Administrative Agent or the Collateral Agent or any other Lender in this Article X.  Notwithstanding the foregoing, the parties
hereto acknowledge that the Co-Syndication Agents and the Co-Documentation
Agents hold such titles in name only, and that such titles confer no additional
rights or obligations relative to those conferred on any Lender hereunder.

 

SECTION 10.09 
Indemnification.  The Lenders severally agree to indemnify each
Agent in its capacity as such (to the extent not reimbursed by the Borrowers or
the Guarantors and without limiting the obligation of the Borrowers or the
Guarantors to do so), ratably according to their respective outstanding Loans
and Commitments in effect on the date on which indemnification is sought under
this Section 10.09 (or, if indemnification is sought after the date
upon which all Commitments shall have terminated and the Loans shall have been
paid in full, ratably in accordance with such outstanding Loans and Commitments
as in effect immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever that may at any
time (whether before or after the payment of the Loans) be imposed on, incurred
by or asserted against such Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by such Agent
under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements that are found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from such Agent’s gross negligence or willful misconduct.  The agreements in this Section 10.09
shall survive the payment of the Loans and all other amounts payable hereunder.

 

SECTION 10.10 
Additional Loans.  Administrative Agent shall not make (and
shall prohibit the Issuing Bank and Swingline Lender, as applicable, from
making) any Revolving Loans or provide any Letters of Credit to Borrowers on
behalf of Lenders intentionally and with actual knowledge that such Revolving
Loans, Swingline Loans, or Letters of Credit would cause the aggregate amount
of the Revolving Exposure to exceed the Borrowing Base of Borrowers, without
the prior consent of all Lenders, except, that, Administrative Agent may make
(or cause to be made) such additional Revolving Loans or Swingline Loans or
provide such additional Letters of Credit on behalf of Lenders, intentionally
and with actual knowledge that such Loans or Letters of Credit will cause the
total outstanding Revolving Exposure to exceed the Borrowing Base, as
Administrative Agent may deem necessary or advisable in its discretion, provided,
that:

 

114

 

(a) the total principal amount of the additional
Revolving Loans, Swingline Loans, or additional Letters of Credit to Borrowers
which Administrative Agent may make or provide (or cause to be made or
provided) after obtaining such actual knowledge that the Revolving Exposure
equals or exceeds the Borrowing Base shall not exceed the amount equal to $10.0
million outstanding at any time and shall not cause the Revolving Exposure to
exceed the Revolving Commitments of all of the Lenders or the Revolving
Exposure of a Lender to exceed such Lender’s Revolving Commitment, (b) without
the consent of all Lenders, Administrative Agent shall not make any such
additional Revolving Loans, Swingline Loans, or Letters of Credit more than
sixty (60) days from the date of the first such additional Revolving Loans,
Swingline Loans, or Letters of Credit and (c) the Required Lenders may at
any time prospectively revoke the Administrative Agent’s authorization to make
such additional Revolving Loans, Swingline Loans or Letters of Credit.  Each Lender shall be obligated to pay
Administrative Agent the amount of its Pro Rata Percentage of any such
additional Revolving Loans, Swingline Loans, or Letters of Credit provided that
Administrative Agent is acting in accordance with the terms of this Section 10.10.

 

ARTICLE XI.
 

MISCELLANEOUS

 

SECTION 11.01 
Notices.
  (a)  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in paragraph (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:

 

(i)                                     if to any Loan Party, to Holdings
at:

 

Department 56, Inc.

One Village Place

6436 City West Parkway

Eden Prairie, MN 55344

Attention: 
Timothy J. Schugel, CFO

Telecopy No.: 952-943-4495

 

(ii)                                  if to the Administrative Agent, to
it at:

 

UBS AG, Stamford Branch

677 Washington Boulevard

Stamford, Connecticut 06901

Attention: 
Vladimira Holeckova

Telecopy No.: 
203-719-4176

 

115

 

with a copy to:

 

Winston & Strawn LLP

200 Park Avenue

New York, New York 10166

Attention: William D. Brewer

Telecopy No.: (212) 294-4700

 

(iii)                               if to the Collateral Agent, to it
at:

 

JPMorgan Chase Bank, N.A.

111 East Wisconsin Avenue, Floor 15

Mail Code WI 1-2061

Milwaukee, WI 53202

Attention: 
Monica Stariha

Telecopy No.: 414-977-6666

 

with a copy to the Administrative Agent as
set 

forth in Section 11.01(b) above and its counsel

 

(iv)                              if to a Lender, to it at its address
(or telecopy number) set forth in its Administrative Questionnaire.

 

Notices sent by hand or
overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received; notices sent by telecopy shall be
deemed to have been given when sent if confirmation of delivery is received
(except that, if not given during normal business hours for the recipient,
shall be deemed to have been given at the opening of business on the next
business day for the recipient).  Notices
delivered through electronic communications shall be effective as provided in
paragraph (b) below.

 

(b)                                 Electronic
Communications.  Notices and other
communications to the Lenders hereunder may (subject to Section 11.01(d))
be delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by the
Administrative Agent; provided, that the foregoing shall not apply to
notices to any Lender pursuant to Article II if such Lender has
notified the Administrative Agent that it is incapable of receiving notices
under such Article by electronic communication.  The Administrative Agent, the Collateral
Agent or Borrowers may, in their discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it (including as set forth in Section 11.01(d));
provided, that approval of such procedures may be limited to particular
notices or communications; provided, further, that, unless the
Collateral Agent otherwise agrees, Borrowing Base Certificates and collateral
reports shall not be delivered or furnished by electronic communication in PDF
format.

 

Unless the Administrative
Agent otherwise prescribes, (i) notices and other communications sent to
an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement); provided, that if such

 

116

 

notice or other
communication is not sent during the normal business hours of the recipient,
such notice or communication shall be deemed to have been sent at the opening
of business on the next business day for the recipient, and (ii) notices
or communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the website address
therefor.

 

(c)                                  Change
of Address, Etc.  Any party hereto
may change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto.

 

(d)                                 Posting.   Each Loan Party hereby agrees that it will
provide to the Administrative Agent all information, documents and other
materials that it is obligated to furnish to the Administrative Agent pursuant
to this Agreement and any other Loan Document, including all notices, requests,
financial statements, financial and other reports, certificates and other
information materials, but excluding any such communication that (i) relates
to a request for a new, or a conversion of an existing, Borrowing or other
extension of credit (including any election of an interest rate or interest period
relating thereto), (ii) relates to the payment of any principal or other
amount due under this Agreement prior to the scheduled date therefor, (iii) provides
notice of any Default under this Agreement or (iv) is required to be
delivered to satisfy any condition precedent to the effectiveness of this
Agreement and/or any Borrowing or other Credit Extension hereunder (all such
non-excluded communications, collectively, the “Communications”), by transmitting the Communications in an
electronic/soft medium in a format reasonably acceptable to the Administrative
Agent at such e-mail address(es) provided to Borrowers from time to time or in
such other form, including hard copy delivery thereof, as the Administrative
Agent shall require.  In addition, each
Loan Party agrees to continue to provide the Communications to the
Administrative Agent in the manner specified in this Agreement or any other
Loan Document or in such other form, including hard copy delivery thereof, as
the Administrative Agent shall require. 
Nothing in this Section 11.01 shall prejudice the right of
the Agents, any Lender or any Loan Party to give any notice or other
communication pursuant to this Agreement or any other Loan Document in any
other manner specified in this Agreement or any other Loan Document or as any
such Agent shall require.

 

To the extent consented
to by the Administrative Agent in writing from time to time, Administrative
Agent agrees that receipt of the Communications by the Administrative Agent at
its e-mail address(es) provided to Borrowers shall constitute effective
delivery of the Communications to the Administrative Agent for purposes of the
Loan Documents; provided, that Borrowers shall also deliver to the
Administrative Agent an executed original of each Compliance Certificate
required to be delivered hereunder.

 

Each Loan Party further
agrees that Administrative Agent may make the Communications available to the
Lenders by posting the Communications on Intralinks or a substantially similar
electronic transmission system (the “Platform”).  The Platform is provided “as is” and “as
available.”  The Agents do not warrant
the accuracy or completeness of the Communications, or the adequacy of the
Platform and expressly disclaim liability for errors or omissions in the communications.  No warranty of any kind, express, implied or
statutory, including, without limitation, any warranty of merchantability,
fitness for a particular purpose, non-infringement of third party rights or
freedom from viruses or other code defects, is made by

 

117

 

any Agent in
connection with the Communications or the Platform.  In no event shall the Administrative Agent,
the Collateral Agent or any of their Related Parties have any liability to the
Loan Parties, any Lender or any other person for damages of any kind, including
direct or indirect, special, incidental or consequential damages, losses or
expenses (whether in tort, contract or otherwise) arising out of any Loan Party’s
or the Administrative Agent’s or the Collateral Agent’s transmission of
communications through the Internet, except to the extent the liability of such
person is found in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from such person’s gross negligence or willful
misconduct.

 

SECTION 11.02 
Waivers; Amendment.  (a)  No
failure or delay by the Administrative Agent, the Collateral Agent, the Issuing
Bank or any Lender in exercising any right or power hereunder or under any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power.  The rights and remedies of the Administrative
Agent, the Collateral Agent, the Issuing Bank and the Lenders hereunder and
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have.  No waiver of any provision of any Loan
Document or consent to any departure by any Loan Party therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of
this Section 11.02, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which
given.  Without limiting the generality
of the foregoing, the making of a Loan or issuance of a Letter of Credit shall
not be construed as a waiver of any Default, regardless of whether the
Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank may
have had notice or knowledge of such Default at the time.

 

(b)                                 Neither
this Agreement nor any other Loan Document nor any provision hereof or thereof
may be waived, amended or modified except, in the case of this Agreement,
pursuant to an agreement or agreements in writing entered into by Borrowers and
the Required Lenders or, in the case of any other Loan Document, pursuant to an
agreement or agreements in writing entered into by the Administrative Agent and
the Loan Party or Loan Parties that are parties thereto, in each case with the
written consent of the Required Lenders; provided that no such amendment, waiver or consent shall,
unless in writing and signed by all the Lenders do any of the following: (i) increase
the dollar amount of the Commitment of any Lender, (ii) reduce or forgive
the principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon (other than to waive default interest under Section 2.06(c) to
the extent a waiver of the underlying default giving rise to such default
interest does not require a vote of all Lenders), or reduce or forgive any Fees
payable hereunder, (iii) postpone the maturity of any Loan, or the
required date of reimbursement of any LC Disbursement, or any date for the
payment of any interest or fees payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of expiration
of any Commitment or postpone the scheduled date of expiration of any Letter of
Credit beyond the Revolving Maturity Date, (iv) change Section 2.14(b) or
(c) in a manner that would alter the pro  rata sharing
of payments or set-offs required thereby or change Section 9.02, (v) change
the percentage set forth in the definition of “Required Lenders”, “Supermajority
Lenders” or any other provision of any Loan Document (including this Section 11.02)
specifying the number or percentage of Lenders (or Lenders of any Class)
required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender (or each Lender of such

 

118

 

Class, as the case may be), (vi) release Holdings
or any Subsidiary Guarantor from its Guarantee (except as expressly provided in
Article VII), or limit its liability in respect of such Guarantee, (vii) release
all or substantially all of the Collateral from the Liens of the Security
Documents or alter the relative priorities of the Obligations entitled to the
Liens of the Security Documents (except in connection with securing additional
Obligations equally and ratably with the other Obligations), or (viii) change
any provisions of any Loan Document in a manner that by its terms adversely
affects the rights in respect of payments due to Lenders holding Loans of any Class differently
than those holding Loans of any other Class, without the written consent of
Lenders holding a majority in interest of the outstanding Loans and unused
Commitments of each affected Class; provided,
further, that (1) no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent, the
Collateral Agent, the Issuing Bank or the Swingline Lender without the prior
written consent of the Administrative Agent, the Collateral Agent, the Issuing
Bank or the Swingline Lender, as the case may be, (2) any waiver,
amendment or consent that adjusts the eligibility criteria or creates new
eligibility criteria for Eligible Accounts or Eligible Inventory which, in each
case, has the effect of making more credit available shall require the consent
of Supermajority Lenders and (3) any waiver, amendment or consent that
increases in advance rates for the Borrowing Base shall require the consent of
Lenders having at least 80% of the Revolving Commitments.  Notwithstanding the foregoing, any provision
of this Agreement may be amended by an agreement in writing entered into by
Borrowers, the Required Lenders and the Administrative Agent (and, if their
rights or obligations are affected thereby, the Issuing Bank and the Swingline
Lender) if (x) by the terms of such agreement the Commitment of each Lender not
consenting to the amendment provided for therein shall terminate upon the
effectiveness of such amendment and (y) at the time such amendment becomes
effective, each Lender not consenting thereto receives payment in full of the
principal of and interest accrued on each Loan made by it and all other amounts
owing to it or accrued for its account under this Agreement.

 

(c)                                  If,
in connection with any proposed change, waiver, discharge or termination of the
provisions of this Agreement that requires unanimous approval of all Lenders as
contemplated by Section 11.02(b) (other than clause (iii) of
such Section), the consent of the Supermajority Lenders is obtained but the
consent of one or more of such other Lenders whose consent is required is not
obtained, then Borrowers shall have the right to replace all, but not less than
all, of such non-consenting Lender or Lenders (so long as all non-consenting
Lenders are so replaced) with one or more Persons pursuant to Section 2.16
so long as at the time of such replacement each such new Lender consents to the
proposed change, waiver, discharge or termination; provided, however, that Borrowers shall not have the
right to replace a Lender solely as a result of the exercise of such Lender’s
rights (and the withholding of any required consent by such Lender) pursuant to
clause (iii) of Section 11.02(b); provided
further that each replaced Lender receives payment in full of the principal of
and interest accrued on each Loan made by it and all other amounts owing to it
or accrued for its account under this Agreement.

 

SECTION 11.03 
Expenses; Indemnity.  (a)  The
Loan Parties agree, jointly and severally, to pay all reasonable out-of-pocket
expenses (including but not limited to expenses incurred in connection with due
diligence and travel, courier, reproduction, printing and delivery expenses)
incurred by the Administrative Agent, Collateral Agent, the Swingline Lender
and Issuing Bank in connection with the syndication of the credit facilities
provided for herein and the preparation, execution and delivery, and
administration of this Agreement and the other Loan

 

119

 

Documents, including any Inventory Appraisal, or in
connection with any amendments, modifications, enforcement costs, work-out
costs, documentary taxes or waivers of the provisions hereof or thereof
(whether or not the transactions hereby or thereby contemplated shall be
consummated) or incurred by the Administrative Agent and the Collateral Agent
or any Lender in connection with the work-out, enforcement or protection of its
rights in connection with this Agreement (including pursuant to Section 5.15
of this Agreement) and the other Loan Documents or in connection with the Loans
made or Letters of Credit issued hereunder, including the fees, charges and
disbursements of counsel for the Administrative Agent and the Collateral Agent,
and, in connection with any such enforcement or protection, or work-out, the
fees, charges and disbursements of any other counsel for the Agents or any
Lender.

 

(b)                                 The
Loan Parties agree, jointly and severally, to indemnify the Agents, each
Lender, the Issuing Bank and the Swingline Lender, each Affiliate of any of the
foregoing Persons and each of their respective directors, officers, trustees,
employees and agents (each such Person being called an “Indemnitee”)
against, and to hold each Indemnitee harmless from, all reasonable
out-of-pocket costs and any and all losses, claims, damages, liabilities and
related expenses, including reasonable counsel fees, charges, expenses and
disbursements, incurred by or asserted against any Indemnitee arising out of,
in any way connected with, or as a result of (i) the Transactions, (ii) any
actual or proposed use of the proceeds of the Loans or issuance of Letters of
Credit, (iii) any claim, litigation, investigation or proceeding relating
to any of the foregoing, whether or not any Indemnitee is a party thereto, or (iii) any
actual or alleged presence or Release or threatened Release of Hazardous
Materials, on, under or from any Property owned, leased or operated by any
Company, or any Environmental Claim related in any way to any Company; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence, bad faith or willful misconduct of such Indemnitee.

 

(c)                                  The
provisions of this Section 11.03 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement,
the consummation of the transactions contemplated hereby, the repayment of any
of the Loans, the expiration of the Commitments, the expiration of any Letter
of Credit, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Agents, the Issuing Bank or any Lender. 
All amounts due under this Section 11.03 shall be payable on
written demand therefor accompanied by reasonable documentation with respect to
any reimbursement, indemnification or other amount requested.

 

(d)                                 To
the extent that a Borrower fails to pay any amount required to be paid by it to
the Agents, the Issuing Bank or the Swingline Lender under paragraph (a) or
(b) of this Section 11.03, each Lender severally agrees to pay
to the Agents, the Issuing Bank or the Swingline Lender, as the case may be,
such Lender’s pro  rata share (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that
the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against any of
the Agents, the Issuing Bank or the Swingline Lender in its capacity as
such.  For purposes hereof, a Lender’s “pro
rata share” shall be determined based upon its share of the sum of the
total Revolving Exposure and unused Commitments at the time.

 

120

 

(e)                                  To
the fullest extent permitted by applicable Requirements of Law, no Loan Party
shall assert, and each Loan Party hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any other Loan Document or
any agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby, any Loan or other Credit Extension or the use of the
proceeds thereof.  No Indemnitee referred
to in paragraph (b) above shall be liable for any damages arising from the
use by unintended recipients of any information or other materials distributed
by it through telecommunications, electronic or other information transmission
systems in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby.

 

SECTION 11.04 
Successors and Assigns.  (a)  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted hereby
(including any Affiliate of the Issuing Bank that issues any Letter of Credit),
except that Borrowers may not assign or otherwise transfer any of their rights
or obligations hereunder without the prior written consent of each Lender (and
any attempted assignment or transfer by a Borrower without such consent shall
be null and void).  Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit) and, to the extent expressly contemplated hereby, the
Affiliates of each of the Administrative Agent, the Issuing Bank and the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

(b)                                 Any
Lender may assign to one or more banks, insurance companies, investment
companies or funds or other institutions (other than Borrowers, Holdings or any
Affiliate or Subsidiary thereof) all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment and the
Loans at the time owing to it); provided
that (i) except in the case of an assignment to a Lender, an Affiliate of
a Lender or a Lender Affiliate, Borrowers (except (i) after the occurrence
and during the continuation of a Default or Event of Default or (ii) prior
to the completion of the primary syndication (as determined by Arranger) of the
Commitments and the Loans by the Arranger) and the Administrative Agent (and, in the case of an assignment of
all or a portion of a Revolving Commitment or any Lender’s obligations in respect
of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline
Lender) must give their prior written consent to such assignment (which consent
shall not be unreasonably withheld or delayed), (ii) except in the case of
an assignment to a Lender, an Affiliate of a Lender or a Lender Affiliate, any
assignment made in connection with the primary syndication of the Commitment
and Loans by the Arranger or an assignment of the entire remaining amount of
the assigning Lender’s Commitments or Loans, the amount of the Commitment or
Loans of the assigning Lender subject to each such assignment (determined as of
the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall not be less than in the case of
Revolving Commitments and Revolving Loans, $5.0 million unless each of the
Borrowers and the Administrative Agent otherwise consent, (iii) each
partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender’s rights and obligations under this Agreement, except
that this clause (iii) shall not be construed to prohibit the
assignment of a proportionate part of all the assigning Lender’s rights and
obligations in respect of one Class of Commitments

 

121

 

or Loans, (iv) the parties to each assignment
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance, together with a processing and recordation fee of $3,500, and (v) the
assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire; and provided, further that any consent of Borrowers
otherwise required under this paragraph shall not be required if a Default or
an Event of Default has occurred and is continuing.  Subject to acceptance and recording thereof
pursuant to paragraph (d) of this Section 11.04, from and
after the effective date specified in each Assignment and Acceptance the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of
a Lender under this Agreement (provided
that any liability of Borrowers to such assignee under Section 2.12,
2.13 or 2.15 shall be limited to the amount, if any, that would
have been payable thereunder by Borrowers in the absence of such assignment,
except to the extent any such amounts are attributable to a Change in Law
occurring after the date of such assignment), and the assigning Lender thereunder
shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.12, 2.13, 2.15 and 11.03).  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section 11.04.

 

(c)                                  The
Administrative Agent, acting for this purpose as an agent of Borrowers, shall
maintain at one of its offices in The City of New York a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans and LC Disbursements owing to, each Lender pursuant to the
terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive in the absence of manifest error, and Borrowers, the Administrative
Agent, the Collateral Agent, the Issuing Bank and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary.  The Register shall be
available for inspection by Borrowers, the Issuing Bank, the Administrative
Agent, the Collateral Agent, the Swingline Lender and any Lender (with respect
to its own interest only), at any reasonable time and from time to time upon
reasonable prior notice.

 

(d)                                 Upon
its receipt of a duly completed Assignment and Acceptance executed by an
assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section 11.04,
any written consent to such assignment required by paragraph (b) of this Section 11.04,
and such tax forms or information described in Section 4.01(s) as
the Administrative Agent shall request, the Administrative Agent shall accept
such Assignment and Acceptance and record the information contained therein in
the Register.  No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.

 

(e)                                  Any
Lender may, without the consent of Borrowers, the Administrative Agent, the
Issuing Bank or the Swingline Lender, sell participations to one or more banks
or other entities

 

122

 

(a “Participant”) in all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that (i) such
Lender’s obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) Borrowers, the Administrative
Agent, the Collateral Agent, the Issuing Bank and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce the Loan Documents and to approve any amendment,
modification or waiver of any provision of the Loan Documents; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 11.02(b) that affects such
Participant.  Subject to paragraph (f) of
this Section 11.04, Borrowers agree that each Participant shall be
entitled to the benefits of Sections 2.12, 2.13 and 2.15
to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section 11.04.  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 11.08
as though it were a Lender; provided
that such Participant agrees to be subject to Section 2.14(c) as
though it were a Lender.  Each Lender
shall, acting for this purpose as an agent of the Borrowers, maintain at one of
its offices a register for the recordation of the names and addresses of its
Participants, and the amount and terms of its participations, provided  that
no Lender shall be required to disclose or share the information contained in
such register with the Borrowers or any other party, except as required by
applicable law.

 

(f)                                    A
Participant shall not be entitled to receive any greater payment under Section 2.12,
2.13 or 2.15 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the prior
written consent of Borrowers (which consent shall not be unreasonably withheld
or delayed).  A Participant that would be
a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15
unless Borrowers are notified of the participation sold to such Participant and
such Participant agrees, for the benefit of Borrowers, to comply with Sections
2.15(e) and (f) as though it were a Lender.

 

(g)                                 Any
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section 11.04 shall not apply to any such
pledge or assignment of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.  In the case of any Lender that is a fund that
invests in bank loans, such Lender may, without the consent of Borrowers or the
Administrative Agent, collaterally assign or pledge all or any portion of its
rights under this Agreement, including the Loans and Notes or any other
instrument evidencing its rights as a Lender under this Agreement, to any
holder of, trustee for, or any other representative of holders of, obligations
owed or securities issued, by such fund, as security for such obligations or
securities; provided
that the documentation governing or evidencing such collateral assignment or
pledge shall provide that any foreclosure or similar action by such trustee or
representative shall be subject to the provisions of this Section 11.04
concerning assignments and shall not be effective to transfer any rights under
this Agreement or in any

 

123

 

Loan, Note or other instrument evidencing its rights
as a Lender under this Agreement unless the requirements of Section 11.04
concerning assignments are fully satisfied.

 

SECTION 11.05 
Survival of Agreement.  All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Agents, the Issuing Bank or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated.  The provisions of Sections 2.12, 2.13,
2.15 and 11.03 and Article X shall survive and remain
in full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any provision hereof.

 

SECTION 11.06 
Counterparts; Integration;
Effectiveness; Electronic Execution.   (a)  This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  This Agreement, the other Loan Documents and
the Fee Letter constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.

 

(b)                                 The
words “execution,” “signed,” “signature,” and words of like import in any
Assignment and Acceptance shall be deemed to include electronic signatures or
the keeping of records in electronic form, each of which shall be of the same
legal effect, validity or enforceability as a manually executed signature or
the use of a paper-based recordkeeping system, as the case may be, to the extent
and as provided for in any applicable Requirement of Law, including the Federal
Electronic Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.

 

SECTION 11.07 
Severability.  Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and

 

124

 

enforceability of the remaining provisions hereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

 

SECTION 11.08 
Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates are hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final, but excluding trust accounts) at any time held and other
obligations at any time owing by such Lender or Affiliate to or for the credit
or the account of Borrowers against any of and all the obligations of Borrowers
now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured.  The rights of each Lender under this Section 11.08
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.

 

SECTION 11.09 
Governing Law;
Jurisdiction; Consent to Service of Process.  (a)  This
Agreement shall be construed in accordance with and governed by the law of the
State of New York, without regard to conflicts of law principles that would
require the application of the laws of another jurisdiction.

 

(b)                                 Each
Loan Party hereby irrevocably and unconditionally submits, for itself and its
Property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to any Loan Document, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
court or, to the fullest extent permitted by law, in such federal court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
any other Loan Document against any Loan Party or its properties in the courts
of any jurisdiction.

 

(c)                                  Each
Loan Party hereby irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any other Loan Document in any court
referred to in paragraph (b) of this Section 11.09.  Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

 

(d)                                 Each
party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 11.01.  Nothing in this Agreement or any other Loan
Document will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

 

125

 

SECTION 11.10 
Waiver of Jury Trial.  Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in any legal proceeding directly or indirectly arising out of or relating
to this Agreement, any other Loan Document or the transactions contemplated
hereby (whether based on contract, tort or any other theory).  Each party hereto (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section 11.10.

 

SECTION 11.11 
Headings.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.

 

SECTION 11.12 
Confidentiality.  Each of the Administrative Agent, the
Collateral Agent, the Issuing Bank and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential pursuant to the terms hereof), (b) to the extent
requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d) to
any other party to this Agreement, (e) in connection with the exercise of
any remedies hereunder or any suit, action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section 11.12, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Agreement or (ii) any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to a Borrower and its obligations, (g) with the
consent of Borrowers or (h) to the extent such Information (i) is
publicly available at the time of disclosure or becomes publicly available
other than as a result of a breach of this Section 11.12 or (ii) becomes
available to the Administrative Agent, the Collateral Agent, the Issuing Bank
or any Lender on a nonconfidential basis from a source other than Borrowers or
any Subsidiary.  For the purposes of this
Section 11.12, “Information” means all information received from
Borrowers or any Subsidiary relating to Borrowers or any Subsidiary or its
business, other than any such information that is available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
prior to disclosure by Borrowers or any Subsidiary; provided  that, in the case of information received
from a Borrower or any Subsidiary after the date hereof, such information is
clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality
of Information as provided in this Section 11.12 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential
information.  Notwithstanding anything to
the contrary set forth herein or in any other written or oral understanding or
agreement to which the parties hereto are parties or by which they are bound,
the parties acknowledge and agree that (i) any obligations of
confidentiality contained herein and therein do not apply and have not applied
from the commencement of discussions between the parties to the tax treatment
and tax structure of the

 

126

 

Transactions (and any related transactions or
arrangements), and (ii) each party (and each of its employees,
representatives, or other agents) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the Transactions
and all materials of any kind (including opinions or other tax analyses) that
are provided to such party relating to such tax treatment and tax structure,
all within the meaning of Treasury Regulation Section 1.6011-4; provided,
however, that each party recognizes that the privilege each has to
maintain, in its sole discretion, the confidentiality of a communication
relating to the Transaction, including a confidential communication with its
attorney or a confidential communication with a federally authorized tax
practitioner under Section 7525 of the Code, is not intended to be
affected by the foregoing.

 

SECTION 11.13 
Interest Rate
Limitation. 
Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to any Loan, together with all fees, charges and other
amounts which are treated as interest on such Loan under applicable law
(collectively, the “Charges”), shall exceed the maximum lawful rate (the
“Maximum Rate”) which may be contracted for, charged, taken, received or
reserved by the Lender holding such Loan in accordance with applicable law, the
rate of interest payable in respect of such Loan hereunder, together with all
Charges payable in respect thereof, shall be limited to the Maximum Rate and,
to the extent lawful, the interest and Charges that would have been payable in
respect of such Loan but were not payable as a result of the operation of this Section 11.13
shall be cumulated and the interest and Charges payable to such Lender in
respect of other Loans or periods shall be increased (but not above the Maximum
Rate therefor) until such cumulated amount, together with interest thereon at
the Federal Funds Effective Rate to the date of repayment, shall have been
received by such Lender.

 

SECTION 11.14 
Lender Addendum.  Each Lender to become a party to this
Agreement on the date hereof shall do so by delivering to the Administrative
Agent a Lender Addendum duly executed by such Lender, the Borrowers and the
Administrative Agent.

 

SECTION 11.15 
USA PATRIOT Act Notice.  Each Lender that is subject to the Act (as
hereinafter defined) and the Administrative Agent (for itself and not on behalf
of any Lender) hereby notifies Borrower that pursuant to the requirements of
the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record
information that identifies Borrower, which information includes the name,
address and tax identification number of Borrower and other information
regarding Borrower that will allow such Lender or the Administrative Agent, as
applicable, to identify Borrower in accordance with the Act.  This notice is given in accordance with the
requirements of the Act and is effective as to the Lenders and the Administrative
Agent.

 

[Signature Pages Follow]

 

127

 

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

 

	
   

  	
  D 56, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
   

  	
  Title:

  	
  Chairwoman & Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEPARTMENT 56 RETAIL, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TIME TO CELEBRATE, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
   

  	
  Title:

  	
  Chairwoman & Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENOX, INCORPORATED, as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James G.
  Berwick

  
	
   

  	
   

  	
  Name:

  	
  James G. Berwick

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEPARTMENT 56, INC., as a Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
   

  	
  Title:

  	
  Chairwoman & Chief Executive
  Officer

  

 

 

	
   

  	
  SUBSIDIARY GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  DEPARTMENT 56 SALES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
   

  	
  Title:

  	
  Chairwoman

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CAN 56, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FL 56 INTERMEDIATE CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
   

  	
  Title:

  	
  President & Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DID, INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward
  Paolella

  
	
   

  	
   

  	
  Name:

  	
  Edward Paolella

  
	
   

  	
   

  	
  Title:

  	
  Vice President & Treasurer

  

 

 

	
   

  	
  UBS AG, STAMFORD BRANCH, as Issuing Bank

  and Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wilfred
  V. Saint

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wilfred V. Saint

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
  Banking Products

  
	
   

  	
   

  	
   

  	
  Services, US

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joselin
  Fernandes

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joselin Fernandes

  
	
   

  	
   

  	
  Title:

  	
  Associate Director

  
	
   

  	
   

  	
   

  	
  Banking Products

  
	
   

  	
   

  	
   

  	
  Services, US

  
	
   

  	
   

  	
   

  
	
   

  	
  UBS SECURITIES LLC, as Arranger and Co-

  Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John C.
  Crockett

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John C. Crockett

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David A.
  Juge

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David A. Juge

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UBS LOAN FINANCE LLC, as Swingline Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wilfred
  V. Saint

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wilfred V. Saint

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
  Banking Products

  
	
   

  	
   

  	
   

  	
  Services, US

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joselin
  Fernandes

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joselin Fernandes

  
	
   

  	
   

  	
  Title:

  	
  Associate Director

  
	
   

  	
   

  	
   

  	
  Banking Products

  
	
   

  	
   

  	
   

  	
  Services, US

  
					

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A., as Collateral

  Agent, Co-Syndication Agent and Issuing Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard
  Marcus

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Marcus

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  WELLS FARGO FOOTHILL, LLC, as Co-

  Documentation Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sanat
  Amladi

  	
   

  
	
   

  	
   

  	
  Name:

  	
  SANAT AMLADI

  
	
   

  	
   

  	
  Title:

  	
  V.P.

  
					

 

 

	
   

  	
  BANK OF AMERICA, N.A., as Co-Documentation
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Allan R.
  Juleus

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Allan R. Juleus

  
	
   

  	
   

  	
  Title:

  	
  SVP

  
					

 

 

Applicable
Margin

 

	
   

  	
   

  	
  Revolving Loans

  	
   

  	
  Applicable Fee

  	
   

  
	
  Leverage Ratio

  	
   

  	
  Eurodollar

  	
   

  	
  ABR

  	
   

  	
   

  
	
  Level I: >
  3.5:1.0

  	
   

  	
  2.50

  	
  %

  	
  0.75

  	
  %

  	
  0.375

  	
  %

  
	
  Level II: <
  3.5:1.0 but > 2.5:1.0

  	
   

  	
  2.25

  	
  %

  	
  0.50

  	
  %

  	
  0.375

  	
  %

  
	
  Level III: <
  2.5:1.0 but > 1.5:1.0

  	
   

  	
  2.00

  	
  %

  	
  0.25

  	
  %

  	
  0.375

  	
  %

  
	
  Level IV: <
  1.5:1.0

  	
   

  	
  1.75

  	
  %

  	
  0.00

  	
  %

  	
  0.375

  	
  %

  

 

Each change in
the Applicable Margin or Applicable Fee resulting from a change in the Leverage
Ratio shall be effective with respect to all Loans and Letters of Credit
outstanding on and after the date of delivery to the Administrative Agent of
the financial statements and certificates required by Section 5.01(a) or
(b) and Section 5.01(d), respectively, indicating such
change until the date immediately preceding the next date of delivery of such
financial statements and certificates indicating another such change.  Notwithstanding the foregoing, the Leverage
Ratio shall be deemed to be (i) in Level II for purposes of determining
the Applicable Margin and Applicable Fee from the Closing Date to the date of
delivery to the Administrative Agent of the financial statements and
certificates required by Section 5.01(a) or (b) and
Section 5.01(d) for the fiscal quarter ending at least six
months after the Closing Date and (ii) in Level I for purposes of
determining the Applicable Margin and Applicable Fee at any time (A) during
which Borrowers have failed to deliver the financial statements and
certificates required by Section 5.01(a) or (b) and
Section 5.01(d), respectively, and (B) during the existence of
an Event of Default.Exhibit 10.2

 

 

$100,000,000

 

TERM
LOAN CREDIT AGREEMENT

 

dated as of September 1, 2005,

 

among

 

D 56, INC.,

DEPARTMENT 56 RETAIL, INC.,

TIME TO CELEBRATE, INC.

and

LENOX, INCORPORATED,

as Borrowers,

 

DEPARTMENT 56, INC.,

and

THE OTHER GUARANTORS PARTY HERETO,

as Guarantors,

 

THE LENDERS PARTY HERETO

 

UBS SECURITIES LLC,

as Sole Arranger and Syndication Agent,

 

UBS AG, STAMFORD BRANCH,

as Administrative Agent and Collateral Agent,

 

and

 

WELLS FARGO FOOTHILL, LLC,

as Documentation Agent,

 

 

 

Table of
Contents

 

	
  ARTICLE I. DEFINITIONS

  	
   

  
	
  SECTION 1.01 Defined Terms

  	
   

  
	
  SECTION 1.02 Classification of Term
  Loans and Term Borrowings

  	
   

  
	
  SECTION 1.03 Terms Generally

  	
   

  
	
  SECTION 1.04 Accounting Terms; GAAP

  	
   

  
	
   

  	
   

  
	
  ARTICLE II. THE CREDITS

  	
   

  
	
  SECTION 2.01 Commitments

  	
   

  
	
  SECTION 2.02
  Term Loans.

  	
   

  
	
  SECTION 2.03
  Borrowing Procedure

  	
   

  
	
  SECTION 2.04
  Evidence of Debt; Repayment of Term Loans.

  	
   

  
	
  SECTION 2.05
  Fees.

  	
   

  
	
  SECTION 2.06
  Interest on Term Loans.

  	
   

  
	
  SECTION 2.07
  Termination of Commitments

  	
   

  
	
  SECTION 2.08
  Interest Elections.

  	
   

  
	
  SECTION 2.09
  Amortization of Term Borrowings

  	
   

  
	
  SECTION 2.10
  Optional and Mandatory Prepayments of Term Loans.

  	
   

  
	
  SECTION 2.11
  Alternate Rate of Interest

  	
   

  
	
  SECTION 2.12
  Increased Costs

  	
   

  
	
  SECTION 2.13
  Breakage Payments

  	
   

  
	
  SECTION 2.14
  Payments Generally; Pro Rata Treatment; Sharing of Setoffs.

  	
   

  
	
  SECTION 2.15
  Taxes

  	
   

  
	
  SECTION 2.16
  Mitigation Obligations; Replacement of Lenders.

  	
   

  
	
   

  	
   

  
	
  ARTICLE III.
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  SECTION 3.01
  Organization; Powers

  	
   

  
	
  SECTION 3.02
  Authorization; Enforceability

  	
   

  
	
  SECTION 3.03
  Governmental Approvals; No Conflicts

  	
   

  
	
  SECTION 3.04
  Financial Statements

  	
   

  
	
  SECTION 3.05
  Properties

  	
   

  
	
  SECTION 3.06
  Equity Interests and Subsidiaries

  	
   

  
	
  SECTION 3.07
  Litigation; Compliance with Laws

  	
   

  
	
  SECTION 3.08
  Agreements

  	
   

  
	
  SECTION 3.09
  Federal Reserve Regulations

  	
   

  
	
  SECTION 3.10
  Investment Company Act; Public Utility Holding Company Act

  	
   

  
	
  SECTION 3.11
  Use of Proceeds

  	
   

  
	
  SECTION 3.12
  Taxes

  	
   

  
	
  SECTION 3.13
  No Material Misstatements

  	
   

  
	
  SECTION 3.14
  Labor Matters

  	
   

  
	
  SECTION 3.15
  Solvency

  	
   

  
	
  SECTION 3.16
  Employee Benefit Plans

  	
   

  
	
  SECTION 3.17
  Environmental Matters

  	
   

  
	
  SECTION 3.18
  Insurance

  	
   

  

 

i

 

	
  SECTION 3.19
  Security Documents

  	
   

  
	
  SECTION 3.20
  Acquisition Documents; Representations and Warranties in Agreement

  	
   

  
	
  SECTION 3.21
  Anti-Terrorism Law

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV.
  CONDITIONS TO CREDIT EXTENSIONS

  	
   

  
	
  SECTION 4.01
  Conditions to Initial Credit Extension

  	
   

  
	
  SECTION 4.02
  Conditions to All Credit Extensions

  	
   

  
	
   

  	
   

  
	
  ARTICLE V.
  AFFIRMATIVE COVENANTS

  	
   

  
	
  SECTION 5.01
  Financial Statements, Reports, etc. 

  	
   

  
	
  SECTION 5.02
  Litigation and Other Notices

  	
   

  
	
  SECTION 5.03
  Existence; Businesses and Properties

  	
   

  
	
  SECTION 5.04
  Insurance

  	
   

  
	
  SECTION 5.05
  Obligations and Taxes

  	
   

  
	
  SECTION 5.06
  Employee Benefits

  	
   

  
	
  SECTION 5.07
  Maintaining Records; Access to Properties and Inspections

  	
   

  
	
  SECTION 5.08
  Use of Proceeds

  	
   

  
	
  SECTION 5.09
  Compliance with Environmental Laws; Environmental Reports

  	
   

  
	
  SECTION 5.10
  Interest Rate Protection

  	
   

  
	
  SECTION 5.11
  Additional Collateral; Additional Guarantors

  	
   

  
	
  SECTION 5.12
  Security Interests; Further Assurances

  	
   

  
	
  SECTION 5.13
  Information Regarding Collateral

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI.
  NEGATIVE COVENANTS

  	
   

  
	
  SECTION 6.01
  Indebtedness

  	
   

  
	
  SECTION 6.02
  Liens

  	
   

  
	
  SECTION 6.03
  Sale and Leaseback Transactions

  	
   

  
	
  SECTION 6.04
  Investment, Loan and Advances

  	
   

  
	
  SECTION 6.05
  Mergers, Consolidations, Sales of Assets and Acquisitions

  	
   

  
	
  SECTION 6.06
  Dividends

  	
   

  
	
  SECTION 6.07
  Transactions with Affiliates

  	
   

  
	
  SECTION 6.08
  Financial Covenants

  	
   

  
	
  SECTION 6.09 Limitation on
  Modifications of Indebtedness; Modifications of Certificate of Incorporation,
  or Other Constitutive Documents, By-laws and Certain Other Agreements, etc.

  	
   

  
	
  SECTION 6.10
  Limitation on Certain Restrictions on Subsidiaries

  	
   

  
	
  SECTION 6.11
  Limitation on Issuance of Capital Stock

  	
   

  
	
  SECTION 6.12
  Limitation on Creation of Subsidiaries

  	
   

  
	
  SECTION 6.13
  Business

  	
   

  
	
  SECTION 6.14
  Limitation on Accounting Changes

  	
   

  
	
  SECTION 6.15
  Fiscal Year

  	
   

  
	
  SECTION 6.16
  No Negative Pledges

  	
   

  
	
  SECTION 6.17
  Lease Obligations

  	
   

  
	
  SECTION 6.18
  Anti-Terrorism Law; Anti-Money Laundering

  	
   

  

 

ii

 

	
  SECTION 6.19
  Embargoed Person

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII.
  GUARANTEE

  	
   

  
	
  SECTION 7.01
  The Guarantee

  	
   

  
	
  SECTION 7.02
  Obligations Unconditional

  	
   

  
	
  SECTION 7.03
  Reinstatement

  	
   

  
	
  SECTION 7.04
  Subrogation; Subordination

  	
   

  
	
  SECTION 7.05
  Remedies

  	
   

  
	
  SECTION 7.06
  Instrument for the Payment of Money

  	
   

  
	
  SECTION 7.07
  Continuing Guarantee

  	
   

  
	
  SECTION 7.08
  General Limitation on Guarantee Obligations

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII.
  EVENTS OF DEFAULT

  	
   

  
	
  SECTION 8.01
  Events of Default

  	
   

  
	
  SECTION 8.02
  Application of Proceeds

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX.
  THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT

  	
   

  
	
  SECTION 9.01
  Appointment and Authority

  	
   

  
	
  SECTION 9.02
  Rights as a Lender

  	
   

  
	
  SECTION 9.03
  Exculpatory Provisions

  	
   

  
	
  SECTION 9.04
  Reliance by Agent

  	
   

  
	
  SECTION 9.05
  Delegation of Duties

  	
   

  
	
  SECTION 9.06
  Resignation of Agent

  	
   

  
	
  SECTION 9.07
  Non-Reliance on Agent and Other Lenders

  	
   

  
	
  SECTION 9.08
  No Other Duties, etc.

  	
   

  
	
  SECTION 9.09
  Indemnification

  	
   

  
	
   

  	
   

  
	
  ARTICLE X. MISCELLANEOUS

  	
   

  
	
  SECTION 10.01
  Notices

  	
   

  
	
  SECTION 10.02
  Waivers; Amendment

  	
   

  
	
  SECTION 10.03
  Expenses; Indemnity; Damage Waiver

  	
   

  
	
  SECTION 10.04
  Successors and Assigns

  	
   

  
	
  SECTION 10.05
  Survival of Agreement

  	
   

  
	
  SECTION 10.06
  Counterparts; Integration; Effectiveness; Electronic Execution

  	
   

  
	
  SECTION 10.07
  Severability

  	
   

  
	
  SECTION 10.08
  Right of Setoff

  	
   

  
	
  SECTION 10.09
  Governing Law; Jurisdiction; Consent to Service of Process

  	
   

  
	
  SECTION 10.10
  Waiver of Jury Trial

  	
   

  
	
  SECTION 10.11
  Headings

  	
   

  
	
  SECTION 10.12
  Confidentiality

  	
   

  
	
  SECTION 10.13
  USA PATRIOT Act Notice

  	
   

  
	
  SECTION 10.14
  Interest Rate Limitation

  	
   

  
	
  SECTION 10.15
  Lender Addendum

  	
   

  

 

iii

 

	
  ANNEXES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex
  I

  	
  Amortization Table

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.01(a)

  	
  Mortgaged Real Property

  	
   

  
	
  Schedule 1.01(b)

  	
  Refinancing Indebtedness To Be Repaid

  	
   

  
	
  Schedule 1.01(c)

  	
  Subsidiary Guarantors

  	
   

  
	
  Schedule 3.03

  	
  Governmental Approvals; Compliance with
  Laws

  	
   

  
	
  Schedule 3.05(b)

  	
  Real Property

  	
   

  
	
  Schedule 3.05(c)

  	
  Intellectual Property Licenses

  	
   

  
	
  Schedule 3.06(a)

  	
  Subsidiaries

  	
   

  
	
  Schedule 3.06(c)

  	
  Corporate Organizational Chart

  	
   

  
	
  Schedule 3.08(c)

  	
  Material Agreements

  	
   

  
	
  Schedule 3.17

  	
  Environmental Matters

  	
   

  
	
  Schedule 3.18

  	
  Insurance

  	
   

  
	
  Schedule 3.19(b)

  	
  Trademarks

  	
   

  
	
  Schedule 3.19(c)

  	
  Patents

  	
   

  
	
  Schedule 3.19(d)

  	
  Copyrights

  	
   

  
	
  Schedule 3.20

  	
  List of Acquisition Documents

  	
   

  
	
  Schedule 4.01(g)

  	
  Local Counsel

  	
   

  
	
  Schedule 4.01(n)

  	
  Landlord Access Agreements

  	
   

  
	
  Schedule 4.01(o)(iii)

  	
  Title Insurance Amounts

  	
   

  
	
  Schedule 6.01(b)

  	
  Existing Indebtedness

  	
   

  
	
  Schedule 6.02(c)

  	
  Existing Liens

  	
   

  
	
  Schedule 6.04(b)

  	
  Existing Investments

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
  Form of Administrative Questionnaire

  	
   

  
	
  Exhibit A-2

  	
  Form of Compliance Certificate

  	
   

  
	
  Exhibit A-3

  	
  Form of Lender Addendum

  	
   

  
	
  Exhibit B

  	
  Form of Assignment and Acceptance

  	
   

  
	
  Exhibit C

  	
  Form of Borrowing Request

  	
   

  
	
  Exhibit D

  	
  Form of Interest Election Request

  	
   

  
	
  Exhibit E

  	
  Form of Joinder Agreement

  	
   

  
	
  Exhibit F

  	
  Form of Landlord Lien Waiver and
  Access Agreement

  	
   

  
	
  Exhibit G

  	
  Form of Mortgage

  	
   

  
	
  Exhibit H

  	
  Form of Term Note

  	
   

  
	
  Exhibit I-1

  	
  Form of Perfection Certificate

  	
   

  
	
  Exhibit I-2

  	
  Form of Perfection Certificate
  Supplement

  	
   

  
	
  Exhibit J

  	
  Form of Security Agreement

  	
   

  
	
  Exhibit K-1

  	
  Form of Opinion of Company Counsel

  	
   

  
	
  Exhibit K-2

  	
  Form of Opinion of Local Counsel

  	
   

  
	
  Exhibit L

  	
  Form of Intercompany Note

  	
   

  
	
  Exhibit M

  	
  Form of Solvency Certificate

  	
   

  

 

 

TERM
LOAN CREDIT AGREEMENT

 

This TERM LOAN CREDIT AGREEMENT
(this “Agreement”) dated as of September 1, 2005, among D 56, INC.,
a Minnesota corporation (“D 56”), DEPARTMENT 56 RETAIL, INC., a
Minnesota corporation (“D 56 Retail”), TIME TO CELEBRATE, INC., a
Minnesota corporation (“TTC”), LENOX, INCORPORATED, a New Jersey
corporation (“Lenox” and, together with D 56, D 56 Retail and TTC, “Borrowers”
and each individually, a “Borrower”), DEPARTMENT 56, INC., a Delaware
corporation (“Holdings”), the Subsidiary Guarantors (such term and each
other capitalized term used but not defined herein having the meaning given to
it in Article I), the Lenders, UBS SECURITIES LLC, as sole arranger
and syndication agent (in such respective capacities, “Arranger” and “Syndication
Agent”), WELLS FARGO FOOTHILL, LLC, as documentation agent (in such
capacity, “Documentation Agent”), UBS AG, STAMFORD BRANCH, as collateral
agent and as administrative agent for the Lenders and the Secured Parties (in
such respective capacities, “Collateral Agent” and “Administrative
Agent”).

 

WITNESSETH:

 

WHEREAS, Holdings has
entered into a stock purchase agreement, dated as of July 21, 2005 (as
amended, supplemented or otherwise modified from time to time in accordance
with the provisions hereof and thereof, the “Acquisition Agreement”),
with Brown-Forman Corporation (“Seller”), a Delaware corporation, to
acquire (the “Acquisition”) all of the issued and outstanding common
shares of Lenox (the “Acquired Business”).

 

WHEREAS, Borrowers have requested the Lenders to extend credit in the
form of Term Loans on the Closing Date, in an aggregate principal amount not in
excess of $100,000,000 to be drawn on the Closing Date.

 

WHEREAS, the proceeds of the Term Loans are to be used in accordance
with Section 3.11.

 

NOW, THEREFORE, the Lenders are willing to extend such credit to
Borrowers on the terms and subject to the conditions set forth herein.  Accordingly, the parties hereto agree as
follows:

 

ARTICLE I.

 

DEFINITIONS

 

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

 

“ABR”, when used in
reference to any Term Loan or Term Borrowing, is used when such Term Loan, or
the Term Loans comprising such Term Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

 

“ABR Term Borrowing” shall
mean a Term Borrowing comprised of ABR Term Loans.

 

 

“ABR Term Loan” shall mean
any Term Loan bearing interest at a rate determined by reference to the
Alternate Base Rate in accordance with the provisions of Article II.

 

“Accounting Changes” shall
have meaning assigned to such term in Section 1.04.

 

“Account Debtor” shall
mean any Person who may become obligated to another Person under, with respect
to, or on account of, an Account.

 

“Accounts” shall mean all “accounts,”
as such term is defined in the UCC as in effect on the date hereof in the State
of New York, in which such Person now or hereafter has rights.

 

“Acquired Business” shall
have the meaning assigned to such term in the first recital hereto.

 

“Acquisition” shall have
the meaning assigned to such term in the first recital hereto.

 

“Acquisition Agreement”
shall have the meaning assigned to such term in the first recital hereto.

 

“Acquisition Consideration”
shall mean the purchase consideration for any Permitted Acquisition and all
other payments paid to or for the benefit of the seller by Holdings, Borrowers
or any of their Subsidiaries in exchange for, or as part of, or in connection
with, any Permitted Acquisition, whether paid in cash or by exchange of Equity
Interests or of assets or otherwise and whether payable at or prior to the
consummation of such Permitted Acquisition or deferred for payment at any
future time, whether or not any such future payment is subject to the
occurrence of any contingency, and includes any and all payments representing
the purchase price and any assumptions of Indebtedness, “earn-outs” and other
agreements to make any payment the amount of which is, or the terms of payment
of which are, in any respect subject to or contingent upon the revenues,
income, cash flow or profits (or the like) of any Person or business; provided,
that, if the amount of any consideration that is a portion of Acquisition
Consideration is contingent and is not otherwise stated or determinable,
Holdings, Borrowers or any of their Subsidiaries may use the maximum reasonable
anticipated amount of such consideration as of the date of determination of the
Acquisition Consideration for purposes of determining compliance with clause
(x) of the definition of Permitted Acquisition.

 

“Acquisition Documents”
shall mean the collective reference to the Acquisition Agreement and all other
agreements, instruments and documents entered into in connection with the
Acquisition.

 

“Adjusted LIBOR Rate”
shall mean, with respect to any Eurodollar Term Borrowing for any Interest
Period, (a) an interest rate per annum (rounded upward, if necessary, to
the nearest 1/100th of 1%) determined by the Administrative Agent to be equal
to the LIBOR Rate for such Eurodollar Term Borrowing in effect for such
Interest Period divided by (b) 1 minus
the Statutory Reserves (if any) for such Eurodollar Term Borrowing for such
Interest Period.

 

“Administrative Agent”
shall have the meaning assigned to such term in the preamble hereto and
includes each other person appointed as the successor pursuant to Article X.

 

2

 

“Administrative Agent Fees”
shall have the meaning assigned to such term in Section 2.05(b).

 

“Administrative Questionnaire”
shall mean an Administrative Questionnaire in the form of Exhibit A-1,
or such other form as may be supplied from time to time by the Administrative
Agent.

 

“Affiliate” shall mean,
when used with respect to a specified Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified; provided, however,
that, for purposes of Section 6.07, the term “Affiliate” shall also
include any Person that directly or indirectly owns more than 10% of any class
of Equity Interests of the Person specified or that is an executive officer or
director of the Person specified.

 

“Agents” shall mean the
Administrative Agent and the Collateral Agent; and “Agent” shall mean any of them.

 

“Agreement” shall have the
meaning assigned to such term in the preamble hereto.

 

“Alternate Base Rate”
shall mean, for any day, a rate per annum (rounded upward, if necessary, to the
nearest 1/100th of 1%) equal to the greater of (a) the Base Rate in effect
on such day and (b) the Federal Funds Effective Rate in effect on such day
plus 0.50%.  If the Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, including
the inability or failure of the Administrative Agent to obtain sufficient
quotations in accordance with the terms of the definition thereof, the
Alternate Base Rate shall be determined without regard to clause (b) of
the preceding sentence until the circumstances giving rise to such inability no
longer exist.  Any change in the
Alternate Base Rate due to a change in the Base Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Base Rate or the Federal Funds Effective Rate, respectively.

 

“Anti-Terrorism Laws”
shall have the meaning assigned to such term in Section 3.21.

 

“Applicable Margin” shall
mean, for any day, with respect to any ABR Term Loan, 2.50%, and with respect
to any Eurodollar Term Loan, 3.50%.

 

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

 

“Arranger” shall have the
meaning assigned to such term in the preamble hereto.

 

“Asset Sale” shall mean (a) any
conveyance, sale, lease, sublease, assignment, transfer or other disposition
(including by way of merger or consolidation and including any sale and
leaseback transaction) of any Property (including stock of any Subsidiary of
Holdings by the holder thereof) by Holdings, Borrowers or any of their
Subsidiaries to any Person other than Borrowers or any Subsidiary Guarantor
(excluding (i) Inventory sold in the ordinary course of business, (ii) any
sale or discount, in each case without recourse, of accounts receivable arising

 

3

 

in the ordinary course of business, but only
in connection with the compromise or collection thereof, (iii) disposals
of obsolete, uneconomical, negligible, worn out or surplus Property in the
ordinary course of business or (iv) sales of Cash Equivalents and
marketable securities) and (b) any issuance or sale by any Subsidiary of
Holdings (other than Borrowers) of its Equity Interests to any Person (other
than to Borrowers or any Subsidiary Guarantor).

 

“Assignment and Acceptance”
shall mean an assignment and acceptance entered into by a Lender and an
assignee, and accepted by the Administrative Agent, in the form of Exhibit B,
or such other form as shall be approved by the Administrative Agent.

 

“Attributable Indebtedness”
shall mean, when used with respect to any sale and leaseback transaction, as at
the time of determination, the present value (discounted at a rate equivalent
to Borrowers’ then-current weighted average cost of funds for borrowed money as
at the time of determination, compounded on a semi-annual basis) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in any such sale and leaseback transaction.

 

“Base Rate” shall mean,
for any day, a rate per annum that is equal to the corporate base rate of
interest established by the Administrative Agent from time to time; each change
in the Base Rate shall be effective on the date such change is announced as
being effective.  The corporate base rate
is not necessarily the lowest rate charged by the Administrative Agent to its
customers.

 

“Board” shall mean the
Board of Governors of the Federal Reserve System of the United States.

 

“Borrower” and “Borrowers” each shall have the meaning
assigned to such terms in the preamble hereto.

 

“Borrowing Request” shall
mean a request by a Borrower in accordance with the terms of Section 2.03
and substantially in the form of Exhibit C, or such other form as
shall be approved by the Administrative Agent.

 

“Business Day” shall mean any
day other than a Saturday, Sunday or other day on which banks in New York City
are authorized or required by law to close; provided,
however, that when used in connection with a Eurodollar Term Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.

 

“Capital Expenditures” shall mean, with respect to any Person,
for any period, the aggregate amount of all expenditures by such Person and its
Subsidiaries during that period for fixed or capital assets that, in accordance
with GAAP, are or should be classified as capital expenditures in the
consolidated balance sheet of such Person and its Consolidated Subsidiaries.

 

“Capital Lease Obligations”
of any Person shall mean the obligations of such Person to pay rent or other
amounts under any lease of (or other arrangement conveying the right to use)
Property, or a combination thereof, which obligations are required to be
classified and accounted

 

4

 

for as capital leases on a balance sheet of
such Person under GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.

 

“Cash Equivalents” shall
mean, as to any Person:  (a) securities
issued, or directly, unconditionally and fully guaranteed or insured, by the
United States or any agency or instrumentality thereof (provided that
the full faith and credit of the United States is pledged in support thereof)
having maturities of not more than one year from the date of acquisition by
such Person; (b) securities issued, or directly, unconditionally and fully
guaranteed or insured, by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at the time
of acquisition, having one of the two highest ratings obtainable from either
Standard & Poor’s Ratings Group or Moody’s Investors Services, Inc.;
(c) time deposits and certificates of deposit or bankers’ acceptance of
any Lender or any commercial bank having, or which is the principal banking
subsidiary of a bank holding company organized under the laws of the United
States, any state thereof or the District of Columbia having, capital and
surplus aggregating in excess of $500.0 million and a rating of “A” (or such
other similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under
the Securities Act) with maturities of not more than one year from the date of
acquisition by such Person; (d) repurchase obligations with a term of not
more than 30 days for underlying securities of the types described in clause
(a) above entered into with any bank meeting the qualifications
specified in clause (c) above, which repurchase obligations are
secured by a valid perfected security interest in the underlying securities; (e) commercial
paper issued by any Person incorporated in the United States rated at least A-1
or the equivalent thereof by Standard & Poor’s Rating Service or at
least P-1 or the equivalent thereof by Moody’s Investors Service, Inc.,
and in each case maturing not more than one year after the date of acquisition
by such Person; (f) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses (a) through
(e) above; (g) variable rate preferred securities issued by
issuers rated AA- or better by Standard & Poor’s Rating Service or Aa3
or better by Moody’s Investors Service, Inc. and otherwise reasonably
acceptable to the Administrative Agent; and (h) demand deposit accounts
maintained in the ordinary course of business.

 

“Casualty Event” shall
mean, with respect to any Property (including Real Property) of any Person, any
loss of title with respect to such Property or any loss of or damage to or
destruction of, or any condemnation or other taking (including by any
Governmental Authority) of, such Property for which such Person or any of its
Subsidiaries receives insurance proceeds or proceeds of a condemnation award or
other compensation.  “Casualty Event”
shall include but not be limited to any taking of all or any part of any Real
Property of any Person or any part thereof, in or by condemnation or other
eminent domain proceedings pursuant to any law, or by reason of the temporary
requisition of the use or occupancy of all or any part of any Real Property of
any Person or any part thereof by any Governmental Authority, civil or
military.

 

“CERCLA” shall mean the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. § 9601 et seq.

 

A “Change in Control”
shall be deemed to have occurred if:  (a) Holdings
at any time ceases to own 100% of the capital stock of any Borrower; (b) at
any time a change of control occurs under and as defined in any documentation
relating to any Material Indebtedness; (c) any

 

5

 

“Person” or “group” (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that for purposes of this clause such Person or group shall be
deemed to have “beneficial ownership” of all securities that any such Person or
group has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of Voting Stock
representing more than 25% of the voting power of the total outstanding Voting
Stock of Holdings; or (d) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of Holdings (together with any new directors whose election to such
Board of Directors or whose nomination for election was approved by a vote of
66 2/3% of the directors of Holdings then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Holdings.

 

“Change in Law” shall mean
(a) the adoption of any law, treaty, order, rule or regulation after
the date of this Agreement, (b) any change in any law, treaty, order, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender
(or for purposes of Section 2.12(b), by any lending office of such
Lender or by such Lender’s holding company, if any) with any request, guideline
or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement.

 

“Charges” shall have the
meaning assigned to such term in Section 10.14.

 

“Closing Date” shall mean
the date of the initial Credit Extension hereunder.

 

“Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time.

 

“Collateral” shall mean,
collectively, all of the Security Agreement Collateral, the Mortgaged Real
Property and all other Property of whatever kind and nature pledged as
collateral under any Security Document.

 

“Collateral Agent” shall
have the meaning assigned to such term in the preamble hereto.

 

“Collateral Agent Fee”
shall have the meaning ascribed to such term in Section 2.05(b)(ii).

 

“Commitment” shall mean,
with respect to any Lender, such Lender’s Term Loan Commitment.

 

“Companies” shall mean
Holdings and its Subsidiaries; and “Company”
shall mean any one of them.

 

“Compliance Certificate”
shall mean a certificate of a Financial Officer substantially in the form of Exhibit A-2.

 

“Consolidated Companies”
shall mean Holdings and its Consolidated Subsidiaries.

 

6

 

“Consolidated Current Assets”
shall mean, as at any date of determination, the total assets of Holdings and
its Consolidated Subsidiaries which may properly be classified as current
assets on a consolidated balance sheet of Holdings and its Consolidated
Subsidiaries in accordance with GAAP.

 

“Consolidated Current Liabilities”
shall mean, as at any date of determination, the total liabilities of Holdings
and its Consolidated Subsidiaries which may properly be classified as current
liabilities (other than the current portion of any Term Loans) on a
consolidated balance sheet of Holdings and its Consolidated Subsidiaries in
accordance with GAAP.

 

“Consolidated EBITDA”
shall mean, for any period, Consolidated Net Income for such period, adjusted,
in each case only to the extent (and in the same proportion) deducted or
excluded in determining such Consolidated Net Income (and with respect to the
portion of Consolidated Net Income attributable to any Subsidiary of Holdings
only if a corresponding amount would be permitted at the date of determination
to be distributed to Holdings by such Subsidiary without prior approval (or
with prior approval that has already been obtained), pursuant to the terms of
its organizational documents and all agreements, instruments, judgments, decrees,
orders, statutes, rules and regulations applicable to such Subsidiary or
its stockholders), by (x) adding thereto (i) the amount of Consolidated
Interest Expense, (ii) provision for taxes based on income taxes
(including without duplication, and to the extent included in GAAP, any foreign
withholding taxes, single business or unitary taxes or other similar state
taxes) and including franchise taxes, (iii) amortization expense, (iv) depreciation
expense, (v) all other non-cash items (excluding any non-cash charge that
results in an accrual or a reserve for cash charges in any future period), (vi) severance
payments paid to former employees after the Closing Date and prior to December 31,
2006 in an aggregate amount not to exceed $8,500,000, (vii) nonrecurring
fees and expenses in connection with the Transactions incurred after the
Closing Date and prior to December 31, 2006 in an aggregate amount not to
exceed $1,000,000, (viii) expenses incurred in connection with retail
store closings after the Closing Date and prior to December 31, 2006 in an
aggregate amount not to exceed $2,500,000 and (ix) expenses incurred in
connection with facility consolidations after the Closing Date and prior to December 31,
2006 in an aggregate amount not to exceed $11,000,000, and (y) subtracting the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such period.  Consolidated EBITDA shall be calculated on a
Pro Forma Basis to give effect to the Acquisition and any other Permitted
Acquisition and Asset Sales consummated during the fiscal period of Holdings
ended on the Test Period thereof as if each such Permitted Acquisition had been
effected on the first day of such period and as if each such Asset Sale had
been consummated on the day prior to the first day of such period.  Notwithstanding the foregoing, to the extent
that results from any of the months set forth below are included in any
applicable test period, “Consolidated EBITDA” for such months shall be deemed
equal to the amounts set forth below:

 

	
  August 2004

  	
   

  	
  $

  	
  6,500,000

  	
   

  
	
  September 2004

  	
   

  	
  $

  	
  13,500,000

  	
   

  
	
  October 2004

  	
   

  	
  $

  	
  15,500,000

  	
   

  
	
  November 2004

  	
   

  	
  $

  	
  10,600,000

  	
   

  
	
  December 2004

  	
   

  	
  $

  	
  9,600,000

  	
   

  
	
  January 2005

  	
   

  	
  $

  	
  (4,300,000

  	
  )

  
	
  February 2005

  	
   

  	
  $

  	
  (1,200,000

  	
  )

  
	
  March 2005

  	
   

  	
  $

  	
  1,800,000

  	
   

  
	
  April 2005

  	
   

  	
  $

  	
  3,200,000

  	
   

  
	
  May 2005

  	
   

  	
  $

  	
  (5,600,000

  	
  )

  
	
  June 2005

  	
   

  	
  $

  	
  3,500,000

  	
   

  
	
  July 2005

  	
   

  	
  $

  	
  3,500,000

  	
   

  

 

7

 

“Consolidated Indebtedness”
shall mean, as at any date of determination, without duplication, the aggregate
amount of all Indebtedness (but including in any event the then outstanding
principal amount of all Loans, all Capital Lease Obligations and all letter of
credit exposure) of Holdings and its Consolidated Subsidiaries on a
consolidated basis as determined in accordance with GAAP.

 

“Consolidated Interest Coverage Ratio”
shall mean, for any Test Period, the ratio of (x) Consolidated EBITDA for
such Test Period to (y) Consolidated Interest Expense for such Test Period.

 

“Consolidated Interest Expense”
shall mean, for any period, without duplication, the total consolidated
interest expense of Holdings and its Consolidated Subsidiaries for such period
(calculated without regard to any limitations on the payment thereof and
including amortization of debt discount and deferred financing costs,
capitalized interest, interest paid in kind, commitment fees, letter of credit
fees and net amounts payable under Hedging Agreements) determined in accordance
with GAAP plus, without duplication, (a) the portion of Capital
Lease Obligations of Holdings and its Consolidated Subsidiaries representing
the interest factor for such period, (b) imputed interest on Attributable
Indebtedness, (c) cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than Holdings or a Wholly
Owned Subsidiary) in connection with Indebtedness incurred by such plan or
trust, (d) all interest paid or payable with respect to discontinued
operations, (e) the product of (i) all dividend payments on any
series of any Preferred Stock, if any, of any Subsidiary of Holdings (other
than any Preferred Stock, if any, held by Holdings or a Wholly Owned
Subsidiary), multiplied  by (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of Holdings and its
Subsidiaries, expressed as a decimal and (f) all interest on any
Indebtedness of the type described in clause (f) or (k) of
the definition of “Indebtedness” with respect to Holdings or any of its
Subsidiaries.  Notwithstanding the
foregoing, to the extent that results from any of the months set forth below
are included in any applicable test period, “Consolidated Interest Expense” for
such months shall be deemed equal to the amounts set forth below:

 

	
  August 2004

  	
   

  	
  $

  	
  1,100,000

  	
   

  
	
  September 2004

  	
   

  	
  $

  	
  1,200,000

  	
   

  
	
  October 2004

  	
   

  	
  $

  	
  1,200,000

  	
   

  
	
  November 2004

  	
   

  	
  $

  	
  1,100,000

  	
   

  
	
  December 2004

  	
   

  	
  $

  	
  900,000

  	
   

  
	
  January 2005

  	
   

  	
  $

  	
  700,000

  	
   

  
	
  February 2005

  	
   

  	
  $

  	
  700,000

  	
   

  
	
  March 2005

  	
   

  	
  $

  	
  800,000

  	
   

  
	
  April 2005

  	
   

  	
  $

  	
  800,000

  	
   

  
	
  May 2005

  	
   

  	
  $

  	
  900,000

  	
   

  
	
  June 2005

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  July 2005

  	
   

  	
  $

  	
  1,000,000

  	
   

  

 

8

 

“Consolidated Net Income”
shall mean, for any period, the consolidated net income of Holdings and its
Consolidated Subsidiaries determined in accordance with GAAP, but excluding in
any event (a) after-tax extraordinary gains or extraordinary losses; (b) after-tax
gains or losses realized from (i) the acquisition of any securities, or
the extinguishment or conversion of any Indebtedness or Equity Interest, of
Holdings or any of its Subsidiaries or (ii) any sales of assets (other
than Inventory in the ordinary course of business); (c) net earnings or
loss of any other Person (other than a Subsidiary of Holdings) in which
Holdings or any Consolidated Subsidiary has an ownership interest, except (in
the case of any such net earnings) to the extent such net earnings shall have
actually been received by Holdings or such Consolidated Subsidiary (subject to
the limitation in clause (d) below) in the form of cash dividends
or distributions; (d) the net income of any Consolidated Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Consolidated Subsidiary of its net income is not at the time of
determination permitted without approval under applicable law or regulation or
under such Consolidated Subsidiary’s organizational documents or any agreement
or instrument applicable to such Consolidated Subsidiary or its stockholders; (e) gains
or losses from the cumulative effect of any change in accounting principles; (f) earnings
resulting from any reappraisal, revaluation or write-up of assets; and (g) the
income (or loss) of any Person accrued prior to the date it becomes a
Subsidiary of Holdings or any Consolidated Subsidiary or is merged into or
consolidated with Holdings or any Consolidated Subsidiary or that Person’s
assets are acquired by Holdings or such Consolidated Subsidiary (other than
pursuant to the Acquisition).

 

“Consolidated Subsidiary”
shall mean, as to any Person, all Subsidiaries of such Person which are
consolidated with such Person for financial reporting purposes in accordance
with GAAP.

 

“Contested Collateral Lien Conditions”
shall mean, with respect to any Permitted Lien of the type described in paragraphs
(a), (b) and (f) of Section 6.02, the
following conditions:

 

(a)                                  the
applicable Loan Party shall be contesting such Lien in good faith;

 

(b)                                 to
the extent such Lien is in an amount in excess of $100,000, in the aggregate
with all other such Liens, the Administrative Agent shall have established a
Reserve (to the extent of such Lien on Accounts or Inventory) with respect
thereto or obtained a bond in an amount sufficient to pay and discharge such
Lien and the Administrative Agent’s reasonable estimate of all interest and
penalties related thereto; and

 

(c)                                  such
Lien shall in all respects be subject and subordinate in priority to the Lien
and security interest created and evidenced by the Security Documents, except
if and to the extent that the law or regulation creating, permitting or
authorizing such Lien provides that such Lien is or must be superior to the
Lien and security interest created and evidenced by the Security Documents.

 

9

 

“Contingent Obligation”
shall mean, as to any Person, any obligation, agreement, understanding or
arrangement of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations (“primary obligations”)
of any other Person (the “primary obligor”) in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (a) to purchase any such primary
obligation or any Property constituting direct or indirect security therefor; (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the
primary obligor or to maintain the net worth or solvency of the primary
obligor; (c) to purchase Property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation; (d) with
respect to bankers’ acceptances and letters of credit, until a reimbursement
obligation arises; or (e) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof; provided, however,
that the term “Contingent Obligation” shall not include endorsements of
instruments for deposit or collection in the ordinary course of business or any
product warranties for deposit or collection in the ordinary course of
business.  The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made (or, if less, the maximum amount of such primary obligation for which
such Person may be liable, whether severally or jointly, pursuant to the terms
of the instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.

 

“Control” shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative
thereto.

 

“Credit Extension” shall
mean the making of a Term Loan by a Lender.

 

“D 56” shall have the
meaning assigned to such term in the preamble hereto.

 

“Debt Issuance” shall mean
the incurrence by Holdings, a Borrower or any of their Subsidiaries of any
Indebtedness after the Closing Date (other than as permitted by Section 6.01).

 

“Default” shall mean any
event, occurrence or condition which is, or upon notice, lapse of time or both
would constitute, an Event of Default.

 

“Deposit Account Control Agreement”
shall have the meaning assigned to such term in the Security Agreement.

 

“Disqualified Capital Stock”
shall mean any Equity Interest which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, (a) matures (excluding any maturity as the
result of an optional redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part,

 

10

 

on or prior to the first anniversary of the
Term Loan Maturity Date, (b) is convertible into or exchangeable (unless
at the sole option of the issuer thereof) for (i) debt securities or (ii) any
Equity Interests referred to in (a) above, in each case at any time prior
to the first anniversary of the Term Loan Maturity Date, or (c) contains
any repurchase obligation which may come into effect prior to payment in full
of all Obligations.

 

“Dividend” with respect to
any Person shall mean that such Person has declared or paid a dividend or
returned any equity capital to its stockholders or authorized or made any other
distribution, payment or delivery of Property (other than common stock of such
Person) or cash to its stockholders as such, or redeemed, retired, purchased or
otherwise acquired, directly or indirectly, for a consideration any shares of
any class of its capital stock outstanding (or any options or warrants issued
by such Person with respect to its capital stock), or set aside any funds for
any of the foregoing purposes, or shall have permitted any of its Subsidiaries
to purchase or otherwise acquire for a consideration any shares of any class of
the capital stock of such Person outstanding (or any options or warrants issued
by such Person with respect to its capital stock).  Without limiting the foregoing, “Dividends”
with respect to any Person shall also include all payments made or required to
be made by such Person with respect to any stock appreciation rights, plans,
equity incentive or achievement plans or any similar plans or setting aside of
any funds for the foregoing purposes.

 

“Documentation Agent”
shall have the meaning assigned to such term in the preamble hereto.

 

“dollars” or “$” shall mean lawful money of the United
States.

 

“Domestic Subsidiary”
shall mean any Subsidiary that is organized or existing under the laws of the
United States, any state thereof or the District of Columbia.

 

“Eligible Assignee” shall
mean (i) any Lender, (ii) an Affiliate of any Lender, (iii) an
Approved Fund and (iv) any other person approved by the Administrative
Agent (such approval not to be unreasonably withheld or delayed); provided that “Eligible Assignee” shall
not include Borrowers or any of their Affiliates or Subsidiaries or any natural
person.

 

“Embargoed Person” shall
have the meaning assigned to such term in Section 6.19.

 

“Environment” shall mean
ambient air, surface water and groundwater (including, without limitation,
potable water, navigable water and wetlands), the land surface or subsurface
strata, natural resources, the workplace or as otherwise defined in any
Environmental Law.

 

“Environmental Claim”
shall mean any claim, notice, demand, order, action, suit, proceeding or other
communication in each case alleging liability for investigation, remediation,
removal, cleanup, response, corrective action, damages to natural resources,
personal injury, Property damage, fines, penalties or other costs resulting
from, related to or arising out of (i) the presence, Release or threatened
Release in or into the Environment of Hazardous Material at any location or (ii) any
violation of Environmental Law, and shall include, without limitation, any
claim seeking damages, contribution, indemnification, cost recovery, compensation
or injunctive relief resulting from, related to or arising out of the presence,
Release or threatened Release of Hazardous Material or alleged injury or threat
of injury to health, safety, the Environment.

 

11

 

“Environmental Law” shall
mean any and all applicable present and future treaties, laws, statutes,
ordinances, regulations, rules, decrees, orders, judgments, consent orders,
consent decrees or other binding requirements, and the common law, relating to
protection of public health or the Environment, the Release or threatened
Release of Hazardous Material, natural resources or natural resource damages,
or occupational safety or health.

 

“Environmental Permit”
shall mean any permit, license, approval, consent or other authorization
required by or from a Governmental Authority under Environmental Law.

 

“Equity Interest” shall
mean, with respect to any Person, any and all shares, interests, participations
or other equivalents, including membership interests (however designated,
whether voting or non-voting), of equity of such Person, including, if such
Person is a partnership, partnership interests (whether general or limited) and
any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
such partnership, whether outstanding on the date hereof or issued after the
Closing Date, but excluding debt securities convertible or exchangeable into
such equity.

 

“Equity Issuance” shall
mean, without duplication, any issuance or sale by Holdings or a Borrower
(other than to Holdings) after the Closing Date of (a) any Equity
Interests (including any Equity Interests issued upon exercise of any warrant
or option) or any warrants or options to purchase Equity Interests or (b) any
other security or instrument representing an Equity Interest (or the right to
obtain any Equity Interest) in the issuing or selling Person; provided, however,
that an Equity Issuance shall not include any such sale or issuance by Holdings
of not more than an aggregate amount of 5.0% of
the shares of its capital stock (including capital stock issued upon exercise
of any warrant or option or warrants or options to purchase its capital stock
but excluding Disqualified Capital Stock), in each case, to directors, officers
or employees of any Company.

 

“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as the same may be amended
from time to time.

 

“ERISA Affiliate” shall
mean any trade or business (whether or not incorporated) that, together with a
Borrower, is treated as a single employer under Section 414(b) or (c) of
the Code, or solely for purposes of Section 302 of ERISA and Section 412
of the Code, is treated as a single employer under Section 414 of the
Code.

 

“ERISA Event” shall mean (a) any
“reportable event,” as such term is defined in Section 4043(c) of
ERISA or the regulations issued thereunder, with respect to a Plan (other than
an event for which the 30-day notice period is waived by regulation); (b) the
existence with respect to any Plan of an “accumulated funding deficiency” (as
defined in Section 412 of the Code or Section 302 of ERISA), whether
or not waived, the failure to make by its due date a required installment under
Section 412(m) of the Code with respect to any Plan or the failure to make
any required contribution to a Multiemployer Plan; (c) the filing pursuant
to Section 412(d) of the Code or Section 303(d) of ERISA of
an application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Company or any of its ERISA Affiliates of
any liability under Title IV of ERISA with respect to the termination of any
Plan; (e) the receipt by any Company or any of its ERISA Affiliates from
the PBGC or a plan

 

12

 

administrator of any notice relating to the
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan, or the occurrence of any event or condition which could reasonably be
expected to constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (f) the incurrence by
any Company or any of its ERISA Affiliates of any liability with respect to the
withdrawal from any Plan or Multiemployer Plan; (g) the receipt by any
Company or its ERISA Affiliates of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA; (h) the making of any amendment to any Plan which could result
in the imposition of a lien or the posting of a bond or other security; and (i) the
occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975
of the Code or Section 406 of ERISA) which could result in liability to
any Company.

 

“Eurodollar Term Borrowing”
shall mean a Term Borrowing comprised of Eurodollar Term Loans.

 

“Eurodollar Term Loan”
shall mean any Term Loan bearing interest at a rate determined by reference to
the Adjusted LIBOR Rate in accordance with the provisions of Article II.

 

“Event of Default” shall
have the meaning assigned to such term in Section 8.01.

 

“Excess Amount” shall have
the meaning assigned to such term in Section 2.10(h).

 

“Excess Cash Flow” shall
mean, for any fiscal year of Holdings, the sum, without duplication, of:

 

(a)                                  Consolidated
EBITDA for such fiscal year, plus

 

(b)                                 gains
excluded from Consolidated Net Income, plus

 

(c)                                  reductions
to non-cash working capital of Holdings and its Consolidated Subsidiaries for
such fiscal year (i.e., the decrease, if any, in Consolidated Current
Assets minus Consolidated Current Liabilities from the beginning to the
end of such fiscal year), minus

 

(d)                                 the
amount of any cash income taxes paid or payable by Borrower and its
consolidated Subsidiaries with respect to such fiscal year, net of any cash tax
refunds received or receivable by Borrower or any of its Subsidiaries in such
fiscal year, minus

 

(e)                                  cash
interest paid by Holdings and its Consolidated Subsidiaries during such fiscal
year, minus

 

(f)                                    Capital
Expenditures made in cash in accordance with Section 6.08(e) during
such fiscal year, to the extent funded from internally generated funds, minus

 

(g)                                 permanent
repayments and prepayments of Indebtedness made by Holdings and its
Consolidated Subsidiaries during such fiscal year, but only to the extent

 

13

 

such
repayments do not occur in connection with a refinancing of all or any portion
of the Term Loans, minus

 

(h)                                 extraordinary
cash losses from the sale of assets during such fiscal year and not included in
Consolidated Net Income, minus

 

(i)                                     additions
to noncash working capital for such fiscal year (i.e., the increase, if any, in Consolidated
Current Assets minus Consolidated Current Liabilities from the beginning
to the end of such fiscal year);

 

provided
that, to the extent otherwise included therein, the Net Cash Proceeds of Asset
Sales and Casualty Events shall be excluded from the calculation of Excess Cash
Flow.

 

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

 

“Excluded Taxes” shall
mean, with respect to the Administrative Agent, any Lender or any other
recipient of any payment to be made by or on account of any obligation of
Borrowers hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States, or by the jurisdiction under the laws
of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office
is located, and (b) in the case of a Foreign Lender (other than an
assignee pursuant to a request by a Borrower under Section 2.16),
any withholding tax that is imposed on amounts payable to such Foreign Lender
at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 2.15(e), except to the extent that
such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from such Borrower with respect to such withholding tax pursuant to Section 2.15(a) (it
being understood and agreed, for the avoidance of doubt, that any withholding
tax imposed on a Foreign Lender as a result of a Change in Law or regulation or
interpretation thereof occurring after the time such Foreign Lender became a
party to this Agreement shall not be an Excluded Tax).

 

“Executive Order” shall
have the meaning assigned to such term in Section 3.21.

 

“Federal Funds Effective Rate”
shall mean, for any day, 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 on the next succeeding 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 the day for such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.

 

“Fee Letter” shall mean
the confidential Fee Letter, dated July 21, 2005, among Holdings, UBS Loan
Finance LLC and UBS Securities LLC.

 

“Fees” shall mean the
Administrative Agent Fees and the Collateral Agent Fees.

 

“Financial Officer” of any
Person shall mean the Chief Financial Officer, principal accounting officer,
Treasurer or Controller of such Person.

 

14

 

“FIRREA” shall mean the
Federal Institutions Reform, Recovery and Enforcement Act of 1989.

 

“Foreign Lender” shall
mean any Lender that is not, for United States federal income tax purposes, (i) a
citizen or resident of the United States, (ii) a corporation or entity
treated as a corporation created or organized in or under the laws of the
United States, or any political subdivision thereof, (iii) an estate the
income of which is subject to U.S. federal income taxation regardless of its
source or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of such trust and one or
more United States Persons have the authority to control all substantial
decisions of such trust.

 

“Foreign Plan” shall mean
any employee benefit plan, program, policy, arrangement or agreement maintained
or contributed to by any Company with respect to employees employed outside the
United States.

 

“Foreign Subsidiary” shall
mean a Subsidiary that is organized under the laws of a jurisdiction other than
the United States or any state thereof or the District of Columbia.

 

“Fund” shall mean any
person that is (or will be) engaged in making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in the ordinary
course of its business.

 

“GAAP” shall mean
generally accepted accounting principles in the United States applied on a
consistent basis.

 

“Governmental Authority”
shall mean any federal, state, local or foreign court, central bank or
governmental agency, authority, instrumentality or regulatory body.

 

“Governmental Real Property
Disclosure Requirements” shall mean any Requirement of Law of any
Governmental Authority requiring notification of the buyer, lessee, mortgagee,
assignee or other transferee of any Real Property, facility, establishment or
business, or notification, registration or filing to or with any Governmental
Authority, in connection with the sale, lease, mortgage, assignment or other
transfer (including, without limitation, any transfer of control) of any Real
Property, facility, establishment or business, of the actual or threatened
presence or Release in or into the Environment, or the use, disposal or
handling of Hazardous Material on, at, under or near the Real Property,
facility, establishment or business to be sold, leased, mortgaged, assigned or
transferred.

 

“Guaranteed Obligations”
shall have the meaning assigned to such term in Section 7.01.

 

“Guarantees” shall mean
the guarantees issued pursuant to Article VII by Holdings and the
Subsidiary Guarantors.

 

“Guarantors” shall mean
Holdings and the Subsidiary Guarantors.

 

“Hazardous Materials”
shall mean the following:  hazardous
substances; hazardous wastes; polychlorinated biphenyls (“PCBs”) or any
substance or compound containing PCBs; asbestos or any asbestos-containing
materials in any form or condition; radon or any other

 

15

 

radioactive materials including any source,
special nuclear or by-product material; petroleum, crude oil or any fraction
thereof; and any other pollutant or contaminant or hazardous, toxic or
dangerous chemicals, wastes, materials, compounds, constituents or substances,
as all such terms are used in their broadest sense and defined by or under any
Environmental Laws.

 

“Hedging Agreement” shall
mean any interest rate protection agreement, foreign currency exchange
agreement, commodity price protection agreement or other interest or currency exchange
rate or commodity price hedging arrangement, entered into for the purpose of
hedging a Borrower’s exposure to interest or exchange rates, loan credit
exchange, security or currency valuations or commodity prices and not for
speculative purposes.

 

“Holdings” shall have the
meaning assigned to such term in the preamble hereto.

 

“Inactive Subsidiaries”
shall mean each of Axis Holdings Corporation, TD56 Holdings, Inc.,
Department 56 Trading Co., Ltd., D56 Canada Holding, Inc., Department 56
Minnesota, LLC, BrowndaleTanley Limited, Department 56 Canada Co. and Samuel
Kirk & Son, Inc.

 

“Indebtedness” of any
Person shall mean, without duplication, (a) all obligations of such Person
for borrowed money or advances; (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments; (c) all
obligations of such Person upon which interest charges are customarily paid or
accrued; (d) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such Person;
(e) all obligations of such Person issued or assumed as the deferred
purchase price of Property or services (excluding trade accounts payable and
accrued obligations incurred in the ordinary course of business on normal trade
terms and not overdue by more than 90 days); (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on Property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed; (g) all Capital Lease Obligations, Purchase Money
Obligations and synthetic lease obligations of such Person; (h) all
obligations of such Person in respect of Hedging Agreements to the extent
required to be reflected on a balance sheet of such Person; (i) all
Attributable Indebtedness of such Person; (j) all obligations for the
reimbursement of any obligor in respect of letters of credit, letters of
guaranty, bankers’ acceptances and similar credit transactions; and (k) all
Contingent Obligations of such Person in respect of Indebtedness or obligations
of others of the kinds referred to in clauses (a) through (j)
above.  The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership
in which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent that terms of such
Indebtedness provide that such Person is liable therefor.

 

“Indemnified Taxes” shall
mean Taxes other than Excluded Taxes.

 

“Indemnitee” shall have
the meaning assigned to such term in Section 10.03(b).

 

“Information” shall have
the meaning assigned to such term in Section 10.12.

 

“Intellectual Property”
shall have the meaning assigned to such term in Section 3.05(c).

 

16

 

“Intercreditor Agreement”
shall mean that certain Intercreditor Agreement dated September 1, 2005,
by and between Holdings, Borrowers, Guarantors, the Administrative Agent and
the Revolving Credit Agent.

 

“Interest Election Request”
shall mean a request by a Borrower to convert or continue a Term Borrowing in
accordance with Section 2.08(b), substantially in the form of Exhibit D.

 

“Interest Payment Date”
shall mean (a) with respect to any ABR Term Loan, the last day of each
March, June, September and December to occur during the period that
such Term Loan is outstanding and the Term Loan Maturity Date and (b) with
respect to any Eurodollar Term Loan, the last day of the Interest Period
applicable to the Term Borrowing of which such Term Loan is a part and, in the
case of a Eurodollar Term Loan with an Interest Period of more than three
months duration, each day prior to the last day of such Interest Period that
occurs at intervals of three months’ duration after the first day of such
Interest Period.

 

“Interest Period” shall
mean, with respect to any Eurodollar Term Borrowing, the period commencing on
the date of such Term Borrowing and ending on the numerically corresponding day
in the calendar month that is one, two, three or six months thereafter, as a
Borrower may elect; provided that
(a) if any Interest Period would end on a day other than a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business
Day, and (b) any Interest Period that commences on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest
Period.  For purposes hereof, the date of
a Term Borrowing initially shall be the date on which such Term Borrowing is
made and thereafter shall be the effective date of the most recent conversion
or continuation of such Term Borrowing; provided, however, that
an Interest Period shall be limited to seven days to the extent required under Section 2.03(d).

 

“Investments” shall have
the meaning assigned to such term in Section 6.04.

 

“Joinder Agreement” shall
mean that certain joinder agreement substantially in the form of Exhibit E.

 

“Landlord Lien Waiver and Access
Agreement” shall mean the Landlord Lien Waiver and Access Agreement,
substantially in the form of Exhibit F, or such other landlord lien
waiver and access agreement reasonably satisfactory in form and substance to
the Administrative Agent and the Collateral Agent.

 

“Leases” shall mean any
and all leases, subleases, tenancies, options, concession agreements, rental
agreements, occupancy agreements, access agreements and any other agreements of
a similar nature (including all amendments, extensions, replacements, renewals,
modifications and/or guarantees thereof), whether or not of record and whether
now in existence or hereafter entered into, affecting the use or occupancy of all
or any portion of any Real Property.

 

17

 

“Lender Addendum” shall
mean with respect to any Lender on the Closing Date, a lender addendum in the
form of Exhibit A-4, to be executed and delivered by such Lender on
the Closing Date as provided in Section 10.15.

 

“Lender Hedging Agreement”
shall mean any Hedging Agreement between a Borrower and any Person (or
affiliate of such Person) that was a Lender or an Affiliate of such lender at
the time it entered into such Hedging Agreement whether or not such Person has
ceased to be a Lender under this Agreement.

 

“Lenders” shall mean (a) the
financial institutions that have become a party hereto pursuant to a Lender
Addendum (other than any such financial institution that has ceased to be a
party hereto pursuant to an Assignment and Acceptance) and (b) any
financial institution that has become a party hereto pursuant to an Assignment
and Acceptance.

 

“Lenox” shall have the
meaning assigned to such term in the preamble hereto.

 

“Leverage Ratio” shall
mean, at any date of determination, the ratio of Consolidated Indebtedness (but
specifically excluding the guaranties referenced in Section 6.01(k))
on such date to Consolidated EBITDA for the Test Period then most recently
ended.

 

“LIBOR Rate” shall mean,
with respect to any Eurodollar Term Borrowing for any Interest Period, the rate
per annum determined by the Administrative Agent to be the arithmetic mean
(rounded to the nearest 1/100th of 1%) of the offered rates for deposits in
dollars with a term comparable to such Interest Period that appears on the
Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined
below) at approximately 11:00 a.m., London, England time, on the second
full Business Day preceding the first day of such Interest Period; provided, however, that (i) if no
comparable term for an Interest Period is available, the LIBOR Rate shall be
determined using the weighted average of the offered rates for the two terms
most nearly corresponding to such Interest Period and (ii) if there shall
at any time no longer exist a Telerate British Bankers Assoc. Interest
Settlement Rates Page, “LIBOR Rate” shall mean, with respect to each day during
each Interest Period pertaining to Eurodollar Term Borrowings comprising part
of the same Term Borrowing, the rate per annum equal to the rate at which the
Administrative Agent is offered deposits in dollars at approximately 11:00 a.m.,
London, England time, two Business Days prior to the first day of such Interest
Period in the London interbank market for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to its portion of the amount of such Eurodollar Term Borrowing to be
outstanding during such Interest Period. 
“Telerate British Bankers Assoc.
Interest Settlement Rates Page” shall mean the display designated as
Page 3750 on the Telerate System Incorporated Service (or such other page as
may replace such page on such service for the purpose of displaying the
rates at which dollar deposits are offered by leading banks in the London
interbank deposit market).

 

“Lien” shall mean, with
respect to any Property, (a) any mortgage, deed of trust, lien, pledge,
encumbrance, claim, charge, assignment, hypothecation, security interest or
encumbrance of any kind, any other type of preferential arrangement in respect
of such Property or any filing of any financing statement under the UCC or any
other similar notice of Lien under any similar notice or recording statute of
any Governmental Authority, including any easement,

 

18

 

right-of-way or other encumbrance on title to
Real Property, in each of the foregoing cases whether voluntary or imposed by
law, and any agreement to give any of the foregoing; (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such Property; and (c) in
the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.

 

“Loan Documents” shall
mean this Agreement, the Notes (if any), the Security Documents, the Fee Letter
(except for the provisions thereof governing payment of fees to the Revolving
Credit Agents), the Intercreditor Agreement and each Lender Hedging Agreement.

 

“Loan Parties” shall mean
Holdings, Borrowers and the Subsidiary Guarantors.

 

“Margin Stock” shall have
the meaning assigned to such term in Regulation U.

 

“Material Adverse Effect”
shall mean (a) a material adverse effect on the business, Property,
results of operations, prospects or condition, financial or otherwise, or
material agreements of Borrowers and their Subsidiaries, taken as a whole; (b) material
impairment of the ability of the Loan Parties to fully and timely perform any
of their obligations under any Loan Document; (c) material impairment of
the rights of or benefits or remedies available to the Lenders, the
Administrative Agent or the Collateral Agent under any Loan Document; or (d) a
material adverse effect on the Collateral or the Liens in favor of the
Administrative Agent (for its benefit and for the benefit of the other Secured
Parties) on the Collateral or the priority of such Liens.

 

“Material Indebtedness”
shall mean (a) the Revolving Credit Indebtedness and (b) any other
Indebtedness (other than the Loans), or obligations in respect of one or more
Hedging Agreements, of any Loan Party evidencing an aggregate outstanding
principal amount exceeding $3.0 million. 
For purposes of determining Material Indebtedness, the “principal amount”
of the obligations of such Loan Party in respect of any Hedging Agreement at
any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that such Loan Party would be required to pay if such Hedging
Agreement were terminated at such time.

 

“Maximum Rate” shall have
the meaning assigned to such term in Section 10.14.

 

“Mortgage” shall mean an
agreement, including, but not limited to, a mortgage, deed of trust or any
other document, creating and evidencing a Lien on a Mortgaged Real Property,
which shall be in substantially in the form of Exhibit G, with such
schedules and including such provisions as shall be necessary to conform such
document to applicable local law or as shall be customary under applicable
local law.

 

“Mortgaged Real Property”
shall mean (a) each Real Property identified on Schedule 1.01(a) hereto
and (b) each Real Property, if any, which shall be subject to a Mortgage
delivered after the Closing Date pursuant to Section 5.11(d).

 

“Multiemployer Plan” shall
mean a multiemployer plan within the meaning of Section 4001(a)(3) or
Section 3(37) of ERISA (a) to which any Company or any ERISA
Affiliate is then making or accruing an obligation to make contributions; (b) to
which any Company or

 

19

 

any ERISA Affiliate has within the preceding
five plan years made contributions; or (c) with respect to which any
Company could incur liability.

 

“Net Cash Proceeds” shall
mean:

 

(a)                                  with
respect to any Asset Sale, the cash proceeds received by any Loan Party
(including cash proceeds subsequently received (as and when received by any
Loan Party) in respect of noncash consideration initially received) net of (i) selling
expenses (including reasonable brokers’ fees or commissions, legal, accounting
and other professional and transactional fees, transfer and similar taxes and
the Loan Parties’ good faith estimate of income taxes paid or payable in
connection with such sale); (ii) amounts provided as a reserve, in
accordance with GAAP, against any liabilities under any indemnification
obligations associated with such Asset Sale (provided that, to the
extent and at the time any such amounts are released from such reserve, such
amounts shall constitute Net Cash Proceeds); (iii) the Loan Parties’ good
faith estimate of payments required to be made with respect to unassumed
liabilities relating to the assets sold within 90 days of such Asset Sale (provided
that, to the extent such cash proceeds are not used to make payments in respect
of such unassumed liabilities within 90 days of such Asset Sale, such cash
proceeds shall constitute Net Cash Proceeds); and (iv) the principal
amount, premium or penalty, if any, interest and other amounts on any
Indebtedness for borrowed money which is secured by a senior Lien on the asset
sold in such Asset Sale and which is repaid with such proceeds (other than any
such Indebtedness assumed by the purchaser of such asset);

 

(b)                                 with
respect to any Debt Issuance or Equity Issuance, the cash proceeds thereof, net
of customary fees, commissions, costs and other expenses incurred in connection
therewith; and

 

(c)                                  with
respect to any Casualty Event, the cash insurance proceeds, condemnation awards
and other compensation received in respect thereof, net of all reasonable costs
and expenses incurred in connection with the collection of such proceeds,
awards or other compensation in respect of such Casualty Event.

 

“Notes” shall mean any
notes evidencing the Term Loans issued pursuant to this Agreement, if any,
substantially in the form of Exhibit H.

 

“Obligations” shall mean (a) obligations
of Borrowers and any and all of the other Loan Parties from time to time
arising under or in respect of the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in such
proceeding) on the Term Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise and (ii) 
all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of Borrowers and any and all of the
other Loan Parties under this Agreement and the other Loan Documents, (b) the
due and punctual performance of all covenants, agreements, obligations and
liabilities of Borrowers and each Loan

 

20

 

Party under or pursuant to this Agreement and
the other Loan Documents, (c) the due and punctual payment and performance
of all obligations of Borrowers and any and all of the other Loan Parties under
each Lender Hedging Agreement and (d) the due and punctual payment and
performance of all obligations in respect of overdrafts and related liabilities
owed to any Lender, any Affiliate of a Lender, the Administrative Agent or the
Collateral Agent arising from treasury, depositary and cash management services
or in connection with any automated clearinghouse transfer of funds.  All Obligations of Borrowers hereunder and
each other Loan Document shall be the joint and several obligations of each
Borrower.

 

“OFAC” shall have the
meaning assigned to such term in Section 3.21.

 

“Officers’ Certificate”
shall mean a certificate executed by the Chairman of the Board (if an officer),
the Chief Executive Officer, the President, one of the Financial Officers, each
in his or her official (and not individual) capacity.

 

“Other Taxes” shall mean
any and all present or future stamp or documentary taxes or any other excise or
Property taxes, charges or similar levies (including interest, fines, penalties
and additions to tax) arising from any payment made or required to be made
under any Loan Document or from the execution, delivery or enforcement of, or
otherwise with respect to, any Loan Document.

 

“Participant” shall have
the meaning assigned to such term in Section 10.04(d).

 

“PBGC” shall mean the
Pension Benefit Guaranty Corporation referred to and defined in ERISA.

 

“Perfection Certificate”
shall mean a certificate in the form of Exhibit I-1 or any other
form approved by the Administrative Agent, as the same shall be supplemented
from time to time by a Perfection Certificate Supplement or otherwise.

 

“Perfection Certificate Supplement”
shall mean a certificate supplement in the form of Exhibit I-2 or
any other form approved by the Administrative Agent.

 

“Permitted Acquisition”
shall mean, with respect to Borrowers or any Subsidiary Guarantor, any
transaction or series of related transactions for the direct or indirect (a) acquisition
of all or substantially all of the Property of any other Person, or of any
business or division of any other Person; (b) acquisition of in excess of
50% of the Equity Interests of any other Person, or otherwise causing any other
Person to become a subsidiary of such Person; or (c) merger or
consolidation or any other combination with any other Person; provided,
that, in the event of any merger or consolidation involving a Borrower, a
Borrower shall be the surviving entity, if each of the following conditions are
met:

 

(i)                                     no
Default then exists or would result therefrom;

 

(ii)                                  after
giving effect to such acquisition on a Pro Forma Basis, (A) Borrowers
shall be in compliance with all covenants set forth in Section 6.08
as of the most recent Test Period (assuming, for purposes of Section 6.08,
that such acquisition, and all other Permitted Acquisitions consummated since
the first day of the relevant Test

 

21

 

Period for
each of the financial covenants set forth in Section 6.08 ending on
or prior to the date of such acquisition, had occurred on the first day of such
relevant Test Period), and (B) the Loan Parties can reasonably be expected
to remain in compliance with such covenants through the Term Loan Maturity Date
and to have sufficient cash liquidity to conduct their business and pay their
respective debts and other liabilities as they come due;

 

(iii)                               no
Company shall, in connection with any such acquisition, assume or remain liable
with respect to any Indebtedness or other liability (including any material tax
or ERISA liability) of the related seller, except (A) to the extent
permitted under Section 6.01, and (B) obligations of the
seller incurred in the ordinary course of business and necessary or desirable
to the continued operation of the underlying properties, and any other such
liabilities or obligations not permitted to be assumed or otherwise supported
by any Company hereunder shall be paid in full or released as to the assets
being so acquired on or before the consummation of such acquisition;

 

(iv)                              the
acquired Person shall be engaged in a business of a same or substantially
similar type as that conducted by Borrowers and the Subsidiaries on the Closing
Date and the Property acquired in connection with any such acquisition shall be
made subject to the Lien of the Security Documents and shall be free and clear
of any Liens, other than Permitted Liens;

 

(v)                                 the
Property acquired in connection with any such acquisition shall be made subject
to the Lien of the Security Documents on terms reasonably satisfactory to the
Administrative Agent and the Collateral Agent, and shall be free and clear of
any Liens, other than Permitted Liens, and the Administrative Agent and the
Collateral Agent shall have received all opinions, certificates, lien search
results and other documents reasonably requested by the Administrative Agent
and the Collateral Agent;

 

(vi)                              at
the time such Permitted Acquisition is made, (A) average Borrowing
Availability (as defined in the Revolving Credit Agreement) for the 30 days
prior to the date that such Permitted Acquisition closes shall be not less than
$35 million and (B) projected average Borrowing Availability (as defined
in the Revolving Credit Agreement) (exclusive of any Accounts and Inventory of
the acquired Person) for the 30 days beginning on the date that such Permitted
Acquisition closes shall be not less than $35 million based on projections
presented by Borrowers to the Administrative Agent and reasonably satisfactory
to the Administrative Agent

 

(vii)                           the
board of directors or other similar governing body of the acquired Person shall
not have indicated publicly its opposition to the consummation of such
acquisition;

 

(viii)                        with
respect to any acquisition involving Acquisition Consideration of more than
$1.0 million, Borrowers shall have provided the Administrative Agent and the
Lenders with (A) historical financial statements for the last three fiscal
years of the Person or business to be acquired (audited if available without
undue cost or delay) and unaudited financial statements thereof for the most
recent interim period which are

 

22

 

available, (B) reasonably
detailed projections for the succeeding five years pertaining to the Person or
business to be acquired, (C) a reasonably detailed description of all
material information relating thereto and copies of all material documentation
pertaining to such acquisition, and (D) all such other information and
data relating to such acquisition or the Person or business to be acquired as may
be reasonably requested by the Administrative Agent or the Required Lenders;

 

(ix)                                Borrowers
shall have delivered to the Administrative Agent and the Collateral Agent and
the Lenders an Officers’ Certificate certifying that (A) such acquisition
complies with this definition (which shall have attached thereto reasonably
detailed backup data and calculations showing such compliance), and (B) such
acquisition could not reasonably be expected to result in a Material Adverse
Effect; and

 

(x)                                   the
aggregate amount of the Acquisition Consideration for all Permitted
Acquisitions during the term of this Agreement shall not exceed $30.0 million; provided
that any Equity Interests constituting all or a portion of such Acquisition
Consideration shall not have a cash dividend requirement on or prior to the
Term Loan Maturity Date.

 

“Permitted Liens” shall
have the meaning assigned to such term in Section 6.02.

 

“Person” shall mean any
natural Person, corporation, business trust, joint venture, association,
company, limited liability company, partnership or government, or any agency or
political subdivision thereof.

 

“Plan” shall mean any “employee
pension benefit plan” as such term is defined in Section 3(2) of
ERISA (other than a Multiemployer Plan) subject to the provisions of Title IV
of ERISA or Section 412 of the Code or Section 302 of ERISA which is
maintained or contributed to by any Company or its ERISA Affiliate or with
respect to which any Company could incur liability (including, without
limitation, under Section 4069 of ERISA).

 

“Preferred Stock” shall
mean, with respect to any Person, any and all preferred or preference Equity
Interests (however designated) of such Person whether now outstanding or issued
after the Issue Date.

 

“Pro Forma Basis” shall
mean on a basis in accordance with GAAP and Regulation S-X and otherwise
reasonably satisfactory to the Administrative Agent.

 

“Property” shall mean any
right, title or interest in or to property or assets of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible and
including Equity Interests or other ownership interests of any Person and
whether now in existence or owned or hereafter entered into or acquired,
including, without limitation, all Real Property.

 

“Purchase Money Obligation”
shall mean, for any Person, the obligations of such Person in respect of
Indebtedness incurred for the purpose of financing all or any part of the
purchase price of any Property (including Equity Interests of any Person) or
the cost of installation, construction or improvement of any Property or assets
and any refinancing thereof; provided, however, that such
Indebtedness is incurred within 90 days after such acquisition of such Property
by such Person.

 

23

 

“Qualified Capital Stock”
of any Person shall mean any capital stock of such Person that is not
Disqualified Capital Stock.

 

“Real Property” shall
mean, collectively, all right, title and interest (including any leasehold
estate) in and to any and all parcels of or interests in real Property owned,
leased or operated by any Person, whether by lease, license or other means,
together with, in each case, all easements, hereditaments and appurtenances
relating thereto, all improvements and appurtenant fixtures and equipment, all
general intangibles and contract rights and other Property and rights
incidental to the ownership, lease or operation thereof.

 

“Refinancing” shall mean
the repayment in full and the termination of any commitment to make extensions
of credit under all of the outstanding indebtedness of Holdings and Borrowers
and their respective Subsidiaries listed on Schedule 1.01(b).

 

“Register” shall have the
meaning assigned to such term in Section 10.04(c).

 

“Regulation D” shall mean
Regulation D of the Board as from time to time in effect and all official
rulings and interpretations thereunder or thereof.

 

“Regulation S-X” shall
mean Regulation S-X promulgated under the Securities Act.

 

“Regulation T” shall mean
Regulation T of the Board as from time to time in effect and all official
rulings and interpretations thereunder or thereof.

 

“Regulation U” shall mean
Regulation U of the Board as from time to time in effect and all official
rulings and interpretations thereunder or thereof.

 

“Regulation X” shall mean
Regulation X of the Board as from time to time in effect and all official
rulings and interpretations thereunder or thereof.

 

“Related Parties” shall
mean, with respect to any person, such person’s Affiliates and the partners,
directors, officers, employees, agents and advisors of such person and of such
person’s Affiliates.

 

“Release” shall mean any
spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, disposing, depositing, dispersing,
emanating or migrating of any Hazardous Material in, into, onto or through the
Environment.

 

“Required Lenders” shall
mean Lenders having more than 50% of the sum of all Term Loans outstanding and
unused Term Loan Commitments.

 

“Requirements of Law”
shall mean, collectively, any and all requirements of any Governmental
Authority including any and all laws, ordinances, rules, regulations or similar
statutes or case law.

 

“Response” shall mean (a) ”response”
as such term is defined in CERCLA, 42 U.S.C. § 9601(24), and (b) all
other actions required by any Governmental Authority or voluntarily undertaken
to: (i) clean up, remove, treat, abate or in any other way address any
Hazardous

 

24

 

Material in the environment; (ii) prevent
the Release or threat of Release, or minimize the further Release, of any
Hazardous Material; or (iii) perform studies and investigations in
connection with, or as a precondition to, clause (i) or (ii) above.

 

“Responsible Officer” of
any corporation shall mean any executive officer or Financial Officer of such
corporation and any other officer or similar official thereof with
responsibility for the administration of the obligations of such corporation in
respect of this Agreement.

 

“Revolving Credit Agent”
shall mean the Administrative Agent as such term is defined in the Revolving
Credit Agreement.

 

“Revolving Credit Agreement”
shall mean that certain Revolving Credit Agreement dated as of September 1,
2005 by and among Borrowers, Holdings, Guarantors, the lenders party thereto,
Wells Fargo Foothill, LLC and Bank of America Business Capital, as
co-documentation agents, JPMorgan Business Credit, as collateral agent and
co-syndication agent, UBS Securities LLC, as arranger and co-syndication agent,
UBS AG, Stamford Branch, as issuing bank and administrative agent, and UBS Loan
Finance LLC, as swingline lender.

 

“Revolving Credit Documents”
shall mean the Loan Documents, as such term is defined in the Revolving Credit
Agreement.

 

“Revolving Credit Indebtedness”
shall mean all Indebtedness and other obligations of the Loan Parties under the
Revolving Credit Documents.

 

“Revolving Credit Priority Collateral”
shall have the meaning provided to such term in the Intercreditor Agreement.

 

“Sarbanes-Oxley Act” shall
mean the United States Sarbanes-Oxley Act of 2002, as amended, and all rules and
regulations promulgated thereunder.

 

“Secured Parties” shall
mean, collectively, the Administrative Agent, the Collateral Agent, each other
Agent, the Lenders and each party to a Lender Hedging Agreement if at the date
of entering into such Lender Hedging Agreement such Person (if it is an
Affiliate of a Lender rather than a Lender) executes and delivers to the
Administrative Agent a letter agreement in form and substance acceptable to the
Administrative Agent pursuant to which such Person (i) appoints the
Administrative Agent as its agent under the applicable Loan Documents and (ii) agrees
to be bound by the provisions of Section 8.02 and the Security
Agreement.

 

“Securities Act” shall
mean the Securities Act of 1933, as amended.

 

“Security Agreement” shall
mean a Security Agreement substantially in the form of Exhibit J
among the Loan Parties and the Administrative Agent for the benefit of the
Secured Parties.

 

“Security Agreement Collateral”
shall mean all Property pledged or granted as collateral pursuant to the
Security Agreement delivered on the Closing Date or thereafter pursuant to Section 5.11.

 

25

 

“Security Documents” shall
mean the Security Agreement, the Mortgages, the Perfection Certificate and each
other security document or pledge agreement delivered in accordance with
applicable local or foreign law to grant a valid, perfected security interest
in any Property, and all UCC or other financing statements or instruments of
perfection required by this Agreement, the Security Agreement or any Mortgage
to be filed with respect to the security interests in Property and fixtures
created pursuant to the Security Agreement or any Mortgage and any other
document or instrument utilized to pledge as collateral for the Obligations any
Property of whatever kind or nature.

 

“Seller” shall have the
meaning assigned to such term in the first recital hereto.

 

“Statutory Reserves” shall
mean for any Interest Period for any Eurodollar Term Borrowing, the average
maximum rate at which reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D by member banks of the United States Federal Reserve System
in New York City with deposits exceeding one billion dollars against “Eurodollar
liabilities” (as such term is used in Regulation D).  Eurodollar Term Borrowings shall be deemed to
constitute Eurodollar liabilities and to be subject to such reserve
requirements without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to any Lender under Regulation D.

 

“Subsidiary” shall mean,
with respect to any Person (the “parent”) at any date, any corporation,
limited liability company, partnership, association or other entity the
accounts of which would be consolidated with those of the parent in the parent’s
consolidated financial statements if such financial statements were prepared in
accordance with GAAP as of such date, as well as any other corporation, limited
liability company, partnership, association or other entity (a) of which
securities or other ownership interests representing more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or
one or more Subsidiaries of the parent or by the parent and one or more
Subsidiaries of the parent.  Unless
otherwise set forth herein, reference in this Agreement to “Subsidiary” shall
mean Borrowers’ direct and indirect Subsidiaries.

 

“Subsidiary Guarantor”
shall mean each Subsidiary listed on Schedule 1.01(c), and each
other Subsidiary that is or becomes a party to this Agreement pursuant to Section 5.11
other than a Foreign Subsidiary.

 

“Survey” shall mean a
survey of any Mortgaged Real Property (and all improvements thereon) (i) prepared
by a surveyor or engineer licensed to perform surveys in the state where such
Mortgaged Real Property is located, (ii) dated (or redated) not earlier
than six months prior to the date of delivery thereof unless there shall have
occurred within six months prior to such date of delivery any exterior
construction on the site of such Mortgaged Real Property, in which event such
survey shall be dated (or redated) after the completion of such construction or
if such construction shall not have been completed as of such date of delivery,
not earlier than 20 days prior to such date of delivery, (iii) certified
by the surveyor (in a manner reasonably acceptable to the Administrative Agent)
to the Administrative Agent, the Collateral Agent and the Title Company, (iv) complying
in all respects with the minimum detail requirements of the American

 

26

 

Land Title Association as such requirements
are in effect on the date of preparation of such survey and (v) sufficient
for the Title Company to remove all standard survey exceptions from the title
insurance policy (or commitment) relating to such Mortgaged Real Property and
issue the endorsements of the type required by Section 4.01(o)(iii).

 

“Syndication Agent” shall
have the meaning assigned to such term in the preamble hereto.

 

“Tax Return” shall mean
all returns, statements, filings, attachments and other documents or
certifications required to be filed in respect of Taxes.

 

“Taxes” shall mean (i) any
and all present or future taxes, duties, levies, fees, imposts, assessments,
deductions, withholdings or other charges, whether computed on a separate,
consolidated, unitary, combined or other basis and any and all liabilities
(including interest, fines, penalties or additions to tax) with respect to the
foregoing, and (ii) any transferee, successor, joint and several,
contractual or other liability (including, without limitation, liability
pursuant to Treasury Regulation §1.1502-6 (or any similar provision of state,
local or non-U.S. law)) in respect of any item described in clause (i).

 

“Term Borrowing” shall
mean a borrowing of Term Loans of the same Type, made, converted or continued
on the same date and, in the case of Eurodollar Term Loans, as to which a single
Interest Period is in effect.

 

“Term Loan Commitments”
shall mean, with respect to each Lender, the commitment, if any, of such Lender
to make a Term Loan hereunder on the Closing Date in the amount set forth on Schedule I
to the Lender Addendum executed and delivered by such Lender, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Term Loan Commitment, as applicable, as the same may be (a) reduced from
time to time pursuant to Section 2.07 and (b) reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04.  The aggregate amount of the Lenders’ Term
Loan Commitments is $100.0 million.

 

“Term Loan Lender” shall
mean a Lender with a Term Loan Commitment or an outstanding Term Loan.

 

“Term Loan Maturity Date”
shall mean the date which is six (6) years after the Closing Date or, if
such date is not a Business Day, the first preceding Business Day.

 

“Term Loan Priority Collateral”
shall have the meaning provided to such term in the Intercreditor Agreement.

 

“Term Loan Repayment Date”
shall have the meaning assigned to such term in Section 2.09.

 

“Term Loan” shall mean the
term loans made by the Lenders to Borrowers pursuant to Section 2.01.  Each Term Loan shall be either an ABR Term
Loan or a Eurodollar Term Loan

 

27

 

“Test Period” shall mean,
at any time, the four consecutive fiscal quarters of Holdings then last ended
(in each case taken as one accounting period).

 

“Title Company” shall mean
any title insurance company as shall be retained by a Borrower and reasonably
acceptable to the Administrative Agent.

 

“Title Policy” shall have
the meaning assigned to such term in Section 4.01(o).

 

“Transaction Documents”
shall mean the Acquisition Documents, the Loan Documents and the Revolving
Credit Documents.

 

“Transactions” shall mean,
collectively, the transactions to occur on or prior to the Closing Date
pursuant to the Transaction Documents, including (a) the consummation of
the Acquisition; (b) the execution and delivery of the Loan Documents and
the initial borrowings hereunder; (c) the execution and delivery of the
Revolving Credit Documents and the initial borrowings thereunder (d) the
Refinancing; and (e) the payment of all fees and expenses to be paid on or
prior to the Closing Date and owing in connection with the foregoing.

 

“Treasury Regulation”
means the regulations promulgated under the Code.

 

“Type,” when used in
reference to any Term Loan or Term Borrowing, refers to whether the rate of
interest on such Term Loan, or on the Term Loans comprising such Term
Borrowing, is determined by reference to the Adjusted LIBOR Rate or the
Alternate Base Rate.

 

“UCC” shall mean the
Uniform Commercial Code as in effect in the applicable state or jurisdiction.

 

“Voting Stock” shall mean
any class or classes of capital stock of Holdings pursuant to which the holders
thereof have the general voting power under ordinary circumstances to elect at
least a majority of the Board of Directors of Holdings.

 

“Wholly Owned Subsidiary”
shall mean, as to any Person, (a) any corporation 100% of whose capital
stock (other than directors’ qualifying shares) is at the time owned by such
Person and/or one or more Wholly Owned Subsidiaries of such Person and (b) any
partnership, association, joint venture, limited liability company or other
entity in which such Person and/or one or more Wholly Owned Subsidiaries of
such Person have a 100% equity interest at such time.

 

“Withdrawal Liability”
shall mean liability to a Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I
of Subtitle E of Title IV of ERISA.

 

SECTION 1.02  Classification of Term Loans and Term Borrowings.  For purposes of this Agreement, Term Loans
may be classified and referred to by Type (e.g., a “Eurodollar Term Loan”)
and Term Borrowings may be classified and referred to by Type (e.g., a “Eurodollar
Term Borrowing”).

 

28

 

SECTION 1.03  Terms Generally.  The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any Loan Document, agreement, instrument of other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the
words “herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement, and (f) the words “asset”
and “Property” shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.

 

SECTION 1.04  Accounting Terms; GAAP.  Except as otherwise
expressly provided herein, all financial statements to be delivered pursuant to
this Agreement shall be prepared in accordance with GAAP as in effect from time
to time and all terms of an accounting or financial nature shall be construed
in accordance with GAAP, as in effect on the date hereof unless agreed to by
Borrowers and the Required Lenders.  In
the event that any “Accounting Change” (as defined below) shall occur and such
change results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then the Borrowers and the Administrative
Agent agree to enter into negotiations in order to amend such provisions of
this Agreement so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating the Borrowers’ financial
condition shall be the same after such Accounting Changes as if such Accounting
Changes had not been made.  Until such
time as such an amendment shall have been executed and delivered by Borrowers
and the Required Lenders, all financial covenants, standards and terms in this
Agreement shall continue to be calculated or construed as if such Accounting
Changes had not occurred.  “Accounting
Changes” refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the Securities and Exchange Commission (or
successors thereto or agencies with similar functions).

 

ARTICLE II.

 

THE
CREDITS

 

SECTION 2.01  Commitments. 
Subject to the terms and conditions and relying upon the representations
and warranties herein set forth, each Lender agrees, severally and not jointly (i) to
make a Term Loan to Borrowers on the Closing Date in the principal amount not
to exceed its Term Loan Commitment. 
Amounts paid or prepaid in respect of Term Loans may not be reborrowed.

 

29

 

SECTION 2.02  Term Loans.  Each
Term Loan shall be made as part of a Term Borrowing consisting of Term Loans
made by the Lenders ratably in accordance with their applicable Commitments; provided that the failure of any Lender to
make its Term Loan shall not in itself relieve any other Lender of its
obligation to lend hereunder (it being understood, however, that no Lender
shall be responsible for the failure of any other Lender to make any Term Loan
required to be made by such other Lender). 
ABR Term Loans comprising any Term Borrowing shall be in an aggregate
principal amount that is (i) an integral multiple of $500,000 and not less
than $500,000 or (ii) equal to the remaining available balance of the
applicable Commitments.  Eurodollar Term
Loans comprising any Term Borrowing shall be in an aggregate principal amount
that is (i) an integral multiple of $500,000 and not less than $1.0
million or (ii) equal to the remaining available balance of the applicable
Commitments.  The initial borrowing of
Term Loans on the Closing Date shall be ABR Term Loans.

 

(b)                                 Subject
to Sections 2.11 and 2.12, each Term Borrowing shall be
comprised entirely of ABR Term Loans or Eurodollar Term Loans as Borrowers may
request pursuant to Section 2.03. 
Each Lender may at its option make any Eurodollar Term Loan by causing
any domestic or foreign branch or Affiliate of such Lender to make such Term
Loan; provided that any exercise
of such option shall not affect the obligation of Borrowers to repay such Term
Loan in accordance with the terms of this Agreement.  Term Borrowings of more than one Type may be
outstanding at the same time; provided
that Borrowers shall not be entitled to request any Term Borrowing that, if
made, would result in more than fifteen Eurodollar Term Borrowings outstanding
hereunder at any one time.  For purposes
of the foregoing, Term Borrowings having different Interest Periods, regardless
of whether they commence on the same date, shall be considered separate Term
Borrowings.

 

(c)                                  Each
Lender shall make each Term Loan to be made by it hereunder on the Closing Date
by wire transfer of immediately available funds to such account in New York
City as the Administrative Agent may designate not later than 12:00 noon, New
York City time, and the Administrative Agent shall promptly credit the amounts
so received to an account as directed by Borrowers in the applicable Borrowing
Request.

 

(d)                                 Unless
the Administrative Agent shall have received notice from a Lender prior to the
date of any Term Borrowing that such Lender will not make available to the
Administrative Agent such Lender’s portion of such Term Borrowing, the
Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Term Borrowing in
accordance with paragraph (c) above, and the Administrative Agent
may, in reliance upon such assumption, make available to Borrowers on such date
a corresponding amount.  If the
Administrative Agent shall have so made funds available, then, to the extent
that such Lender shall not have made such portion available to the
Administrative Agent, each of such Lender and Borrowers severally agrees to
repay to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to Borrowers until the date such amount is repaid to the
Administrative Agent at (i) in the case of Borrowers, the interest rate
applicable at the time to the Term Loans comprising such Term Borrowing and (ii) in
the case of such Lender, the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.  If
such Lender shall repay to the Administrative Agent such corresponding amount,
such amount shall constitute such

 

30

 

Lender’s Term
Loan as part of such Term Borrowing for purposes of this Agreement, and
Borrower’s obligation to repay the Administrative Agent such corresponding
amount pursuant to this Section 2.02(c) shall cease.

 

(e)                                  Notwithstanding
any other provision of this Agreement, Borrowers shall not be entitled to
request, or to elect to convert or continue, any Term Borrowing if the Interest
Period requested with respect thereto would end after the Term Loan Maturity
Date.

 

SECTION 2.03  Borrowing Procedure.  To request a Term Borrowing, Borrowers shall
notify the Administrative Agent of such request by telephone (promptly
confirmed by telecopy) (i) in the case of a Eurodollar Term Borrowing, not
later than 12:00 noon, New York City time, three Business Days before the date
of the proposed Term Borrowing and (ii)  in the case of an ABR Term
Borrowing, not later than 12:00 noon, New York City time, on the Business Day
of the proposed Term Borrowing.  Each
such telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent and signed by
Borrowers.  Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:

 

(a)                                  the
aggregate amount of such Term Borrowing;

 

(b)                                 the
date of such Term Borrowing, which shall be a Business Day;

 

(c)                                  whether
such Term Borrowing is to be an ABR Term Borrowing or a Eurodollar Term
Borrowing;

 

(d)                                 in
the case of a Eurodollar Term Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; provided that until the earlier of (i) the
date on which the Administrative Agent shall have notified Borrower that the
primary syndication of the Commitments has been completed and (ii) the date
which is 30 days after the Closing Date, the Interest Period shall be seven
days;

 

(e)                                  the
location and number of the account to which funds are to be disbursed, which
shall comply with the requirements of Section 2.02; and

 

(f)                                    that
the conditions set forth in Section 4.02(b)-(e) are satisfied
as of the date of the notice.

 

If no election as to the Type of Term Borrowing is specified, then the
requested Term Borrowing shall be an ABR Term Borrowing.  If no Interest Period is specified with
respect to any requested Eurodollar Term Borrowing, then Borrowers shall be
deemed to have selected an Interest Period of one month’s duration (subject to
the proviso in clause (d) above). 
Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Term Loan to be made as part of the
requested Term Borrowing.

 

31

 

SECTION 2.04  Evidence of Debt; Repayment of Term Loans.

 

(a)                                  Borrowers
hereby unconditionally promise to pay to the Administrative Agent for the
account of each Term Loan Lender, the principal amount of each Term Loan of
such Term Loan Lender as provided in Section 2.09.

 

(b)                                 Each
Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of Borrower to such Lender resulting from
each Term Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.  The Administrative Agent
shall maintain accounts in which it will record (i) the amount of each
Term Loan made hereunder and the Type thereof and the Interest Period
applicable thereto; (ii) the amount of any principal or interest due and
payable or to become due and payable from Borrowers to each Lender hereunder;
and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.  The entries made in the accounts maintained
pursuant to this paragraph shall be prima
facie evidence of the existence and amounts of the obligations
therein recorded; provided that
the failure of any Lender or the Administrative Agent to maintain such accounts
or any error therein shall not in any manner affect the obligations of
Borrowers to repay the Term Loans in accordance with their terms.

 

(c)                                  Any
Lender may request that Term Loans made by it be evidenced by a promissory
note.  In such event, Borrowers shall
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) in the form of Exhibit H. 
Thereafter, the Term Loans evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to Section 10.04)
be represented by one or more promissory notes in such form payable to the
order of the payee named therein (or, if such promissory note is a registered
note, to such payee and its registered assigns).

 

SECTION 2.05  Fees.

 

(a)                                  [Intentionally
Omitted].

 

(b)                                 Administrative
Agent Fees; Collateral Agent Fees.  (i)  Borrowers
agree to pay to the Administrative Agent, for its own account, the applicable
administrative agency fees set forth in the Fee Letter or such other fees
payable in the amounts and at the times separately agreed upon between
Borrowers and the Administrative Agent (the “Administrative Agent Fees”).

 

(ii)                                  Borrowers agree to pay to the
Administrative Agent and the Collateral Agent, each for its own account, the
applicable agency fee set forth in the Fee Letter or such other fees payable in
the amounts and at the times separately agreed upon between Borrower and the
Administrative Agent and the Collateral Agent, as the case may be (the “Collateral
Agent Fees”).

 

(c)                                  All
Fees shall be paid on the dates due, in immediately available funds, to the
Administrative Agent for distribution, if and as appropriate, among the
Lenders.  Once paid, none of the Fees
shall be refundable under any circumstances.

 

32

 

SECTION 2.06  Interest on Term Loans.

 

(a)                                  Subject
to the provisions of Section 2.06(c), the Term Loans comprising
each ABR Term Borrowing, shall bear interest at a rate per annum equal to the
Alternate Base Rate plus the Applicable Margin in effect from time to time.

 

(b)                                 Subject
to the provisions of Section 2.06(c), the Term Loans comprising
each Eurodollar Term Borrowing shall bear interest at a rate per annum equal to
the Adjusted LIBOR Rate for the Interest Period in effect for such Term
Borrowing plus the Applicable Margin in effect from time to time.

 

(c)                                  Notwithstanding
the foregoing, during an Event of Default, all Obligations shall, at the
discretion of the Administrative Agent or Required Lenders upon notice thereof
to the Borrowers, bear interest, after as well as before judgment, at a per
annum rate equal to (i) in the case of principal of any Term Loan, 2% plus
the rate otherwise applicable to such Term Loan as provided in the preceding
paragraphs of this Section 2.06 or (ii) in the case of any
other amount, 2% plus the rate applicable to ABR Term Loans as provided
in paragraph (a) of this Section 2.06.

 

(d)                                 Accrued
interest on each Term Loan shall be payable in arrears on each Interest Payment
Date for such Term Loan; provided
that (i) interest accrued pursuant to Section 2.06(c) shall
be payable on demand (provided  that, absent demand, such interest
shall be payable on each Interest Payment Date and upon the Term Loan Maturity
Date), (ii) in the event of any repayment or prepayment of any Term Loan ,
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (iii) in the event of any
conversion of any Eurodollar Term Loan prior to the end of the current Interest
Period therefor, accrued interest on such Term Loan shall be payable on the
effective date of such conversion.

 

(e)                                  All
interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).  The applicable Alternate Base Rate or
Adjusted LIBOR Rate shall be determined by the Administrative Agent in
accordance with the provisions of this Agreement and such determination shall
be conclusive absent manifest error.

 

SECTION 2.07  Termination of Commitments.  The Term Loan Commitments shall automatically
terminate at 5:00 p.m., New York City time, on the Closing Date.  Notwithstanding the foregoing, all the
Commitments shall automatically terminate at 5:00 p.m., New York City
time, on September 1, 2005, if the initial Credit Extension shall not have
occurred by such time.

 

SECTION 2.08  Interest Elections.

 

(a)                                  Generally.  Each Term Borrowing initially shall be of the
Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Term Borrowing, shall have an initial Interest Period as specified
in such Borrowing Request.  Thereafter,
Borrowers may elect

 

33

 

to convert such
Term Borrowing to a different Type or to continue such Term Borrowing and, in
the case of a Eurodollar Term Borrowing, may elect Interest Periods therefor,
all as provided in this Section. 
Borrowers may elect different options with respect to different portions
of the affected Term Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Term Loans comprising such Term
Borrowing, and the Term Loans comprising each such portion shall be considered
a separate Term Borrowing. 
Notwithstanding anything to the contrary, Borrowers shall not be
entitled to request any conversion or continuation that, if made, would result
in more than fifteen Eurodollar Term Borrowings outstanding hereunder at any
one time.

 

(b)                                 Interest
Election Notice.  To make an election
pursuant to this Section, Borrowers shall notify the Administrative Agent of
such election by telephone or by email of a scanned and duly executed Interest
Election Request by the time that a Borrowing Request would be required under Section 2.03
if Borrowers were requesting a Term Borrowing of the Type resulting from such
election to be made on the effective date of such election.  Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery
or telecopy to the Administrative Agent of a written Interest Election Request
substantially in the form of Exhibit D.

 

(c)                                  Each
telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:

 

(i)                                     the Term Borrowing to which such
Interest Election Request applies and, if different options are being elected
with respect to different portions thereof, the portions thereof to be
allocated to each resulting Term Borrowing (in which case the information to be
specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Term Borrowing);

 

(ii)                                  the effective date of the election
made pursuant to such Interest Election Request, which shall be a Business Day;

 

(iii)                               whether the resulting Term Borrowing
is to be an ABR Term Borrowing or a Eurodollar Term Borrowing; and

 

(iv)                              if the resulting Term Borrowing is a
Eurodollar Term Borrowing, the Interest Period to be applicable thereto after
giving effect to such election, which shall be a period contemplated by the
definition of the term “Interest Period”; provided that until the
earlier of (i) the date on which the Administrative Agent shall have
notified Borrowers that the primary syndication of the Commitments has been
completed and (ii) the date which is 30 days after the Closing Date, the
Interest Period shall be seven days.

 

If any such Interest Election Request requests a Eurodollar Term
Borrowing but does not specify an Interest Period, then Borrowers shall be
deemed to have selected an Interest Period of one month’s duration (subject to
the proviso in clause (iv) above).

 

Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of
such Lender’s portion of each resulting Term Borrowing.

 

34

 

(d)                                 Automatic
Conversion to ABR Term Borrowing.  If
an Interest Election Request with respect to a Eurodollar Term Borrowing is not
timely delivered prior to the end of the Interest Period applicable thereto,
then, unless such Eurodollar Term Borrowing is repaid as provided herein, at
the end of such Interest Period such Eurodollar Term Borrowing shall be
converted to an ABR Term Borrowing. 
Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request of
the Required Lenders, so notifies Borrowers, then, after the occurrence and
during the continuance of such Event of Default (i) no outstanding Term
Borrowing may be converted to or continued as a Eurodollar Term Borrowing and (ii) unless
repaid, each Eurodollar Term Borrowing shall be converted to an ABR Term
Borrowing at the end of the Interest Period applicable thereto.

 

SECTION 2.09  Amortization of Term Borrowings.  Borrowers shall pay to the Administrative
Agent, for the account of the Lenders, on the dates set forth on Annex I,
or if any such date is not a Business Day, on the immediately preceding Business
Day (each such date, a “Term Loan Repayment Date”), a principal amount
of the Term Loans equal to the amount set forth on Annex I for such
date (as adjusted from time to time pursuant to Section 2.10(h)),
together in each case with accrued and unpaid interest on the principal amount
to be paid to but excluding the date of such payment.  To the extent not previously paid, all Term
Loans shall be due and payable on the Term Loan Maturity Date.

 

SECTION 2.10  Optional and Mandatory Prepayments of Term Loans.

 

(a)                                  Optional
Prepayments.  Borrowers shall have
the right at any time and from time to time, after the repayment and
satisfaction in full of the Revolving Credit Indebtedness and the termination
of all commitments under the Revolving Credit Documents, to prepay any Term
Borrowing, in whole or in part, subject to the requirements of this Section 2.10;
provided that each partial
prepayment shall be in an amount that is an integral multiple of $1.0 million
and not less than $1.0 million.

 

(b)                                 Asset
Sales.  Not later than one Business
Day following the receipt of any Net Cash Proceeds of any Asset Sale, Borrowers
shall, and shall cause their Subsidiaries to, apply 100% of the Net Cash
Proceeds received with respect thereto to make prepayments in accordance with Section 2.10(g);
provided that, prior to the repayment and satisfaction in full of the
Revolving Credit Indebtedness and the termination of all commitments under the
Revolving Credit Documents, only Net Cash Proceeds from Asset Sales of Term
Loan Priority Collateral shall be subject to the provisions of this Section 2.10(b);

 

(c)                                  Debt
Issuance and Preferred Equity Issuance. 
Upon any Debt Issuance or Equity Issuance of Equity Interests (other
than common Equity Interests of Holdings) after the Closing Date, Borrowers
shall make prepayments in accordance with Section 2.10(g) in
an aggregate principal amount equal to 100% of the Net Cash Proceeds of such
Debt Issuance or Equity Issuance.

 

(d)                                 Common
Equity Issuance.  Upon any Equity
Issuance of common Equity Interests of Holdings after the Closing Date,
Borrowers shall make prepayments in accordance with

 

35

 

Section 2.10(g) in
an aggregate principal amount equal to 75% of the Net Cash Proceeds of such
Equity Issuance.

 

(e)                                  Casualty
Events.  Not later than one Business
Day following the receipt of any Net Cash Proceeds from a Casualty Event,
Borrowers shall, and shall cause their Subsidiaries to, apply an amount equal
to 100% of such Net Cash Proceeds to make prepayments in accordance with Section 2.10(g);
provided that, prior to the repayment and satisfaction in full of the
Revolving Credit Indebtedness and the termination of all commitments under the
Revolving Credit Documents, only Net Cash Proceeds from Casualty Events of Term
Loan Priority Collateral shall be subject to the provisions of this Section 2.10(e).

 

(f)                                    Excess
Cash Flow.  Beginning with the fiscal
year ending on or about December 31, 2006, no later than the earlier of (i) 90 days
after the end of such fiscal year and each fiscal year thereafter and (ii) the
date on which the financial statements with respect to such fiscal year are
delivered pursuant to Section 5.01(a), Borrowers shall make
prepayments in accordance with Section 2.10(g) in an aggregate
amount equal to 75% of Excess Cash Flow for the fiscal year; provided,
however, that, no prepayments from Excess Cash Flow shall be made if, after
giving effect to such payment, Borrowing Availability (as defined in the
Revolving Credit Agreement) shall be less than $35.0 million.  Any such prepayments which are not permitted
to be made as a result of the proviso at the end of the immediately preceding
sentence shall be deferred and shall be made at such time, if any, that, after
giving effect to such payment, Borrowing Availability (as defined in the
Revolving Credit Agreement) would be greater than or equal to $35.0 million.

 

(g)                                 Application
of Prepayments.  Prior to any
optional or mandatory prepayment hereunder, Borrowers shall select the Term Borrowing
or Term Borrowings to be prepaid and shall specify such selection in the notice
of such prepayment pursuant to Section 2.10(h), subject to the
provisions of this Section 2.10(g). 
Any mandatory prepayments of Term Loans pursuant to this Section 2.10
shall be applied to reduce scheduled prepayments required under Section 2.09
on a pro rata basis among the
prepayments remaining to be made on each Term Loan Repayment Date.

 

Amounts to be applied pursuant to this Section 2.10 to the
prepayment of Term Loans shall be applied, as applicable, first to reduce
outstanding ABR Term Loans.  Any amounts
remaining after each such application shall be applied to prepay Eurodollar
Term Loans.  Notwithstanding the
foregoing, if the amount of any prepayment of Term Loans required under this Section 2.10
shall be in excess of the amount of the ABR Term Loans at the time outstanding
(an “Excess Amount”), only the portion of the amount of such prepayment
as is equal to the amount of such outstanding ABR Term Loans shall be
immediately prepaid and, at the election of Borrowers, the Excess Amount shall
be either (A) deposited in an escrow account on terms satisfactory to the
Collateral Agent and applied to the prepayment of Eurodollar Term Loans on the
last day of the then next-expiring Interest Period for Eurodollar Term Loans; provided that (i) interest in respect
of such Excess Amount shall continue to accrue thereon at the rate provided
hereunder for the Term Loans which such Excess Amount is intended to repay
until such Excess Amount shall have been used in full to repay such Term Loans
and (ii) at any time while a Default has occurred and is continuing, the
Administrative Agent may, and upon written direction from the Required Lenders
shall, apply any or all proceeds then on deposit to

 

36

 

the payment of such Term Loans in an amount
equal to such Excess Amount or (B) prepaid immediately, together with any
amounts owing to the Lenders under Section 2.13.

 

(h)                                 Notice
of Prepayment.  Borrowers shall
notify the Administrative Agent by written notice of any prepayment hereunder (i) in
the case of prepayment of a Eurodollar Term Borrowing, not later than 11:00 a.m.,
New York City time, three (3) Business Days before the date of prepayment,
and (ii) in the case of prepayment of an ABR Term Borrowing, not later
than 11:00 a.m., New York City time, on the date of prepayment.  Each such notice shall specify the prepayment
date, the principal amount of each Term Borrowing or portion thereof to be
prepaid and, in the case of a mandatory prepayment, a reasonably detailed
calculation of the amount of such prepayment. 
Promptly following receipt of any such notice, the Administrative Agent
shall advise the Lenders of the contents thereof.  Each prepayment of a Term Borrowing shall be
applied ratably to the Term Loans included in the prepaid Term Borrowing and
otherwise in accordance with this Section 2.10.  Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.06.

 

SECTION 2.11  Alternate Rate of Interest.  If prior to the commencement of any Interest
Period for a Eurodollar Term Borrowing:

 

(a)                                  the
Administrative Agent determines (which determination shall be final and
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBOR Rate for such Interest Period; or

 

(b)                                 the
Administrative Agent is advised in writing by the Required Lenders that the
Adjusted LIBOR Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders of making or maintaining their Term Loans
included in such Term Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to Borrowers
and the Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies Borrowers and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Term Borrowing to, or
continuation of any Term Borrowing as, a Eurodollar Term Borrowing shall be
ineffective and (ii) if any Borrowing Request requests a Eurodollar Term
Borrowing, such Term Borrowing shall be made as an ABR Term Borrowing.

 

SECTION 2.12  Increased Costs.  (a)  If any
Change in Law shall:

 

(i)                                     impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBOR Rate); or

 

(ii)                                  impose on any Lender or the London
interbank market any other condition affecting this Agreement or Eurodollar
Term Loans made by such Lender;

 

and the result
of any of the foregoing shall be to increase the cost to such Lender of making
or maintaining any Eurodollar Term Loan (or of maintaining its obligation to
make any such Term

 

37

 

Loan) or to
reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or otherwise), then Borrowers will pay to
Administrative Agent for the account of such Lender, such additional amount or
amounts as will compensate such Lender for such additional costs incurred or reduction
suffered.

 

(b)                                 If
any Lender determines that any Change in Law affecting such Lender or any
lending office of such Lender or such Lender’s holding company, if any,
regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender’s capital or on the capital of such Lender’s
holding company, if any, as a consequence of this Agreement, the Commitments of
such Lender or the Term Loans made by such Lender, to a level below that which
such Lender or such Lender’s holding company could have achieved but for such
Change in Law (taking into consideration such Lender’s policies and the
policies of such Lender’s holding company with respect to capital adequacy),
then from time to time Borrowers will pay to such Lender such additional amount
or amounts as will compensate such Lender or such Lender’s holding company for
any such reduction suffered.

 

(c)                                  A
certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section 2.12
shall be delivered to Borrowers and shall be conclusive absent manifest
error.  Borrowers shall pay
Administrative Agent for the account of such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.

 

(d)                                 Failure
or delay on the part of any Lender to demand compensation pursuant to this Section 2.12
shall not constitute a waiver of such Lender’s right to demand such
compensation; provided that Borrowers
shall not be required to compensate a Lender pursuant to this Section for
any increased costs incurred or reductions suffered more than six months prior
to the date that such Lender notifies Borrowers of the Change in Law giving
rise to such increased costs or reductions and of such Lender’s intention to
claim compensation therefor (except that, if the Change in Law giving rise to
such increased costs or reductions is retroactive, then the six-month period
referred to above shall be extended to include the period of retroactive effect
thereof) .

 

SECTION 2.13  Breakage Payments. 
In the event of (a) the payment or prepayment, whether optional or
mandatory, of any principal of any Eurodollar Term Loan other than on the last
day of an Interest Period applicable thereto (including as a result of an Event
of Default), (b) the conversion of any Eurodollar Term Loan other than on
the last day of the Interest Period applicable thereto, (c) the failure to
borrow, convert, continue or prepay any Term Loan on the date specified in any
notice delivered pursuant hereto or (d) the assignment of any Eurodollar
Term Loan other than on the last day of the Interest Period applicable thereto
as a result of a request by Borrowers pursuant to Section 2.16,
then, in any such event, Borrowers shall compensate each Lender for the loss,
cost and expense attributable to such event. 
In the case of a Eurodollar Term Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on
the principal amount of such Term Loan had such event not occurred, at the
Adjusted LIBOR Rate that would have been applicable to such Term Loan, for the
period from the date of such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow, convert or continue,
for the period that would have been the Interest

 

38

 

Period for
such Term Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the Eurodollar
market.  A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section 2.13 shall be delivered to Borrowers and
the Administrative Agent and shall be conclusive and binding absent manifest
error.  Borrowers shall pay
Administrative Agent for the account of such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.

 

SECTION 2.14  Payments Generally; Pro Rata Treatment; Sharing of Setoffs.

 

(a)                                  Payments
Generally.  Borrowers shall make each
payment required to be made by it hereunder or under any other Loan Document
(whether of principal, interest, fees, or of amounts payable under Section 2.12,
2.13, 2.15 or 10.03, or otherwise) on or before the time
expressly required hereunder or under such other Loan Document for such payment
(or, if no such time is expressly required, prior to 2:00 p.m., New York
City time), on the date when due, in immediately available funds, without
setoff, deduction or counterclaim.  Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices at 677 Washington Boulevard, Stamford,
Connecticut, except that payments pursuant to Sections 2.12, 2.13,
2.15 and 10.03 shall be made to the Administrative Agent for the
benefit of the Persons entitled thereto and payments pursuant to other Loan
Documents shall be made to the Administrative Agent for the benefit of the
Persons specified therein.  The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof.  If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for
the period of such extension.  All
payments under each Loan Document shall be made in dollars.

 

(b)                                 Pro
Rata Treatment.

 

(i)                                     Each payment by Borrowers of
interest in respect of the Term Loans shall be applied to the amounts of such
obligations owing to the Lenders pro rata
according to the respective amounts then due and owing to the Lenders.

 

(ii)                                  Each payment on account of principal
of the Term Loans pursuant to Section 2.09 shall be allocated among
the Term Loan Lenders pro rata
based on the principal amount of the Term Loans held by the Term Loan Lenders.

 

(c)                                  Insufficient
Funds.  If at any time insufficient
funds are received by and available to the Administrative Agent to pay fully
all amounts of principal, interest and fees then due hereunder, such funds
shall be applied (i) first,
toward payment of interest and fees then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second,
toward payment of principal then due

 

39

 

hereunder,
ratably among the parties entitled thereto in accordance with the amount of
principal then due to such parties.

 

(d)                                 Sharing
of Set-Off.  If any Lender shall, by
exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Term Loans or other
Obligations resulting in such Lender’s receiving payment of a proportion of the
aggregate amount of its Term Loans and accrued interest thereon or other
Obligations greater than its pro  rata share thereof as provided herein,
then the Lender receiving such greater proportion shall (a) notify the
Administrative Agent of such fact, and (b) purchase (for cash at face
value) participations in the Term Loans and such other obligations of the other
Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Term Loans and other amounts owing them, provided that:

 

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

 

(ii)                                  the provisions of this paragraph
shall not be construed to apply to (x) any payment made by Borrowers
pursuant to and in accordance with the express terms of this Agreement or
(y) any payment obtained by a Lender as consideration for the assignment
of or sale of a participation in any of its Term Loans to any assignee or participant,
other than to Borrowers or any Subsidiary thereof (as to which the provisions
of this paragraph shall apply).

 

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

 

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

 

(f)                                    Lender
Default.  If any Lender shall fail to
make any payment required to be made by it pursuant to Section 2.14(e) or
10.03(c), then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter

 

40

 

received by
the Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are
fully paid.

 

SECTION 2.15  Taxes.  (a)  Any and all
payments by or on account of any obligation of Borrowers hereunder or under any
other Loan Document shall be made without set-off, counterclaim or other
defense and free and clear of and without deduction or withholding for any and
all Indemnified Taxes; provided that if a Borrower shall be required by
law to deduct any Indemnified Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions or withholdings applicable to additional sums
payable under this Section 2.15) the Administrative Agent or Lender
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions or withholdings been made, (ii) such Borrower shall
make such deductions or withholdings and (iii) such Borrower shall pay the
full amount deducted or withheld to the relevant Governmental Authority in
accordance with applicable law.

 

(b)                                 In
addition, Borrowers shall pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

 

(c)                                  Borrowers
shall indemnify and pay the Administrative Agent and each Lender, within 10
Business Days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender, as the case may be, on or with respect to any payment by or on account
of any obligation of Borrowers hereunder or under any other Loan Document
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 2.15) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability delivered to a Borrower by a Lender or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

 

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

 

(e)                                  Any
Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which a Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to Borrowers (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by Borrowers as will permit such payments to be made
without withholding or at a reduced rate. 
In the case of a U.S. Borrower, each Foreign Lender either (1) (i) agrees
to furnish either U.S. Internal Revenue Service Form W-8ECI or U.S.
Internal Revenue Service Form W-8BEN (or successor form) and (ii) agrees
(for the benefit of Borrowers and the Administrative Agent), to the extent it
may lawfully do so at such times, upon reasonable request by Borrowers or the
Administrative Agent, to provide a new Form W-8ECI or Form W-8BEN

 

41

 

(or successor
form) upon the expiration or obsolescence of any previously delivered form to
reconfirm any complete exemption from, or any entitlement to a reduction in,
U.S. federal withholding tax with respect to any interest payment hereunder or (2) in
the case of any such Foreign Lender that is not a “bank” within the meaning of Section 881(c)(3)(A) of
the Code, (i) agrees to furnish either (a) a “Non-Bank Certificate”
in a form acceptable to the Administrative Agent and the Borrowers and two
accurate and complete original signed copies of Internal Revenue Service Form W-8BEN
(or successor form) or (b) an Internal Revenue Form W-8ECI (or
successor form), certifying (in each case) to such Foreign Lender’s legal
entitlement to an exemption or reduction from U.S. federal withholding tax with
respect to all interest payments hereunder and (ii) agrees (for the
benefit of Borrowers and the Administrative Agent) to the extent it may
lawfully do so at such times, upon reasonable request by Borrowers or the
Administrative Agent, to provide a new Form W-8BEN or W-8ECI (or successor
form) upon the expiration or obsolescence of any previously delivered form to
reconfirm any complete exemption from, or any entitlement to a reduction in,
U.S. federal withholding tax with respect to any interest payment hereunder.

 

(f)                                    If
the Administrative Agent or a Lender (or an assignee) determines in its
reasonable discretion that it has received a refund of any Indemnified Taxes or
Other Taxes as to which it has been indemnified by Borrowers or with respect to
which a Borrower has paid additional amounts pursuant to this Section 2.15,
it shall pay over such refund to Borrowers (but only to the extent of indemnity
payments made, or additional amounts paid, by such Borrower under this Section 2.15
with respect to the Indemnified Taxes or the Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of the Administrative Agent or such
Lender (or assignee) and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund); provided, however,
that Borrowers, upon the request of the Administrative Agent or such Lender (or
assignee), agree to repay the amount paid over to Borrowers (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent or such Lender (or assignee) in the
event the Administrative Agent or such Lender (or assignee) is required to
repay such refund to such Governmental Authority.  Nothing contained in this Section 2.15(f) shall
require the Administrative Agent or any Lender (or assignee) to make available
its tax returns or any other information which it deems confidential to
Borrowers or any other Person. 
Notwithstanding anything to the contrary, in no event will any Lender be
required to pay any amount to Borrowers the payment of which would place such
Lender in a less favorable net after-tax position than such Lender would have
been in had the additional amounts giving rise to such refund of any
Indemnified Taxes or Other Taxes never been paid in the first place.

 

SECTION 2.16  Mitigation Obligations; Replacement of Lenders.

 

(a)                                  Designation
of a Different Lending Office.  If
any Lender requests compensation under Section 2.12, or requires
Borrowers to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.15,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Term Loans hereunder or to assign its rights
and obligations hereunder to another of its offices, branches or affiliates,
if, in the reasonable judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.12 or 2.15,
as the case may be, in the future and (ii) would not subject such Lender
to any unreimbursed cost or

 

42

 

expense and
would not otherwise be disadvantageous to such Lender.  Each Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

 

(b)                                 Replacement
of Lenders.   If any Lender requests
compensation under Section 2.12, or if Borrowers are required to
pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.15, or if any Lender
defaults in its obligation to fund Term Loans hereunder, or if Borrowers
exercise their replacement rights under Section 10.02(c), then
Borrowers may, at their sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in Section 10.04),
all of its interests, rights and obligations under this Agreement and the other
Loan Documents to an assignee selected by Borrowers that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) Borrowers shall have received the prior
written consent of the Administrative Agent, which consent shall not
unreasonably be withheld or delayed, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Term Loans,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or Borrowers (in the case of all other amounts) and (iii) in
the case of any such assignment resulting from a claim for compensation under Section 2.12
or payments required to be made pursuant to Section 2.15, such
assignment will result in a material reduction in such compensation or
payments.  A Lender shall not be required
to make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Lender or otherwise, the circumstances entitling Borrowers to
require such assignment and delegation cease to apply.

 

ARTICLE III.

 

REPRESENTATIONS
AND WARRANTIES

 

Each Loan Party represents and warrants to the Administrative Agent,
the Collateral Agent and each of the Lenders (with references to the Companies
being references thereto after giving effect to the Transactions unless
otherwise expressly stated) that:

 

SECTION 3.01  Organization; Powers.  Each Company (a) is duly organized and
validly existing under the laws of the jurisdiction of its organization, (b) has
all requisite power and authority to carry on its business as now conducted and
to own and lease its Property and (c) is qualified and in good standing
(to the extent such concept is applicable in the applicable jurisdiction) to do
business in every jurisdiction where such qualification is required, except in
such jurisdictions where the failure to so qualify or be in good standing, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.

 

SECTION 3.02  Authorization; Enforceability.  The Transactions to be entered into by each
Loan Party are within such Loan Party’s powers and have been duly authorized by
all necessary action.  This Agreement has
been duly executed and delivered by each Loan Party and constitutes, and each
other Loan Document to which any Loan Party is to be a party, when executed and
delivered by such Loan Party, will constitute, a legal, valid and binding
obligation

 

43

 

of such Loan
Party, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

SECTION 3.03  Governmental Approvals; No Conflicts.  Except as set forth on Schedule 3.03,
the Transactions (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental
Authority, except (i) such as have been obtained or made and are in full
force and effect, (ii) filings necessary to perfect Liens created under
the Loan Documents and (iii) consents, approvals, registrations, filings
or actions the failure of which to obtain or perform could not reasonably be
expected to result in a Material Adverse Effect, (b) will not violate the
charter, by-laws or other organizational documents of any Company or any order
of any Governmental Authority, (c) will not violate, result in a default
or require any consent or approval under any applicable law or regulation,
indenture, agreement or other instrument binding upon any Company or its
assets, or give rise to a right thereunder to require any payment to be made by
any Company, except for violations, defaults or the creation of such rights
that could not reasonably be expected to result in a Material Adverse Effect,
and (d) will not result in the creation or imposition of any Lien on any
Property of any Company, except Liens created under the Loan Documents and
Permitted Liens.

 

SECTION 3.04  Financial Statements.  (a)  Holdings
and Borrowers have heretofore furnished to the Lenders (i) the audited
consolidated balance sheets and the related statements of income, stockholders’
equity and cash flows of Holdings and its Consolidated Subsidiaries as of and
for the fiscal years ended January 1, 2005 and January 3, 2004,
audited by and accompanied by the opinion of Deloitte & Touche LLP,
independent public accountants, (ii) the unaudited consolidated balance
sheets and the related statements of income and cash flows of Holdings and its
Consolidated Subsidiaries as of and for the fiscal quarter ended April 2,
2005, and (iii) the unaudited consolidated and consolidating balance
sheets and the related statements of income of Holdings and its Consolidated
Subsidiaries as of and for each of the fiscal months ending May 28, 2005, July 2,
2005 and July 30, 2005.  Such
financial statements have been prepared in accordance with GAAP consistently
applied and present fairly and accurately the financial condition and results
of operations and cash flows of Holdings and its Consolidated Subsidiaries as
of such dates and for such periods subject to year-end adjustments for interim
financial statements.

 

(b)                                 Holdings
and Borrowers have heretofore furnished to the Lenders: audited consolidated
balance sheets and the related statements of income, stockholders’ equity and
cash flows of the Acquired Business and its Consolidated Subsidiaries as of and
for the fiscal years ended April 30, 2005 and April 30, 2004, audited
by and accompanied by the opinion of PricewaterhouseCoopers, independent public
accountants.  Such financial statements
have been prepared in accordance with GAAP consistently applied and present
fairly and accurately, in all material respects, the financial condition and
results of operations and cash flows of the Acquired Business and its
Consolidated Subsidiaries as of such dates and for such periods.

 

(c)                                  Except
as set forth in the financial statements described in Section 3.04(a) and
3.04(b) or the schedules hereto, as of the Closing Date, there are
no liabilities of any Company of any kind, whether accrued, contingent,
absolute, determined, determinable or otherwise, which if

 

44

 

unpaid could
reasonably be expected to result in a Material Adverse Effect, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than liabilities under the Loan
Documents and the Term Loan Documents.

 

(d)                                 Holdings
and Borrowers have heretofore delivered to the Lenders unaudited pro forma
consolidated and consolidating balance sheets and statements of income, as well
as pro  forma EBITDA, as of and for the twelve-month period ended July 31,
2005, after giving effect to the Transactions as if they had occurred on such
date.  Such pro forma financial
statements have been prepared in good faith by the Loan Parties, based on the
assumptions stated therein (which assumptions are believed by the Loan Parties
on the date hereof and on the Closing Date to be reasonable), are based on the
best information available to the Loan Parties as of the date of delivery
thereof, accurately reflect all adjustments required to be made to give effect
to the Transactions, and in accordance with Regulation S-X under the Securities
Act, and present fairly on a Pro Forma Basis the estimated consolidated and
consolidating financial position and results of operations of Holdings and
Borrowers (including the Acquired Business) as of and for such dates, assuming
that the Transactions had actually occurred at such dates, it being recognized
by Lenders, however, that projections as to future events are not to be viewed
as facts and that the actual results during the period or periods covered by
said projections may differ from the projected results.

 

(e)                                  Since
April 30, 2005 with respect to Lenox and its Subsidiaries and since January 1,
2005 with respect to Holdings and its Subsidiaries, there has been no event,
change or occurrence that, individually or in the aggregate, has had or could
reasonably be expected to result in a Material Adverse Effect.

 

SECTION 3.05  Properties.  (a)  Each Company
has good title to, or valid leasehold interests in, all its Property material
to its business, except for minor irregularities or deficiencies in title that,
individually or in the aggregate, do not interfere with its ability to conduct
its business as currently conducted or to utilize such Property for its
intended purpose.  Title to all such
Property held by such Company is free and clear of all Liens except for Permitted
Liens.  The Property of the Companies,
taken as a whole, (i) is in good operating order, condition and repair
(ordinary wear and tear excepted) (except to the extent that the failure to be
in such condition could not reasonably be expected to result in a Material
Adverse Effect) and (ii) constitutes all the Property which is required
for the business and operations of the Companies as presently conducted.

 

(b)                                 Schedule 3.05(b) contains
a true and complete list of each interest in Real Property owned by any Company
as of the date hereof and describes the type of interest therein held by such
Company.  Schedule 3.05(b) contains
a true and complete list of each Real Property leased, subleased or otherwise
occupied or utilized by any Company, as lessee, sublessee, franchisee or
licensee, as of the date hereof and describes the type of interest therein held
by such Company and whether such lease, sublease or other instrument requires
the consent of the landlord thereunder or other parties thereto to the Transactions.

 

(c)                                  Except
for those agreements listed in Schedule 3.05(c), at least one Loan
Party owns, or is licensed to use, all patents, patent applications,
trademarks, trade names, service

 

45

 

marks,
copyrights, technology, trade secrets, proprietary information, domain names,
know-how and processes necessary for the conduct of its business as currently
conducted (the “Intellectual Property”), except for those the failure to
own or license which, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.  With respect to those license agreements
listed in Schedule 3.05(c), each Loan Party is using commercially
reasonable efforts to obtain a consent from each third-party licensor listed
therein to become the licensee of the applicable license agreement.  No claim has been asserted and is pending by
any Person challenging or questioning the use of any such Intellectual Property
or the validity or effectiveness of any such Intellectual Property, nor does
any Loan Party know of any valid basis for any such claim.  The use of such Intellectual Property by each
Loan Party does not infringe the rights of any Person, except for such claims
and infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.

 

(d)                                 (i) No
Company has received any notice of, nor has any knowledge of, the occurrence or
pendency or contemplation of any Casualty Event affecting all or any portion of
the Property and (ii) no Mortgage encumbers improved Real Property that is
located in an area that has been identified by the Secretary of Housing and
Urban Development as an area having special flood hazards and with respect to
which flood insurance has been made available under the National Flood
Insurance Act of 1968.

 

SECTION 3.06  Equity Interests and Subsidiaries.  (a)  Schedule 3.06(a) sets
forth a list of (i) all the Subsidiaries and their jurisdiction of
organization as of the Closing Date and (ii) the number of shares of each
class of its Equity Interests authorized, and the number outstanding (and the
record holder of such Equity Interests), on the Closing Date and the number of
shares covered by all outstanding options, warrants, rights of conversion or
purchase and similar rights at the Closing Date.  All Equity Interests of each Company (other
than Holdings) are duly and validly issued and are fully paid and
non-assessable and, except as set forth on Schedule 3.06(a), are owned by
Holdings or Borrowers, directly or indirectly through Wholly Owned Subsidiaries
and all Equity Interests of Borrowers are owned directly by Holdings.  Each Loan Party is the record and beneficial
owner of, and has good and marketable title to, the Equity Interests pledged by
it under the Security Agreement, free of any and all Liens, rights or claims of
other Persons, except the security interest created by the Security Agreement
and the first priority security interest securing the Revolving Credit Indebtedness,
and there are no outstanding warrants, options or other rights to purchase, or
shareholder, voting trust or similar agreements outstanding with respect to, or
Property that is convertible into, or that requires the issuance or sale of,
any such Equity Interests.

 

(b)                                 Subject
to the provisions of the Intercreditor Agreement, no consent of any Person
including any other general or limited partner, any other member of a limited
liability company, any other shareholder or any other trust beneficiary is necessary
or desirable in connection with the creation, perfection or second priority
status of the security interest of the Administrative Agent in any Equity
Interests pledged to the Administrative Agent for the benefit of the Secured
Parties under the Security Agreement or the exercise by the Administrative
Agent of the voting or other rights provided for in the Security Agreement or
the exercise of remedies in respect thereof.

 

46

 

(c)                                  An
accurate organization chart, showing the ownership structure of Holdings,
Borrowers and each Subsidiary on the Closing Date, and after giving effect to
the Transaction, is set forth on Schedule 3.06(c).

 

SECTION 3.07  Litigation; Compliance with Laws.  (a)  There
are no actions, suits or proceedings at law or in equity by or before any
Governmental Authority now pending or, to the knowledge of any Company,
threatened against or affecting any Company or any business, Property or rights
of any such Person (i) that involve any Loan Document or the Transactions
or (ii) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.

 

(b)                                 Except
for matters covered by Section 3.17, no Company or any of its
Property is in violation of, nor will the continued operation of their Property
as currently conducted violate, any Requirements of Law (including any zoning
or building ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting the Real Property or is in
default with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.

 

SECTION 3.08  Agreements.  (a)  No Company is
a party to any agreement or instrument or subject to any corporate or other
constitutional restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.

 

(b)                                 No
Company is in default in any manner under any provision of any indenture or
other agreement or instrument evidencing Indebtedness, or any other agreement
or instrument to which it is a party or by which it or any of its Property are
or may be bound, where such default could reasonably be expected to result in a
Material Adverse Effect.

 

(c)                                  Schedule 3.08(c) accurately
and completely lists all material agreements (other than leases of Real
Property set forth on Schedule 3.05(b)) to which any Company is a
party which are in effect on the date hereof in connection with the operation
of the business conducted thereby and Borrowers have delivered to the
Administrative Agent complete and correct copies of all such material
agreements, including any amendments, supplements or modifications with respect
thereto.

 

SECTION 3.09  Federal Reserve Regulations.  (a)  No
Company is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of buying or carrying Margin
Stock.

 

(b)                                 No
part of the proceeds of any Loan will be used, whether directly or indirectly,
and whether immediately, incidentally or ultimately, for any purpose that
entails a violation of, or that is inconsistent with, the provisions of the
regulations of the Board, including Regulation T, U or X.  The pledge of the Security Agreement
Collateral pursuant to the Security Agreement does not violate such regulations.

 

SECTION 3.10  Investment Company Act; Public Utility Holding Company Act.  No Company is (a) an “investment company”
or a company “controlled” by an “investment

 

47

 

company,” as
defined in, or subject to regulation under, the Investment Company Act of 1940,
as amended, or (b) a “holding company,” an “affiliate” of a “holding
company” or a “subsidiary company” of a “holding company,” as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935, as
amended.

 

SECTION 3.11  Use of Proceeds. 
On the Closing Date, Borrowers will use the proceeds of the Term Loans
to finance a portion of the Acquisition consideration and the Refinancing and
to pay related fees, commissions and expenses in connection therewith.

 

SECTION 3.12  Taxes.  Each
Company has (a) timely filed or caused to be timely filed all federal Tax
Returns and all material, state, local and foreign Tax Returns or materials
required to have been filed by it and all such Tax Returns are true and correct
in all material respects and has (b) duly and timely paid or caused to be
duly and timely paid all Taxes (whether or not shown on any Tax Return) due and
payable by it and all assessments received by it, except Taxes (i) that
are being contested in good faith by appropriate proceedings and for which such
Company shall have set aside on its books adequate reserves in accordance with
GAAP or (ii) which could not, individually or in the aggregate, have a
Material Adverse Effect; provided that any such contest of Taxes with
respect to Collateral shall also satisfy the Contested Collateral Lien
Conditions.  Each Company has made
adequate provision in accordance with GAAP for all Taxes not yet due and
payable.  Each Company is unaware of any
proposed or pending tax assessments, deficiencies or audits that could be
reasonably expected to, individually or in the aggregate, result in a Material
Adverse Effect.

 

SECTION 3.13  No Material Misstatements.  No information, report, financial statement,
exhibit or schedule furnished by or on behalf of any Company to the
Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto contained,
contains or will contain any material misstatement of fact or omission, omits
or will omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were, are or will
be made, not misleading as of the date such information is dated or certified; provided
that to the extent any such information, report, financial statement, exhibit
or schedule was based upon or constitutes a forecast or projection, each
Company represents only that it acted in good faith and utilized reasonable
assumptions and due care in the preparation of such information, report,
financial statement, exhibit or schedule.

 

SECTION 3.14  Labor Matters. 
As of the date hereof and the Closing Date, there are no strikes,
lockouts or slowdowns against any Company pending or, to the knowledge of any
Company, threatened.  The hours worked by
and payments made to employees of any Company have not been in violation of the
Fair Labor Standards Act or any other applicable federal, state, local or
foreign law dealing with such matters in any manner which could reasonably be
expected to result in a Material Adverse Effect.  All payments due from any Company, or for
which any claim may be made against any Company, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of such Company except where the failure to
do so could not reasonably be expected to result in a Material Adverse
Effect.  The consummation of the
Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining
agreement to which any Company is bound.

 

48

 

SECTION 3.15  Solvency. 
Immediately after the consummation of the Transactions to occur on the
Closing Date and immediately following the making of each Term Loan and after
giving effect to the application of the proceeds of each Term Loan taking into
account rights of contribution against or reimbursement from other Loan
Parties, (a) the fair value of the assets of each Loan Party (individually
and on a consolidated basis with its Subsidiaries) will exceed its debts and
liabilities, subordinated, contingent or otherwise; (b) the present fair
saleable value of the Property of each Loan Party (individually and on a
consolidated basis with its Subsidiaries) will be greater than the amount that
will be required to pay the probable liability of its debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) each Loan Party (individually and on a
consolidated basis with its Subsidiaries) will be able to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) each Loan Party
(individually and on a consolidated basis with its Subsidiaries) will not have
unreasonably small capital with which to conduct its business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Closing Date.

 

SECTION 3.16  Employee Benefit Plans.   (a)  Each
Company and its ERISA Affiliates is in compliance in all material respects with
the applicable provisions of ERISA and the Code and the regulations and
published interpretations thereunder.  No
ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events, could reasonably be expected to
result in material liability of any Company or any of its ERISA Affiliates or
the imposition of a Lien on any of the assets of a Company.  The present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not,
as of the date of the most recent financial statements reflecting such amounts,
exceed by more than $250,000 the fair market value of the assets of all such
underfunded Plans.  Using actuarial
assumptions and computation methods consistent with subpart 1 of subtitle E of
Title IV of ERISA, the aggregate liabilities of each Company or its ERISA
Affiliates to all Multiemployer Plans in the event of a complete withdrawal
therefrom, as of the close of the most recent fiscal year of each such
Multiemployer Plan, could not reasonably be expected to result in a Material
Adverse Effect.

 

(b)                                 None
of the Companies has any Foreign Plans.

 

SECTION 3.17  Environmental Matters.  (a)  Except
as set forth in Schedule 3.17 or except as, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect:

 

(1)                                  The Companies and their businesses,
operations and Real Property are and in the last six years have been in
compliance with, and the Companies have no liability under, Environmental Law;

 

(2)                                  The Companies have obtained all
Environmental Permits required for the conduct of their businesses and
operations, and the ownership, operation and use of their assets, under
Environmental Law, all such Environmental Permits are valid and in good standing
and, under the currently effective business plan of the Companies, no
expenditures or operational adjustments are expected to be required in order to
renew or

 

49

 

modify
such Environmental Permits during the next five years except as may be needed
in the ordinary and normal course of business;

 

(3)                                  There has been no Release or
threatened Release of Hazardous Material on, at, under or from any real
Property or facility presently or formerly owned, leased or operated by the
Companies or their predecessors in interest that could result in liability of
the Companies under Environmental Law;

 

(4)                                  There is no Environmental Claim
pending or, to the knowledge of the Companies, threatened against the
Companies, or relating to the real Property currently or formerly owned, leased
or operated by the Companies or relating to the operations of the Companies,
and there are no actions, activities, circumstances, conditions, events or
incidents that could reasonably be expected to form the basis of such an
Environmental Claim; and

 

(5)                                  No Person with an indemnity or
contribution obligation to the Companies relating to compliance with or
liability under Environmental Law is in default with respect to such
obligation.

 

(b)                                 Except
as set forth in Schedule 3.17:

 

(1)                                  No Company is obligated to perform
any action or otherwise incur any expense under Environmental Law pursuant to
any order, decree, judgment or agreement by which it is bound or has assumed by
contract or agreement, and no Company is conducting or financing any Response
pursuant to any Environmental Law with respect to any Real Property or any
other location except as, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect;

 

(2)                                  No Real Property or facility owned,
operated or leased by the Companies and, to the knowledge of the Companies, no
real Property or facility formerly owned, operated or leased by the Companies
or any of their predecessors in interest is (i) listed or proposed for
listing on the National Priorities List promulgated pursuant to CERCLA or (ii) listed
on the Comprehensive Environmental Response, Compensation and Liability
Information System promulgated pursuant to CERCLA or (iii) included on any
similar list maintained by any Governmental Authority including, without
limitation, any such list relating to petroleum except as, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect;

 

(3)                                  No Lien has been recorded or, to the
knowledge of any Company, threatened under any Environmental Law with respect
to any Real Property or assets of the Companies;

 

(4)                                  The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not require any notification, registration, filing,
reporting, disclosure, investigation, remediation or cleanup pursuant to any
Governmental Real Property Disclosure Requirements or any other Environmental
Law except where the failure to provide or perform any of the

 

50

 

foregoing
could not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect; and

 

(5)                                  The Companies have made available to
Lenders all material reports and assessments in the possession, custody or
control of, or otherwise reasonably available to, the Companies concerning
compliance with or liability under Environmental Law including, without
limitation, those concerning the existence of Hazardous Material at real
Property or facilities currently or formerly owned, operated, leased or used by
the Companies except as, individually or in the aggregate, could not reasonably
be expected to reveal or result in a Material Adverse Effect.

 

SECTION 3.18  Insurance.  Schedule 3.18
sets forth a true, complete and correct description of all insurance maintained
by each Company as of the Closing Date. 
As of each such date, such insurance is in full force and effect and all
premiums have been duly paid.  Each
Company has insurance in such amounts and covering such risks and liabilities
as are in accordance with normal industry practice.

 

SECTION 3.19  Security Documents.  (a)  The
Security Agreement is effective to create in favor of the Administrative Agent
for the benefit of the Secured Parties, a legal, valid and enforceable security
interest in and Lien on the Security Agreement Collateral and, when (i) financing
statements and other filings in appropriate form are filed in the offices specified
on Schedule 6 to the Perfection Certificate and (ii) upon the taking
of possession or control by the Administrative Agent (or, prior to the payment
in full of the Revolving Credit Indebtedness and the termination of the
Revolving Credit Documents, possession or control by the Revolving Credit Agent
to the extent that the Revolving Credit Agent is acting as agent for the
Collateral Agent for purposes of possession or control of Collateral pursuant
to the Intercreditor Agreement) of the Security Agreement Collateral with
respect to which a security interest may be perfected only by possession or
control (which possession or control shall be given to the extent possession or
control by the Administrative Agent is required by the Security Agreement), the
Lien created by the Security Agreement shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the grantors
thereunder in the Security Agreement Collateral (other than such Security
Agreement Collateral in which a security interest cannot be perfected under the
UCC as in effect at the relevant time in the relevant jurisdiction), in each
case subject to no Liens other than Permitted Liens.

 

(b)                                 To
the extent that the federal trademark laws of the United States are applicable
to security interests in trademarks, the proper filing and recordation of the
Security Agreement or a short form thereof in the United States Patent and
Trademark Office against all U.S. registered trademarks and trademark
applications (other than intent-to-use trademark applications) set forth on Schedule 3.19(b) (“Trademarks”)
within three (3) months of the date of execution thereof will render the
Administrative Agent’s Lien on, and security interest in, for the benefit of
the Secured Parties, the applicable Loan Party’s right title and interest in
such Trademarks fully perfected and effective against subsequent purchasers of
such Trademarks, in each case subject to no Liens other than Permitted Liens.

 

(c)                                  To
the extent that the federal patent laws of the United States are applicable to
security interests in patents, the proper filing and recording of the Security
Agreement or a short

 

51

 

form thereof
at the United States Patent and Trademark Office against the U.S. patents and
patent applications set forth on Schedule 3.19(c) (“Patents”)
within three (3) months of the date of execution thereof will render the
Administrative Agent’s Lien on, and security interest in, for the benefit of
the Secured Parties, the applicable Loan Party’s right, title and interest in
such Patents fully perfected and effective against subsequent purchasers of
such Patents, in each case subject to no Liens other than Permitted Liens.

 

(d)                                 To
the extent that the federal copyright laws of the United States are applicable
to security interests in copyrights, the proper filing and recording of the
Security Agreement or a short form thereof at the United States Copyright
Office against the U.S. registered copyrights set forth on Schedule 3.19(d) (“Copyrights”)
within one (1) month of the date of execution thereof will render the
Administrative Agent’s Lien on, and security interest in, for the benefit of
the Secured Parties, the applicable Loan Party’s right, title and interest in
such Copyrights fully perfected and effective against subsequent transferees of
such Copyrights, in each case subject to no Liens other than Permitted Liens.

 

(e)                                  Each
Mortgage executed and delivered as of the Closing Date is, or, to the extent
any Mortgage is duly executed and delivered thereafter by the relevant Loan
Party, will be, effective to create, in favor of the Administrative Agent, for
its benefit and the benefit of the Secured Parties, a legal, valid and
enforceable first priority Lien on and security interest in all of the Loan
Parties’ right, title and interest in and to the Mortgaged Real Properties
thereunder and the proceeds thereof, and when the Mortgages are filed in the
offices specified on Schedule 1.01(a), (or, in the case of any
Mortgage executed and delivered after the date thereof in accordance with the
provisions of Sections 5.11 and 5.12, when such Mortgage is filed
in the offices specified in the local counsel opinion delivered with respect
thereto in accordance with the provisions of Sections 5.11 and 5.12)
the Mortgages shall constitute fully perfected Liens on, and security interests
in, all right, title and interest of the Loan Parties in the Mortgaged Real
Properties and the proceeds thereof, in each case prior and superior in right
to any other Person, other than Liens reasonably acceptable to Administrative
Agent.

 

(f)                                    Each
Security Document delivered pursuant to Sections 5.11 and 5.12
will, upon execution and delivery thereof, be effective to create in favor of
the Administrative Agent, for the benefit of the Secured Parties, a legal,
valid and enforceable security interest in and Lien on all of the Loan Parties’
right, title and interest in and to the Collateral thereunder, and when all
appropriate filings or recordings are made in the appropriate offices as may be
required under applicable law, such Security Document will constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Collateral, in each case subject to no Liens other
than the applicable Permitted Liens.

 

SECTION 3.20  Acquisition Documents; Representations and Warranties in Agreement.  (a)  Schedule 3.20
lists (i) each exhibit, schedule, annex or other attachment to the
Acquisition Agreement and (ii) each agreement, certificate, instrument,
letter or other document contemplated by the Acquisition Agreement or any item
referred to in clause (i) to be entered into, executed or delivered
or to become effective in connection with the Acquisition.  The Lenders have been furnished true and
complete copies of each Acquisition Document to the extent executed and
delivered on or prior to the Closing Date.

 

52

 

(b)                                 All
representations and warranties of each Company set forth in the Acquisition
Agreement were true and correct in all material respects as of the time such
representations and warranties were made and shall be true and correct in all
material respects as of the Closing Date as if such representations and
warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date.

 

SECTION 3.21  Anti-Terrorism Law.   (a)  No
Loan Party and, to the knowledge of the Loan Parties, none of their Affiliates
is in violation of any Requirement of Law relating to terrorism or money
laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224
on Terrorist Financing, effective September 24, 2001 (the “Executive
Order”), and the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

 

(b)                                 No
Loan Party and to the knowledge of the Loan Parties, no Affiliate or broker or
other agent of any Loan Party acting or benefiting in any capacity in
connection with the Term Loans is any of the following:

 

(i)                                     a person that is listed in the annex
to, or is otherwise subject to the provisions of, the Executive Order;

 

(ii)                                  a person owned or controlled by, or
acting for or on behalf of, any person that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order;

 

(iii)                               a person with which any Lender is
prohibited from dealing or otherwise engaging in any transaction by any
Anti-Terrorism Law;

 

(iv)                              a person that commits, threatens or
conspires to commit or supports “terrorism” as defined in the Executive Order;
or

 

(v)                                 a person that is named as a “specially
designated national and blocked person” on the most current list published by
the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”)
at its official website or any replacement website or other replacement
official publication of such list.

 

(c)                                  No
Loan Party and, to the knowledge of the Loan Parties, no broker or other agent
of any Loan Party acting in any capacity in connection with the Term Loans (i) conducts
any business or engages in making or receiving any contribution of funds, goods
or services to or for the benefit of any person described in paragraph (b) above,
(ii) deals in, or otherwise engages in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order, or (iii) engages
in or conspires to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law.

 

53

 

ARTICLE IV.

 

CONDITIONS
TO CREDIT EXTENSIONS

 

SECTION 4.01  Conditions to Initial Credit Extension.  The obligation of each Lender to fund the
initial Credit Extension requested to be made by it shall be subject to the
prior or concurrent satisfaction of each of the conditions precedent set forth
in this Section 4.01.

 

(a)                                  Loan
Documents.  All legal matters
incident to this Agreement, the Credit Extensions hereunder and the other Loan
Documents shall be reasonably satisfactory to the Lenders and to the
Administrative Agent and there shall have been delivered to the Administrative
Agent an executed counterpart of each of the Loan Documents, including this
Agreement, the Security Agreement, the Intercreditor Agreement, each Mortgage,
the Perfection Certificate and each other applicable Loan Document.

 

(b)                                 Corporate
Documents.  The Administrative Agent
shall have received:

 

(i)                                     a certificate of the Secretary or
Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that
attached thereto is a true and complete copy of the certificate or articles of
incorporation or other constitutive documents, including all amendments thereto
certified as of a recent date by the Secretary of State of the state of its
organization, (B) that attached thereto is a true and complete copy of the
by-laws of such Loan Party as in effect on the Closing Date and at all times
since a date prior to the date of the resolutions described in clause (C) below,
(C) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the execution,
delivery and performance of the Loan Documents to which such Person is a party
and, in the case of Borrowers, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (D) as to the incumbency and specimen signature of each
officer executing any Loan Document or any other document delivered in
connection herewith on behalf of such Loan Party (together with a certificate
of another officer as to the incumbency and specimen signature of the Secretary
or Assistant Secretary executing the certificate in this clause (i);

 

(ii)                                  a long form certificate as to the
good standing (in such jurisdictions where such certificates are issued and, in
jurisdictions where a long form certificate of good standing is not issued, a
short form certificate of good standing) of each Loan Party as of a recent
date, from such Secretary of State; and

 

(iii)                               such other documents as the Lenders or
the Administrative Agent may reasonably request.

 

(c)                                  Officers’
Certificate.  The Administrative
Agent shall have received a certificate, dated the Closing Date and signed by
the Chief Executive Officer and the Chief Financial Officer of each Borrower (or
in the case of Lenox, the Chief Financial Officer and another officer),
confirming compliance with the conditions precedent set forth in paragraphs
(f), (i), (j)

 

54

 

and (k) of this Section 4.01, clauses (ii), (iii) and (v) of
paragraph (d) of this Section 4.01 and paragraphs (b), (c), (d) and
(e) of Section 4.02.

 

(d)                                 Financings
and Other Transactions, Etc.

 

(i)                                     The Lenders shall be satisfied with
the form and substance of the Transaction Documents (including fairness
opinions, employment agreements, indemnity agreements and comfort letters, if
any, related to the Acquisition).

 

(ii)                                  The total debt financing
requirements for the Transaction shall not exceed $205.0 million and the
Transactions shall have been consummated or shall be consummated simultaneously
on the Closing Date, in each case in all material respects in accordance with
the terms hereof and the terms of the Transaction Documents (and without the
waiver or amendment of any such terms not approved by the Administrative Agent
and Borrowers shall have delivered copies of executed Acquisition Documents,
certified by each Borrower’s Chief Financial Officer as current).

 

(iii)                               Borrower shall have received the
proceeds of initial extension of credit under the Revolving Credit Agreement
and the Revolving Credit Agreement shall be in form and substance satisfactory
to the Lenders and copies of the executed Revolving Credit Documents shall have
been delivered to the Administrative Agent.

 

(iv)                              The Lenders shall be satisfied with
the capitalization, the terms and conditions of any equity arrangements and the
corporate or other organizational structure of the Companies (after giving
effect to the Transactions).

 

(v)                                 The Refinancing shall have been
consummated in full to the satisfaction of the Lenders with all liens in favor
of the existing lenders being unconditionally released; the Administrative
Agent shall have received a “pay-off” letter with respect to all debt being
refinanced in the Refinancing; the Administrative Agent shall have received
from any Person holding any Lien securing any such debt, such UCC termination
statements, mortgage releases, releases of assignments of leases and rents and
other instruments, in each case in proper form for recording, as the
Administrative Agent shall have reasonably requested to release and terminate
of record the Liens securing such debt.

 

(e)                                  Financial
Statements; Pro Forma Balance Sheet; Projections.  The Lenders shall have received and shall be
reasonably satisfied with the form and substance of the financial statements
described in Section 3.04 and with the forecasts of the financial
performance of Holdings, Borrowers and their respective Subsidiaries.

 

(f)                                    Indebtedness
and Minority Interests.  After giving
effect to the Transactions and the other transactions contemplated hereby, no
Company shall have outstanding any Indebtedness for borrowed money, preferred
stock or minority interests other than (i) the Loans and extensions of
credit hereunder, (ii) the loans and extensions of credit under the Term
Loan Credit Agreement (iii) the Capital Lease Obligations and other
Indebtedness listed on Schedule 6.01, and (iv) Indebtedness
owed to Borrowers or any Guarantor.

 

55

 

(g)                                 Opinions
of Counsel.  The Administrative Agent
shall have received, on behalf of itself, the other Agents, the Arranger and
the Lenders, a favorable written opinion of (i) Dorsey & Whitney
LLP, special counsel for the Loan Parties, substantially to the effect set
forth in Exhibit K-1, and (ii) each local counsel listed on Schedule 4.01(g),
substantially to the effect set forth in Exhibit K-2, in each case (A) dated
the Closing Date, (B) addressed to the Agents and the Lenders and (C) covering
such other matters relating to the Loan Documents and the Transactions as the
Administrative Agent shall reasonably request, and (iii) a copy of each
legal opinion, if any, delivered under the other Transaction Documents, and
Borrowers shall use their best efforts to deliver reliance letters from the
party delivering such opinion authorizing the Agents and Lenders to rely
thereon as if such opinion were addressed to them.

 

(h)                                 Solvency
Certificate and Other Reports.  (i) 
The Administrative Agent shall have received all audits, reports and opinions
of appraisers, consultants or other advisors retained by it to review the
Collateral, business, operation or condition of Borrowers and their
Subsidiaries giving effect to the Transactions, and shall be satisfied with such
audits, reports and opinions.

 

(ii)                                  The Administrative Agent shall have
received a solvency certificate in the form of Exhibit M, dated the
Closing Date and signed by the Chief Financial Officer of each Borrower.

 

(i)                                     Requirements
of Law.  The Lenders shall be
satisfied that the Transactions shall be in full compliance with all material
Requirements of Law, including without limitation Regulations T, U and X of the
Board.  The Lenders shall have received
reasonably satisfactory evidence of compliance with all applicable Requirements
of Law, including all applicable environmental laws and regulations.

 

(j)                                     Consents.  The Lenders shall be satisfied that all
requisite Governmental Authorities and third parties shall have approved or
consented to the Transactions, and there shall be no governmental or judicial
action, actual or threatened, that has or would have, singly or in the
aggregate, a reasonable likelihood of restraining, preventing or imposing
burdensome conditions on the Transactions or the other transactions
contemplated hereby.

 

(k)                                  Litigation.  There shall be no litigation, public or
private, or administrative proceedings, governmental investigation or other
legal or regulatory developments, actual or threatened, that, singly or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect,
or could materially and adversely affect the ability of Holdings, Borrowers and
the Subsidiaries to fully and timely perform their respective obligations under
the Transaction Documents, or the ability of the parties to consummate the
financings contemplated hereby or the other Transactions.

 

(l)                                     Sources
and Uses.  The sources and uses of
the Term Loans shall be as set forth in Section 3.11.

 

(m)                               Fees.  The Arranger, Collateral Agent and Administrative
Agent shall have received all Fees and other amounts due and payable on or
prior to the Closing Date, including, to the extent invoiced, reimbursement or
payment of all out-of-pocket expenses (including the reasonable legal fees and
expenses of Winston & Strawn LLP, special counsel to the

 

56

 

Administrative
Agent, and the reasonable fees and expenses of any local counsel, appraisers,
consultants and other advisors) required to be reimbursed or paid by Borrowers
hereunder or under any other Loan Document.

 

(n)                                 Personal
Property Requirements.  The
Administrative Agent shall have received:

 

(i)                                     all certificates, agreements or
instruments representing or evidencing the Pledged Securities and the Pledged
Notes (each as defined in the Security Agreement) accompanied by instruments of
transfer and stock powers endorsed in blank shall have been delivered to the
Administrative Agent;

 

(ii)                                  all other certificates, agreements,
including control agreements, or instruments necessary to perfect the
Administrative Agent’s security interest in all Chattel Paper, all Instruments
and all Investment Property of each Loan Party (as each such term is defined in
the Security Agreement and to the extent required by Section 3.4 of
the Security Agreement);

 

(iii)                               UCC Financing Statements in
appropriate form for filing under the UCC, filings with the United States
Patent, Trademark and Copyright offices and such other documents under
applicable Requirements of Law in each jurisdiction as may be necessary or
appropriate or, in the opinion of the Administrative Agent, desirable to
perfect the Liens created, or purported to be created, by the Security
Documents.

 

(iv)                              certified copies of UCC, tax and
judgment lien searches, bankruptcy and pending lawsuit searches or equivalent
reports or searches, each of a recent date listing all effective financing
statements, lien notices or comparable documents that name any Loan Party as
debtor and that are filed in those state and county jurisdictions in which any
Property of any Loan Party is located and the state and county jurisdictions in
which any Loan Party is organized or maintains its principal place of business
and such other searches that the Administrative Agent deems necessary or appropriate,
none of which encumber the Collateral covered or intended to be covered by the
Security Documents (other than Permitted Liens);

 

(v)                                 with respect to each Real Property
set forth on Schedule 4.01(n), such Loan Party shall have obtained
a Landlord Lien Waiver and Access Agreement or, if applicable, a bailee letter
or other appropriate waiver and access agreement;

 

(vi)                              evidence acceptable to the
Administrative Agent of payment by the Loan Parties of all applicable recording
taxes, fees, charges, costs and expenses required for the recording of the
Security Documents.

 

(o)                                 Real
Property Requirements.  The
Administrative Agent shall have received:

 

(i)                                     a Mortgage encumbering each
Mortgaged Real Property in favor of Administrative Agent, for the benefit of
the Secured Parties, duly executed and acknowledged by each Loan Party that is
the owner of or holder of any interest in such Mortgaged Real Property, and
otherwise in form for recording in the recording office of each political
subdivision where each such Mortgaged Real Property is situated, together

 

57

 

with
such certificates, affidavits, questionnaires or returns as shall be required
in connection with the recording or filing thereof to create a lien under
applicable law, and such UCC-1 Financing Statements, all of which shall be in
form and substance reasonably satisfactory to Administrative Agent, and any
other instruments necessary to grant a mortgage lien under the laws of any
applicable jurisdiction;

 

(ii)                                  with respect to each Mortgaged Real
Property, such consents, approvals, amendments, supplements or other
instruments as necessary or required to consummate the Transactions or as shall
reasonably be deemed necessary by the Administrative Agent in order for the
owner or holder of the fee or leasehold interest constituting such Mortgaged
Real Property to grant the Lien contemplated by the Mortgage with respect to
such Mortgaged Real Property;

 

(iii)                               with respect to each Mortgage, a
policy (or commitment to issue a policy) of title insurance insuring (or
committing to insure) the Lien of such Mortgage as a valid second mortgage Lien
on the Mortgaged Real Property and fixtures described therein (junior only to
the Lien securing the Term Loan Indebtedness) in the amount set forth on Schedule 4.01(o)(iii) hereto
with respect to such Mortgaged Real Property which policies (or commitments)
(each, a “Title Policy”) shall (A) be
issued by the Title Company, (B) to the extent necessary, include such
reinsurance arrangements (with provisions for direct access, if necessary) as
shall be reasonably acceptable to the Administrative Agent, (C) contain a “tie-in”
or “cluster” endorsement (if available under applicable law) (i.e.,
policies which insure against losses regardless of location or allocated value
of the insured Property up to a stated maximum coverage amount), (D) have
been supplemented by such endorsements (or where such endorsements are not
available, opinions of special counsel, architects or other professionals
reasonably acceptable to the Administrative Agent to the extent that such
opinions can be obtained at a cost which is reasonable with respect to the
value of the Mortgaged Real Property subject to such Mortgage) as shall be
reasonably requested by the Administrative Agent (including, without
limitation, endorsements on matters relating to usury, first loss, last dollar,
zoning, contiguity, revolving credit, doing business, non-imputation, public
road access, survey, variable rate, environmental lien and so-called
comprehensive coverage over covenants and restrictions), and (E) contain
no exceptions to title other than exceptions reasonably acceptable to the
Administrative Agent;

 

(iv)                              with respect to each Mortgaged Real
Property, such affidavits, certificates, information (including financial data)
and instruments of indemnification (including, without limitation, a so-called “gap”
indemnification) as shall be required to induce the Title Company to issue the
Title Policies (or commitment) and endorsements contemplated in subparagraph (iii) above;

 

(v)                                 evidence reasonably acceptable to
the Administrative Agent of payment by Borrowers of all Title Policy premiums,
search and examination charges, and related charges, mortgage recording taxes,
fees, charges, costs and expenses required for the recording of the Mortgages
and issuance of the Title Policies referred to subparagraph (iii) above;

 

58

 

(vi)                              with respect to each Real Property
or Mortgaged Real Property, copies of all Leases in which Borrowers or any
Subsidiary holds the lessor’s interest or other agreements relating to
possessory interests, if any.  To the
extent any of the foregoing affect any Mortgaged Real Property, such agreement
shall be subordinate to the Lien of the Mortgage to be recorded against such
Mortgaged Real Property, either expressly by its terms or pursuant to a
subordination, non-disturbance and attornment agreement, and shall otherwise be
acceptable to the Administrative Agent;

 

(vii)                           with respect to each Mortgaged Real
Property, Borrowers and each Subsidiary shall have made all notification,
registrations and filings, to the extent required by, and in accordance with,
all Governmental Real Property Disclosure Requirements applicable to such
Mortgaged Real Property; and

 

(viii)                        within sixty (60) days after the
Closing Date, Surveys with respect to each Mortgaged Real Property.

 

(p)                                 Insurance.  The Administrative Agent shall have received
a copy of, or a certificate as to coverage under, the insurance policies
required by Section 5.04 and the applicable provisions of the
Security Documents, each of which shall be endorsed or otherwise amended to
include a “standard” or “New York” lender’s loss payable endorsement and to
name the Administrative Agent as additional insured, in form and substance
satisfactory to the Administrative Agent.

 

(q)                                 USA
Patriot Act.  The Lenders shall have
received, sufficiently in advance of the Closing Date, all documentation and
other information required by bank regulatory authorities under applicable “know
your customer” and anti-money laundering rules and regulations, including
without limitation, the United States PATRIOT Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) including, without limitation, the
information described in Section 10.13.

 

SECTION 4.02  Conditions to All Credit Extensions.  The obligation of each Lender to make any
Credit Extension (including the initial Credit Extension) shall be subject to,
and to the satisfaction of, each of the conditions precedent set forth below.

 

(a)                                  Notice.  The Administrative Agent shall have received
a Borrowing Request as required by Section 2.03 (or such notice
shall have been deemed given in accordance with Section 2.03).

 

(b)                                 No
Default.  Borrowers and each other
Loan Party shall be in compliance in all material respects with all the terms
and provisions set forth herein and in each other Loan Document on its part to
be observed or performed, and, at the time of and immediately after such Credit
Extension, no Default shall have occurred and be continuing on such date or
after giving effect to the Credit Extension requested to be made on such date.

 

(c)                                  Representations
and Warranties.  Each of the
representations and warranties made by any Loan Party set forth in Article III
hereof or in any other Loan Document shall be true and correct in all material
respects (except that any representation

 

59

 

and warranty that is qualified
as to “materiality” or “Material Adverse Effect” shall be true and correct in
all respects) on and as of the date of such Credit Extension with the same
effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date.

 

(d)                                 No
Material Adverse Effect.  There has
been no event, condition and/or contingency that has had or is reasonable
likely to have a Material Adverse Effect.

 

(e)                                  No
Legal Bar.  No order, judgment or
decree of any Governmental Authority shall purport to restrain any Lender from
making any Term Loans to be made by it. 
No injunction or other restraining order shall have been issued, shall
be pending or noticed with respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of, or to recover any damages or
obtain relief as a result of, the transactions contemplated by this Agreement
or the making of Term Loans hereunder.

 

Each of the delivery of a Borrowing Request and the acceptance by
Borrowers of the proceeds of the Credit Extension shall constitute a
representation and warranty by Borrowers and each other Loan Party that on the
date of such Credit Extension (both immediately before and after giving effect
to such Credit Extension and the application of the proceeds thereof) the
conditions contained in this Section 4.02 have been satisfied.  Borrowers shall provide such information
(including calculations in reasonable detail of the covenants in Section 6.08)
as the Administrative Agent may reasonably request to confirm that the
conditions in Section 4.02 have been satisfied.

 

ARTICLE V.

 

AFFIRMATIVE
COVENANTS

 

Each Loan Party covenants and agrees with each Lender that so long as
this Agreement shall remain in effect and until the Commitments have been
terminated and the principal of and interest on each Term Loan, all Fees and
all other expenses or amounts payable under any Loan Document shall have been
paid in full, unless the Required Lenders shall otherwise consent in writing,
each Loan Party will, and will cause each of its Subsidiaries to:

 

SECTION 5.01  Financial Statements, Reports, etc.  In the case of Holdings and Borrowers,
furnish to the Administrative Agent and each Lender:

 

(a)                                  Annual
Reports.  Within 90 days after the
end of each fiscal year (but no later than the date on which Holdings is
required to file a Form 10-K under the Exchange Act), (i) the
consolidated balance sheet of Holdings as of the end of such fiscal year and
related consolidated statements of income, cash flows and stockholders’ equity
for such fiscal year, and notes thereto, all prepared in accordance with
Regulation S-X under the Securities Act and accompanied by an opinion of
Deloitte & Touche LLP or other independent public accountants of
recognized national standing satisfactory to the Administrative Agent or one of
the “Big 4” accounting firms (which opinion shall not be qualified as to scope
or contain any going concern or other qualification), stating that such
financial statements fairly present, in all material respects, the consolidated
financial

 

60

 

condition, results of
operations, cash flows and changes in stockholders’ equity of the Consolidated
Companies as of the end of and for such fiscal year in accordance with GAAP
consistently applied, (ii) a management report in a form reasonably
satisfactory to the Administrative Agent setting forth, on a consolidating
basis, the financial condition, results of operations and cash flows of each of
the Department 56 business and the Lenox business as of the end of and for such
fiscal year, as compared to the financial condition, results of operations and
cash flows of such business as of the end of and for the previous fiscal year
and its budgeted results of operations and cash flows, and (iii) a
management’s discussion and analysis of the financial condition and results of
operations for such fiscal year, as compared to the previous fiscal year;

 

(b)                                 Quarterly
Reports.  Within 45 days after the
end of each of the first three fiscal quarters of each fiscal year (but no
later than the date on which Holdings is required to file a Form 10-Q
under the Exchange Act), (i) the consolidated balance sheet of Holdings as
of the end of such fiscal quarter and related consolidated statement of income
for such fiscal quarter and the related consolidated statements of income and
cash flows for the then elapsed portion of the fiscal year, in comparative form
with the consolidated statements of income and cash flows for the comparable periods
in the previous fiscal year, and notes thereto, all prepared in accordance with
Regulation S-X under the Securities Act and accompanied by a certificate of a
Financial Officer stating that such financial statements fairly present, in all
material respects, the consolidated financial condition, results of operations
and cash flows of the Consolidated Companies as of the date and for the periods
specified in accordance with GAAP consistently applied, and on a basis
consistent with audited financial statements referred to in Section 5.01(a),
subject to normal year-end audit adjustments, (ii) a management report in
a form reasonably satisfactory to the Administrative Agent setting forth, on a
consolidating basis, the financial condition, results of operations and cash
flows of each of the Department 56 business and the Lenox business as of the
end of and for such fiscal quarter and for the then elapsed portion of the
fiscal year, as compared to the financial condition, results of operations and
cash flows of such business as of the end of such fiscal quarter and for the
comparable periods in the previous fiscal year and its budgeted results of
operations and cash flows, and (iii) a management’s discussion and
analysis of the financial condition and results of operations for such fiscal
quarter and the then elapsed portion of the fiscal year, as compared to the
comparable periods in the previous fiscal year;

 

(c)                                  Monthly
Reports.  Within 30 days (40 days for
the month ending January 31 of each year) after the end of the first two
months of each fiscal quarter, (i) the consolidated statement of income of
Holdings for such month and the consolidated statements of income and cash
flows for the then elapsed portion of the fiscal year, in comparative form with
the consolidated statements of income and cash flows for the comparable periods
in the previous fiscal year, accompanied by a certificate of a Financial
Officer stating that such financial statements fairly present, in all material
respects, the consolidated results of operations and cash flows of the
Consolidated Companies as of the date and for the periods specified in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments, and (ii) a management report in a form reasonably satisfactory
to the Administrative Agent setting forth, on a

 

61

 

consolidating basis, the
results of operations and cash flows of each of the Department 56 business and
the Lenox business for such month and for the then elapsed portion of the
fiscal year, as compared to the results of operations and cash flows of such
business for the comparable periods in the previous fiscal year and its
budgeted results of operations and cash flows;

 

(d)                                 Financial
Officer’s Certificate.  (i) 
Concurrently with any delivery of financial statements under paragraphs (a), (b) or
(c) above, a certificate of a Financial Officer certifying that no Default
has occurred or, if such a Default has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken with
respect thereto; (ii) concurrently with any delivery of financial
statements under sub-paragraph (a) or (b) above, a Compliance
Certificate; and (iii) in the case of paragraph (a) above, a report
of the accounting firm opining on or certifying such financial statements
stating that in the course of its regular audit of the financial statements of
Holdings and its Subsidiaries, which audit was conducted in accordance with
GAAP, such accounting firm obtained no knowledge that any Default has occurred
or, if in the opinion of such accounting firm such a Default has occurred,
specifying the nature and extent thereof;

 

(e)                                  Financial
Officer’s Certificate Regarding Collateral. 
Concurrently with any delivery of financial statements under paragraph (a) above,
a Perfection Certificate Supplement in accordance with the provisions of Section 5.13(b);

 

(f)                                    Public
Reports.  Promptly after the same
become publicly available, copies of all periodic and other reports, proxy
statements and other materials filed by any Company with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or all of
the functions of said Commission, or with any national securities exchange, or
distributed to holders of its Indebtedness pursuant to the terms of the
documentation governing such Indebtedness (or any trustee, agent or other
representative therefor), as the case may be;

 

(g)                                 Management
Letters.  Promptly after the receipt
thereof by any Company, a copy of any “management letter” received by any such
Person from its certified public accountants and the management’s responses
thereto;

 

(h)                                 Budgets.  No later than the first day of each fiscal
year of Holdings and Borrowers, a budget in form reasonably satisfactory to the
Administrative Agent (including budgeted statements of income by each of the
Department 56 business and the Lenox business and sources and uses of cash and
balance sheets) prepared by each of Holdings and Borrowers, respectively, for (i) each
fiscal month of such fiscal year prepared in detail and (ii) each of the
two years immediately following such fiscal year prepared in summary form, in
each case, of Holdings, Borrowers and their respective Subsidiaries, with
appropriate presentation and discussion of the principal assumptions upon which
such budgets are based, accompanied by the statement of a Financial Officer of
each of Holdings and Borrowers to the effect that the budget of Holdings and
Borrowers, respectively, is a reasonable estimate for the period covered
thereby;

 

62

 

(i)                                     Annual
Meetings with Lenders.  Within 120
days after the close of each fiscal year of Holdings, Holdings and Borrowers
shall, at the request of the Administrative Agent or Required Lenders, hold a
meeting (at a mutually agreeable location and time) with all Lenders who choose
to attend such meeting at which meeting shall be reviewed the financial results
of the previous fiscal year and the financial condition of the Companies and
the budgets presented for the current fiscal year of the Companies; and

 

(j)                                     Other
Information.  Promptly, from time to
time, such other information regarding the operations, business affairs and
financial condition of any Company, or compliance with the terms of any Loan
Document, as the Administrative Agent or any Lender may reasonably request.

 

SECTION 5.02  Litigation and Other Notices.  Furnish to the Administrative Agent and each
Lender prompt written notice of the following:

 

(a)                                  any
Default, specifying the nature and extent thereof and the corrective action (if
any) taken or proposed to be taken with respect thereto;

 

(b)                                 the
filing or commencement of, or any threat or notice of intention of any Person
to file or commence, any action, suit or proceeding, whether at law or in
equity by or before any Governmental Authority, (i) against any Company or
any Affiliate thereof that could reasonably be expected to result in a Material
Adverse Effect or (ii) with respect to any Loan Document;

 

(c)                                  any
development that has resulted in, or could reasonably be expected to result in
a Material Adverse Effect;

 

(d)                                 the
occurrence of a Casualty Event and will ensure that the Net Cash Proceeds of
any such event (whether in the form of insurance proceeds, condemnation awards
or otherwise) are collected and applied in accordance with the applicable
provisions of this Agreement and the Security Documents;

 

(e)                                  (i) the
incurrence of any material Lien (other than Permitted Liens) on, or claim
asserted against any of the Collateral or (ii) the occurrence of any other
event which could materially affect the value of the Collateral; and

 

(f)                                    any
threatened indictment by any Governmental Authority of any Loan Party, as to
which any Loan Party receives knowledge or notice, under any criminal or civil
proceedings against any Loan Party pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of
the Collateral having a value in excess of $500,000 or (ii) any other
Property of any Loan Party which is necessary or material to the conduct of its
business.

 

SECTION 5.03  Existence; Businesses and Properties.  (a)  Do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect its legal existence, except as otherwise expressly permitted
under Section 6.05 or, in the case of any Subsidiary, where the

 

63

 

failure to perform such obligations,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

(b)                                 Do
or cause to be done all things necessary to obtain, preserve, renew, extend and
keep in full force and effect the rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names material to the
conduct of its business; maintain and operate such business in substantially
the manner in which it is presently conducted and operated; comply with all
applicable Requirements of Law (including any and all zoning, building,
Environmental Law, ordinance, code or approval or any building permits or any
restrictions of record or agreements affecting the Real Property) and decrees
and orders of any Governmental Authority, whether now in effect or hereafter
enacted, except where the failure to comply, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect; pay
and perform its obligations under all Leases and Transaction Documents; and at
all times maintain and preserve all Property material to the conduct of such
business and keep such Property in good repair, working order and condition and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times; provided that nothing in this Section 5.03(b) shall
prevent (i) sales of assets, consolidations or mergers by or involving any
Company in accordance with Section 6.05; (ii) the withdrawal
by any Company of its qualification as a foreign corporation in any
jurisdiction where such withdrawal, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect; or (iii) the
abandonment by any Company of any rights, franchises, licenses, trademarks,
tradenames, copyrights or patents that such Person reasonably determines are
not useful to its business.

 

SECTION 5.04  Insurance.  (a)  Keep its
insurable Property adequately insured at all times by financially sound and
reputable insurers (provided that Borrowers shall not be deemed to
breach this provision if, after their insurer becomes unsound or irreputable,
Borrowers promptly and diligently obtain adequate insurance from an alternative
carrier); maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies in the same or similar businesses operating in the
same or similar locations, including public liability insurance against claims
for personal injury or death or Property damage occurring upon, in, about or in
connection with the use of any Property owned, occupied or controlled by it;
and maintain such other insurance as may be required by law; and, with respect
to the Collateral, otherwise maintain all insurance coverage required under
each applicable Security Document, such policies to be in such form and amounts
and having such coverage as may be reasonably satisfactory to the
Administrative Agent and the Collateral Agent, it being agreed that the levels
of insurance in place on the Closing Date, absent a material change in the
Property of the Loan Parties, shall be satisfactory to the Administrative Agent
and the Collateral Agent so long as appropriate steps are taken to assure that
such insurance coverage is also obtained for any future Subsidiaries.

 

(b)                                 All
such insurance shall (i) provide that no cancellation, material reduction
in amount or material change in coverage thereof shall be effective until at
least 30 days after receipt by the Administrative Agent and the Collateral
Agent of written notice thereof, (ii) name the Administrative Agent and
the Collateral Agent as mortgagee (in the case of Property insurance) or
additional insured (in the case of liability insurance) or loss payee (in the
case of

 

64

 

casualty insurance), as applicable, (iii) if
reasonably requested by the Administrative Agent or the Collateral Agent,
include a breach of warranty clause and (iv) be reasonably satisfactory in
all other respects to the Administrative Agent and the Collateral Agent.

 

(c)                                  Notify
the Administrative Agent and the Collateral Agent immediately whenever any
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained under this Section 5.04 is taken out
by any Company; and promptly deliver to the Administrative Agent and the
Collateral Agent a duplicate original copy of such policy or policies.

 

(d)                                 Obtain
flood insurance in such total amount as the Administrative Agent or the
Required Lenders may from time to time require, if at any time the area in
which any improvements located on any real Property covered by a Mortgage is
designated a “flood hazard area” in any Flood Insurance Rate Map published by
the Federal Emergency Management Agency (or any successor agency), and
otherwise comply with the National Flood Insurance Program as set forth in the
Flood Disaster Protection Act of 1975, as amended from time to time.

 

(e)                                  Deliver
to the Administrative Agent and the Collateral Agent and the Lenders a report
of a reputable insurance broker with respect to such insurance and such
supplemental reports with respect thereto as the Administrative Agent or the
Collateral Agent may from time to time reasonably request.

 

SECTION 5.05  Obligations and Taxes.  (a)  Pay
its Indebtedness and other obligations promptly and in accordance with their
terms and pay and discharge promptly when due all Taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
in respect of its Property, before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise that, if unpaid, might give rise to a Lien other than a Permitted
Lien upon such properties or any part thereof; provided that such
payment and discharge shall not be required with respect to any such Tax,
assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the applicable
Company shall have set aside on its books adequate reserves with respect
thereto in accordance with GAAP and such contest operates to suspend collection
of the contested obligation, Tax, assessment or charge and enforcement of a
Lien other than a Permitted Lien and, in the case of Collateral, the applicable
Company shall have otherwise complied with the Contested Collateral Lien
Conditions.

 

(b)                                 Timely
and correctly file all material Tax Returns required to be filed by it.

 

SECTION 5.06  Employee Benefits.  (a)  With
respect to each Plan, comply in all material respects with the applicable
provisions of ERISA and the Code and (b) furnish to the Administrative
Agent (x) as soon as possible after, and in any event within 10 days after any
Responsible Officer of the Companies or their ERISA Affiliates or any ERISA
Affiliate knows or has reason to know that, any ERISA Event has occurred that,
alone or together with any other ERISA Event could reasonably be expected to
result in liability of the Companies or their ERISA Affiliates in an aggregate
amount exceeding $500,000 or the imposition of a Lien, a statement of a
Financial Officer of Holdings setting forth details as to such ERISA Event and
the action, if any, that the Companies propose to take with respect thereto,
and (y) upon request by

 

65

 

the Administrative Agent, copies of:  (i) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by any Company
or any ERISA Affiliate with the Internal Revenue Service with respect to each
Plan; (ii) the most recent actuarial valuation report for each Plan; (iii) all
notices received by any Company or any ERISA Affiliate from a Multiemployer
Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such
other documents or governmental reports or filings relating to any Plan (or
employee benefit plan sponsored or contributed to by any Company) as the
Administrative Agent shall reasonably request.

 

SECTION 5.07  Maintaining Records; Access to Properties and Inspections.  Keep proper books of record and account in
which full, true and correct entries in conformity with GAAP and all
Requirements of Law are made of all dealings and transactions in relation to
its business and activities.  Keep proper
records of intercompany accounts with full, true and correct entries reflecting
all payments received and paid (including, without limitation, funds received
by Borrowers from swept deposit accounts of the other Companies).  Upon reasonable prior notice, each Loan Party
will permit any representatives designated by the Administrative Agent,
Collateral Agent or any Lender to visit and inspect the financial records and
the Property of such Loan Party at reasonable times and as often as reasonably
requested and to make extracts from and copies of such financial records, and
permit any representatives designated by the Administrative Agent, Collateral
Agent or any Lender to discuss the affairs, finances and condition of any Loan
Party with the officers thereof and independent accountants therefor.

 

SECTION 5.08  Use of Proceeds. 
Use the proceeds of the Term Loans only for the purposes set forth in Section 3.11.

 

SECTION 5.09  Compliance with Environmental Laws; Environmental Reports.  (a)  Comply,
and cause all lessees and other Persons occupying Real Property owned, operated
or leased by any Company to comply, in all material respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Real Property; obtain and renew all material Environmental Permits applicable
to its operations and Real Property; and conduct any Response required by a
Governmental Authority in accordance with Environmental Laws; provided that
no Company shall be required to undertake any Response to the extent that its
obligation to do so is being contested in good faith and by proper proceedings
and appropriate reserves are being maintained with respect to such
circumstances in accordance with GAAP.

 

(b)                                 If
a Default caused by reason of a breach of Section 3.17 or 5.09(a) shall
have occurred and be continuing for more than 20 days without the Companies
commencing activities reasonably likely to cure such Default, at the written
request of the Required Lenders through the Administrative Agent, provide to
the Lenders within 45 days after such request, at Borrowers’ expense, an
environmental assessment report regarding the matters which are the subject of
such default, including where appropriate, any soil and/or groundwater
sampling, prepared by an environmental consulting firm and in the form and
substance reasonably acceptable to the Administrative Agent and indicating the
presence or absence of Hazardous Materials and the estimated cost of any
compliance or Response to address them.

 

66

 

SECTION 5.10  Interest Rate Protection.  No later than the 90th day after the Closing
Date, Borrowers shall enter into, and thereafter maintain, interest rate Hedging
Agreements with terms and conditions reasonably acceptable to the
Administrative Agent.

 

SECTION 5.11  Additional Collateral; Additional Guarantors.  (a)  Subject
to this Section 5.11, with respect to any Property acquired after
the Closing Date by Borrowers or any other Loan Party that is intended to be
subject to the Lien created by any of the Security Documents but is not so
subject (but, in any event, excluding any Property described in paragraph (b) of
this subsection) promptly (and in any event within 30 days after the
acquisition thereof provided the Administrative Agent has provided all joinder
agreements to the applicable Security Documents necessary for the Loan Parties
to comply herewith):  (i) execute
and deliver to the Administrative Agent and the Collateral Agent such
amendments or supplements to the relevant Security Documents or such other
documents as the Administrative Agent or the Collateral Agent shall deem
necessary or advisable to grant to the Administrative Agent, for its benefit
and for the benefit of the other Secured Parties, a Lien on such Property
subject to no Liens other than Permitted Liens, and (ii) take all actions
necessary to cause such Lien to be duly perfected to the extent required by
such Security Document in accordance with all applicable Requirements of Law,
including, without limitation, the filing of financing statements in such
jurisdictions as may be reasonably requested by the Administrative Agent.  Borrowers shall otherwise take such actions
and execute and/or deliver to the Administrative Agent such documents as the
Administrative Agent or the Collateral Agent shall require to confirm the
validity, perfection and priority of the Lien of the Security Documents against
such after-acquired properties or assets.

 

(b)                                 With
respect to any Person that is or becomes a Wholly Owned Subsidiary (other than
any Foreign Subsidiary that is not a direct Subsidiary of a Loan Party)
promptly (and in any event within 30 days after such Person becomes a
Subsidiary) (i) deliver to the Administrative Agent (or, prior to the
payment in full of the Revolving Credit Indebtedness and the termination of the
Revolving Credit Documents, to the Revolving Credit Agent) the certificates, if
any, representing the Equity Interests of such Subsidiary (provided that
with respect to any first-tier Foreign Subsidiary of a Borrower or a Subsidiary
organized in a State of the United States, in no event shall more than 66% of
the Equity Interests of any Foreign Subsidiary be subject to any Lien or pledged
under any Security Document if such pledge would have a material adverse tax
impact on Borrowers (determined at the reasonable discretion of the
Administrative Agent)), together with undated stock powers or other appropriate
instruments of transfer executed and delivered in blank by a duly authorized
officer of such Subsidiary’s parent, as the case may be, and all intercompany
notes owing from such Subsidiary to any Loan Party together with instruments of
transfer executed and delivered in blank by a duly authorized officer of such
Subsidiary, and (ii) cause such new Subsidiary (other than any Foreign
Subsidiary if such pledge would have a material adverse tax impact on Borrowers
(determined at the reasonable discretion of the Administrative Agent) (A) to
execute a Joinder Agreement or such comparable documentation and a joinder
agreement to the Security Agreement in the form annexed thereto which is in
form and substance reasonably satisfactory to the Administrative Agent, and (B) to
take all actions necessary or advisable in the opinion of the Administrative
Agent or the Collateral Agent to cause the Lien created by the Security
Agreement to be duly perfected to the extent required by such agreement in
accordance with all applicable Requirements of Law,

 

67

 

including, without limitation, the filing of
financing statements in such jurisdictions as may be reasonably requested by
the Administrative Agent or the Collateral Agent.

 

(c)                                  Each
Loan Party will promptly grant to the Administrative Agent, within 60 days of
the acquisition thereof, a security interest in and Mortgage Lien on each owned
or leased Real Property of such Loan Party as is acquired by such Loan Party
after the Closing Date and that, together with any improvements thereon,
individually has a fair market value of at least $1.0 million, as additional
security for the Obligations (unless the subject Property is already mortgaged
to a third party to the extent permitted by Section 6.02).  Such Mortgages shall be granted pursuant to
documentation reasonably satisfactory in form and substance to the
Administrative Agent and the Collateral Agent and shall constitute valid and
enforceable perfected Liens subject only to Permitted Liens.  The Mortgages or instruments related thereto
shall be duly recorded or filed in such manner and in such places as are
required by law to establish, perfect, preserve and protect the Liens in favor
of the Administrative Agent required to be granted pursuant to the Mortgages
and all taxes, fees and other charges payable in connection therewith shall be
paid in full.  Such Loan Party shall
otherwise take such actions and execute and/or deliver to the Administrative
Agent such documents as the Administrative Agent or the Collateral Agent shall
require, to confirm the validity, perfection and priority of the Lien of any
existing Mortgage or new Mortgage against such after-acquired Real Property
(including, without limitation, a Title Policy, a Survey and local counsel
opinion (in form and substance reasonably satisfactory to the Administrative
Agent and the Collateral Agent) in respect of such Mortgage).

 

SECTION 5.12  Security Interests; Further Assurances.  Promptly, upon the reasonable request of the
Administrative Agent, the Collateral Agent or any Lender, at Borrowers’
expense, execute, acknowledge and deliver, or cause the execution,
acknowledgment and delivery of, and thereafter register, file or record, or
cause to be registered, filed or recorded, in an appropriate governmental
office, any document or instrument supplemental to or confirmatory of the
Security Documents or otherwise deemed by the Administrative Agent or the
Collateral Agent reasonably necessary or desirable for the continued validity,
perfection and priority of the Liens on the Collateral covered thereby superior
to and prior to the rights of all third Persons other than the holders of
Permitted Liens and subject to no other Liens except as permitted by the
applicable Security Document, or obtain any consents, including, without
limitation, landlord or similar lien waivers and consents, as may be necessary
or appropriate in connection therewith. 
Deliver or cause to be delivered to the Administrative Agent and the Collateral
Agent from time to time such other documentation, consents, authorizations,
approvals and orders in form and substance reasonably satisfactory to the
Administrative Agent and the Collateral Agent as the Administrative Agent and
the Collateral Agent shall reasonably deem necessary to perfect or maintain the
Liens on the Collateral pursuant to the Security Documents.  Upon the exercise by the Administrative
Agent, the Collateral Agent or the Lenders of any power, right, privilege or
remedy pursuant to any Loan Document which requires any consent, approval,
registration, qualification or authorization of any Governmental Authority
execute and deliver all applications, certifications, instruments and other
documents and papers that the Administrative Agent, the Collateral Agent or the
Lenders may be so required to obtain.  If
the Administrative Agent, the Collateral Agent or the Required Lenders
determine that they are required by law or regulation to have appraisals
prepared in respect of the Real Property of any Loan Party constituting Collateral,
Borrowers shall provide to the Administrative Agent and the 

 

68

 

Collateral Agent appraisals that satisfy the
applicable requirements of the Real Estate Appraisal Reform Amendments of
FIRREA and are otherwise in form and substance reasonably satisfactory to the
Administrative Agent and the Collateral Agent.

 

SECTION 5.13  Information Regarding Collateral.  (a)  Furnish
to the Administrative Agent and the Collateral Agent 30 days prior written
notice (in the form of an officer’s certificate), clearly describing any of the
following changes (i) in any Loan Party’s corporate name or in any trade
name used to identify it in the conduct of its business or in the ownership of
its properties, (ii) in the location of any Loan Party’s chief executive
office, its principal place of business, any office in which it maintains books
or records relating to Collateral owned by it or any office or facility at
which Collateral owned by it is located (including the establishment of any
such new office or facility), (iii) in any Loan Party’s identity or
corporate structure, (iv) in any Loan Party’s Federal Taxpayer
Identification Number or (v) in any Loan Party’s jurisdiction of
organization.  Borrowers agree not to
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the UCC or otherwise that are required in order
for the Administrative Agent to continue at all times following such change to
have a valid, legal and perfected security interest in all the Collateral.  Borrowers agree to provide to the
Administrative Agent such other information in connection with such changes as
the Administrative Agent and the Collateral Agent may reasonably request.  Borrowers also agree promptly to notify the
Administrative Agent and the Collateral Agent if any material portion of the
Collateral is subject to a Casualty Event.

 

(b)                                 Each
year, at the time of delivery of annual financial statements with respect to
the preceding fiscal year pursuant to paragraph (a) of Section 5.01,
deliver to the Administrative Agent (i) a Perfection Certificate
Supplement setting forth any changes to the information required pursuant to
the Perfection Certificate or confirming that there has been no change in such
information since the date of the Perfection Certificate delivered on the
Closing Date or the date of the most recently delivered Perfection Certificate
Supplement pursuant to this Section 5.13(b) and (ii) a
certificate of a Financial Officer and the chief legal officer of the Loan
Parties certifying that all UCC Financing Statements (including fixture
filings, as applicable) or other appropriate filings, recordings or
registrations, including all refilings, rerecordings and reregistrations,
containing a description of the Collateral have been filed of record in each
governmental, municipal or other appropriate office in each jurisdiction
necessary to protect and perfect the security interests and Liens under the
Security Documents for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period).

 

ARTICLE VI.

 

NEGATIVE
COVENANTS

 

Each Loan Party covenants and agrees with each Lender that, so long as
this Agreement shall remain in effect and until the Commitments have been
terminated and the principal of and interest on each Term Loan, all Fees and
all other expenses or amounts payable under any Loan Document have been paid in
full, unless the Required Lenders shall otherwise consent in writing, no Loan
Party will, nor will they cause or permit any Subsidiaries to:

 

69

 

SECTION 6.01  Indebtedness. 
Incur, create, assume or permit to exist, directly or indirectly, any
Indebtedness, except:

 

(a)                                  Indebtedness
incurred pursuant to this Agreement and the other Loan Documents;

 

(b)                                 (i) Indebtedness
actually outstanding on the Closing Date and listed on Schedule 6.01(b) or
(ii) refinancings or renewals thereof; provided that (A) any
such refinancing Indebtedness is in an aggregate principal amount not greater
than the aggregate principal amount of the Indebtedness being renewed or
refinanced, plus the amount of any premiums required to be paid thereon
and fees and expenses associated therewith, (B) such refinancing
Indebtedness has a later or equal final maturity and longer or equal weighted
average life than the Indebtedness being renewed or refinanced and (C) the
covenants, events of default, subordination and other provisions thereof
(including any guarantees thereof) shall be, in the aggregate, no less
favorable to the Lenders than those contained in the Indebtedness being renewed
or refinanced;

 

(c)                                  Indebtedness
of Borrowers under Hedging Agreements required pursuant to Section 5.10;

 

(d)                                 to
the extent recorded in the Companies’ intercompany account ledgers,
intercompany Indebtedness of the Companies outstanding to the extent permitted
by Section 6.04(e);

 

(e)                                  Indebtedness
of the Borrowers and their Subsidiaries organized in a State within the United
States in respect of Purchase Money Obligations and Capital Lease Obligations
and refinancings or renewals thereof (other than refinancings funded with
intercompany advances), in an aggregate amount not to exceed $10.0 million at
any time outstanding;

 

(f)                                    Indebtedness
in respect of workers’ compensation claims, self-insurance obligations,
performance bonds, surety appeal or similar bonds and completion guarantees
provided by a Company in the ordinary course of its business;

 

(g)                                 Contingent
Obligations of any Loan Party in respect of Indebtedness otherwise permitted
under Section 6.01;

 

(h)                                 Indebtedness
in respect of taxes, assessments or governmental charges to the extent that
payment thereof shall not at the time be required to be made in accordance with
Section 5.05;

 

(i)                                     Indebtedness
in respect of netting services and overdraft protections in connection with
deposit accounts, in each case in the ordinary course of business;

 

(j)                                     the
Revolving Credit Indebtedness;

 

(k)                                  unsecured
guaranties by Holdings, Borrowers or any of their Subsidiaries in respect of
the obligations under that certain Consignment Agreement, dated as of

 

70

 

August 5, 1998 (as
amended), among Lenox, Sovereign Bank and Sovereign Precious Metals, LLC,
successor in interest to BankBoston, N.A.; and

 

(l)                                     other
unsecured Indebtedness (not of the type covered in clauses (a) – (k)
above) of any Company not to exceed $25.0 million in the aggregate principal amount at any time outstanding.

 

SECTION 6.02  Liens. 
Create, incur, assume or permit to exist, directly or indirectly, any
Lien on any Property now owned or hereafter acquired by it or on any income or
revenues or rights in respect of any thereof, except (the “Permitted Liens”):

 

(a)                                  inchoate
Liens for taxes, assessments or governmental charges or levies not yet due and
payable or delinquent and Liens for taxes, assessments or governmental charges
or levies, which (i) are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance
with GAAP, which proceedings (or orders entered in connection with such
proceedings) have the effect of preventing the forfeiture or sale of the
Property or assets subject to any such Lien, or (ii) in the case of any
such charge or claim which has or may become a Lien against any of the
Collateral, such Lien and the contest thereof shall satisfy the Contested
Collateral Lien Conditions;

 

(b)                                 Liens
in respect of Property of any Company imposed by law, which were incurred in
the ordinary course of business and do not secure Indebtedness for borrowed
money, such as carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s,
suppliers’, repairmen’s and mechanics’ Liens and other similar Liens arising in
the ordinary course of business, and (i) which do not in the aggregate
materially detract from the value of the Property of the Companies, taken as a
whole, and do not materially impair the use thereof in the operation of the
business of the Companies, taken as a whole, (ii) which do not pertain to
Indebtedness that is due and payable or which pertain to Liens that are being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, which proceedings (or orders
entered in connection with such proceedings) have the effect of preventing the
forfeiture or sale of the Property or assets subject to any such Lien, and (iii) in
the case of any such Lien which has or may become a Lien against any of the
Collateral, such Lien and the contest thereof shall satisfy the Contested
Collateral Lien Conditions;

 

(c)                                  Liens
in existence on the Closing Date and set forth on Schedule 6.02(c);
provided that (i) the aggregate principal amount of the
Indebtedness, if any, secured by such Liens does not increase; and (ii) such
Liens do not encumber any Property other than the Property subject thereto on
the Closing Date;

 

(d)                                 easements,
rights-of-way, restrictions (including zoning restrictions), covenants,
encroachments, protrusions and other similar charges or encumbrances, and minor
title deficiencies on or with respect to any Real Property, in each case
whether now or hereafter in existence, not (i) securing Indebtedness, (ii) individually
or in the aggregate materially impairing the value or marketability of such
Real Property and (iii)

 

71

 

individually or in the
aggregate materially interfering with the conduct of the business of the
Companies at such Real Property;

 

(e)                                  Liens
arising out of judgments or awards not resulting in a Default and in respect of
which such Company shall in good faith be prosecuting an appeal or proceedings
for review in respect of which there shall be secured a subsisting stay of
execution pending such appeal or proceedings; provided that the
aggregate amount of all such judgments or awards (and any cash and the fair
market value of any Property subject to such Liens) does not exceed $1.0
million at any time outstanding;

 

(f)                                    Liens
(other than any Lien imposed by ERISA) (i) imposed by law or deposits made
in connection therewith in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other types of social security,
(ii) incurred in the ordinary course of business to secure the performance
of tenders, statutory obligations (other than excise taxes), surety, stay,
customs and appeal bonds, statutory bonds, bids, leases, government contracts,
trade contracts, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money) or (iii) arising
by virtue of deposits made in the ordinary course of business to secure
liability for premiums to insurance carriers; provided that (w) with
respect to clauses (i), (ii) and (iii) hereof,
such Liens are for amounts not yet due and payable or delinquent or, to the
extent such amounts are so due and payable, such amounts are being contested in
good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, which proceedings for orders entered in
connection with such proceedings have the effect of preventing the forfeiture
or sale of the Property or assets subject to any such Lien, (x) to the extent
such Liens are not imposed by law, such Liens shall in no event encumber any
Property other than cash and Cash Equivalents which have been deposited with
such lienholder or has otherwise been subordinated to the Liens securing the
Obligations hereunder pursuant to a Landlord Lien Waiver and Access Agreement,
(y) in the case of any such Lien against any of the Collateral, such Lien and
the contest thereof shall satisfy the Contested Collateral Lien Conditions and
(z) the aggregate amount of deposits at any time pursuant to clause (ii) and
(iii) shall not exceed $250,000 in the aggregate;

 

(g)                                 Leases
or subleases with respect to the assets or properties of any Company, in each
case entered into in the ordinary course of such Company’s business so long as
such Leases are subordinate in all respects to the Liens granted and evidenced
by the Security Documents and do not, individually or in the aggregate, (i) interfere
in any material respect with the ordinary conduct of the business of any
Company or (ii) materially impair the use (for its intended purposes) or
the value of the Property subject thereto;

 

(h)                                 Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by any Company in the ordinary
course of business in accordance with the past practices of such Company;

 

(i)                                     Liens
arising pursuant to Purchase Money Obligations or Capital Lease Obligations
incurred pursuant to Section 6.01(e); provided that (i) the
Indebtedness

 

72

 

secured by any such Lien
(including refinancings thereof) does not exceed 100% of the cost of the
Property being acquired or leased at the time of the incurrence of such
Indebtedness and (ii) any such Liens attach only to the Property being
financed pursuant to such Purchase Money Obligations or Capital Lease
Obligations and do not encumber any other Property of any Company;

 

(j)                                     bankers’
Liens, rights of setoff and other similar Liens existing solely with respect to
cash and Cash Equivalents on deposit in one or more accounts maintained by any
Company, in each case granted in the ordinary course of business in favor of
the bank or banks with which such accounts are maintained, securing amounts owing
to such bank with respect to cash management and operating account
arrangements, including those involving pooled accounts and netting
arrangements; provided that in no case shall any such Liens secure
(either directly or indirectly) the repayment of any Indebtedness;

 

(k)                                  Liens
granted pursuant to the Security Documents;

 

(l)                                     licenses
or sublicenses of Intellectual Property granted by any Company in the ordinary
course of business and not interfering in any material respect with the
ordinary conduct of the business of such Company;

 

(m)                               Liens
attaching solely to cash earnest money deposits in connection with any letter
of intent or purchase agreement in connection with a Permitted Acquisition;

 

(n)                                 Liens
in favor of customs and revenues authorities which secure payment of customs
duties in connection with the importation of goods to the extent required by
law;

 

(o)                                 Liens
deemed to exist in connection with set-off rights in the ordinary course of
Borrowers’ and their Subsidiaries’ business;

 

(p)                                 replacement,
extension or renewal of any Lien permitted herein in the same property
previously subject thereto provided the underlying Indebtedness is permitted to
be replaced, extended and renewed under Section 6.01(b);

 

(q)                                 the
filing of financing statements solely as a precautionary measure in connection
with operating leases or the filing of financing statements regarding
consignment of goods; and

 

(r)                                    the
following Liens securing the Revolving Credit Indebtedness: (i) with
respect to the Revolving Credit Priority Collateral, first priority Liens
senior to the Liens securing the Obligations and (ii) with respect to the
Term Loan Priority Collateral, second priority Liens junior to the Liens
securing the Obligations;

 

provided, however,
that no Liens (other than Liens permitted under Section 6.02(r)(i))
shall be permitted to exist, directly or indirectly, on any Pledged Securities
or Pledged Notes (each as defined in the Security Agreement).

 

73

 

SECTION 6.03  Sale and Leaseback Transactions.  Enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell or transfer any Property,
real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such Property or other
Property which it intends to use for substantially the same purpose or purposes
as the Property being sold or transferred unless (i) the sale of such
Property is permitted by Section 6.05 and (ii) any Liens
arising in connection with its use of such Property are permitted by Section 6.02.

 

SECTION 6.04  Investment, Loan and Advances.  Directly or indirectly, lend money or credit
or make advances to any Person, or purchase or acquire any stock, obligations
or securities of, or any other interest in, or make any capital contribution
to, any other Person, or purchase or own a futures contract or otherwise become
liable for the purchase or sale of currency or other commodities at a future
date in the nature of a futures contract (all of the foregoing, collectively, “Investments”),
except that the following shall be permitted:

 

(a)                                  the
Companies may consummate the Transactions in accordance with the provisions of
the Transaction Documents;

 

(b)                                 Investments
outstanding on the Closing Date and identified on Schedule 6.04(b);

 

(c)                                  the
Companies may (i) acquire and hold accounts receivables owing to any of
them if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary terms, (ii) acquire and hold
cash and Cash Equivalents, (iii) endorse negotiable instruments for
collection in the ordinary course of business, (iv) make lease, utility
and other similar deposits in the ordinary course of business; or (v) make
prepayments and deposits to suppliers in the ordinary course of business;

 

(d)                                 Borrowers
may enter into Hedging Agreements to the extent required by Section 5.10;

 

(e)                                  any
Loan Party (other than Holdings) may make intercompany loans and advances to
any other Loan Party (other than Holdings); provided that such loan
shall simultaneously be recorded on such Loan Party’s ledgers as an
intercompany loan, evidenced by a promissory notes and shall be pledged (and
delivered) by such Loan Party that is the lender of such intercompany loan as Collateral
pursuant to the Security Agreement, provided  further that (i) no
Loan Party may make loans to any Foreign Subsidiary pursuant to this paragraph (e) and
(ii) any loans made pursuant to this paragraph (e) shall be
subordinated to the Obligations of the Loan Parties pursuant to an intercompany
note in substantially the form of Exhibit L;

 

(f)                                    Borrowers
and the Subsidiaries may make loans and advances (including payroll,
relocation, travel and entertainment related advances) in the ordinary course
of business consistent with past practices to their respective employees (other
than any loans or advances to any director or executive officer (or equivalent
thereof) that would be in violation of Section 402 of the Sarbanes-Oxley
Act);

 

74

 

(g)                                 Borrowers
and the Subsidiaries may sell or transfer amounts and acquire assets to the
extent permitted by Section 6.05;

 

(h)                                 Borrowers
may establish (i) Wholly Owned Subsidiaries to the extent permitted by Section 6.12
and (ii) non-Wholly Owned Subsidiaries and/or joint ventures to the extent
that Investments in such non-Wholly Owned Subsidiaries and/or joint ventures
shall not exceed $2.5 million at any time outstanding, after taking into
account amounts returned in cash (including upon disposition);

 

(i)                                     Investments
(other than as described in Section 6.04(e)) (i) by a Borrower
in any Subsidiary Guarantor, (ii) by any Company in a Borrower or any
Subsidiary Guarantor, (iii) by Holdings in a Borrower and (iv) by a
Subsidiary Guarantor in another Subsidiary Guarantor;

 

(j)                                     Investments
in securities of trade creditors or customers in the ordinary course of
business and consistent with such Company’s past practices that are received in
settlement of bona fide disputes or pursuant to any plan of reorganization or
liquidation or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers;

 

(k)                                  Investments
made by a Borrower or any Subsidiary as a result of consideration received in
connection with an Asset Sale made in compliance with Section 6.05;

 

(l)                                     earnest
money required in connection with and to the extent permitted by Permitted
Acquisitions;

 

(m)                               Loan
Parties may hold Investments to the extent such Investments reflect an increase
in the value of Investments otherwise permitted under this Section 6.04
hereof;

 

(n)                                 Investments
in deposit accounts opened in the ordinary course of business provided such
deposit accounts are subject to Deposit Account Control Agreements if required
hereunder;

 

(o)                                 Loan
Parties may capitalize or forgive any Indebtedness owed to it by other Loan
Parties (except that Borrowers shall not forgive intercompany loans made to any
other Loan Party);

 

(p)                                 the
Loan Parties may maintain an executive deferred compensation program and
acquire, maintain and sell readily marketable securities as part of such
program, which securities may consist of stocks, bonds and mutual funds, but
not to exceed $5.0 million in the aggregate at any time; and

 

(q)                                 Other
Investments not exceeding $1,000,000 at any time outstanding (plus any
appreciation in the value of any such Investment occurring after such
Investment is acquired).

 

75

 

SECTION 6.05  Mergers, Consolidations, Sales of Assets and Acquisitions.  Wind up, liquidate or dissolve its affairs or
enter into any transaction of merger or consolidation, or convey, sell, lease
or otherwise dispose of (or agree to do any of the foregoing at any future
time) all or any part of its Property or assets, or purchase or otherwise
acquire (in one or a series of related transactions) any part of the Property
or assets of any Person (or agree to do any of the foregoing at any future
time), except that:

 

(a)                                  Capital
Expenditures by Borrowers and the Subsidiaries shall be permitted to the extent
permitted by Section 6.08(e);

 

(b)                                 (i) purchases
or other acquisitions of inventory, materials, equipment and intangible assets
in the ordinary course of business shall be permitted, (ii) subject to Section 2.10(b),
sales of used, worn out, obsolete or surplus Property by any Company in the
ordinary course of business and the abandonment or other Asset Sale of
Intellectual Property that is, in the reasonable judgment of Borrowers, no
longer economically practicable to maintain or useful in the conduct of the
business of the Companies as currently being conducted shall be permitted and (iii) subject
to Section 2.10(b), the sale, lease or other disposal of any assets
shall be permitted; provided that the aggregate consideration received
in respect of all Asset Sales pursuant to this clause (b)(iii) shall
not exceed $1.0 million in any four consecutive fiscal quarters of Borrowers;

 

(c)                                  Investments
in connection with any such transaction may be made to the extent permitted by Section 6.04;

 

(d)                                 Borrowers
and the Subsidiaries may sell Cash Equivalents and use cash for purposes that
are otherwise permitted by the terms of this Agreement in the ordinary course
of business;

 

(e)                                  Borrowers
and the Subsidiaries may lease (as lessee or lessor) real or personal Property
and may guaranty such lease, in each case, in the ordinary course of business
and in accordance with the applicable Security Documents;

 

(f)                                    the
Transactions shall be permitted as contemplated by the Transaction Documents;

 

(g)                                 Borrowers
and the Subsidiaries may consummate Permitted Acquisitions;

 

(h)                                 (i) any
Loan Party may transfer or lease Property to, or acquire or lease Property
from, any Loan Party; provided, that any such lease of any of the
Mortgaged Real Property shall be made expressly subordinated to the applicable
Mortgage, and (ii) any Loan Party (other than Holdings) may be merged into
any other Loan Party (other than Holdings); provided, that, in any merger
involving a Borrower, a Borrower shall be the surviving corporation; provided
that the Liens on the Collateral granted in favor of the Administrative Agent
under the Security Documents shall be maintained;

 

(i)                                     any
Subsidiary of a Borrower may dissolve, liquidate or wind up its affairs at any
time; provided that such dissolution, liquidation or winding up, as
applicable, could not reasonably be expected to have a Material Adverse Effect;
and

 

76

 

(j)                                     discounts
or forgiveness of accounts receivable in the ordinary course of business or in
connection with collection or compromise thereof shall be permitted provided
the account debtor is not an Affiliate; and

 

(k)                                  Permitted
Liens (to the extent constituting a conveyance of Property) shall be permitted.

 

To the extent the Required Lenders waive the
provisions of this Section 6.05 with respect to the sale of any
Collateral, or any Collateral is sold as permitted by this Section 6.05,
such Collateral (unless sold to a Company) shall be sold free and clear of the
Liens created by the Security Documents, and the Administrative Agent and the
Collateral Agent shall take all actions deemed appropriate in order to effect
the foregoing.

 

SECTION 6.06  Dividends. 
Authorize, declare or pay, directly or indirectly, any Dividends with
respect to any Company, except that:

 

(a)                                  any
Subsidiary of a Borrower (i) may pay cash Dividends to such Borrower or
any Wholly Owned Subsidiary of such Borrower and (ii) if such Subsidiary
is not a Wholly Owned Subsidiary of such Borrower, may pay cash Dividends to
its shareholders generally so long as such Borrower or its Subsidiary which
owns the equity interest or interests in the Subsidiary paying such Dividends
receives at least its proportionate share thereof (based upon its relative
holdings of equity interests in the Subsidiary paying such Dividends and taking
into account the relative preferences, if any, of the various classes of equity
interests in such Subsidiary);

 

(b)                                 so
long as no Default exists or would result therefrom, Borrowers may pay
Dividends to Holdings for the purpose of enabling Holdings to, and Holdings
may, repurchase outstanding shares of its common stock (or options to purchase
such common stock) following the death, disability, retirement or termination
of employment of employees, officers or directors of any Company; provided
that (i) all amounts used to effect such repurchases are obtained by
Holdings from a substantially concurrent issuance of its common stock (or
options to purchase such common stock) to other employees, members of
management, executive officers or directors of any Company or (ii) to the
extent the proceeds used to effect any repurchase pursuant to this clause (ii) are
not obtained as described in preceding clause (i), the aggregate amount
of Dividends paid by Holdings to its stockholders pursuant to this paragraph (b) (exclusive
of amounts paid as described pursuant to preceding clause (i)) shall not
exceed $1.0 million in any fiscal
year of Holdings;

 

(c)                                  Borrowers
may pay cash Dividends to Holdings for the purpose of paying, so long as all
proceeds thereof are promptly used by Holdings to pay, its franchise taxes and
operating expenses incurred in the ordinary course of business and other
corporate overhead costs and expenses (including legal and accounting expenses
and similar expenses and customary fees to non-officer directors of Holdings);

 

77

 

(d)                                 Borrowers
and Subsidiaries may pay cash Dividends to Holdings for the purpose of paying,
so long as all proceeds thereof are promptly used by Holdings to pay, its
income tax when and as due; and

 

(e)                                  On
the Closing Date, D 56 may pay a cash Dividend in the amount of the Acquisition
Consideration to effect the Acquisition.

 

SECTION 6.07  Transactions with Affiliates.  Enter into, directly or indirectly, any
transaction or series of related transactions, whether or not in the ordinary
course of business, with any Affiliate of any Company (other than between or
among Borrowers and their Wholly-Owned Subsidiaries), other than in the
ordinary course of business and on terms and conditions substantially as
favorable to such Company as would reasonably be obtained by such Company at
that time in a comparable arm’s-length transaction with a Person other than an
Affiliate, except that:

 

(a)                                  Dividends
may be paid to the extent provided in Section 6.06;

 

(b)                                 loans
may be made and other transactions may be entered into between and among any
Company and its Affiliates to the extent permitted by Sections 6.01 and 6.04;

 

(c)                                  customary
fees may be paid to non-officer directors of Holdings and customary indemnities
may be provided to all directors of Holdings; and

 

(d)                                 the
Transactions may be effected.

 

SECTION 6.08  Financial Covenants.

 

(a)                                  Maximum
Leverage Ratio.  Permit the Leverage
Ratio, for any Test Period ending on or about the dates set forth in the table
below, to exceed the ratio set forth opposite such period in the table below:

 

	
  Test
  Period

  	
   

  	
  Leverage Ratio

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2005

  	
   

  	
  2.9 to 1.0

  	
   

  
	
  Four fiscal quarters ending March 31,
  2006

  	
   

  	
  3.3 to 1.0

  	
   

  
	
  Four fiscal quarters ending June 30,
  2006

  	
   

  	
  3.7 to 1.0

  	
   

  
	
  Four fiscal quarters ending
  September 30, 2006

  	
   

  	
  4.0 to 1.0

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2006

  	
   

  	
  2.0 to 1.0

  	
   

  
	
  Four fiscal quarters ending March 31,
  2007

  	
   

  	
  2.0 to 1.0

  	
   

  
	
  Four fiscal quarters ending June 30,
  2007

  	
   

  	
  2.6 to 1.0

  	
   

  
	
  Four fiscal quarters ending
  September 30, 2007

  	
   

  	
  2.8 to 1.0

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2007

  	
   

  	
  2.0 to 1.0

  	
   

  
	
  Each period of four fiscal quarters thereafter

  	
   

  	
  2.0 to 1.0

  	
   

  

 

(b)                                 Minimum
Interest Coverage Ratio.  Permit the
Consolidated Interest Coverage Ratio, for any Test Period ending on or about
the dates set forth in the table below, to be less than the ratio set forth
opposite such period in the table below:

 

78

 

	
  Test
  Period

  	
   

  	
  Interest Coverage

  Ratio

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2005

  	
   

  	
  2.35 to 1.0

  	
   

  
	
  Four fiscal quarters ending March 31,
  2006

  	
   

  	
  2.35 to 1.0

  	
   

  
	
  Four fiscal quarters ending June 30,
  2006

  	
   

  	
  2.75 to 1.0

  	
   

  
	
  Four fiscal quarters ending
  September 30, 2006

  	
   

  	
  2.90 to 1.0

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2006

  	
   

  	
  3.00 to 1.0

  	
   

  
	
  Four fiscal quarters ending March 31,
  2007

  	
   

  	
  3.35 to 1.0

  	
   

  
	
  Four fiscal quarters ending June 30,
  2007

  	
   

  	
  3.60 to 1.0

  	
   

  
	
  Four fiscal quarters ending
  September 30, 2007

  	
   

  	
  3.75 to 1.0

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2007

  	
   

  	
  3.75 to 1.0

  	
   

  
	
  Each period of four fiscal quarters
  thereafter

  	
   

  	
  3.75 to 1.0

  	
   

  

 

(c)                                  Limitation
on Capital Expenditures.  Permit the
aggregate amount of Capital Expenditures made in any test period ending on or
about the dates set forth in the table below, to exceed the amount set forth
opposite such period below:

 

	
  Test
  Period

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
  (in millions)

  	
   

  
	
  Closing Date - December 31, 2005

  	
   

  	
  $

  	
  5.7

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2006

  	
   

  	
  $

  	
  14.0

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2007

  	
   

  	
  $

  	
  14.0

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2008

  	
   

  	
  $

  	
  14.0

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2009

  	
   

  	
  $

  	
  14.0

  	
   

  
	
  Four fiscal quarters ending
  December 31, 2010

  	
   

  	
  $

  	
  14.0

  	
   

  

 

 

provided,
however, that (x) if the aggregate amount of Capital Expenditures
described in clause (c) above for any test period shall be less
than the amount permitted in clause (c) above for such test period
(before giving effect to any carryover), then 50% of the shortfall may be added
to the amount of Capital Expenditures permitted in clause (c) above
for the immediately succeeding (but not any other) fiscal year and (y) in
determining whether any amount is available for carryover, the amount expended
in any fiscal year shall first be deemed to be from the amount allocated to
such year before any carryover.

 

SECTION 6.09  Limitation on Modifications of Indebtedness; Modifications of Certificate
of Incorporation, or Other Constitutive Documents, By-laws and Certain Other
Agreements, etc.  (i) Amend
or modify, or permit the amendment or modification of, any provision of
existing Indebtedness or of any agreement (including any purchase agreement,
indenture, loan agreement or security agreement) relating thereto other than
any amendments or modifications to Indebtedness which do not in any way
materially adversely affect the interests of the Lenders and are otherwise
permitted under Section 6.01(b); or (ii) amend or modify, or
permit the amendment or modification of, the Revolving Credit Documents except
as permitted under the Intercreditor Agreement or (iii) amend or modify,
or permit the amendment or modification of, any other Transaction Document, in
each case except for amendments or modifications which are not in any way
adverse in any material respect to the interests of the Lenders; or (iv) amend,
modify or change its articles of incorporation or other constitutive

 

79

 

documents (including by the filing or
modification of any certificate of designation) or by-laws, or any agreement
entered into by it, with respect to its capital stock (including any
shareholders’ agreement), or enter into any new agreement with respect to its
capital stock, other than any amendments, modifications, agreements or changes
pursuant to this clause (iv) or any such new agreements pursuant to this
clause (iv) which do not in any way materially adversely affect in any
material respect the interests of the Lenders; provided that Holdings may issue
such capital stock as is not prohibited by Section 6.11 or any
other provision of this Agreement and may amend articles of incorporation or
other constitutive documents to authorize any such capital stock.

 

SECTION 6.10  Limitation on Certain Restrictions on Subsidiaries.  Directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Subsidiary to (a) pay dividends or make any other
distributions on its capital stock or any other interest or participation in
its profits owned by a Borrower or any other Subsidiary of a Borrower, or pay
any Indebtedness owed to a Borrower or any other Subsidiary of a Borrower, (b) make
loans or advances to a Borrower or any other Subsidiary of a Borrower or (c) transfer
any of its properties to a Borrower or any other Subsidiary of a Borrower,
except for such encumbrances or restrictions existing under or by reason of (i) applicable
law; (ii) this Agreement and the other Loan Documents; (iii) the Term
Loan Documents, (iv) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of a Borrower or any
other Subsidiary of a Borrower; (v) customary provisions restricting
assignment of any agreement entered into by a Borrower or any other Subsidiary
of a Borrower in the ordinary course of business; (vi) any holder of a
Lien permitted by Section 6.02 may restrict the transfer of the
asset or assets subject thereto; (vii) restrictions which are not more
restrictive than those contained in this Agreement contained in any documents
governing any Indebtedness incurred after the Closing Date in accordance with
the provisions of this Agreement; (viii) customary restrictions and
conditions contained in any agreement relating to the sale of any Property
permitted under Section 6.05 pending the consummation of such sale;
(ix) any agreement in effect at the time such Subsidiary becomes a
Subsidiary of Borrower, so long as such agreement was not entered into in
contemplation of such Person becoming a Subsidiary of a Borrower; or (x) in the
case of any joint venture which is not a Loan Party in respect of any matters
referred to in clauses (b) and (c) above, restrictions
in such Person’s organizational or governing documents or pursuant to any joint
venture agreement or stockholders agreements solely to the extent of the Equity
Interests of or assets held in the subject joint venture or other entity.

 

SECTION 6.11  Limitation on Issuance of Capital Stock.  (a)  With
respect to Holdings, issue any Equity Interest that is not Qualified Capital
Stock.

 

(b)                                 Borrowers
will not, and will not permit any Subsidiary, to issue any Equity Interest of
any Subsidiary (including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, Equity Interest of any
Subsidiary, except (i) for stock splits, stock dividends and additional
Equity Interests issuances which do not decrease the percentage ownership of a
Borrower or any Subsidiaries in any class of the Equity Interest of such
Subsidiary; (ii) Subsidiaries of a Borrower formed after the Closing Date
pursuant to Section 6.12 may issue Equity Interests to a Borrower
or the Subsidiary of a Borrower which is to own such stock; and (iii) a
Borrower may issue common stock that is Qualified Capital Stock

 

80

 

to Holdings. 
All Equity Interests issued in accordance with this Section 6.11(b) shall,
to the extent required by this Agreement or the Security Agreement, be
delivered to the Administrative Agent for pledge pursuant to the Security
Agreement.

 

SECTION 6.12  Limitation on Creation of Subsidiaries.  Establish, create or acquire any additional
Subsidiaries; provided that a Borrower may establish or create one or
more Wholly Owned Subsidiaries of a Borrower or one of its Wholly Owned
Subsidiaries without consent so long as (a) 100% of the Equity Interest of
any new Subsidiary is, upon the creation or establishment of any such new
Subsidiary (or, in the case of Foreign Subsidiaries if such pledge would have a
material adverse tax impact on a Borrower (determined at the reasonable
discretion of the Administrative Agent), 66%), pledged and delivered to the
Administrative Agent for the benefit of the Secured Parties under the Security
Agreement; and (b) upon the creation or establishment of any such new
Wholly Owned Subsidiary (other than a Foreign Subsidiary if such actions would
have a material adverse tax impact on a Borrower (determined at the reasonable
discretion of the Administrative Agent)), such Subsidiary becomes a party to
the applicable Security Documents and shall become a Subsidiary Guarantor
hereunder and execute a Joinder Agreement and the other Loan Documents all in accordance
with Section 5.11(b) above.

 

SECTION 6.13  Business.  (a)  With respect to
Holdings, engage in any business activities or have any assets or liabilities,
other than (i) its ownership of the Equity Interests of Borrowers, (ii) obligations
under the Loan Documents and the Term Loan Documents and (iii) activities
and assets incidental to the foregoing clauses (i) and (ii).

 

(b)                                 With
respect to Borrowers and the Subsidiaries, engage (directly or indirectly) in
any business other than those businesses in which Borrowers and its
Subsidiaries are engaged on the Closing Date (or which are substantially
related thereto or are reasonable extensions thereof).

 

SECTION 6.14  Limitation on Accounting Changes.  Make or permit, any change in accounting
policies or reporting practices, without the consent of the Required Lenders,
which consent shall not be unreasonably withheld or delayed, except changes
that, in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect or are required by GAAP.

 

SECTION 6.15  Fiscal Year. 
Change its fiscal year end to a date other than on or about December 31.

 

SECTION 6.16  No Negative Pledges.  Directly or indirectly enter into or assume
any agreement (other than this Agreement prohibiting the creation or assumption
of any Lien upon its properties or assets, whether now owned or hereafter
acquired, except for Property subject to purchase money security interests,
operating leases and capital leases.

 

SECTION 6.17  Lease Obligations. 
Create, incur, assume or suffer to exist any obligations as lessee for
the rental or hire of real or personal Property of any kind under leases or
agreements to lease having an original term of one year or more that would
cause the direct and contingent liabilities of Borrowers and their
Subsidiaries, on a consolidated basis, in respect of all such obligations to
exceed $20.0 million payable in any period of 12 consecutive months.

 

81

 

SECTION 6.18  Anti-Terrorism Law; Anti-Money Laundering.

 

(a)                                  Directly
or indirectly, (i) knowingly conduct any business or engage in making or
receiving any contribution of funds, goods or services to or for the benefit of
any person described in Section 3.21, (ii) knowingly deal in,
or otherwise engage in any transaction relating to, any property or interests
in property blocked pursuant to the Executive Order or any other Anti-Terrorism
Law, or (iii) knowingly engage in or conspire to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and
the Loan Parties shall deliver to the Lenders any certification or other
evidence requested from time to time by any Lender in its reasonable
discretion, confirming the Loan Parties’ compliance with this Section 6.18).

 

(b)                                 Cause
or permit any of the funds of such Loan Party that are used to repay the Loans
to be derived from any unlawful activity with the result that the making of the
Loans would be in violation of any Requirement of Law.

 

SECTION 6.19  Embargoed Person. 
Cause or permit (a) any of the funds or properties of the Loan
Parties that are used to repay the Loans to constitute property of, or be
beneficially owned directly or indirectly by, any person subject to sanctions
or trade restrictions under United States law (“Embargoed Person” or “Embargoed
Persons”) that is identified on (1) the “List of Specially Designated
Nationals and Blocked Persons” maintained by OFAC and/or on any other similar
list maintained by OFAC pursuant to any authorizing statute including, but not
limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701
et seq., The Trading with the
Enemy Act, 50 U.S.C. App. 1 et seq.,
and any Executive Order or Requirement of Law promulgated thereunder, with the
result that the investment in the Loan Parties (whether directly or indirectly)
is prohibited by a Requirement of Law, or the Term Loans made by the Lenders
would be in violation of a Requirement of Law, or (2) the Executive Order,
any related enabling legislation or any other similar Executive Orders or (b) any
Embargoed Person to have any direct or indirect interest, of any nature
whatsoever in the Loan Parties, with the result that the investment in the Loan
Parties (whether directly or indirectly) is prohibited by a Requirement of Law
or the Term Loans are in violation of a Requirement of Law.

 

SECTION 6.20  Inactive Subsidiaries.  Cause or permit any of the Inactive
Subsidiaries to become active, conduct business or hold assets in an amount
exceeding $250,000 in the aggregate.

 

ARTICLE VII.

 

GUARANTEE

 

SECTION 7.01  The Guarantee. 
The Guarantors hereby jointly and severally guarantee, as a primary
obligor and not as a surety to each Secured Party and their respective
successors and assigns, the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the principal of and interest
(including any interest, fees, costs or charges that would accrue but for the
provisions of the Title 11 of the United States Code after any bankruptcy or
insolvency petition under Title 11 of the United States Code) on the Term Loans
made by the Lenders to, and the Notes held by each Lender of, Borrowers, and
all other

 

82

 

Obligations from time to time owing to the
Secured Parties by any Loan Party under any Loan Document or Lender Hedging
Agreement relating to the Term Loans, in each case strictly in accordance with
the terms thereof (such obligations being herein collectively called the “Guaranteed
Obligations”).  The Guarantors hereby
jointly and severally agree that if any Borrower or other Guarantor(s) shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.

 

SECTION 7.02  Obligations Unconditional.  The obligations of the Guarantors under Section 7.01
shall constitute a guaranty of payment and are absolute, irrevocable and
unconditional, joint and several, irrespective of the value, genuineness,
validity, regularity or enforceability of the Guaranteed Obligations of
Borrowers under this Agreement, the Notes, if any, or any other agreement or
instrument referred to herein or therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law, irrespective
of any other circumstance whatsoever that might otherwise constitute a legal or
equitable discharge or defense of a surety or Guarantor (except for payment in
full).  Without limiting the generality
of the foregoing, it is agreed that the occurrence of any one or more of the
following shall not alter or impair the liability of the Guarantors hereunder
which shall remain absolute, irrevocable and unconditional under any and all
circumstances as described above:

 

(a)                                  the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Loan Document or any other agreement,
document or instrument to which a Borrower is or may become a party;

 

(b)                                 the
absence of any action to enforce this Agreement or any other Loan Document or
the waiver or consent by Administrative Agent and Lenders with respect to any
of the provisions thereof;

 

(c)                                  the
existence, value or condition of, or failure to perfect its Lien against, any
security for the Obligations or any action, or the absence of any action, by
Administrative Agent and Lenders in respect thereof (including the release of
any such security);

 

(d)                                 the
insolvency of a Borrower or any other Guarantor;

 

(e)                                  at
any time or from time to time, without notice to the Guarantors, the time for
any performance of or compliance with any of the Guaranteed Obligations shall
be extended, or such performance or compliance shall be waived;

 

(f)                                    any
of the acts mentioned in any of the provisions of this Agreement or the Notes,
if any, or any other agreement or instrument referred to herein or therein
shall be done or omitted;

 

83

 

(g)                                 the
maturity of any of the Guaranteed Obligations shall be accelerated, or any of
the Guaranteed Obligations shall be amended in any respect, or any right under
the Loan Documents or any other agreement or instrument referred to herein or
therein shall be amended or waived in any respect or any other guarantee of any
of the Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;

 

(h)                                 any
lien or security interest granted to, or in favor of, any Lender or Agent as
security for any of the Guaranteed Obligations shall fail to be perfected;

 

(i)                                     the
release of a Borrower or any other Guarantor; or

 

(j)                                     any
other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor (other than
indefeasible payment in full in cash of all Obligations and the termination of
all Commitments).

 

The Guarantors hereby expressly waive diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that any
Secured Party exhaust any right, power or remedy or proceed against a Borrower
under this Agreement or the Notes, if any, or any other agreement or instrument
referred to herein or therein, or against any other Person under any other
guarantee of, or security for, any of the Guaranteed Obligations.  The Guarantors waive any and all notice of
the creation, renewal, extension, waiver, termination or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by any Secured Party
upon this Guarantee or acceptance of this Guarantee, and the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred in reliance upon this Guarantee, and all
dealings between Borrowers and the Secured Parties shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee.  This Guarantee shall be
construed as a continuing, absolute, irrevocable and unconditional guarantee of
payment without regard to any right of offset with respect to the Guaranteed
Obligations at any time or from time to time held by Secured Parties, and the
obligations and liabilities of the Guarantors hereunder shall not be
conditioned or contingent upon the pursuit by the Secured Parties or any other
Person at any time of any right or remedy against Borrowers or against any
other Person which may be or become liable in respect of all or any part of the
Guaranteed Obligations or against any collateral security or guarantee therefor
or right of offset with respect thereto. 
This Guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Guarantors and the
successors and assigns thereof, and shall inure to the benefit of the Lenders,
and their respective successors and assigns, notwithstanding that from time to
time during the term of this Agreement there may be no Guaranteed Obligations
outstanding.

 

SECTION 7.03  Reinstatement. 
The obligations of the Guarantors under this Article VII
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of a Borrower or other Loan Party in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise. 
The Guarantors jointly and severally agree that they will indemnify each
Secured Party on demand for all reasonable costs and expenses (including
reasonable fees of counsel) incurred by such Secured Party in

 

84

 

connection with such rescission or
restoration, including any such costs and expenses incurred in defending
against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law, other than any costs or expenses resulting from the bad faith or
willful misconduct of such Secured Party.

 

SECTION 7.04  Subrogation; Subordination.  Each Guarantor hereby agrees that until the
indefeasible payment and satisfaction in full in cash of all Guaranteed
Obligations and the expiration and termination of the Commitments of the
Lenders under this Agreement it shall not exercise any right or remedy arising
by reason of any performance by it of its guarantee in Section 7.01,
whether by subrogation or otherwise, against a Borrower or any other Guarantor
of any of the Guaranteed Obligations or any security for any of the Guaranteed
Obligations.  The payment of any amounts
due with respect to any Indebtedness of Borrowers or any other Guarantor now or
hereafter owing to any Guarantor or Borrowers by reason of any payment by such
Guarantor under the Guarantee in this Article VII is hereby
subordinated to the prior indefeasible payment in full in cash of the
Guaranteed Obligations.  In addition, any
Indebtedness of the Guarantors now or hereafter held by any Guarantor is hereby
subordinated in right of payment in full in cash to the Guaranteed Obligations.  Each Guarantor agrees that it will not
demand, sue for or otherwise attempt to collect any such Indebtedness of
Borrowers to such Guarantor until the Obligations shall have been indefeasibly
paid in full in cash.  If,
notwithstanding the foregoing sentence, any Guarantor shall prior to the
indefeasible payment in full in cash of the Guaranteed Obligations collect,
enforce or receive any amounts in respect of such Indebtedness, such amounts
shall be collected, enforced and received by such Guarantor as trustee for the
Secured Parties and be paid over to Administrative Agent on account of the
Guaranteed Obligations without affecting in any manner the liability of such
Guarantor under the other provisions of the guaranty contained herein.

 

SECTION 7.05  Remedies. 
The Guarantors jointly and severally agree that, as between the
Guarantors and the Lenders, the obligations of Borrowers under this Agreement
and the Notes, if any, may be declared to be forthwith due and payable as
provided in Article XI (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Article XI)
for purposes of Section 7.01, notwithstanding any stay, injunction
or other prohibition preventing such declaration (or such obligations from
becoming automatically due and payable) as against Borrowers and that, in the
event of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and
payable by Borrowers) shall forthwith become due and payable by the Guarantors
for purposes of Section 7.01.

 

SECTION 7.06  Instrument for the Payment of Money.  Each Guarantor hereby acknowledges that the
guarantee in this Article VII constitutes an instrument for the
payment of money, and consents and agrees that any Lender or Agent, at its sole
option, in the event of a dispute by such Guarantor in the payment of any
moneys due hereunder, shall have the right to bring a motion-action under New
York CPLR Section 3213.

 

SECTION 7.07  Continuing Guarantee.  The guarantee in this Article VII
is a continuing guarantee of payment, and shall apply to all Guaranteed
Obligations whenever arising.

 

85

 

SECTION 7.08  General Limitation on Guarantee Obligations.  In any action or proceeding involving any state
corporate law, or any state, federal or foreign bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of any Guarantor under Section 7.01 would otherwise be
held or determined to be void, voidable, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 7.01, then, notwithstanding any other
provision to the contrary, the amount of such liability shall, without any
further action by such Guarantor, any Loan Party or any other Person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.

 

ARTICLE VIII.

 

EVENTS
OF DEFAULT

 

SECTION 8.01  Events of Default. 
In case of the happening of any of the following events (“Events of
Default”):

 

(a)                                  default
shall be made in the payment of any principal of any Term Loan when and as the
same shall become due and payable, whether at the due date thereof (including a
Term Loan Repayment Date) or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;

 

(b)                                 default
shall be made in the payment of any interest on any Term Loan or any Fee or any
other amount (other than an amount referred to in (a) above) due under any
Loan Document, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of three Business Days;

 

(c)                                  any
representation or warranty made or deemed made in or in connection with any
Loan Document or the borrowings hereunder, or any representation, warranty,
statement or information contained in any report, certificate, financial
statement or other instrument furnished in connection with or pursuant to any
Loan Document, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished; it being recognized by Lenders,
however, that projections as to future events are not to be viewed as facts and
that the actual results during the period or periods covered by said
projections may differ from the projected results;

 

(d)                                 (i) default
shall be made in the due observance or performance by any Company of any
covenant, condition or agreement contained in Section 5.02, 5.03(a) or
5.08 or in Article VI or (ii) default shall be made in
the due observance or performance by any Company of any covenant, condition or
agreement contained in Section 5.07 and such default shall continue
unremedied or shall not be waived for a period of 5 Business Days;

 

(e)                                  default
shall be made in the due observance or performance by any Company of any
covenant, condition or agreement contained in any Loan Document (other than
those specified in (a), (b) or (d) above) and such default shall
continue

 

86

 

unremedied or shall not be
waived for a period of 20 days after written notice thereof from the
Administrative Agent or any Lender to Borrowers;

 

(f)                                    (i) an
“Event of Default” under, and as defined in the Revolving Credit Agreement,
shall occur; provided that, if
the “Event of Default” under the Revolving Credit Agreement is anything other
than a failure to make a payment when and as the same shall become due and
payable, it shall not constitute an Event of Default pursuant to this clause (i) unless
and until the Revolving Credit Indebtedness shall have been accelerated; or (ii) any
Company shall (x) fail to pay any principal or interest, regardless of
amount, due in respect of any Indebtedness (other than the Obligations), when
and as the same shall become due and payable, or (y) fail to observe or
perform any other term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any such Indebtedness if the
effect of any failure referred to in this subclause (y) causes such
Indebtedness to become due prior to its stated maturity or become subject to a
mandatory offer to purchase by the obligor; provided
that it shall not constitute an Event of Default pursuant to this clause (ii) unless
the aggregate amount of all such Indebtedness referred to in
subclauses (x) and (y) exceeds $2.5 million at any one time;

 

(g)                                 an
involuntary proceeding shall be commenced or an involuntary petition shall be
filed in a court of competent jurisdiction seeking (i) relief in respect
of any Company, or of a substantial part of the Property or assets of any
Company, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other federal, state or foreign bankruptcy,
insolvency, receivership or similar law; (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
any Company or for a substantial part of the Property or assets of any Company;
or (iii) the winding-up or liquidation of any Company; and, in any such
case, such proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing shall be
entered;

 

(h)                                 any
Company shall (i) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other federal, state or foreign
bankruptcy, insolvency, receivership or similar law; (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (g) above; (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Company or for a
substantial part of the Property or assets of any Company; (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding; (v) make a general assignment for the benefit of
creditors; (vi) become unable (after taking into account all rights of
contribution), admit in writing its inability or fail generally to pay its
debts as they become due; (vii) take any action for the purpose of
effecting any of the foregoing; or (viii) wind up or liquidate, except as
expressly allowed under Section 6.05(j);

 

(i)                                     one
or more judgments for the payment of money in an aggregate amount in excess of
$2.5 million shall be rendered against any Company or any combination thereof and
the same shall remain undischarged for a period of 30 consecutive days

 

87

 

during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of any Company to enforce any such
judgment;

 

(j)                                     an
ERISA Event shall have occurred that, in the opinion of the Required Lenders,
when taken together with all other such ERISA Events that have occurred, could
reasonably be expected to result in liability of any Company and its ERISA
Affiliates in an aggregate amount exceeding $2.5 million or the imposition of a
Lien on any assets of a Company;

 

(k)                                  any
security interest and Lien purported to be created by any Security Document
shall cease to be in full force and effect, or shall cease to give the
Administrative Agent, for the benefit of the Secured Parties, the Liens,
rights, powers and privileges purported to be created and granted under such
Security Documents (including a perfected first priority security interest in
and Lien on, all of the Collateral thereunder (except as otherwise expressly
provided in such Security Document)) in favor of the Administrative Agent, or
shall be asserted by a Borrower or any other Loan Party not to be, a valid,
perfected, first priority (except as otherwise expressly provided in this
Agreement or such Security Document) security interest in or Lien on the
Collateral covered thereby;

 

(l)                                     the
Guarantees shall cease to be in full force and effect, unless in connection
with the sale, merger or dissolution of a Guarantor to the extent permitted
under Section 6.05 hereof;

 

(m)                               any
Loan Document or any material provisions thereof shall at any time and for any
reason be declared by a court of competent jurisdiction to be null and void, or
a proceeding shall be commenced by any Loan Party or any other Person, or by
any Governmental Authority, seeking to establish the invalidity or
unenforceability thereof (exclusive of questions of interpretation of any
provision thereof), or any Loan Party shall repudiate or deny that it has any
liability or obligation for the payment of principal or interest or other
obligations purported to be created under any Loan Document;

 

(n)                                 there
shall have occurred a Change in Control;

 

(o)                                 any
Loan Party shall be prohibited or otherwise restrained from conducting the
business theretofore conducted by it in any manner that has or could reasonably
be expected to result in a Material Adverse Effect by virtue of any
determination, ruling, decision, decree or order of any court or Governmental
Authority of competent jurisdiction; or

 

(p)                                 the
indictment by any Governmental Authority of any Loan Party as to which any Loan
Party or Administrative Agent receives notice as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Administrative Agent, under any criminal statute, or commencement of criminal
or civil proceedings against any Loan Party pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral having a

 

88

 

value in excess of $1.0 million
or (ii) any other Property of any Loan Party which is necessary or
material to the conduct of its business;

 

then, and in every such event (other than an event with respect to
Holdings or Borrowers described in paragraph (g) or (h) above),
and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by
notice to Borrowers, take either or both of the following actions, at the same
or different times:  (i) terminate
forthwith the Commitments and (ii) declare the Term Loans then outstanding
to be forthwith due and payable in whole or in part, whereupon the principal of
the Term Loans so declared to be due and payable, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of
Borrowers accrued hereunder and under any other Loan Document, shall become
forthwith due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by Borrowers and
the Guarantors, anything contained herein or in any other Loan Document to the
contrary notwithstanding; and in any event, with respect to Holdings or
Borrowers described in paragraph (g) or (h) above, the
Commitments shall automatically terminate and the principal of the Term Loans
then outstanding, together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of Borrowers accrued hereunder and under any
other Loan Document, shall automatically become due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Borrowers and the Guarantors, anything contained
herein or in any other Loan Document to the contrary notwithstanding.

 

SECTION 8.02  Application of Proceeds.  Subject to the provisions of the
Intercreditor Agreement, the proceeds received by the Administrative Agent in
respect of any sale of, collection from or other realization upon all or any
part of the Collateral pursuant to the exercise by the Administrative Agent of
its remedies shall be applied, together with any other sums then held by the
Administrative Agent pursuant to this Agreement, promptly by the Administrative
Agent as follows:

 

(a)                                  First,
to the payment of the reasonable costs and expenses, fees, commissions and
taxes of such sale, collection or other realization incurred or due to the
Administrative Agent and its agents and counsel, and all expenses, liabilities
and advances made or incurred by the Administrative Agent in connection
therewith, together with interest on each such amount at the highest rate then
in effect under this Agreement from and after the date such amount is due,
owing or unpaid until paid in full;

 

(b)                                 Second,
to the payment of all other reasonable costs and expenses of such sale,
collection or other realization including, without limitation, costs and
expenses and all costs, liabilities and advances made or incurred by the other
Secured Parties in connection therewith, together with interest on each such
amount at the highest rate then in effect under this Agreement from and after the
date such amount is due, owing or unpaid until paid in full;

 

(c)                                  Third,
without duplication of amounts applied pursuant to clauses (a) and (b) above,
to the indefeasible payment in full in cash, of all Obligations constituting
accrued interest, payable to the Lenders hereunder, equally and ratably;

 

89

 

(d)                                 Fourth,
without duplication of amounts applied pursuant to clauses (a) and (b) above, to the indefeasible payment in full in
cash of the outstanding principal amount of
the Term Loans;

 

(e)                                  Fifth, to the indefeasible payment in full in
cash of any Obligations due to any Lender under a Lender Hedging Agreement permitted by this Agreement;

 

(f)                                    Sixth,
to the payment of all other Obligations; and

 

(g)                                 Seventh,
the balance, if any, to the Person lawfully entitled thereto (including the
applicable Loan Party or its successors or assigns).

 

In carrying out the foregoing, (a) amounts received shall be
applied in the numerical order provided until exhausted prior to application to
the next succeeding category; (b) each of the Lenders shall receive an
amount equal to its pro rata share (based on the proportion that its then
outstanding Term Loans, and obligations
outstanding under the Lender Hedging Agreements permitted by this Agreement
bears to the aggregate then outstanding Term Loans, and obligations outstanding
under the Lender Hedging Agreements) of amounts available to be applied
pursuant to clauses “Third”, “Fourth” and “Fifth” above.

 

ARTICLE IX.

 

THE
ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT

 

SECTION 9.01  Appointment and Authority.  Each of the Lenders hereby irrevocably
appoints UBS AG, Stamford Branch, to act on its behalf as the Administrative
Agent and the Collateral Agent hereunder and under the other Loan Documents and
authorizes such Agents to take such actions on its behalf and to exercise such
powers as are delegated to such Agents by the terms hereof or thereof, together
with such actions and powers as are reasonably incidental thereto.  The provisions of this Article are
solely for the benefit of the Administrative Agent, the Collateral Agent and
the Lenders, and neither Borrower nor any other Loan Party shall have rights as
a third party beneficiary of any of such provisions.

 

SECTION 9.02  Rights as a Lender. 
Each person serving as an Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the
same as though it were not an Agent and the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated or unless the context otherwise requires,
include each person serving as an Agent hereunder in its individual
capacity.  Such person and its Affiliates
may accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with
Borrowers or any Subsidiary or other Affiliate thereof as if such person were
not an Agent hereunder and without any duty to account therefor to the Lenders.  The Lenders hereby acknowledge that the
Administrative Agent is also acting as the administrative agent under the
Revolving Credit Documents.

 

SECTION 9.03  Exculpatory Provisions.  No Agent shall have any duties or obligations
except those expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the
foregoing, no Agent:

 

90

 

(i)                                     shall be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing;

 

(ii)                                  shall have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby or by the other Loan Documents
that such Agent is required to exercise as directed in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be
expressly provided for herein or in the other Loan Documents); provided that such Agent shall not be
required to take any action that, in its judgment or the judgment of its
counsel, may expose such Agent to liability or that is contrary to any Loan
Document or applicable Requirements of Law; and

 

(iii)                               shall, except as expressly set forth
herein and in the other Loan Documents, have any duty to disclose, and shall
not be liable for the failure to disclose, any information relating to
Borrowers or any of their Affiliates that is communicated to or obtained by the
person serving as such Agent or any of its Affiliates in any capacity.

 

No Agent shall be liable for any action taken or not taken by it
(x) with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary, or as such
Agent shall believe in good faith shall be necessary, under the circumstances
as provided in Section 10.02) or (y) in the absence of its own
gross negligence or willful misconduct. 
No Agent shall be deemed to have knowledge of any Default unless and
until notice describing such Default is given to such Agent by Borrowers or a
Lender.

 

No Agent shall be responsible for or have any duty to ascertain or
inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance
or observance of any of the covenants, agreements or other terms or conditions
set forth herein or therein or the occurrence of any Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to such Agent.  Without
limiting the generality of the foregoing, the use of the term “agent” in this
Agreement with reference to the Administrative Agent or the Collateral Agent is
not intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law.  Instead, such term us used merely as a matter
of market custom and is intended to create or reflect only an administrative
relationship between independent contracting parties.

 

SECTION 9.04  Reliance by Agent. 
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed
by it to be genuine and to have been signed, sent or otherwise authenticated by
the proper person.  Each Agent also may
rely upon any statement made to it orally or by telephone and believed by it to
have been made by the proper person, and shall not incur any liability for
relying thereon.  In determining
compliance with any condition hereunder to the making of a Term Loan, that by
its terms must be fulfilled to the satisfaction of

 

91

 

a Lender, the Administrative Agent may
presume that such condition is satisfactory to such Lender unless the
Administrative Agent shall have received notice to the contrary from such
Lender prior to the making of such Term Loan. 
Each Agent may consult with legal counsel (who may be counsel for
Borrowers), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

 

SECTION 9.05  Delegation of Duties.  Each Agent may perform any and all of its
duties and exercise its rights and powers hereunder or under any other Loan
Document by or through any one or more sub-agents appointed by such Agent.  Each Agent and any such sub-agent may perform
any and all of its duties and exercise its rights and powers by or through
their respective Related Parties.  The
exculpatory provisions of this Article shall apply to any such sub-agent
and to the Related Parties of each Agent and any such sub-agent, and shall
apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as Agent.

 

SECTION 9.06  Resignation of Agent.  The Administrative Agent and/or Collateral
Agent may resign as such at any time upon at least 30 days’ prior notice to the
Lenders and Borrowers.  Upon any such
resignation, the Required Lenders shall have the right, in consultation with
Borrowers, to appoint a successor from among the Lenders.  If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent and/or Collateral Agent, as applicable,
gives notice of its resignation, then the retiring Administrative Agent and/or
Collateral Agent, as applicable may, on behalf of the Lenders, appoint a
successor Administrative Agent and/or Collateral Agent, as applicable, which
successor shall be a commercial banking institution organized under the laws of
the United States (or any state thereof) or a United States branch or agency of
a commercial banking institution, and having combined capital and surplus of at
least $250.0 million; provided, however, that if such retiring
Administrative Agent and/or Collateral Agent, as applicable is unable to find a
commercial banking institution which is willing to accept such appointment and
which meets the qualifications set forth above, the retiring Administrative
Agent’s and/or Collateral Agent’s resignation shall nevertheless thereupon
become effective, and the Lenders shall assume and perform all of the duties of
the Administrative Agent and/or Collateral Agent, as applicable hereunder until
such time, if any, as the Required Lenders appoint a successor Administrative
Agent and/or Collateral Agent, as applicable.

 

Upon the acceptance of its appointment as Administrative Agent and/or
Collateral Agent, as applicable, hereunder by a successor, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent and/or Collateral Agent, as applicable,
and the retiring Administrative Agent and/or Collateral Agent, as applicable,
shall be discharged from its duties and obligations hereunder.  The fees payable by Borrowers to a successor
Administrative Agent and/or Collateral Agent, as applicable, shall be the same
as those payable to its predecessor unless otherwise agreed between Borrowers
and such successor.  After the
Administrative Agent’s and/or Collateral Agent’s resignation hereunder, the
provisions of this Article IX and Section 10.03 shall
continue in effect for the benefit of such retiring Administrative Agent and/or
Collateral Agent, as applicable, its respective sub-agents and their respective
Affiliates in respect of any actions taken or omitted to

 

92

 

be taken by
any of them while it was acting as Administrative Agent and/or Collateral
Agent, as applicable.

 

SECTION 9.07  Non-Reliance on Agent and Other Lenders.  Each Lender acknowledges that it has,
independently and without reliance upon any Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will,
independently and without reliance upon any Agent or any other Lender and based
on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or any related
agreement or any document furnished hereunder or thereunder.

 

SECTION 9.08  No Other Duties, etc.  The Lenders identified in this Agreement, the
Syndication Agent and the Documentation Agent shall not have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders.  Without
limiting the foregoing, neither the Syndication Agent nor the Documentation
Agent shall have or be deemed to have a fiduciary relationship with any
Lender.  Each Lender hereby makes the
same acknowledgments with respect to the Syndication Agent and the
Documentation Agent as it makes with respect to the Administrative Agent or the
Collateral Agent or any other Lender in this Article IX.  Notwithstanding the foregoing, the parties
hereto acknowledge that the Syndication Agent and the Documentation Agent hold
such titles in name only, and that such titles confer no additional rights or
obligations relative to those conferred on any Lender hereunder.

 

SECTION 9.09  Indemnification. 
The Lenders severally agree to indemnify each Agent in its capacity as
such (to the extent not reimbursed by the Borrowers or the Guarantors and
without limiting the obligation of the Borrowers or the Guarantors to do so),
ratably according to their respective outstanding Loans and Commitments in
effect on the date on which indemnification is sought under this Section 9.09
(or, if indemnification is sought after the date upon which all Commitments
shall have terminated and the Loans shall have been paid in full, ratably in
accordance with such outstanding Loans and Commitments as in effect immediately
prior to such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever that may at any time (whether before or
after the payment of the Loans) be imposed on, incurred by or asserted against
such Agent in any way relating to or arising out of, the Commitments, this
Agreement, any of the other Loan Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by such Agent under or in connection
with any of the foregoing; provided that no Lender shall be liable for
the payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements that are
found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from such Agent’s gross negligence or willful
misconduct.  The agreements in this Section 9.09
shall survive the payment of the Loans and all other amounts payable hereunder.

 

93

 

ARTICLE X.

 

MISCELLANEOUS

 

SECTION 10.01  Notices.

 

(a)                                  Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in paragraph (b) below), all notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy as
follows:

 

(i)                  if to any Loan Party, to Holdings
at:

 

Department 56, Inc.

One Village Place

6436 City West Parkway

Eden Prairie, MN 55344

Attention: 
Timothy J. Schugel, CFO

Telecopy No.: 952-943-4495

 

(ii)               if to the Administrative Agent or the Collateral
Agent, to it at:

 

UBS AG, Stamford Branch

677 Washington Boulevard

Stamford, Connecticut 06901

Attention: 
Vladimira Holeckova

Telecopy No.: 
203-719-4176

 

with a copy to:

 

Winston & Strawn LLP

200 Park Avenue

New York, New York 10166

Attention: William D. Brewer

Telecopy No.: (212) 294-4700

 

(iii)            if to a Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.

 

Notices sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received;
notices sent by telecopy shall be deemed to have been given when sent if
confirmation of delivery is received (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the
opening of business on the next business day for the recipient).  Notices delivered through electronic
communications shall be effective as provided in paragraph (b) below.

 

(b)                                 Electronic
Communications.  Notices and other
communications to the Lenders hereunder may (subject to Section 10.01(d))
be delivered or furnished by electronic

 

94

 

communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by the Administrative Agent; provided
that the foregoing shall not apply to notices to any Lender pursuant to Article II
if such Lender has notified the Administrative Agent that it is incapable of
receiving notices under such Article by electronic communication.  The Administrative Agent, the Collateral
Agent or Borrowers may, in their discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it (including as set forth in Section 10.01(d));
provided that approval of such
procedures may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise prescribes, (i) notices
and other communications sent to an e-mail address shall be deemed received
upon the sender’s receipt of an acknowledgement from the intended recipient
(such as by the “return receipt requested” function, as available, return
e-mail or other written acknowledgement); provided
that if such notice or other communication is not sent during the normal
business hours of the recipient, such notice or communication shall be deemed
to have been sent at the opening of business on the next business day for the
recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

 

(c)                                  Change
of Address, Etc.  Any party hereto
may change its address or telecopier number for notices and other
communications hereunder by notice to the other parties hereto.

 

(d)                                 Posting.   Each Loan Party hereby agrees that it will
provide to the Administrative Agent all information, documents and other
materials that it is obligated to furnish to the Administrative Agent pursuant
to this Agreement and any other Loan Document, including all notices, requests,
financial statements, financial and other reports, certificates and other
information materials, but excluding any such communication that (i) relates
to a request for a new, or a conversion of an existing, Term Borrowing or other
extension of credit (including any election of an interest rate or interest
period relating thereto), (ii) relates to the payment of any principal or
other amount due under this Agreement prior to the scheduled date therefor, (iii) provides
notice of any Default under this Agreement or (iv) is required to be
delivered to satisfy any condition precedent to the effectiveness of this
Agreement and/or any borrowing or other extension of credit hereunder (all such
non-excluded communications, collectively, the “Communications”), by transmitting the Communications in an
electronic/soft medium in a format reasonably acceptable to the Administrative
Agent at such e-mail address(es) provided to Borrowers from time to time or in
such other form, including hard copy delivery thereof, as the Administrative
Agent shall require.  In addition, each
Loan Party agrees to continue to provide the Communications to the
Administrative Agent in the manner specified in this Agreement or any other
Loan Document or in such other form, including hard copy delivery thereof, as
the Administrative Agent shall require. 
Nothing in this Section 10.01 shall prejudice the right of
the Agents, any Lender or any Loan Party to give any notice or other
communication pursuant to this Agreement or any other Loan Document in any
other manner specified in this Agreement or any other Loan Document or as any
such Agent shall require.

 

To the extent consented to by the Administrative Agent in writing from
time to time, Administrative Agent agrees that receipt of the Communications by
the Administrative Agent at

 

95

 

its e-mail
address(es) provided to Borrowers shall constitute effective delivery of the
Communications to the Administrative Agent for purposes of the Loan Documents; provided that Borrowers shall also deliver
to the Administrative Agent an executed original of each Compliance Certificate
required to be delivered hereunder.

 

Each Loan Party further agrees that Administrative Agent may make the
Communications available to the Lenders by posting the Communications on
Intralinks or a substantially similar electronic transmission system (the “Platform”). 
The Platform is provided “as is” and “as available.”  The Agents do not warrant the accuracy or
completeness of the Communications, or the adequacy of the Platform and
expressly disclaim liability for errors or omissions in the communications.  No warranty of any kind, express, implied or
statutory, including, without limitation, any warranty of merchantability,
fitness for a particular purpose, non-infringement of third party rights or
freedom from viruses or other code defects, is made by any Agent in connection
with the Communications or the Platform. 
In no event shall the Administrative Agent or any of its Related Parties
have any liability to the Loan Parties, any Lender or any other person for
damages of any kind, including direct or indirect, special, incidental or consequential
damages, losses or expenses (whether in tort, contract or otherwise) arising
out of any Loan Party’s or the Administrative Agent’s transmission of
communications through the Internet, except to the extent the liability of such
person is found in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from such person’s gross negligence or willful
misconduct.

 

SECTION 10.02  Waivers; Amendment.

 

(a)                                  Generally.  No failure or delay by any Agent or any
Lender in exercising any right or power hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.  The rights and remedies of each Agent and the
Lenders hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of any Loan
Document or consent to any departure by any Loan Party therefrom shall in any
event be effective unless the same shall be permitted by this Section 10.02,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. 
Without limiting the generality of the foregoing, the making of a Term
Loan shall not be construed as a waiver of any Default, regardless of whether
any Agent, any Lender may have had notice or knowledge of such Default at the
time.  No notice or demand on Borrowers
in any case shall entitle Borrowers to any other or further notice or demand in
similar or other circumstances.

 

(b)                                 Required
Consents.  Subject to Section 10.02(c),
neither this Agreement nor any other Loan Document nor any provision hereof or
thereof may be waived, amended, supplemented or modified except, in the case of
this Agreement, pursuant to an agreement or agreements in writing entered into
by Borrowers and the Required Lenders or, in the case of any other Loan
Document, pursuant to an agreement or agreements in writing entered into by the
Administrative Agent, the Collateral Agent, as applicable, and the Loan Party
or Loan Parties that are party thereto, in each case with the written consent
of the Required Lenders; provided
that no such agreement shall be effective if the effect thereof would:

 

96

 

(i)                                     increase the Commitment of any
Lender without the written consent of such Lender (it being understood that no
amendment, modification, termination, waiver or consent with respect to any
condition precedent, covenant or Default shall constitute an increase in the
Commitment of any Lender);

 

(ii)                                  reduce the principal amount of any
Term Loan, or reduce the rate of interest thereon (other than interest pursuant
to Section 2.06(c)), or reduce any Fees payable hereunder, or
change the form or currency of payment of any Obligation, without the written
consent of each Lender directly affected thereby (it being understood that any
amendment or modification to the financial definitions in this Agreement shall
not constitute a reduction in the rate of interest for purposes of this
clause (ii));

 

(iii)                               (A) change the scheduled final
maturity of any Term Loan, or any scheduled date of payment of or the
installment otherwise due on the principal amount of any Term Loan under Section 2.09,
(B) postpone the date for payment of any interest or fees payable
hereunder, (C) change the amount of, waive or excuse any such payment
(other than waiver of any increase in the interest rate pursuant to Section 2.06(c)),
or (D) postpone the scheduled date of expiration of any Commitment beyond
the Term Loan Maturity Date, in any case, without the written consent of each
Lender directly affected thereby;

 

(iv)                              increase the maximum duration of
Interest Periods hereunder, without the written consent of each Lender directly
affected thereby;

 

(v)                                 permit the assignment or delegation
by Borrowers of any of their rights or obligations under any Loan Document,
without the written consent of each Lender;

 

(vi)                              release Holdings or all or
substantially all of the Subsidiary Guarantors from their Guarantee, or limit
their liability in respect of such Guarantee, without the written consent of
each Lender;

 

(vii)                           release all or a substantial portion
of the Collateral from the Liens of the Security Documents or alter the
relative priorities of the Obligations entitled to the Liens of the Security
Documents, in each case without the written consent of each Lender;

 

(viii)                        change Section 2.14(b), (c) or
(d) in a manner that would alter the pro rata sharing of payments or setoffs required thereby or
any other provision in a manner that would alter the pro rata allocation among the Lenders of Term Loan
disbursements, without the written consent of each Lender directly affected
thereby;

 

(ix)                                change any provision of this Section 10.02(b) or
Section 10.02(c), without the written consent of each Lender
directly affected thereby;

 

(x)                                   change the percentage set forth in
the definition of “Required Lenders” or any other provision of any Loan
Document (including this Section) specifying the number or percentage of
Lenders required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender, other than to increase such percentage or number or to

 

97

 

give
any additional Lender or group of Lenders such right to waive, amend or modify
or make any such determination or grant any such consent; or

 

(xi)                                change or waive any provision of Article IX
as the same applies to any Agent, or any other provision hereof as the same
applies to the rights or obligations of any Agent, in each case without the
written consent of such Agent;

 

provided, further, that

 

(1)                                  any waiver, amendment or
modification prior to the completion of the primary syndication of the
Commitments and Term Loans (as determined by the Arranger) may not be effected
without the written consent of the Arranger; and

 

(2)                                  any waiver, amendment or
modification of the Intercreditor Agreement (and any related definitions) may
be effected without the consent of any Loan Party, so long as such amendment,
waiver or modification does not impose any additional duties or obligations on
the Loan Parties or alter or impair any right of any Loan Party under the Loan
Documents.

 

(c)                                  Dissenting
Lenders.  If, in connection with any
proposed change, waiver, discharge or termination of the provisions of this
Agreement as contemplated by Section 10.02(b), the consent of the
Required Lenders is obtained but the consent of one or more of such other
Lenders whose consent is required is not obtained, then Borrowers shall have
the right to replace all, but not less than all, of such non-consenting Lender
or Lenders (so long as all non-consenting Lenders are so replaced) with one or
more persons pursuant to Section 2.16 so long as at the time of
such replacement each such new Lender consents to the proposed change, waiver,
discharge or termination; provided, however, that Borrowers shall
not have the right to replace a Lender solely as a result of the exercise of
such Lender’s rights (and the withholding of any required consent by such
Lender) pursuant to paragraph (iii) of Section 10.02(b);
provided further that each replaced Lender receives payment in full of
the principal of and interest accrued on each Loan made by it and all other
amounts owing to it or accrued for its account under this Agreement.

 

SECTION 10.03  Expenses; Indemnity; Damage Waiver.

 

(a)                                  Costs
and Expenses.  The Loan Parties
agree, jointly and severally, to pay all reasonable out-of-pocket expenses
(including but not limited to expenses incurred in connection with due
diligence and travel, courier, reproduction, printing and delivery expenses)
incurred by the Administrative Agent and the Collateral Agent in connection
with the syndication of the credit facilities provided for herein and the preparation,
execution and delivery, and administration of this Agreement and the other Loan
Documents, or in connection with any amendments, modifications, enforcement
costs, work-out costs, documentary taxes or waivers of the provisions hereof or
thereof (whether or not the transactions hereby or thereby contemplated shall
be consummated) or incurred by the Administrative Agent and the Collateral
Agent or any Lender in connection with the work-out, enforcement or protection
of its rights in connection with this Agreement and the other Loan Documents or
in connection with the Loans made hereunder, including the fees, charges and
disbursements of counsel for the Administrative

 

98

 

Agent and the
Collateral Agent, and, in connection with any such enforcement or protection,
or work-out, the fees, charges and disbursements of any other counsel for the
Agents or any Lender.

 

(b)                                 Indemnification.  The Loan Parties agree, jointly and
severally, to indemnify the Agents, each Lender, each Affiliate of any of the
foregoing Persons and each of their respective directors, officers, trustees,
employees and agents (each such Person being called an “Indemnitee”)
against, and to hold each Indemnitee harmless from, all reasonable out-of-pocket
costs and any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, charges, expenses and
disbursements, incurred by or asserted against any Indemnitee arising out of,
in any way connected with, or as a result of (i) the Transactions, (ii) any
actual or proposed use of the proceeds of the Loans, (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, or (iii) any actual or
alleged presence or Release or threatened Release of Hazardous Materials, on,
under or from any Property owned, leased or operated by any Company, or any
Environmental Claim related in any way to any Company; provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses are determined by
a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence, bad faith or willful misconduct of such
Indemnitee.

 

(c)                                  Reimbursement
by Lenders.  To the extent that a
Borrower fails to pay any amount required to be paid by it to the Agents under
paragraph (a) or (b) of this Section 10.03, each Lender
severally agrees to pay to the Agents, such Lender’s pro  rata
share (determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against any of the
Agents in its capacity as such.  For
purposes hereof, a Lender’s “pro  rata share” shall be determined
based upon its share of the sum of the total Revolving Exposure and unused
Commitments at the time.

 

(d)                                 Waiver
of Consequential Damages, Etc.  To
the fullest extent permitted by applicable Requirements of Law, no Loan Party
shall assert, and each Loan Party hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any other Loan Document or
any agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby, any Term Loan or the use of the proceeds thereof.  No Indemnitee referred to in paragraph (b) above
shall be liable for any damages arising from the use by unintended recipients
of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby.

 

(e)                                  The
provisions of this Section 10.03 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement,
the consummation of the transactions contemplated hereby, the repayment of any
of the Loans, the expiration of the Commitments, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Agents or any

 

99

 

Lender.  All amounts due under this Section 10.03
shall be payable on written demand therefor accompanied by reasonable
documentation with respect to any reimbursement, indemnification or other
amount requested.

 

SECTION 10.04  Successors and Assigns.

 

(a)                                  Successors
and Assigns Generally.  The provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby, except
that Borrowers may not assign or otherwise transfer any of their rights or
obligations hereunder without the prior written consent of the Administrative
Agent, the Collateral Agent and each Lender and no Lender may assign or
otherwise transfer any of its rights or obligations hereunder except (i) to
an Eligible Assignee in accordance with the provisions of paragraph (b) of
this Section 10.04, (ii) by way of participation in accordance
with the provisions of paragraph (d) of this Section 10.04
or (iii) by way of pledge or assignment of a security interest subject to
the restrictions of paragraph (f) of this Section (and any other
attempted assignment or transfer by Borrowers or any Lender shall be null and
void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any person (other than
the parties hereto, their respective successors and assigns permitted hereby,
Participants to the extent provided in paragraph (d) of this Section and,
to the extent expressly contemplated hereby, the other Indemnitees) any legal
or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)                                 Assignments
by Lenders.  Any Lender may at any
time assign to one or more Eligible Assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Term Loans at the time owing to it); provided that

 

(i)                                     except in the case of any assignment
made in connection with the primary syndication of the Commitment and Term
Loans by the Arranger or an assignment of the entire remaining amount of the
assigning Lender’s Commitment and the Term Loans at the time owing to it or in
the case of an assignment to a Lender or an Affiliate of a Lender or an
Approved Fund with respect to a Lender, the aggregate amount of the Commitment
(which for this purpose includes Term Loans outstanding thereunder) or, if the
applicable Commitment is not then in effect, the principal outstanding balance
of the Term Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such assignment
is delivered to the Administrative Agent or, if “Trade Date” is specified in
the Assignment and Acceptance, as of the Trade Date) shall not be less than
$1.0 million, in the case of any assignment in respect of Term Loans and/or
Term Loan Commitments, unless each of the Administrative Agent and, so long as
no Default has occurred and is continuing, Borrowers otherwise consent (each
such consent not to be unreasonably withheld or delayed);

 

(ii)                                  each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Lender’s
rights and obligations under this Agreement with respect to the Term Loan or
the Commitment assigned; and

 

100

 

(iii)                               the parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Acceptance,
together with a processing and recordation fee of $3,500, and the Eligible
Assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire and such tax forms or information
described in Section 4.01(q) as the Administrative Agent shall
request.

 

Subject to acceptance and recording thereof by the Administrative Agent
pursuant to paragraph (c) of this Section 10.04, from and
after the effective date specified in each Assignment and Acceptance, the
Eligible Assignee thereunder shall be a party to this Agreement and, to the
extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto) but shall continue to be entitled to the
benefits of Sections 2.12, 2.13, 2.15 and 10.03
with respect to facts and circumstances occurring prior to the effective date
of such assignment.  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does
not comply with this paragraph shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with paragraph (d) of this Section 10.04.

 

(c)                                  Register.  The Administrative Agent, acting solely for
this purpose as an agent of Borrowers, shall maintain at one of its offices in
Stamford, Connecticut a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the Lenders,
and the Commitments of, and principal amounts of the Term Loans owing to, each
Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive in the absence of manifest error, and Borrowers, the Administrative
Agent and the Lenders may treat each person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by Borrowers, the Administrative Agent, the Collateral Agent and any
Lender (with respect to its own interest only), at any reasonable time and from
time to time upon reasonable prior notice.

 

(d)                                 Participations.  Any Lender may at any time, without the
consent of, or notice to, Borrowers or the Administrative Agent, sell
participations to any person (other than a natural person or Borrowers or any
of Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”) in all
or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Term Loans owing to
it); provided that (i) such
Lender’s obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) Borrowers, the Administrative
Agent and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement.

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce the Loan Documents and to approve any amendment, modification or waiver
of any provision of the Loan Documents;

 

101

 

provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in clause (i), (ii) or (iii) of the first proviso to Section 10.02(b) that
affects such Participant.  Subject to
paragraph (e) of this Section, Borrowers agree that each Participant
shall be entitled to the benefits of Sections 2.12, 2.13 and 2.15
(subject to the requirements of those Sections) to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. 
To the extent permitted by law, each Participant also shall be entitled
to the benefits of Section 10.08 as though it were a Lender,
provided such Participant agrees to be subject to Section 2.14 as
though it were a Lender.

 

(e)                                  Limitations
on Participant Rights.  A Participant
shall not be entitled to receive any greater payment under Sections 2.12,
2.13 and 2.15 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with Borrowers’ prior
written consent.

 

(f)                                    Certain
Pledges.  Any Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment
shall release such Lender from any of its obligations hereunder or substitute
any such pledgee or assignee for such Lender as a party hereto.  In the case of any Lender that is a fund that
invests in bank loans, such Lender may, without the consent of Borrowers or the
Administrative Agent, collaterally assign or pledge all or any portion of its
rights under this Agreement, including the Term Loans and Notes or any other
instrument evidencing its rights as a Lender under this Agreement, to any
holder of, trustee for, or any other representative of holders of, obligations
owed or securities issued, by such fund, as security for such obligations or
securities.

 

SECTION 10.05  Survival of Agreement.  All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the certificates
or other instruments delivered in connection with or pursuant to this Agreement
or any other Loan Document shall be considered to have been relied upon by the
other parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of any Term Loans, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Agents or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Term Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid and so long as the
Commitments have not expired or terminated. 
The provisions of Sections 2.12, 2.13, 2.15
and Article X shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Term Loans, the expiration or termination the Commitments or
the termination of this Agreement or any provision hereof.

 

SECTION 10.06  Counterparts; Integration; Effectiveness; Electronic Execution.

 

(a)                                  Counterparts;
Integration; Effectiveness.  This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.

 

102

 

This Agreement and the other Loan Documents,
and the Fee Letter, constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Agreement.

 

(b)                                 Electronic
Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and Acceptance
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable Requirement of Law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.

 

SECTION 10.07  Severability. 
Any provision of this Agreement held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

SECTION 10.08  Right of Setoff. 
If an Event of Default shall have occurred and be continuing, each
Lender and each of its Affiliates are hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final, but
excluding trust accounts) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of Borrowers
against any of and all the obligations of Borrowers now or hereafter existing
under this Agreement held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement and although such
obligations may be unmatured.  The rights
of each Lender under this Section 10.08 are in addition to other
rights and remedies (including other rights of setoff) which such Lender may
have.

 

SECTION 10.09  Governing Law; Jurisdiction; Consent to Service of Process.

 

(a)                                  Governing
Law.  This Agreement shall be
construed in accordance with and governed by the law of the State of New York,
without regard to conflicts of law principles that would require the
application of the laws of another jurisdiction.

 

(b)                                 Submission
to Jurisdiction.  Each Loan Party
hereby irrevocably and unconditionally submits, for itself and its Property, to
the nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the Southern
District of New York, and any appellate court from any thereof, in

 

103

 

any action or
proceeding arising out of or relating to any Loan Document, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State court
or, to the fullest extent permitted by applicable law, in such Federal
court.  Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.  Nothing in this
Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Collateral Agent or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Document against any Loan Party or its properties in the courts of any
jurisdiction.

 

(c)                                  Waiver
of Venue.  Each Loan Party hereby
irrevocably and unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement or any other Loan Document in any court referred to in Section 10.09(b).  Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

(d)                                 Service
of Process.  Each party hereto
irrevocably consents to service of process in the manner provided for notices
in Section 10.01.  Nothing in
this Agreement or any other Loan Document will affect the right of any party
hereto to serve process in any other manner permitted by applicable law.

 

SECTION 10.10  Waiver of Jury Trial.  Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in any legal proceeding directly or indirectly arising out of or relating
to this Agreement, any other Loan Document or the transactions contemplated
hereby (whether based on contract, tort or any other theory).  Each party hereto (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section.

 

SECTION 10.11  Headings.  Article and
Section headings and the Table of Contents used herein are for convenience
of reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this
Agreement.

 

SECTION 10.12  Confidentiality. 
Each of the Administrative Agent, the Collateral Agent and the Lenders
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential pursuant to
the terms hereof), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or
by any subpoena or similar legal process, (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies

 

104

 

hereunder or
any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this Section 10.12,
to (i) any assignee of or Participant in, or any prospective assignee of
or Participant in, any of its rights or obligations under this Agreement or (ii) any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to a Borrower and its obligations, (g) with the
consent of Borrowers or (h) to the extent such Information (i) is
publicly available at the time of disclosure or becomes publicly available
other than as a result of a breach of this Section 10.12 or (ii) becomes
available to the Administrative Agent, the Collateral Agent or any Lender on a
nonconfidential basis from a source other than Borrowers or any
Subsidiary.  For the purposes of this Section 10.12,
“Information” means all information received from Borrowers or any Subsidiary
relating to Borrowers or any Subsidiary or its business, other than any such
information that is available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by Borrowers or any Subsidiary; provided
that, in the case of information received from a Borrower or any
Subsidiary after the date hereof, such information is clearly identified at the
time of delivery as confidential.  Any
Person required to maintain the confidentiality of Information as provided in
this Section 10.12 shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information. 
Notwithstanding anything to the contrary set forth herein or in any
other written or oral understanding or agreement to which the parties hereto
are parties or by which they are bound, the parties acknowledge and agree that (i) any
obligations of confidentiality contained herein and therein do not apply and
have not applied from the commencement of discussions between the parties to
the tax treatment and tax structure of the Transactions (and any related
transactions or arrangements), and (ii) each party (and each of its
employees, representatives, or other agents) may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the Transactions and all materials of any kind (including opinions or other tax
analyses) that are provided to such party relating to such tax treatment and
tax structure, all within the meaning of Treasury Regulation Section 1.6011-4;
provided, however, that each party recognizes that the privilege
each has to maintain, in its sole discretion, the confidentiality of a
communication relating to the Transaction, including a confidential
communication with its attorney or a confidential communication with a
federally authorized tax practitioner under Section 7525 of the Code, is
not intended to be affected by the foregoing.

 

SECTION 10.13  USA PATRIOT Act Notice.  Each Lender that is subject to the Act (as
hereinafter defined) and the Administrative Agent (for itself and not on behalf
of any Lender) hereby notifies Borrowers that pursuant to the requirements of
the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record
information that identifies Borrowers, which information includes the name,
address and tax identification number of Borrowers and other information
regarding Borrowers that will allow such Lender or the Administrative Agent, as
applicable, to identify Borrowers in accordance with the Act.  This notice is given in accordance with the
requirements of the Act and is effective as to the Lenders and the
Administrative Agent.

 

SECTION 10.14  Interest Rate Limitation.  Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Term Loan,
together with all fees,

 

105

 

charges and
other amounts which are treated as interest on such Term Loan under applicable
Requirements of Law (collectively, the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for,
charged, taken, received or reserved by the Lender holding such Term Loan in
accordance with applicable Requirements of Law, the rate of interest payable in
respect of such Term Loan hereunder, together with all Charges payable in
respect thereof, shall be limited to the Maximum Rate and, to the extent
lawful, the interest and Charges that would have been payable in respect of
such Term Loan but were not payable as a result of the operation of this Section shall
be cumulated and the interest and Charges payable to such Lender in respect of
other Term Loans or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received
by such Lender.

 

SECTION 10.15  Lender Addendum. 
Each Lender to become a party to this Agreement on the date hereof shall
do so by delivering to the Administrative Agent a Lender Addendum duly executed
by such Lender, Borrowers and the Administrative Agent.

 

[Signature Pages Follow]

 

106

 

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

 

	
   

  	
  D 56, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
  Title:

  	
  Chairwoman & Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEPARTMENT 56 RETAIL, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TIME TO CELEBRATE, INC., as a Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
  Title:

  	
  Chairwoman & Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LENOX, INCORPORATED, as a Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James G.
  Berwick

  
	
   

  	
  Name:

  	
  James G. Berwick

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEPARTMENT 56, INC., as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
  Title:

  	
  Chairwoman & Chief Executive
  Officer

  
				

 

 

	
   

  	
  SUBSIDIARY GUARANTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
  DEPARTMENT 56 SALES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
  Title:

  	
  Chairwoman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CAN 56, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FL 56 INTERMEDIATE CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan E.
  Engel

  
	
   

  	
  Name:

  	
  Susan E. Engel

  
	
   

  	
  Title:

  	
  President & Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DID, INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward
  Paolella

  
	
   

  	
  Name:

  	
  Edward Paolella

  
	
   

  	
  Title:

  	
  Vice President & Treasurer

  
				

 

 

	
   

  	
  UBS SECURITIES LLC,

  
	
   

  	
  as Arranger and Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  John C. Crockett

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John C. Crockett

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  David A. Juge

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David A. Juge

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UBS AG, STAMFORD BRANCH,

  
	
   

  	
  as Administrative Agent and Collateral
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  Wilfred V. Saint

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wilfred V. Saint

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
  Banking Products 

  Services, US

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  Satioz Sikka

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Satioz Sikka

  
	
   

  	
   

  	
  Title:

  	
  Associate Director

  
	
   

  	
   

  	
   

  	
  Banking Products 

  Services, US

  
					

 

 

	
   

  	
  WELLS FARGO FOOTHILL, LLC,

  
	
   

  	
  as Documentation Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  Sanat Amladi

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Sanat Amladi

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

 

Annex I

 

Amortization
Table

 

	
  Date

  	
   

  	
  Term Loan

  Amount

  	
   

  
	
  March 31,
  2006

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  June 30,
  2006

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  September 30,
  2006

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  March 31,
  2007

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  June 30,
  2007

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  September 30,
  2007

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  March 31,
  2008

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  June 30,
  2008

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  September 30,
  2008

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  December 31,
  2008

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  March 31,
  2009

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  June 30,
  2009

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  September 30,
  2009

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  December 31,
  2009

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  March 31,
  2010

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  June 30,
  2010

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  September 30,
  2010

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  December 31,
  2010

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  March 31,
  2011

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  June 30,
  2011

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  Term Loan
  Maturity Date

  	
   

  	
  $

  	
  45,000,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]